China Since 1949: A Survey (1974)

From the October 1974 issue of the Socialist Standard

When the Chinese People's Republic was inaugurated in 1949, Mao Tse-tung was careful to point out that the new society would not be Socialist. His inaugural speech said:

To counter imperialist oppression and raise her backward economy to a higher level, China must utilize all the factors of urban and rural capitalism that are beneficial and not harmful to the national economy and people’s livelihood . . . Our present policy is to regulate capitalism, not to destroy it.

The teaching of 1949 was that the workers and peasants of China still had to endure the development of capitalism — “several decades of hardship” (Mao, 21st September 1949) — before the change to “socialism” could be achieved. In the sophistries of the time China was “semi-feudal”; there were “semi-proletarians”, and the peasants were divided neatly into rich, middle and poor. There was also a “national bourgeoisie”, who were considered revolutionary allies, and a petty bourgeoisie who could be conveniently used as either comrades-in-arms or whipping-boys. The bogeys were the big landowners and the Kuomintang bourgeoisie.

Under “the people’s democratic dictatorship” the Chinese capitalists would develop the means of production together with a widening State sector and eventually the whole would fall into the laps of the workers. In the meantime the “democratic” structure would ensure that though a large section of the economy would remain capitalist, the capitalists would never exercise political power. Because the political institutions were democratically elected it followed naturally that the Chinese Communist Party, representing by definition the great majority of the population, would always be m power. It was similar, in fact, to the Chinese Imperial doctrine of “merchant operation, official supervision”.

The Capitalists

Of course it didn’t work. The idea of regulating capitalism had to be abandoned, largely because of the weakness of Chinese capitalists; the foreign capitalists who mattered — Mattheson & Lang, Butterfield, Russel & Co. — pulled out to Hong Kong after a very short time, leaving a gap which the Chinese had a hard struggle to fill. It was from this time, in the mid-fifties, that Mao and the CCP began to claim that China was socialist (the prefix “semi-” in front of "feudal” and “proletarian” was dropped at the same time). Chinese capitalists were bought out on terms described by Yuan-li Wu in The Economy of Communist China (1965) as follows:

A nominal ‘‘fixed interest” or “dividend” of 1-6 per cent a year, payable quarterly, regardless of the profit or loss of the enterprises in question, was promised to private stockholders for a period of six years. The amount was subsequently revised to a uniform 5 per cent per annum.

These compensation agreements were in fact extended for further periods, and as far as can be ascertained dividends are still being paid. Many capitalists were also offered State agencies on relatively generous terms. However, the smallness of the area in which these owners operated must be borne in mind. It was the confiscation of banking and manufacturing interests of owners identified with the Kuomintang that gave the Communists, at the beginning of their rule, a nucleus of important financial and manufacturing enterprises in addition to already-State-owncd enterprises.

By 1956 it was claimed that the proportion of the “capitalist enterprises” in the gross value of output of industry had declined to 0.1 per cent. However, as with so much else in China, hard facts are not so easily come by. As in Russia, illegal manufacture and trading have been widespread and persistent. Wu says:

In fact, among the “crimes” the Communist authorities have tried to stamp out are the matter of unauthorized invoices and purchase orders, purchase and sale of raw materials on the black market, and production in “underground factories”. These “deviations" became especially prominent in the spring of 1963 and required the institution of official drives to eliminate them along with the “rectification" of various "individualistic trends" contrary to the spirit of planning. The 1963 drives were reminiscent of similar campaigns in 1952. The Soviet tolkachi (pushers) most definitely have their Chinese counterparts.

It is often assumed that Soviet aid was, before the breach between the two countries, highly important to China. Certainly it was the major source of foreign capital, but its volume was quite negligible. In The Journal of Asian Studies, XXI, 1961, F. H. Mah estimated that only 727 million yuan out of 3 billion yuan loaned by Russia to Communist China during the First Five-Year Plan consisted of economic loans — about 1.5 per cent, of the state capital investment; the remainder was military loans and transfers of assets already in China. Wu estimates the total of Soviet loans between 1950 and 1957 at 5.2 billion yuan. (Exchange rate between yuan and $: 1 yuan = $2.5.) Thus, the principal source of capital investment was domestic capital formation.

Party and Bureaucracy

In an article “China’s ‘New Economic Policy’ ” in China Under Mao (1973) Franz Schurmann says: “The bitterness against the Soviet Union runs very deep in China.” Mao Tse-tung and Hoxha of Albania are the only political leaders in the world today still singing the praises of Stalin, yet Mao can have nothing for which to thank Stalin. When after 1917 the European revolution did not materialise for them the Bolsheviks turned their interest to China. From the time when the Chinese Communist Party was formed in 1921, until 1940, it was under the domination of the CPSU. (The name adopted was the Chinese CP, and not the CP of China: this is a unique distinction among national Communist parties, implying a subordinate status.)

