Macroeconomic reform in China: laying the foundation for a socialist market economy


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Rebalancing the Economy

Hence, if the market leads to capitalist restoration, it is in part that it supplies fresh opportunities for certain continuous —and yet previously amorphous —processes of class formation to differentiate, accelerate, or even break out. That is, the governing elites are now able to employ their monopolized political power for direct economic gains and to convert the state-controlled public assets to their own private capital.


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Marketization does not necessarily bring about fundamental changes in the basic structure and organization of class power, but it unquestionably transforms and displaces its field of application, by multiplying the points and circuits where ruling-class power can be deployed. Such processes of ruling-class development are indeed structurally conditioned, yet they may also exhibit a certain amorphous or uneven character.

This may warrant some additional clarification. The alienation of the state does not necessarily mean that the bureaucracy and bureaucrats have already formed a fully developed ruling class or bourgeois class. We need to keep in mind that class structure and class formation are two different levels of analysis, and a useful distinction can be made between structural positions and developmental potentials, with the latter being structurally conditioned but not fully determined.

Instead, I would argue that our present inquiry will benefit more if we can in some way re-map the main arguments in these debates—which have been hitherto based primarily on a synchronic mode of analysis—along a more historical line and moreover, rework them into a more flexible or extended temporal frame. The point is rather simple: the ruling stratum even with its long-standing monopoly of politico-economic powers may or may not already form a fully developed ruling class or bourgeois class at any given point in time for example, China in However, that does not mean that they will not be capable of evolving into such class positions when objective conditions ripen or become more hospitable, as new institutional mechanisms or ideological resources e.

Some sense of ambiguity or indeterminacy may indeed benefit us. The problem of class formation in post-revolutionary China, with regard to the ruling class in particular, may be messier than what the neat formulations of state-capitalist theories can easily accommodate, at least for some of the stronger versions. Given such a view, I understand I may encounter some serious theoretical difficulties: for example, can there be dominated and exploited classes without a well-developed ruling class? Would it be totally absurd in conceptual terms to talk about a state but not a fully constituted dominant class?

Or, can there be the fulfillment of certain class or class-like functions—e. It should not come as a surprise to us that real history is quite often more complicated than our elegant conceptual scheme may wish. In the long waves of history, class subjects and positions form, re-form, and may even de-form, yet it is highly improbable that all the jigsaw pieces will fall into their proper places magically all at once.

Indeed, what we have witnessed in China during the past decade or so is precisely the blossoming—the phase of acceleration and differentiation —of the continuous and yet uneven process of ruling-class formation. A cadre-capitalist class has been in the construction with astonishingly swift speed, striving to expropriate public assets by any means possible. But denouncing these illicit practices as mere corruption grossly trivializes their political and historical significance.

What is happening in China is nothing short of a societal great transformation—the brutal processes of primitive capital accumulation. Specifically, privatization and capital accumulation have been spearheaded often by a specific class of agents—the bureaucratic power-holders and their networks of well-placed cronies. Such systematic conversion of public assets into private capital constitutes part of the more general process of privatization of political power.

The issue here is not how this might account for the apparent primitiveness of capitalism with Chinese characteristics. A bureaucratically-dominated socialist society cannot be revitalized simply by embellishing or mixing it with the market. A fundamental political transformation is imperative, lest its existing class structure and inequalities inevitably constrain and distort whatever liberalizing effects such measures may bring about, and channel them in a direction that can only further aggravate existing social and political contradictions.

Here it may be instructive to begin with some of the ideas from the Sweezy—Bettelheim exchange from thirty years ago. Suffice it to say that their decade-long discussions revolved around two major issues: first, how to interpret the trend toward bourgeois restoration, and second, the class nature of socialism. Again, I think our present endeavor may be greatly enhanced if we can tap more into the critical insights of past Marxian discussions particularly those within the Monthly Review tradition itself , or else we might risk reinventing the wheel.

Paul Sweezy was a vocal critic of market socialism long before the idea became intellectually fashionable. The most important difference between capitalism and post-revolutionary society is that this overwhelming dominance of capital has been broken and replaced by the direct rule of a new ruling class which derives its power…from the unmediated control of the state and its multiform apparatuses of coercion. Post-revolutionary society contains not only contradictions inherited from millennia of class-riven society, but it produces and reproduces its own contradictions. This revolution provides no final solutions.

It only opens the possibility of moving forward in the direction of eliminating classes. But the existence of this as possibility implies its opposite, the possibility of moving backward toward the re-entrenchment of an exploiting class based not on private property in the means of production but on control of an all-encompassing repressive state apparatus. Whereas Maoist China was more successful in revitalizing socialism and carrying out a cultural revolution, the Soviet Union failed utterly in this task and had to rely on capitalist measures of market discipline and incentives.

He posited too direct—and, as a result too deterministic—a link between class structure and class formation. Sweezy begins with a postulate that appears to be deceptively minimal—that is, its unambiguous recognition of the fundamental fact of class rule. There seems to be some ambiguity or a lack of theorized connection between his class diagnosis and his view of historicity.

Circumventing the issue only after raising it, Sweezy seems to have underestimated the gravity of the problem of ruling-class power, thereby falling short of making use of the full critical implications of his own class analysis. I would contend that the key point here is not only about the evolutionary or self-reform possibilities among such transitional societies—Maoist or post-Mao China can serve as a clear example of how vibrant such self-critical energies can be—but also about their political limits.

