In Response to Monthly Review on China
By Nat Weinstein
The SV report, “Has China Gone Capitalist?” was written by this writer. Both articles follow a similar logic, and generally agree on where the Chinese Communist Party (CCP) has been headed since the time of Deng Xiaoping’s assumption of top leadership of the People’s Republic of China in the late 1970s. That’s when the Stalinist regime began its crash course toward the dismantling of the conquests of its socialist revolution in order to gain entry into the imperialist-controlled World Trade Organization (WTO) and to the world division of labor in 2001.
As we shall see, the events around Tiananmen, which constituted a new level of mass opposition to bureaucratic misrule of the Chinese workers state shocked the Stalinist bureaucracy into launching its crash program to gain access to the world division of labor. And to conceal their real purposes, the Stalinists invented the term “market socialism.”
Where the MR and SV lines on China diverge
However, whereas Monthly Review’s analysis concludes that the CCP has gone all the way toward the restoration of a market-driven capitalist economy, the Socialist Viewpoint article argues that it has not yet crossed over the barrier between what it is and where it is going. And as the saying goes, “there’s many a slip twixt the cup and the lip.”
It is entirely understandable that the authors of the MR report, Martin Hart-Landsburg and Paul Burkett, should rush to the conclusion that whatever was socialistic in the Peoples Republic of China is no more. But while that is a mistake, they are absolutely correct in not giving any credit to the reactionary anti-working-class Stalinist bureaucratic dictatorship for its successful expansion of China’s productive forces. Not when it was paid for by the drastic reduction in the living standards of the one billion workers and farmers.
This is an oversimplification of the very complex social process by which China’s extremely rapid economic expansion was achieved. It is tantamount to giving total credit to the CCP’s counter-revolutionary, pro-capitalist “reforms,” for China’s unparalleled 20-year-long expansion. Rather, as we have argued, it was the uninterrupted domination of the planned, nationalized economy that has permitted this phenomenal economic expansion—proving the superiority of the socialistic planned economy over the profit-driven capitalist economy.
Where Monthly Review goes wrong
The obstacles standing in the way of the consolidation of capitalism in China, I believe, are quite formidable. The most important obstacle to the consolidation of capitalism is the unrelenting fighting spirit of the Chinese masses, who have lost almost everything by the transition to capitalism. The masses are emerging from the initial demoralization caused by the crushing blows dealt workers who organized mass demonstrations in support of the student uprising at TiananmenSquare in May-June 1989.
In recent years, the opposition by workers and farmers to the CCP’s assault on their cradle-to-grave social security system began gathering momentum as the impact of the Stalinist dictatorship’s dismantling of their “iron rice bowl” began hitting them ever harder.
But another major obstacle standing in the CCP’s way, upon which MR and SV appear to agree, is the long-festering global capitalist economic crisis.
It is this unfolding crisis that will be the decisive factor determining the outcome of the transition by the CCP back toward capitalism. And not only in China—but also in all the other rapidly degenerating workers states, with the outstanding exception of Cuba.
There are other countervailing forces at work inside China that stand in the way of the consolidation of capitalism; the most important being the negative impact of increasing productivity in China, as well as in the capitalist world. These forces serve to disrupt social equilibrium in China. But, while market socialism has provided a temporary impulse to the stagnating global economy, it is contributing significantly to the sharpening of the world capitalist economy’s deadly contradictions.
In a world where market forces dominate, growing productivity means that the misery and numbers of the “reserve army of the unemployed” also grows. And that means that the purchasing power of the masses falls as the rich get richer.
Worst of all for the profit system, as the world market shrinks, competition intensifies, the least efficient companies are bankrupted, and their share of the market is taken over by their largest and most efficient competitors.
The stability of the Chinese ruling caste is also eroding by the day—paradoxically, because of the “success” of market socialism. That is, China’s seemingly endless economic expansion since 1980, without suffering any real interruption, has been bought and paid for by what will prove to be a fatal decision—the merciless reduction of the living standards of its laboring masses.
Consequently, the bureaucratic caste is betwixt the devil and the deep blue sea. It fears the mounting threat of rising resistance by workers and farmers on the one side, and the threat of an imperialist takeover of its economy, on the other.