In the ’twenties and ’thirties the advice from Russia to the Chinese Communists in their struggle against Chiang Kai-shek was continually disastrous. When the struggle resumed after the war Stalin gave little encouragement, and at the point of the Communists’ victory in 1949 urged a compromise settlement: a divided China was a better prospect for Russia than a united one. John Gittings says in The History of the Twentieth Century (Vol. 6, p. 2483): “the Chinese knew that Stalin’s foreign policy was dictated by national interest rather than by ‘proletarian internationalism’.” After a few years of alliance marked by well-founded mistrust, the rift came over nuclear weapons. The line taken in China, however, was that Stalin’s successors had departed from the principles of Lenin. An Editorial commemorating the 50th anniversary of the CCP in June 1971 said:

Khrushchev, Brezhnev and company are renegades from the proletarian revolution, and present-day social-imperialists and world storm-troopers opposing China, opposing Communism and opposing the people. It is our Patty’s bounden internationalist duty to continue the exposure and criticism of modem revisionism with Soviet revisionism at the centre and carry the struggle through to the end.

(Translated Peking Review, 2nd July 1971)

The historical oppressors of the Chinese people are the Imperial Despot and the bureaucracy which administered the despot’s will; and, by implication, the Confucian philosophy which sanctioned them. Mao’s declared aim is the abolition of bureaucracy. The ideological quarrel with the Soviet Union is that, according to Mao, it is the interests of the bureaucracy which govern the politics of Russia: the Party must be a wholly separate institution if it is to identify with the interests of the people. Yet all Mao’s attempts to curb the bureaucracy have failed. From the Great Leap Forward, through various rectification and education campaigns, to the Cultural Revolution and the anti-Confucius campaign, immediately the pressure has been eased the bureaucracy has re-established itself. The reasons are only too obvious, given the industrial and commercial structure China is building. Schurmann describes it:

Factory administration has been recentralised, with major decisions once again being made at the executive level, rather than on the production floor. Money is stressed over production . . . much of the talk about economising could come from the mouths of good Republicans in the United States. Concern over money also implies an orientation to some kind of professional or technical élite (bankers, executives, etc.) and so it is not surprising that the present turn toward accumulation has gone hand in hand with a return of authority to the country’s professional intellectuals.

The ideal of every regime is to see ideology and organization go hand in hand. When they fail to do so, scapegoats are usually sought; and since the advent of “socialism” in China Mao’s speeches and writings have been about little else than the dangers of subversion from “capitalist-roaders”.

Workers and Peasants

The living conditions of the Chinese peasant and worker are hard by any western standard. By their own standards, it can be said that things have never been otherwise and would be no different under any other government in China. It can be said, further that millions do not now die every year from starvation. Yet, since China has adopted the devices and modes of organization necessary to being a major power in the capitalist world, it is the standards of that world that must be applied.

The primary task for the Communist régime was the accumulation of capital. In Problems of Capital Formation in Underdeveloped Countries (1964) Ragnar Nurkse writes:

External resources, even if they come in the most desirable forms, are not enough. They cannot automatically provide a solution to the problem of capital accumulation in backward areas . . . Greater efficiency in food production is the basic way of releasing human energy for capital construction. The domestic saving potential consists here in an increment of real income, and the task of mobilizing it is to withhold the highest possible proportion of this increment for investment purposes. (Our italics.)

Thus, along with the establishment of “mutual-aid teams” — predecessors of the agricultural communes — in the early years political means were used to curtail consumption. As well as heavy taxation, compulsory saving, and rationing of necessities, "conspicuous consumption” was made a crime. According to Choh-ming Li’s article “Economic Development” in China Under Mao, per capita consumption of food, cloth and housing services declined from 1952 to 1957 and in the following two years “took a deep dive. The severe shortage of staple (rice and wheat) and subsidiary food was nation-wide.” In the rural areas, where 50-70 per cent, of total output was required to be set aside as accumulation, there was considerable discontent. Yuan-li Wu in his book says:

In the course of the programme to establish control over resources for accumulation, a principle of low wages and low farm income was evolved. The system of low wages, according to Communist Chinese authors, is one under which all workers would have enough to eat while improvements in the standard of living would be gradual and would be granted only on the basis of further development in production.

Industrial wage differentials on an eight-point scale were introduced in 1956. It was estimated in 1964 (Charles Hoffman: Work Incentives in Communist China) that the wage rates of the highest grades in Manchurian industry were 2.5 to 3.2 times those of the lowest grades; and in the ’sixties other material incentives — rewards and bonuses — were extended. A social welfare system has been steadily expanded with the familiar range of insurance benefits and including subsidized housing. The role of trade unions is similar to that of other Communist countries: enforcing labour discipline, performing welfare functions, and acting as a department of the government rather than as guardians of the workers’ interests.

All Toe the Line

What is considered one of Mao’s most important theoretical statements is his 1957 speech On the Correct Resolution of Contradictions among the People. It is part of life in China that absolute conformity is demanded; while speaking of the dignity of “socialist” man, Mao encourages every deception for degrading opponents and non-conformists. Though the CCP has not reproduced the slaughtering political purges which took place in Russia in the nineteen-thirties, in another sense a purge goes on all the time in the form of the continual “rectification” campaigns.

