Global Economic Intersection Article of the Week
In this article, I will present a loop theory to further support my writings on politics. The loop theory is to simply and clearly define the relationship between capitalism and socialism. It was formulated by simply modifying Karl Marx's theory of societal development.
Marx's Theory
Figure 1 highlights Marx's theory of societal development: evolution from some early societies (e.g. slavery) to feudalism, to capitalism, to socialism, and finally to communism.
Follow up:
At a very high level, this theory is right. Two individuals capitalized on this theory more than anybody else: Lenin and Mao. Both of them eventually failed for the same reason: They jumped from feudalism to socialism via a violent revolution that destroyed capitalism (in its primitive stage in their respective countries) first. Yes, the Soviet Union was a total disaster, as was China under Mao (1949-1976). Yes, Mao was China's last de facto emperor.
The Loop Theory
Figure 2 shows my loop theory by extending and truncating Marx's theory as follows:
- Capitalism and socialism are in a loop, requiring balancing from time to time. Capitalism is a must for prosperity. Socialism, if poorly managed, may set us back to feudalism (or even further)!
- Communism is so far away that we all should ignore it.
Where is everybody in societal development?
Let's examine four representative countries (or regions) one by one: