Supply and demand determines prices and the state intervenes only at the margin. (Craig, 2002).
Market socialism refers to an economic system that combines both capitalism and socialism in its practice. (Guo, 2005). It is an economic system where economic law is in direct conflict with political monopoly because it each prevents the recognition of the other. (Guo, 2005). Loss making and less liquid firms can be bailed out from financial distress by the government through the transfer of funds from profit making firms to the insolvent firms under market socialism. (Guo, 2005). Also, the leadership style adopted by chief executive officers or managers is the bureaucratic leadership style and subordinates or employees have no option than to respect the rules and regulations laid down by the manager if they want to keep their jobs and advance their careers. (Guo, 2005). Business success and the concern for customers is not the primary objective of operative business. (Guo, 2005). Therefore market socialism does not allow for competition among firms and as such there is doubt as to how far such an economy can go.
To better understand whether the reform has taken a capitalistic of a market socialistic approach, we will carry out a review of some of the reforms in a selected number of Asian Countries including; China, Vietnam, Korea and Laos.
Following the fall of Mao's followers between 1976-1978, market reforms began in China with the reformers taking over the entire party-state apparatus. (Guo, 2004). Two groups of reformers existed the radical and the moderate groups. The two groups had similar objectives of improving the economic performance Chinese socialist economic system, promote economic modernisation, and improve the standards of living of the entire population, with the major difference being the scope and pace or extent of reforms. (Guo, 2004).
Moderate reformers were of the view that China should be launched in the direction of a planned or state controlled economy and restricted the operations of the market to agricultural goods and inessential public sectors, industries or areas. They emphasized that the market should be regarded as a support mechanism for the allocation of resources and determination of prices. (Guo, 2004).
In addition, the moderate reformers advocated a slow approach to the reforms process with allowances for adjustments during which imbalances could be resulting from the reforms process could be rebalanced. (Guo, 2004). The moderate reformers also desired to exert strict administrative control over certain important aspects of the economy especially investment and foreign exchange. (Guo, 2004).
Finally, the moderate reformers stressed the importance of the basic principles of socialism put forward by Lenin, Marx and Stalin (planned economy, public ownership the factors of production, and distribution according to labour). (Guo, 2004).
On the other hand the radical reformers defined socialism in a less restrictive way and excluded the planned economy as one of the basic principles of socialism. However, while maintaining the dominant position of public ownership, they recognized the need for flexibility so as to allow for the existence of a diversified ownership structure (Guo, 2004).
There were a lot of