I want to have a socialist* country where economy is good enough to have at least one big city of more then million people, that has well maintained buildings. The people don't have to be rich but there shouldn't be any queues for basic food & clothing. Upper middle class should be able to own a private car, whether it's Lada, Volga or whatever brand is popular there.

Beside the mom-pop stores, street vendors, artisans and small family farms all the other businesses must be state owned. No other private property nor special economic zones. All the banks, factories, utilities, department stores, large hotels and so on. Every business that can't be operated by the nuclear family with maybe few other workers at most must be either owned by the state or by cooperatives. The management could be either government appointed like in USSR or decided by the workers like in Yugoslavia, it doesn't make any difference to me as long as its not privately held.

The time period is the 70s of the XX century Earth.

Is the existence of such country realistic? Are there examples of real-world nations that could be used as a model?

* Please note that the term socialism has different meanings in different parts of the world. What is described here is called socialism in the USA, but in Europe this would be recognized as communism. These terms are, in Europe, not interchangeable at all. (What about other parts of the world?)

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    $\begingroup$ Why do you want a solid economy? The point of doing socialism is that you don't need the market to distribute goods for you -- the state does it for you. $\endgroup$ – Cort Ammon Dec 13 '16 at 14:22
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    $\begingroup$ The answers to this question all seem ideologically motivated. Capitalism is a couple hundred years old; of course other arrangements could be successful. I don't know if you're really describing socialism though; you could just as easily be describing "state capitalism" or something else. $\endgroup$ – Casey Dec 13 '16 at 15:01
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    $\begingroup$ @Casey The OP defines 'socialism' in this case as the state owns everything with more than 10 employees. That specific system describes only a few countries (Soviet Union, China before Deng, Cuba before 1991, etc) and just does not work. "Socialism" in other senses, like modern Europe or modern China, is much more defensible. $\endgroup$ – kingledion Dec 13 '16 at 15:14
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    $\begingroup$ F.A. Hayek answered this question a long time ago with the "Local Knowledge Problem", explaining why Socialism cannot work under any circumstances. The real problem is few people will listen to the answer, and so long as Socialists can leech off any functioning free market, they can continue to exist. The problem with socialism is they always run out of other people's money. $\endgroup$ – Thucydides Dec 14 '16 at 6:26
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    $\begingroup$ Please note that the term "socialism" has different meanings in other parts of the world. I believe that what is described in the question is called socialism in the USA, but in Europe this would be recognized as "communism". These terms are, in Europe, not interchangeable at all. $\endgroup$ – user7139 Dec 14 '16 at 7:56

22 Answers 22


Whenever there's a question about socialism or capitalism on here I always get fed up with the trite and blinkered answers which obsess only on the most painfully obvious facts of the matter - namely the USA and USSR.

But the fact is capitalism and socialism are broad philosophies with many different implementations. Socialist economies can be mixed, and many were. Often the question hinges on how you define the "means of production". Consider the rise of democratic socialism in Britain. When the socialist Labour party won the 1945 general election many industries were nationalised: coal, steel, railways, healthcare, defence, etc. This didn't mean private enterprise was forbidden. Banks were regulated but private, along with many other large and small companies.

While full employment was achieved after the war, attempting to maintain it became crippling. Job-for-life-socialism was assumed best for the individual and economy, but it eventually led to the Winter of Discontent in 1978. Stagflation affected many economies in the 70s and was not specific to Britain or socialism; but low growth, high inflation, and union demands created a perfect storm. British socialism was especially vulnerable to stagflation, given that the Labour party was unable to mediate between the national interest, corporate management, and the workers (as the party had always been the party of the unions).

Far-left union agitation destroyed the system. Strikes were so frequent and disruptive that electricity was rationed in many places to a three day week. Productivity collapsed as there were no regulations on when a union could call a strike, or how many union members needed to agree for one to begin. Many amongst the far left hoped this chaos would lead to an even more socialist government... but all it did was give Margret Thatcher a mallet with which to smash the socialist system. She won the 1979 general election, promising to bring the unions to heel and to end British socialism (spoiler alert: she did).

Regardless of how it ended, Britain saw solid economic growth and increasing living standards with a socialist economy from 1945 to 70. The national debt was an eye-watering 240% of GDP after the war, and rationing was enforced until 1954... but by the 70s the national debt had been brought back to manageable levels. The postwar consensus was that whoever got elected; Conservative or Labour, they'd not rock the boat. Indeed the Conservative prime minister Harold MacMillan said in 1957: "You've never had it so good". And he was correct.

The main issue is how the state handles technological progress. If government never commits to full employment, and instead seeks technological innovation and promotes jobs when they are necessary, you'd likely see a more stable system over the longer term. A mixed economy is essential too. Let the private sector do its thing, while the public controls the "means of production" and seeks to improve its efficiency.

A large part of Germany and Scandinavia's success is owing to their willingness to mediate between national, corporate, and workers' interests. They engage in a collaborative and strategic consensus quite unlike the adversarial and tactical politics found in the UK or USA.

Perhaps the biggest problem is the conflict between socialism's raison d'etre of protecting worker's rights, and the cycles of redundancy brought about by rapid technological change. And perhaps the obvious solution is to make a clear distinction between workers and jobs. Government needs to empower workers, and yet not be precious about obsolete jobs.

You're basically having to sell to someone that being made redundant is a good thing. It can be, if the opportunities are better on the other side. Socialist economies typically offer free higher education, so it's entirely possible. You need to encourage some sort of idea of cycles of technological rebirth. If you go too soft (letting unions run amok) the system will fail. If you go too hard (nationalising everything and always spending the profit) the system will fail.