The Party in China has probably played a more crucial role than its counterpart did in the early Soviet Union. It aims to be in command in every department of social endeavour. Its legitimacy is its interpretation of Marxist-Leninism, conveyed through “the mass line”. By definition, the correct policy of the CCP must be one which will be acclaimed by its own model worker (assumed to be the overwhelming majority); the mass line is Mao’s attempts to give practical demonstration of this.

The CCP has built an elaborate system of communication. A decision made at the centre is carefully graded as information, directive or instruction; it is elaborated in the newspapers, and suitable correspondents procured to identify the CCP with the mass line. A meeting — the vital part of the system — follows. Pretending the possibility of CCP fallibility, the meetings are market-research exercises at which some notice may be taken of views from the floor. Though local party fractions are allowed latitude in the means they adopt, each exercise is stage-managed to give no choice as to the decision over the mass line. Preparatory open and secret sessions are held, the speakers selected, questions planted and bogeys exploited. In the end, the CCP’s correctness is demonstrated, and opposition becomes the evil intent of recalcitrant workers influenced by bad elements (“poisonous weeds”).

On the other hand, the Chinese rulers have discovered what western ones learned: that they can go too far. During the Great Leap Forward workers toiled to the point of exhaustion and produced shoddy goods in the factories, while the bumper crop of 1958 suffered heavy losses from the tiredness, hunger and resentment of the peasants. The disaffection was not confined to economic factors: it concerned corruption, maltreatment by the militia, the threat of labour camps, and the enforced disintegration of family life in the communes. The mass line has had to be accompanied by reforms.

Socialism or Sam's Image ?

What kind of social system exists and is being developed in China ? They claim it to be Socialism:

Article I. The People’s Republic of China is a socialist state of proletarian dictatorship led by the working class (through the Chinese Communist Party) and based on the alliance of workers and peasants.

(Draft Constitution, 1970-71)

The economic, political and social resemblances to Russia of, say, forty years ago are striking — even to the humourless ponderosity of speeches and writings and the endless sloganizing, and their repetition by parrot-brained supporters abroad.

Not one of the economic characteristics of Socialism is to be seen existing in China. The wages system is not abolished but flourishes. Production in its entirety takes place not for use but for accumulation and profit. So far from withering away or becoming an “administration of things” the State has consolidated itself and taken pride in being a dictatorship — of “the proletariat”, which would not exist if there were Socialism.

However, it is not even a question of theoretical shortcomings. The idea of Socialism is founded on the desire for equality, freedom of choice, and the population to be able to claim the fruits of its labour. Because it is opposed to capitalism, there is an over-riding implication that the consequences and concomitants of capitalism — war, economic crises, the shyster dealing between nations — would be absent. And if by some word-magic the theoretical rules for Socialism could be shown to be complied with but the latter conditions were not fulfilled, all Socialists would say that Socialism wasn’t worth having. What they have in China is not Socialist life.

One argument is that though the Chinese system is admittedly not Socialism, it is not capitalism either, because investment is in the hands of the State and a capitalist class in the traditional sense cannot be seen. The obvious point to be made is that, as in Russia, this makes no difference whatever to the social relationships of production; with the State behaving as the capitalist, the working class is exploited to produce interest and profit just the same. Given favourable historical circumstances, some nations can do all the time what others can do only part of the time. Ragnar Nurkse makes plain that this has nothing to do with “socialist” as against capitalist economies:

The country that affords the most notable instance of forced collective saving is Soviet Russia under the five-year plans since 1928. In this case private investment activity was entirely suppressed . . .   I mention it along with the others only in order to bring out the point that in countries with widely different political ideologies the system of collective saving appears to have arisen from basic economic needs which those countries had in common. It worked of course imperfectly, being man-made; but it worked nevertheless. It became very prominent in the post-war reconstruction effort of Western Europe in the 1940’s, but that is an example that does not come from an underdeveloped area.

Moreover, the State can respond to economic needs by admitting outside investment and private enterprise at times. After 1961 (see China Under Mao, pp 222-228) the right of enterprise management to make autonomous use of the capital furnished by the State, so long as quotas and targets were met, was emphasized. The purpose was to overcome defects in the planning system; it was accompanied by permitting open markets to develop, and one immediate consequence was the growth of advertising. Obviously the State at another time will seek to repress what it has licensed and encouraged — leaving the position that sometimes individual profit-makers can be discerned and sometimes not.

The centralized Soviet-type economy is sometimes thought to have greater stability than “free enterprise” and “mixed” economies. This is not true (the difference is the difficulty of obtaining information). It is now generally accepted that the failure of the Great Leap Forward was “a depression, such as in the capitalist world: overproduction, underconsumption, drying up of savings, unemployment, decline in business morale, disruption of the market, etc.” (Schurmann, ibid.) Nor has the Chinese régime escaped the problem of rising prices, or abstained from inflationary “deficit financing” (increasing the note circulation).

What has been set on its feet in China therefore is capitalism: where the privileged smirk and philosophize, and the peasant and the worker bear the burden. The announcement of the American President's visit there in 1971 said :

The meeting between the leaders of China and the United States is to seek the normalization of relations between the two countries and also to exchange views on questions of concern to the two sides.

It might have been more simply put: Uncle Sam recognizes his own image.

Robert Barltrop