First Published: Frontline, Vol. 3, No. 7, September 30, 1985.
Transcription, Editing and Markup: Paul Saba
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Excuse the cliche, but. .. Is the current leadership of the Chinese Communist Party (CPC) getting ready to throw out the socialist baby with the Maoist bath-water?
The irony of the question will surely not be lost on those who can recall that for almost two decades the CPC’s ideological calling-card was the thesis that capitalism had been restored in the Soviet Union. One noteworthy difference with recent history is that while the Maoist accusation against the Soviet Union became a cause celebre only in certain sectors of the left, the possibility of capitalism making a comeback in China today is being closely examined by many far from disinterested observers in the ranks of capital as well.
Thus the Wall Street Journal, which never for a moment took seriously the notion that the Soviet Union was moving toward capitalism, did note (Oct. 25, 1984) with undisguised glee that in light of the sweeping program of economic reforms adopted by the CPC last year, those who charged Deng Xiaoping 19 years ago with being “a capitalist roader” clearly “were on to something.”
The same thought occurred to the British Economist which wondered aloud (June 8, 1985), “How much of the antiquated ideological baggage of Marx, Engels, Lenin, Stalin and Mao can be ditched without turning China from a socialist into a quasi-capitalist country?“ It then went on to note that “many people in the West have begun to speculate that China is indeed preparing to take the capitalist road.”
Right-wing columnist William Safire was even less restrained, declaring, “When it comes to world history, the big event of 1984 was surely the rejection of Marxism and embrace of capitalism by the government of a billion Chinese.” (New York Times, Dec. 10, 1984.)
While such comments certainly include a measure of wishful thinking on the part of those who would like nothing better than to see China reincorporated into the world capitalist system, the sobering fact is that there is a real basis for such speculation. And, as has happened on other occasions historically, the disasters resulting from the ultra-left, super-egalitarian policies of the Cultural Revolution play no small part in making the capitalist path, seem attractive to many in China today.
Nevertheless, the question of China’s actual road-capitalist or socialist is not yet settled. (That fact is, in itself, a telling commentary on the precarious state of Chinese socialism 36 years after the CPC came to power.) In this sense, China’s moment of truth – although it is rapidly approaching – has not yet arrived. Indeed, there are signals pointing in both directions.
Much attention, naturally, has been given to the post-Mao economic reforms adopted by the CPC. The first round of reforms in 1978 concentrated on agriculture and put into place an extensive system of material incentives for individual achievement and private cultivation. The result was both a sharp rise in agricultural output and a qualitative undermining of the commune system.
The next set of measures, adopted last October, focused principally on industry and commerce. The main features of these were to give much greater autonomy to a million state-owned enterprises while at the same time, fostering competition between them. Instead of turning their profits over to the state, companies would retain them, paying only a percentage as a tax. As a result, centralized planning was sharply curtailed and profitability became a gauge for whether or not any particular enterprise could survive. In addition, prices on many products would no longer be fixed by the state but would fluctuate according to market conditions, and state subsidies, which had kept the price of certain consumer items low, began to get phased out.
Although many of these measures are unmistakably capitalist, in and of themselves they do not necessarily signify a policy that will end up in the all-sided restoration of capitalism as a system. A number were long overdue correctives to the ruinous policies of the Cultural Revolution. For instance, no serious Marxist would quarrel with the dismantling of the commune system in agriculture – a process begun in the late ’70s – since Mao’s reckless leap to collectivization had not been accompanied by a qualitative advance in the mechanization of agriculture, without which the collective system could not possibly have worked.
The contrast with the experience of other socialist countries is striking. In the Soviet Union, collectivization in the early ’30s was accompanied by a huge leap in the production of tractors which went from a total of 1,000 to 50,000 annually in less than five years. In Vietnam, on the other hand, where conditions resembled more those of China, the organization of agriculture is still principally at the stage of voluntary cooperatives. Vietnamese party leaders are extremely wary about pushing to a more advanced form of socialist ownership prior to advances in mechanization.
