@Bill That's a funny story...

In China, the social system is Chinese with a nod to certain very un-Chinese notions of the "social contract". I think you'll remain "Chinese" long after socialism has been consigned to the dustbin of history...

As for capitalism, Marx's analyses don't even cover the developed capitalism of the Old West, let alone the particular economic and social forces at work in China

There are significant differences, but the main difference is a social agreement as to where capital can be gathered.

In Capitalism it was thought that due to the automatic adjustments that are created in the market, that market fairness would be achieved if everyone was allowed to have access to capital, and competition determined who could accumulate the most. Unfortunately it turned out that the more capital you have, the easier it is to get. As a result we get globalized capitalism where a few families own the financial resources of the world.

In Socialism it was thought, that the government should aggregate capital, and serve the people, by creating opportunities for economic improvements. Central Planning, Government ownership of intellectual property, and everyone essentially worked for the government.

Both of these systems have foundered on what are essentially the same problems, the problem of overconcentration of resources in too few hands, resulting in poor planning. A hybrid system might assure a better economic future, as long as it somehow reduced over-aggregation of resources.

The main problem is communications. Given a concentration of resources, how are the resources apportioned among the many clamoring projects that need them?

In an overconcentration based system, only a small number of people are in a place where they can make decisions on the global movements of resources. There are only a few hours in a day, and there are only two ears in every head, so the sheer amount of information needed to make a good decision on where to apportion resources cannot reach the ears of the person who must make the decisions.

They have no choice, they must delegate, so they allow a small number of very smart people to suggest the best management options. But this inner circle still does not have enough ears to hear the clamoring of the multitude, so they in turn must delegate, and so on, creating a compact multi-level bureaucracy central to the aggregation of resources. Because of communication needs this compact bureaucracy gathers in a central location often a "Head Office" or "Capital".

Now as the inner circle has available to it, more resources than others they tend to be more powerful, and to attract people who are attracted to the power, not the service. These people tend to ingratiate themselves with the powerful, thus creating a powerful lobby, intent on misdirecting resources. The interesting thing is that because of the centralization of the resources, and the link between resources and power, the power to do things becomes centralized as well. Because the local, lobby is clamoring right in the ear of the powerful, they tend to overwhelm the fainter sounds of the clamoring that comes from further away, resulting in a concentration of resources near the capitals or headquarters, and a dearth of resources in the hinterlands, or sticks.

This problem seems standard for all forms of economic systems no matter who runs them or what economic theory they are based on.

Subsidiarity, the organizing principle that matters ought to be handled by the smallest, lowest or least centralized competent authority, is the answer to overconcentration.

http://en.wikipedia.org/wiki/Subsidiarity

You would think so, Bill, but however when this principle has been applied, what we find is that nobody concentrates enough capital to achieve anything. Local competition for the resources results in spreading the resources so thin, that no-one can get ahead. This however changes in three different strategic versions that I know about:.

Collectivism, where the Collective at the local level gathers the resources. Examples of this are the Kibuttz type systems that were popular in Isreal, and the Mennonite, and Huttarite Colonies in the new world.

These however tend to be labor focussed relationships where members are held in virtual slavery to the collective, and often are heavily influenced by religion.

Cooperativism, where the members of the collective give up a portion of their personal resources in order to increase the ability of the collective to gather resources, and each member has one vote in what the collective as a whole does.

Unfortunately you seldom see evidence of a multi-level co-operative, Possibly because the egalitarian concept of one member one vote, does not scale well.

Communism, where the population is organized into a communal relationship often by the government, and resource gathering at the commune level is encouraged. Unfortunately this tends to be run by a central government with the result that the resources become centralized even though they are generated at the local level.

@David

I agree with you about Marx's analysis shortcomings, particularly, I have found that chinese government employees formed a main force that may destroy economy and economic rules in chinese society, kill the fairness in free market.

The eternal problem of "how much government"... I do fear that you have rather too much in China; but then we have rather too much in France, too - this isn't a *political* question, but rather the more fundamental question of the relation between individual entreprise and collective well-being (and no, there are NO easy solutions!).

Both France and China provide examples of governments required by historical precedent to establish a strongly centralised "State" (without the central hub, the result would be "mere anarchy"). In both cases, the model of government is 'rational' and 'humanist', and the governing class is - in theory - supposed to emerge from the governed by merit (and this is as much Confucian as socialist). Unfortunately, people beong people, it also leads to an oligarchical bureacracy...

GS: "This however changes in three different strategic versions that I know about..."

Don't forget the Federalist model. It had worked reasonably well in the USA, until recent times. Now, however, society seems to be breaking down due to the materialism which seems to accompany modern life.

The problem with Federalism is similar to the problem with communism, while each state/province has its own government, power tends to gather in specific locations. Each state/province/canton has its own capital, and each federation has its own capital, and from a strategic planning sense, it is more likely that the Federal Capital is going to concentrate more resources than it leaves for the states/provinces/cantons.

Ideally, from a distribution of resources point of view, Local governments should be stronger than state/provincial/canton governments, and they should be stronger than Federal Governments. This is the shortest distance to resources concept that maximizes communication. However even here in Canada, the Federal Government pays the Provincial Governments, and the Provincial Governments pay the Municipalities. In other words, Power concentration is felt at the federal level first.

Well, here in the USA, the several states were more powerful than the federal government until the Civil War. Since then the situation has been reversed. Now, the states have little power.

The process accelerated during FDR's 'New Deal.' Basically the states sold themselves into servitude to the federal government: The federal government would offer them money if they would accept standards from Washington. Law after law came out, offering the states little goodies. Few cared about the strings attached to the goodies.

The problem I think became worse when the countries moved to a central bank that printed money, as long as each bank printed its own money, the federal government did not have fiscal control of the purse strings and could not offer goodies to states/provinces at their own expense. However a central bank, allowed the government to inflate the currency at will, and pay the resulting money to its states for bribes to let it have more control.

In theory, the US Constitution says that the only money the federal government could use for tax purposes is gold or silver coin. Maybe the founders had a good idea.

They got around that by making "Gold Certificates" the original dollar bill, was really a gold certificate that could be exchanged for an equal value in gold. It is when they did the change from the gold standard that inflation really took off.

FDR's New Deal did its best to do away with gold. I'm not sure about gold certificates... I remember silver certificates, but not gold.

The New Deal failed to fix the Depression, but led to a great expansion of federal power. That certainly came in handy during the World War, but ultimately led to the age of nuclear war.

In some sense, the growth of the federal government may have been a necessary evil, I suppose.

It was probably partly because of the New Deal, and the power it gave the Federal Government to force anti-prejudice laws on the states, that resulted in the assination of JFK.

Of course, my bad, it's been so long since I saw one of those silver-backed currencies that I forgot it was silver not gold. Gold certificates must be used by banks and so on.

Nonsense!! JFK was assassinated by Lee Harvey Oswald who killed him because he, Oswald, was a communist. It had nothing to do with "anti-prejudice laws." That is simply a way for leftists to cover up the true cause of the deed.

Right, I believe you, but milliions of conspiracy theorists disagree... ;)

GS: "Right, I believe you, but milliions of conspiracy theorists disagree..."

Sure... The leftist media started pretending that somehow race questions were involved from the moment the shot was heard. They claimed it could be nothing else --- since it occurred in Texas, a Southern state, which could easily be labeled as racist. So all of Texas --- indeed, all the South --- was somehow guilty.

But that was pure nonsense, designed to hide the true cause, the Marxist ideology which Oswald believed.

Which is of course appros po, for this discussion... ;)