Clarifying the development of the socialist-oriented market economy

The birth, rise, and decline of the market and market economy

This is a natural historical process.  In the work “On the So-Called Market Question" V.I. Lenin pointed out that in the growth of capitalism, there were two important factors, namely the transformation of the natural economy of the direct producers into the commodity economy and the transformation of the commodity economy into the capitalist economy. The former took place due to the emergence of social labor division, that is to say the specialization of individual manufacturing. The latter came into being due to the fact that each individual producer in their purpose of selling their products at the highest price competed with each other. As a result, the strong waxed stronger; the weak waxed weaker. Some rich became richer, but the majority went bankrupt, causing independent producers to turn into workers and the majority of small businesses into a few big companies. The above process is associated with the advent of the market and the market economy.

He also illustrated these two processes schematically, consisting of 6 producers and 6 stages. To simplify, only some are considered here.

Stage 1: There are 6 producers; each of them spends his labor in all 3 industries (a, b, c). Each produces 9 products (3a, 3b, and 3c) for their own consumption in their own economy. This is a pure natural form of economy. No products are on the market. Of course, there is no market yet.

Stage 2: Due to changes in their productivity, producers I, III and V abandon industry b and spend their time in industry c. Meanwhile, producers II, IV, VI focus on industry b and quit industry c. Producers I, III, V sell 1c product and buy 1b product, and producers II, IV, VI sell 1b product and buy 1c product. As a result, 6 units of products are put on the market totally. The market size is completely suitable for the specialization of social workers. 1/9 of total social production has been specialized and 1/9 of the total social products are introduced on the market. This means the market where goods are exchanged has come into being.

Stage3: The social labor division continues to grow and the market keeps expanding.

Stage 4: There starts the process of transforming commodity production into capitalist production. A few people get rich and start hiring employees. Others only partially self-produce and they have to work as employees for the rest of their time.

Stage 5: Continue the situation in the fourth stage.

Stage 6: There appears the specialization of occupations. That means the social labor division is completed. Producer I becomes a capitalist specializing industry a. Producer III becomes a capitalist specializing in industry b. Producer V becomes a capitalist specializing in industry c, and other producers (namely, II, IV, and VI) become employees.

The market appears from the second stage, but each producer still consumes a large part of his own products and still follows the goods- money- goods formula, which is still a small production. Therefore, there is no market economy. By the sixth stage, commodity production reaches a high level and follows the money- goods- money formula. All production inputs (including labor force) and outputs are bought and sold in the market, which is a true market economy. However, there still remain quite a few capitalist enterprises directly consuming a part of their own products, but the number is not significant.

Comparing market economy with small commodity production, K. Marx wrote, “Let’s compare a Pharisee in Scotland with a small farmer in Europe. The Pharisee sells his entire products. As a result, the market has to return all his factors of production, even seeds.  The small farmer directly consumes most of his products; he buys and sells as little as possible, and he even makes his own labor tools, clothes, etc.”(1)

The preeminence of the capitalist market economy is to promote ever higher productivity and deeper labor socialization. However, the capitalist market economy is based on the private ownership regime of the means of production. Therefore, to a certain level, the conflict between the socialization of labor and the private ownership of capital will take place fiercely, becoming a chain preventing the development of productivity, calling for socialization (or publicization) of the means of production and the transition to the socialist market economy. Although the labor force has been highly developed, the wealth has not been in abundance to be distributed according to the needs of all members of society, so it must be distributed according to labor. Working time will play a double role here. The distribution of working time according to a social plan will dictate a correct ratio between different labor functions and different needs. On the other hand, the working time is also used to measure the individual's labor in general labor, and his share which can be used for personal consumption as well.

