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

buy to "further fuel the private economy". To have money to do these things, it is necessary to increase state spending. In turn, to increase this spending, the state needs to increase taxes on the population, increase state debt, and implement moderate inflation.

Third, American economists consider the state budget as the main tool to regulate the American economy. They call it the "internal stabilizing tool" of the economy. It includes: income tax, social insurance, unemployment benefits. They see that it is necessary to use this "tool" depending on the economic development situation. The amount of tax increases during prosperous times and decreases during crisis. Social insurance and unemployment benefits, on the contrary, increase during crisis and decrease during prosperous times.

Fourth, in addition to internal stabilization tools are "harmonizing measures". This measure aims to regulate private capital investment and flexibly use state expenses. In prosperous times, state expenses are limited. In times of crisis, state expenses need to be increased to compensate for the decrease in private investment expenses. The increase in state expenses during this period does not stop even though the budget has a large deficit.

Fifth , Keynesians in the US also added another principle to Keynes' multiplier principle, "acceleration". According to them, the close combination of these two principles can proactively create "recession" or "expansion" of the bottom or the top of the business cycle, thereby proactively adjusting the economy and counter-cyclical.

- A. Haxen added to the explanation of the cause of the economic crisis by "stagnation". According to this theory, the economic crisis is caused by the weakening of economic development drivers, which are affected by external factors. For example, the population is growing slowly, there are no more "free" lands.

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due to", slow technical progress. Later, American economists also added to the theory of external factors leading to economic crises, such as wars, revolutions, gold discoveries, and elections. From there, they came up with the theory of political business cycles. According to this theory, after elections, politicians spend one to two years imposing austerity policies on the economy, raising unemployment, and increasing the number of idle factories to reduce inflationary pressures. Then, about a year before the election day, they find measures to stimulate economic growth, such as reducing taxes, increasing wages, and convincing the Federal Reserve to keep interest rates low. Therefore, when people go to the ballot box, they only see prosperity, not economic recession.

Sixth, American economists consider war spending as the best means to stabilize the market situation, and war economy is a special type of economy to escape from crisis and unemployment. Thanks to the production of war weapons, monopoly capital gains high profits, stimulates production expansion, stabilizes the market, and prolongs the time of crisis.

JM Keynes and his followers in developed capitalist countries hoped that the State, through the use of macroeconomic regulation tools, would combat crisis and unemployment, creating stability for the economic development process. However, major shocks in the capitalist economy still occurred. Moreover, adding to the crisis and unemployment was increasingly severe inflation. In that context, new theories were required.

Obviously, the development requirements of highly socialized production require the bourgeois state to intervene in the economy. JM Keynes has put forward a theory to meet this requirement. However, the biggest shortcoming in his theory is that he has not fully evaluated the role of the market mechanism, the freedom of business activities according to the supply and demand of commodity prices. As classical economists

The New Dictionary notes that the Keynesian school has "aimed its heavy artillery at market problems" (Samuelson T2, p.424). From there, an urgent requirement for bourgeois economists is to come up with a theory that combines the power of the State with the power of the market mechanism to regulate the economy. One of the modern bourgeois theories that develops in this direction is neoliberalism.

Basically, neoliberalism aims to restore the ideas of liberalism in the new era. Its core idea is to use the market mechanism with a certain level of State intervention. According to them, economic problems need to be solved mainly through the market economic system, State intervention should be retained to a certain extent. They put forward the slogan: "more market competition, less State intervention". Neoliberalism develops in many countries with different names: neoconservatism in the US includes modern monetarism, supply-side school, rational forecasting school, social market economy in the Federal Republic of Germany, new restrictiveism in Sweden, neoliberal commandism in France...

Monetarism was formed in the 1950s. The leader of this school is a famous American economist: Milton Friedman. The starting point of monetarism is the view on the quantity of money and its increasing role in economic activities. They replaced the principle "Money is important" with the principle "Only money is important". With such arguments, it can be seen that modern monetarism reproduces the monetary views of mercantilism in the 15th century -

XVII. In the period of primitive accumulation capitalism for the birth of large-scale production, currency has an extremely important meaning. Economists believe that currency is the only asset that reflects the wealth of a country. The more a country has, the more it will be able to produce.

