<p><strong>TL;DR</strong>:</p>
<p>The premise of the question is somewhat flawed. Embargos &amp; or sanctions are not capitalist policies. Next embargos definitely hurt prosperity of socialist countries, but it is definitely not the <em>only</em> reason why the economic system is not successful in delivering high material standards for its people.</p>
<p><strong>Full Answer:</strong></p>
<blockquote>
<p>I want to explore the assertion often made by proponents of socialism, that socialism did indeed not work only because it was constrained by capitalism</p>
</blockquote>
<ol>
<li>I think the premise of this question is somewhat flawed. Capitalism is poorly defined in economics but Pocket Oxford English Dictionary (11ed edited by M. Waite) defines capitalism as followed:</li>
</ol>
<blockquote>
<p>An economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state.</p>
</blockquote>
<p>under the dictionary definition of capitalism, trade embargo, such as the embargo of Cuba is literally anti-capitalist policy. Embargos are implemented by government, they are government intervention not result of operation of markets. They are also not done for profit but as geopolitical interventions.</p>
<p>So the premise that it was the capitalism constraining socialism is flawed, if US would be antagonistic power operating socialist economy embargoing Cuba, then the embargo would still isolate Cuba in exactly same way.</p>
<ol start="2">
<li>However, let us set the flawed premise aside, since we can easily modify your question a question whether socialism was constrained by the non-socialist governments and it would still be reasonable question to ask.</li>
</ol>
<p>Any country, socialist or not, will be hurt by trade restrictions. Free trade is generally beneficial because it allows countries to specialize in what they can do best, have larger variety of goods and services, take advantage of economies of scales, it has dynamic effect on technology development and so on (see discussion of this in Krugman et al International Economics Theory and Policy pp 35-36,64-77, 250-253). Even in cases where open trade might not be the first best policy, rent seeking, lack of timely information, informational asymmetries and principal agent problems make free trade often the best possible practical policy for country to pursue (see <a href="https://www.aeaweb.org/articles?id=10.1257/jep.1.2.131" rel="nofollow noreferrer">Krugman 1987</a>).</p>
<p>Consequently, being excluded from participation in free trade will definitely significantly hurt country's  economy (although it is worth noting many socialist countries deliberately pursued autarky (i.e. no trade) so it is not clear if let's say Cuba would become free trading nation in absence of embargo). For example, USSR  explicitly tried to achieve autarky and maximum level of self-sufficiency <a href="https://www.jstor.org/stable/2144779" rel="nofollow noreferrer">(Armstrong 1948)</a>. In 1985 the exports+ imports share of GDP was estimated to be only 4% for USSR (<a href="https://www.loc.gov/item/90025756/" rel="nofollow noreferrer">Keefe et al 1991</a>) which is basically  nothing.</p>
<p>Next in your question you specifically ask if these embargos and sanctions are the only or main reason for demise of socialist economies.</p>
<p>That is highly unlikely for numerous reasons.</p>
<ul>
<li><p>before fall of the USSR in <a href="https://commons.wikimedia.org/wiki/File:Cold_War_Map_1959.svg" rel="nofollow noreferrer">1980</a> more than 1/3 of the world (by population) was socialist or socialist aligned, and another 1/3 was unaligned. USSR was also not having sanction put on itself by every democratic country, most of it was USA and UK (see this data by <a href="https://www.piie.com/summary-economic-sanctions-episodes-1914-2006" rel="nofollow noreferrer">Peterson Institute</a>). Moreover, USSR had its own sanctions against western democratic countries which have mixed but predominantly capitalist economies and they did more or less fine.</p>
<p>Also, just on a face of it the argument that socialism failed because USA and UK refused to trade with socialist countries seems to be flawed. If every socialist economy needs a capitalist trading partner to sustain itself then socialism is not generally viable economic system. There has to be something else added to the argument to make trade with capitalist nations in that particular time period necessary and not general precondition for success of socialist states that must be present at all times.</p>
<p>As pointed out by Giskard, in his excellent comments, one could argue here that the problem was relative factor abundance that west had too much capital and socialist countries too much labor. However, this could not be major factor in their demise. While there are certainly gains from trade to be made trade between capital abundant and labor abundant countries, most trade flows cannot be explained simply by different factor abundance (Krugman et al. International Economics  pp 128-134). Patterns of trade and gains from trade crucially depend on many other factors such as comparative advantage, network effects etc., so this could not be the primary reason why they would need to trade with USA or UK (although for sure it would help at least a bit). In addition, there were some minor socialist nations that had relatively large capital stocks (see   O'Rourke and Williamson (2017) in The Spread of Modern Industry to the Periphery since 1871 ch4). While no substitute for larger nations like USA or UK, it still makes the factor abundance argument weaker.</p>