Reforms were also long overdue in China’s industry where Maoist concepts of the primacy of egalitarian social relations at the point of production had wreaked havoc with the Chinese economy. At the same time, the low level of socialization in industry – small-scale, labor-intensive factories dominated – made serious centralized planning virtually impossible. Under such circumstances, steps toward greater autonomy at the enterprise level and the institution of certain market mechanisms in industry make a lot of sense. And contrary to those Western observers who have characterized Deng’s program as a “rejection of the Soviet model,” the reforms actually resemble in key particulars the New Economic Policy (NEP) instituted by Lenin in the Soviet Union in the early ’20s.
In this sense, it is not the reforms themselves so much as the context and manner in which they have been unfolded which gives rise to the concern over China’s socialist future. Here three points in particular are worth noting.
The first has to do with the goal of the reform program. Lenin saw the NEP in Russia as a temporary retreat toward capitalism in order to establish the material basis for socialism – especially by the development of large-scale industry. Deng’s program is significantly different. Its aim is the all-sided modernization of China, with the road to that goal – capitalism or socialism – to be determined by whichever proves more “efficient.” (Hence Deng’s famous remark that it makes no difference what color a cat is so long as it catches mice.)
One of the problems posed by this approach can be seen in some of the current debates in China. For while the economic reforms have more than proven their worth in agriculture, the results in industry have been mixed.
Overall industrial production has risen, but it seems that in practice, profitability of enterprise has been used not simply as a gauge of economic efficiency but as a criterion for investment of capital. As a result, there has been widespread misallocation of resources and the introduction of typical capitalist anarchy of production into the economy as a whole. At the same time, with enterprises retaining a significant portion of their profits to use as they see fit, corruption has become widespread. Enterprise managers have been able to accumulate slush funds, with which they have bribed government officials charged with overseeing their work and negotiating contracts with them.
Some party leaders have pointed to these problems as a reason for approaching the reform program with greater caution. Others, however, have argued that the reforms don’t go far enough. A recent article in China’s Economic Daily, for instance, argues that decentralization of decision-making will not, by itself, produce the sought-after efficiency of production, and that to be thorough, all enterprises should be turned into joint stock companies in which shares would be owned by both the state and private investors. The share-holders would elect a board of directors who, in turn, would hire management. The managers would be given near-total authority to operate enterprises as they saw fit, the bottom line simply being profitability. The profits, obviously, would be distributed proportionately among share-holders who would then be free to invest their capital as they saw fit.
One of the authors, Wu Jiaxiang, a political economist in the propaganda department of the CPC’s central committee, put it this way in an interview with the Far Eastern Economic Review (Sept. 12): “If a [market] economy is to be achieved, then the present form of ’public ownership of the means of production’ will have to be changed .... If you want a commodity economy, you must have a stock economy .... The way out of the difficulties facing urban economic reforms is to change the ownership system.”
The significance of these comments is not that they reflect current official policy, but that a climate has been created in which what amounts to an open call for the establishment of an all-sided capitalist economy is now seen as a legitimate and practical topic of discussion in policy-making circles.
Second, it is already clear that Deng’s ambitious goal of wholesale modernization is going to require a massive investment of capital. For while agriculture and light industry are growing rapidly, China does not yet have a supporting economic infrastructure on which such growth depends. Major weaknesses exist in the areas of energy, transport and telecommunications. Current plans call for adding between five and six million kilowatts of energy-generating capacity a year by 1990, principally by building eight coal-fired thermal plants and two nuclear power facilities. In addition, a major harbor renovation project is in the works, along with plans to double China’s railroad and aviation capacity.
The question is – where will the money to pay for these and other major projects come from? According to the Wall Street Journal (Sept. 17), China’s economic planners are looking for some $5 to $7 billion in direct foreign investment and somewhere between $23 and $25 billion in foreign loans over the next five years. The overwhelming bulk of these funds will come from capitalist countries.
