Communists believed that their system would be much more efficient than capitalism: They thought that competition...

Communists believed that their system would be much more efficient than capitalism: They thought that competition between companies was wasteful. Why build three separate headquarters for carmakers. (General Motors, Chrysler and Ford), when you can just build one? Why have three advertising budgets? Why pay for three CEOs? Why not put all the factories together, so that the same engineers can fix problems at all of the plants? Doesn’t one large firm maximize economies of scale? These are all good questions. So why do you think communism turned out to be such an economic disaster, when it sounded like it would be so efficient.

Expert Solution

Despite many good conceptual benefits of the communism philosophies, communism became a disaster in an economic sense, because it stopped firms from creating private property and wealth, so discouraging them to make investments and innovate something new. It, further made inefficient labor equal to the proficient worker and people stopped making best of their efforts to improve the productivity. Besides, the government took all the control in their hands and made centralized decisions that made the decision making process to be slow, laggard and inefficient. As a result of these consequences, communism based economies suffered and became great disasters.

It sounded to be efficient in the beginning of the communism based economic process, when economy of scale was achieved and inequality got reduced among the people. But, it turned out to be short lived once the these firms were either nationaized or taken under the control of government. It sent a negative message and economic sufferings started in the economy.

Rahul Sunny answered 1 month ago

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