<p>Trade is two way street capital abundant countries benefit from trading with labor abundant countries (see Krugmant et al, International Economics Ch 5).  So by putting the sanctions on trade with USSR, USA and UK harmed themselves as well. This being said one could still say, they might not suffered equally. It is hard to estimate counterfactual gains from trade between USSR and USA for each party, but a priori there is no reason to even think that USSR suffered more from USA not willing to trade with it. It might well be other way around.</p>
</li>
<li><p>Core economic characteristic of socialist economies such as state ownership of all factors of production itself is economically inefficient. In economics, it is accepted that countries with good 'inclusive' institutions, such as strong property rights, are more productive and able to develop faster (or even develop at all) than countries with bad 'extractive' institutions, such as forced labor (see Acemoglu 2008, Acemoglu &amp; Robinson <a href="https://academic.oup.com/qje/article-abstract/115/4/1167/1820389" rel="nofollow noreferrer">2000a</a>, <a href="https://www.aeaweb.org/articles?id=10.1257/aer.90.2.126" rel="nofollow noreferrer">2000b</a>, <a href="https://www.aeaweb.org/articles?id=10.1257/aer.91.4.938" rel="nofollow noreferrer">2001</a>, <a href="https://www.cambridge.org/core/books/economic-origins-of-dictatorship-and-democracy/3F29DF90519971B183CAA16ED0203507" rel="nofollow noreferrer">2006</a>, <a href="https://www.aeaweb.org/articles?id=10.1257/aer.98.1.267" rel="nofollow noreferrer">2008</a>; Olson <a href="https://www.jstor.org/stable/j.ctt1nprdd" rel="nofollow noreferrer">1984</a>, Bates <a href="https://www.ucpress.edu/book/9780520282568/markets-and-states-in-tropical-africa" rel="nofollow noreferrer">1981</a>, <a href="https://www.ucpress.edu/book/9780520060142/essays-on-the-political-economy-of-rural-africa" rel="nofollow noreferrer">1983</a>, <a href="https://www.cambridge.org/core/journals/africa/article/abs/robert-h-bates-beyond-the-miracle-of-the-market-the-political-economy-of-agrarian-development-in-kenya-cambridge-cambridge-university-press-218-pp-2995-isbn-0-521-34257-0-hard-covers-1989-1095-isbn-0-521-43792-x-paperback-1992/FA07682578E411892B1628A8593E12E1" rel="nofollow noreferrer">1989</a> and sources cited therein)</p>
<p>Strong property rights, free access to labor markets, free enterprise are all examples of very important inclusive institutions that help economies to prosper and grow. Some of these institutions are not compatible with socialist economies (e.g. free enterprise, strong property rights).</p>
</li>
<li><p>Historically most socialist countries implement price controls instead of letting prices be determined by market. This in itself is not core feature of socialism (like autraky which is also not in definition of socialism), but for some reason its popular policy omnipresent in all socialist economies.</p>
<p>Both historically and in the present price controls are generally speaking (there might be few rare exceptions) unmitigated disaster (see <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3575173" rel="nofollow noreferrer">Guenette 2020</a> for more recent overview, or <a href="https://www.goodreads.com/book/show/19238120-forty-centuries-of-wage-and-price-controls" rel="nofollow noreferrer">Schuettinger and Butler 2011</a> for some historical perspective). Non-market prices lead to chronic shortages or waste for goods and services.</p>
</li>
</ul>
<p>For example, China itself started experiencing strong robust growth and economic progress only once it eschewed, direct government ownership of most of the factors of production, price controls, opened itself to foreign investment etc (see <a href="https://books.google.nl/books/about/How_China_Became_Capitalist.html?id=Aq4YDAAAQBAJ&amp;printsec=frontcover&amp;source=kp_read_button&amp;hl=en&amp;redir_esc=y#v=onepage&amp;q&amp;f=false" rel="nofollow noreferrer">Wang and Coase, 2012</a>).</p>
<p>Thus while various sanctions and embargos from democratic countries definitively did not help socialist countries, they are hardly the major factor disrupting socialist economies, generally speaking. The effect is of course heterogenous Cuba likely suffered from sanctions more than USSR, but the socialist economic system as implemented in USSR was effectively imposing economic self-isolation anyway. It also had wider institutional and policy problems that hardly can be ascribed to the sanctions (e.g. I doubt one could show there is any relationship between USA sanctions and USSR having price controls).</p>