However, this is the first stage of communism (i.e. socialism), not a communist society that develops on its own basis, but rather a communist society just taking shape from the capitalist society. Therefore, this is a society which still carries traces of the old society that it has been born from in all aspects namely, economy, ethics, spirit, etc. It is clear that what rules here is still the same principle that regulates the exchange of goods. To some extent, it is the exchange of equal value, but the content and form are different, for under the changed conditions no one can provide anything other than his own labor, and apart from personal consumables, nothing else can become personal property. Also, for the distribution of such articles among producers, what dominates here is still the principle in the exchange of goods and things of equal price; an amount of labor in one form is exchanged for the same amount of labor in another form. Therefore, with an equal job and equal participation in the social expenditure fund, one person in fact still takes more than the other; one is still richer than the other, which is unbalanced

The main difference between capitalist market economy and socialist market economy lies in the fact that in the perfect socialist market economy, the means of production are owned by the public and the surplus value is under common ownership. The accumulated surplus after being spent on extended reproduction, setting up a welfare fund, a bonus fund, and being paid to the state as taxes, the remainder is distributed according to each member's labor contribution.

According to the gradual development, the aforementioned natural history process took place under the rule of the bourgeois state. If the proletarian revolution is successful in the capitalist countries with a highly developed market economy, the revolutionary state only needs to inherit the achievements of the old society and turn it into the socialist market economy. However, due to the unique historical circumstances, the revolution is successful in a country dominated by small farmers; the state of the working class and the working people needs to learn from capitalism to advance the historical process. Because this process does not take place under the capitalist regime, it is considered a transition to socialism through the capitalist regime. Therefore, V.I. Lenin emphasized that it was necessary to take advantage of the factors of organizational talent, technical knowledge that the previous society has accumulated; the factors that nine-tenths, and possibly ninety-nine percent, belong to the class hostile to the socialist revolution. Socialism must be studied mostly from the trusts, and it also must be studied from the biggest organizers of capitalism. That is not a paradox.

Thus, market economy came into being and developed with the birth and development of capitalism. Nevertheless, it will not disappear with the missing of the capitalism, but it will be inherited in socialism with some new manifestations.

K. Marx once predicted that with the growth of industry, the making of wealth would become less dependent on labor time and the amount of labor cost, but more on progress of science and technology, or on the application of science and technology to production. Automated machinery systems would step by step replace most direct workers. Once direct labor is no longer a source of wealth, production based on exchangeable value would collapse. That means there would be no more commodity economy and market economy.

Questions need to be answered in order to have a proper understanding of the socialist-oriented market economy

Contrasting capitalism with socialism, thereby contrasting the market economy with socialism

There is an opinion that if the socialist orientation is to make people rich, country strong, and society democratic, fair and civilized; after all, there will be no difference in comparison with the society that the developed countries are building. Market economy in essence is an economic system with capitalist government, so there is a conflict between the market economy with socialism and socialist orientation. Therefore, the explanations on the socialist-oriented market economy are just an invisible hat for researchers to avoid facing the internal contradiction between capitalism and socialism, or avoid the question how embarking on the journey of capitalist market economy can reach socialist destination.

V.I. Lenin emphasized that Marx could not imagine or think of a new society. He studied the emergence of a new society from the old society, studied forms of transition from one society to another, and considered it a natural historical process. He repeatedly criticized the habit of contrasting capitalism with socialism in an abstract way without realizing its historical inheritance. He pointed out that it was the highly developed capitalism that created the premises for socialism. Therefore, we cannot envisage any other socialism than socialism on the basis of all the lessons learned from civilization of capitalism. Also, socialism is not something invented, but it is the result of the fact that the proletariat's vanguard, after taking power, embraces and manipulates what the trusts have created.

It should be noted that market economy with socialist orientation is short form of the market economy under the management (or regulation) of the state, which means from the mixed market economy to socialism rather than from free market economy to socialism. The free competitive market economy subject to the spontaneous regulations of the laws of the market economy called by A. Smith as "the invisible hand" practices the distribution according to the possession and ownership of the means of production. This results in an ever bigger rich - poor polarization, which can only lead to capitalism. However, a mixed economy, which is subject to the state's regulation also called the "tangible hand”, can follow directions determined by the nature of the state. Nevertheless, the state's regulation in the condition that the private ownership of the means of production still exists is, to some extent, limited. In order to achieve the goal of rich people, a strong country, and a fair, democratic and civilized society, it is necessary to inherit the achievements of the existing society in order to overcome the conflict between the high level of socialization of the labor force and the private ownership of the means of production, which means moving to socialism.

