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CATO JOURNAL

Making large SOEs the ‘‘pillars’’ of the national economy by ‘‘corpora- tizing’’ them, with the government holding all or most of the stock, is a recipe for disaster. That would be market socialism in spades.5

From Market Socialism to Market Taoism

China need not be confined to the ideological cage of market socialism by fear of copying Western traditions of market liberalism. T´he way of the market is universal. The free-market economy is, as Vaclav Havel (1992: 62) so elegantly stated in the introductory quote, ‘‘the only natural economy, the only kind that makes sense, the only one that can lead to prosperity, because it is the only one that reflects the nature of life itself.’’ Since 1978, market liberalization has substan- tially increased the standard of living of millions of Chinese, and a recent poll showed that many Chinese now believe that ‘‘private property is sacred.6 Today more than 22 million entrepreneurs in China are members of the National Association of Private Entrepreneurs (Pei 1997: 4).

The climate is ripe for further market liberalization in China. At the Communist Party’s 15th Congress, in September 1997, President Jiang Zemin stood firmly behind Deng Xiaoping’s economic reforms and favored turning SOEs into joint-stock companies. And, at the National People’s Congress, in March 1998, Premier Li Peng stated, ‘‘The incompatibilities of government institutions to the development of a socialist market economy have become increasingly apparent’’ (quoted in Mufson 1998: A1). China’s new premier, economic pragma- tist Zhu Rongji, needs to recognize that the only way to eliminate those incompatibilities is by eliminating socialism and moving toward a free society with limited government, the rule of law, and private ownership. The announcement at the NPC that the size of China’s civil service will be cut in half and that at least 11 ministries will be abolished or streamlined is an indication that China may be ready to move in the right direction (Kynge 1998, Mufson 1998). Yet, as long as China confines itself to creating a socialist market economy and restricts economic liberties, the future path of China’s market economy will remain unclear.

5Hugo Restall (1997: A22) writes, ‘‘Most of the state-owned enterprises that have been corporatized under the 1993 Company Law are still run as private fiefdoms by management at the expense of the state banks. As long as the state remains in control, it appears, it is impossible to make a credible break from the old days of subsidies and easy credit. . . . Sooner or later the state will have to face up to the need to relinquish both ownership and control.’’

6Minxin Pei (1998:76) reports, ‘‘In a 1993 poll of 5,455 respondents in six provinces, 78 percent agreed with the statement, ‘Private property is sacred and must not be violated’.’’

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