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This article argues for the construction of a new political economy based on Chinese practices. It begins with an explanation of the research approach of starting from practice, and from a distinctive mode of thinking that is akin to that of medicine, rather than Newtonian physics and mathematical logic. Then it discusses the present-day Chinese practices of combining socialism with market economy, state enterprises with private enterprises, the peasant economy with an industrial economy, and the party-state with the economy—all distinctive realities about the new Chinese political-economic system. The foil for the discussion is the long-standing hegemonic ideology and worldview of Anglo-American classical and neoclassical liberal economics and law. This article suggests that we employ China's traditional dyadic integration worldview, evident in today's practices, to arrive at a new integrative cosmological view that rises above both. To a considerable extent, this article is also a reinterpretation of classical Marxist political economy. What the article advocates may be termed a "participatory socialist market economy," to be distinguished from a bureaucratized and controlling socialist planned economy. This is a system that is still very much in the process of formation, its particular content and characteristics yet to be clarified and specified through a sustained period of searching through practice. [ABSTRACT FROM AUTHOR]

The theory and ideology of mainstream Anglo-American "marketism" do not accord with reality. Its core idea—equating all trade with equal and mutually beneficial market exchanges, and believing that such exchanges are certain to lead to division of labor and transformative changes in labor productivity—is a one-sided, idealized construction. It erases unequal exchanges under imperialism and ignores the realities of the use of cheap informal labor in developing countries by hegemonic capital in the globalized economy. It also disregards pervasive unethical pursuits of profit among producers and widespread human weaknesses among consumers. If we proceed instead from China's actual experiences, we can come to see and grasp the many different varieties of trade that differ from the abstractions of conventional marketism, including the "commercialization of extraction" that long characterized the principally unidirectional "trade" based on severe inequities between town and country, as well as the "growth without (labor productivity) development," or "involutionary commercialization," that long characterized domestic Chinese commerce that emerged under severe population pressures on the land. If we turn instead to the "take-off" period of the recent decades in Chinese economic development, we can see also the great contrast between Chinese realities and the mainstream economics construct of a "laissez faire state," and see instead the state engaging most actively in development, and state-owned enterprises working closely together with private enterprises. Those realities are perhaps most evident in the recent dramatic development of China's mammoth real estate economy that has been the main engine of rapid development since about 2000—most especially in its immense process of the "capitalization of land." We can also see how the tradition of the "socialist planned economy" has operated in unison with the new capitalist market economy, by combining the twin ideals and mechanisms of "people's livelihood" and "private profit." What is needed is a new kind of political economy that can grasp and illuminate such changes. [ABSTRACT FROM AUTHOR]

Today, thirty-five years after this author first wrote about involution, and at a time when that term and concept have come to be commonly used by many people, this article revisits that term to explain more clearly and succinctly its meaning and also to add to it contributions made by other scholars as well as by this author's own further research, including new research on the de-involution of the past few decades in China, and analyses of the mechanisms and theoretical logics contained therein. Because China's peasant economy has been the longest-lasting and largest in the world, perhaps also the most highly involuted, and its recent changes, including de-involution, make up the most dramatic example of the modernization of a peasant economy, it serves to explain most clearly the principles and mechanisms of change, and shows just how different those are from the Western historical experience of transition from feudalism to capitalism. Furthermore, peasant economy, not just in China but also in many other developing countries, has been the source most recently of the rise globally of an enormous informal economy—of labor that has little or no legal protection or benefits, according to the definition of the International Labor Organization—now reaching one-half to three-quarters of all urban employment in many developing countries, and more in China than anywhere else. That too is directly connected to the peasant economy and its background of involution and de-involution. At the moment, China's future direction on this matter is at once full of uncertainties and of exciting promises. [ABSTRACT FROM AUTHOR]

The "third sphere" born of the interacting of a market economy with a centralized state, and of a system of market contracting 合同 with administrative "assigning responsibility" 发包/承包, has become a key characteristic of the new political-economic system of Reform China. It has imported the private enterprise market economy of the modern West, but has also retained the (revolutionary) tradition of a socialist party-state and its ownership of the principal means of production. Its administrative system resembles more and more the modern West's (Weberian) bureaucratic system, but it has also retained the traditional imperial Chinese "centralized minimalism" and "parcelized despotism" characteristics. It cannot be grasped by the either/or dualistic opposites mode of thinking, but can only be understood in terms of the combining and interacting of dualistic opposites. The combination may be understood as one concrete and substantive meaning of the officialized term of a "socialist market economy." [ABSTRACT FROM AUTHOR]

Chongqing’s experience suggests that while Janos Kornai is surely correct about shortage in a planned economy, he is mistaken that market signals may only be employed under an economic regime of private property. Chongqing has called instead on government-owned firms, and their market earnings and appreciation, to fund social equity programs and infrastructural construction. This “third hand” is different from Adam Smith’s “invisible” first hand, which, on the basis of rational individuals pursuing their own interests, supposedly generates a self-regulating and optimizing market economy; it is also different from the second hand, by which the state engages in a variety of interventions in order to perfect the functioning of such a market economy. Its main actors are state-owned and not privately owned enterprises but, unlike earlier state enterprises, it strives not for the profit of the enterprise but rather for social equity and public benefit. It in fact at once challenges and utilizes the other two hands. Though state-owned, in the context of China’s current political-economic system and the globalized economy, this third hand does not behave like a monopoly; rather, it must compete against the other two hands, and not only against other localities within China but also other nations and economic entities outside China. Only if it succeeds in driving economic development under such competition can it become a “model” with wider application in China as a whole. And only thus can it, in a globalized economy dominated by capitalism, establish equitable development as a realistic alternative. Thanks to the Chongqing “experiment,” the question is no longer just a theoretical or ideological one, but one of observable and evolving realities. [ABSTRACT FROM AUTHOR]