History & Perspectives on the Economics of Socialism

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When examining contemporary versions of versions of socialism, whether they fall under the Marxian or the Fabian view, the topic of the mixed economy is never excluded. Many economies that were socialist at one point have now been moving toward a mixed economy, in part because of increased globalization. In short, a mixed economy is one in which both private individuals and organizations own the means of production while still other means are controlled by the state. Governments, while not always involved in certain aspects of private economic decisions, still hold a great deal of influence and sometimes can trump the decisions of private individuals. Furthermore, these economies, while “mixed” are not an even distribution of capitalism and socialism (as an example) but generally lean more towards one or the other. The point is, there is no pure theory of either capitalism, socialism, or any other economic system governing the state, but rather an integration of different aspects and degrees of both (or even more than two)...

According to one preeminent economic scholar, “the market economy or capitalism, as it is usually called, and the socialist economy preclude one another. There is no mixture of the two systems possible or thinkable; there is no such things as a mixed economy, a system that would be in part capitalist and in part socialist” (Mises 42) because, according to him, even the state is not free from the market forces necessitated by capitalism. Mises’ view is rather interesting, especially when one considers nations such as the People’s Republic of China, which has quickly begun mixing several elements of capitalism with the former Soviet-style socialism that was part of its history throughout a majority of the twentieth century. If Mises is correct, one must wonder whether China’s “mixed” economy is becoming simply capitalist while maintaining the name of a socialist state or if they are still more inclined to follow socialist principles. Furthermore, if Mises is correct, even the state-sponsored elements of the economy (of which there are still many) are all influenced by market forces and thus are no longer purely socialist at all. In any case, it is clear that introduction of market capital into a formerly socialist state is “corrupting” to the ideal “pure theory” of socialism.

The economy of the People’s Republic of China is one of the largest and fasting-growing in the world. Part of this dramatic increase has come about as a result of the mixed economy, which began slowly and gradually expanded to include more features of a market-driven and more capitalist state. This system has famously been termed “Socialism with Chinese characteristics” and this refers, in part, to the fact that the reforms made to the communist system since the mid-1970s have combined a number of Soviet-style elements as well as those of capitalism. This also refers to the fact that the Chinese government, while still exerting a great deal of influence over industry, began a series of reforms in order to save the economy that allowed more private individuals to take control of some of the means of production in the country, most notably in the industrial sector. Part of this reform was because many of the state-run industries were failing and inflation was incredibly high. Most importantly, the reason why this is called “Socialism with Chinese characteristics” is because the Chinese government, in making these reforms, tried to reconcile the Marxist notions of the Communist party with the changing (increasingly market-driven) forces from outside. In this way the Chinese still maintain that they are adhering to socialist principles even though they make concessions to encourage outside private investment in industry. In many ways, it seems that despite the People’s Republic of China’s claims that it is still essentially a socialist state with traditions in Marxian economic theory, there is a conflict of interest since they are shedding a number of tenants of socialism, most notably in terms of eschewing private ownership. In nearly every sense, this mixed economy, no matter what moniker it goes by, is looking far more like a market-based economy than a socialist one and one must ask whether or not China will eventually liberalize its markets and begin modeling itself after its competitors in the West.

China’s economy is the “second largest in the world in terms of purchasing power parity with a GDP of over $7 trillion in 2004” (Deping 96). It is the world’s largest economy that is still in development and its growth has affected markets worldwide, especially in the United States and Europe. Since 1978, Chinese leadership has made several large-scale efforts at changing the economic structure from a Soviet-based centrally planned economy to one that is more similar to capitalism. Although there is still the semblance of this Svoiet-style government, this mixed economic structure is where the term “Socialism with Chinese characterics” comes from. Since the reform, much of the changes have been in the area of agriculture. China has always had trouble with resources and for most of its history, there were a large number of peasants living on very small plots of land. Since the reforms in 1978, this old collectivization of farms has changed and the traditional rural farm village has been changed as more of these peasants are encouraged to branch out beyond the farm and create small enterprises. While this is still far from capitalism, there is a definite sense that these changes will eventually continue until the economy becomes entirely market-based.

Currently, nearly one half of all of Chinese laborers are in the agricultural industry and cultivate staple crops such as rice, tea, and peanuts as well fish and grow livestock. The problem with this is that not much of China’s land is suitable for growing and therefore a large number of people must subsist off of very little land. China’s problems with reconciling the large rural populations with the urban has always been a difficult and the agricultural sector of the economy was (and still is) in need of more reforms before some of these issues are corrected. “China was the first socialist country to recognize the need for radical market reforms, to bring the nation out of the economic and political dead end created in the last years of Mao Zedong’s life. The enormous scales of the agrarian economy, the failed efforts to create rural communes, and the peasant’s extremely low standards of living dictated that the new Chinese leadership necessarily reject any further attempts to force the building of socialism in the rural sphere” (Yaskina 26). Clearly, China recognized that with such a large rural population the idea of socialism would have to be altered in order to be truly effective and it seems that currently the switch to a more market-driven base has been the most positive movement made in years and according to World Bank, China now feeds 20 percent of the world’s population off of the very little amount of arable land it posses. Even with these agricultural reforms, there still exists a tension between the economies of rural and urban areas and this is a problem that neither pure socialism nor a purely market-based economy will solve. When viewed strictly in terms of agriculture, it is clear that a mixed economy might be the best solution once the kinks are worked out of the still-developing system.

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 This article has been reprinted with permission from author Nicole Hemsoth ~   All Content Copyright 2008 Article Myriad. All Rights Reserved.

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