A Planned Commodity Economy Based on Public Ownership

In 1984, the Third Plenary Session of the Twelfth Central Committee of the Party put forward the main thesis on the nature of China’s economic system. It expressed that the socialist economic system is a system of planned regulation of commodity production and exchange based on the public ownership of the means of production.

In October 1984, the Third Plenary Session of the Twelfth Central Committee of the Communist Party of China made the “Decision of the Central Committee of the Communist Party of China on Economic System Reform” based on the task of systematically carrying out economic system reform proposed by the 12th CPC National Congress, drawing a “blueprint for comprehensive reform” and for the first time proposed “a planned commodity economy based on public ownership.” The “Decision” advocated that to reform the planned system, we must first break through the traditional concept that antagonizes the planned economy and the commodity economy, and clearly understand that the socialist planned economy must consciously base itself on and use the law of value. It is a planned commodity economy based on public ownership. Considering China’s vast territory, large population, inconvenient transportation, unbalanced economic and cultural development and underdeveloped commodity economy, the “Decision” emphasizes that the full development of the commodity economy is an insurmountable stage for social and economic development and is the necessary condition for the realization of China’s economic modernization. The “Decision” believes that only by fully developing the commodity economy can the economy be truly invigorated, encouraging enterprises to improve efficiency, operate flexibly, and quickly adapt to complex and changing social needs, which cannot be done solely by administrative means and mandatory plans. At the same time, it should be noted that even being the socialist commodity economy, its extensive development will produce some kind of blindness that needs planned guidance, regulation and administrative management, which can be done under socialist conditions. Therefore, the implementation of a planned economy and the use of the law of value and the development of a commodity economy are not mutually exclusive, but unified. It is wrong to put them on opposite sides. The “Decision” clarified the basic goals and requirements of the reform and created conditions for gradually breaking the planned economic system. The system of a socialist planned commodity economy is an internally unified system of planning and market. First of all, the essential difference between the socialist commodity economy and the capitalist commodity economy lies in their different ownership. The socialist commodity economy based on public ownership provides the possibility for the whole society to consciously maintain the coordinated development of the national economy. It is necessary to be good at using the two forms and means of planned regulation and market regulation to turn this possibility into reality.

The development of the socialist commodity economy is inseparable from the development and improvement of the market, and the use of market regulation is by no means equivalent to capitalism. Secondly, planning must be based on commodity exchange and the law of value. Direct management based on mandatory plans cannot meet the requirements of the development of the socialist commodity economy. Planned regulations cannot be equated with mandatory plans. Instead, the scope of mandatory plans should be gradually reduced through various methods such as signing purchase contracts between the country and enterprises, and between enterprises and enterprises in accordance with the principle of equivalent exchange. The country's management of enterprises should gradually shift to indirect management. Thirdly, the scope of the plan and the market covers the whole society. This was the comprehensive beginning stage of our country’s economic system reform. That is, on the basis of the initial success of rural reform, it was a major decision to start the entire economic system reform phase focusing on cities. After that, the state's management of enterprises gradually shifted from direct control to indirect control, which greatly reduced the scope of the planned economy. According to different circumstances, the country implemented mandatory plans, guided plans or completely let the economy adjusted by the market. The “dual track system” of prices and other aspects were implemented. The above were done to actively develop a variety of economic forms, including national, collective, and individual economies, to make full use of domestic and foreign resources and to open up domestic and foreign markets, etc. These were all the important measures to the socialist market economy at the transitional stage and they conformed to the objective laws of our country's socialist economic system reform.

The socialist economy is a commodity economy on the basis of public ownership. The proposal of this theory marked a major breakthrough in the understanding of socialist economic issues. It broke through the concept of putting socialism and commodity economy on opposite sides and also broke through the idea of taking the mandatory planning as the fundamental feature of a socialist planned economy. It was a phased achievement of the economic system reform.