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Market socialism refers to various economic systems where the means of production are either publicly owned or cooperatively owned and operated for a profit in a market economy. The profit generated by the firms would be used to directly remunerate employees or would be the source of public finance or could be distributed amongst the population through a social dividend.^[1][2] Theoretically, the fundamental difference between market socialism and a non-market socialism is the existence of a market for the means of production and capital goods. Market socialism is distinguished from models of mixed economies, because unlike the mixed economy, models of market socialism are complete and self-regulating systems.^[3]

Early forms of market socialism consisted of proposals for cooperative enterprises operating in a free-market economy, so that exploitation would be eliminated and individuals would receive the full product of their labor. Early market socialism was expressed by Ricardian socialists, mutualists and individualist anarchists and was based on the theories of classical economics.

Contemporary models of market socialism are based on neoclassical economic theory beginning in the early twentieth century. Early neoclassical models of socialism include a role for a central planning board (CPB) in setting prices to equal marginal cost in order to achieve pareto efficiency. Alternative models of market socialism outlined models where socially-owned enterprises operate free markets to maximize economic profit. In contemporary models proposed by economists such as John Roemer and James Yunker, public ownership is achieved through public ownership of equity.

Market socialism has also been used to refer to reformed economic systems in Marxist-Leninist states, such as the People's Republic of China, where a free price system is utilized for the allocation and distribution of all resources in the state sector. In this model, state ownership is reserved for "strategic" sectors of the economy. Within this model, the state would utilize indirect market mechanisms (fiscal, monetary and Industrial policy) to influence economic activity in the same manner governments affect economic decisions in capitalist economies, including the use of (external) regulation over the otherwise autonomously-operating state enterprises. However, proponents of this model do not consider it to be a form of market socialism in the neoclassical sense, and instead describe it as an alternative economic model called the "socialist market economy".^[4]

Theoretical history[link]

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Classical economics[link]

Proponents of early free-market socialism include the Ricardian socialist economists, the classical liberal philosopher John Stuart Mill, and the anarchist philosopher Pierre-Joseph Proudhon.

This form of market socialism has been termed "free market socialism" because it does not involve planners.^[5][6] Pierre-Joseph Proudhon developed a theoretical system called mutualism, which attacks the legitimacy of existing property rights, subsidies, corporations, banking, and rent. Proudhon envisioned a decentralized market where people would enter the market with equal power, negating wage slavery.^[7] Proponents believe that cooperatives, credit unions, and other forms of worker ownership would become viable without being subject to the state. Market socialism has also been used to describe some individualist anarchist works^[8] which argue that free markets help workers and weaken capitalists.

Neoclassical economics[link]

The earliest models of this form of market socialism were developed by Leon Walras, Enrico Barone (1908)^[9][10] and Oskar R. Lange (c. 1936).^[11] Lange and Fred M. Taylor^[12] proposed that central planning boards set prices through "trial and error", making adjustments as shortages and surpluses occurred rather than relying on a free price mechanism. If there were shortages, prices would be raised; if there were surpluses, prices would be lowered.^[13] Raising the prices would encourage businesses to increase production, driven by their desire to increase their profits, and in doing so eliminate the shortage. Lowering the prices would encourage businesses to curtail production to prevent losses, which would eliminate the surplus. Therefore, it would be a simulation of the market mechanism, which Lange thought would be capable of effectively managing supply and demand^[14] but could not work as efficiently or as effectively as the true thing. Time delays due to bureaucracy, distortions due to politics, and the lack of an entrepreneurial process that would come up with newer, better and cheaper products would seriously hamper the results of this approach vis-a-vis the real thing, which would also avoid the financial cost of paying for inessential government administrative staff.

H. D. Dickinson published two articles proposing a form of market socialism: "Price Formation in a Socialist Community" (The Economic Journal 1933) and "The Problems of a Socialist Economy" (The Economic Journal 1934). Dickinson proposed a mathematical solution whereby the problems of a socialist economy could be solved by a central planning agency. The central agency would have the necessary statistics on the economy, as well as the capability of using statistics to direct production. The economy could be represented as a system of equations. Solution values for these equations could be used to price all goods at marginal cost and direct production. Hayek (1935) argued against the proposal to simulate markets with equations. Dickinson (1939) adopted the Lange-Taylor proposal to simulate markets through trial and error.

