|dc.description.abstract||INFORMATION, STRATEGIES AND SOCIALIST PRACTICE IN CHINA
The socialist experiment has been the great utopian adventure of our century. In the avalanche year of 1989, however, a most brilliant chapter in a long and stormy history has surely been closed. Amid such a tempestuous historical trend, the real question is: Why is it that seventy years after 1917 or thirty years after 1949 - which were to have been the ultimate revolution, the revolution to end all further need of revolutions - Deng Xiaoping and Gorbachev proclaims urbi et orbi that socialism urgently requires a "second revolution," a "rebuilding" of its fundamental fabric? What is so drastically wrong as to require such drastic action?
To answer these questions, most people would agree that the core failure of socialism lies at its inability to provide correct information for economic decision-making and adequate incentives for productivity gains, for innovativeness and responsiveness to consumer needs and wants. In terms of Game theory, these critics can be grouped under the headings of "information problems" and "problems of strategic behavior."
Information problems have long been known to create inefficiencies in CPEs. For transfer of dispersed information by the central planning board (CPB) is not feasible because of the absence of market. In the process of collecting, transmitting, and processing information about preferences and production possibilities, the limits of central bureaucratic coordination inevitably introduce errors into the system. Strategic problems, on the other hand, arise because the action of one player influences the outcomes for another, as in the classic "prisoners' dilemma". These have long been known to give rise to inefficiencies in the case of "soft budget" constraints. These are problems of incomplete information.
The socialist experiments in our century has been aimed at resolving these two problems, during which various decentralized and market socialism models were proposed, formulated and tested. However, by forbidding private ownership of means of production, the socialist mode of organization eliminates the factor markets that are essential to the functioning of the market economy. This accounts for the failure of market socialism experiments in Eastern European countries. A corollary is that the introduction of market forces in socialist economies should be accompanied by large-scale privatization of means of production.
This thesis is concerned with the two fundamental problems of information and strategies in the socialist centrally planned economies - in both of its traditional and transitional stages. The first chapter elaborates the theoretical development of socialism and the problems of various versions of centrally planned economy, outlines the information and incentives framework for application to the Chinese socialist economy. The second chapter discusses the institutions and functions of the centrally planned, administrative command system in China and examines the reasons why the CPE in China has failed - the empirical record of thirty years of socialist practice shows that its fundamental structures reached an inextricable impasse at the end of the 1970s. This explains why almost all previously CPEs wanted to reform their economic system in order to establish market-economy institutions as soon as possible and achieve rapid and high economic growth within this framework. However, the insertion of markets -voluntary coalitions by economic actors to promote their selfinterest - into an exogenous socialist system where the economic structure is imposed from above means that marketization is seen as a change independent of other changes in the economic system especially price formation and the entry and exits process. Chapter IV tackles the question of why it is so hard to reform the CPE. In the absence of capital market, marktization can not produce the desired efficiency and other ameliorating results, the changes are incomplete, and administrative retrenchment follows: reforming the reforms back on the old treadmill. The hybrid of markets, grafted from the endogenous market system where no central authority imposes a design from above, and a socialist, exogenously determined - that is, imposed from above coordination mechanism lacking free entry, an alltomatic exit process such as bankruptcy, and a price system that would reflect opportunity costs will not come to grips with the problems that marketizaiton is supposed to address and, it is hoped, to solve in fact, the combination might make things worse.
The reasoning for choosing China as a case of study is that any examination of the development of this kind of "market socialism" experiments has undoubtedly revealed China as a leading player. However, as researching the mass of specialist works on the failure of market socialism in the Eastern European countries is a task of herculean proportions, the conscientious examination of the socialism with Chinese characteristics still remains very limited. This thesis goes some way towards making up for this deficiency and aims at an evaluation of the economic reform between 1978-1992 in China, with an intelligently balance between appreciation and criticism since the focus will be on reform in the industry, other areas, such as promotion of agriculture reform will not be dealt with here the analysis will he based on descriptive elaboration of current Chinese economic system through the use of statistics as latest as possible to strengthen its explanation and persuasiveness.||nor