Sometimes it isn't necessary to nationalise all industries, simply the largest ones. Ghana is an interesting example which certainly started as a democratic system, but unfortunately ended rather bleakly. Nonetheless their leader, Kwame Nkrumah, was a socialist who embarked upon many grand industrial projects to benefit his people, quite reminiscent of the infrastructure projects of the New Deal. The Volta river project was to create a hydroelectric dam which would produce the electricity to allow them to smelt and thus export aluminium rather than just the ore. This would also provide the electricity to drive industrialisation and economic growth, leading Ghana to economic independence, which would be the catalyst for a united Africa.

Unfortunately they lacked financing, and American backers suggested they would bridge the gap if restrictions were placed on what could be made from the dam's electricity. They were also interested in importing ore to use in the Ghanaian smelt; on face value because Ghanaian ore was not usable, in reality because they feared an integrated project would be nationalised.

That was against Nkrumah's plan to seek economic independence through national development. As the project dragged on Nkrumah became increasingly unpopular, and reacted with increasingly paranoid and authoritarian decisions. Just a month after the dam was completed Nkrumah was overthrown by a CIA-led military coup. The Americans got their terms, and Nkrumah's dream of creating an industrial example for a united post-colonial Africa died.

There are other examples where public ownership of the means of production (or simply the largest company) has had an overwhelmingly positive influence on society, namely Norway. In 1972 Norway's government created Statoil, which was and still is a publicly owned energy company. The Norwegians however had a very shrewd vision, and dumped profits from Statoil into a public fund. Importantly only the interest from this would be used to bolster public spending.

This was owing to their concern that spending all of the proceeds would imbalance the Norwegian economy to the point it was dependent and uncompetitive. This was a concern not shared by Venezuela's Hugo Chavez, who spent oil money subsidising the cost of food and fuel.

Long term this ended in the economic and political implosion of a country which had so much going for it. Comparatively Norway is now proportionally one of the richest nations on earth, with one of the most educated populations who enjoy a very high standard of living. Consider examples like this to be how the means of production could be administered sensibly, and the relevance of the old question: which is more important, controlling inflation or unemployment?

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    $\begingroup$ @inappropriateCode It's rather disingenuous of you to use Ghana as a positive example, when in fact the country was a dysfunctional de facto military dictatorship under Nkrumah by the time he was deposed. $\endgroup$ – Ian Kemp Dec 14 '16 at 11:01
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    $\begingroup$ @IanKemp I stand corrected and will modify the answer. $\endgroup$ – inappropriateCode Dec 14 '16 at 14:45
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    $\begingroup$ +1 for informing me on some history in other countries. There's a lot of valid points in this post, and I learned something in the process, so thank you. $\endgroup$ – Anoplexian Dec 14 '16 at 16:49
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    $\begingroup$ I've been here for about a year now, but this answer is literally one of the best things ever happened here. Thank you very much. $\endgroup$ – Katamori Dec 18 '16 at 3:14
  • $\begingroup$ Old answer, but note that the stagflation of the 70s was a western-global phenomena, not isolated at all to the UK. Attributing it to features of the UK economy is thus implausible. (far less socialist western economies suffered similar problems) $\endgroup$ – Yakk Oct 27 '20 at 18:28

Cuba is about the closest you'll get.

Cuba's economy was artificially depressed for the last 50 years due to trade embargos. For much of that time though it still had a market in the USSR, its major export (sugar) was relatively valuable, and imported fuel (again from the USSR) was relatively inexpensive. It wasn't until the simultaneous impacts of the demise of the USSR, the bottom dropping out of the sugar market and the price of oil rising hugely that more flexibility was needed. In particular, with the dropping of the embargo, the Cuban government discovered that tourism was once again their major asset, and this could not reasonably be centrally controlled.

This flexibility has serious limits though, and prices of many commodities are centrally controlled. Much of Cuba's population still work in public sector jobs too. So whilst it's not centrally-controlled to the extent you ask for (>10 employees), it's still recognisably a centrally-controlled communist country, just with a small amount of wiggle room where previously there was none.

The Cuban economy isn't the best in the world, but it isn't in too bad shape compared to a lot of countries with similar size and natural resources. On the plus side, by many measures it has the best healthcare in the world, its school education system is famously good, and homelessness virtually doesn't exist. So whether it "sucks" would very much depend on your viewpoint. If you're Donald Trump, it looks awful because there's nowhere to strip-mine or strip-mall. If you're some homeless guy on the streets of New York, it looks like the next best thing to Paradise. If you're a regular working-class person, it's a mixed bag of no shopping malls and much more limited types of work, but a guarantee that you're always going to have food on the table, you're never going to lose your home, you're never going to have to pay for medical care, and you're never going to have to pay for your kids' education.

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    $\begingroup$ I'm not sure it would be the best healthcare in the world by many measures. Perhaps one or two. I've heard you have to bring your own bed sheets to the hospitals because they don't have enough. $\endgroup$ – user3161729 Dec 14 '16 at 8:29
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    $\begingroup$ @user3161729 And a general shortage of imported medicines, of course. OTOH out of necessity they've got preventative care to a level where all other countries come to Cuba for a masterclass on how to do it. So if you end up with some exotic disease/disorder then you're probably screwed, and cancer is particularly an issue; but for the majority of everyday medical issues you're going to be doing OK. And of course with good preventative care you might not get to the point of needing a hospital in the first place. $\endgroup$ – Graham Dec 14 '16 at 10:55
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    $\begingroup$ While Cuba certainly isn't Haiti, from what I understand of it the two largest problems are a complete ban on private enterprise only being lifted now, and that your claim that Cuba has the best healthcare in the world is demonstrably false. The WHO 2000 ranking is out of date, but it gives a good general view of healthcare outcomes by the type of system - at the time it was considered comprehensive enough to not need repeated. $\endgroup$ – inappropriateCode Dec 14 '16 at 15:59
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    $\begingroup$ @inappropriateCode at the time it was considered comprehensive enough to not need repeated - actually, the WikiPedia article in you link states the opposite: Indeed, the 2000 results have proved so controversial that the WHO declined to rank countries in their World Health Reports since 2000, but the debate still rages on. But I appreciate your point, and stand convinced. $\endgroup$ – ANeves thinks SE is evil Dec 14 '16 at 21:32
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    $\begingroup$ @ANeves I'm just not reading things comprehensively today! I stand corrected! $\endgroup$ – inappropriateCode Dec 14 '16 at 22:57

The evidence from our own history suggests that countries with strictly state owned businesses are an economic disaster. However, state owned businesses were all the rage for pretty much all of history until 1500.