Money makes you richer. Wealth accumulated in the form of money is eternal wealth. However, modern monetarism is different from the primitive monetarism of mercantilism. If primitive monetarism did not understand the nature of money and its laws of motion, modern monetarism has known how to combine the understanding of mercantilism, the classical school, the neoclassical school, the Marx school and the Keynes school to put forward its theory. The central point of view of modern monetarism is the hypothesis of the internal stability of the capitalist economy, under the free influence of the market, in which the economic role of the State in the field of credit and currency is only at a minimum level.

The view of modern monetarism denies Keynes's principle of state intervention through tax and monetary policies. According to Keynes, financial policy (tax and government spending) affects macroeconomic variables. On the contrary, monetarism believes that financial policy is only related to the distribution of national income for national defense or public consumption. Macroeconomic variables such as national income, employment, and prices are decisively influenced by the money supply. If the symbol: M is the money supply. V is the velocity of money circulation in the year, it is usually stable, Q is the volume of goods, P is the average price of goods and services, then:

MV = PQ

Here, because V is fixed, Q does not depend or depends very little on M, only P depends on the money supply level, so when M changes, P and PQ change.

According to M. Friedman, the demand for money is highly stable. Because it depends on the economic indicators, first of all national income. On the contrary,

On the other hand, the money supply is unstable and depends on the subjective decisions of the banking system. If the bank issues a quantity of money that is higher or lower than the demand for money, it will lead to inflation or crisis. From there, he made practical suggestions about the money cycle and national income. According to him, in a crisis period, the money supply should increase. In a prosperous period, the money supply should decrease. However, in general, the money supply should be increased at a stable rate of 3% - 4%. He believes that because money increases stably, national income increases stably. That prevents unstable phenomena in the economy, stabilizes prices and ensures the desired growth rate.

The difference between monetarism and Keynesianism is that monetarism believes that the intractable disease of capitalism is inflation, not unemployment. They believe that unemployment is just a normal phenomenon, nothing to worry about. Moreover, they criticize the use of unemployment benefits because they believe that doing so will destroy the positive nature of free competition. They propose a natural unemployment rate that society can accept. Inflation, according to them, is the most dangerous disease. The unstable nature of inflation as a general destabilizing factor affects prices and creates unemployment. Therefore, there must be measures to fight inflation. Here, they believe that the State should use laws to control the problem of inflation.

In general, modern monetarist economists support the traditional view of liberalism. They support private property, support free enterprise, free market, ensuring initiative and responsibility for business owners. They believe that the capitalist economy is always in a state of dynamic equilibrium. It is a self-regulating system that operates according to its inherent economic laws. From there, they believe that we must rely on the market as much as possible, and the State should only intervene in the economy to a certain extent.

The other direction of neoconservatism in the US is supply-side. The name of this school only shows that they want to oppose Keynes's demand-side theory. If the monetarism theory appeared due to the urgent need to fight severe inflation, the supply-side theory originated from another objective factor. The reason for its appearance was first of all a reflection of the process of finding a way to solve the problem of growth rhythm and stagnation of labor productivity. Representatives of the supply-side school were politicians, lawyers, journalists, economists, outside of research institutes. They criticized the shortcomings of the tax system and the Keynesian demand-side adjustment policy. Their important thesis was: Production volume is the result of costs, and these costs bring economic stimuli. Therefore, the main task of the State is to build economic conditions for these stimuli to appear. When there is economic stimulus, it will increase costs and thus increase production and increase supply. In turn, new supply will create new demand. Thus, the economy will reach an ideal state, where supply will create demand itself, and the crisis of overproduction is eliminated.

