Socialist Economic Development in the 21st Century
* Book: Alberto Gabrielle and Elias Jabbour. Socialist Economic Development in the 21st Century.
"Alberto Gabrielle and Elias Jabbour, in Socialist Economic Development in the 21st Century, maintain that a new type of socioeconomic formation has emerged in the world-economy. Several national economies, including China, have developed socioeconomic formations that mix socialist and capitalist modes of production in the framework of a socialist-oriented development strategy, in which the state exerts control over the national economy. This new type of socioeconomic formation, they note, must pursue its objectives in the context of a world-economy with a capitalist mode of production.
Gabrielle and Jabbour maintain that the People’s Republic, both in the time of Mao and since 1978, has forged two development projects that are developmentalist, that is, oriented to catching up with the central capitalist countries. Both development projects were essentially socialistic in nature, structurally different from advanced and developing capitalist countries. At the same time, in many aspects, China’s dynamics and institutions were not too dissimilar from the catching up policies of other East Asian countries, especially Japan and South Korea.
China has taken what Gabrielle and Jabbour call the New Developmentalist approach, which like the dependency theory of previous decades, emphasizes the tendency toward the deterioration of terms of trade for the raw materials of the developing countries. But unlike dependency theory, and consistent with the Asian newly industrialized countries (NICs), the New Developmentalist model rejects the prevailing tendency to adopt monetary policies that overvalue national currencies. Such a policy, in spite of short-term benefits, is not conducive to a high rate of investment in relatively advanced sectors of the developing economies, because it makes access to the world’s best available technologies overly expensive, weakening the capacity of national enterprises to produce tradable manufactures. There is, they maintain, mounting evidence of the long-term relation between competitive currency exchange rates and economic growth.
Gabrielle and Jabbour maintain that a competitive rate of exchange cannot be attained simply through fiscal and monetary moderation. It also requires a high degree of fiscal sovereignty. To attain fiscal sovereignty, they advocate mixed forms of property in which socialized ownership is dominant and in which the public national financial system plays the role of facilitating the services sector.
Thus, Gabrielle and Jabbour maintain that there needs to be a redefinition of what constitutes the essence of the socialist economic system beyond the notion of state ownership of the main means of production. Today we can understand socialism to include “state capabilities” or state capacities, that is, the ability of states to control asset and income flows through taxation and regulation.
New Developmentalism rejects external financing, which only works in particular situations. In general, external indebtedness leads to a long-run exchange rate appreciation. In all the successful catching up countries, Gabrielle and Jabbour maintain, domestic financing has been paramount. There generally was some form of state intervention to promote the financing of investment in key sectors driving the economy, either directly by state banks or indirectly with state subsidized credit lines operated by private banks. Gabrielle and Jabbour maintain that a strong state role is necessary, because financing and funding mechanisms do not arise spontaneously through the operation of the market."
The role of the Party and the state
"Gabrielle and Jabbour maintain that the Communist Party of China commands the market. They maintain that the Party, after some wavering in the 1990s and early 2000s, has been firm in upholding the principle of the centrality and preeminence of state ownership in the economy. The approach of the party is different, they maintain, from the worshipping of the market in bourgeois ideology. In China, the Party commands the market.
In explaining the commanding power of the Party over the economy, Gabrielle and Jabbour quote C. Holtz, who declares that “the Party makes and adjusts the law. I.e., the Party cannot be subjected to an independent regulatory framework and formal institutions that operate independently of the Party, and cannot submit to market outcomes created by private actors.” The Party has, Holtz says, “absolute authority.”
This may be true in a practical sense, especially with respect to economic decisions, given the strong support of the Party and allied parties among the elected deputies of the National People’s Congress. But the Holtz quotation is an imprecise and misleading formulation that ignores the structures of people’s power that have been developed since the triumph of the Chinese Revolution in 1949. More precisely expressed, the Party (through its representatives in the appropriate institutions) presents a plan to the National People’s Congress, which is the highest authority in the state. Such legislative proposals go through a process of consultation and modification in various commissions, seeking consensus, before they are presented to the People’s Congress for a vote. Thus, the post-1978 laws establishing state control of an expanding market were based on the recommendations of the Party and were enacted with the support of the elected deputies of the people."