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2021-12-20T21:38:58.440Z
1.Does China with it's immense growth have "strong property rights"?
Giskard
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2021-12-20T21:40:20.703Z
2. Seems like the socialist aligned third of the world had much less accumulated capital than the other third to start with. Surely this matters?
Giskard
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2021-12-20T21:46:57.330Z
@Giskard 1. not as strong as UK or NL but far stronger than North Korea. If we are taking about dichotomy of having weak property rights or strong property rights China would be in my opinion on the strong side although only marginally. 2. How would that make any difference? The sanctions were trade sections, socialist countries already did not allowed FDI. I do not think one can reasonably assume that if USA would not embargo Cuba or put sanction on Russia, McDonald could open restaurant there in 1980s. So absence of these sanctions could not lead to capital inflow into socialist countries
1muflon1
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2021-12-20T21:50:11.173Z
Also, it is not universally true. Czechoslovakia was capital rich country before communist coup. Or North Korea had more capital then South Korea which was mostly rural at the start of civil war. Furthermore, if socialist countries were unable to accumulate capital over time then that is another internal problem I could put on the list above. It is not like UK, USA or France found some exogenous capital endowment. They accumulated capital because they had (relatively) well functioning capital markets and high savings rates in the past
1muflon1
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2021-12-21T07:06:08.850Z
Can you please support your claim that "*Czechoslovakia was capital rich country before communist coup*" with a reference? I assume you mean after WW2, otherwise I do not see the point of the remark. Perhaps also add some statistical estimates about capital levels in each country in 1948? I recall the US had an extremely high share of all the capital in the world. Perhaps because of excellent libertarian policies, perhaps because most other non-colonial parts of the world were just bombarded for several years.
Giskard
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2021-12-21T07:09:29.390Z
I brought up the issue of capital because of your remark: "*If every socialist economy needs a capitalist trading partner to sustain itself then socialism is not generally viable economic system.*" Most economic models would argue that capital poor countries would benefit greatly from trade with capital rich countries. Why are you counting countries by the number then?
Giskard
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2021-12-21T07:11:06.720Z
"*Furthermore, if socialist countries were unable to accumulate capital over time then that is another internal problem I could put on the list above.*" As I pointed out, they way had less capital to start with. I could be convinced that the rate of accumulation was slower than in Westerns countries (please add reference) but this was not your claim, was it?
Giskard
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2021-12-21T07:12:08.553Z
Note that I am not debating your central thesis, but you make several arguments where the consequences do not follow from your assumptions/statements.
Giskard
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2021-12-21T07:21:32.003Z
I just realized you added a Mises Institute book as a reference. ...
Giskard
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2021-12-21T08:41:22.807Z
@Giskard 1. sure, you can have a look at Vonyó & Klein (2008) which show capital stocks for czechoslovakia, poland and hungary (CZ has the highest one). Also capital stock in CZ was relatively high in absolute terms *for the era*, from that I extrapolate that CZ was capital rich although I did not see rigorous analysis of comparison of capital to labor but I think its reasonable claim (also of course not as capital rich as US - here the claim is that if we would divide countries into capital poor and rich CZ would made the cut in 1950). They also conclude "While we
1muflon1
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2021-12-21T08:45:20.560Z
accept that socialism was relatively inefficient, we argue that the
socialist growth experience requires revision. Official statistics not only overstated
the growth of national income but also the rate of capital accumulation. Planned
economic development was not as capital-intensive as previous research has
suggested. Productivity growth never came to a standstill and certainly did not
go into reverse. The growth retardation of the 1980s in east-central Europe did not
result from the failure to sustain productivity growth but mainly from the failure
to sustain factor accumulation."
1muflon1
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2021-12-21T08:51:54.523Z
@Giskard 2. But in my answer I do say that socialist countries would benefit from trade, point was they had plenty other trading partners to choose from (its not like USA was literally only country they could trade, there were many countries that ended up being neutral Austria/Switzerland and as I showed the sanctions were mostly laid by UK and US and in addition USSR consciously pursued autarky. 3. Since these countries were closed to FDI the trade would not be as beneficial as for regular country (non-trivial amount of trade is due to companies making brown/green field investment and
1muflon1
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2021-12-21T08:57:11.600Z
exporting products back. 4. And I thank you for pointing those instances, I mean it is hard to discern emotion over internet so let me assure you that all your remarks are taking in good spirit. 5. Yes the history book on price controls happens to be published by mises institute. What of it? It happens to be a good book. I do not think that generally publications from think tanks like Mises institute or INET etc are high quality, but this one is actually quite matter of fact historical recant of price control failures and decent overview of historical literature. Credit where credit is due
1muflon1
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2021-12-21T08:57:45.120Z
In the past I occasionally cited INET publications in my answers as well, never saw anyone complaining about that. Mises Institute is libertarian version of left wing INET, sure often they publish sub-par heterodox scholarship like all these non-academic think thanks with ideological bent but even blind man occasionally hits the target. The book does not have much if any heterodox economics in it and its rather mainstream and it is mostly historical account of price controls
1muflon1
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2021-12-21T15:02:55.833Z
"*1. sure, you can have a look at Vonyó & Klein (2008) which show capital stocks for czechoslovakia, poland and hungary (CZ has the highest one). Also **capital stock in CZ was relatively high in absolute terms for the era***" (**emphasis** by me) I have parsed the document ([2016 version](http://demop.scomos.com/pdf/vonyo-klein-2016.pdf)), but I am not sure where you get support for your quote. Is your argument for CZ being well-endowed that it was richer than the other battlefield countries after WW2?
Giskard
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2021-12-21T15:18:18.230Z
@Giskard from the comparison of CZ capital stocks to other countries of the Warsaw pact in the paper. I am not sure if we are not talking pass each other, so let me just give you run down of my argument. From IT perspective capital abundance matters for A) capital flows - we can disregard that since USSR or Warsaw pact did not permit those by internal policies. B) It matters for patterns of trade in H-O factor endowment model. There is scope for gains from trade when Labor-Rich country trades with Capital-Rich (capital rich just means capital is relatively more abundant than trading partner)
1muflon1
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2021-12-21T15:21:11.530Z