Supply-siders argue that subjective incentives seem to determine the behavior of entrepreneurs and private firms. The only way to solve the problems of a modern capitalist economy is to remove the constraints that limit the initiative of entrepreneurs. Instead of Keynesian demand adjustment, which leads to increased budget deficits and increased inflation, supply-siders advocate limiting government expenditure, primarily by reducing taxes.

Supply-siders reject Keynes's view of saving as the source of overproduction, the factor that reduces employment and the scale of economic activity, as well as Keynes's hypothesis of stimulating demand. According to supply-siders, the problem is not stimulating demand but

in increasing productivity. The way to increase production is to stimulate labor, investment, and savings. Any faster rate of growth requires savings. Only the portion of national income devoted to savings can ensure investment and cover budget deficits.

Supply-siders criticize Keynes's tax policy. They argue that high tax rates will reduce the level and extent of saving, while increased income tax will increase the propensity of workers to consume their wages, thereby reducing the saving share of the working class. According to them, for each individual, saving is future income. The more current income is saved, the greater the future income. Keynes's high tax measures will reduce saving, thus investment, and ultimately reduce future income.

From there, economists also advocate tax reduction. According to them, tax reduction will positively stimulate human activities, increase products, increase profits, thereby not only not reducing, but also increasing budget revenue and expenditure.

The idea of strengthening the market mechanism and reducing State intervention was developed in the Federal Republic of Germany in the "social market economy" theory of the Franz Josef school led by Eucks (1891 - 1950). This school considers the purpose of the social market economy to be three freedoms: freedom of the market to form prices and stabilize monetary circulation, freedom of competition, and freedom from monopoly. The core idea of this viewpoint is to protect the inviolable right of private ownership.

Economists of the "social market economy" school believe that the capitalist economy must be developed according to the principle of free competition, without the intervention of monopoly. They consider free competition as the basic factor of the social market economy. Free competition is the most perfect form of

Market relations ensure self-regulating economic development. They talk a lot about "individual freedom", "freedom of trade", "free market economy", "economic freedom", "free enterprise", "organized free society". They consider monopoly as a factor destroying competition, opposed to the nature of private ownership. Here, they understand monopoly not as monopoly unions, but as state ownership and management of the economy according to centralized planning.

The new liberals in the Federal Republic of Germany considered the main card of the "social market economy" to be the business owners. They considered the business owners to be a factor of production. The function of the business owner is to manage and coordinate other factors of production. Therefore, the business owner also brings profit. From there, they added to Say's (1767 - 1832) theory of three factors of production, the fourth factor being the business owner. On that basis, they promoted the principle of economic freedom and the responsibility of the business owner to protect the interests of the business owner.

Economists of the Federal Republic of Germany support the market mechanism, and at the same time believe that the market economy cannot operate spontaneously. It is not anarchic production, but the State has a certain role to ensure the harmonious and comprehensive development between the freedom regime and social regulations. They believe that the basic function of the government is to create and ensure compliance with the maintenance of freedom and the necessary conditions for economic activities.

Repke and Erhard's theory of organizing the economy in the "football field" style stands out. According to this theory, society is a football field, social classes and strata are players, each person takes a certain position on the field. The State plays the role of referee, controlling the match. Like the referee on the football field, the State does not directly participate in football, but plays the role of ensuring that the match takes place according to the prescribed rules and avoids dangers such as crisis and unemployment.

Nowadays, German economists consider the State as the guardian of capitalism, ensuring the infrastructure for production and life, building economic policies and being a member participating in the market economy to a certain extent.

Although admitting limited State intervention in the market mechanism, the theory of neoliberalism sets out a reality for bourgeois economists that economic adjustment in the conditions of modern capitalism cannot ignore the market mechanism and cannot lack State intervention. Therefore, in recent years, there has been a rapprochement between the basic trends of bourgeois economics in order to find common adjustment solutions. The most prominent is the rapprochement between the neoclassical and the neo-Keynesian schools, forming the "mixed economy" perspective of the modern mainstream school to coordinate between private business and the State.

