Some Consequences of Mixed Systems
By Tibor Machan - May 05, 2011

China is what political economists call a market socialist country, with political socialism at a virtual dictatorial level (as distinct from, say, democratic socialist and liberal democratic countries) and is thus very precarious when it comes to its political stability, kind of like Chile was under General Pinochet. The rulers will keep trying to square the circle, having a largely free, capitalist economy and a one party socialist political regime. But everyone knows this is very vulnerable to upheavals, especially once the economic side of the equation makes enough ordinary people wealthy so they no longer look to the government to sustain their way of life.

When a country is politically socialist, this means that officially what is most important is the well being of society as a whole. Karl Marx referred to a socialist society as an organic whole or body and this implies that the different elements of it, the limbs, organs, cells, etc., are all subordinate to the whole society. This is why such a country is also called collectivist – it is the collection of everything, including people, land, natural resources, culture and achievements, that is important.

Certainly the individual citizens are not except as they contribute to the society as a whole. By such an understanding of a society or country, anyone who isn't fully on board with where the society is headed – as determined by the rulers who are, officially, the head of the organic body – is deemed to be mentally ill. Sometimes so much so that like some tumor in a human individual, such an individual might need to be cut out or otherwise pacified. Any idea that such an individual might simply be a legitimate dissident is officially alien in a bona fide socialist country.

Of course, there has never been a fully functioning socialist country – even in contemporary North Korea, which comes the closest to the idea, small segments of the population manage to function outside of the system. In the economy there is a sizable black market that operates without the full involvement of the government (which is the official policy). Indeed, in all the political economies around the globe referred to as "capitalist," "socialist," "fascist," "communist," or "welfare statist" the correspondence between what the theory requires and what exists in reality is rather loose.

Still, it is undeniable that when the legal system conforms mainly to socialist tenets–when the public sector is deemed to be far more important than the private sector–this will have practical consequences. In the official rhetoric of the rulers and their supporters there will be routine endorsements of the superior significance of the public versus the private interest in society. Non-profit endeavors will be favored, at least in official discussions. The idea that people are all a tiny part of the country – and that, for example, they ought not to ask what the country can do for them but ask what they can do for the country – will be embraced and seeking to advance one's own agenda will be deemed objectionable, greedy, selfish, and narrowly individualist.

The welfare state, in turn, is indeed an explicit attempt to combine certain socialist and some capitalist political economic features. A more complicated mixed economy will have elements of most political economic systems combined in it, a kind of smorgasbord in which some of the items may not co-exist well with others and where if troubles arise it is difficult to tell which element made the greatest contribution to it. Nor will the successes be easily traced to their causes.

For example, the recent financial fiasco – some call it a meltdown – comes from a mixed system and not from the policies of one political economic arrangement and so to tell which of the various elements that have been in place for decades on end – or which combination of them – is responsible is very difficult to determine. This is one clear reason why when the likes of Paul Krugman point fingers at the free market elements, such as a bit of economic deregulation, as responsible for the mess, their claims can be seen as purely ideological, meaning indicative of their prior, unexamined commitment to anti-market economic policies. No one who is honest could tell from a quick examination that the meltdown or whatever one calls it was caused by one or another type of economic ingredient of the mixture that has been in operation for a very long time. It is possible to figure that out but it would take meticulous study since the different elements of the mixture do not operate in isolation from each other. It is as if one tried to determine why one caught food poisoning after a sumptuous smorgasbord. Any one or some combination of the items on the menu could have been responsible.

A statist will tend to blame the free market elements whereas a free market champion will look to statist elements to explain the mess. And this is not without good reason, since both have gained confidence in their ideas over time and do not consider it plausible that elements they champion would have produced havoc.

That is just one of the consequences of a mixed economic system.

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