Communism – The Economic Problems

In a planned economy, all of the economic activity is carried out under the orders of the government. Even the fall of the Berlin Wall and the subsequent collapse of communism a the ending of the 80’s and beginning of the 90’s, a great part of the world’s population lived in countries with planned economies. Unfortunately though, they did not live very well so to say.

Scarcity of everything, starting from basic things such as rice, sugar and milk, to clothing and even toilet paper, brought about continual and constant problems. What is even worse yet is that frequently doctors did not have hypodermic needles or medication for their patients and the supply of food was not sufficient.

The goods and services were not assigned through a price system by which the products got to those that were willing to pay for them. Since, according to ideology, in a communist country every person is considered equal, the government tried to give everyone and equal amount of goods and services that were produced. The outcome, however, did not end up being equal division as there were always long lines and those that were able to stand in the line the longest were the ones that would obtain what was corresponded to them. The lines were so long that often times people had to stay in a line for an entire day in order to get a roll of toilet paper. If a person saw there was a line forming, they would try to get into it as quickly as possible even when they did not know what the line was for. Since there was not enough of anything, it was almost certain that the line had to do with something that a household needed.

The structure of this complete disaster was centralization. Functionaries of the government in Moscow, who were called central planners, would try to determine the amounts they needed to produce of 24 million different items. This was an insane and stupid thing to even try to achieve. Take toilet paper for example, in first place one would have to estimate how many millions of rolls of toilet paper would be needed. Afterwards, you would have to calculate how many trees would need to be cut in order to make that amount of toilet paper, as well as how many train wagons you would need to transport the trees to the paper factories and you would have to figure out how many workers would be needed in order for the factories to work smoothly and efficiently. During all this, you would still need to try to balance the production of toilet paper with other things that also require trees, train wagons, workers, etc.

This is a problem that simply involves too much and requires of an astronomical amount of information in order to resolve. The result of communism was the bad management and a waste of resources. An example of this is that often times the food would rot in the barns because the transportation of this food had not been programmed to take them to the cities. The functionaries did not have an idea of premature harvesting and the wagons were being used in other things. In price system, farmers would have simply paid what was necessary in order to get the wagons on the move on. These types of solutions were not possible when living with a planned economy in which the prices were not used to assign resources.

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