The Socialist Market Economy: China and the World

Author(s): Xiaoqin Ding

Source: Science & Society , Apr., 2009, Vol. 73, No. 2, China: Socialism, Capitalism,
Market: Why Not? Where Next? (Apr., 2009), pp. 235-241
Published by: Guilford Press

Stable URL: https://www.jstor.org/stable/40404550

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 CHINA AND THE WORLD 235

crimes that accompanied the revolution, f

done more to better the lives of more peo
was decisive for China's subsequent econom
industries in the 1980s would not have bee
ity of public land. Public commitment to
relatively high level of state investment in
ture, such as free schooling and free to low-
accessible medical services. These arrangem
from most other developing countries, co
The Beijing Olympics showcased the Chi
wants to present to the outside world - su
vanced, prosperous and modern as anythin
the more genuine and in fact better China th
the May earthquake in Sichuan with heroic r
all levels, the army, and people from all walk
try. The resilience and resourcefulness of
source of optimism. With a socialist ideal a
pursue it, true reform is well within China's

Chun Lin

c.lin@lse.ac.uk

Dr. Chun Lin is Senior Lecturer in Comparative Politics at the London School of Eco-
nomics. She is the author of many articles in both Chinese and English, and the editor
of several anthologies, including a three-volume collection on China for Ashgate (2000).
Among her most recent books isThe Transformation of Chinese Socialism (2006).

Science & Society, Vol. 73, No. 2, April 2009, 235-241

THE SOCIALIST MARKET ECONOMY:

CHINA AND THE WORLD

In his report to the 17th Chinese Communist Party conference, Pres

Hujintao spoke of combining the socialist system with the market econom
What is the socialist economic system? And what is the market econo
The basic economic system is determined by production relations, especial
by the ownership of means of production. In our primary stage of sociali

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236 SCIENCE & SOCIETY

this means that public ownership is

sectors develop side by side, assuring
off society and the realization of so
The market economy is only an eco
ernment to achieve certain socialist goa
to achieve them - the Chinese gove
control of the economy than any capit
the production and circulation of co
nomic systems.
Prof. Yang writes that "capitalism
private ownership and a correlated s
the market economy as a main feature
market economy as an independent eco
level with socialism when he says: "T
market economy, fundamentally surm
combine the superiority of the econ
vantages of the market economy." T
leads to many misunderstandings ab
The socialist economic system at its
in Article 6 of the Constitution. "The
of the People's Republic of China is s
of production, namely, ownership b
ership by the working people. ... In th
upholds the basic economic system w
nant and diverse forms of ownership
the state, Party and people uphold
mechanisms like the market to the
talist restoration.
It is fanciful to think, as both ultra-leftists and social democrats do, that
because we use the market mechanism and have allowed entrepreneurs to
assume a handful of positions in a Party of more than 73 million, the nature
and control of the system have changed. The main force lies in the other
direction. What has really happened is that entrepreneurs have become
more patriotic and subordinate to the state and people and, if Party mem-
bers, to the principles of Marxism, in a country in which the emerging bour-
geoisie has never become independent as a class for itself.
I don't think Yang really thinks otherwise. Post-structuralists confused
generations of intellectuals by talking of mixed social formations without a
dominant ruling class and structure. The market does not constitute a sepa-
rate economic system in a mixed Chinese social formation. It is only one
mechanism, combined with other more direct forms of public regulation
and control, deployed to achieve socialist goals by a ruling class of workers

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 CHINA AND THE WORLD 237

and peasants, in effect all the people, dispos

of the means of production.
The same economic system may use diffe
Marx's future society, the "community of fre
mon ownership and planned production to
Union had common ownership of the means
ent forms of management, including cooper
ited market mechanisms.

It is another picture in China, where the market currently plays a more

important role and a fundamental one in resource allocation after the reform
and global opening-up. However, the planning dimension is not missing. It is
the backbone of macroeconomic regulation, which is stronger than that in
any capitalist nation. With the opening up we have moved from dominant
planned regulation and a "planned commodity economy" to a "socialist mar-
ket economy." No one mix of the market and planning is correct for all times
and situations; it all depends on concrete economic and global conditions.
Economic and technological conditions may not exist to permit the imple-
mentation of a totally planned economy, abolishing the production and cir-
culation of commodities. But the market economy has its inherent deficiency
and it is mistaken to idealize or absolutize it. When the conditions for abol-
ishing the relations of commodity and money and implementing a totally
planned economy arise, this will happen in an inevitable historical process.

