World have seen a lot of global recessions. Two of the famous one is The Great Depression of 1929 and the other one is recent 2007-09. Both have shown a large impact on world economy. But, in each of these recessions, there was a nation which has shown no effects of depression. In 1929 depression, that nation was USSR. In the recent one, the nation was People’s Republic of China. A very common thing among both of them is both of them were following Centrally Planned Economy. Also, both of them were socialist nation.
Socialism is an economic and political theory advocating public or common ownership and cooperative management of the means of production and allocation of resources. The model of economy followed by USSR was creation of centrally planned economies directed by a state that owns all the means of production, aka Marxist-Leninists. China follows Socialist Market Economy with Chinese characteristics. It is a mixture of socialist planning with a market economy (capitalist).
World had already seen the power of USSR as a strong economic power. Till 1970, it was a developed nation with a very high growth rate. China on the contrary followed the same centrally planned economy till 1978, which USSR used to follow. After the death of Mao Zedong, China began to reform the economy. It started to move towards a market oriented mixed economy. It started privatizing land. Later, aiming at foreign investments, it created Special Economic Zones (SEZs) in various cities of China. State owned enterprises were restructured with western style management.
Since, Economic liberalisation of 1978, China’s economy has grown 90 times. Right now, it is the fastest growing economy of the world. The Chinese economy surpassed UK as the fourth largest economy in 2005, replaced Germany from third place in 2007 and finally in 2010 overtook Japan to become second largest economy. Today, about 10% of the Chinese population (down from 64% in 1978) live below the poverty line.
Socialist market economy (Chinese) is often criticised for being capitalist form of economy. But, this Chinese model is still a form of socialist economy. Even though, state run industries are privatised in China. The Chinese government still guides overall national economic development through “indicative planning”.
For China, the road for being Numero Uno is still long ahead. Currently, GDP of China is estimated to be $5.4 trillion, while, estimation for GDP of US is $14.8 trillion. Almost, three times. With the current growth rate of China speculations are that it could surpass US in at least 20 years. But, from where we see China walking, we must say in a very short duration, they have come a long way. Once again a socialist nation is proving the world, that socialist form of economy is a very powerful and practical economy.
With China in this different world, we must welcome socialism too. Welcome back, Socialism.