Over 2 million + professionals use CFI to learn accounting, financial analysis, modeling and more. Unlock the essentials of corporate finance with our free resources and get an exclusive sneak peek at the first module of each course.
Start Free
What is Communism?
Communism is a social, political, and economic ideology in which the means of production are owned communally, and it advocates for a classless society with little or no private ownership of property. The Communist theory was founded by German political philosophers and economists Karl Marx and Friedrich Engels in the second half of the 19th century.
In 1848, the pair wrote and published “The Communist Manifesto,” a detailed outline of communist principles. The book was circulated widely and referred to as the “Communist Bible.” It was adopted as the communist handbook by several emergent communist countries in the 19th and 20th centuries.
A major aim of communism was to end capitalism. It was to be achieved through a classless society where class conflict will be resolved, and proletarians (the majority working class) will revolt against the bourgeoisie (owners of the means of production) and end worker exploitation. The abolishment of private property ownership ensures a pure communist society is established. Communism meant people gave to society according to their abilities and received according to their needs and the needs of the society placed above the needs of individuals.
Communism is considered a variant or an advanced form of socialism. The debate on the distinction is still ongoing as the two are often used interchangeably throughout history, even by Karl Marx himself. However, communist ideology is largely based on Karl Marx’s revolutionary communism philosophy.
Historical Account of Communism
Communism comes from the Latin word “communis,” which means “common” or “shared.” Communism is thought to come into existence in ancient times as considered in Plato’s Socratic dialogue “Republic,” published around 375 BC. Plato considered an ideal state in which a governing class of guardians serves the interests of the whole community by living as a large family sharing the ownership of goods and people (labor). Other early examples of communism are in Christianity, the formation of the monastic order, and others.
However, the emergence of modern communism was instigated by the Industrial Revolution of the late 18th and early 19th centuries. The major highlight of the revolution was the rapid industrialization of world economies, which increased economic productivity. However, the success was largely achieved at the back of exploitation of the proletariat through extreme working conditions and poor wages.
The above phenomenon convinced Karl Max, et al. to rethink a suitable system where there are fewer class struggles and are doing away with the allure of private property ownership that leads to greediness and inequalities in the society. Marx envisaged a society where prosperity is shared by everyone through common ownership of the means of production.
Marxist Communism
Marxist communism (Marxism) was founded by Karl Marx by laying out the theoretical and scientific foundations of communism. Karl Marx was born in Germany to middle-class Jewish parents who previously abandoned their religion. Marx studied philosophy at the University of Berlin and later moved to the University of Jena, where he obtained a doctorate in 1841.
Marx became a political radical because of his Jewish background living in a European nation. He moved from Germany fearing persecution and settled in Paris, France, where he met Friedrich Engels, a countryman. There, they developed a partnership that culminated in the publication of various communist journals, including “The Communist Manifesto.”
Marxist communism makes use of materialist methodology to explain and evaluate the development of class society and the role of class struggles in universal political, economic and social change. Marxism became the common ideology for communist movements around the world. The duo believed that challenges faced by the proletariat, such as poverty, early deaths, and diseases, were prevalent in a capitalist society. They argued that the systemic and structural challenges of capitalism could only be solved by replacing capitalism with communism. Marxist communism encompassed three main aspects.
Materialist Conception of History
The materialist conception theory, according to Karl Marx, is a series of class struggles and revolutions, which ultimately leads to freedom for all citizens. Marx’s view stated that human activity begins with material production for their subsistence before they can embark on other human activities.
According to Karl Marx, material production requires two essential elements, such as:
Material forces of production – Pertains to inputs in production, such as raw materials and the tools necessary for extraction and processing of the inputs into real products.
Social relations of production – Relates to the division of labor through which the raw material inputs are extracted and processed.
Marx indicated that the material production process also underwent revolutionary and technological change such that the extractive process, as well as the processing of raw materials, greatly advanced and became more complex.
There are now advanced and complex tools in the hands of one class, i.e., the bourgeoisie ruling class and the proletariat must seek work from the bourgeoisie to be part of the production process. It means the working class lost their independence in material production, necessitating the establishment of a new kind of economic system that is not unfair to one social class.
The Critique of Capitalism
The critique of capitalism theory is based on the history of societal class dominance over time, where the ruling aristocracy of ancient times was overthrown by the bourgeoisie, thereby replacing feudalism with capitalism. Marx’s aim was the overthrow of the bourgeoisie by the proletariat, thereby replacing capitalism with communism in the process.
Marx regarded capitalism as a necessary stage in societal development mostly because of the conspicuous benefits derived from the economic system over time. The benefits include scientific and technological advancement, which helped humans to conquer nature. In the process, people managed to amass huge wealth but it was mainly concentrated on the capitalist elite, the bourgeoisie.
