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CHINA'S SOCIALIST MARKET ECONOMY

Since the 1980s, China's Communist Party has been using "socialist market economy" to describe their nation's economic system. China's economy is subject to market forces, and capitalists are involved, but the Party does not believe that capitalists run their economy.

Some people in the United States believe that capitalist influence accounts for China's economic growth: 8.4 percent in GDP in 2009 compared to minus 2.4 percent for the United States. They may describe some of President Obama's policies as socialist and may speak disparagingly of socialism regarding some economies in Europe. Socialism does not work, they claim. They are not inclined to credit socialism for any of China's growth -- while China's Communist Party believes it is exercising effective control over their nation's economic engine.

China's Communists recognized that it was to their nation's advantage not to isolate itself economically from the rest of the world -- not unlike Lenin, Stalin and Khrushchev regarding the Soviet Union. Beyond trade, China's Deng Xiaoping invited investment from abroad in Chinese industries.

Foreign ownership and Chinese ownership share in operating private industries alongside state-owned industries. The share of private industry in the economy has grown, and today it includes health care and education. The private sector employs more than the public sector. According to Business Week in 2005, the private sector accounts for 70 percent of the nation's GDP -- a figure many believe to be an under-estimation.

But at least some Marxists in China view the economy as functioning for the sake of "The People" collectively rather than for the gain of individual entrepreneurs. They see investors seeking profits but doing so within the confines of state control -- in other words "The People's" control. Marxists describe the state as controlling the "commanding heights" of the economy and the private sector engaged primarily in commodity production and light industry.

Banking -- lending and credit -- is under state control. If the state wants the banks to hold back on credit to prevent market overheating (credit bubble creation) it does so. If the state wants the banks to increase their lending, the banks do so. In the U.S. in late 2009 the government wanted the banks to lend but the banks were reluctant to do so. Banks in the United States are governed by their own economic interests, with some regulation.

China's 150 or so large state-owned enterprises report directly to the central government while choosing their own CEO's and keeping their profits. But if they get into financial trouble, the state bails them out.

Unlike the Soviet Union in Lenin's and Stalin's day, Chinese law protects a person's right to his private property. This began at a Communist Party gathering in October, 2003, followed by Chinese legislators proposing amendments to the state constitution. In March, 2004, the National People's Congress approved the amendments.

Marx did his intellectual work more than 150 years ago, and Communist Party members see their Party as having grown intellectually in accordance with their experience and what history has handed them. A world has developed not exactly as Marx envisioned, but, they believe, China's revolution was and remains essentially Marxist.

Some in the West view China's Communist Party identifications with Karl Marx as an anachronism. Some who are most hostile see China as indeed Marxist. And some think of China as anything but democratic so long as it does not have a multi-party political system.

If China did have a multi-party political system -- as exists in Thailand, Russia, the United States, et cetera, then people of wealth might indeed gain the political influence that would enable them to guide the economy to their benefit. And there would probably be the social instability that has existed in recent years in Thailand and elsewhere.