so my point is that there were socialist countries that were relatively more capital rich with which labor rich socialist countries can exchange labor intensive goods for capital intensive goods. They did not need to do that with USA or UK. However, in any case I do not think this is much relevant point for any other country then perhaps Cuba. USSR and countries of Warsaw pact were explicitly trying to be self-sufficient and autarky was their political goal. Foreign embargos/sanctions have zero effect on a country that chooses to autarky as policy choice
1muflon1
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2021-12-21T15:25:17.713Z
the data show that CZ could have played role of capital rich country for HU and PL and I am just extrapolating from that and assuming the same would hold other socialist countries because I doubt that lets say Albania was more capital endowed then Hungary or Poland etc
1muflon1
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2021-12-21T15:47:03.617Z
Also for the highlighted passage I suppose I could provide more sources. For example, O'Rourke and Williamson (2017) in The Spread of Modern Industry to the Periphery since 1871, describe that Bohemia was one of the most industrialized east European country. It had head start over neighbours and after Austria was most industrialized part of AH empire, and generally in output per capita dominated other countries such as Poland and Hungary, Also according to the source the industrialization of Czech lands was further accelerated during Nazi occupation (due to wartime industrial expansion),
1muflon1
CC BY-SA 4.0
2021-12-21T15:49:33.517Z
CZ also had the larger number of cars per head than HU, comparable with Austria and not much Smaller than Germany did.  So for me that is pretty clear indication that CZ was heavily industrialized and capital rich, likely comparable to Austria. It did not see much heavy fighting when it was liberated, at that point 3rd Reich was in death-trows, so there wasnt as much capital destruction there. Also after the war CZ expelled Sudeten Germans and Hungarians, and although morally that was repugnant, that would just make them have higher ratio of capital to labor vis-a-vis neighbors
1muflon1
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2021-12-21T16:17:14.870Z
Seems to me you are arguing that the Soviet bloc could have traded with capital rich countries because they had the Czech republic (a small country), which in 1950 was relatively well off when compared to their neighbors (who where just invaded and occupied by the Soviet army). This - to me - seems ridiculous. It was a small and not that industrialized country, clearly it could do little the satisfy Soviet industrial demand. If I were you I would remove this part of the answer.
Giskard
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2021-12-21T16:18:31.880Z
Perhaps the Soviet aim was autarky anyway. I do not know enough history to know of their trade policy, but it seems this could have been a "sour grapes" type of policy. (Perhaps it was simply ideological, I really do not know.) The Soviets did have [Comecon](https://en.wikipedia.org/wiki/Comecon). (Not to be confused with Comic-Con.)
Giskard
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2021-12-21T16:25:02.073Z
@Giskard I am always happy to edit my A, but what part should I edit? that was not part of my answer, that was respond to your comment. In my answer I do not discuss HO model of trade. But that is in any case just small part of trade. Large portion of trade is simply due to comparative advantage, difference in tastes, just gravity between the countries etc. Also maybe you missed it, but in my answer I already say that the fact that these countries did not trade was bad for them, I just say that it wasn't the main factor why they failed.
1muflon1
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2021-12-21T16:25:35.777Z
"*before fall of the USSR in 1980 more than **1/3 of the world was socialist or socialist aligned, and another 1/3 was unaligned**. USSR was also not having sanction put on itself by every democratic country, most of it was USA and UK (see this data by Peterson Institute). Moreover, USSR had its own sanctions against western democratic countries which have mixed but predominantly capitalist economies and they did more or less fine. **If every socialist economy needs a capitalist trading partner to sustain itself then socialism is not generally viable economic system.***"
Giskard
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2021-12-21T16:27:54.603Z
1. Clarify how you measure "1/3" (share of world population? share of world capital stock?). What is the point if this if not to imply gains from trade were achievable? 2. Final sentence is hyperboly.
Giskard
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2021-12-21T16:32:18.743Z
@Giskard 1. by population.  2. But that is an if statement. E.g. If premise that every socialist country needs a capitalist trading partner is true then conclusion, socialism is not generally viable system follows
1muflon1
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2021-12-21T16:33:58.800Z
If false, then that is a rather silly sentence to write. I percieve "if false, then [insert hiperboly/wished for implication]" as a type of bad faith argument.
Giskard
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2021-12-21T16:35:12.793Z
Okay, I think I wrote all that I wished to say, thank you for reading. Whether you edit your answer or not is of course up to you. I am by no means a foreign trade scholar.
Giskard
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2021-12-21T16:35:54.267Z
@Giskard I am not trying to argue in bad faith, but that seems to be implication of the argument that Western countries not wanting to trade with socialist countries was part of their demise
1muflon1
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2021-12-21T16:38:07.197Z
@Giskard I am going to edit it per your suggestion, but just to clarify factor abundance is not primary factor that even determines patterns of trade. Sure there are gains from trade from trading with a party that has different factor abundance, but already countries exhibit Leontief paradox where they ofthen simply dont for various reasons like networks new trade theory stuff comparative advantage etc. So i dont think this is something that *qualitatively* changes the answer,  but more nuance cant hurt, and again thanks for all the remarks
1muflon1
CC BY-SA 4.0
2021-12-21T20:10:04.257Z
Thanks for your thorough answer. Maybe you could add South Korea to the list? North Korea is one of the most isolated countries in the world while South Korea experienced above average GDP growth rates.
CuriousIndeed
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2021-12-21T23:12:28.403Z
@Rubus you are welcome, if you think the answer answered your question consider accepting it, also what list in my text you refer to?
1muflon1
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2021-12-21T23:21:51.703Z
Sorry, list is the wrong word, just where it fits..Since you answer many of my questions there is a bounty for you in 23h.(cannot award it sooner).Thanks again for answering this important question!
CuriousIndeed
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2021-12-20T20:54:45.067Z
2021-12-21T17:07:13.700Z
2021-12-21T17:07:13.700Z
1muflon1
<p>Following the definition of socialism by Oxford dictionary. <a href="https://www.oxfordlearnersdictionaries.com/definition/english/socialism?q=socialism" rel="nofollow noreferrer">Socialism</a></p>
<blockquote>
<p>a set of political and economic theories based on the belief that everyone has an equal right to a share of a country’s wealth and that the government should own and control the main industries.</p>
</blockquote>
<p>I want to explore the assertion often made by proponents of socialism, that socialism did indeed not work only because it was constrained by capitalism.</p>
<p>I know for example that the US imposed sanctions on Cuba which were devastating to its economy. Similar sanctions were made by the US against the Soviet Union lasting for 50 years.</p>
<p>On the other hand the border between east and west (iron curtain) was built and maintained by the Soviet Union. Furthermore the Soviet Union spanned huge areas and trading with other socialist countries (such as China) was possible.</p>
<p>Is constraint by capitalist countries the main reason why socialism did not work or is the planned economy the main reason for the demise of socialist countries?</p>

