In order to avoid capitalistic exploitation, injustice and
inequality, in the 19th century was found a socialistic
alternative. Karl Marx (1818-1883) and Friedrich Engels
(1820-1895) propagated a communistic economic society without
exploitation. It should be a society without the permanent
struggle of the classes about the distribution of the income
of private companies. A big fan of Marx was Wladimir Iljitsch
Lenin (1870-1924). He was convinced that a market economy is not
possible without exploitation. Private ownership of means of
production is in his ideology the main characteristic of
capitalism and the condition for exploitation. He requested and
propagated the end of private ownership of means for production.
The way to realize socialism was in his opinion a revolution. After a
revolution he hoped for a society with a central public
management for the whole economy. Privatization was the biggest
political and social evil for him. He maintained that the reason
for an upperclass of proprietors and a lower class of workers is
privatization of the means of production.
Not self-government was the resolution for him but central
government. Centralization of the management through a political
economy was his way to finish economic injustice. The political
way to reach this aim is in his doctrine the dictatorship
of the proletariat with the help of a communistic party.
He said that all other economic and political problems are small
problems in relation to the main questions of justice. Therefore
he didn' t give precise rules and laws for the socialistic
economy and the belonging political system. He was successful with his
Russia since 1917 and later the founder of Soviet Union. During
and after World War II the communistic ideas and principles were
realized in Eastern Europe, in the Peoples Republic of China and
in many other countries.
In the communistic society the people paid the rents for housing
to the government and they got interest from the government for
their savings. In socialism the industrial companies had even to
pay taxes to the central political government. It was money from
the management of a people owned company to the central
government. Hence the socialistic tax system should be a tool to
assist the central steering and control of the economy.
Although in the communistic theory no taxation was necessary, the
communistic societies used taxes for their money distribution.
Some tax rates had the task to confiscate the most private earned money
in order to support the socialized economy.
So it was possible to realize an economy without unemployment and
without the permanent struggle about the allocation of the
income. Because of the central administered prices of all
products they established theoretically an economy without
inflation. A strength of the socialistic sociaty was social
security without bureaucracy. In comparison with the capitalistic
economies they did need only a few loans. Especially for young
families they offered credits. The loans for the industrial
companies were like their taxes a tool for remote control.
On the other hand, the communistic societies suffered under many
weaknesses and principle problems. It was very difficult to
organize and manage agriculture without private property. The
trading with industrial and other products became very difficult,
because of administered prizes without any flexibility.
Motivation of the workers in the factories developed to a big problem
also to keep a level of quality for their products.
In comparison with a market economy in a communistic economy the
consumers have no chance to give a feedback to the producers
about preferences or about quality. The absence of such an
information system about the true value of a product for the
consumer is a fatal deficit of all socialistic economies.
Since 1989 we all know much more about the destinies of socialistic
economies. Since those times it seems to be that we know more
than enough about socialism. It is no more modern to discuss
socialistic ideas. But it is not a fiction that since the crash
socialism the economic problems in capitalistic countries were
ascending and not descending. In the most western economies the
money allocation through stocks and bonds is growing in relation
to the distribution through wages and salaries. The management of
private companies get more and more money through stock options
of their own firm. The dismissal of workers is a well-tried method
for the increasing of the exchange rates of the shares. And even if
it is no more possible to keep solvency for the firm, their
management save the rest of the money from the banks through
settlements for themself.
The accumulation of shares is the reason for the centralization
of power in capitalistic companies. Democracy is in socialistic
and capitalistic companies a fiction, an utopian vision.
The management of a capitalistic company must represent sometimes
the interests of the workers, sometimes they have to represent
the interests of the shareholders and don' t forget, that they
represent first of all their own interests. Such managements are
not elected from the workers and they are not elected from the
shareholders. Mostly they represent only a few shareholder who
keep the majority in the supervisory board. All members of a
company desire to maximize the income. But later the
money must disintegrate in wages and salaries for the workers and
in profit for the shareholders and their representatives. The
consequence is a differential of money allocation and the
distribution of economic power. That means the economic incomes
are in a bad relation to the personal economic performances. This
differential would be bigger without the activities of the labor
unions. But they can' t avoid the differential. The trade unions
way to minimize the differential of money distribution and
economic power distribution includes also a big disadvantage. The wage
agreements negotiated between the trade unions and the employers
can' t be paid for all people who seek a job. Hence unemployment
is an unavoidable feature of such an economy. Another
characteristic is low wages for people who look for a new job. It
is usually difficult to change the job or to leave the school in
order to start a profession. Especially for older workers it is
nearly impossible to find a new job with to the education and the
skills adequate conditions.
Then they are one of the minorities with more job problems than
the average. Other minorities are foreign people, less educated
persons, women after bringing up children or people with a
The resumé of this chapter is, that we have a dependance between
the distribution of money, the allocation of work and of economic
power. Private economic power and the private distribution of
work is not the true problem. And also the private distribution
of economic income is not a real problem. But there is another
dependance. The dependance between the private distribution of
gross income and the public distribution of net income. This
feature of market economy was for Karl Marx, Friedrich Engels and
Lenin and their follower not important. Even the most famous
representatives of the capitalist economy do not know the features
and the possibilities and the consequences of a fair tax system.
Fair money distribution is unthinkable with an unfair tax system.
The core of economic justice is beginning with a fair financial
system. Therefore we must learn more about justice in the tax
In the next chapter we discuss
6. The consequences of capitalistic money distribution