World imperialism is also troubled by Beijing’s lagging compliance with the terms of its treaty with the World Trade Organization. For instance, we reported last month Washington’s complaint that Beijing is not moving fast enough toward the consolidation of a market-driven economy and issued the following implied threat: “Far too many key assets and means of production within the Chinese economy are owned and operated by the state, [and that there were too few] for sale signs on the commanding heights of the Chinese economy….”
But the bureaucracy knows, that in order to maintain the kind of independence they had when the Soviet superpower held world imperialism in check, they must first establish an independent capitalist class capable of standing on its own economic feet in the dog-eat-dog world of global capitalist competition. And they also know that it must be done before the complete dismantling of the remaining elements of its still existing workers state. Otherwise, China will lose control over its economy, without which, there would be nothing standing in the way of a complete takeover by the major imperialist powers.
And given the world relation of forces today, that means becoming a semi-colonial captive of the American empire—like capitalist India and the rest of the world’s semicolonial and neocolonial countries.
The imperialists know that if China’s Stalinists hold off dismantling what’s left of their planned economy—which allows them to limit imperialist penetration long enough to achieve their objectives—it might well be too late for imperialism. That is, Washington fears that if China continues to block a wholesale takeover of its economy by imperialism much longer, it might be too late to save world capitalism from the growing threat of economic collapse.
Besides, if world capitalism sinks into a global depression, the Chinese Stalinists have good reason to believe that as long as they continue to exercise a bureaucratic political dictatorship and maintain control over their nationalized economy, they could coast through such a global crisis relatively unaffected—as long as the planned economy stays in place.
And from there, anything can happen. It cannot be excluded either, that when a new global pre-revolutionary period erupts, it would be logical to expect that workers and peasants in China, and all the other degenerating workers states for that matter, would seize the opportunity to re-expropriate their privatized collectively-owned property—and thereby gain the power to restore all the benefits of their iron rice bowl and more!
In that context, the hardened and otherwise incorrigible Stalinist bureaucracy would be faced with a choice between Scylla and Charybdis, of either going along with the flow and hope workers will forgive them for their past crimes, or far more likely, attempt to crush a vengeful working class inspired by a new fighting spirit sweeping through the world working class to take back all that was stolen from them by Stalinist bureaucrats and capitalists—foreign and domestic.
These, in our view, are the main reasons why the CCP has not yet abolished the last remaining conquests of its socialist revolution.
Why Monthly Review says China is now capitalist
In line with its thesis that China has gone all the way to a market-driven capitalist economy, the authors of the Monthly Review article argue:
“The fact is that in China and throughout the capitalist world, the competitive drive for profit has an inbuilt tendency to eliminate jobs through the mechanization and intensification of labor, and through overproduction and resulting recessions and economic retrenchment.”
To be sure, this is entirely true in the profit-driven capitalist world. But to say in the same breath that the profit system now dominates the Chinese economy as well, is not consistent with all the facts.
Up to now, the predominant evidence is overwhelming that it has been the continued existence of decisive elements of its planned, state-owned and controlled basic industrial and financial infrastructure that has allowed the prolonged and uninterrupted expansion of its economy—despite the growing influence of market forces.
But if we were to say that market forces had become dominant in China 20 years ago (Monthly Review fails to say when the qualitative change had occurred), we would be compelled to also say that capitalism had been restored in China that long ago. Otherwise the logical consistency of the authors’ argument breaks down.
(Such a claim, that China became capitalist in 1980 would be far more difficult to prove. That might explain why the authors’ failed to locate the time period within which the alleged consolidation of capitalism in China occurred.)
Neither does Monthly Review mention, or explain, why both Washington and Wall Street have for more than a year been demanding that Beijing move much more swiftly to cool down its overheating economy or face a “crash landing.” That is, apply some of the classic Keynesian measures to avoid the breakout of a classic crisis of overproduction.
Such measures, by the way, are designed to either make borrowed capital more costly, having the effect of discouraging construction of more efficient, and therefore, more profitable, new plant and equipment, or by devaluing its currency. (In capitalist countries devaluation is usually accomplished simply by printing more paper money.)
