The "Resolution on Major Issues Regarding the Building of a Harmonious Socialist Society," released at the end of the Sixth Plenary Session of the 16th Central Committee of the Communist Party of China was reaffirmed two weeks later in President Hu Jintao's speech commemorating the 70th Anniversary of the People's Liberation Army's legendary Long March.

He likened the Long March to persevering in constructing China's modernization as a market economy that maintains socialism's "core values."

These declarations illustrate how China has joined and may now lead a historic global dialogue on two key questions, whether there is a contradiction between the economics of capitalism and socialism, and on the nature of the "civil society."

On the first question economists engaged in a raging debate throughout the decade preceding WWII and the Cold War, and since forgotten, known as the Lange-Lerner or Lange-Taylor dispute, led by University of Chicago's Marxist economist Oskar Lange who became a post-war finance minister of Poland.

Lange claimed there is no contradiction because the same scientific "general-equilibrium" mechanism of allocating goods according to prices was used by both systems. The only difference, he said, lay in how the prices were set, whether by informed central planners or in a decentralized "discovery" process that, it has since been observed, enables mistakes of multiple decision-makers to cancel each other out.

British mathematician and economist Frank Ramsey already mathematically proved in the 1920s how one and the same solution was achievable as a central "command optimum" or as a "decentralized equilibrium."

Italian socialist Vilfredo Pareto (of the "Lausanne School" of general equilibrium's discoverer, Leon Walras) earlier suggested the two fundamental theorems of general equilibrium, namely that everyone is best off in a competitive market equilibrium, the second one requiring an appropriate starting distribution of wealth for a competitive market to guarantee everyone is best off.

The other question addressed by the Central Committee and President Hu, involving the nature of "civil society," grew out of the French Revolution of two centuries ago and the concern of how private behaviour can be sufficiently socially compatible and how voluntary it can be.

Even such a champion of free-market capitalism as Milton Friedman has affirmed the paradox of how a minimum set of commonly agreed and followed "rules of the road" are required for a market-economy to work, the fundamental idea of a transaction being based on trust and on confidence in the system.

As philosopher-physicist Mario Bunge has said, there is no freedom in a lawless universe.

Accordingly, the focus of socialism in China's market economy is increasingly on developing "spiritual education" and maintaining a "core system of values" that at the same time enables "creativity and enterprise" that themselves are not the product of a specific set of rules, in other words on developing "civic virtue" and pre-empting cynicism.

This is similar in many ways to the public debate on "values" in the United States following decades of moral relativism.

I disagree with the Asian Development Bank's interpretation that the Central Committee's resolution, now reaffirmed in President Hu's speech, signals a shift of emphasis away from economic growth and toward (re)distribution of wealth.

Nevertheless, the residual welfare-state social-democracy of Europe, begun by 19th century German Prince Otto von Bismarck, may be encouraging China to make such a shift.

As I explained in my editorial of March 23rd in the People's Daily after the National People's Congress met, it is a natural development of China's market economy to achieve a second economic miracle by moving production and growth "inward" to thereby urbanizing rural areas (where income is already rising faster than the cities) and away from the coastal cities that increasingly become net consumers.

What government need do is facilitate this already-occurring process, more than initiate it or direct it. While the US, Europe and Japan struggle with how to adjust their systems to efficiently incentivize the provision and use of social services nationally, China has the opportunity to address this issue from the start and to lead.

China's explicit policy goal of a "harmonious society" expressed in the Central Committee's resolution and President Hu's speech is practically universally shared. It is not a rejection of Marxist dialectics based on contradiction and struggle (class conflict) in the revolutionary stage.

Even the early 20th century's Viennese market philosopher-economist, Josef Schumpeter, borrowed revolutionary Marxian dialectics in describing markets as driving a process of progressive "creative destruction" among contending enterprises and ideas.

"Harmonious society" is rather a reflection of the post-revolutionary stage where Marx foresaw even a reduction in the role of the State.

China's market economy is growing from a relatively level playing field starting-point for participants, without a historically entrenched wealth-concentrated class structure (or a caste system like India's), and a generally universally literate, educated and healthy population (especially relative to India).

Even the beacon of market capitalism, The Wall Street Journal, has published editorials by American free-marketers recognizing the huge one-time gains by socialist revolutions in terms of universal education and health, which Pareto's second theorem would suggest can be starting points for great market economies.

The "Chinese characteristics" recognized in the Central Committee's resolution and President Hu's speech, are not an exception to the objectivity and universality of the scientific-method they espouse.

Besides logical consistency, the essence of scientific method is to check theory against objective reality, and find more powerful universal theories and arrangements to explain and accommodate the specific circumstances.

My philosophy professor, Raymond Klibansky, was the first to publish in the West in 1958 an essay signaling China's explicit ideological rupture several years later from the Soviet Union, an essay written by his friend, Beijing University philosopher Feng Youlan.

This essay identified the centrality of Mao Zedong's essays, "On Practice" and "On Contradiction", and was included in a volume distributed for UNESCO by Italian publisher Mario Casalini but overlooked by Western policymakers.

"Chinese" in this case means a tendency to "reality check," as we would call this in today's terminology.

And no one who has studied Max Weber, the German father of scientific sociology a century ago whose last book my professor edited for Weber's widow fails to see in Chinese the "work ethic" that Weber identified as the fundamental driver of a market economy. That work ethic is evidenced in the refusal this summer by university graduates in Beijing to accept any unemployment insurance payment to them!

Robert Blohm is a Canadian and American economist and investment banker currently working in Beijing, who also holds a philosophy degree.

(China Daily 11/04/2006 page4)