The Lange-Dickinson version of market socialism kept capital investment out of the market. Lange (1926 p65) insisted that a central planning board would have to set capital accumulation rates arbitrarily. Lange and Dickinson saw potential problems with bureaucratization in market socialism. According to Dickinson "the attempt to check irresponsibility will tie up managers of socialist enterprises with so much red tape and bureaucratic regulation that they will lose all initiative and independence" Dickinson 1938 p214). In the Economics of Control (1944) Abba Lerner admitted that capital investment would be politicized in market socialism.

More contemporary models include "Coupon Socialism" (by the economist John Roemer) and "Economic Democracy" (by the philosopher David Schweickart).

Bardham and Roemer suggested a form of Market Socialism where there was a "stock market" that distributed capital fairly between the workers. In this stock market, there is no buying or selling of stocks, which leads to negative externalities associated with a concentration of capital ownership. The Bardham and Roemer model satisfied the main requirements of both Socialism (workers own all the factors of production – not just labour) and market economies (prices determine efficient allocation of resources). A New Zealand Economist, Steven O'Donnell, expanded on the Bardham and Roemer model and decomposed the capital function in a general equilibrium system to take account of entrepreneurial activity in market socialist economies. O'Donnell (2003) set up a model that could be used as a blueprint for transition economies, and the results suggested that although market socialist models were inherently unstable in the long term, in the short term they would provide the economic infrastructure necessary for a successful transition from Socialist to market economy.

Yugoslav economists Jaroslav Vanek and Branko Horvat promoted a model of market socialism dubbed the Illyrian model, where firms were socially-owned by their employees and based on worker's self-management, competing in open and free markets.

Anti-Equilibrium economics[link]

Another form of market socialism was promoted by critics of central planning and general equilibrium theory, the most notable economists being Alec Nove and Janos Kornai. In particular, Alec Nove's feasible socialism proposed a mixed economy consisting of state-run enterprises, autonomous publicly-owned firms, cooperatives, and small-scale private enterprise operating in an economy consisting of both markets and indirect macroeconomic planning.^[15]

Theoretical basis[link]

The key theoretical basis for market socialism is the negation of the underlying expropriation of surplus value present in other, exploitative, modes of production. Socialist theories that favored the market date back to the Ricardian socialists, who advocated a free-market combined with state ownership of the means of production.

An important base for the first definition of market socialism in economic theory is the Lange Model, which states that an economy in which all production is performed by the state, but in which there is a functioning price mechanism, has similar properties to a market economy under perfect competition, in that it achieves Pareto efficiency.

Implementation[link]

Peter Drucker described the U.S. system of regulated pension funds providing capital to financial markets as "pension fund socialism".^[16] William H. Simon characterized pension fund socialism as "a form of market socialism", concluding that it was promising but perhaps with prospects more limited than those envisioned by its enthusiasts.^[17]

Other uses of the term[link]

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Although the name is similar, it markedly differs from the socialist market economy and Socialist-oriented market economy, which is practiced within the People's Republic of China and Socialist Republic of Vietnam, respectively.

Market socialism has also been used as a name for any attempt by a Soviet-style economy to introduce market elements into its economic system. In this sense, "market socialism" was first attempted during the 1920s in the Soviet Union as the New Economic Policy (NEP), but soon abandoned. Later, elements of "market socialism" were introduced in Hungary (where it was nicknamed "goulash communism"), Czechoslovakia and Yugoslavia (see Titoism) in the 1970s and 1980s. The Economy of Belarus has been described as a "market socialist" system. Modern Vietnam and Laos also describe themselves as market socialist systems. The Soviet Union attempted to introduce a market socialist system with its perestroika reforms under Mikhail Gorbachev. During the later stages there was talk within top circles that the government should create the Socialist Market Economy; however, they never reached an agreement of how much socialism and market was to be featured.

Historically, these kinds of "market socialist" systems attempt to retain state ownership of the commanding heights of the economy, such as heavy industry, energy, and infrastructure, while introducing decentralised decision making and giving local managers more freedom to make decisions and respond to market demands. Market socialist systems also allow private ownership and entrepreneurship in the service and other secondary economic sectors. The market is allowed to determine prices for consumer goods and agricultural products, and farmers are allowed to sell all or some of their products on the open market and keep some or all of the profit as an incentive to increase and improve production.