Yang relates the issue of equity and efficiency to the mix of socialism with
the market economy. "The basic economic system of socialism," he says,
"ensures the equity of society, while the market assures economic efficiency."
However, instead of explaining how socialism ensures social equity of soci-
ety and market efficiency, he makes a forced analogy. "Metaphorically again,
under the socialist market economy, the market economy, like a tamed well-
bred horse, can be reined in by the people and operated according to so-
cialist values." But he does not tell us how these values in the socialist market
economy can guarantee equity and efficiency.
As far as I can see, the superiority of socialism lies in the public owner-
ship of means of production, as maintained by scientific socialists instead
of the "socialist values" proffered by social democrats. The Communist Mani-
festo sums up scientific socialism in one sentence: abolishing private owner-
ship of the means of production. Only the change of ownership of the means
of production from private to public can make it possible to abolish classes
and exploitation and to realize common wealth. Otherwise, remarks about
equity and fairness are just idle talk agitating the wind.
Under the influence of neoliberal ideas, the rapid growth of private and
the weakening of public ownership have led to social polarization in China

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238 SCIENCE àf SOCIETY

in recent years. In total social assets, t

sets declined to 48.8% in 2005. It further declined to 44.4% in 2006 with
the state-owned sector accounting for 32.1% and local collectively owned
property 12.3%. The proportion of non-publicly owned assets increased to
50.9% in 2005 and 55.4% in 2006, with the domestic private sector account-
ing for 31.6%, the foreign sector 20.8%, and individual property 3%. Total
domestic private assets today almost equal those of the state sector.
This shift in direct ownership has intensified the disparity between poor
and rich. Among all residents, the income ratio between the high and low
paid increased from 3.1 in 1996 to 6 in 2005. The ratio between urban and
rural per capita disposable income rose from 2.57 in 1978 to 3.11 in 2005.
The income gap has not only increased markedly between urban and rural
residents. The ten percent wealthiest urbanités own 45% of the assets and
the ten per cent poorest only 1.4%.
These data show that it is not enough to regard "socialist values" as the
guarantors of social equity and equality. Only a publicly owned economy can
do this. The rise of income and wealth inequality has been connected to the
policy shift between public, collective and private control and ownership.
Neither can Yang's belief that "the market assures economic efficiency"
hold water. This judgment presumes that the planned economy is of lower
efficiency. However, whether we take the planned economy of the Soviets
or our own, their growth was prodigious when compared to those of capi-
talist market economies. So how can we say that the market economy is more
efficient?

Look at the first 30 years after the beginnings of new China in 1949 and
before the reforms of 1978. During that time China achieved unprecedented
growth and performance thanks to the inherent superiority of socialist public
ownership under the leadership of our party adhering to Marxist principles,
even though the Kuomintang left a feudal and bureaucratic society with a
very weak material and technological base.
The period 1949 to 1952 was essentially one of recovery in which sup-
ply was increased to meet the existing demand. From 1952 to 1978, that is,
from the end of recovery to the eve of the third session of the Eleventh
Central Committee, China carried out a planned economy while preserv-
ing some commodity and money relations. During this period GDP increased
from 67.9 billion to 362.41 billion RMB, an annual growth of 6.1%. The
industrial structure was also significantly improved. The proportion among
the primary, secondary, and tertiary sectors was changed from 50.5, 20.9 and
28.6% in 1952 to 28.1, 48.2 and 23.7% in 1978.
China grew from being a rather underdeveloped agricultural coun-
try into an elementary industrialized one with great national strength, its
own industrial and technological independence and the capacity for self-

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 CHINA AND THE WORLD 239

development. Were it not for many unfav

mance would have surpassed that of all cap
It is patently obvious today that socialis
enthusiasm, concentrate resources on key inf
what capitalist countries cannot even imagine
Three Gorges Dam. The largest in the wor
tion caused by the seasonal flooding of the Y
to all of Western China.

The socialist market economy is of historical world importance. However, it

is inappropriate to look on it as "a new way for developing human society
and economy" or "a new contribution to the development of human soci-
ety." The originality of the socialist market economy cannot be isolated
from the theory and practice of scientific socialism; nor should we regard
it as a Chinese invention. Instead, we should think of it as an application
of scientific socialism in the present period to the Chinese domestic and
global situation.
When talking about the socialist future, Marx and Engels did not dis-
cuss the production and circulation of commodities. Lenin first encountered
this problem after the October Revolution. He did not want to abolish com-
modity and money relations immediately or make a direct transition to a
planned economy. However, the armed invasion by 14 countries and domes-
tic rebellions forced the Soviets onto the road of war communism and they
began to deny the necessity for a transition. The experience finally made
Lenin realize that this was wrong; he implemented the New Economic Policy
to restore commodity and money relations.
But the New Economic Policy was just a transitional policy. The question
was still posed as to whether the production and circulation of commodities
should be further developed. This question was resolved practically and theo-
retically by Stalin. In practice Stalin emphasized the importance of develop-
ing Soviet trade and severely criticized the ideas of the "Red Professors" and
workers who denied commodity and money relations. In his book Economic
Problems of Socialism in the USSR, published in the 1950s, Stalin explained why
the production and circulation of commodities existed in socialist society. He
discussed the role of the law of value in socialist production and circulation
and the relationship between the law of value, the basic law of socialism and
that of planned proportional development. This was undeniably a great contri-
bution, although Stalin did not exhaust discussion of the problem. Thereafter,
Mao Zedong studied commodity production and the law of value in socialist
society and completed some of Stalin's thinking. So when we talk about the
socialist market economy today, we should not forget the past achievements
of socialism and the work of predecessors.