Ancient Egypt concentrated its linen and cloth industries in Pharoah's palace workshops in Memphis. The Roman Emperors owned huge swathes of the state, both farmland and industrial mining, marble-quarrying, and amphorae-making concerns. During the Golden Age of Islam under Caliph Harun al-Rishd, the entirety of Mesopotamia was essentially one big plantation, worked by native serfs and imported slaves. Massive workshops in Basra and Baghdad produced sugar, paper, and other luxury goods. The same could be said with the Gangetic plain during the 17th century under the Moghuls.

So the easy solution is to set your story in pre-modern times. Then no one will notice the squalor of your society, since the whole world is poor.

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    $\begingroup$ The 1500 saw some radical alterations to the social fabric of Europe. Basically, that period is where the primacy of Religion and State ended. Individuals became more empowered and less willing to just bend over and take whatever the religious/political leadership decided to give them. $\endgroup$ – Green Dec 13 '16 at 14:47
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    $\begingroup$ The ancient Romans, the Byzantines, and others did, in fact, have largely planned economies, but the idea that these societies were all squalid and poor doesn't stand up to scrutiny. $\endgroup$ – Casey Dec 13 '16 at 14:57
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    $\begingroup$ @Casey The vast majority of humanity before the Industrial Revolution was living hand to mouth. Just because the emperor wears purple silks doesn't mean that 1/2 of his subjects aren't one bad harvest from famine. $\endgroup$ – kingledion Dec 13 '16 at 15:09
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    $\begingroup$ According to the UN, 2.7 billion people still live on less than two dollars a day despite a global system where domination of markets is nearly total. When you also take into account the confounding factor that modern societies have far more efficient methods of manufacturing, medicine, resource extraction, etc., it's less than clear that the ancient system was catastrophic or catastrophic specifically because of being planned. $\endgroup$ – Casey Dec 13 '16 at 15:16
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    $\begingroup$ Calling ancient monarchies and totalitarian regimes set before the existence of Marx "socialism" makes me doubt you know what socialism even is. $\endgroup$ – Sklivvz Dec 14 '16 at 8:06

Not in a long run. Sooner or later you will run out of other people's money.

If you really need it, and you want real socialism, not a mixed system like China, here are a few things that could help you make it more realistic:

  • Use small country. If they got lucky of having an enlightened government it's easier to run small country then a large one.
  • Use homogeneous country (race, religion, nationality). Homogeneous population could much easily reach consensus.
  • Recent switch to socialism, if they accumulated quite a lot of capital stock they could run on it for a while.
  • Populist elections vs revolutionary war. If the switch to socialism happened in populist elections the capital stock stayed intact compared to revolutionary war.
  • Tourism income. If the country earns sizable amount of its foreign currency from tourism, they will be interested to keep their cities in good order. At least the ones regularly visited by tourists.
  • Peaceful & neutral. Stay out of conflicts. Socialist countries have a tendency to under invest in capital stock.

Use small businesses to improve productivity.

Companies with less than 10 employees could be private

You could run a lot of things with below 10 employees: motels, small hotels, restaurants, bakeries, gas stations, workshops. Heck you could run a hydro power plant with 10 people beside a yearly refurbishment, which could be done by other company. Even investment bank could be run with less then 10 people, just outsource everything (secretaries, cleaning, accounting..) beside your core staff.

So if the law doesn't specify revenue or capital beside number of employees you can bend the law very far. Use whatever works for you best.

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    $\begingroup$ It's already a mixed system because the question talks about ownership and as everyone knows, property is theft. $\endgroup$ – Separatrix Dec 13 '16 at 14:30
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    $\begingroup$ @Separatrix The question says that small businesses with less then 10 employees are fine. You could run a lot of things with 10 people (small hotel, bar, restaurant, store, workshop) that should help with lack of productivity. Landlord who makes a living from renting his building has an incentive to do maintenance. $\endgroup$ – slobodan.blazeski Dec 13 '16 at 14:35

Yes, you can, but you can't get the answer from us.

Generally speaking economists and philosophers have found that socialism is an unstable equilibrium. It is constantly being disrupted by the nature of humans, and energy must be continuously spent maintaining it, or it falls apart. The larger the group, the more rapidly it falls off of this ideal.

Accordingly, there is no way we can give you a path for your state. There is no path that can be written down on paper, and handed to you with a note saying "here's how to make socialism work." Your state is going to have to constantly observe the disruptions and find the most efficient way to deal with each of them as they come.

What we can do, and many of the answers have done, is show you a laundry list of ways that we have observed socialist (and communist) countries falter. You can draw from these as examples of what your society is going to have to to combat. But the actual solutions must be carefully measured against the exact specifics of each occurrence. Underact, and your society falls apart. Overact, and you turn into a totalitarian regime that destroys itself or its economy. Balance is the key, and if there was a way to write down the right way to balance a government, we'd have a lot fewer problems in our world today (I like to think the Founding Fathers of the United States at least got close).