Socialist market economy[link]

The Chinese experience with socialism with Chinese characteristics is frequently referred to as a "socialist market economy" in which the "commanding heights" remain in state ownership, but a substantial portion of both the state and private sectors of economy are governed by free market practices, including a stock exchange for trading equity. The free-market is the arbitrator for most economic activity, with economic planning being relegated to macro-economic government indicative planning that does not encompass the microeconomic decision-making that is left to the individual organizations and state-owned enterprises. This model includes a significant amount of privately owned firms that operate as a business for profit, but only for consumer goods and services.^[18]

Directive centralized planning composed of mandatory output requirements and production quotas have been displaced by the free-market mechanism (for most of the economy) and directive planning in larger state industries.^[19] One of the major changes between the old planned economy and the socialist market model is the corporatization state institutions, with 150 of them reporting directly to the central government.^[20] By 2008, these state-owned corporations have became increasingly dynamic and generated lots of revenue for the state,^[21][22] with the state-sector leading the recovery of economic growth in 2009 in the wake of the financial crises.^[23]

The Socialist Republic of Vietnam pursued market-oriented reforms in 1986, resulting in what is officially called a "Socialist-oriented market economy", a system that utilizes market forces to distribute consumer goods produced by state-run, collectively owned and privately owned enterprises.

Proponents of socialist market economic systems argue from a Marxist perspective, stating that a planned socialist economy can only be brought about by first establishing a comprehensive commodity market economy and letting it fully develop until it exhausts its historical stage and gradually transforms itself into a planned economy.^[24] They argue that the economic system of the USSR and its satellite states attempted to go from a natural economy to a planned economy by decree, without passing through the necessary market economy phase of development. Proponents of socialist-directed market economies distinguish themselves from market socialists, and state that market socialists believe that only through utilizing the market mechanism can socialism be achieved, and that planned economies are ineffective or undesirable.^[25]

See also[link]

References[link]

Further reading[link]

• Bertell Ollman ed. (1998). Market Socialism: the Debate Among Socialists, with other contributions by James Lawler, Hillel Ticktin and David Schewikart. Preview.
• Steven O'Donnell (2003). Introducing Entrepreneurial Activity Into Market Socialist Models, University Press, Auckland
• John E. Roemer et al. (E. O. Wright, ed.) (1996). Equal Shares: Making Market Socialism Work, Verso.
• Alec Nove (1983). The Economics of Feasible Socialism, HarperCollins.
• David Miller (1989). Market, State, and Community: Theoretical Foundations of Market Socialism, Clarendon Press, Oxford.
• David Schweickart (2002). After Capitalism, Rowman & Littlefield, Lanham, Maryland.
• Johanna Bockman (2011). Markets in the Name of Socialism: The Left-Wing Origins of Neoliberalism, Stanford University Press, Stanford. Preview.

This biographical article needs additional citations for verification. Please help by adding reliable sources. Contentious material about living persons that is unsourced or poorly sourced must be removed immediately, especially if potentially libelous or harmful. (September 2011)

David Schweickart is an American mathematician and philosopher. He holds a BS in Mathematics from University of Dayton, a PhD in Mathematics from University of Virginia, and a PhD in Philosophy from Ohio State University. He currently is Professor of Philosophy at Loyola University Chicago.^[1]

He has taught at Loyola since 1975. He was a visiting professor of mathematics at the University of Kentucky from 1969 to 1970, and a visiting professor of philosophy at the University of New Hampshire from 1986 to 1987. He has also lectured in Spain, Cuba, El Salvador, Italy, and the Czech Republic, as well as throughout the United States.

He is an editor and contributing writer to SolidarityEconomy.net, an online journal dedicated to Economic Democracy.

In 1999, Schweickart was named Faculty Member of the Year at Loyola University Chicago.

Economic democracy[link]

In After Capitalism and other works, Schweickart has developed the model of market socialism he refers to as "economic democracy". In his own words "Economic Democracy is a market economy."^[2] It embodies several key ideas:

• Workplace self-management, including election of supervisors
• Management of capital investment by a form of public banking
• A market for goods, raw materials, instruments of production, etc.
• Protectionism to enforce trade equality between nations

The firms and factories are owned by society and managed by the workers. These enterprises, so managed, compete in markets to sell their goods. Profit is shared by the workers. Each enterprise is taxed for the capital they employ, and that tax is distributed to public banks, who fund expansion of existing and new industry.

