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Game Theory #8: Communist Specter

Original Transcript

Today we discuss communism and Marxism — what it is, where it came from, and why it succeeded. The twentieth century had the Cold War, an ideological struggle between capitalism and communism. For the longest time we believed that capitalism and communism were polar opposites — a dialectic, a black and white. But if that is the case, then how do we explain China? For the longest time China was a communist country, and then in the 1980s it started to reform and now China is very much a capitalist country. In fact, this transition has been seamless — there hasn't been much conflict. That's not historically true of other major transitions. Think of the transition from feudalism to capitalism — that was a very violent process. Think of the process from Catholic Europe into Protestant Europe — that was also a very violent process. But in China, communism transitioned into capitalism pretty easily, pretty quickly, and extremely successfully. Today China is very much a capitalist country with some communist elements. So the question is: if these two ideologies are such polar opposites, such a dialectic, how did this happen in China? What I want to show you today is that this is actually a false dialectic — meaning that communism and capitalism are actually more similar than they are different. In fact, in many ways communism is a creation of capitalism, a weapon to destroy capitalism's major enemies.

Communism is not really the enemy of capitalism. The real enemies of capitalism are different ideologies. These ideologies include monarchy. The idea of monarchy is that rather than power in the hands of a capitalist, power is in the hands of the king. And what a king often does is redistribute capital in a way that is more fair. For example, when a king first comes into power, what a king often does is cancel all debts and redistribute the land — and that's why he's so popular. So capitalists are afraid of kings. They don't want kings because a king will often redistribute property.

Another great enemy of capitalism is religion, or theocracy. All religions teach you that money is evil — God doesn't want you to make money, God wants you to be kind to others, to love your children, to be a nice person. That's why in Catholic Europe people were so poor — they were more focused on redemption and salvation than on making money. So theocracy is also a major enemy of capitalism.

Then you have nationalism. Nationalism is the idea of loyalty to your people, loyalty to your nation. For capitalism, that's a problem, because capitalism wants to be loyal to capital and wants capital to flow freely across borders. If I see an investment opportunity in China, I want to take my money from America and put it into China — I don't want to worry about whether China is my enemy or not my people. So nationalism is also a major problem.

And then you also have democracy. Believe it or not, capitalists hate democracy. Why? Because if people had power — if the workers had power — they would all get together and vote to redistribute wealth, to make the rich pay more taxes. We call this socialism. So the enemy of capitalism is not communism; it's these four other things.

Communism, if you actually think about it, is working with capitalism to destroy all four of these things. Look at monarchy: communism does not allow for monarchs to arise. It allows for a party to arise. And what is a party? A party is an oligarchy — which is a capitalist system. Now theocracy: what does Marx say? Marx says religion is the opiate of the people, the great evil of the world, that religion creates false consciousness and therefore we must destroy all religion. And if religion is destroyed, what is left? Only money. Now nationalism: communism is international — workers of the world, unite. Nationalism is bad. We want to unite as a world. Class consciousness is more important than national identity. And democracy: communism says no, workers cannot defend their rights because workers have false consciousness — they have been brainwashed by the capitalists through schools, through the media, through Hollywood. Therefore, a vanguard — the party — must lead the people into socialism.

So it's really convenient how capitalism and communism have similar enemies, and communism helps destroy all four enemies in a way that capitalism cannot. You could make the argument that communism was a weapon — a virus — created by capitalism in order to conquer the world, in order to clear the way for capitalism to spread throughout the world. And China is an example of this. Think about the Cultural Revolution that destroyed religion, destroyed tradition, destroyed cultural identity. And what happened after the Cultural Revolution? China became capitalist, and hyper-capitalistic — China had the fastest economic growth rate in the world. So I'm not saying this is definitively true, I'm saying it's something for us to think about. Why is this correlation here?