<history-economic-thought><history>
Is there any evidence that socialist systems are/ were constrained by capitalism and this is the main cause for its demise?
CuriousIndeed
# Is there any evidence that socialist systems are/ were constrained by capitalism and this is the main cause for its demise?

(Asked by: username_0 on 2021-12-19)

Following the definition of socialism by Oxford dictionary. [Socialism](https://www.oxfordlearnersdictionaries.com/definition/english/socialism?q=socialism)

> a set of political and economic theories based on the belief that everyone has an equal right to a share of a country’s wealth and that the government should own and control the main industries.

I want to explore the assertion often made by proponents of socialism, that socialism did indeed not work only because it was constrained by capitalism.

I know for example that the US imposed sanctions on Cuba which were devastating to its economy. Similar sanctions were made by the US against the Soviet Union lasting for 50 years.

On the other hand the border between east and west (iron curtain) was built and maintained by the Soviet Union. Furthermore the Soviet Union spanned huge areas and trading with other socialist countries (such as China) was possible.

Is constraint by capitalist countries the main reason why socialism did not work or is the planned economy the main reason for the demise of socialist countries?

**Tags:** history-economic-thought, history

---

## 1 answers

### Answer by username_1 on 2021-12-20. Score: 2 | Accepted answer

**TL;DR**:

The premise of the question is somewhat flawed. Embargos & or sanctions are not capitalist policies. Next embargos definitely hurt prosperity of socialist countries, but it is definitely not the *only* reason why the economic system is not successful in delivering high material standards for its people.

**Full Answer:**

> I want to explore the assertion often made by proponents of socialism, that socialism did indeed not work only because it was constrained by capitalism

1. I think the premise of this question is somewhat flawed. Capitalism is poorly defined in economics but Pocket Oxford English Dictionary (11ed edited by M. Waite) defines capitalism as followed:

> An economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state.

under the dictionary definition of capitalism, trade embargo, such as the embargo of Cuba is literally anti-capitalist policy. Embargos are implemented by government, they are government intervention not result of operation of markets. They are also not done for profit but as geopolitical interventions.

So the premise that it was the capitalism constraining socialism is flawed, if US would be antagonistic power operating socialist economy embargoing Cuba, then the embargo would still isolate Cuba in exactly same way.

2. However, let us set the flawed premise aside, since we can easily modify your question a question whether socialism was constrained by the non-socialist governments and it would still be reasonable question to ask.

Any country, socialist or not, will be hurt by trade restrictions. Free trade is generally beneficial because it allows countries to specialize in what they can do best, have larger variety of goods and services, take advantage of economies of scales, it has dynamic effect on technology development and so on (see discussion of this in Krugman et al International Economics Theory and Policy pp 35-36,64-77, 250-253). Even in cases where open trade might not be the first best policy, rent seeking, lack of timely information, informational asymmetries and principal agent problems make free trade often the best possible practical policy for country to pursue (see [Krugman 1987](https://www.aeaweb.org/articles?id=10.1257/jep.1.2.131)).

Consequently, being excluded from participation in free trade will definitely significantly hurt country's economy (although it is worth noting many socialist countries deliberately pursued autarky (i.e. no trade) so it is not clear if let's say Cuba would become free trading nation in absence of embargo). For example, USSR explicitly tried to achieve autarky and maximum level of self-sufficiency [(Armstrong 1948)](https://www.jstor.org/stable/2144779). In 1985 the exports+ imports share of GDP was estimated to be only 4% for USSR ([Keefe et al 1991](https://www.loc.gov/item/90025756/)) which is basically nothing.

Next in your question you specifically ask if these embargos and sanctions are the only or main reason for demise of socialist economies.

That is highly unlikely for numerous reasons.

