Qin Hui on the Illusion of Capitalism, and Socialist Market Economies

I came across this translation of Dilemmas via Marginal Revolution. I enjoyed the insights, pithy irony and slightly mysterious turns of phrase.*

Here’s translator David Ownby’s mini bio:

Qin Hui (b. 1953) is a leading historian and public intellectual in China, having spent much of his career at the prestigious Tsinghua University in Beijing.  His early academic focus was on rural history and the peasantry, but over the past two decades he has published widely on any number of topics relating to themes of social justice, traditional Chinese culture, globalization, and much more.  He writes as a fiercely independent liberal, with a mordant wit seldom appreciated by Chinese officialdom. 

And here’s are a couple of extracts that I found interesting:

Two Types of Socialist Market Economy

In China, [Thomas Piketty’s] Capital in the Twenty-First Century, was translated as The Twenty-First Century’s Das Kapital, which is very eye-catching.  But does “capitalism” still exist in today’s world?  The capitalism that Marx criticized disappeared long ago, and every country in the world, or at least the important ones, including China and the United States, all practice some version of a “socialist market economy.”  It’s neither the “free competition capitalism” of the nineteenth century, nor a Leninist planned economy, nor Marx’s vague dreams of the future.  “The plan and the market co-exist, as do state ownership and private ownership, we all strive for social equality even as we compete for profits.”  This is the reality for most countries today. 
 
But I’m not arguing here for “convergence”.  Even if we find a lot of “the same thing” everywhere, this does not mean that these countries’ institutions are the same.  This is obviously true for political systems, and economic systems also have basic differences, and not simply in terms of quantitative comparisons.  Of course, how much of one element or another a system contains matters, but it is not the most important question, nor can it necessarily sum up the essential differences.  The number of state employees in China is higher than in America, but lower than in Austria, yet the differences between the Chinese and American economies are greater than those between the American and Austrian economies.  Another example is “welfare.”  Sweden is known as a high-welfare state, and the US as a low-welfare state.  But in China it’s not a question of “high” or “low” welfare; elsewhere I have described the situation in China as being one of “negative welfare.”

Someone might note: You just said that neither pure socialism nor pure capitalism exists any more, and everyone is practicing a “socialist market economy” but at the same time you said that systemic differences were growing. Isn’t this a contradiction? Why are the differences growing?

Socialist Market Economy – Type A [“The West”]

The reason is that there can be dramatically different understandings of what we mean by “socialist market economies.”  In one version, which I will call “social market economy type A,” “socialism” means that the common people will hold the government responsible for a high level of common welfare.  The fact that the government must provide ever more welfare and security is not the government’s “gift” to the people, but rather the people’s right, which is the reason that the people support the government.  This is what the government should do, and the people do not have to feel grateful (in Sweden the government is responsible for “cradle to grave” welfare and we do not see the people expressing particular gratitude).  If the government fails to do this the people will demand accountability, or vote in another government (hence when the Swedish Liberal Party took power they had to provide welfare, even if in theory they were against the welfare state; the people didn’t allow them to shirk their responsibility so they had no choice).  When we say that the government must “serve the people” and not the people serve the government, this is what “type-A socialism” does, even if the government doesn’t constantly flaunt it—because there’s no need.  If you don’t work properly, the boss [i.e., the people] will fire you.  Not only must you work properly, but if the boss has further demands, you must also become even more productive (i.e., provide more welfare). 

 But what is the “market economy” then?  In type-A systems what we call the market economy means “the mayor doesn’t look for you, the market looks for you.” (Note:  this does not mean “don’t look to the mayor, look to the market;” type-A systems constrain the mayor’s ability to abuse his power over the people, but do not constrain the people’s ability to call on the “mayor” to be accountable).  The government’s powers must be limited.  Not only do the people grant power to the state, in addition there must be clear boundaries to the state’s power.  Outside the boundaries (of state power) is our freedom, including freedom of contract and market freedom.  In sum, the “socialism” of a “type-A socialist market economy” means that citizens increase their calls for accountability from the government, and “market economy” in this context means that the citizens strictly limit the powers of the government. A government with unlimited powers cannot be part of a market economy.