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    $\begingroup$ The equilibrium problem can be restated as the "Local Knowledge Problem". F.A. Hayek demonstrated that it is impossible for a command economy (and Socialism is a command system) to outperform any free market system, and indeed real world examples show the more centralized the system, the worse off it becomes. $\endgroup$ – Thucydides Dec 13 '16 at 17:58
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    $\begingroup$ @RedSonja And what's really interesting is we do indeed see socialist societies springing up all the time. They're just small (a handful of people, not a nation), and they tend to break apart relatively quickly (compared to the pace at which nations operate) due to the inherent instability of the concept. $\endgroup$ – Cort Ammon Dec 14 '16 at 17:26
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    $\begingroup$ Most of the other answers can be summarized with this. Capitalism, Socialism, Merchantilism... all these systems are simply ways to balance the competing demands of consumers and producers. Socialism puts command and control in the government and they cannot afford any mistakes. Because they own everything, if they fail the whole country fails. Capitalism is distributed. Decisions are spread throughout the market and communicate via prices, but a failing business just pulls itself down, not the whole country. That's the difference. $\endgroup$ – Zoey Boles Dec 14 '16 at 17:29
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    $\begingroup$ @ZoeyBoles "but a failing business just pulls itself down, not the whole country." Considering the numbers of banks that have had to bailed out by Governments in order to avoid the whole country defaulting, I'm not so sure about this being a positive of Capitalism anymore. $\endgroup$ – SGR Dec 15 '16 at 10:46
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    $\begingroup$ "Generally speaking economists and philosophers have found that socialism is an unstable equilibrium. It is constantly being disrupted by the nature of humans, and energy must be continuously spent maintaining it, or it falls apart. The larger the group, the more rapidly it falls off of this ideal." - How does this differ from every other economic policy? $\endgroup$ – Peter Dec 17 '16 at 21:32

The basic unit of economic organization is the Corporation. This is a non-person eintity that can own goods, make agreements, and the like.

Historically, creating such a corporation required government assent.

Smaller organizations, like partnerships, are sort of like them as well.

Modern "Western" economies have a mixture of privately owned corporations, publicly owned corporations, state corporations, nations, non-profit corportations (which are not owned) of various kinds, etc.

I could interpret your meaning as stating the privately owned and publicly owned corporations don't exist.

Examples of such an organizations engaging in commercial purposes is Ikea, most national postal services, central and regional banks.

Now, in the past half-century, there was a massive economic war between "Capitalist" and "Communist" states, and the "Capitalist" states won. Nations that did not ally with the "Capitalist" states where economically isolated, invaded, attacked, overthrown and destroyed by the winners of this war.

Despite this, some "Socialist" economies have persisted and flourished better than similar nearby "Capitalist" economies. An example is Cuba, which is richer than the nearby island of Haiti and Dominican Republic (both halves!) despite being both invaded and under economic sanctions from the nearby super power economy (USA).

Corporations themselves almost universally operate as "Socialist" organizations within themselves -- Command Economies. And there are Corporations whose size exceeds that of many nations.

That isn't to say there aren't horrible traps that Socialist centrally planned economies fall into.

Corporations avoid them through a number of ways. They aren't the primary power, so their rulers must obey the rules of the state in which they are embedded. This prevents them from going off-the-rails in power-centralization and protection (the dictator trap, where you turn state power into an engine of protecting the current set of rulers).

As they are relatively small, they often have competition. Their ability to use their power to crush their competition is limited by the state they are embedded in; which means even strong corporations can eventually be outmaneuvered and fail if they stop generating excess value efficiently.

Newly large capitalist corporations almost always have recently successfully generated a whole pile of surplus value in order to grow. Inertia keeps them doing what they have been doing, with minor corrections (their correction process was also possibly successful at smaller scales).

Over time they'll drift. If they remain long, they almost always have a natural monopoly they have managed to corner. They now drift, protected against competition to some extent by their monopoly power. Sometimes they drift into being really inefficient; that is when competition can grow and threaten them. Sometimes they drift into being more efficient.

Cross-transfer of corporate culture occurs, where what other successful corporations are doing is imported via business school graduates, hiring workers from their businesses, etc. This is another source of culture drift, almost unavoidable if a business wants to grow at a fast pace.

And then they die. They are torn apart into their assets, and new Corporations claim their "territory".

States could do much the same thing, but traditionaly States "death" involves violent war, revolution, and a lot more destruction than Corporate "death".

So one approach would be to invent an authority that prevents overly violent "death" of States, and prevents them from going into the trap of protecting the ruler's interests against the interest of the State or the (entire) People.

Another would be to point out that the advantages Corporations have over States is mostly long term. In the short term, it is perfectly plausible for a medium-large "Socialist" state to function. The Soviet Union went from an agricultural economy to one capable of defeating the German Empire and then holding off the most powerful industrialized nation for a half-century in a few decades under a centrally planned economy.

Another approach is to solve the problem with information. The theoretical advantage markets have over planning is that markets solve pricing problems better. A genius economist with modern computers might be plausibly able to solve the pricing problem without markets.

Doing so accidentally would easily be reasonable, and sustaining it for a while as well.

The biggest problems against such an experiment in our world is both the extreme risk that it would fail (and cause untold suffering), the violent reaction of the capitalist western economies to such an experiemnt, and the fact that this doesn't prevent the "protect the king" dictatorship trap.

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    $\begingroup$ Good answer beside the information problem. No genious economist and no kind of computer no matter how strong could solve the pricing problem without a market. Soviets already tried that with Leonid Kantorovich linear programming. The problem is that information is distributed and not given to the planner. You are dealing with society full of people who are both complex and interact on even more complex ways. You can't optimize what you don't know, market could youtube.com/watch?v=aBYzvPbIFNw $\endgroup$ – slobodan.blazeski Dec 13 '16 at 17:49
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    $\begingroup$ @slob they tried that prior to our current sensor density. We can literally track everything everyone looks at, consumes, and where thry go, and get a real time approximation of their emotional response at this point. It is unlikely that it would work, but it is not proven it could not. You need plausibility, not certainty. $\endgroup$ – Yakk Dec 13 '16 at 17:58
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    $\begingroup$ Even if we hooked up every human being with cameras & other sensors we don't have a clue what that data means. The current AI pinnacle is classifying images & playing GO. We still don't have a clue how the brain works. Until we do I suggest we stick with the market. Everything else is science fiction at least for near future. $\endgroup$ – slobodan.blazeski Dec 13 '16 at 18:06
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    $\begingroup$ @slobodan.blazeski the "market" doesn't have a clue how the brain works, either. And it can't even play GO! Only 5% of the world's money exists as real coins or paper money. That could not be said during the 30s and 40s. The market IS computers nowadays. Hell, high frequency trading, trading done only by computers, makes up 75% of all trading done in the US. These programs even read the news and make trading decisions based on it. And as AI improves they are only going to get better. Your idea that markets 'don't know' is spurious at best. $\endgroup$ – Shane Dec 15 '16 at 17:23
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    $\begingroup$ If markets get along fine without knowing how the brain works, claiming that other things won't work because they don't know how the brain works is a logical failure. Claiming that networks and computers don't have the needed data when they actually keep track of all of the data to begin with is a truly bizarre statement to make. Claiming that because something didn't work once nearly a century ago, therefore it won't work ever, is absolute foolishness. Maybe you are right and markets are just the bestest thing ever (Haha, no) but your arguments about it suck. $\endgroup$ – Shane Dec 15 '16 at 21:58