The germ of the "mixed economy" perspective dates back to the late 1930s. After the war, it was further developed by two American economists, Avin Haxen and John Maurice Clark. Recently, it was presented in the "mixed economy" theory of P. Samuelson. If classical and neoclassical economists were fascinated with the "Invisible Hand", Keynes and his followers were fascinated with the "Hand of the State", P. Samuelson realized that the adjustment of the modern economy cannot be without the "Invisible Hand" of the market and the "Visible Hand" of the government. According to him, the market system is not an anarchic chaotic system but an economic order. The market economy is a sophisticated mechanism for unconscious coordination between people and businesses through the price system and the market. It is a means of communication to gather the knowledge and actions of millions of different individuals. Without a central brain, it still solves problems that today's largest computers cannot solve. No one designed it. It

It emerges and, like human society, it changes. A well-functioning market mechanism will work wonders to increase economic output. When the market mechanism malfunctions, political crisis occurs.

However, the market mechanism is not free from market failures. The "invisible hand" can sometimes lead the economy astray. Evils such as crisis, inflation, unemployment, inequality in income and asset distribution, natural and environmental destruction are problems that the market mechanism itself cannot solve. To deal with these defects, modern economies with the combination of the market and the "visible hand" of the government will ensure economic development in an efficient, fair and stable manner. Therefore, in "Economics" P. Samuelson wrote: "The market mechanism determines prices and output in many areas, while the government regulates the market through tax programs, spending and regulations. Both the market and the government are essential. Running an economy without government or without the market is like trying to clap with one hand".

1.1.2. The importance of the economic role of the state in a market economy

A question arises that if the free market allows for efficient allocation of resources, why does the State need to intervene in economic activities? Why don't countries implement a completely laissez-fair policy and let private businesses do their business? In response to this question, economists have affirmed that although the State cannot replace the market, it can complete market activities.

History has also shown that successful market economies do not develop spontaneously without government intervention and support.

Government. One reason the invisible hand needs to be protected by government is because markets function well only if property rights are respected. A farmer will not plant rice if he thinks his crop will be stolen, a restaurant will not serve food unless it is assured that customers will pay before leaving. We all rely on the police and courts provided by government to enforce our rights to the things we create.

The market economy has a long history of formation and development. Today, the market economy is not only a popular form of production organization in developed countries, but also gradually spreading to developing countries, having a great influence on the economic and social life of the world in general and of each country in particular.

A market economy can be understood as an economy in which market relations determine the allocation of resources through the price system. In a market economy, individuals are free to make economic decisions. They are not forced to do things that they consider unprofitable. They are free to choose their own jobs, join unions and decide their own employers; free to decide how much of their income to spend on current consumption and on which goods and services; how much to save for the future and allocate existing assets into different investment portfolios. Enterprises are free to choose their business lines, choose their scale, production technology and hire input factors; free to choose the location and method of distributing the products they create... Most of these decisions do not come from the motive of contributing to the general welfare of the whole society but from personal interests . Prices act as a signaling device to link those dispersed decisions and make the whole system work together.

Competition is a fundamental principle of the market economy, it requires

requires businesses to constantly improve efficiency to be able to stand firm in the fierce competition between suppliers to maximize profits. Competition is the driving force that allows resources to be allocated in the most effective way. Weak, loss-making businesses will go bankrupt, resources will be transferred to better-performing businesses. Competition and bankruptcy also limit mistakes in business. Businesses will draw practical lessons from bankruptcies to do better business. Bankruptcy is a necessary screening to eliminate weak businesses, clean and healthy business environment. If accepting competition, businesses of any form of ownership will do business more effectively than in the condition that those businesses have market power.

Like an invisible hand (Adam Smith's famous term), the price system links the actions of individual decision-makers who are seeking only their own self-interest. But while they are selfishly seeking their own self-interest, the invisible hand of the market will lead them to an outcome that is not intended to be socially beneficial even if they consciously intend it to be so. This is why the market system is superior to central planning: it allocates resources efficiently in the sense that it maximizes the welfare of the whole society.