Published works[link]

• After Capitalism (Rowman and Littlefield, 2002) - ISBN 0-7425-1300-9
• Market Socialism: The Debate Among Socialists, with Bertell Ollman, Hillel Ticktin and James Lawler (Routledge, 1998)
• Against Capitalism (Cambridge University Press, 1993; Spanish translation, 1997; Chinese translation, 2003)
• Capitalism or Worker Control? An Ethical and Economic Appraisal (Praeger, 1980)

See also[link]

• American philosophy
• List of American philosophers

References[link]

External links[link]

• Schweickart's faculty homepage at Loyola University Chicago
• The National Cooperative Grocers Association—An organization of cooperatively owned food stores. Cooperators hold economic democracy to be a key element of their movement.
• SolidarityEconomy.net—An online journal of radical social change that features David Schweickart's works and other writings on economic democracy and leftist politics.
• "After Capitalism" in Facebook

Jason Mattera
Mattera speaking at the Pajamas TV Conservatism 2.0 conference at the 2009 Conservative Political Action Conference.
Born	Jason Joseph Mattera (1983-09-08) September 8, 1983 (age 28) Brooklyn, New York
Occupation	blogger, activist, talk radio host
Education	Roger Williams University (B.S., business management and communications 2005)
Subjects	U.S. politics
Notable work(s)	Obama Zombies The Jason Mattera Show

Jason Joseph Mattera (born September 8, 1983)^[1][2] is an American writer, activist, and radio host. He entered conservative activism while attending Roger Williams University and has worked for Young America's Foundation.

Personal background and education[link]

Born in the New York City borough of Brooklyn, Mattera is of Italian and Puerto Rican descent and a practicing Christian.^{[3][4][5][6][7]} He is one of five children of Joseph G. Mattera and Joyce Mutkoski Mattera, senior pastors of the Resurrection Church in Brooklyn.^{[8][9][10][11][12]} In 2005, Jason Mattera graduated summa cum laude from Roger Williams University with a Bachelor of Science degree in business management and communications.^[1][13]

Career[link]

Writing[link]

In 2010, Mattera wrote his first book, Obama Zombies: How the Liberal Machine Brainwashed My Generation. That book debuted at #14 on The New York Times best-seller list for hardcover non-fiction.^[14] Stephen Gutowski at Human Events praised the book, which he said "well chronicles how liberals have taken advantage of and brain-washed" college-aged voters.^[15] Promoting Obama Zombies on broadcast media, Mattera was a guest on the Fox News Channel program Hannity^[16] and radio programs The David Pakman Show,^[17][18], The Mark Levin Show,^[19] and The Thom Hartmann Program.^[20] Liberal watch dog Media Matters for America pointed out inaccuracies in Obama Zombies regarding Barack Obama's statements regarding the September 11 attacks and foreign policy as well as attacks on the scientific opinion on climate change.^[21][22]

In 2012, Mattera published his second book, Hollywood Hypocrites: The Devastating Truth About Obama's Biggest Backers. Two ambush videos intended to promote this book received significant attention. The first one was released in mid-March 2012 and was of Mattera confronting comedian Chris Rock at a Sundance Film Festival after party over remarks that Rock made calling the Tea Party movement racist. The video shows Rock lunging for the camera.^[23]

Mattera's articles have appeared on websites including Breitbart's Big Journalism, LewRockwell.com, Townhall.com, and Hot Air. He was editor of Human Events magazine from March 31, 2010 through March, 2012.^[13]

Activism[link]

At Roger Williams University, Mattera was chairman of the Campus Conservatives organization and editor in chief of campus conservative newsletter The Hawk's Right Eye.^[24] The New York Times reported that The Hawk's Right Eye "upset college officials with its critiques of Islam and homosexuality."^[25] In 2003, the College Republican National Committee named Mattera the Best State Chairman, and Young America's Foundation recognized him as a top college conservative activist for two years.^[24]

In response to a 2003 appearance by Judy Shepard, whose son Matthew Shepard was murdered for being gay, The Hawk's Right Eye published articles accusing "militant homosexuals" who supported hate-crime legislation of opposing free speech and a gay-rights group of indoctrinating students. University president Roy Nirschel responded: "While we affirm the right of campus organizations to hold different points of view and to disagree, the university will not condone publications that create a hostile environment for our students." Administration also temporarily halted funding for printing The Hawk's Right Eye. Mattera defended his newsletter and claimed that campus conservatives were victims of censorship.^[26][27]