An example: Karl Marx, the founder of communism. His history is really strange. He was a German citizen but spent all his time in Britain, exiled from Germany because he advocated for world revolution. He went to Britain — but Britain is also a capitalistic country. So why was he allowed to do whatever he wanted there? He wrote most of his works in the British Museum library. Why did the British authorities allow him to do that? Britain is the most capitalist country in the world in the nineteenth century, and Britain basically allowed Marx to live there and do whatever he wanted.

Second: where did Karl Marx get his money from? His wife was a German aristocrat, accustomed to luxury. But Karl Marx never made any money in his life. He writes the Communist Manifesto, Das Kapital — no one's going to read them, they don't sell. So he's not wealthy, yet we know for a fact that he actually lived a very good life. His kids went to private school, they had a nice house in Britain. So where did the money come from? It's said he got his money from his partner Friedrich Engels. And where did Engels get his money from? His father was a capitalist, an industrialist. Here's the question: why would a very wealthy industrialist father let his son give money to Marx, who is calling for world revolution to destroy the capitalists? Why would they do that?

Third: at this time, socialism was the most dominant ideology for many reasons. And the idea of socialism is that it will evolve naturally. But Marx says: no, we cannot allow it to evolve naturally, we need a revolution — a world revolution. Why would he say this?

So let's look at what socialism is, and then what communism is. The idea of socialism is pretty simple. Before, you had a feudal society, then it became industrial. Because it becomes industrial, you have lots and lots of workers and you have capitalists. The problem is that capitalism exploits labor. It makes people very unhappy. The workers want change. But also capital consolidates — maybe you start with a thousand capitalists, but then maybe ten will take over all the money, then maybe one, because that's how capitalism works. It consolidates, which means eventually the capitalist will turn against capitalism as well. And because of democracy — because people can vote — they can together affect political change, and this will lead to socialism.

What is socialism? Socialism is just a redistribution of wealth. Say there are three classes: the rich, the middle class, and the poor. All redistribution does is take money from the rich and give it to the poor. But because of this, the middle class improves in status and power. So you would think the poor want this system because they have more equality — but actually the people who really want the system are the middle class, because over time they have more power and status than the rich. That's a pretty powerful coalition. That's why socialists believe that over time this is just a natural evolution. This is true for most of human history — after World War II, Europe didn't become communist, it didn't become purely capitalist, it became socialist with a very strong welfare system.

But Marx had problems with this. He says the major problem is false consciousness. Capitalists — the ruling elite — have a lot of tricks up their sleeves. They can brainwash the workers. For this to work out, you need to create true consciousness: you need to destroy religion, revamp the education system, control the media. Otherwise the capitalist will use schools, media, and religion to brainwash the workers. Also these workers need to unite across the world to have true power, because the real struggle is one of class consciousness. And for socialism to arise, we need to destroy class. So the idea of the middle class obtaining power is bad — what we should have is everyone the same: equality. That's the idea of Marxism — to destroy all property. That's the main difference between socialism and communism. Socialism is the redistribution of property. Communism is the destruction of property.

But if you do it this way — if you destroy all property — the middle class loses status. And so it's both the rich and the middle class that suffer under communism, and therefore they will probably unite together against the poor. So socialism and communism sound similar but are night and day. Socialism seems like the natural evolution of things. Why is Marx screwing around with this?

He also says: you need a party, a vanguard elite, to destroy the false consciousness, unite the workers, and create a communist society. And when the system is completely communist, then the party will give up power and you will have a socialist paradise. But why would the party give up power? If the party is capable of creating consciousness, why don't they just switch to a different false consciousness? The problem with Marx is that he takes socialism and makes it more extreme, makes it more confusing. And my argument is that when an idea becomes more extreme, the intention is to discredit it, to make it illegitimate, to destroy the idea. According to game theory, the people responsible for communism are not Marx — they are the capitalists, the ruling elite, who want to destroy the idea of socialism. They don't want unity between the middle class and the workers. They want the middle class to remain aligned with the nobility and the oligarchy.

