The economic role of the State in the socialist-oriented market economy in Vietnam - 1

- Prof. Dr. Luong Xuan Quy (project leader): State Management

in the socialist-oriented market economy in Vietnam - State-level scientific program KX.01

The above research works from different perspectives have clarified many issues of the economic role of the State in the socialist-oriented market economy in Vietnam. However, the approach to the economic role of the State as a requirement to overcome the shortcomings of the market economy arising in the process of economic renovation in our country still has many issues that have not been satisfactorily resolved.

3. Purpose and tasks of the thesis

3.1. Purpose

Based on the generalization of the theoretical system on the economic role of the State and the current status of the economic role of the State in Vietnam, the topic proposes directions and solutions to strengthen the economic role of the State in overcoming the shortcomings of the socialist-oriented market economy in our country in the coming years.

3.2. Tasks

- Clarifying theoretical issues on the economic role of the State in a market economy based on an overview of the history of economic thought and the experience of a number of countries.

- Analyze the current economic role of the State in the socialist-oriented market economy in our country today.

- Propose directions and some main solutions to strengthen the role of the State economy in the socialist-oriented market economy in our country in the coming years.

4. Research object and scope

- Thesis research object: The economic role of the State in the socialist-oriented market economy in Vietnam.

- Scope of the thesis: The role of the State in the fields of law, management and development of business types, use of financial tools, credit, tax, income distribution, social security to regulate income and stabilize the economy.

5. Theoretical basis and research methods

5.1 Theoretical basis

The topic is based on the theoretical foundation and research methods of Marxism-Leninism and Ho Chi Minh thought, the viewpoints of our Party, modern viewpoints on the economic role of the State, and at the same time selectively inherits the ideas of previous authors on this issue.

5.2. Research methods

- Dialectical materialism and historical materialism, combining logic with history, analysis, comparison and synthesis.

- Selective use of published research results.

- Use documents and statistics.

6. New scientific contributions of the thesis

- Contribute to clarifying the theory of the economic role of the State in the socialist-oriented market economy in our country.

- Assess the current economic role of the State in our country, point out the achievements, limitations, and causes of the limitations in the economic role of the State.

- Recommend some solutions to strengthen the economic role of the State in the socialist-oriented market economy in our country in the coming years.

7. Structure of the thesis

In addition to the introduction, conclusion and reference list, the thesis consists of 2 chapters.

Chapter I :  Basic theoretical issues on the economic role of the State in a market economy

Chapter II :  The economic role of the state in the socialist-oriented market economy in Vietnam: Current situation and solutions.

Chapter 1

BASIC ISSUES ON THE ECONOMIC ROLE OF THE STATE IN A MARKET ECONOMY

1.1. The economic role of the state in a market economy: Theoretical overview and importance

1.1.1. Overview of ideas on the economic role of the state in a market economy

It can be said that the idea of ​​the role of the State in a market economy is one of the two most important ideas in economic theory: the idea of ​​value and the idea of ​​the role of the State. If economists have had fierce debates about the idea of ​​value, the debate in the field of the role of the State is no less fierce. In general, in history there are two viewpoints. Should the State intervene in the economy or not? And to what extent? Those who do not support State intervention in the economy are called economic liberals, typically A. Smith (1723-1790). In his work "An Inquiry into the Cause and Nature of the Wealth of Nations", he argued that human economic activities are free activities, governed by the "Invisible Hand" or objective economic laws. According to this principle, economic activities must be carried out freely, determined by the supply-demand mechanism and price fluctuations in the market. What to produce? For whom? How? All are resolved through the market. The State does not interfere in the market and economic activities of enterprises. According to classical bourgeois economists, the State is necessary to protect the rights of private owners, fight against internal and external enemies, and protect the country. However, he also believes that sometimes the State also has other responsibilities.

certain economic tasks, when these tasks go beyond the scope of the enterprise such as road construction, river digging...

Not only the classical school, but also the neoclassical school economists (late 19th century) supported the principle of economic freedom. They believed that the free operation of entrepreneurs according to the spontaneous fluctuations of supply - demand and prices of goods in the dominant market is the basic condition for the development and balance of the market situation. On this basis, Leon Walras (1834-1910) proposed the theory of "general equilibrium between markets".

Classical and neoclassical economists both see the fact that as production develops, the State's functions will expand, and thus the State's role will increase. Especially in the face of practical demands in the field of foreign trade, the emergence of monopolies and the problems of labor reproduction, the bourgeois State must increasingly intervene in the economy. However, they still believe that economic freedom is the operating force of the capitalist economy. Economic laws are invincible, although economic policies can restrain or promote the operation of economic laws. They have a firm belief in the market mechanism and self-regulate operations according to supply - demand and prices. According to the automatic regulation of the "Invisible Hand", the reproduction process ensures balanced proportions and maintains normal development.

However, the economic crisis of capitalism that began in 1825 and became more frequent in the 1930s proved that the "invisible hand" could not guarantee the normal development of the capitalist economy. Moreover, the increasing trend of socialization of production showed bourgeois economists that there must be a force in the name of society to intervene in the economic process and regulate the economy. From there, the theory of "Regulated Capitalism" appeared. The founder of this theory was John Meynard Keynes (1884 -

1946), British economist, social activist and banking practitioner.

