Coming to the issue of property rights, the near dominance of state-owned and collective forms of property has been reduced in favour of a new and more inclusive system in which private individuals are allowed to own property. This led also to the emergence of a private sector alongside the existing state sector. An Assessment of the Reforms Even though it is clear that judging by the above distinguishing features as given by Kornai, the Chinese system is essentially communist, certain developments that have taken place in China since 1949 and especially since after 1978.
It is clear from the previous passages that some of the reforms that have been introduced in China especially since 1978 have been substantial and far-reaching- especially those that allowed the participation of private ownership of property, private participation in running industries and the abolishment of the rural-urban divide in terms of employment and benefit rights. These reforms have brought about speculations, debates and predictions as to what direction the Chinese economy is heading. According to some, the evidence points to a China that will ultimately embrace capitalism.
Another group is of the view that communism will be the final destination. A third group is of the view that what is happening in China’s industrialism is neither going to end up in the embrace of capitalism or communism; it is a unique system born out of necessity. Each of the positions stated in the last paragraph above has arguments in support of it and ones against it. As time and space cannot permit a full discussion of each, I am going to choose one of the positions and present a critical discussion of it.
My chosen perspective is the last, namely, China’ industrialization does not fall neatly into any of the capitalist-communist distinctions as enunciated by Kornai (2000). That instead, it is unique in the sense that it has elements of both in one form or another and yet fails to satisfy any of them. Compared to the public choice regimes in Europe and the USA, the main difference of the Chinese experience was that the private economy had to be created from the scratch and that the growth of the economy had to rely on market-like incentives that did not constitute a mature market economy (Transitions theme text, p.
130). Writing in The Financial Times of 12 December, 2002, James Kynge adduces a range of evidence and arguments to support the view that modern China is fast moving towards and is being prepared for ascent to industrial capitalism. The claim of China moving towards capitalism is dealt a big blow by the continuation of the communist party leadership – the CCP. It is still a one-party state where the principle of the ‘rule of law’ does not apply. What applies instead may be called ‘rule by law’.
It fails the Kornai test of the nature of the state and political power. Even Kynge admits in his article admits that the concessionary steps and reforms which appear to lean towards the adoption of a market economy do not imply that China is preparing to overhaul its single-party system. Evidence cited in support of this statement includes the continued ban on opposition parties and the holding of direct elections for senior posts. More reforms are needed within the administrative and political spheres.
Proponents of the view of ascent towards communism argue that what is currently happening in China is nothing but a necessary phase of the Chinese society in its march towards communism via socialism. Making one or two concessions in terms of ideological leaning does not necessarily mean that the CCP has jettisoned its communist project. In fact, some argue that it is part of the CCP agenda towards the realisation of the communist dream. Before it would be possible to introduce socialism, it was necessary to complete the stage of capitalism.
Introduction of socialism involves the socialisation of the means of production, whereby ownership is vested in society and not in individuals. Without doubt, the current climate in China (led by the CCP) is one that has increasingly become friendly to private property. Given that Kornai views the existence of a political system friendly to private property as a defining feature of capitalism, one then wonders whether this causes the CCP to become a proponent of capitalism.
The answer depends on how one assesses the communist party’s ability to control development. According to the Transitions theme text, ‘the litmus test must go deeper than looking at the appearance and the official declarations. What must be examined and taken into consideration is the extent to which the CCP retains its capacity to realize its long-term goals of development and to what extent the Chinese state is also able to manage the economy and make the technological and economic progress available for a political cause that goes beyond capitalism.
It is clear that China is engaged in a process of industrialization that does not easily fit in with the dominant capitalist views of what constitutes development. What we have seen with respect to industrialisation in China is the revitalizing of the Chinese economy through the introduction of limited elements of economic liberalization, while preserving pivotal elements of the socialist model with its emphasis on central planning.
As a result, individuals, collectives, and certain state-owned agencies and enterprises are now permitted to produce for markets where prices are increasingly determined by the forces of supply and demand, while certain goods continue to be produced on command with prices determined by the state. Simultaneously, de-collectivization has taken place in the agricultural sector with a shift to smaller labour groupings and the restoration of private household production China’s transition from a planned economy to a market economy began at the end of 1978.
When China started the process, its people and government did not have a well-designed blueprint. The initial conditions that pertained to China were unique- unique in terms of its population size and its ethnic and cultural mix. China’s approach to reform has been characterized as piecemeal, partial, incremental, and often experimental. In spite of the occasional boom and bust cycles, China’s transition to industrialization has witnessed an average annual rate of GDP growth has been phenomenal since the beginning of the transition. 1641 words
References Course book, and also (mainly) transition book. Kornai, J. (2000) ‘What the change of system from socialism to capitalism does and does not mean’, Journal of Economic Perspectives, vol. 14,no. 1,pp. 27-42. Kynge, J. ‘Middle Kingdom’s class revolution: the Chinese leadership has outlined robust expansionary plans for the next two decades with a big emphasis on the middle classes’, The Financial Times, 12 December 2002. Copyright The Financial Times Limited Lewis, W. A. (1954) ‘Economic development with unlimited supply of labour’. Manchester School, vol. 22 (May), pp. 139-91.