Communalism, a political economic theory of social organization which advocates that the means of production, distribution and exchange should be regulated by the community as a whole has a major part to play in modern day economics. One’s mind may ponder over the thought whether communalism and economics are inter-related to each other in some way or not. There exist many branches of economics such as agricultural economics, industrial economics, international economics but communal economics is no widespread term which makes this issue open to debate whether communal nature and economics go hand in hand or not.
Although, communal economics can be interlinked with socio-economics to some extent, some economists still feel there is a huge difference between the two. On going through various sources on the Internet, a couple of books and papers of some professional economists, I feel it safe to say that communism and economics cannot go hand in hand. This has a couple of specific reasons which I intend to explain in detail below.
GOVERNMENT ROLE MAXIMIZED
A communist economy is managed and controlled by the government present in the economy. In a broader sense, the major economic activities of production, distribution and exchange are administered by the government with no role of the producers or the consumers. The government tries to retain control of the prevalent market conditions through its policies which are ultimately meant to increase government welfare and if left, it wants the benefits to reach out to the the society.
Producers don’t have much say in a centrally planned economy which leads to discontent among them and eventually brings down production levels. Everything produced is government-oriented and important producer goals such as profit maximization and wealth creation are suspended by selective production.
RESOURCE DISTRIBUTION INEFFICIENCY
This is the problem that almost every communist economy faces. The planners and economic policy advisers are not able to accurately predict shortages, surpluses, etc. due to which an element of inefficiency always surrounds the resource allocation process. More is allocated to the less important sector and vice versa.
For example, more resources can be diverted towards the railway industry due to which lesser resources would remain standing for airlines and roads, keeping in mind that roads are used more often than railways. This may lead to discontentment among the consumers as well as the producers on national level.
VIOLATION OF CONSUMER RIGHTS
The society’s demands for various products and services is completely ignored as the government produces whatever it wants, regardless of consumer rights, tastes and preferences. The government wants to produce whatever it feels will bring in more revenue for it and completely sidelines consumer welfare.
For example, in British India the farmers were forced to grow indigo regardless of the fact that it would render their lands barren for many years to come, as it was beneficial for the then government. It was only due to such deeds of the government that ultimately an uprising took place which overthrew the British colonial rule.
SUPPRESSION OF ECONOMIC FREEDOM
Since the government regulates whatever is to be produced in the economy, it gets difficult for entrepreneurs to come up with good ideas, take risks and innovate new things mainly because of lack of incentives. The government won’t support their ideas or provide the necessary help unless it feels that the entrepreneur’s ideas and innovations prove out to be beneficial for the government.
According to Adam Smith, all activities in an economy are guided by an invisible hand but in a communist economy, the invisible hand cannot function to the best of its ability as its very essence, incentives and personal economic freedom are not supported.
In addition to the above mentioned points, command economies even face some more disadvantages such as delay in decision-making, government bureaucracy and red-tapeism. It leads to high levels of unemployment which again adds up to the discontent of the community and hence, often leads to uprisings against the government by the community.
Command economies even foster corruption as all the money that could’ve been utilized in order to increase consumer welfare, protect consumer rights, etc. goes directly into the pockets of government officials. Communist countries such as Cuba, Laos and North Korea still follow command economy system which is the most important reason why these countries aren’t developing.
So, after considering all the aforementioned points, it is quite clear that in modern day economics, command economies have no place to stay as they kill the very purpose of economics, best utilization of scarce resources. China understood this and switched from communist economy system to mixed economy system, which has played a major role in the development of the country.
Our country India too follows a mixed economic system in which both the producers and the government exercise control over the market conditions and consumer rights are taken care of too. Thus, a mixed economy surpasses a communist economy by a very big margin in terms of economic growth and development and everything else that comes with it.