A completely socialist country is possible as long as your neighbors aren't capitalists

As kingledion mentioned in his answer, before 1500, it was possible to have a completely socialized/nationalized system. Prior to 1500, the marriage of religion, economic power and monopoly on violence hadn't yet broken down. When all countries operate with nationalized industries, they are on equal footing. However, as soon as someone comes up with capitalism, all those nationalized industries and the countries that depend on them will start to lose.

Most of what keeps capitalistic systems so functional is the inherent competition in free-markets. Anyone with the capital can start a competitor to a incumbent company and eat their lunch. Clayton Christensen's Innovators Dilemma talks about this kind of situation extensively. Any company in a free-market that fails to eliminate waste, cut expenses and increase profits will eventually go out of business. In a socialist country, this kind of competition is either impossed by legislation (which can be cheated by legal manuvering or backroom deals) or not at all. In general, competition in socialized systems is social competition ("who do I know that can get me a sweet deal...") vs free-markets systems ("can I make a product/service that will sell better than the other guy's")

Because of the lack of pressure to be efficient, the nationalized industries will tend to become more inefficient over time. Capitalist industries tend to get more efficient over time because of competition. As long as the socialized country doesn't have to compete with anyone else, it should be okay.

"An economy that doesn't suck" is inherently comparitive. A nationalized economy that benefits everyone is better than no industry.

  • $\begingroup$ Does it mean that capitalist industries are better at competition, without having to be necessarily more efficient? Or am I reading this in a wrong way? $\endgroup$ – PatJ Dec 13 '16 at 15:18
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    $\begingroup$ Any company, socialist or capitalist, will be as efficient as the environment demands. In a system described by the OP, the pressures to be efficient are low. In a free-market economy, pressures to be efficient and therefore profitable can be (though are not always) extremely high $\endgroup$ – Green Dec 13 '16 at 15:32
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    $\begingroup$ This here is a good example of some broad generalizations. $\endgroup$ – Mad Physicist Dec 13 '16 at 16:51
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    $\begingroup$ capitalist systems do not necessarily become more efficient over time - cartels and monopolies can emerge and basically institutionalize the then-current power balance (Happens, when the state can not enforce anti-trust laws). A state-owned situation where different branches compete with each other and vie for recognition by the central government could be just as efficient as a market without government participation. As long as new market participants have a reasonable chance, all systems could tend to efficiency. $\endgroup$ – Chieron Dec 13 '16 at 17:04
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    $\begingroup$ I think most South Korean people are satisfied of the state-owned train network, whereas traveling by train in the US is notoriously a pain in the ass. You may say that the train system in the US degenerated because traveling by car or by plane is more efficient. But efficient for who? $\endgroup$ – Taladris Dec 15 '16 at 9:26

It is worth looking at some examples of countries that attempted at one point or another to introduce some form of market socialism. For instance, in China 50% of GDP is still generated by SOEs, and it is mostly the large companies that are state-owned.

You may also want to look at other countries with a large SOE sector, such as Russia, Malaysia, UAE, Saudi Arabia, Indonesia, India or Brazil. Some are relatively successful, many are not and struggle with ineffective management and corruption.The biggest issue is the introduction of effective governance and the creation of incentives that are similar to those faced by privately-owned companies.

The most interesting example is Singapore, where, although the economy is mostly composed of small and medium enterprises, pretty much all the large ones are SOEs. Singapore is considered to be a very successful case of how the state can manage SOEs well. Corporations linked to the government account for around 50% of the stock market valuation in Singapore.

  • $\begingroup$ +1 for Singapore. I don't know what sort of -ism it is. Rather unique, and we don't yet know how it will fare once its founders pass away. $\endgroup$ – nigel222 Dec 14 '16 at 9:23

Yes, A Post-Scarcity society can be purely socialist because it no longer needs motivated humans to fill all of the roles in the economy. With AI driven robots handling all of the mining, farming, manufacturing, distribution, and everything else, each human citizen can have a life of leisure with all of the material wealth that they can ever dream of.
See Cory Doctorow's Down and Out in the Magic Kingdom for a good example of what such a society would look like.

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    $\begingroup$ There is still an economy at play, though, and there will always be scarcity. Who is in charge of deciding how many robots to make? Is it more important use steel to build robots right now or cars, or buildings? How much wheat should be produced, should dairy be working towards cheese or milk production? In a capitalist society, these decisions are decided by purchases and price, in the society you describe, it'd be committees deciding allocation of resources, and this always ends in warehouses full of toilet paper. $\endgroup$ – SethWhite Dec 13 '16 at 16:24
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    $\begingroup$ So combine this answer with @user3644640's answer above, where a benevolent AI makes all the resource allocation decisions. $\endgroup$ – Henry Taylor Dec 13 '16 at 16:42

From personal memories, Hungary in the seventies seems to be a good match. The question specifies a particular decade, so the long term sustainability and unchanging political system may not be relevant.

