Volume 5, No. 3, March 2023
Editor: Rashed Rahman
In the name of ‘socialist modernisation’, the Chinese Communist Party (CPC) since 1978 imposed markets on the economy by government fiat, forcibly broke up the communes in favour of family contracts on the land they tilled (which eventually led to the private control if not ownership of the land by these families), and embarked on an equally rapid, forcible demolition of socialist forms of collective public welfare under the umbrella of the state-owned enterprises (SOEs) and all other major institutional centres of society, including universities.
However much a market economy was touted as the solution to raising the country’s productive forces, market imperatives quickly proved their autonomous dynamic that was uncontrollable. Each stage of reforms along the road of embracing capitalism generated new contradictions that were attempted to be addressed by further expansion of market power, leading inexorably towards the consolidation of a capitalist political economy. The slogan “Market socialism” proved misleading, since in practice, rather than using capitalism to build socialism, as the reformers had argued, ‘market socialism’ used already existing socialism to build capitalism.
Although Chinese society and the economy continue to have some hangovers from the socialist system, these are incrementally being dismantled in favour of capitalist methods and approaches. While this has created at one pole an elite capitalist class, some of whom are now billionaire members of the CPC, at the other pole there is poverty, inequality (both class and regional) and, as capitalism’s rapacious drive for maximising profits is showing worldwide, ecological destruction. In between is a burgeoning middle class that is now the real backbone of the hybrid system in vogue in China, and who have been persuaded to trade relative material prosperity for political quietude.
The turn from socialism to capitalism ran through three incremental stages. In the first stage (1978-83), lifelong jobs in SOEs were incrementally abolished in favour of contract workers. The emerging private sector, domestic and foreign, saw its workforce increase from 240,000 in the end-1970s to 1.1 million in 1981 and 3.3 million by 1984. By the mid-1980s, SOEs employed 70 percent of all workers, a decline from 78 percent in 1978. In 1979, Deng Xiao Ping announced an “open door” policy towards foreign multi-national corporations (MNCs) as role models for capitalist-oriented market principles. In 1983, the restrictions limiting foreign investment to joint ventures with local enterprises were relaxed to allow wholly owned foreign operations.
The decollectivisation of agriculture was initiated in September 1980, under which the commune-based system was replaced by the household production system. In theory the land remained public property, but in reality it gravitated towards becoming the private property in all but name of the families contracted for its use. By 1983-84, these possessors of contracted land were allowed to hire wage workers and rent out land to tenant farmers. By the end-1980s, such possessors had full rights to rent, sell, or pass on the land to their heirs, setting the seal on the reversal of the revolutionary land reforms brought in under Mao Tse Tung.
The second stage of the reform process (1984-91) saw foreign investors take advantage of low-cost labour, but they did little to build industrial skills or transfer technology. The much trumpeted special economic zones (SEZs) such as Shenzhen opened the door for corruption by diverting 70 percent of their production intended for export to the local market, often illegally in exchange for foreign currencies. Most imports for these SEZs, intended to be utilised as inputs for exportable goods, were resold for illegal profits in interior China.
In March 1987, Zhao Ziyang, the then secretary general of the CPC, put forward a proposal to offer foreign investors new preferential conditions in order to develop an “export-oriented economy”. This policy reorientation caused galloping inflation. After rising at a rate of eight percent over 1985-87, prices jumped by over 18 percent in 1988-89. That trend produced declining real wages and budget deficits (fuelled by the government being forced to raise state wages). With trade and budget deficits, inflation, food shortages (the result of the collapse of the commune system and the consequent stagnation of farm production by the mid-1980s) and labour unrest growing, the government decided in late 1988 to tighten money supply and reduce bank loans and investments. The economy went into a recession in 1989. This is the context for the1989 Tiananmen Square protests and the repression that followed, the resistance to the path taken coming from urban workers and bourgeois democrats (the logical outcome of adopting a bourgeois economic system without any semblance of bourgeois democracy). The chickens of adopting capitalism under communist rule had come home to roost and could only be quelled by tough repressive measures. Stage three of the reform process (1991-present) saw Deng Xiao Ping attempting to embellish and justify his earlier ideological pronouncement that “It does not matter whether a cat is black or white so long as it catches mice” by stating: “As long as it makes money it is good for China.” The money god and pursuit of profit, wealth and material goods had triumphed over the ideals of socialism and communism for a just and equitable society. In pursuit of these money-making goals, communist cadres stripped state assets under their control to set themselves up as capitalists, ensuring in the process the breaking of the ‘iron rice-bowl’ Mao had declared would put China’s past of starvation at a mass level behind. Tiananmen Square and its bourgeois aspirants notwithstanding, these developments have inevitably led to the alienation of the CPC from its working-class base.
