Because Karl Marx made a catastrophic error in basing his system of thought on the Labor Theory of Value, and amplified that with a complete failure to understand the necessity of prices and incentives as information systems – a combination that invalidated everything else he concluded from that point onward.
This catastrophe would not have mattered, and would have made him little more than the subject of economic ridicule that he is today, except that he wrote ideological works including the Communist Manifesto, that were prescriptions for rebellion, and that formed both the basis of a new pseudo-religion masquerading as a political system. Second this pseudo-religion formed the a model with which the east could react to, and compete with, the disruptive social and political effects of anglo consumer Capitalism under Democracy.
The east needed an ideological alternative to ‘jump ahead’ of the west. In their societies, democracy could not function because it requires that familial trust and freedom from coercion be extended to all members of society, which was impossible due to eastern cultural retention of family and tribal priorities where trust and freedom from coercion is extended only to family and tribe – and coercion and corruption were pervasive elsewhere.
While Marx is sometimes given a pass, because his ideas were abused by Joseph Stalin, Mao Zedong (???), and the Khmer Rouge, which resulted in the murder 100M people, the fact remains that Communism isn’t possible because human cooperation is impossible in a division of knowledge and labor without the combination of money, prices, accounting, contracts, and the constant desire of people to identify new opportunities and niches to fill in response to changing demand and shocks.
The reason that the west demonized Marxism was because it was a threat to consumer capitalist society: it was used to militarize countries, it was used as an ideological tool to foment rebellion around the world, and it resulted in more deaths than anything in Human History other than perhaps even the Black Death. So realistically, it deserves to be demonized.
WHAT WORKS IF MARX DOESN’T?
Social democracy, which is ordinary english classical liberalism with the addition of Keynesian Economic policy, does not include the abolishment of private property, prices, and incentives, instead keeps all of those institutions, while ‘siphoning off as much profit from individuals as it can without killing the cow that feeds it.’
This seems to be working quite well, except that people do not work hard or long enough, and have now spent both the money that they would have saved during their lifetimes, and the money that the future generations would have consumed. This is a problem of building a Ponzi Scheme dependent on the same perpetual Economic Growth that we saw during Industrialization, but it is not one of the impossibility that Marx fantasized about.
WHY IS CONSUMER CAPITALISM NECESSARY?
It is very easy to be China or India and import existing western technology. But when easy opportunities (as we see is happening in China) are fully exploited, the country must turn to domestic consumption, and to domestic innovation. So Totalitarianism is effective in China at creating literacy, and effective in ‘investment’ in infrastructure. The question remains how effective or burdensome that bureaucracy will be when the limits of totalitarian direction are reached, and the society must run entirely on domestic consumption.
THE VALUE OF TOTALITARIANISM AT EARLY STAGES
Chinese totalitarianism is useful at this stage because the army can be counted on to enforce policy if the people rebel, but India can’t do the same. While both China and India are empires, India has more systematic corruption and insufficient centralization of power to forcibly implement policy as does China.
It is possible that China can convert to an innovation country at some point. But it remains a desperately poor country. But the entire issue is that innovation and constant adaptation become the source of prosperity once easily obtained opportunities have been fully exploited.
CHINA IS A CORPORATIST NOT A COMMUNIST STATE
(Which would be painfully ironic if not for 100M dead people.)
There is nothing communist about China at all. China is operated by Confucian rules: as a large, extended-family corporation. And the modern communist party is not communist, or a party, it is a corporation and runs china as a corporation. It satisfies consumers, and it must satisfy consumers because internal frictions would disrupt it if it didn’t.
In this sense, there is nothing communist about china any longer other than the symbolism, and the disproportionate power of the People’s Liberation Army that still lives by doctrine.
China is an example of Corporatism. Corporatism works. Because it’s meritocratic.
Russia is trying to move to corporatism, but culturally is too much of a bridge civilization between east and west, and will have to retain some semblance of democratic rule even if the bureaucracy will remain corporatist.
The west is having problems with its fantasy of universalism, and social democracy which were invented in a period of temporary economic superiority that no longer exists in a globalized labor force. It is not any more sustainable than is the US military control of trade and petrodollars.
But that’s a different topic for another time.