Friday, July 20, 2007 07/20/07-Communism

In today's excerpt--economics and Communism. Today, the principle has been emphatically demonstrated: when people can keep what their labor produces--coupled with property rights--an economy can grow, and when people instead work for the state and can't own property, the economy crumbles. Though it seems that any thoughtful reflection on human nature would have led to this conclusion, in the 50s and 60s, and for some even into the 80s, leading US economists and academics believed the centrally controlled economy of the USSR could outperform the capitalist economy of the US. This belief helped reinforce the almost irrational fear that informed US policy-making during that era:

"In 1960, W.W. Rostow published his best-selling book, The Stages of Economic Growth. ... Rostow was in government throughout the administrations of Kennedy and Johnson. ... Rostow played on cold war fears in Stages. (The subtitle was Non-Communist Manifesto). Rostow saw in Russia 'a nation surging under Communism into a long-delayed status as an industrial power of the first order,' a common view at that time. Hard as it is to imagine today, many American opinion makers thought the Soviet system was superior for sheer output production, even if inferior in individual freedoms. In issues of Foreign Affairs in the 1950s, writers noted the Soviet willingness to 'extract large forced savings,' the advantage of which was 'difficult to overemphasize.' In 'economic power' they will 'grow faster than we do' ... [and they] derived 'certain advantages' from the 'centralized character of the operation.' ...

"It is too easy in hindsight to mock these fears. When I first visited the Soviet Union in August of 1990, almost everyone by then had belatedly realized that the Soviet Union was still a poor country, not 'an industrial power of the first order.' As I sat sweating in a tiny Intourist hotel room with sealed windows, with air-conditioning that had broken down under Khruschev and hadn't been fixed yet, with less than irresistible prostitutes trying to break down my door ('Hello I Natasha, I lonely'), I wondered how the Soviets managed to fool us for so long. Today, Russian per capita income is estimated to be less than one-sixth of American per capita income. ... [G]rowth has been negative every year since 1990."

William Easterly, The Elusive Quest for Growth, MIT Press, Copyright 2001, Massachusetts Institute of Technology, pp. 31-33.


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