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1-16 Business and Economic Environments [CH 1

struggle would make way for a new form of society to emerge. Marx labeled this new
order communism. In his work The Communist Manifesto he writes that “[t]he
communists disdain to conceal their view and aims. They openly declare that their
ends can be attained only by the forcible overthrow of all existing social conditions.”
Marx believed that the people should own all of a nation's productive capacity but
conceded the government would have to operate businesses until a classless society
could evolve. He also adhered to the principle that people should receive according to
their needs and give according to their abilities. Despite Marx's prediction of a
classless society, managerial and professional classes evolved as the "privileged"
groups in all communist societies.
Under communism, the government (state) owns all the means of production and
the people, in turn, labor in government enterprises. Our economists tell us that the
number one means of production is labor and as such, under communism, labor is
owned by the state. A rationally thinking person concludes that when the state owns
labor, then labor is a slave, and in the United States slavery was abolished with the
13th Amendment to our Constitution in 1865. Traditionally under Communism there
has been little or no freedom of choice in terms of employment, purchases, or
investments. For example, the government determines what people can buy because it
dictates what is to be produced, and consumer goods are generally rated as a low
priority.
Many nations were coerced to communism and its economic system during the
20th century. They promised to improve the quality of life for their citizens, with the
result that the people were given little or no freedom of choice in selecting jobs,
purchases, or investments.
Communist economies have undergone profound changes. With the collapse of
the Soviet Union, its domination of East-European states has also ended. The
withdrawal of government control exposed how uncompetitive eastern European
industries had become under communism. Suddenly companies had to compete with
Western firms for market share, and they found that their products were often inferior,
with out-of-date production processes.
Debatably there is no great middle class in the former Soviet Union, only the
wealthy and poor. For any economy and political state to survive there must be an
entrepreneurial middle class.
The People's Republic of China is now the largest of declared communist states,
and centralized planning remains a cornerstone of this communist economy; it is clear
that the Chinese communist economics includes some features that have long
characterized capitalism.

Planned economy—Socialism: we own it all and regulate the people
Socialism is an economic system that exists in countries where the government
owns and operates all the basic industries such as banking, transportation, mining and
large-scale manufacturing. Private ownership exists in such smaller businesses like
shops and restaurants. Socialists believe major industries are too important to be left
in private hands. The individual is not capable to make “right” decisions. They assert
that government-owned industries are more efficient and serve the public better. They
are asserting that government operates efficiently which is nonesense.
Capitalists argue that state-run industries become massive bureaucracies that are
insensitive to consumer needs. Many Western European countries have recognized
the encumbrances that socialism brings and have begun a concerted effort to
eliminate socialist effects on their economies through renewed private ownership.
Britain began to sell-off much of its major industries in the 1980s under a program
championed by Prime Minister Margaret Thatcher. As the state industries were sold
off, prosperity began to rise in Britain. As Britain’s Labour Party holds political
power it will work to return that nation back towards socialism.
Socialist economies usually follow some master plan for the use of the nation's
resources. Workers are free to choose their employment, but the state often
encourages people to pursue careers in areas where a need is greatest. As a result,
most citizens work for government enterprises, which are rather inefficient and

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