By using such indirect methods, capitalists can exert some influence over the economy. But the nature of capitalism is such that in the final analysis the profit-driven economy remains beyond the control of human beings and sooner or later every capitalist boom must end in a bust.
But Beijing has largely ignored the demands of its imperialist advisors—for good reason. Instead of capitalist measures of “control,” China continues to primarily rely on the very effective measures of direct intervention to control its planned economy. That is, they simply ordered the managers of the state-owned industries that had been producing more than was needed, to reduce the rate of production in existing plant and equipment and stop any increase in the productive forces in those sectors producing more than the economy as a whole could absorb.
That’s why, rather than the phrase, planned economy, capitalists prefer the loaded term, “command economy.” It’s as if being commanded by the unconscious forces engendered by the profit system is far preferable to conscious, democratically controlled planning by workers as producers and consumers.
That’s why, rather than raising interest rates to discourage production—which is the only way capitalist governments can interfere with the sacrosanct right of capitalists to conduct their businesses without direct and unchallengeable government interference—the managers of China’s state-owned and controlled banks simply ordered those in charge of the banks to stop lending in those spheres of the economy that were racing ahead of the rest. In that way, resources are consciously shifted specifically from those industries exceeding the plan, to those not meeting their quota.
Thus, a rational correction of mistakes in planning is corrected more swiftly, restoring a more balanced distribution of limited resources before too much damage is done.
In the last analysis, capitalist norms of “managing” the economy can only postpone a crisis of overproduction. In the end, the unconscious laws of the capitalist market compel individual capitalists to either slow down the productive forces or be driven by bankruptcy out of the marketplace.
Much of this line of argumentation in support of its thesis that China remains a workers state was documented in last month’s Socialist Viewpoint article on the class nature of the Chinese state. It was further argued here last month that, so far at least, these characteristic manifestations of the boom-bust nature of all profit-driven economic systems have largely been confined to the privatized sector of the Chinese economy.
Meanwhile, China’s nationalized and planned economy and state-owned financial infrastructure has maintained the equilibrium of the state sector, allowing the economy as a whole to remain relatively unaffected by overproduction in the privatized sector.
The authors of Monthly Review’s China report have prematurely reached the conclusion that capitalism has been consolidated in China. However, it is to their credit that they have focused the main thrust of their analysis on the counter-revolutionary, anti-working class policies of the Chinese Communist Party government.
Monthly Review is also to be commended for having published a carefully documented account of the CCP’s attack on the living and working conditions of China’s workers and farmers. Their “iron rice bowl”—the guaranteed social services and minimum standard of living for all—is considered by the masses in all workers states to be the most treasured conquest of their socialist revolutions. Of all the crimes of Stalinism in its 80-year-long existence, this one cannot be rationalized by pseudo-dialectical double talk, as when they first took the Stalinist road to perdition. It will never be forgiven by the world working class. And sooner or later they will take their revenge on both bosses and bureaucrats.
The MR authors, Hart-Landsburg and Burkett, are also right, to recognize the Chinese Stalinist bureaucracy’s determination to take the capitalist road to its very end.
But by failing to recognize the contradiction between China’s uniquely uninterrupted 20-year long economic expansion after Deng came to power—something that has never occurred in any truly capitalist economy—the authors give undue credit to capitalist market forces, which certainly help explain China’s prolonged expansion. But it does not explain how of all “capitalist” nations in the last 150 years, China is the only country to have maintained an accelerated expansion of its economy for such an extended period. Moreover, it shows no sign of ending in a crash landing in the near future.
As we have previously noted in these pages, the simple fact helping explain this anomaly is that market forces in China—unlike in all other “capitalist” countries—do not govern the value and price of goods exchanged among heavy industries in China’s state-owned sector. The planned economy, along with its control over the state-owned national bank, give the CCP government and state control over the commanding heights of the Chinese economy.
However, while exchange between industries in the state sector is indirectly influenced by prices in the privatized sector of the economy, market forces do not dominate exchange in the state sector. This, in fact, is why the CCP is able to maintain the rapid rate of production in the state sector far longer than is possible in capitalist economies. And the relative stability of the state sector has been instrumental in preventing a classic capitalist crisis of overproduction.
