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Karl Marx’s Long Shadow in Eastern Europe

Tuesday, October 4, 2011

Communist political philosophy is still a powerful force in many former Soviet bloc countries.

Bulgarians appear to have a hard time letting go of communism. This month, many Bulgarians celebrated the hundredth anniversary of the birth of Todor Zhivkov, the country’s longstanding communist leader, according to the Wall Street Journal. Earlier this year, the Journal also reports, Bulgarians were outraged when vandals spray painted monuments to the country’s socialist past.

While you might think that the country’s nostalgia for the communist era has little to do with its ability to foster entrepreneurship today, it turns out that the two are related. In the Eastern European countries that experienced several decades of communist rule, Karl Marx’s ideas still influence the views of many people about business ownership. According to a 2009 survey of more than 26,000 people in 36 countries conducted by the Gallup Organization, only 31 percent of Americans agree with the statement that “entrepreneurs exploit other people’s work.” By contrast, 70 percent of Bulgarians, 72 percent of Estonians, 54 percent of Latvians, 79 percent of Lithuanians, 70 percent of Poles, 63 percent of Romanians, 73 percent of Slovenians, 73 percent of Slovakians, and 69 percent of Croats agree.

Karl Marx’s ideas still influence the views of many people about business ownership.

That business owners exploit the work of others is a concept embedded in Marx’s economic philosophy. Marx believed that business owners cannot make profits unless they exploit their employees because the value of products and services is proportional to the amount of labor they take to produce. Therefore, according to Marx, unless business owners pay their employees less than what their labor is worth, owners cannot make a profit. Because business owners control the “means of production”—the materials and facilities used to produce the product—and because more people want jobs than there are positions available, making employees easily replaceable, Marx argued that employees cannot capture the true value of their labor.

While the percentage of people that view entrepreneurs as exploiters of labor increased in the United States and Western Europe between 2007 and 2009, the size of the increase was much greater in many Eastern European countries. For instance, in Estonia the share of people who said that entrepreneurs exploit the labor of others increased by 19 percentage points between 2007 and 2009, and in Slovakia it increased by 18 percentage points.

Another negative perception of entrepreneurs is that they “think only about their own wallet.”  While only 31 percent of Americans hold this view, 71 percent of Bulgarians, 54 percent of Czechs, 64 percent of Estonians, 62 percent of Lithuanians, 59 percent of Hungarians, 63 percent of Poles, 67 percent of Romanians, 67 percent of Slovenians, 69 percent of Slovakians, and 69 percent of Croats think this statement is true. In fact, among Eastern Europeans, only Latvians, at 50 percent, were less likely to agree with this statement than Europeans as a whole.

The legacy of communism has left the average person in these nations with a much more negative view of business owners than that held by the average American.

While the share of Americans who believe that entrepreneurs think only about their own profits increased from 24 to 31 percent between 2007 and 2009, the increase was once again higher in many Eastern European nations. For instance, in Estonia the share of people holding this belief increased by 21 percentage points over the same period, while in Slovakia the share of the population expressing this point of view increased by 20 percentage points, and in Hungary and the Czech Republic it increased by 13 percentage points.

In short, Karl Marx’s political philosophy appears to have cast a long shadow in many former Soviet bloc countries. The legacy of communism has left the average person in these nations with a much more negative view of business owners than that held by the average American.  This, in turn, will likely have ramifications for the development of entrepreneurship and small business in those countries.

Scott Shane is the A. Malachi Mixon III Professor of Entrepreneurial Studies at Case Western Reserve University.

FURTHER READING: Shane also writes “Understanding Just How Harmful Obama’s Tax Hikes Would Be,” “Scrap the Accredited Investor Rule,” “Are Federal Policies Toward Small Business Contracting Succeeding?” and “Why Small Business Wants Repeal of ObamaCare.”

Image by Rob Green | Bergman Group

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