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240 SCIENCE & SOCIETY

Our exploration of the socialist m

There are still many unresolved pr
sons to be learned and reflected on. It is not the time to declare "the his-
torical importance of the combination of socialism and the market
economy." Even if we succeed, we should still keep in mind the Chinese
saying: "peaches and plums do not have to talk, yet the world beats a path
to them." Look what the world discovered about us during the 2008 Olym-
pic Games. So Yang is wrong to talk about the period since 1978 as the third
historical stage of world socialism and a leap from a traditional to a modern
pattern of development.

When Yang talks about applying socialist values to the capitalist market
economy, he obviously diverges from scientific socialism into the theory and
practice of modern social democracy, two totally different outlooks. The so-
called "ameliorative measures" taken under capitalism are not recent but
can be traced to its early beginnings. They have nothing to do with social-
ism but serve to help vindicate and justify capitalism. Social democracy has
not adopted "the equitable values of socialism."
Yang is also mistaken to regard "equitable" as a peculiar "value of so-
cialism." Equity and fairness, together with equality, freedom and phil-
anthropism were once progressive aims as the slogans of the bourgeoisie in
opposing feudal privileges. But these slogans stood for the interests of the
bourgeoisie and were fraudulent. Marx exposed this fraudulence in Volume I
of Capital when he wrote about the "purchase and sale of labor power."
Engels distinguished between the bourgeois and working-class conceptions
of equality in Anti-Diihnng. He showed that proletarian equality meant the
abolition of classes. It is therefore incorrect to talk about equity and fair-
ness abstractly without considering class.
There are all kinds of so-called socialisms in the world. The socialism
that we are talking about is Marxian or scientific socialism, which has taken
on certain characteristics in the present Chinese situation that are the re-
sult of experience and practice. It is important to draw a line between this
adaptation of Marxist socialism and modern capitalist social democracy. This
distinction is widely misunderstood in many influential Chinese circles.
In 2007 a big controversy erupted in China between Marxist socialists
and social democrats, with Tao Xie, former vice president of Renmin Uni-
versity, and Ziling Xin, retired research fellow of the National University of
Defense Technology, being representative of the latter. President Hu in his
report to the 17th congress made the position of the Party clear. The social-
ist market economy results from the application of scientific socialism to the
current situation of China. But the misunderstanding rumbles on. Xie and
Xin still publicize their social democratic ideas as official ones. Their errors

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 CHINA AND THE WORLD 241

must be exposed. If no distinction is made

modern capitalist social democracy, then one
of advocating a restoration of capitalism. Y
trap.

Scientific socialism aims to establish public ownership or the social owner-

ship of the means of production. Communists, said Marx in the Manifesto,
could simply state their objective as gaining power for the proletariat in order
to abolish the private ownership of the means of production, which was the
basis for class exploitation and rule. The Chinese people's revolution essen-
tially accomplished these goals. Modern capitalist social democracy has
opposed and condemned these changes, which are necessary for the devel-
opment of true human equality and freedom. Prof. Yang's opinions are in-
fluenced by these all-too-prevalent social democratic ideas.

Xiaoqin Ding

hpjjx@vip. 163.com

Xiaoqin Ding is Associate Professor and Assistant Director of the Research Institute
of Marxism and the Economics Research Center of the Shanghai School, Shanghai
University of Finance and Economics; Deputy Secretary-General of the World Asso-
ciation for Political Economy (WAPE), an international organization of Marxist econo-
mists and related academic specialists; Executive Associate Editor of the Economics
Journal of the Shanghai School.

REFERENCES

Xi, Zhaoyong. 2008. "The Development of World Socialism and the Socialist
ket Economy of China." The Economics Journal of the Shanghai School, 23:3
186. Shanghai, China: Shanghai University of Finance and Economics Pr
Cheng, Enfu. 2007. "Fundamental Characteristics of the Socialist Market Eco
Nature, Society, and Thought, 20:1, 44-51.

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