< Previous | Contents | Next >
2. State Economy
Rooted in the ideas of historical change proposed by the German philosopher Karl Marx (1818–1883), more specifically, this kind of economic system first came up in the erstwhile USSR after the Bolshevik Revolution (1917) and got its ideal shape in the People’s Republic of China (1949). This form of economic system also spread to other countries in Eastern Europe. Here we see two versions of the state economy—in erstwhile USSR known as the socialist economy and in pre-1985 China as the communist economy. While a socialistic economy emphasised collective ownership of the means of production (property and assets), it also ascribed a large role to the state in running the economy, while communist economy, on the other hand, advocated state ownership of all properties including labour with absolute power to state in running the economy. Though for Marx, Socialism was a transitional stage to communism, it never did happen in reality.
Basically, this form of economy came in reaction to the prevalent popular economic system of capitalism and proposed just the opposite. The decisions related to production, supply and prices were all suggested to be taken solely by the state only. Such economies were also known as Centralised Economy, Centrally Planned Economy or Non-market Economy.
The socialist and communist economies used to criticise capitalistic economics of being based on exploitation. In response, the capitalist economies called them the practioners of ‘state capitalism’, where the state was the sole exploitator. The communist and anti-communist propagandas resulted in serious intellectual discussions almost upto the mid-1980s.