Chongqing

Abstract

Chongqing’s experience suggests that while Janos Kornai is surely correct about shortage in a planned economy, he is mistaken that market signals may only be employed under an economic regime of private property. Chongqing has called instead on government-owned firms, and their market earnings and appreciation, to fund social equity programs and infrastructural construction. This “third hand” is different from Adam Smith’s “invisible” first hand, which, on the basis of rational individuals pursuing their own interests, supposedly generates a self-regulating and optimizing market economy; it is also different from the second hand, by which the state engages in a variety of interventions in order to perfect the functioning of such a market economy. Its main actors are state-owned and not privately owned enterprises but, unlike earlier state enterprises, it strives not for the profit of the enterprise but rather for social equity and public benefit. It in fact at once challenges and utilizes the other two hands. Though state-owned, in the context of China’s current political-economic system and the globalized economy, this third hand does not behave like a monopoly; rather, it must compete against the other two hands, and not only against other localities within China but also other nations and economic entities outside China. Only if it succeeds in driving economic development under such competition can it become a “model” with wider application in China as a whole. And only thus can it, in a globalized economy dominated by capitalism, establish equitable development as a realistic alternative. Thanks to the Chongqing “experiment,” the question is no longer just a theoretical or ideological one, but one of observable and evolving realities.