The fluctuating prices of machines, raw materials and other commodities imported for use in the state sector’s heavy industries, however, also affect exchange in the state sector and diminish its stabilizing function. It’s a trade-off: Without importing these more productive machines, this sector of the economy would be unable to function and would more quickly be forced to shut down. And importing such capital goods from capitalist nations increases China’s costs of production.
The impact of genuine free trade between workers and capitalist states
But this has always been true of trade between workers and capitalist states, except that the state monopoly of foreign trade, which is an essential component of all workers’ states, had to be partly sacrificed by the CCP in exchange for access to the world division of labor. That’s the only way imperialism would allow China into the WTO and into the world division of labor.
But it is also a dangerous tradeoff for imperialism; one that it dared not risk when the Soviet superpower remained intact.
That is, the terms of the World Trade Organization Treaty signed by China to gain access to the world division of labor forced the Stalinist regime to pledge that the remaining conquests of its socialist revolution—essentially the remnants of its planned economy and monopoly of foreign trade—will be substantially dismantled by 2005.
Besides, even healthy workers’ states, such as Cuba, are compelled to allow a limited penetration of capitalist investment into their economies—but nothing comparable to the concessions made by the Stalinized workers states with the exception of North Korea, at least so far. In the early 1920s, for instance, there was a minor exception to imperialism’s modus operandi. That occurred when Henry Ford accepted an invitation by the Soviet government to build a factory to manufacture tractors in the Soviet Union.
By 1926 there were 25,000 Ford tractors in use on Soviet cooperative and collective farms. They were a pure plus for the Soviet economy. What made it so was that, unlike in China and the rest of the Stalinized states, where privatized companies, foreign and domestic, are permitted to have complete control over hiring and firing with the price of wages determined by supply and demand, in the early 1920s, Ford managers were not granted sole control over the wages and working conditions of their Soviet workforce. Their right to hire and fire was sharply restricted by the terms of the trade agreement between the Soviet government and Ford.
Imperialism learned its lesson and dropped any such plans until Yugoslavia’s Communist Party’s central leader, Josip Broz, also known as “Tito,” defied Stalin’s order in 1945 to form a coalition capitalist government with the Yugoslav capitalist class, after German imperialism was driven out of Eastern Europe by the Soviet Red Army. By that time, Tito’s army was in sole control over the country and instead of leaving capitalists in charge, mobilized the workers to take sole political power over government and state.
By 1948, faced with a hostile Stalinist Soviet Union, Tito broke with Stalin. Consequently Stalin froze Yugoslavia out of any trade relations with the Soviet Union and after 1946, trade with its Eastern European client states. U.S.-led world imperialism, anxious to perpetuate the break between the two workers states, let Yugoslavia participate in trade with the capitalist world. To be sure, imperialist influence over the Yugoslav economy was gradually extended, but with far less influence than China has permitted. But that’s another story.
In 1973, a similar rift developed between Mao Zedung and the Stalinized Soviet Union forcing China to try to manage on its own resources with only a trickle of trade with the Western world until the late 1970s.
The Cuban government, as a matter of absolute necessity after the collapse of the Soviet Union, has made similar arrangements with foreign capitalists in its thriving tourist industry and other key sectors of its economy—such as in the mining and processing of the rich deposits of nickel with the help of the far more technologically advanced imperialist nickel companies. And more recently, Cuba formed a partnership with highly sophisticated capitalist oil-industry companies who have the technology to search and extract oil from oil deposits in Cuba’s territorial waters.
But Cuba makes sure that, like the Soviet government in the early 1920s, it gains more than it loses in such agreements on trade with the capitalist world. Thus, only those countries in the capitalist world hard-pressed by economic conditions dare risk the wrath of the American Empire by trading with Cuba.
Consequently, the trade-off has also proved to be a plus for Cuba. But so far U.S. imperialism has not budged from its position that such a trade-off between the U.S. and Cuba would be a risk not worth taking since it would only strengthen Cuba and further prove the superiority of Cuba’s planned economy over the market-driven economies of the neocolonial world. In fact, Cuba’s amazing recovery after being hard hit by the dissolution of the world’s first workers state and loss of trade with the Soviet bloc is in itself a testimonial to the superiority of Cuba’s planned economy.