* before fall of the USSR in [1980](https://commons.wikimedia.org/wiki/File:Cold_War_Map_1959.svg) more than 1/3 of the world (by population) was socialist or socialist aligned, and another 1/3 was unaligned. USSR was also not having sanction put on itself by every democratic country, most of it was USA and UK (see this data by [Peterson Institute](https://www.piie.com/summary-economic-sanctions-episodes-1914-2006)). Moreover, USSR had its own sanctions against western democratic countries which have mixed but predominantly capitalist economies and they did more or less fine.

  Also, just on a face of it the argument that socialism failed because USA and UK refused to trade with socialist countries seems to be flawed. If every socialist economy needs a capitalist trading partner to sustain itself then socialism is not generally viable economic system. There has to be something else added to the argument to make trade with capitalist nations in that particular time period necessary and not general precondition for success of socialist states that must be present at all times.

  As pointed out by Giskard, in his excellent comments, one could argue here that the problem was relative factor abundance that west had too much capital and socialist countries too much labor. However, this could not be major factor in their demise. While there are certainly gains from trade to be made trade between capital abundant and labor abundant countries, most trade flows cannot be explained simply by different factor abundance (Krugman et al. International Economics pp 128-134). Patterns of trade and gains from trade crucially depend on many other factors such as comparative advantage, network effects etc., so this could not be the primary reason why they would need to trade with USA or UK (although for sure it would help at least a bit). In addition, there were some minor socialist nations that had relatively large capital stocks (see O'Rourke and Williamson (2017) in The Spread of Modern Industry to the Periphery since 1871 ch4). While no substitute for larger nations like USA or UK, it still makes the factor abundance argument weaker.

  Trade is two way street capital abundant countries benefit from trading with labor abundant countries (see Krugmant et al, International Economics Ch 5). So by putting the sanctions on trade with USSR, USA and UK harmed themselves as well. This being said one could still say, they might not suffered equally. It is hard to estimate counterfactual gains from trade between USSR and USA for each party, but a priori there is no reason to even think that USSR suffered more from USA not willing to trade with it. It might well be other way around.
* Core economic characteristic of socialist economies such as state ownership of all factors of production itself is economically inefficient. In economics, it is accepted that countries with good 'inclusive' institutions, such as strong property rights, are more productive and able to develop faster (or even develop at all) than countries with bad 'extractive' institutions, such as forced labor (see Acemoglu 2008, Acemoglu & Robinson [2000a](https://academic.oup.com/qje/article-abstract/115/4/1167/1820389), [2000b](https://www.aeaweb.org/articles?id=10.1257/aer.90.2.126), [2001](https://www.aeaweb.org/articles?id=10.1257/aer.91.4.938), [2006](https://www.cambridge.org/core/books/economic-origins-of-dictatorship-and-democracy/3F29DF90519971B183CAA16ED0203507), [2008](https://www.aeaweb.org/articles?id=10.1257/aer.98.1.267); Olson [1984](https://www.jstor.org/stable/j.ctt1nprdd), Bates [1981](https://www.ucpress.edu/book/9780520282568/markets-and-states-in-tropical-africa), [1983](https://www.ucpress.edu/book/9780520060142/essays-on-the-political-economy-of-rural-africa), [1989](https://www.cambridge.org/core/journals/africa/article/abs/robert-h-bates-beyond-the-miracle-of-the-market-the-political-economy-of-agrarian-development-in-kenya-cambridge-cambridge-university-press-218-pp-2995-isbn-0-521-34257-0-hard-covers-1989-1095-isbn-0-521-43792-x-paperback-1992/FA07682578E411892B1628A8593E12E1) and sources cited therein)

  Strong property rights, free access to labor markets, free enterprise are all examples of very important inclusive institutions that help economies to prosper and grow. Some of these institutions are not compatible with socialist economies (e.g. free enterprise, strong property rights).
* Historically most socialist countries implement price controls instead of letting prices be determined by market. This in itself is not core feature of socialism (like autraky which is also not in definition of socialism), but for some reason its popular policy omnipresent in all socialist economies.

  Both historically and in the present price controls are generally speaking (there might be few rare exceptions) unmitigated disaster (see [Guenette 2020](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3575173) for more recent overview, or [Schuettinger and Butler 2011](https://www.goodreads.com/book/show/19238120-forty-centuries-of-wage-and-price-controls) for some historical perspective). Non-market prices lead to chronic shortages or waste for goods and services.

For example, China itself started experiencing strong robust growth and economic progress only once it eschewed, direct government ownership of most of the factors of production, price controls, opened itself to foreign investment etc (see [Wang and Coase, 2012](https://books.google.nl/books/about/How_China_Became_Capitalist.html?id=Aq4YDAAAQBAJ&printsec=frontcover&source=kp_read_button&hl=en&redir_esc=y#v=onepage&q&f=false)).

Thus while various sanctions and embargos from democratic countries definitively did not help socialist countries, they are hardly the major factor disrupting socialist economies, generally speaking. The effect is of course heterogenous Cuba likely suffered from sanctions more than USSR, but the socialist economic system as implemented in USSR was effectively imposing economic self-isolation anyway. It also had wider institutional and policy problems that hardly can be ascribed to the sanctions (e.g. I doubt one could show there is any relationship between USA sanctions and USSR having price controls).