So let me show how this works. In the feudal economy you have the monarch and the nobility. They have power through three mechanisms: they control the land, they control the military, and they control the religion. Then with the rise of industrialism, new people come into power: the bourgeoisie — the capitalists, the factory owners. And because of the bourgeoisie, you now have the workers. And because of the industrial economy, you have the middle class — lawyers, teachers, accountants, journalists, people who support the industrial economy.

When these new groups emerge, you have tension and violence. This is ultimately what led to the French Revolution, where the new order worked together to try to overthrow the old order, leading to the Napoleonic Wars — seven wars fought between France and everyone else, killing tens of millions of people. After Napoleon was defeated, all the leaders and nobility of Europe got together and decided that from now on they would no longer fight war. They created something called the Concert of Europe — these different monarchies agreeing to resolve differences through negotiation rather than on the battlefield, like a kind of United Nations. And it worked really well.

The problem is it worked too well, because it didn't resolve the underlying conflict: the old order wanted to maintain the status quo, but the industrial economy was demanding a new order allowing for democracy, liberalism, socialism, redistribution of wealth, greater political participation, and limitations on religion. So this system was created to avoid the French Revolution, but because of the resulting peace, the ingredients for another French Revolution were increasing. This led to something called the 1848 Revolutions, which happened throughout the entirety of Europe simultaneously — uprisings combining bourgeoisie, middle class, and workers calling for changes in government, some violent, some peaceful, some focused more on democracy, some on liberalism, some on socialism.

After 1848, the leaders of Europe recognized that if nothing changed, eventually the new order was going to consume them. Their solution was to divide the coalition between bourgeoisie, middle class, and workers. The first idea was to create the concept that the real conflict is class — that the real enemy is not between the nobility and the bourgeoisie, but between the bourgeoisie and the workers. Second: discredit the movement by making it seem extreme, fanatical, zealous. And you do that by saying: what we want is not a welfare society — what we want is a completely equal society where no one has any money, no one has any rights, no one has any freedom. Communism. Third: delegitimize it by saying this is an international conspiracy — these communists are in a secret society who want to take over the entire world, funded by Jews, by foreigners, by the British — they're not Germans, they're not French, they're not us.

So you think about it: communism was a psyop — a tool used by the elite, by the nobility, to make the movement of democracy, socialism, and liberalism illegitimate. Let's look at the evidence. In 1848 because of peace you had overpopulation and economic growth, which led to inequality, which led to conflict between the bourgeoisie — the new rising powers — and the nobility — the status quo powers. The only place in Europe basically spared these revolutions was England, and the reason is that England had colonies: if you're unhappy, you could go to Canada, Australia, New Zealand. Everyone else was stuck where they were, fighting for more rights. And this put the fear of God into the European nobility.

So what they do is sponsor the creation of communism to divide the capitalist class, the middle class, and the workers against each other — to create the idea of class conflict. Karl Marx and Friedrich Engels write the Communist Manifesto. This comes after the 1848 revolutions, when they are absolutely convinced that Europe is ready for a global revolution. And this is also a secret document — at this time the communists were a secret society all around Europe. I would argue this was probably being funded by the nobility.

The Manifesto calls for: abolition of property — no more property, which is pretty extreme, because remember the middle class wants to support socialism but cannot support communism. Socialism is redistribution of wealth; communism is the abolition of wealth — two very different things. Abolition of inheritance — meaning the middle class who worked hard to pass wealth to their children is now excluded. Centralization of credit in the hands of the state by means of a national bank — and you think this sounds extreme, but they already do this in capitalism: it's called the Bank of England. So there are already a lot of similarities between capitalism and communism. Centralization of communication — this is just the capitalist class, an oligarchy. Extension of factories and instruments of production owned by the state; equal liability of all to work; free education for all children — which sounds great, but that just means you can brainwash them through the state school system.