Big city: Budapest with two million people, check.

Well maintained buildings, er, needs a local party secretary with good taste and then no problem. Certain parts were nice, others not so much. A lot of old residential buildings had WW2 scars even later, but many new (70's era) buildings were erected.

No queues for basic food & clothing, in national store chains.

Cars were those normal in the Eastern block, but they were all imports so long queues existed. People waited sometimes ten years after submitting the request before they could receive the car, then request the next to have it in another ten years.

Small non-family ventures (GMK) appeared in the 80-ies and then the private sector gradually increased as the Soviets looked elsewhere. In the 70-ies this may not be in the picture.

Corporation management included a representative of the Party who was influential. The workers not so much.

  • $\begingroup$ Yes, kind of communism but the soft version of it with some freedoms and a large pool of talented workers. That could have worked out at least to some degree. $\endgroup$ – Trilarion Dec 15 '16 at 8:00
  • $\begingroup$ Same goes pretty much for Czechoslovakia in the 70's and 80's pretty much thought of as the shining beacon of the iron curtain. (At least by us in the west.) While it wasn't exactly a picnic it was by no means the Soviet Union or DDR. en.wikipedia.org/wiki/Economy_of_communist_Czechoslovakia $\endgroup$ – Doomfrost Jul 14 '17 at 12:04

Just look at the list of countries with large ratios of tax revenue to GDP and you find at the top of the list: Denmark, Belgium, France, Sweden, Cuba, Finnland, Norway with about 45-50% percent government income (or spending) of total GDP. Depending on your definition of socialism this might not yet fit, but indeed these countries are probably amonst the most social in the world and quite successful economically they are too.

Depending on how socialistic you want your country to be, take some traits of these and then mix them together.

For example give them:

  • a strong political, philosophical tradition of egalite (the notion that all men (and women) are equal) like in France
  • strong unions demanding a share of the profit like in France
  • a good educational system like in Denmark, Sweden, Cuba, Finnland
  • lots of natural resources like in Norway
  • money from supranational organizations to build their headquarters there like in Belgium
  • a superb and free healthcare system like in Cuba (and Denmark and ...)
  • peaceful neighbours like in Denmark, Sweden, Norway,...
  • incredible transparency like the public tax declarations in Sweden
  • a very rich society where everyone has plenty of everything like in Norway (so nobody is really unsatisfied)

So much for real world examples, now for some fictious properties:

  • draconic laws and efficient persecution could eliminate corruption
  • effective taxation could eliminate waste (like taxing luxuries very high and useful stuff very low)
  • just incredible luck with choosing superb (incorruptible) leaders (outstanding personality, clever, charismatic, beloved) - sometimes you are just lucky
  • some kind of philosophy/religion that gives everyone the idea that the community must work together and everybody has the duty to give
  • a strong principle of subsidiarity, so people vote regularly on everything they are responsible for (what should be researched next, which motorways should be built, what kind of cars should be produced,...), make the unions and party actually desirable organizations, a place where people find together

This all might result in a socialistic country like none we know and it might work or might not work, but given a bit of luck, at least modest economic success should be guaranteeable, you just need the right people for it.


Yes, but it needs almost perfect resource management or some quasi-free markets. It needs a system that is guarding the administration and itself, by for example having multiple divisions that enforce the policies on every governmental body, including each other.

It is hard, and no system has ever succeed. With technology a super intelligent AI that oversees could make it work.

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    $\begingroup$ It's impossible even with super intelligent AI, you must use market prices to reveal hidden human preferences. Check Mises Economic calculation problem infogalactic.com/info/Economic_calculation_problem $\endgroup$ – slobodan.blazeski Dec 13 '16 at 14:17
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    $\begingroup$ @slobodan.blazeski you must use market prices to reveal hidden human preferences. - I like that, lol. How about just telling what you like and what you not like :) "you can" or "we use" but "must" as it is the only way looks like a religion :) $\endgroup$ – MolbOrg Dec 13 '16 at 16:40
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    $\begingroup$ Who finds the logical gap between the two statements by @slobodan.blazeski ? :-) $\endgroup$ – Nobody Dec 13 '16 at 17:21
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    $\begingroup$ If there are hidden human preferences then the AI isn't smart enough. When it can fully simulate the humans then it can spin up N copies of them, check which allocation works best. In fact, this may be happening right now. :-) $\endgroup$ – SRM Dec 14 '16 at 7:02
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    $\begingroup$ @slobodan.blazeski Thats where the quasi-free markets come. The consumers did have cash at the communism. It gives some flexibility. The object of production side is simply to maximise the value of the products. The preferences are not really too much of problem, because they can be sampled by simply asking. If an agent would lie, then the allocation would get worse and thus they have no reason to lie. $\endgroup$ – user3644640 Dec 14 '16 at 7:33


Centrally planned economies have universally been a disaster. They're unable to respond to local requirements and market pressures fast enough to be useful.

Nationalising universal infrastructure like water and power and the rail companies, all perfectly reasonable. You could even consider nationalising the automotive industry if you want everyone to drive really boring cars. The worst you'll get out of this is epic inefficiency.

However there's really no point nationalising a tea shop or surf school, all of which will come under your current heading. Local business needs to remain locally owned and run, responding to local needs and environment. A government owned tea shop would look the same as every other tea shop in the country and end up with all the wrong stock for local tastes.

The state should only get involved a company which is a (near) national monopoly or nationally critical infrastructure.

As a note relating to ownership and management. Since, as everyone knows, property is theft, "ownership" in a socialist world means "control".

