Archive

Archive for November 23, 2017

Monopolies, Managerialism and the Downfall of State Communism: 1

November 23, 2017 4 comments

As regular readers of my blog are well aware of, I do not believe in ideologies of any kind since all ideologies are by definition highly compromised and simplified mental models of “reality”. These pathetic human attempts to model reality are as similar to the real thing as a photograph of a clock is to the passage of time. But perhaps the biggest reason to oppose any ideology is that every single one of them comes with its own unique baggage of unnecessary tragedies and a priestly class and elite who benefits from all that unnecessary suffering.

What I have said above holds true for every single ideology which has ever been proposed or pushed as the “only right way”. And this includes everything from polytheistic and monotheistic religions, older modes of social organization to all forms of capitalism, socialism and communism. The study of ideologies is however interesting because it provides a very useful, if cynicism inducing, insight into the nature of human self-delusion. One of the more interesting observation I have made is that ideologies created under similar conditions are more similar to each other than they are dissimilar.

The similarity between ideologies created under similar conditions also extends to their modes of failure. As I have mentioned in more than one of my older posts, capitalism and communism are far more similar to each other than is commonly understood since both are based in a particular version of post-industrial revolution social and economic organization. In other words, they are just two slightly distinct attempts to solve the same “problem”. This similarity is more obvious once you start looking at how the two types of systems work in reality, as opposed to how they are represented in literature.

But what does any of this have to do with the topic of this post? Well.. as you will soon see, a lot.

Have you ever wondered why state communism (especially in Russia) was able to survive the post-ww1 civil wars, Stalin’s despotism, ww2 and still keep making impressive gains till the 1970s- only to fall in the early 1990s? Why could a system that handily survived tons of adverse conditions which included the deaths of tens of millions start losing public support in an era of relative peace and prosperity? As I have said in older posts, there were many reasons- from ideological rigidity, institutional inertia to the apparent inability to deliver on some of the promised improvements in general quality of life.

Let us focus on the last one, because it has a lot of commonality to what we are seeing in western capitalist societies in the post-2008 era. So.. why were countries run according to the ideology of state communism unable to provide a high standard of living and comfort for most of their citizens? Why were the cars made in those countries so ugly and often hard to get? Why was the toilet paper so coarse? Why was the quality of TVs often so bad? Why was everything that most people used in their daily lives so mediocre or shoddy?

The conventional explanation for this phenomena involves some hand-waving about “capitalism being better” and “market economy”. But is that really true? Think about it this way.. the soviet union had no problem building excellent rocket launchers, spacecraft, aircraft, ICBMS, tanks and weapons of pretty much every other kind. They were very clearly capable of manufacturing high quality items on very large scales- if doing so was deemed necessary. So why did that ability not translate into the manufacture of high-quality cars, TVs, toilet paper and other consumer goods? And why did they experience chronic shortages of even those consumer goods?

The answer, in my opinion, comes down to the downstream effects of what were essentially monopolies run by incestuous cabals of power-hungry professional “managers”. To appreciate what I am saying, ask yourself the following question- How would the process of buying a car and the choices differ between a person in USA and USSR in 1970? Let us start by considering the issue surrounding the ability to buy one in both situations. For starters, average wages in 1970-era USA were high enough to make it possible for almost anyone to buy a half-decent new car.

But do wages really matter? I mean, it was perfectly feasible for a nation as big as Soviet Russia to create a different currency for internal use only. In other words, if they wanted to make sure that every adult in that country could buy a car- they could just pay part of the wages in such a restricted currency or just distribute one car to every adult once every few years. It is important to note that every material and labor input (plus fuel) to create something as technologically simple as automobiles was present within in large quantities within that country. So why did that not occur?

Once again, there a bunch of closely related reasons but it mostly comes down to availability of manufactured cars. As many of you know, state communism was a top-down system of governance in which most consumer products were produced by companies that were, for all practical purposes, monopolies. Consider the sheer number of car models from competing corporations vying for the money of a car buyer in USA in 1970. Now compare that situation to a person in a similar position in 1970-era Russia. I should also point out the system in 1970-era USA tried to prevent the formation of monopolies and oligopolies.

To make a long story short, people involved with the production of cars (or other consumer goods) under state communism did not have to worry about whether consumers liked their products or whether they made enough of them. It simply did not matter because they were the only game in town and they had the full backing of the government behind them. They could produce ugly and often crappy cars, unreliable TVs and toilet paper full of wooden splinters and guess what.. the people who has to use them had no option.

In contrast to this state of affairs, failure to make decent ICBMs, airplanes, spacecraft, tanks, guns etc was severely punished by the state. Also, unlike for consumer goods- different companies, design bureaus and groups competed against other to develop and manufacture excellent products. It was as if the mechanisms to ensure effective innovation and production were present for products required by the state but absent for those required by the average person. But why does any of this matter to us in 2017, except perhaps as a historical curiosity?

Well.. because post-2000 era USA has undergone a similar change in almost every sector of the economy. The buzzword and operative principle of most businesses in USA today is profit through consolidation leading to what is basically monopolization and monopolization. Compare the number of department stores in 1980 with 2017 (including their relative market shares). Do the same exercise for for banks, pharmaceutical companies, hospitals, newspapers, TV and radio station ownership, internet providers etc. I could go on and on.. My point is that consolidation of smaller corporations into ever larger oligopolies and monopolies have resulted in a concurrent deterioration of product quality, demise of real innovation in addition to an increasingly poor consumer experience.

The oligopolies and monopolies which increasingly dominate the commercial landscape in USA have far more in common with state-sanctioned monopolies in communist countries that their predecessors from the era when anti-trust laws and regulations were actually enforced. It is likely that the outcome will be the same and USA will be known as the land of shittier, costlier and scarer products. In case you haven’t noticed- it is already happening in sectors as diverse as banking, telecommunications, pharmaceuticals and household appliances. Then again.. similar systems reach similar end points, even if some may reach it faster that others.

In the upcoming part of this series, I will talk about the remarkable similarity between the type of people (under capitalism and communism) who end up in important positions in state-sanctioned monopolies and oligopolies- and how they speed up rate of overall crapification and hollowing out of the system.

What do you think? Comments?