> **Comments:**
> **username_2**: 1.Does China with it's immense growth have "strong property rights"?  
> **username_2**: 2. Seems like the socialist aligned third of the world had much less accumulated capital than the other third to start with. Surely this matters?  
> **username_1**: @Giskard 1. not as strong as UK or NL but far stronger than North Korea. If we are taking about dichotomy of having weak property rights or strong property rights China would be in my opinion on the strong side although only marginally. 2. How would that make any difference? The sanctions were trade sections, socialist countries already did not allowed FDI. I do not think one can reasonably assume that if USA would not embargo Cuba or put sanction on Russia, McDonald could open restaurant there in 1980s. So absence of these sanctions could not lead to capital inflow into socialist countries  
> **username_1**: Also, it is not universally true. Czechoslovakia was capital rich country before communist coup. Or North Korea had more capital then South Korea which was mostly rural at the start of civil war. Furthermore, if socialist countries were unable to accumulate capital over time then that is another internal problem I could put on the list above. It is not like UK, USA or France found some exogenous capital endowment. They accumulated capital because they had (relatively) well functioning capital markets and high savings rates in the past  
> **username_2**: Can you please support your claim that "*Czechoslovakia was capital rich country before communist coup*" with a reference? I assume you mean after WW2, otherwise I do not see the point of the remark. Perhaps also add some statistical estimates about capital levels in each country in 1948? I recall the US had an extremely high share of all the capital in the world. Perhaps because of excellent libertarian policies, perhaps because most other non-colonial parts of the world were just bombarded for several years.  
> **username_2**: I brought up the issue of capital because of your remark: "*If every socialist economy needs a capitalist trading partner to sustain itself then socialism is not generally viable economic system.*" Most economic models would argue that capital poor countries would benefit greatly from trade with capital rich countries. Why are you counting countries by the number then?  
> **username_2**: "*Furthermore, if socialist countries were unable to accumulate capital over time then that is another internal problem I could put on the list above.*" As I pointed out, they way had less capital to start with. I could be convinced that the rate of accumulation was slower than in Westerns countries (please add reference) but this was not your claim, was it?  
> **username_2**: Note that I am not debating your central thesis, but you make several arguments where the consequences do not follow from your assumptions/statements.  
> **username_2**: I just realized you added a Mises Institute book as a reference. ...  
> **username_1**: @Giskard 1. sure, you can have a look at Vonyó & Klein (2008) which show capital stocks for czechoslovakia, poland and hungary (CZ has the highest one). Also capital stock in CZ was relatively high in absolute terms *for the era*, from that I extrapolate that CZ was capital rich although I did not see rigorous analysis of comparison of capital to labor but I think its reasonable claim (also of course not as capital rich as US - here the claim is that if we would divide countries into capital poor and rich CZ would made the cut in 1950). They also conclude "While we  
> **username_1**: accept that socialism was relatively inefficient, we argue that the socialist growth experience requires revision. Official statistics not only overstated the growth of national income but also the rate of capital accumulation. Planned economic development was not as capital-intensive as previous research has suggested. Productivity growth never came to a standstill and certainly did not go into reverse. The growth retardation of the 1980s in east-central Europe did not result from the failure to sustain productivity growth but mainly from the failure to sustain factor accumulation."  
> **username_1**: @Giskard 2. But in my answer I do say that socialist countries would benefit from trade, point was they had plenty other trading partners to choose from (its not like USA was literally only country they could trade, there were many countries that ended up being neutral Austria/Switzerland and as I showed the sanctions were mostly laid by UK and US and in addition USSR consciously pursued autarky. 3. Since these countries were closed to FDI the trade would not be as beneficial as for regular country (non-trivial amount of trade is due to companies making brown/green field investment and  
> **username_1**: exporting products back. 4. And I thank you for pointing those instances, I mean it is hard to discern emotion over internet so let me assure you that all your remarks are taking in good spirit. 5. Yes the history book on price controls happens to be published by mises institute. What of it? It happens to be a good book. I do not think that generally publications from think tanks like Mises institute or INET etc are high quality, but this one is actually quite matter of fact historical recant of price control failures and decent overview of historical literature. Credit where credit is due  
> **username_1**: In the past I occasionally cited INET publications in my answers as well, never saw anyone complaining about that. Mises Institute is libertarian version of left wing INET, sure often they publish sub-par heterodox scholarship like all these non-academic think thanks with ideological bent but even blind man occasionally hits the target. The book does not have much if any heterodox economics in it and its rather mainstream and it is mostly historical account of price controls  
> **username_2**: "*1. sure, you can have a look at Vonyó & Klein (2008) which show capital stocks for czechoslovakia, poland and hungary (CZ has the highest one). Also **capital stock in CZ was relatively high in absolute terms for the era***" (**emphasis** by me) I have parsed the document ([2016 version](http://demop.scomos.com/pdf/vonyo-klein-2016.pdf)), but I am not sure where you get support for your quote. Is your argument for CZ being well-endowed that it was richer than the other battlefield countries after WW2?  