In 2004, Mattera attracted national attention for creating the Whites Only Scholarship worth $50. Having received a $5,000 scholarship from the Hispanic College Fund, Mattera felt that his scholarship gave him "an inherent advantage over my white peers."^[4] He told The New York Times that the scholarship was a parody of others specifically available only for minorities: "If you are a white student on campus, you don't have anyone helping you, there is no one compiling a list of scholarships just for you, Why is it that only students of color have this?"^[25] Sixteen people applied for the Whites Only Scholarship by February 2004, and the Rhode Island Republican Party criticized the scholarship for allegedly being racist.^[4]

Campus Progress criticized one of Mattera's videos explaining why the conservative movement struggles to attract young voters.^[28]

On YouTube, Mattera posts ambush journalist videos of him confronting politicians.^[29] In March 2010, Mattera posted videos on YouTube in which he confronted Senator Al Franken and Representative Alan Grayson about certain portions of the Patient Protection and Affordable Care Act: Mattera asked Franken about a provision that Mattera claimed would fund construction of jungle gyms for $7 billion and Grayson about a provision Mattera claimed would provide grants to "Native American child molesters." ^[30]

That year, Mattera also spoke at the Conservative Political Action Conference (CPAC). In his speech, he stated: "Students are subjected to a bombardment of liberal talking points throughout their collegiate careers."^[31] He also compared CPAC to the Woodstock Festival and added: "Except that our women are beautiful, we speak in complete sentences, and our notion of freedom doesn't consist of snorting cocaine, which is certainly one thing that separates us from Barack Obama."^[32] Mattera also impersonated comedian Chris Rock, according to a Kate Zernick report in the NY Times, in attacking "diversity" and proclaiming “Get your government off my freedom!”^[33] The validity of Zernick's Rock-impersonation characterization was challenged by conservative blogger Andrew Breitbart, who said "[Mattera] happens to be from Brooklyn! He's using his voice!"^[34] Further on diversity, Mattera imagined college courses on "what it means to be a feminist new black man [as] ... a crossover between RuPaul and Barney Frank".^[33] Andrew Sullivan cited Mattera's speech as part of how he felt the Republican Party was becoming "whiter and whiter, and straighter and straighter" with "hostility towards gay equality...becoming an intense and defining shibboleth of what the party means."^[35]

Mattera was the subject of a complaint from Joe Biden's office in 2011 after questioning whether Biden stood by his claims that “murder will continue to rise, rape will continue to rise, all crimes will continue to rise” if a Democratic Party spending bill was not passed.^[36]

Radio and television[link]

Mattera also hosts a weekly talk show on WABC-AM, The Jason Mattera Show and has been a guest host on the station since June 2010.^[37] On television, Mattera has been interviewed on Hannity and Colmes, Fox and Friends, Weekend News with Chris Core, and Washington Journal.^[24][38]

Bibliography[link]

• Mattera, Jason (2010), Obama Zombies: How the Liberal Machine Brainwashed My Generation, New York City: Threshold Editions, ISBN 1-4391-7207-2 
• Mattera, Jason (2012), Hollywood Hypocrites: The Devastating Truth About Obama's Biggest Backers, New York City: Threshold Editions, ISBN 1-4516-2563-4 

References[link]

External links[link]

• Official website
• The Jason Mattera Show website on WABC

Michael Albert
Michael Albert speaking at New York's annual Left Forum, 2007.
Born	(1947-04-08) April 8, 1947 (age 65)
Occupation	Writer
Nationality	American
Subjects	Politics, Economics
Notable work(s)	Moving Forward: Program for a Participatory Economy
www.zcommunications.org/zspace/malbert

Michael Albert (born April 8, 1947) is an American activist, economist, speaker, and writer.

During the 1960s, he was a member of Students for a Democratic Society, and was active in the anti-Vietnam War movement. He is co-editor of ZNet, and co-editor and co-founder of Z Magazine. He also co-founded South End Press and has written numerous books and articles.

Albert identifies himself as a market abolitionist^[1] and favors participatory planning as an alternative.^[2] He developed, with Robin Hahnel, the economic vision called participatory economics. Albert has also been a moving force in the creation of the International Organization for a Participatory Society founded in 2012.

