There are two systems: one on paper and one in practice. Much is said about the invisible hand and how a competitive market would create the cheapest products of the highest quality for the lowest price by the nature of competition. But in reality, firms often work together, merge, or cooperate competitively because it is better for a corporation to keep prices high and product quality as low as possible to maximize profits.
But I see the same discrepancy within socialist states. Firstly, on the path to communism, there is socialism, which, as I understand it, is supposed to lead to communism, a moneyless, classless, and stateless society. As Engels and Marx argued, they are supposed to achieve this through a revolution in which a dictatorship of the proletariat takes control of the means of production by force, puts the proletariat in power, and eventually allows the state to wither away. But Marxist theory is flawed in that he never describes how this transition will happen.
No socialist state has ever really withered away. Power always remains, and many people will say that this is because of Western interference or siege socialism. However, I doubt this, simply because of the history of détente. The Cold War was not a continuous state of tension. It reached high points (the Cuban Missile Crisis), but after détente began in the late 1960s, relations improved, culminating in the SALT treaties limiting arms in 1972, and reprochment between china and the west, a gradual easing of tension. Much of Cold War history was relatively peaceful (for the Global North). To prove this, we can look at trade relations between China and the West. After the 1960s and into the 1970s, the communist and capitalist worlds were more interested in coexistence and trade than mutual destruction. States like Yugoslavia, Ethiopia, and India, for instance, never saw as much Western interference (in coups or instability), and in Yugoslavia's case, it became a trade nexus between the nascent EU and the Warsaw Pact.
Arguably socialist Chinese and the capitalist world are arguably extremely interdependent now. If capitalism and the socialist worlds only exist in antagonism, with capitalists wanting to destroy them at any opportunity, then why would the West help invest and trade with China during the period around 1978 and invest in its markets, building up Chinese industry in manufacturing (Nixon's rapprochement with China in 1972), etc.? Or why would they engage in arms limiting treaties together, the ISS, or joint research, etc.? Towards the late Cold War, leaders like Gorbachev and Bush were more interested in coexistence than annihilation. Also remember that China split with the Soviets around 1960, with even some border clashes in 1969. During that period, isolated from the Soviets and the West, from Korea, China actually traded a lot with Japan, its former colonizer, a capitalist country (achieved record growth during the Japanese economic miracle from the mid-1950s to the 1970s.)
The failure of the Great Leap Forward and China's sluggish economic growth in the 1960s and 1950s showcase the limits of centralized state planning of the economy, as Mao's campaigns against nature and the state's outlandish production targets led to large scale lying, like at Dazhai https://www.jstor.org/stable/188965 China's GDP graphs support this argument. The Third Front and heavy handed state planning under Mao hurt Chinese economic growth, and it didn't start to accelrate and outpace pouplation growth and begin to become that manufacturing giant until the 1980s, when Deng Xiaoping opened the economy. Without at least some markets or any currency at all, governments don't have price indicators to measure or allocate the value of goods and services. This is why no state, not even socialist ones, has gotten rid of currency or money, and those that try are burned by the experience, like the Soviet experiment.
Wait, hold on. I am not saying that freer markets necessarily lead to more economic growth. Take Japan and its economic growth during the Japanese economic miracle. This can be explained partly by the iron triangle, with bureaucrats, politicians, and businessmen working together. The Japanese government limited certain imports through import substitution policies and focused on developing domestic industry. It used government policy to protect domestic industries from foreign competition while making targeted investments in the private sector to rebuild and develop the Japanese economy. This is called an import substitution strategy, but Japan was also heavily involved in export-led growth strategies. Likewise, China's opening up isn't a vindication of free markets. The Chinese government still controlled the vast majority of industry; most companies aren't publicly traded or open to shareholders. It's a bank-led system, and the Chinese government heavily subsidized industries and levied tariffs to build up infant industries. While China certainly isn't communist, it is close to state socialism, but it does have markets. Market firms are the minority compared to state led enterprises, though few state-led companies have a monopoly.
The United States isn't as free market as we think. The state also plays a significant role in its economy. Look at corn subsidies or the Jones Act, which protects domestic shipping and supports the American maritime industry. Or look at how much money we put into oil, corn, or soybeans, or simply imperialism as market interference with other nations. The United States is not a libertarian free market economy.
In fact, it is interesting that most developed economies, like France, Germany, China, Japan, and the US, rely heavily on the state to influence how capital is allocated through stock markets, bond markets, banks, and other financial institutions, or simply on subsidies and tariffs for their firms to remain internationally competitive and for the economy to be diversified. The same is true of South Korea and, in a different way, China. Their governments were heavily involved in the economy, and state planning played a role in subsidizing and supporting industries. Japan, for example, has historically relied heavily on bank financing for capital allocation.
