Economics of Market Socialism and the Issue of Public Enterprise Reform in Developing Countries (The Distinguishedl Lecture)

Abstract

Historically state socialism has had dramatic initial success in creating a basic capital goods base in early stages of industrialisation and in its spectacular feats of mass literacy and public health campaigns made possible by mass-based organisations and forces of human mobilisation unleashed by socialist revolutions in poor countries like China, Vietnam or Cuba. But from the post-mortem reports of the collapse of the command economy in different parts of the world it is now clear that centralised state socialism is largely incapable of coping with the technological demands of the increasing sophistication in product quality and diversity and the needs of quick flexibility in decision-making and risk-taking in a whole range of economic activities spanning the technological spectrum from agriculture to semiconductors. There is no doubt that a more decentralised market-mediated allocation of resources and greater competition can correct much of the wastage and dynamic efficiency of the bureaucratic command system and introduce more agility and flexibility in economic decisions. But the big question is how effective the stimulus of competition and markets can be without large-scale private ownership.