Definition
Communism is an economic and political system where all property is publicly owned, and each person works and is paid according to their needs and abilities. It advocates for the elimination of private ownership and the division of wealth among the community to prevent class struggle. The goal of communism is to create a classless society where all wealth and property are owned by the community as a whole.
Phonetic
/kəˈmyo͞onizəm/
Key Takeaways
Three Main Takeaways About Communism
- Classless Society: One of the primary tenets of Communism is the belief in a classless society. This means that there are no divisions between rich and poor, and wealth and resources are distributed among citizens equally or according to individual need.
- Public Ownership: In a communist society, the community or the state owns the means of production. This includes factories, farms, and offices. The idea is to prevent exploitation and ensure that the benefits of these enterprises are shared by everyone.
- Abolition of Private Property: In a true communist system, there are no privately owned properties. All properties and resources belong to the collective community or the state, with the aim of providing everyone with equal access to the basic necessities of life.
Importance
Communism, as a business/finance term, is significant because it outlines a socio-economic model where all property is publicly owned and each person works and is paid according to their abilities and needs. This ideology seeks to eliminate socio-economic disparities, creating a harmonious society where resources and wealth do not concentrate in the hands of a few. The importance of Communism lies in its focus on equality and communal benefit over individual gain, challenging the principles of market-driven economies such as capitalism. From a business perspective, understanding the tenets of Communism can help entities operate effectively in countries where this system is practiced, and gain insights into alternative economic models. Despite these ideals, critics argue that it can stifle competition, innovation, and individual ambition, affecting economic growth and prosperity.
Explanation
Communism, as a political and economic ideology, aims to achieve a classless society where all property is publicly owned, and each person works and is paid according to their abilities and needs. The primary purpose of communism is to negate the effects of capitalism that lead to socio-economic disparities among the population. In a purely communist economy, there is no private ownership; instead, all assets and resources are collectively owned and controlled by the society or the state, thus theoretically eliminating poverty and class distinction.Communism is utilised to establish a society where wealth and power are distributed equally, resulting in a state where there is no distinction between the rich and the poor, thereby promoting equality. Under a communist system, economies are planned centrally with the aim of eliminating business cycles of booms and busts, unemployment and inflation. Essentially, the use of communism is associated with the ultimate goal of achieving equity, communal welfare and a society devoid of capitalist competition. However, it should be noted that a purely communist state has never been achieved and country’s that label themselves as such often deviate greatly from the original ideology.
Examples
Sure, Communism, an economic system where the state owns the means of production and there is no private property, has been experimented in different forms across several countries. Below are three real-world examples:1. Soviet Union (1922-1991): The Soviet Union was among the most prominent real-world examples of a communist state. Under their system, the government had control over all means of production, and private businesses did not exist. Everything was planned and controlled by the government – from what goods were produced, to how much was produced and what the prices should be. 2. People’s Republic of China: While Communist China has significantly opened its markets since 1978 under the reform of Deng Xiaoping, the Chinese Communist Party still follows strict regulations on key industries including telecommunications, utilities, and energy. The government maintains control over major sectors of the economy and all land is either owned by the state or collectives.3. Cuba: Since the revolution in 1959, Cuba has been under the one-party socialist rule, with nearly all means of production being state-owned and operated. Private property and businesses were confiscated and nationalized, and the government made decisions on production and pricing of goods and services. However, since 2010, Cuba has started to slowly relax some restrictions, allowing for some small, private businesses to operate. These examples provide snapshots of communism in different countries, each of these countries implemented the communist ideals in slightly different ways, and some have even moved away from strict communism over time.
Frequently Asked Questions(FAQ)
What is communism?
Communism is an economic theory that advocates for a classless society where all property is publicly owned and each person works and is paid according to their abilities and needs.
Who proposed the concept of communism?
The concept of communism was proposed by philosophers Karl Marx and Friedrich Engels in the 19th century.
How does communism relate to business and finance?
In a communist set-up, the means of production are owned by the community, meaning there isn’t individual or private business ownership. The community or state manages the economy, deciding what goods and services to produce and how resources should be allocated.
What key principles underscore communism?
Communism is underscored by the principle of equal distribution of wealth, with no existing divisions of class or wealth. It also supports the elimination of private ownership of property or capital.
What is a classless society in communism?
A classless society in communism means a society where there are no divisions of individuals based on economic status. Everyone has equal status and rights.
Where has communism been implemented?
Some countries where communism has been implemented in the past or present include the Soviet Union, China, Cuba, North Korea, and Vietnam.
How does communism influence the economy?
Under communism, the government controls the economy. It decides how to utilize resources and distribute goods and services, and sets prices and wages, influencing economic outcomes.
What are the advantages of communism?
The perceived advantages include equitable distribution of resources, minimized disparity in wealth, and the potential for stable economic conditions since the economy is state-controlled.
What are the disadvantages of communism?
Disadvantages can include lack of competition and incentive for innovation, potential for misuse of power, and inefficiencies due to lack of market-driven decision making.
Does communism support free trade?
Since the state controls the economy in a communist system, free trade is generally not supported. The state controls both internal and external economic transactions.
Related Finance Terms
- Central Planning
- Public Ownership
- Proletariat
- Marxism
- Classless Society
Sources for More Information
