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Tuesday, August 18, 2015

'What Is The Chinese Economic System?

Barkley Rosser:

What Is The Chinese Economic System?: In a recent post Paul Krugman criticizing China's interventions in forex markets..., he labeled the Chinese system as being "rapacious crony capitalism." This has led various commentators in various papers to have varying degrees of vapors. But even if we grant that "rapacious" is not a scientific term that may be dramatic for blogging but is not useful for seriously categorizing the Chinese economic system, the hard fact is that it is not obvious what it is, and it may simply be too complicatedly mixed and large for any of the usual categories to really fit.

This is actually a current professional problem for me and my wife, who are nearing completing the third edition of our textbook, Comparative Economics in a Transforming World Economy, MIT Press. ... From the standpoint of professional comparative economics, what the heck the Chinese system is is a matter of serious and substantial debate. ...

As it was, China never was that much of a full-blown command socialist economy. It was always more decentralized than the old USSR, with this partly due to its sheer size and diversity...

The ... Chinese government itself [says] ... China is a "socialist market economy." OK, it is indeed a market economy. It probably was not during the Mao era, even if command central planning was much weaker than in the old USSR. There was still command planning, but a lot of it was decentralized to local levels. After Deng Xiaoping took control in 1978, he pretty much undid most of the command central planning apparatus, moving the economy to being predominantly a market one.

The more complicated issue involves property ownership, and here there is no agreement. A major part of this is that China has property forms that are not seen anywhere else in the world. One of the larger parts of the Chinese economy, which used to get lots of publicity but has not received much lately, is what was called the Town and Village Enterprise (TVE) sector. This is the sector that lies between the remaining state-owned sector (from the center) and the fully privatized corporate capitalist sector of the Chinese economy. There are at least four different property forms in this mostly rural part of the Chinese economy, with them varying from being somewhat more publicly (if locally) owned to being more privately, although in some cases cooperatively so, owned. Much of this sector, which as more than a third of the whole economy, is very hard to characterize as being either socialist or capitalist, although clearly the Chinese like to consider it more socialist.

Now this odd term is close to others that have been or still are used to describe economies around the world. One is "market socialist." That was most famously used to describe the former Yugoslavia, which also had a form of workers' management that attracted lots of attention from comparative economists. Other nations also were called this, especially Hungary, which lacked the workers' management part. They had forms of collective or state ownership, but no (or little) command central planning. The state-owned enterprises operated in market environments. ...

The other similar term is "social market economy," which Germany uses to label its system ("sozialmarktwirtschaft" in German). This is really a fully market capitalist system, but one with a large social safety net. And the Germans have that, certainly compared to the US, and many have commented on the generally better functioning of that economy (which also has lots of labor-management cooperation) than many other economies around.

So, the Chinese system is not like either the old Yugoslav or the current German system, even though it has a lot of state or collective ownership, and certainly is heavily a market system. Clunky and not precisely accurate and vaguely propagandistic as it is, "socialist market economy" may be the best we can do.

    Posted by on Tuesday, August 18, 2015 at 12:18 PM in Economics | Permalink  Comments (77)


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