  • $\begingroup$ Comments are not for extended discussion; this conversation has been moved to chat. $\endgroup$ – HDE 226868 Dec 13 '16 at 18:22
  • $\begingroup$ Local requirements aren't a problem if you get a more homogenous populace. I recommend structuring sci-fi socialism around a very strong eugenics program with intense social programming. "Brave New World" comes to mind. $\endgroup$ – SRM Dec 14 '16 at 6:55
  • $\begingroup$ There's no reason shared ownership means nationalising. A tea shop could be a member coop or be owned and run by the village council. The tea served by the library is technically served by a socialist enterprise. $\endgroup$ – gerrit Dec 14 '16 at 14:25
  • $\begingroup$ @gerrit, I'm not sure why you're talking about shared ownership? There's no reference to it in question or answer $\endgroup$ – Separatrix Dec 14 '16 at 14:57
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    $\begingroup$ @Separatrix The very first word in the title of the question says "socialist", which, by definition, means shared ownership of the means of production. Socialism does not imply a planned economy and a free market does not imply capitalism. $\endgroup$ – gerrit Dec 14 '16 at 15:03

I think your description leaves a loop hole that not only makes this possible but also transforms your world into a pseudo-capitalistic system.

Much like anything running a business is a skill some people are very good, others not so much.

In your proposed framework really good business people would build a business to the allowable limit and then stop. Sort of. While they might not own the business they might also run the business of their friend as well as their own. The friend and the good business owner would split profits. The friend would benefit by having money for nothing, and the business owner would be able to grow a second business and quite possibly the first as the two might compliment each other.

Then how many associates could the good business owner repeat this process? In effect he would form a conglomerate of small family businesses, and presumably have a large income.

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    $\begingroup$ This actually happens quite often when regulation is onerous "Why so many French firms are stuck at 49 employees" aeaweb.org/research/charts/french-firms-50-employees but it kicks in after certain number of employees $\endgroup$ – slobodan.blazeski Dec 14 '16 at 17:11
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    $\begingroup$ Similar things happen in the US. One company I know of does design work for the government. If the company with the contract does the design, the IP belongs to the government. If that same company hires a third company to do the same work the third company owns the design work. Guess contractors form two companies and they will own the IP forever. Different kind of thing, but similar loophole finding skills. $\endgroup$ – Pete B. Dec 15 '16 at 16:21

Make it small, religious, and unappealing to foreign aggressors.

Let's work backwards from the problems of real attempts at socialism:

  1. Lack of incentives discourages hard work: You mention "upper middle class" so it sounds like you're OK with some financial incentives, but social prestige is just as motivating. Give them a traditional religion (maybe even an interpretation of Christianity) where charity is the strongest ideal, so people aren't angry about others "leeching" of their work. Make the country small enough that people can earn a reputation for helping the country, and the critical inventors and managers can become celebrities.
  2. Central planning is hard: Hayek was right, markets rock. But you don't need everything run by a single 5 year plan. Break the economy into manageable chunks (Amazon has 300k employees and is still dynamic), and make the country overall small enough that there are a manageable number of them. Give the people a few different options (like 4 independently managed but government owned fast food chains) and let them allocate resources.
  3. Lack of investment in consumer products: Both the Soviet Union and current China are trying to build armies that directly compete with that of the largest economy on Earth. That takes an incredible amount of money and necessitates investment in heavy industry over keeping the people happy. Make them unappealing to foreign aggression by making the world safe (like modern day Europe), or making the country lack in strategic value or be naturally defensible (like Switzerland).
  4. Corruption: This is hardly unique to socialism, but destroyed the Venezuelan experiment and is common in centralized economies. But it's mitigated with a religious/social more against opulence and a way to remove those in a position to profit from corruption. Let the monastic priests kick the crooks out.

Bonus: Give them a head start. The GDP per capita of the areas that would become the USSR was only 1488 on the eve of the revolution compared to 5301 in the US. Even if they had they'd matched US GDP growth until today, they'd still be 3.5x poorer. If the situation was reversed, the socialist country could grow slower and still be relatively more prosperous.

EDIT: Added 4.

  • $\begingroup$ The stipulation of religion is good. I think that the Jewish kibbutzes were probably the most successful socialist societies. You would need extremely high social cohesion for socialism to work, and religion provides that to some extent. Religion could discourage people from free-riding. $\endgroup$ – dan-gph Dec 16 '16 at 2:17

It's not impossible

But it should be understood that Karl Marx's original vision was not that Communism would be efficient, but that it could be adopted in a post-scarcity economy and it wouldn't matter if it wasn't efficient.

The key to getting Communism right is to get the post scarcity economy first, then switch to Communism so everyone has a slice of the pie. Actual Communist countries have made the switch without the post scarcity economy and found that the existing scarcity got worse and there wasn't enough pie to go around.

Socialism in general is like this. Morally appealing, but expensive. You take what you can afford.

  • $\begingroup$ James notice that communism as a political ideology is both stateless and prior to Karl Marx (that notably described Marxism). Socialism itself (again as a political ideology) requires democratic control of means of production. Due to many countries calling themselves Communist ..., Socialist ..., Republic of ..., Democratic ..., United ..., has been more of a propaganda operation than an factual description of what the country really is. For example Social Democracy (i.e. most of Europe) is no more than a reinforcement that a party follows a Socialist philosophy under a Democracy. $\endgroup$ – armatita Dec 16 '16 at 15:15

What history has taught us is that a system with a wasteful controlling class, a communist party, a dictator, a royal family, will indeed leave the lower classes poor and wanting.

Most people forget how wasteful the current capitalist system is and how many people are left poor and wanting. How many homeless people are there in the US? How many people have lost everything when last bubble bursted?

A friend of mine told me in the late eighties that a plan economy could not work because the giant matrices you'll have to calculate to set prices and production so that you could reduce waste. It would take so long to calculate what next years production should be, that next year would have gone and many other next years with it before you got the result.

That was true then, today you could just fire up an array of a few thousands of high grade graphics cards and be done with it in a few weeks.

And to beat the current capitalist system it does not have to be optimal, it only has to be decent.

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    $\begingroup$ Your friend has not made a career in Data assimilation. The matrices that get inverted every 3 hours to produce weather forecasts are huge. $\endgroup$ – gerrit Dec 14 '16 at 14:22

Another close-enough example can be Turkey 1923-1946.

