Market Socialism (Essay Sample)

Market Socialism
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China has achieved remarkable success in its economy by practicing social market economic principles. While China has achieved economic success through the application of this system it has to be asked whether the social market system is a logically coherent and viable system which can be used in other countries. Many countries such as Russia and former Soviet nations of Eastern Europe which adopted a capitalist market economy have not experienced as much success as compared to China. China’s catch up coefficient with the US rose from 54% to 74% between 1990 and 2010 as compared to Russia whose coefficient tailed off (Wùnsche, & Ludwig-Erhard-Stiftung, 2012).
Defining the social market economy as practiced by China is not easy since the system uses a mix of many other market systems in its economic policy. It has been argued that China practices state capitalism since its policies have many features of market economies such as financial markets and lesser control of aspects of production as would be expected in classic social economies (Dorn, 2008). The system is based on public ownership which is the dominant form which exists side by side with diverse systems of co-development ownership systems. It makes use of market and regulation policies, win-win opening up of the economy for mutual benefit and economic globalization and a high degree of theoretical consciousness. The economic miracle has been attributed to the high degree of theoretical consciousness and confidence among the Chinese people (Suliman, 2008). China’s economy is geared towards innovation for necessity and the development of solutions for worldwide problems. The socialist market economy is geared towards liberation, development of productivity, elimination of polarization, exploitation and the achievement of common prosperity. Economic reform in China is therefore based on two aspects; the enhancement of market efficiencies by market mechanisms and the provision of better services through improving the capacity of macro-control and the planned economy.
Deng Xiaoping is the foremost figure responsible for the exponential growth of the Chinese economy since 1978. In 1978 Deng Xiaoping the Chinese premier declared that China would transition to a social market economy from the purely communist one practiced by other communist states such as the USSR. He asserted that the Chinese economy would be based on the idea of "Socialism with Chinese characteristics" (Sim, 2013). Initial policy reforms included the decollectivisation of agriculture. In the 1980s foreign investment and private businesses were allowed including the setting up of financial markets instruments such as the stock exchange. There were radical reforms in the 1990s which included the state sector being partially privatized, prices and trade being liberalized. One of the most radical of these changes was the dismantling of the system of job security which guaranteed lifetime employment in state owned corporations commonly known as the "iron rice bowl”. From 1978 the Chinese economy’s GDP grew by more than 10 times from 150 billion dollars to greater than 1.6 trillion dollars. This was accomplished through a growth rate averaging 9.4 percent per annum (Wùnsche, & Ludwig-Erhard-Stiftung, 2012).
Since 1978 the share of GDP provided by the private sec...