Albert's memoir, Remembering Tomorrow: From SDS to Life After Capitalism (ISBN 1583227423), was published in 2007 by Seven Stories Press.

Books[link]

• What Is To Be Undone? (1974)
• Unorthodox Marxism with R. Hahnel (1978)
• Socialism Today and Tomorrow with R. Hahnel (1981)
• Marxism and Socialist Theory with R. Hahnel (1981)
• Liberating Theory with Holly Sklar, Lydia Sargent, Mel King, Robin Hahnel, Noam Chomsky and Leslie Cagan (1986)
• Quiet Revolution in Welfare Economics with R. Hahnel (1990)
• Looking Forward with R. Hahnel (1990)
• The Political Economy of Participatory Economics with R. Hahnel (1991)
• Stop the Killing Train: Radical Visions for Radical Change (1994)
• Thinking Forward: Learning To Conceptualize Economic Vision (1997)
• Moving Forward: Program for a Participatory Economy (2001)
• Parecon: Life After Capitalism (2002)
• The Trajectory of Change: Activist Strategies for Social Transformation (2002)
• Thought Dreams: Radical Theory for the 21st Century (2004)
• Realizing Hope: Life beyond Capitalism (2006)
• Remembering Tomorrow: From SDS to Life After Capitalism, A Memoir (2007)

See also[link]

• Participatory politics
• Participatory economics
• Market abolitionism
• Z Communications
• Complementary holism
• Left-wing politics

References[link]

1. ^ Market Madness. Z-Mag, 13 July 2004.
2. ^ Albert, Michael There Is An Alternative. ZNet, July 27, 2005.

External links[link]

Wikimedia Commons has media related to: Michael Albert

• Michael Albert discusses memoir with Amy Goodman on Democracy Now!, April 17, 2007 (video, audio, and print transcript)
• Parecon (Participatory Economics)
• Interview with Michael Albert in Imagineer magazine about the American economy and his proposal for a more effective economic alternative.
• Text of a speech delivered to a CNT Sponsored gathering in Barcelona, Spain (on parecon)
• Anarchism?!

The socialist market economy of modern China consists of a mixture of state-owned enterprises with an open-market economy. It is based on Deng Xiaoping's political platform of socialism with Chinese characteristics (t 中國特色社會主義, s 中国特色社会主义, Zhōngguótèsè shèhuìzhǔyì) and Reform and Opening (s 改革开放, t 改革開放, Gǎigé Kāifàng). It is the economic system in the People's Republic of China since the Chinese economic reform started in 1978 (see Economy of the People's Republic of China). Despite its formal title, this system has been widely cited as a form of state capitalism.^[1]

Similar though much less extensive reforms were undertaken in Vietnam, where the economic system is called the Đổi Mới (lit. "New Age", trans. "Renovation") and socialist-oriented market economy.

Description[link]

After the Great Leap Forward (1958-1961) and the ousting of the Gang of Four from power, Chairman Deng Xiaoping was willing to consider market-based methods of economic growth so as to revitalise China's economy. However, in doing so, he remained committed to the centralized control and the one-party state central to Leninism.

The socialist market economy is a concept first proposed by Deng Xiaoping in order to incorporate the market into the planned economy in the People's Republic of China, and later, to the Đổi Mới in Vietnam.^[2] Following its implementation, this economic system has supplemented the centrally planned economy in the People's Republic of China, with high growth rates in GDP during the past decades have been attributed to it. Within this model, privately owned enterprises have become a major component of the economic system alongside the central state-owned enterprises and collective / township village enterprises.

However, the fundamental distinction between the Chinese and Western mixed-market economy models lies less in the implementation of the mixed economic model but rather in the degree of state-ownership and underlying authoritarian political philosophy, which eschews Western notions of democracy, individual rights, and the rule of law.^[3]

This type of economic system is defended from a Stalinist perspective which states that a fully developed socialist planned economy can only come into existence after first establishing the necessary and comprehensive commodity market economy and letting it fully develop until it exhausts its historical stage and gradually transforms itself into a planned economy (the Stalinist Two-Stage theory of revolution). Proponents of this economic model distinguish it from Market socialism: Market socialists believe that economic planning is unattainable, undesirable or ineffective, and thus view the market as an integral part of socialism, whereas proponents of the socialist market economy view markets as a temporary phase in development of a fully planned economy.^[4]