In fact, all workers states have historically more than welcomed truly free trade with capitalist nations. Free trade presumably grants each side in any proposed exchange between buyer and seller—individuals as well as nations—the right to agree or not to agree to the terms of any proposed exchange of commodities or other commercial transactions.
But imperialism did everything it could to block the development of the Soviet Union, knowing that if the first workers state was allowed to freely participate in world trade it would develop a modern industrial society far more rapidly than it was able to accomplish despite all imperialism could do to prevent it.
Even so, the Soviet Union’s socialistic planned economy, in fact, proved that while the productivity of the entire capitalist world shrunk during the years of the Great Depression, the Soviet economy grew with amazing speed while the capitalist world was locked in a pre-revolutionary crisis. Moreover, these gains were made despite the Stalinist bureaucratic dictatorship and ruthless oppression and super-exploitation of millions of Soviet workers and peasants in its notorious slave labor camps—known as the Gulag Archipelago.
But it all started with Stalin’s usurpation of the leadership of the Soviet Communist Party and state apparatus and adoption of the strategy of building “socialism in one country” and “peaceful coexistence” with world imperialism—a break from the Bolshevik program of world revolution. Stalin made this ultimately fatal decision only months after Lenin died, on January 27, 1924. It served to give world imperialism time to solve its greatest-ever economic crisis by launching the second imperialist World War. War production allowed world capitalism to bring an end to unemployment and thus emerge from its devastating economic crisis.
Just imagine the progress that might have resulted had the revolutionary post-World War I pre-revolutionary crisis in Germany resulted in a socialist Germany instead of the victory of Hitler’s version of fascism? In fact, the Soviet Union, with a Soviet Socialist German Republic at its industrial and political center of gravity, would have equaled and surpassed the productive capacity of the capitalist world in relatively short order. A Soviet Germany in an expanded Union of Soviet Socialist Republics and would have set such an inspiring example of the power of socialism to raise mass living standards to at least match that of American workers would have ultimately swept the entire capitalist world into its world socialist orbit.
But that’s another story. Suffice it to say that had Stalin not abandoned the Soviet Union’s founding progam of world socialist revolution, and had Lenin and Trotsky’s Bolshevik strategy of “uninterrupted,” or “permanent” revolution continued to be the fundamental strategy guiding the policies of the first workers state and the Communist International, the world would be a qualitatively different place today.
What happens when the global crisis crystallizes?
We have seen, so far, that the Chinese Stalinist regime has shown, by its efforts to maintain remaining control over the state sector, that it is fully aware that if it does not, its relative independence from world imperialism will evaporate and it’s hopes for transforming itself from a ruling bureaucratic caste into a ruling capitalist class will also disappear.
However, whether or not China complies with its WTO Treaty obligations, will not be solely decided by the relation ship of forces between China and the most powerful imperialist powers that dominate the WTO and world trade. That is, the state of global capitalist economy in the immediate period ahead, and its impact on the class relation of forces in the entire world, will have the greatest impact on what happens in China and everywhere else.
More specifically, whether or not capitalism is consolidated in China depends as much or more on how long the festering global economic crisis can be kept from the crystallization of its irreconcilable contradictions, than in what happens in China. The relative economic equilibrium of world imperialism has been steadily eroding for more than a half-century by the price it has been paying to avoid a major global crisis of overproduction for that entire period.
That luxury was made possible, by the introduction of Keynesian economics in 1944. This was accomplished by gradually separating the global monetary system from its golden base. That, in turn, permitted a near-exponential expansion of credit. But, of course public and private debt has grown to unmanageable proportions.
As Keynes, the aforementioned British economist, had himself conceded in response to a question by one of his students: “Yes, the debt will eventually grow to unsustainable proportions, but by that time we’ll all be dead.” And according to more than a few serious and knowledgeable bourgeois economists, that time appears to be right around the corner.
When the global capitalist economy takes a nosedive, the relations between class forces on a global scale will shift sharply away from class collaboration and toward class struggle. And along with the steadily rising militancy of the working class, there will be another major shift in the relation of class forces, as happened more than once before, such as during the Great Depression. Next time, we predict, the world working class will win decisively.