Karl Marx wrote that communism would solve the unemployment
problem created by capitalism. Evidence
from China shows he had it backwards.
In 1847 Marx wrote:
“Big industry constantly requires a reserve army of
unemployed workers for times of overproduction. The main purpose of the bourgeois
in relation to the worker is, of course, to have the commodity labour as
cheaply as possible, which is only possible when the supply of this commodity
is as large as possible in relation to the demand for it, i.e., when the
overpopulation is the greatest.”
But does his critique of capitalism hold?
China provides a natural experiment. Were Marx correct that socialism solves the
unemployment problem then we’d expect to see little or no unemployment in China.
China is the world largest communist regime. The Chinese Communist Party has been in power
for 74 years. Surely they must have
gotten it right by now.
Well, not so much.
The figure below contains the unemployment rate for young
Chinese (between 16 and 24). Their
reported unemployment rate is almost 20 percent. And since the Chinese government often fudges
its figures, the actual youth unemployment rate may well be far higher.
Compare that to the United States. Youth unemployment in the United States never
got above 20 percent.
This comparison show that socialism, even when practiced in its
most extreme form (communism), doesn’t solve the unemployment problem. In fact, it makes it worse.
The figure below contains average unemployment rates among
young people between the ages of 20 and 34 for the advanced countries of the
world (OECD member countries) over the past ten years.
The chart clearly shows that unemployment rates are lower in
countries with economies that are closer to the capitalist economic model (more
economic freedom) than those with larger public sectors and more regulation
(less economic freedom).
Bottom line: socialism fails young people wherever its been
tried. And that’s a fact.
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