In Marxism-Leninism the question of state and economy, plan and market has been often intertwined with the transition period between capitalism (sometimes pre-capitalism) and socialism, and between capitalism and communism. Marx and Engels developed the concept of the transition period and dealt chiefly with its political aspects. They gave comparatively little analysis of the economic tasks of the proletariat after it seized political power.

Lenin, on the other hand, devoted much attention to both political and economic aspects of the transition period, discussing this issue in some detail. From even before the October Revolution until his death, the issue is analyzed in such works as 'The April Theses,' 'The Impending Catastrophe and How to Combat It,' 'The Tasks of the Proletariat in Our Revolution,' and ''Left-Wing' Childishness and the Petty-Bourgeois Mentality.'

He concluded that in a predominantly peasant country, with a multi-sectoral economy and low levels of productive forces and education, there could be no 'leap to socialism' (unless, of course, there was a revolution in a developed capitalist country which could then aid them). Instead there had to be a series of transitional steps with appropriate economic and political tasks for each one. These measures constructed the material-technical and democratic foundations for socialism that had, in other cases, been developed by capitalism in advanced industrial societies. As such, they could include state capitalism, the law of value, money-commodity relations and other market mechanisms. However, there were two political conditions under which this must occur: (1) a workers state to promote a trajectory towards socialism and (2) a worker-peasant alliance to assure that the majority petty-bourgeois population could be won to the socialist goal.

Reflecting on this situation Lenin formulated a series of propositions and practices leading to a socialist market economy in embryonic form, most explicitly exemplified in the New Economic Policy (NEP). For example, state capitalism was realized in the following forms: (1) foreign joint ventures and even foreign ownership of enterprises ('concessions'); (2) cooperatives based on market principles; (3) the use of capitalist merchants, as well as economic administrators and technical specialists trained in capitalist methods of management and organization; (4) the leasing of state-owned enterprises and natural resources to both foreign and domestic capitalists. State owned enterprises, which controlled the 'commanding heights,' were self-sufficient and operated on profit-and-loss principles, supplying themselves out of their own circulating assets. The law of value was recognized in the state economic sphere as an objective category and extended to cover the economy as a whole; market links existed not only between the socialist and non-socialist sectors but within the socialist sector itself.

Economic competition was to be the norm both within and between sectors. State plans were materialized through market, not primarily administrative, mechanisms. If competition was conducted properly the socialist sector would demonstrate its superiority thereby ousting or marginalizing the capitalist sector. Lenin referred numerous times to this process as 'paying our (capitalist) tuition for an undeveloped capitalism,' 'learning to trade like European businessmen,' 'advancing towards socialism...by capitalist management methods' and 'test(ing) through competition between state and capitalist enterprises.'

Among the rural and urban petty-bourgeois majority - against which state capitalism was to counter their spontaneous development into capitalism - individual farms and shops were allowed, but the goal was to have them voluntarily join cooperatives of various types and levels of socialization as pathways of transition to socialism.

This history indicates that the socialist market economy has its roots in the Marxist-Leninist experience, specifically in the early attempts to create socialism in multi-sectoral Soviet Russia. These origins are one of the sources drawn upon for contemporary China, Vietnam, Laos and, most recently, Cuba, as well as for the current concept of the socialist market economy.

It's important to note that the idea of socialist market economy is somewhat different from market socialism, although in practice itís sometimes difficult to distinguish. The socialist market economy presumes a multi-sectoral socioeconomic formation that has a transitional character. The immediate goal is economic and social development, and the long-range goal is achieving entry into the first rung of socialism proper; the means is to use the advantages of all sectors to develop the productive forces, while attempting to minimize their disadvantages.

This leads to a second presumption: that the level of economic, social and political development is inadequate to the task of entering socialism immediately, or after a brief transition period. In other words, the socialist market economy is designed for transition from an early capitalist or even pre-capitalist society, and the focus is to create the prerequisites for socialism that were put in place in the societies of developed industrial capitalism. Chinese and Vietnamese theorists of socialist market economy see underdeveloped forces of production leading to an underdeveloped form of socialism, and as the former become more robust, so does the latter.

These theorists view market socialism, on the other hand, as a mechanism for negotiating all the steps of socialism through to the communist phase of development. Market socialism is not employed to 'get to' socialism, but to ìget throughî socialism. While many similar economic and political tools may be used by both the socialist market economy and market socialism, the types of social formations and their final objectives differ.

So, briefly, what does a contemporary socialist market economy look like? Economically, it is a mixed economy with a public sector of state, cooperative and mass organization-owned enterprises; a private sector of petty bourgeois, domestic capitalist and foreign capitalist owned enterprises; an intermediate state capitalist sector with various combinations of the public-private sectors (e.g., joint private-public stock enterprises). The public sector controls the 'commanding heights' with the state macro-managing the overall economy, mostly through economic but also administrative means. State functions include the accumulation and protection of state assets, ownership of infra-structural and other strategic industries, maintaining sectoral proportions and overall balance, regulating income distribution, coordinating regional economic and social development and providing human services and public commodities, among others. Enterprises within each socioeconomic sector operate on the basis of market regulation. It may be summed up by saying that the state macro-manages the market and the market regulates the enterprises.

Politically, the state is the instrument of working class rule. Hence, one of its main functions is to keep society on the path to socialism and maintain the dominance of the working class. While the state must accommodate the interests of all classes and strata represented by each socioeconomic sector, it must gear those interests to the goal of proletarian socialism. Although the working-class party has its economic base primarily among state enterprises in the public sector - since that sector is the foundation for socialism - it represents workers in every sector. Petty bourgeois, capitalist and other non-working-class people voice their interests in associations, parties and legislative bodies. The task of the working class is to prevent the capitalist class shifting from a class-in-itself to becoming a class-for-itself.

These economic and political aspects raise certain questions that need to be addressed. A few of the crucial ones are:

(1) How does the public sector remain strong enough to be competitive with the capitalist sector in the market?

(2) While state enterprises control the 'commanding heights' do these 'heights' vary in accordance with historical conditions?

(3) How does the state deal with the negative phenomena produced by the market economy?

(4) How does the working class maintain the path towards socialism over several generations of transition?

(5) Does the scope of the state and market alter as the socialist market economy reaches the threshold of socialism proper and what role, if any, does the market play after this plateau has been reached?

Issues of this sort are not only grist for theoretical analysis, but urgent problems facing the concrete test of political practice in the countries currently constructing socialism via a socialist market economy.