> **username_1**: @Giskard from the comparison of CZ capital stocks to other countries of the Warsaw pact in the paper. I am not sure if we are not talking pass each other, so let me just give you run down of my argument. From IT perspective capital abundance matters for A) capital flows - we can disregard that since USSR or Warsaw pact did not permit those by internal policies. B) It matters for patterns of trade in H-O factor endowment model. There is scope for gains from trade when Labor-Rich country trades with Capital-Rich (capital rich just means capital is relatively more abundant than trading partner)  
> **username_1**: so my point is that there were socialist countries that were relatively more capital rich with which labor rich socialist countries can exchange labor intensive goods for capital intensive goods. They did not need to do that with USA or UK. However, in any case I do not think this is much relevant point for any other country then perhaps Cuba. USSR and countries of Warsaw pact were explicitly trying to be self-sufficient and autarky was their political goal. Foreign embargos/sanctions have zero effect on a country that chooses to autarky as policy choice  
> **username_1**: the data show that CZ could have played role of capital rich country for HU and PL and I am just extrapolating from that and assuming the same would hold other socialist countries because I doubt that lets say Albania was more capital endowed then Hungary or Poland etc  
> **username_1**: Also for the highlighted passage I suppose I could provide more sources. For example, O'Rourke and Williamson (2017) in The Spread of Modern Industry to the Periphery since 1871, describe that Bohemia was one of the most industrialized east European country. It had head start over neighbours and after Austria was most industrialized part of AH empire, and generally in output per capita dominated other countries such as Poland and Hungary, Also according to the source the industrialization of Czech lands was further accelerated during Nazi occupation (due to wartime industrial expansion),  
> **username_1**: CZ also had the larger number of cars per head than HU, comparable with Austria and not much Smaller than Germany did.  So for me that is pretty clear indication that CZ was heavily industrialized and capital rich, likely comparable to Austria. It did not see much heavy fighting when it was liberated, at that point 3rd Reich was in death-trows, so there wasnt as much capital destruction there. Also after the war CZ expelled Sudeten Germans and Hungarians, and although morally that was repugnant, that would just make them have higher ratio of capital to labor vis-a-vis neighbors  
> **username_2**: Seems to me you are arguing that the Soviet bloc could have traded with capital rich countries because they had the Czech republic (a small country), which in 1950 was relatively well off when compared to their neighbors (who where just invaded and occupied by the Soviet army). This - to me - seems ridiculous. It was a small and not that industrialized country, clearly it could do little the satisfy Soviet industrial demand. If I were you I would remove this part of the answer.  
> **username_2**: Perhaps the Soviet aim was autarky anyway. I do not know enough history to know of their trade policy, but it seems this could have been a "sour grapes" type of policy. (Perhaps it was simply ideological, I really do not know.) The Soviets did have [Comecon](https://en.wikipedia.org/wiki/Comecon). (Not to be confused with Comic-Con.)  
> **username_1**: @Giskard I am always happy to edit my A, but what part should I edit? that was not part of my answer, that was respond to your comment. In my answer I do not discuss HO model of trade. But that is in any case just small part of trade. Large portion of trade is simply due to comparative advantage, difference in tastes, just gravity between the countries etc. Also maybe you missed it, but in my answer I already say that the fact that these countries did not trade was bad for them, I just say that it wasn't the main factor why they failed.  
> **username_2**: "*before fall of the USSR in 1980 more than **1/3 of the world was socialist or socialist aligned, and another 1/3 was unaligned**. USSR was also not having sanction put on itself by every democratic country, most of it was USA and UK (see this data by Peterson Institute). Moreover, USSR had its own sanctions against western democratic countries which have mixed but predominantly capitalist economies and they did more or less fine. **If every socialist economy needs a capitalist trading partner to sustain itself then socialism is not generally viable economic system.***"  
> **username_2**: 1. Clarify how you measure "1/3" (share of world population? share of world capital stock?). What is the point if this if not to imply gains from trade were achievable? 2. Final sentence is hyperboly.  
> **username_1**: @Giskard 1. by population.  2. But that is an if statement. E.g. If premise that every socialist country needs a capitalist trading partner is true then conclusion, socialism is not generally viable system follows  
> **username_2**: If false, then that is a rather silly sentence to write. I percieve "if false, then [insert hiperboly/wished for implication]" as a type of bad faith argument.  
> **username_2**: Okay, I think I wrote all that I wished to say, thank you for reading. Whether you edit your answer or not is of course up to you. I am by no means a foreign trade scholar.  
> **username_1**: @Giskard I am not trying to argue in bad faith, but that seems to be implication of the argument that Western countries not wanting to trade with socialist countries was part of their demise  
> **username_1**: @Giskard I am going to edit it per your suggestion, but just to clarify factor abundance is not primary factor that even determines patterns of trade. Sure there are gains from trade from trading with a party that has different factor abundance, but already countries exhibit Leontief paradox where they ofthen simply dont for various reasons like networks new trade theory stuff comparative advantage etc. So i dont think this is something that *qualitatively* changes the answer,  but more nuance cant hurt, and again thanks for all the remarks  
> **username_0**: Thanks for your thorough answer. Maybe you could add South Korea to the list? North Korea is one of the most isolated countries in the world while South Korea experienced above average GDP growth rates.  
> **username_1**: @Rubus you are welcome, if you think the answer answered your question consider accepting it, also what list in my text you refer to?  
> **username_0**: Sorry, list is the wrong word, just where it fits..Since you answer many of my questions there is a bounty for you in 23h.(cannot award it sooner).Thanks again for answering this important question!  

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