Also, market economy should not be opposed to the public ownership of the means of production.

Asserting that division of social labor is a condition of existence of commodity production, K. Marx also emphasizes that in the communes in India or in modern factories there is a division of labor, but their products do not become a commodity. Only the products of independent private labor can face each other as commodities. Private labor is not synonymous with private property. Independent private labor can be individual labor or general labor (in a cooperative, a craft site, a workshop, a factory, or a state-owned enterprise) but only collective products can be commodity. In the whole society, that individual or general labor is firstly manifested as private labor. Such questions as for whom the product is made, what product is made, and how to make it are solved by the individual or general labor. Only through the exchange of private labor can it manifest itself into social labor, and can that private labor be recognized by society. Moreover, as K. Marx points out that the barter of goods begins where the commune ends, where it comes into contact with other communes or with members of other communes. This means the exchange of goods begins with the relationship between two public economic entities. History has shown that it was this commodity exchange that gave rise to private ownership.

The market economy comes into conflict with the centralized, bureaucratic, and subsidized economy, but not with planning.

The high level of socialization of labor force requires regulation from a center. The State plays that central role. Planning upholding the laws of the market economy is an important tool to orient the development of the market economy. V.I. Lenin once repeated, “When the Germans adopted their Ecphuya platform, F. Angels said that one could not keep explaining that capitalism was lack of planning. Such an explanation is out of date. When there are trusts there is no such thing as lack of planning”.

In short, market economy is not the opposite of socialism. The higher the speed of the market economy ship under the helmsman of a state of the people, by the people and for the people is, the faster the socialist destination will be.

Why is it just a socialist-oriented market economy rather than a socialist market economy?

The socialist orientation implies moving towards socialism, or in other words, in the transition period towards socialism. When there were people wondering about the name of the country the Socialist Republic of Soviet in 1921, V.I. Lenin explained that the term meant that the Soviet government was determined to make the move to socialism, but it did not at all mean that it recognized the new economic regime as socialism. Likewise, the term "Socialist Republic of Viet Nam" only expresses the determination of the Party, State and people of Viet Nam to advance to socialism, but it does not mean that Viet Nam has completed building socialism.

Things are similar in China. Although the country affirms that it has completed its transition period and is in the early stage of socialism, it is still in transition from the early stage to the advanced stage of socialism, not in complete socialism.

In his speech at the Sino - Viet Nam Scientific Conference named "Socialism: the common and the special", Li Thiet Anh, Politburo member, Director of the Chinese Academy of Social Sciences, admitted that the socialist regime was unfinished, the market economy institutions and socialist democratic legislation were uncompleted. Remnants of feudalism, perverted ideology of capitalism and small production habits still had a strong impact on society. These are the very things that dictate that the first stage of socialism must be a relatively long period in order to practice socialization and marketization, industrialization and modernization of the industry and the economy. This historical period cannot be skipped. Therefore, it should be fully realized that the early stage of socialism is a long, arduous, complicated historical process which may last at least 100 years. Consolidation and development of the socialist regime requires a much longer time. It might take several generations or even dozens of generations to fulfill the mission.

All in all, due to the specific historical context and different cultural traditions of each country, the same problem can be expressed in different ways, but in essence there are similarities.

We are convinced that socialist orientation implies a practical meaning. It reminds us that our country is on a long way with different stages to socialism. It is a must to pay attention to the specific context of each stage so as to have appropriate policies and guidelines with a view to increasing labor productivity, economic efficiency, and constantly improving people’s lives. It is also necessary to avoid haste, subjectively wishing to immediately apply basic characteristics of perfect socialism, such as elimination of private equity ownership and alleviation of exploitation of surplus value when conditions are not ripe.

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(1) K. Marx and F. Angels: Complete Works, Publisher: National Politics, Hanoi, 1994, episode24, page 125.