The Bankruptcy of the Traditional System

Abstract

Abstract To describe the traditional socialist system as a repetition of the closed economy on the scale of the whole society is both colorful and appropriate. People also call it a planned economy, or command or centralized economy. Its essence, however, is that it is both closed and on a society-wide scale. This is why it contains a pair of inherent and insurmountable contradictions—as a closed economy, it cannot but possess the most basic and primary characteristic of a closed economy, the direct distribution of labor and material resources, that is, the factors of production. As an economy encompassing the whole of society, labor and material resources have to be distributed throughout the society, and this is most difficult to do when distribution is direct and non-market. This is the contradiction. The imbalance of the socio-economic structure, low efficiency, lack of results or even corruption that we mentioned earlier are all consequences of this contradiction. It is, therefore, inevitable that the traditional system should decline and go bankrupt. The failure of economic reform in East Europe, the dissolution of the Soviet Union, and the fact that major Chinese economic breakthroughs came not from the state sector, but from the pluralistic sectors not governed by the traditional system, all bear testimony to this. After Comrade Deng Xiaoping's talks in the south, in particular, people have come to the consensus that the traditional planned economic system has to be sublated and the socialist market economic system adopted. The 14th Party Congress has officially affirmed this new system as the goal of Chinese economic reform. This proves that the bankruptcy of the traditional system is no longer just a trend, but becoming a fact.