Why closed loop economic and protectionist systems fail

Why communism failed

From the end of WWII to 1989 (and beyond for some countries) a prevailing ideology that took over most of Eastern Europe as well as other countries also, was one of total state control and domination over the lives of every citizen living within the borders of that nation state.  One can argue that this was nothing but the continuation of state control from the previous monarchies to fascism and Nazism to communism and it wasn’t until the revolutions of 1989 that these nations finally started to experience freedom for the first time in their existence that the West has been able to carve out for itself for a hundred years or more. 

The ideologies in those communist states encompassed both political and economic ideologies and although the political can be and has been debated as the underlying reason why communism essentially failed versus the perceived freedoms of the West, the reality is that although political freedom was a significant contributing factor as to why eventually people rose up against their governments, the implosion of the economies due to poor management was the biggest contributing factor in the inabilities of those governments to continue to assert control over the lives of the millions of people living there.  As proof of this idea, one can take a look at the means various nations chose to use to change their governments.  Nations, such as Hungary and the former Czechoslovakia, which split into Slovakia and the Czech Republic, had relatively bloodless, peaceful transitions that involved large scale protests, but no overt or underlying violence from either side.  More like an understanding between the population and the government that it is time for a change.

However, countries such as Romania or Bulgaria, where the economies were wrecked and the population was starving, fought a bloody campaign against the regimes that were beings forced out with literal bullets and uprisings that took thousands of lives and brought the nations to the brink of a civil war.  In former Yugoslavia, not only did it bring the country into a brutal and multi-year civil war, but it fractured the entire nation and cost hundreds of thousands of lives not to mention bringing up a nightmarish scenario of lighting a powder keg fuse that could lead to the destruction of the continent.  After all, the Genesis of the entire era, starting in 1914, that eventually brought about the end of the monarchies of Eastern Europe and ushered in 2 world wars, started in Sarajevo with the assassination of Franz Ferdinand in 1914. 

So one would be remis to ignore the correlation between the economic issue and the capacity of a nation to absorb the anger of the population as the nations transitioned into a free market economic system from that of a state controlled and directed one.  The weightiness of brutality in the change from a communist to a multi-party system can almost be directly measured by the level of openness that was present in the economic system preceding the revolutionary times of 1988 – 1989.   

Prior to 1989, the more open a system was to trade, to economic freedom to lessening of government control of small businesses, the less brutal and less bloody the revolution was that allowed that country to transition to a democratic, free market system. 

Why is that?  Well, there is a perfectly rational observation that can be made to understand that point.  That observation is this: the less concentrated the wealth is at the top, the more openness towards economic advancement potential there is for the population, the more opportunities people see in the future, the less need they see to burn down the village to start over.  If there is already a path to economic advancement for most people at least one where they see an opportunity for advancement, the less likely they are willing to upset that system to build something else.  Why?  Because building something new is scary and risky and there is no possibility of knowing the outcome for sure, but if there is already a system in place that can provide some sort of advancement opportunity, why not stick to the tried and true if it is perceived to be in their best interest? What I am trying to say in a concise manner is this: if people are already seeing a potential to be happy, content and free, they will not upset that system in favor of an uncertain one.  But if people are desperate because they see no outcome other than misery from the current economic system, they won’t hesitate to opt for destroying the current one to potentially invent a new one where they can be content, happy and free.

This is just human nature. 

So how were some of the communist countries able to pull off that small miracle of maintaining their ideology, somewhat, while economically opening their borders to trade with the West and to provide some relief to their people to pursue economic advancements?  It seems that they were able to pursue a duality in their governing, weather on purpose or by accident of fortune, that recognized one key factor which ended up sparing them from a bloody conflict.  It is essentially the avoidance of building a closed loop system that relies solely on the abilities of said system to survive.  So what does that mean? 

What is a closed system anyway?  In a basic co-pilot search, here is what comes up for a closed-loop control system:

“…in a closed-loop control system, the input is first fed to the controller after error detection. The controller produces a control signal that leads to a specific output. The output is then measured to check if it matches the desired output. A section of the output signal is fed back to the input as a feedback signal. This feedback signal is compared with the input to generate an error signal, which is provided to the controller to produce manipulated signals that remove the error and produce the desired output.

The main components of a closed-loop control system include:

• Reference Input: The target output that the system is designed to follow.

• Error Detector: Compares the feedback signal with the reference input to generate an error signal.

• Controller: Calculates the corrective action needed to minimize the error and bring the system output closer to the setpoint.

• Process: The system being controlled, such as a motor or chemical process.

• Controlled Output: The parameter or variable that the control system aims to control and regulate.

• Feedback: Part of the output signal fed to the error detector for comparison with the reference input”

  
  

How does this relate to the problematic systems of communism and the failure of those governments?  Here is how we can correlate it:

•             Reference Input: The Central Committee tasked with coming up with the economic plan that is rigid enough to pass muster with the Secretary – i.e. the dictator’s (Supreme Leader) wishes and aligns with his desires.  Usually written by people who have no business coming up with economic ideas, for they lack both the training or the desired necessity to identify and understand real world implications of asinine ideas they deem essential. 

•             Error Detector: eliminated – the system is deemed perfect because it originated with the perfect being – the Supreme Leader. There is nor can there be any room for discussion.  Therefore, all real controls that would point out the glaring mistakes in the plan are eliminated as counterrevolutionary. 

•             Controller: The apparatus that is designed to carry out punitive tasks to punish real people for failures in the rigged system for non-existent “crimes” they may have committed to explain away or hide the glaring failures of the plan.

•             Process: Usually a 5-year plan that sets out the goals of the Supreme Leader.

•             Controlled Output: The means with which the production is siphoned off to pad the wealth of those on the top, starting with the Supreme Leader.  But because it is a closed-loop circuit, any wealth that is siphoned off, essentially does so at the cost of everyone else.  I.E. for a small group of people to become wealthy, everyone else has to become poorer and because the system does not produce nor allow for the introduction of foreign material, universal decimation of the overall economy is almost impossible to prevent. 

•             Feedback: until such time as the pressure expands to the point where it blows up the system, feedback consists of only affirmations and adulations given up towards the Supreme Leader about the vast resources of knowledge he appears to be bestowing on the plan from those who benefit from the plan most aside from the Leader. 

Essentially the failure of communism can be attributed to the closed-loop system it designed for itself as an economic agenda, where the possibility of free trade, of advancement for most of the population and of a balance of fairness is virtually eliminated.  It creates the potential to both economically and politically fosters an aura of resentment and a picture of bondage for much of the population while the top 1% happily siphon off and use resources freely to always further enrich themselves. 

It starts in a similar fashion as a controlling spouse might start off an abusive relationship: by attempting to isolate and cut off ties between their victim and anyone who might come to their aid.  Isolationism and lack of outside interaction leads to a world where everything can be explained in terms of the Supreme Leader’s vision because there simply is no other source of information or capital available to the people. 

The only good thing we can point to in this scenario: it is not tolerated for long.  Eventually, people living on bread and water will want something else.  And they will do just about anything to get something else.  That is ultimately why communism failed and unfortunately, that is also why economic systems that practice protectionism ultimately fail.  Because they are perceived by the population as methods for the top class to enrich themselves at the expense of everyone else.  They are ok with the top enriching themselves, if they can also advance somewhat and see optimism on the horizon.  The problem starts when someone brazenly and with malice cuts that lifeline for the population.  That lack of perceived fairness is what ultimately gets people mad.