Meanwhile, developing countries face pressure to lower tariffs and liberalize their economies through international trade agreements and institutions. This can limit their ability to protect emerging industries while they attempt to compete with established manufacturers. As a result, some resource exporting countries remain dependent on exporting raw materials rather than developing higher value manufacturing industries, limiting how much of the final value they capture. Countries such as the Democratic Republic of the Congo and Namibia rely significantly on natural resources. Here is an article about how the Imf tearing down of trade barriers hurts the Global South through structural adjustment: https://sites.lsa.umich.edu/mje/2024/04/29/structural-adjustments-complex-legacy-in-sub-saharan-africa/
However, economic exploitation is not unique to capitalism. Consider the Soviet Union and its empire, where Moscow exercised considerable economic and political influence over other socialist states and territories. We can also look at the United States and the United Fruit Company, including American intervention against governments that threatened the company's interests or attempted to nationalize its assets. Economic imperialism is not exclusive to capitalism, because an economy in which the state controls capital allocation can also be imperialistic. The Soviet Union's relationship with Mongolia provides another example of how a state socialist power could exercise economic and political dominance over another country.
China is a form of state socialism that controls much of its industry and banking. The government has significant power over banks, corporations, and private industry. In contrast, in the United States, corporations and their lobbyists often have the upper hand. Nevertheless, there is a strong relationship of interdependence between the socialist Chinese state and the capitalist West. This is to say that not all socialist and capitalist relations are antagonistic, as we can also see with Yugoslavia and India.
Mao disagreed with Marx's idea that socialism would eventually lead to a classless society. In practice, even when workers are supposed to control the means of production, things are more complex. Take China, for instance. In the beginning, under Mao, workers were very enthusiastic because they felt validated by the system and believed they had real power over the country's economic planning. But as Chinese socialism developed, especially during the Great Leap Forward in the late 1950s, more power came into the hands of bureaucrats who set extreme production targets. This contributed to one of the worst famines in history.
In the Soviet Union as well, there was little to no meaningful worker input into economic planning, with most power concentrated in the managerial and bureaucratic class. In a way, Marxist Leninist single party states seem to substitue the capitalist class with a managerial or bureaucratic class and the poltical party. Abolishing markets doesn't abolish hierarchy or class, as Mao argued. While in idea the workers control the means of production, in practice, a representative of the Socialist or Communist Party will control the means of production in the name of the workers, and the means of production will be controlled by the state. Power is in the hands of party officials, the Politburo, etc., not in the hands of the workers (as seen in the Soviet Union or China).
https://www.jstor.org/stable/2158775
Marxists and Communists want to achieve communism and a moneyless, classless society, but within the process, there is a very, very serious roadblock that has yet to be overcome.
While the idea is that there should be a dictatorship of the proletariat, in reality, most socialist states have been under the control of a single figure, such as Mao Zedong, Joseph Stalin, or Enver Hoxha in Albania and their cults of personality. The dictatorship of the proletariat usually means the supremacy of a Leninist party led by a strongman because the collective working class isn't a physcial thing, it's an abstraction (but no less poweful), and thus needs a leader or representative, and those leaders will compete for power, resulting in purges like Stalin's Great Purge of rivals and restriction of free speech or state criticism, usually justified to protect the revolution but usually just serving the interests of the vanguardist leader.
If the socialist nation relies on the state for everything for capital allocation, production targets, resources, and loyalty and you have a Leninist political party like the PRC or the Bolsheviks that has an obvious interest in maintaining its new power, then why would we ever expect the state to wither away? Once the revolutionary party has power, it becomes the new establishment. Thus, you have a paradox: to change the state, you have to form a state. So how can you abolish a state without a state?
Eventually, the interests of the state and party managers will conflict with the workers and people, just like how in capitalism the interests of representatives in the legislative and executive branches, through corporate lobbying, can conflict with the common people. ((Chapter 1) linked a paper in this as proof. It's about how the Great Leap Forward changed state priorities from the well being of workers into state development in industry to catch up with Britain and the US, and this shift resulted in drastically increased working hours and the same kind of alienation from work that is present in capitalism. The author does a better job than I could.)
https://dokumen.pub/factory-politics-in-the-peoples-republic-of-china-9789004421752-9789004421745.html
I am not saying that Marx's failure to describe the withering away of the state is a failure of communism. I am arguing that this is a flaw that present socialist leaders must amend, because in reality, most communist movements end up as state socialist. I really don't care if it's capitalists, socialists, communists, or whatever. I want a system that can bring the most prosperity, unity, and freedom to my entire national community, not just some elite few.