The unfair distribution of wealth is what concerned Marx as the proletariat were the actual producers of goods and services through their labor. According to Marx’s labor theory of value, which states that the value of a product is determined by the amount of labor required to produce it.
It meant that the bourgeoisie was profiting unfairly over the proletariat, who produced the goods and received pity wages while they (the bourgeoisie) pocketed large sums of profits. Hence, one class got richer and more powerful whilst the other fell more and more into poverty. Capitalism causes poverty, inequality, false consciousness, and alienation. Alienation means the working class is separated from:
The product of their labor
The process of production
The sense of satisfaction
Other competing workers
Revolutionary Overthrow of Capitalism and its Replacement by Communism
Marxism is anchored on the belief that capitalism is an unstable and inferior economic system that is destined to falter and fall through its inherent weaknesses that will cause a series of economic crisis events. Such challenges include turbulent economic cycles that produce economic depressions and recessions, which in turn yield to high unemployment, high inflation, poor wages, and misery, an increase in poverty levels among other downstream ills. The proletariat will be a major class severely affected by these economic changes as the bourgeoisie are able to insulate themselves through their accumulated wealth.
Marx believed the proletariat will seize and take over the means of production when they realize that the system is working against them through a process termed revolutionary class consciousness. The seizure should also spread to include institutions of state power, such as the judiciary, police, army, prisons among others.
They will establish a socialist state that Marx described as “the revolutionary dictatorship of the proletariat.” The proletariat will then rule placing their interest ahead and taking measures to prevent counterrevolution by the bourgeoisie. Eventually, the need for the state will disappear and will be replaced by an egalitarian communist society.
However, Marx could not paint a clear picture of this eventual communist society. Some of the features of this ideal society have been adopted in modern capitalist economies notably public education. Other views are still considered extreme in an economic and political sense and will probably never see mainstream adoption in world economies.
Arguably, there has never been a practical model of communism that had worked successfully for the greater good of all people concerned. Marx was also a believer in democracy, in terms of how institutions of the communist society are determined and designed.
Remaining Communist Countries
The 19th and 20th centuries witnessed several countries that tried to implement communism and socialism to a certain extent. No single country has been able to clearly implement communism in its purest form. Communism was extensively implemented by the Soviet Union before its dissolution in 1991.
At present, there are only five remaining countries with communist ideologies in different forms and degrees. They include China, Cuba, North Korea, Vietnam, and Laos. Most of the countries are in transition from communist/socialist systems to more capitalist or mixed economic systems. A brief look at the countries follows:
China
Communism was entrenched in China through the establishment of the Chinese Communist Party by Mao Zedong in 1949. However, China started moving towards a mixed economy through the Deng Xiaoping Chinese economic reform in the 1970s. The reforms encompassed allowing private enterprise and the phasing out of collective farms.
In 2004, China changed its constitution to recognize private property. The transition helped the country become the world’s second-largest economy in 2010 and the world’s largest exporter in 2014.
Cuba
Fidel Castro took over Cuba in 1953 and established a communist state by 1965 with strong ties to the Soviet Union. However, when the Soviet Union dissolved, the country went into an economic crisis. The Partido Comunista de Cuba is described by the Cuban constitution as “the leading force of society of the state.” The party policies are strictly from Marxism-Leninism communist ideology. The country began to initiate a few market reforms after Raul Castro took over in 2008.
North Korea
China and Russia helped North Korea declare independence to end the Korean War in 1953 led by Kim Il-Sung. North Korea’s system involved central planning and communal farming. However, successive famines took place in the 1990s and 2000s. The country began allowing semi-private markets in 2002.
Vietnam
Vietnam became a communist nation in 1975 through communist leader Ho Chi Minh. However, the country began a slow transition to a market-based economy in 1986.
Laos
Laos became a communist state in 1975 following a revolution supported by Vietnam and the Soviet Union. However, in 1988, it started allowing some forms of private ownership and joined the World Trade Organization (WTO) in 2013.
Criticisms of Communism
Lack of free market means distortion of price signals which leads to product shortages
Suppression of liberal democratic rights
Implementation challenges
Negative effect on economic development
Suppresses technological and scientific development
Environmental degradation
Political repression and lack of social development
Personality cults in communist rulers
Famines, lack of freedom of movement, and forced labor practices
Take your learning and productivity to the next level with our Premium Templates.
Upgrading to a paid membership gives you access to our extensive collection of plug-and-play Templates designed to power your performance—as well as CFI's full course catalog and accredited Certification Programs.
Gain unlimited access to more than 250 productivity Templates, CFI's full course catalog and accredited Certification Programs, hundreds of resources, expert reviews and support, the chance to work with real-world finance and research tools, and more.