The really worrisome question, however, is what economic policies China will have to pursue in order to meet these obligations? Will Chinese industry have to become so profit-oriented and export-oriented in order to acquire the hard currency needed that the conception of the socialist development of China’s economy becomes a secondary consideration?
Finally, there is the problem of the ideological climate in which all these changes are taking place. When Lenin introduced the NEP in Russia, the Bolsheviks took great pains to explain to both the cadres and the masses that this acknowledged detour from socialism was limited and temporary – and why it was being done.
In China today, on the other hand, Deng’s overall program is being presented as China’s road to the future, its path to “greatness,” while at the same time Marxist-Leninist theory has been belittled as having little practical significance for China’s problems, The equation – Marxism = dogmatism – has become a virtual article of faith in today’s China.
But it is precisely at a time when concessions toward capitalism are dictated by historical necessity that, the party’s proletarian ideology must be zealously guarded and strengthened. For even the most tested parties are subject to pragmatic tendencies in the heat of solving the incredibly complex tasks of industrial and economic development. But when pragmatism is honored as the essence of materialism – and this certainly seems to be Deng Xiaoping’s world outlook – then it will be very difficult to evaluate policies on the basis of the long-term strategic goal of the communists to build not only a modern society but a socialist society.
Looked at more broadly, however, the most troubling aspect of China’s present course is that Deng has not yet addressed the most fundamental of Mao’s deviations – the narrow nationalist outlook which is at the heart of China’s break with the socialist camp. For whatever political mistakes may have been made by Stalin or Khrushchev in the handling of the Sino-Soviet relationship, there can be little doubt any longer that Mao and most of the leadership of the CPC viewed China’s economic and political integration into a single socialist camp as in and of itself a violation of China’s national sovereignty and, therefore, an unacceptable road to socialist construction. On this point, at least, there is no difference between Mao and Deng Xiaoping. And so long as the CPC continues to be held hostage to that outlook, Chinese socialism will continue to be in peril.
For given China’s enormous economic and demographic problems – lack of a stable economic infrastructure, a tiny industrial base, 800 million people out of a total population of one billion still working in a largely primitive and non-mechanized agricultural sector – any strategy which envisions economic development unfolding outside the framework of the existing system of world socialism runs the grave risk of enmeshing itself inextricably in the world capitalist economy and making its own internal concessions to capitalist relations permanent.
On the more encouraging side of this picture is the fact that some of these very concerns are apparently still capable of being voiced in the very center of the CPC. Thus the most recent leadership shakeup in the party – while clearly a “victory” for Deng Xiaoping’s attempt to put the levers of authority in the hands of his brand of more pragmatic-minded individuals – still left in place some of his more outspoken critics.
Two of these, Chen Yun and Peng Zhen – described in a Wall Street Journal article (Dec. 24, 1984) as “restorationists” who “prefer the economic system that was in place before the Cultural Revolution began in 1966” – were influential in last year’s campaign against “spiritual pollution“ resulting from the unrestrained open-door policy to the West. Not only have both retained their seats in the Politburo, but Chen continues as a member of that body’s Standing Committee – its executive, in effect – while Peng is chairperson of the Standing Committee of the National People’s Congress.
Also significant is the noticeable warming trend toward the Soviet Union (see Frontline, August 5). There have even been signs of a slight reduction of tensions with Vietnam.
These developments can be attributed to two factors: strengthening economic ties with the Soviet Union so that China does not have all its eggs in the Western basket; and a desire to reduce military spending in order to have more capital available for industrial investment. The point is that while the motives behind such moves do not themselves indicate a break with the still prevailing narrow nationalist orientation, reality may be imposing new relationships which in the long run can help resuscitate the dormant spirit of socialist internationalism in the CPC.
Whether or not these turn out to be genuine silver linings capable of dispelling the clouds of a possible capitalist restoration in China remains to be seen.