State ownership of major industries was not as absolute as you require, but it was close. The country was founded on the ashes of the Ottoman empire, severely depleted of capital after 500 years of continuous warfare, often on the losing side.

The ethnic minorities that comprised the majority of the upper middle class were either living outside the newly drawn borders, immigrated, "exchanged", or purged. Therefore, the ruling founder of the country, Mustafa Kemal, adopted "statism" and started a 25 year period of the state building and running all kinds of industrial enterprises from sugar factories to foundries to textile mills.

Private enterprise was not illegal but very few private citizens had the necessary capital. Feudal "lords" in the countryside continued to own large swathes of land, though; agriculture was not cooperative-ized (These landowners eventually supported a more conservative, capitalist movement from 1946 onwards).

This country supported exactly 1 city of 1M+ (Istanbul) where quality of life was very reasonable for the middle class compared to the rest of Europe. Buildings were not only in good state of repair but were admired all over the continent fo their architecture.

However, this being 1930s, private automobile ownership would not be at the level you need.

Source: My ancestors lived there during the time period described.


To make this stable in slightly longer term, instead of everyone starving themselves if they don't work, in the laziest way, everyone should have some inherent high income and expense, which cancels out so they have the net income similar to the rest of the world.

At first I thought of making a group of scientists to declare independence in Antarctica or even Mars. But that doesn't seem to satisfy your criteria.

But some much simpler models might work too, for example some oil field near some extreme environment. The expense could be explained by the extreme environment. But the problem is, if humans didn't have modern technologies when they first arrive there, so they still have chances to form a new country, how did they survive? The income could be from the oil field. But why isn't it owned by the leader of the first group of people discovering it? And many young people may not think an oil field could prove all their value. Why don't they want to leave there? The answers might not be straightforward, but I think they should be all possible.

The nearest thing in the modern world might be the space station. It's unlikely anyone will charge the astronauts for their expenses, even if the expenses are not for their main mission. And it is expensive to launch all the resources they require. The only difference beside not being an independent country is that they relies on the earth and cannot generate income themselves.

Many companies in capitalist countries could operate in similar ways. It's just a way to isolate them to a specific location and prevent them dealing with anyone else after their jobs.


The power isn't allowed to be to concentrated and retained indefinitly, otherwise you will end up with defacto oligarchies or dictatorship. Make it a multiparty system (maybe each party representing different interests, like internet interests, scientific interests, technical interests, nature preserving interests, production interests in general, policy interests, system failure-fix interests).

The country needs (not only theoretical, but practically) guranteed free speech and free journalism.

People need to really have influence and there need to be anti-corruption mechanisms that immediatly imprison/fire anyone not reporting a bribe attempt or taking a bribe. You can use randomly appointed citizens which serve as short term inspectors as control instance here, for the important tasks. The control should be without any holes, so that inbetween inspections no corruption can take place.

If you have a high focus on scientific method in the goverment and control mechanisms that prevent capitalistic failures and corruption, and potentially give some incentives for work, like a public reputation system or privilege system that gives you quicker access (other still get access but require longer time) to luxury goods, then I can easily see a non-corrupt goverment of any kind to be more efficent than any other system.

Because lets face it UDSSR, failed because of a static high power with non-shifting goverments, which were highly corrupt. This is also todays russian problem were police is still corrupt and power is still static.


What about Yugoslavia itself? Did you consider it as an example?

I think it can be definitely considered a socialist country. In Belgrade has over a million citizens. Novi Beograd, 1980. Isn't it a beautiful example of communist architecture?

They had these "famous" Yugo cars and I think buildings were pretty well maintained, at least according to the pictures of the 70s you can find. The overall standard of living surely wasn't as bad as in the USSR since it was an open country, people could easily leave it. In fact many did, there has always been a strong Yugoslavian immigration in Germany and Switzerland. But if things down there were as bad as in the USSR, almost everyone would have left the country (like many people wanted in the GDR, for example). It was also a quite popular holiday destination for western-Europeans. Here are some pictures of a resort close to Dubrovnik, in the 1980s and what's left of it today

  • $\begingroup$ Hello and welcome to Worldbuilding. Please take a look at the worldbuilding tour and the help center on how to write good answers (worldbuilding.stackexchange.com/help). Would you please write some facts about Yugoslavia, why this country should be considered as a good example (and please, not just a link to Wikipedia). $\endgroup$ – Alexander von Wernherr Dec 16 '16 at 10:49
  • $\begingroup$ @Frostfyre I think this post attempts to answer the question, but it would be great if Tobi could add more details about why 1970s-1980s Yugoslavia's economy could be considered 'good.' $\endgroup$ – kingledion Dec 16 '16 at 14:24
  • $\begingroup$ @kingledion At the time, the answer consisted of just the first two sentences. $\endgroup$ – Frostfyre Dec 16 '16 at 14:46
  • $\begingroup$ @Frostfyre No harm in deleting your from-review comment if it no longer applies. Remember, comments are ephemeral. $\endgroup$ – user Dec 16 '16 at 21:03
  • $\begingroup$ @kingledion Yugoslavia was much richer (10X-20X higher living standard) then former Eastern block countries, partly due to less socialism, and because it got special treatment (access to markets) & credits from the West. However in the 80's the economy was already in serious trouble, with lack of credit, jobs and competitiveness. So it could serve as a good setting, but only because economic & diversity problems were hidden under the rug. $\endgroup$ – slobodan.blazeski Dec 16 '16 at 21:17

I suggest to consider Poland. Similarly to Hungary, Poland had such kind of economy as you need. But you should remember, that Poland got big debts and credits at that time. As a consequence, your economy will collapse at the end of 70ths.

  • $\begingroup$ Poland wasn't in a good economic situation after WW2... $\endgroup$ – user22613 Dec 18 '16 at 10:28

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