To sum up, these three stages of the turn from socialism to capitalism led to the following results. (1) They weakened central planning to create a new, more ‘efficient’ market ‘socialist’ economy, thereby privileging the market over planning. The market’s revenge was the same trajectory of inequality, over- and under-production crises, and the emergence of a privileged class of party and government leaders presiding over an alienated people (cf. the similar experience of the Soviet Union from 1956 to its collapse in 1991). (2) Privileging private over state enterprises, amongst the former being increasingly foreign enterprises and markets over domestic ones. Sliding down this slippery slope, China’s economy today has little to do with socialism.
As a consequence of this change, the transformation in social relations and the realities of the working and living conditions of the majority of working people, unemployment and worsening income equality define today’s China. The people have suffered the loss of social safety nets, i.e. pensions, housing, health care, and increasingly even primary and secondary education.
China is undoubtedly now a major regional and global economic force. It has achieved this through double-digit GDP growth in the years 1985-95, and seven percent even during and after the 1997-98 East Asian (‘Tigers’) crisis. China’s growth was 17.5 percent of world GDP growth in 2002. The trend continues to date.
However, capitalist development has not failed to bring in its train the ‘joys’ of this system. These consist, among other things, uneven development and overproduction crises. Foreign Direct Investment is critically central to China’s emergence as a major export centre, shifting the export mix from basic and intermediate goods to increasingly high-tech exports. Foreign firms’ share of these high-tech exports has risen from 59 percent in 1996 to 74 percent in 1998 and 81 percent in 2000. Again, the trend continues. China owes its rise in considerable regard to its penetration of the US market, whose spillover effect is China’s regional economic dominance. Contrary to the policy of solidarity with revolutionary, national liberation and independence movements the world over in China’s past, today no one is looking to China to fulfil its internationalist solidarity duty. Admittedly, the past litany of movements (particularly in what was then called the Third World) that were the recipients of such support and aid have all but disappeared from the world stage. This defeat/retreat has a long and sorry history. China even in the late stages of Mao’s leadership had begun qualifying its support to movements on the touchstone of whether such movements sided with China or the Soviet Union in their bitter ideological (and sometimes physical, directly or through proxies) struggle that raged from 1963 to 1976.
The aftermath of the 1991 collapse of the Soviet Union has yielded a turn on the Left from socialist revolution to social democracy the world over. The latter implies being a party or movement of Left opposition to the by now dominant capitalist system without any programme of its revolutionary overthrow, striving within the confines of the system and whatever political space it offers for people-oriented reforms. Does this imply the final victory of capitalism over all alternative comers, including Francis Fukuyama’s premature declaration of the ‘end’ of history?
If only. Part of the rehabilitation of Karl Marx and his ideas, even among his enemies and haters, is owed to the re-emergence in the prematurely triumphant global capitalist system of the very same type of contradictions and crises that he had so brilliantly enunciated. History has yet to pronounce its final word on this subject. As for China, it has rediscovered Marx’s scientific wisdom: “The bourgeoisie…has created more massive and more colossal productive forces than have all preceding generations together…what earlier century had even a presentiment that such productive forces slumbered in the lap of social labour?” (The Communist Manifesto). China has benefited from unleashing in capitalist fashion the productive forces slumbering in the lap of social labour. But it would be pertinent to warn it of the rest of Marx’s wisdom that the capitalist system, because of its laws of motion, is perpetually given to recurring crises of overproduction and at the same time has produced its own gravediggers, the proletariat. Perhaps today it is difficult to envisage a ‘pure’ proletarian revolution since class complexity has brought both old and new protagonists onto the barricades. But the logical end of China’s embrace of capitalism leads inexorably to imperialist export of capital (cf. the Belt and Road Initiative of which the China Pakistan Economic Corridor is a part) and at home a political counter-revolution to impose the rule of its new bourgeoisie instead of the CPC. Only that can resolve the contradiction between the material base (capitalist) and the political superstructure (communist rule).
Finally, the lessons to be learnt from the Soviet Union’s collapse and China’s embrace of capitalism regarding the blueprint for socialism after the seizure of power remain to be fully explicated, with all their implications for a movement for socialism in the 21st century.