Modern World Question

Question

How did the failure of communism in the twentieth century illustrate the power of competitive markets?

 -Big History question

Answer 1

The best way to look at this question is to determine what caused these failures. In Russia, the failure ultimately came from a debt crisis from defense spending. Also, in 1985, Gorbachev took control of the nation, leading to a slow process towards democratization before finally moving away from communism completely in 1991. In China, famine and genocide from Mao Zedong painted the picture of communism for the world. None of this has happened in countries practicing capitalism. Markets follow the laws of supply and demand. Therefore, they see profit and losses, so they can determine what to invest/divest in related to certain products or services. Planned economies have no profits or losses, so they cannot achieve efficiency. Competitive markets also tailor to the consumer, who is "King" (Wealth of Nations by Adam Smith 1776). This allows for the firms to compete with each other to obtain the consumers wealth, vs a planned economy where there is no competition, so there is no incentive to obtain wealth, because there is none. This allowed the super power of the US to thrive economically in the 20th century into the 21st century, while communist regimes create instability in famine throughout the globe.