Strangely, communist ideas did not take hold in industrialized, capitalist
countries where the gap between owners and workers was most evident, but in agri-
cultural countries, usually after revolutions or civil wars, such as in Russia (1917),
China (1949), Vietnam (1954), Cuba (1959), and Yemen (1969). These countries
usually called themselves socialist rather than communist because the government had
not yet “withered away.”
But as time passed, the government never withered away. Bureaucracy and regu-
lation actually expanded, until the governments were stronger and more centralized
than in capitalist countries. And social and class divisions remained strong
(Muravchik, 2002; Pipes, 2001). What happened?
Sociologists explain that social stratification isn’t simply a matter of economics.
It involves power and status as well as wealth, so eliminating income disparities will
not result in paradise. In fact, the communist governments created a new class of polit-
ical elite. In the Soviet Union, about 10 percent of the population in 1984 belonged
to the Communist Party. Called the nomenklatura,they got to shop in the best stores,
send their children to the best schools, vacation at exclusive resorts, and travel abroad
(Taylor, 1987; Voslensky, 1984).
The worker’s paradise that Marx envisioned never happened and probably never
could. After half a century of trying, most of the communist governments of the world
have shifted to some form of capitalism. Today there are only five communist coun-
tries left (China, Cuba, Laos, North Korea, and Vietnam), and all except North Korea
are busily decentralizing government controls and encouraging entrepreneurship
(Hall, 1994; Oh and Hassig, 2000; Schopflin, 1993). Communists still hold positions
of local political power in capitalist countries, but overall, on a large scale, commu-
nism does not seem to work.
The American Economy
What is the American “economic system”? While it is surely not socialist, it’s also
not a pure capitalist system either. How did the American economy develop?
Early American Economic Development
The United States has experienced the same movement from an agricultural to an
industrial to a postindustrial economy as the rest of the world. Its economic roots
lie in the seventeenth- and eighteenth-century Europeans of the Protestant Refor-
mation, who sought to do good work, and they showed that they were good by mak-
ing a profit and resisting the temptation to spend it on leisure pleasures. In England
and the Netherlands, groups of stockholders formed charter companies that
acquired the rights to the natural resources in the New World and sent colonists
over to do the trapping, fishing, and farming. When quick profits did not materi-
alize, the stockholders generally turned the charters over to the colonies. Soon they
created an independent agricultural economy, with a few support industries like
sawmills and shipyards.
The U.S. Constitution can be read as an economic charter. The entire nation is
conceived as a single “common market,” so there are no tariffs or taxes on interstate
commerce, and there are uniform standards of currency, weights and measures, post
offices and roads, patents, and copyright. The federal government can regulate
international commerce, but it has little power to regulate the economic activity of
individual states.
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