ALTERNATIVE

MODELS
MANAGED CAPITALISM, SOCIALISM
& SOVIET STYLE COMMUNISM

Cyrus
• Market Economy
Economy in which the what, how and
for whom concerning resource allocations
are primarily determined by supply and
demands of market
• Capitalism
an economic system in which most
property (land and capital) is privately
owned. Private markets are the primary
vehicles used to allocate resource and
generate incomes

BACKGROUND
PROPONENTS:
1. Limited Government Intervention
2. Individual rights
right to life, liberty & property
3. Private Ownership
4. Equal Justice Under Law
Individuals are treated by government
equally.
5. Unlimited Accumulation of Profit

BACKGROUND
• Capitalism: Criticisms
Karl Marx is famous for his work Das Kapital that
criticizes capitalism as a source of social inequality.
• Labor Theory of Value
the value of a product depends on the amount of work
necessary to produce it.
commodity value = worker’s force
surplus value: excess work done by extending or
contracting the labor hours that was extracted by the
capitalists.
Labor power is commodified into exchange value
• Alienation
Workers gradually lose their purpose on lives and
future, to establish relationships to other actors, as
well as the value or goods that is produced by their
actions.

BACKGROUND
• Developmental States:
a regulatory state that governs the economy
• Other Names: Managed Capitalism, Asian Models, East Asia Miracles
• Cases: South Korea, Singapore, Hong Kong, & Taiwan
• Characteristics:
1. High Investment Rates: It leads to development of latest technology & necessary
infrastructures. In terms of GDPs from 1960s to 1991, S. Korea & Japan invested
20%+ while Singapore is 30%+.
2. Corporativism: It involves division of people within society into corporate goods:
Community as Organic
3. Outward Orientation: Keeping their exchange value undervalued to promote
exports
4. Human Capital, Low Inflation & High Savings Rates
5. Economic Nationalism: Trade Protectionists; regulatory boards, domestic control
of currency.
• Problem: Crony Capitalism
• Special Case: China’s Market – Leninism; decentralization of economy
(leading to capitalism) at the same time a rigid and authoritarian bureaucracy

DEVELOPMENTAL STATES
• Socialism
It places the ownership of property, mostly key
industries, in the authority of state or community
ownership.
The aim of socialism is “to bring about greater
economic equality within society.
• Cases: Western Europe
• Characteristics:
1. Government ownership of productive resources
2. Planning Mechanism Since socialist are suspicious
of the efficiency of invisible hand, they insist that it
is in need to coordinate different sectors.
3. Redistribution of Income Inherited wealth and the
highest income are to be reduced by taxing powers.
4. Social Democracy Social services for every
individual
5. Peaceful and democratic means

Problems: Efficient Management

SOCIALISM
• Soviet Communism
It was led by Lenin and the Bolsheviks in the 1917 ‘October’ revolution of the
workers and peasants in Russia.
Prerogative:
• Marxism
(1) Economics as a suprastructure: Economic interpretation of the history.
Primitive Communal > Slavery > Feudalism > Capitalism <
– Socialism – Communism
- Imperialism: as profits decline and investment opportunities at home
become exhausted, the ruling capitalist classes resort to imperialism. It
tend to look for higher rates of profit abroad.
- Note: For Marx, the one who shifts to socialism are highly industrialized societies
but it only rose in many cases in feudal societies.
(2) Proletarian Revolution: Class Consciousness
• Leninism
Feudalism/Early Capitalism }====> Socialism/Communism
The formula excluded the high industrialization phase in Capitalism arguing
that why need to wait for capitalism if it can be eradicated now.
Rigid Bureaucratization
SOVIET STYLE COMMUNISM
• Cases: USSR, Eastern Europe Bloc, North Korea
• Theory of Productive Force
Technological Change Social Change
• Characteristics:
1. Central Planning: ‘Command
Economy’
Budget Allocation: Military, Scientific
Resources and Investment while the
residual would be Consumption
2. Five Year Plan: Farm Collectivization,
Rapid Industrialization
3. State Ownership of the means of
Production
4. Rigid Bureaucracy
SOVIET STYLE COMMUNISM
• Problems
1. Principal - Agent problem: There
were no appropriate incentives for
the people to behave according to
the orders of the principals;
example is soviet book publication

SOVIET STYLE COMMUNISM

• Why the Soviet Model Failed?
1. Breakdown of Technology
• Slow technological innovation resulted increase diminishing
marginal returns. (in terms of capital per hour; also they
lack competition)
• Failed to predict the emergence of light industrial
production and consumer durables. (stayed with heavy
industries such as coals;

SOVIET STYLE COMMUNISM

• Why the Soviet Model Failed?
2. Misallocation of Resources
The regime funded the military and the residual would be
for consumption.
3. Poor Leadership
In the later period, reforms were proposed separating
from the communist principles.

SOVIET STYLE COMMUNISM