The main features that make a market economy superior to a centrally planned system in allocating resources include:

Automatic and flexible linking

Proponents of market economies argue that compared to centrally planned models, market systems based on decentralized decisions are more flexible, adjust more quickly, and are more adaptable to a constantly changing environment.

When economic conditions change, prices in a market economy can change rapidly and decentralized decision makers can respond quickly to price signals. In contrast, government-planned quotas, allocations and distributions are very difficult to adjust and the result is that surpluses or shortages often arise before the government has time to adjust. A great advantage of the market is that it signals automatically when conditions change. This is in stark contrast to a centrally planned system where the government must anticipate and make adjustments. The government must make adjustments to countless market fluctuations each year and this requires a great deal of effort on the part of the government to anticipate and plan for all of these adjustments and often fails.

Promote progress and growth

Technology, preferences, and resources change over time in every economy. New products and new techniques are invented to respond to changes in consumer demand and to exploit the opportunities created by new technology.

In a market economy, individuals take risks, sacrifice time and money in the pursuit of profit. Sometimes they succeed, but sometimes they fail. New products and processes emerge and are replaced by superior ones. Some of these new products become fashionable, while others fail to impress. The market system works through trial and error to sort out goods and allocate resources to those that are considered superior: goods are produced by those with the lowest costs and sold to those who bid the highest .

This is in contrast to a centrally planned economy, where

Planners must predict where technological advances or high-demand products will appear. Planned growth can work wonders by focusing resources on the chosen path, but it can be too risky if planners predict wrongly and thus allocate resources to activities that are not beneficial to society.

Decentralization of power

An important feature of a market economy is the decentralization of power and people are less oppressed because the operating mechanism is oriented towards personal interests and freedom of decision making. Competition is the most important driving force of development in a market economy. Due to pressure from competitors, businesses must always find ways to improve themselves to be able to produce goods with the highest quality, the lowest price and serve customers best in order to gain profits, to maintain operations and expand their market share.

However, the market economy also has its flaws, just like a medal always has its downside. These flaws can be listed as follows:

First, the crisis and unemployment.

Economic crisis is a state of overproduction, production increases more than consumption but consumption is not enough. Therefore, goods cannot be sold, businesses do not have income to cover production costs to continue the reproduction process. Therefore, businesses must close. That situation makes businesses have no profit, workers have no jobs, unemployment. That increases economic and social conflicts in the economy.

Economic crises occur in cycles. Economists divide the crisis cycle into four stages: crisis, depression, recovery, and prosperity. Crisis is the first stage of the cycle. At this time, goods are not sold.

Okay, the factory closed, workers lost their jobs.

Desolation is the next stage. In this stage, production is stagnant due to mass factory closures, severe unemployment, and excess inventory, causing profits to decline dramatically.

Due to the impact of investment in equipment innovation during the recession period, especially from the State, the country gradually escaped from the recession and entered the recovery period.

The recovery phase is the phase where production is gradually restored, goods are sold, businesses gradually make profits, causing them to expand their businesses. Thanks to that, workers are attracted to work and earn income. The economy gradually accelerates.

Recovery beyond the peak of the previous cycle is called prosperity . During this period, the market expands, goods sell well, bringing high profits to businesses, causing the scale and speed of production to increase rapidly. Workers have more jobs, so wages increase even more.

When production increases too quickly, supply exceeds demand, the economy falls into crisis and begins a new economic cycle.

Nowadays, economists all acknowledge that crisis and unemployment are natural phenomena of the market economy. It cannot be eliminated, but it can be regulated to ensure the stable development of the economy.

Second, the state of polarization and inequality.

No matter how well the market economy works, it still creates inequality. The reason for this situation is that in the production and business process, due to the pursuit of profit and the reduction of the value of goods, some talented and lucky people get rich. Meanwhile, many incompetent and unlucky people lose their capital and go bankrupt. That leads to

The economic role of the State in the socialist-oriented market economy in Vietnam - 2

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