So you're like: as a capitalist, I'm okay with most of this agenda. The Manifesto also describes how the proletariat in its contest with the bourgeoisie is compelled to make itself the ruling class and then will, along with sweeping away the old conditions of production, have abolished its own supremacy as a class. This sounds very noble — but notice that it establishes that the proletariat and the party are the real enemies of the bourgeoisie, not the capitalists against the monarchy, not capitalism against religion. The real conflict is class. And for the proletariat to win, they need a vanguard party. But once this party establishes itself and destroys class, it will voluntarily give up power. This has never happened in history before, but trust us on this one.

Now I want to talk about 1917. World War I is breaking out, the Russians are losing the war, the Tsar Nicholas abdicates, and now you have a democratic government in Russia. But then the Bolsheviks — an extreme communist faction — launch the October Revolution, seize power, and then hold elections. Even though the Bolsheviks have seized power, they're not very popular: seventeen million people voted for the socialists, only ten million for the Bolsheviks, even though the Bolsheviks controlled the government — only twenty-three percent of the popular vote. So they are a minority faction. This launches the civil war. At this time the communists control the major cities of Russia but not most of the country — they face the Whites, which is basically the nobility; allied armies coming in from outside; the Greens, who are the peasants. You could not possibly expect the Bolsheviks to win this battle. But they do.

Here's something interesting. The Romanovs have been in power in Russia for hundreds of years, beloved by the peasants, part of the Orthodox tradition, and relatives of the nobility of Europe — including in England and Germany. When the revolution broke out, you would think they would just run away to Europe, where their relatives are. They didn't. They just stuck around, because they never believed they were in danger. They couldn't expect the Bolsheviks to win, they were beloved by the peasants, they were part of the Orthodox Church tradition, and they had relatives who were the most powerful people in Europe. But then something strange happens: the Bolsheviks decided to kill every one of them. Between seventeen and eighteen members of the Romanov family were assassinated. Why would they do that? By doing that, you turn the peasants against you, you enrage the royal families of Europe, and you come across as fanatical. But let's assume they had a good reason. Why would they?

The answer is this: the Romanovs had billions and billions of dollars in foreign banks — in the City of London, on Wall Street. A lot of their wealth was stored overseas. What happens if they all die? Those billions now belong to the foreign banks. And that is exactly what happened — the Romanovs all died and the foreign banks took control of the money. The government of Russia has been trying for a long time to get this money back, and the foreign banks say: well, you don't own this money, it belonged to the Romanovs. So this is evidence that the communists and the capitalists are actually working together.

Another thing: the Bolsheviks are not popular. The peasants are upset at them for killing the royal family. There aren't that many workers. So how do they fight this war? With mercenaries — from Latvia, from China, from Hungary — over two hundred thousand of them. But the Bolsheviks don't have any money. How do they pay these mercenaries? Wall Street and the City of London gave the Bolsheviks money to pay the mercenaries. Why would they do that? Because the Bolsheviks, to pay back Wall Street, created the Red Terror — basically going to all the rich people in Russia, the nobility, and saying: give me all your money or I will hurt your family and kill you. By doing that they made a lot of money, and that money went to pay Wall Street for the foreign mercenaries. Again: capitalists and communists working well together.

Then you have the allied forces — Britain, America, France, Japan — who sent huge armies to Russia. Everyone thought this would destroy communism, because these are capitalists afraid of the communists. But in fact they went to collect debt: Russia owed these countries money. The Bolsheviks paid off the debt. So then the Allies left and actually attacked the Whites. So the Allies helped the Bolsheviks, and Wall Street gave money to the Bolsheviks for mercenaries. That's how the Bolsheviks won the civil war.