[Some interesting historical examples]

Socialist Market Economy Type B [China and…]

But there is another kind of “socialist market economy” that we will for the moment call type B. This type has two features, the logic of which is completely opposed to that of type A. In the type-B system, “socialism” means that the government has unlimited power, and the people cannot limit that power. And “market economy” means that the government can shirk its responsibilities, while the people cannot call the government to account for its lack of provision of public welfare. The meaning of “socialism” in this system is that there is no way for the free market to exist (either there is no market, or there is a “market” dominated by monopoly and special privilege); the understanding of “market economy” in this system makes the welfare state impossible—if the state accords a bit of welfare to the people they must bow and scrape out of gratitude, and if it gives nothing they cannot make demands. The people are told “don’t seek out the mayor, seek out the market,” but the “mayor” can abuse the people at will. In sum, from the angle of “socialism” or of “market economy”, type B means that the people must “serve the government” even if the state usually puts things otherwise.

In other words, in the above discussion of type-A systems, “socialism” meant that the government’s responsibilities are important, and “market economy” meant that the government’s power is limited, and “socialist market economy” meant that the government’s responsibility continues to grow while its powers continue to decrease. The opposite is true of type B: here, “socialism” means that government powers are great, and “market economy” means that the government’s responsibilities are few, and things will continue to develop in this direction. In this sense, the differences between A and B will grow ever greater. In other words, it’s not “convergence” but “divergence.”

An Unhealthy Symbiosis

Comparing A to B, it is increasingly obvious: there are some countries whose governments possess enormous powers, and can abuse their people at will while assuming few responsibilities. If they decide not to accord welfare then they don’t: they can push back the retirement age, increase the prices for public welfare—they have the final word. In some other countries, the state’s power is small, but they have vast responsibilities, and the people ask for reduced taxes (or oppose taxes) at the same time demanding increased welfare (or opposing decreases in welfare). The differences between the two systems is becoming greater and greater. Yet in the context of globalization these two systems have fashioned an extremely interesting exchange: while the people of type-A countries can be very rich, their governments are increasingly poor, to the point that debts are mounting. And while the people of type-B countries are often not rich, even very poor, the governments have more money than they can spend, and use this excess cash in two ways: the government engages in “self-welfare,” not only becoming increasingly corrupt, but also spending more on suppressing the people; and it loans money to the type-A countries so that their debt load continues to increase.

Qin Hui – Dilemmas, Translated by David Ownby

I’m most of the way through the essay. Recommended.

Enormous Footnote

*These reminded me of the pithy, ironic lines from Marx. Here’s the one I always remember:

This sphere… within whose boundaries the sale and purchase of labour-power goes on, is in fact a very Eden of the innate rights of man. There alone rule Freedom, Equality, Property and Bentham. Freedom, because both buyer and seller of a commodity, say of labour-power, are constrained only by their own free will. They contract as free agents, and the agreement they come to, is but the form in which they give legal expression to their common will. Equality, because each enters into relation with the other, as with a simple owner of commodities, and they exchange equivalent for equivalent. Property, because each disposes only of what is his own. And Bentham, because each looks only to himself.

The only force that brings them together and puts them in relation with each other, is the selfishness, the gain and the private interests of each. Each looks to himself only, and no one troubles himself about the rest, and just because they do so, do they all, in accordance with the pre-established harmony of things, or under the auspices of an all-shrewd providence, work together to their mutual advantage, for the common weal and in the interest of all.

On leaving this sphere of simple circulation or of exchange of commodities, which furnishes the “Free-trader Vulgaris” with his views and ideas, and with the standard by which he judges a society based on capital and wages, we think we can perceive a change in the physiognomy of our dramatis personae. He, who before was the money-owner, now strides in front as capitalist; the possessor of labour-power follows as his labourer. The one with an air of importance, smirking, intent on business; the other, timid and holding back, like one who is bringing his own skin to market and has nothing to expect but — a hiding.

Marx – Capital

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