If the classical and neoclassical schools consider the capitalist state as only a guardian protecting the assets of capitalism, Keynes evaluates the role of the state in a completely different position. In his work "The General Theory of Employment, Interest and Money" (1936), he draws an important conclusion that the market mechanism cannot ensure the full use of production factors, all the evils of capitalism such as crisis and unemployment originate from the state's non-intervention in the economy. Therefore, to ensure that capitalism operates normally and avoid crisis and unemployment, the bourgeois state must introduce economic adjustment policies and intervene in the production process.

In the history of bourgeois economics, Keynes was not the first person to put forward the idea that the State must intervene in the economy.

During the 15th - 17th centuries, mercantilist economists also advocated that the State must intervene in the economy. However, due to different levels of economic development, the scope and methods of implementation were different. During the mercantilist period, capitalism was in the primitive accumulation stage, still weak, and needed support and a "midwife" to give birth. Therefore, the mercantilist school advocated that the State must intervene in foreign trade activities to implement a protective tariff policy, in order to help the national economy develop. In the 1930s, the issue of intervention by the bourgeois State in the economy was raised in completely different conditions. At this time, capitalism had developed so strongly that it reached the point of overproduction and "crisis". Therefore, it required the bourgeois State to have a new method of intervening in the entire process of capitalist reproduction. People considered J.M. Keynes as a

The author of State monopoly capitalism, not only because he proved the necessity of intervention of the bourgeois State in the economy, but also because he pointed out the main tool for this intervention. That is the macroeconomic tool. He proposed a macroeconomic model with three types of quantities.

One is  the starting quantities. They are considered to be unchanged, or change very slowly, such as material resources for production, labor force, technical level, professional level of workers...

Second,  independent variables, such as "propensity to consume", "propensity to save" "propensity to invest".

Third,  the dependent variable quantities reflect the state of the capitalist economy such as national production and national income. They change under the influence of the independent variable quantities.

There is a relationship between the independent variable and the dependent variable. If Q is the current output value, R is income, C is consumption, I is investment, S is saving then:

Q = C + I

R = C + S

Since production equals income (this is derived from A. Smith's "dogma": value equals total income), I = S, which means investment equals savings. In modern economic theory, investment and savings are two quantities of special interest. If all savings are invested, it means that all national income is used for consumption. Without savings, there will be no surplus products, no economic crisis. On the contrary, if savings are large, a part of income is not used for consumption but goes into savings. In that case, there will be a part

Part of the products produced cannot realize their value, and a crisis of overproduction occurs. Thus, the crisis of overproduction is due to "inadequate consumption".

In fact, in history, JMKeynes was not the first person to explain the cause of the overproduction crisis as being due to inadequate consumption. This theory was analyzed by K.Mark in the book "Capital". Before that, RT Malthus (1766 - 1834), a bourgeois economist and S. Sismondi (1773 - 1842), a petty bourgeois economist, discovered it. The novelty of JM Keynes is that he combined the "limit" theory of the new classical school with the theory of inadequate consumption to analyze the cause of the crisis. He believed that in the economy, along with the increase in production, income increases and therefore consumption also increases. But consumption increases more slowly than income because there is a tendency towards "limited consumption". According to this tendency, from the increased income, less is spent on consumption and more is spent on savings. According to him, this is the basic psychological law of humans. In developed societies, when people have high income and consumption levels, in less developed societies. Due to this law, consumer demand and "effective demand" decrease. Its consequence, as is known, is the crisis of overproduction.

Table 1: Income distribution for consumption and savings

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S

102

93

80

60

60

140

Figure 1: Income, consumption and savings

To overcome the above situation, Keynes pointed out that the State must intervene in the economy, and the main measures are: The State must stimulate demand, maintain investment demand, and open up large investment projects. From there, according to the "multiplier principle", it stimulates social consumption, effectively increasing demand. The State

The country uses finance, credit, and money circulation as the main tools to regulate the economy and fight the cycle. Through that, it strengthens the confidence and optimism of businessmen in investments, and improves the "limited" efficiency of capital. At the same time, it ensures compensation for the deficit of the State budget due to increased costs to stimulate investment by printing more paper money, implementing "moderate inflation"; building a tax system and State bonds to regulate a part of income for savings, stimulating businessmen to be active. Keynes advocates encouraging the expansion of all forms of investment to increase demand and employment, including investment in the production of weapons of war; encouraging the increase of all personal consumption of workers and capitalists.

In short, the central idea of ​​the economic adjustment theory proposed by JM Keynes is that the State must have measures to increase "effective demand" to stimulate production and personal consumption, stimulate capital investment, thereby ensuring employment, increasing income, fighting crisis and unemployment.

Keynes's theory of macroeconomic adjustment was highly welcomed by bourgeois economists representing all trends in developed capitalist countries and used as the basis for the State's economic adjustment strategy. In the Federal Republic of Germany, it was used as the ideological basis for the fascist economic adjustment model. In France, it was used as the basis for the theory of "command unit" and planning. Especially in the United States, it was most widely used. American economists have added many new things to Keynes' theory.

First , they put forward the "stagnation" theory. According to this theory, the cause of economic crisis is not only due to insufficient consumption but also due to external forces that weaken the economy. Specifically, due to slow population growth, no more free land, slow technical progress.

Second,  the Keynesians in the US advocated the use of state means such as large state orders, the system of