In the book Wall Street and the Russian Revolution by Richard Spence, a historian with a lot of documentation, it is explained that Wall Street was actually financing the Bolsheviks and why. Wall Street wanted to destroy the Russian economy — Russia was a threat — and then steal the riches and resources from the Russians. From 1918 until 1921, the Bolsheviks reduced Russia to an economy based on barter and robbery. They stole everything from the rich, the middle class, and the poor to finance their war. They ransacked palaces, bank vaults, churches, and museums — asset stripping. By the close of 1921, an estimated $450 million in valuables had been sequestered, with more to come, and much of it fenced abroad for a fraction of its value in capitalist hard currency. The Bolsheviks stole everything to finance the war. And in the process, by destroying tradition, wealth, religion, and nobility, they made the Soviet Union much more amenable to capitalism. That's what happened when the Soviet Union fell — it became capitalist. This shows us that capitalism and communism are not enemies. They are partners in world conquest. That's what the twentieth century is about.

A student asked about China: when China officially became a recognized country, they pursued communism and followed Marx's thinking. Currently there's a Chinese term — "socialism with Chinese characteristics" — is that a way the leaders deal with the fact that the country is actually pursuing capitalism? Is communism just professed?

China is an interesting example because when Marx was examining the world, the two places he didn't really consider were Russia and China. Why? Because both are agrarian — what he calls feudal — and from his perspective they had not reached a state of development which is ripe for world revolution. For him the focus was on Germany. And this makes sense because remember, Marx was being supported by Britain, and Britain was a great enemy of Germany. So Britain would support Marx because Marx was trying to create a revolution in Germany. For Marx, Russia and China don't really matter because they're backward, agricultural, with monarchies — they don't fit into his model.

But then Lenin came and said: you can speed up the revolution. Even though peasants haven't yet become workers, if you have a party to help the process, you can accelerate it. And Mao said: you don't even need workers. You can have a movement entirely of peasants. And once you have won the revolution, you can then create an industrial revolution. So really, if you think about it, Mao wasn't really leading a communist revolution. It had the facade of communism, but it was really a peasant uprising — Mao was no different from other peasant leaders in Chinese history like Zhu Yuanzhang of the Ming dynasty. In order to create legitimacy and obtain support from the Soviet Union, they had the communist facade. And also communism provided a framework to industrialize very quickly.

What's important to understand is that at this time in history, Mao was actually trying to work with the United States as well — trying to work with both the Soviet Union and the United States. The United States wanted to support Chiang Kai-shek. So when Mao won, the United States shut off China, embargoed China, which forced Mao to fully embrace communism. But for Mao, communism was not that important. What was important was industrialization and national sovereignty. He didn't really want to be controlled by the Soviet Union. That's what ultimately led to the Sino-Soviet split in 1957.

Another student asked: can we understand that capitalism equals communism — or that communism is a weapon of capitalism — and that at the end, pursuing communism will finally lead to capitalism?

Capitalism is the belief that you can structure society around capital. And this is a direct threat to the old order, which focused on religion, the king, and the military. So capitalism says: let's get away with all this complexity, let's just make capital the basis of society. As these two systems came into conflict, the workers wanted socialism — social democracy. Social democracy is: yes, we believe in capitalism, but we believe in restraints on capitalism, in a fair distribution of capital. You can't just have a few people with all the money. And that makes sense — it's a natural and reasonable evolution. But social democracy was a threat to the old order, and also a threat to pure capitalism. So what the old order and capitalism did was mutate social democracy into communism in order to delegitimize it — to turn it into a threat against everyone.

To summarize: capitalism is a natural outgrowth of history, and it gives birth to social democracy, which is a natural response to capitalism. Social democracy becomes a threat to both the old order and to capitalism. Capitalism and the old order are also in conflict with each other. So they conspire to create communism. In the early days, communism is being supported by both the nobility and the capitalists, for different reasons. And then because of this support, communism becomes much more extreme, which leads to Bolshevism. No one initially thought that from communism you'd get Bolshevism — Bolshevism seemed crazy. But over time it became more mainstream, which led to the rise of communism everywhere, including in China. The October Revolution of 1917 was a wild gamble that worked because of the greed of capitalists. But once communism was established in the Soviet Union, it changed the way people saw the world, and people thought that communism was now possible anywhere — including in China.