The state sector[link]

By 2005 the market-oriented reforms, including privatisation, was virtually halted and partially reversed.^[5] In 2006, the Chinese government announced that the armaments, power generation and distribution, oil and petrochemicals, telecommunications, coal, aviation and shipping industries had to remain under "absolute state control" and public ownership by law.^[6] The state retains indirect control in directing the non-state economy through the financial system, which lends according to state priorities. Liberalization continues to be rolled back in the state-sector by the consolidation of state enterprises into large "national champions" with the goal of consolidating efforts and creating internationally competitive national industries.^[7]

The state sector is concentrated in the 'commanding heights' of the economy with a growing private sector engaged primarily in commodity production and light industry. Centralized directive planning based on mandatory output requirements and production quotas has been superseded by the free-market mechanism for most of the economy and directive planning in large state industries.^[8] A major difference from the old planned economy is the restructuring of state companies along a commercial basis, with the exception of 150 large state-owned enterprises that remain and report directly to the central government, most having a number of subsidiaries.^[9]

By 2008, these state-owned corporations have become increasingly dynamic largely contributing to the increase in revenue for the state.^[10][11] By 2009 the government considered a state insurance scheme to expand healthcare coverage.^[12] The state-sector led the economic recovery process and increased economic growth in 2009 after the financial crises, partially because most of the Chinese stimulus package was directed towards these state-owned firms.^[13] The state-sector make out 40 to 50 percent of China's GDP.^[14]

History[link]

The transition to a socialist market economy began in 1978 when Deng Xiaoping introduced his program of "Socialism with Chinese characteristics". Initial reforms in decollectivising agriculture and allowing private businesses and foreign investment in the late 1970s and early 1980s later led to large-scale radical reforms, consisting of privatisation of the state sector, liberalisation of trade and prices, and dismantling the welfare state in the late 1990s. Since the beginning of Deng Xiaoping's reforms, China's GDP rose from some 150 billion USD to more than 1.6 trillion USD, with an annual increase of 9.4 percent.^[15] As of 2004, 50% of the remaining state-owned enterprises have been transformed into joint-stock companies.^[15]

The private sector's share of the GDP rose from less than 1% in 1978 to 70% by 2005, a figure that is still increasing. Due to the poor performance of traditional state enterprises in the market economy, China embarked on a massive restructuring program of corporatization. Under this scheme, the state retains ownership and control of large enterprises but the central government has little direct control over the operations of state-owned enterprises.^[16] Recently the Conservative Hu-Wen Administration rolled back many of Deng's reforms, leaving observers dubbing 2008 the "third anniversary of the end of reform.^[17]

Analysis[link]

Despite the official designation of "socialism", the current Chinese economy is often described by economists as a hybrid of free market capitalism and socialism.^{[citation needed]}

This view is also shared by orthodox Marxists, who criticise China on the grounds that the socialist market economy restores capitalist commodity relations and production while further dis-empowering the working class, leading to a sharp increase in social inequality and the formation of a growing capitalist class.^[18] Classical Marxists believe a "socialist commodity economy" is contradictory. Other socialists believe the Chinese have embraced many elements of market capitalism, specifically commodity production, resulting in a full-blown capitalist economic system.^[19]

Proponents of the socialist market economy compare it to the New Economic Policy in Soviet Russia that introduced market-oriented reforms while maintaining state-ownership of the 'commanding heights' of the economy. The reforms are justified through the belief that changing conditions necessitate new strategies for socialist development.^[20] According to Li Rongrong in 2003, chairman of the State-Owned Assets Supervision and Administration Commission of the State Council,

Public ownership, as the foundation of the socialist economic system, is a basic force of the state to guide and promote economic and social development and a major guarantee for realising the fundamental interests and the common prosperity of the majority of the people… The state owned economy has taken a dominant place in major trades that have a close bearing on the country’s economic lifeline and key areas, and has propped-up, guided and brought along the development of the entire socio-economy. The influence and control capacity of SOEs have further increased. State owned economy has played an irreplaceable role in China’s socialist modernisation drive.

See also[link]

• Corporatization
• Chinese socialism
• Criticism of capitalism
• Criticisms of socialism
• Economy of the People's Republic of China
• Free market
• Mixed economy
• Market socialism
• New Economic Policy
• State capitalism

References[link]

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