The (In-)compatibility of the “Visible” and the “Invisible Hand”: Tracing the Intellectual Origins of the Chinese “Socialist Market Economy”

• In Event: Thinking Economics in Twentieth-Century China

Abstract

After more than a decade of reform, in 1989 China’s path had to be determined anew. The decision of the Fourteenth Party Congress to implement a “socialist market economy” responded to the demand. As Cui Zhiyuan points out, most commentators in the West believe “that the notion of a ‘socialist market economy’ is internally incoherent and at best serves the ideological role of window dressing.” Yet, this overlooks the long theoretical tradition of the concept of market socialism as well as the intellectual struggles in the context of its introduction in China. Chen Jinhua, then Minister of Economic System Reform, reports that materials were compiled that “summarized century-long disputes among the Western academic world on the main means of allocating resources, by central planning organs or by the market.” The notion of market socialism reaches back to classical economics and was discussed by two of the most prominent founding fathers of neoclassical economics. Furthermore, the socialist calculation debate between Ludwig von Mises and Friedrich Hayek on the one side and Oskar Lange, Abba Lerner and Maurice Dobb on the other, had the concept of market socialism at its core. This paper examines how these historic debates influenced the Chinese dispute of 1990-2 and asks to what extent the main positions in the Chinese debate do or do not resemble the historic confrontation. It finally analyses in how far the neoclassical conception of market socialism has informed the formulation of the Chinese model of a socialist market economy.

Author

• Isabella Maria Weber, The New School for Social Research