Read the case study below and answer ALL questions.

Communism By Bryan Caplan

Before the Russian Revolution of 1917, socialism and communism were synonyms. Both referred to economic systems in which the government owns the means of production. The two terms diverged in meaning largely as a result of the political theory and practice of Vladimir Lenin (18701924). Like most contemporary socialists, Lenin believed that socialism could not be attained without violent revolution. But no one pursued the logic of revolution as rigorously as he. After deciding that violent revolution would not happen spontaneously, Lenin concluded that it must be engineered by a quasi-military party of professional revolutionaries, which he began and led. After realizing that the revolution would have many opponents, Lenin determined that the best way to quell resistance was with what he frankly called terrormass executions, slave labor, and starvation. After seeing that the majority of his countrymen opposed communism even after his military triumph, Lenin concluded that one-party dictatorship must continue until it enjoyed unshakeable popular support. In the chaos of the last years of World War I, Lenins tactics proved an effective way to seize and hold power in the former Russian Empire. Socialists who embraced Lenins methods became known as communists and eventually came to power in China, Eastern Europe, North Korea, Indo-China, and elsewhere. The most important fact to understand about the economics of communism is that communist revolutions triumphed only in heavily agricultural societies. Government ownership of the means of production could not, therefore, be achieved by expropriating a few industrialists. Lenin recognized that the government would have to seize the land of tens of millions of peasants, who surely would resist. He tried during the Russian Civil War (19181920), but retreated in the face of chaos and five million famine deaths. Lenins successor, Joseph Stalin, finished the job a decade later, sending millions of the more affluent peasants (kulaks) to Siberian slave labour camps to forestall organized resistance and starving the rest into submission.The mechanism of Stalins terror famine was simple. Collectivization reduced total food production. The exiled kulaks had been the most advanced farmers, and after becoming state employees, the remaining peasants had little incentive to produce. But the governments quotas drastically increased. The shortage came out of the peasants bellies. Robert Conquest explains: Agricultural production had been drastically reduced, and the peasants were driven off by the millions to death and exile, with those who stayed reduced, in their own view, to serfs. But the State now controlled grain production, however, reduced in quantity. And collective farming had prevailed. In the capitalist West, industrialization was a by-product of rising agricultural productivity. As output per farmer increased, fewer farmers were needed to feed the population. Those no longer needed in agriculture moved to cities and became industrial workers. Modernization and rising food production went hand in hand. Under communism, in contrast, industrialization accompanied falling agricultural productivity. The government used the food it wrenched from the peasants to feed industrial workers and pay for imports. The new industrial workers were, of course, former peasants who had fled the wretched conditions of the collective farms. One of the most basic concepts in economics is the production possibilities frontier (PPF), which shows feasible combinations of, for example, wheat and steel. If the frontier remains fixed, more steel means less wheat. In the non-communist world, industrialization was a continuous outward shift of the PPF driven by technological change. In the communist world, industrialization was a painful movement along the PPF; or, to be more precise, it moved along the PPF as it shifted. The other distinctive feature of Soviet industrialization was that few manufactured products ever reached consumers. The emphasis was on heavy industry such as steel and coal. This is puzzling until one realizes that the term industrialization is a misnomer. What happened in the Soviet Union during the 1930s was not industrialization, but militarization, an arms build-up greater than that by any other nation in the world, including Nazi Germany.

Question 5 (20 Marks)

Examine the different modes of market entry for an organisation using appropriate examples.