What are the possibilities and limits of re-revolutionizing post-revolutionary societies through a process of radical reforms? What is the likelihood that radical changes in pursuit of genuine democratic and egalitarian aims can proceed within the existing framework of class relations?

These are difficult questions, but also very important ones. I submit that Marxists should have the least difficulty acknowledging this key proposition—that under no ordinary circumstances should the ruling classes be expected to abdicate their ruling power and prerogatives, unless they are compelled by extraordinary forces.

Applying this to a post-revolutionary society wherein the bureaucracy monopolizes political and economic power, the question arises: What is the likelihood that internally generated reforms might promote unity between direct producers and the social means of production through democratic self-management? In other words, what likelihood is there that such reforms can be used to implement the central premise of the socialist project? Instead of democratically mobilizing and reorganizing society, a depoliticizing, reformist program is much more likely to emerge as the political necessity of the existing class structure and relation of political forces.

Such a program becomes necessary precisely because the ruling elite will not voluntarily adopt a course of fundamental reforms that would undermine its own power. A passive strategy of gradual and partial adjustments that aims at preserving the ruling-class position is also likely to succeed, due to the fundamental political weakness of the subordinated classes.

It is necessary for the dominant social form to preserve this weakness. And by effective counter-forces we do not mean ideological doctrines or statements of good intentions but organized political struggle. Relying largely on market discipline, profit incentive, and private consumption, a market-based reform program has a discernible political logic: first, it poses much less of a threat to the ruling class; second, it preempts popular upheavals that threaten from below.

This is the line of least resistance, so to speak. As noted earlier, market liberalization gives rise to massive opportunities for the ruling elite to convert the public power they are entrusted with into private economic gains. The creation of such a milieu, I shall add, tends to be the unintended consequence of initial reforms, when this particular abuse of power arises more from individual opportunism.

However, the expansion of the money-power nexus and entrenchment of the bureaucratic-capitalist class have emboldened the ruling elite, enabling them to employ the expedient instrument of state policy to facilitate their ends more efficiently and systematically—i. Because of this, the principal embodiment of neoliberalism lay in the benefits accruing to social groups [formed] through the process of the creation of interest groups within the state structure. Market reforms are in a fundamental way mediated by political-structural factors, and marketization derives its significance from historically existing class relations.

Market expansion is unquestionably driven by the structural logic of capitalist relations of production, yet it also has its distinct political momentum. This is no small leap forward, to say the very least. Up until now I have deliberately avoided the issue of Maoism. The historical complexity of Chinese socialism is more than ever relevant to our present concerns. However, I think that any serious inquiry into the general problem of the possibilities and limits of socialist reforms must examine the Chinese experience, especially the role of Maoism as it culminated in the political practices of the Cultural Revolution.

There is little doubt that late Maoism and the Cultural Revolution are an aberration in the history of world socialism. But let me begin by saying that it would be politically shortsighted if we limited our view of reforms only to the post-Mao era. What is unique about the historical experience of Chinese socialism is precisely its incessant dynamism and energy for self-reformation. Instead of moving down the market path, which would have been much easier insofar as preserving ruling-class positions was concerned, Maoist China took an uncharted course of reform that was far more challenging and could rely on no blueprints whatsoever.

Late Maoism developed a highly dynamic view of the process of post-revolutionary class formation and bourgeois restoration, integrating the reciprocal interactions among ideological, political, and economic levels in a single analytical framework.


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The restorative process begins with the acceptance of bourgeois ideas by a degenerate clique of leaders. The usurped party leadership then sets about the transformation of the class character of state power, dismantling the socialist economy and creating a new dominant, exploiting class.

This, in turn, demands the development of a more thoroughly bourgeois political system so as to consolidate the ruling-class position. It is a long struggle. He hopes workers in China will slowly move back to this path, in which case they should eventually win. It is in part for this reason that those who are still dedicated to the struggle for socialism have found other ways to pass along their consciousness and experience, using cultural forms, and not just political and economic ones, to keep alive the legacy of the revolution and transfer it to new generations.

Class Relations in Chinese Socialism

In a corner of a park that we visited in the middle of a working-class district in Zhengzhou, workers and their family members get together each night to sing the old revolutionary songs. On the weekday evening that we were there, a hundred or more—from older retirees to teenagers and even young children—took part in the very spirited singing, accompanied by a group of musicians, and led by a dynamic conductor.

This same historic spirit pervades the practical struggles in the city as well. After many twists and turns, part of the plant still remains in the hands of the workers, but it is struggling to survive not only in the market economy, but in the face of official attempts to undermine it economically.

The same year as the paper mill seizure, a celebration of the anniversary of the death of Mao began. In this gathering had tens of thousands of workers—with 10, police surrounding them—and there was a big strike and confrontation. Today, workers are prohibited from even going to the small square where the last Mao statue in the city still stands, on either his birth or death dates.

But they go anyway and confront the police. It was there, on September 9, , that a worker activist, Zhang Zhengyao, passed out a leaflet charging the Communist Party and government with deserting the interests of the working classes and taking part in widespread corruption. Both he and the coauthor of the leaflet, Zhang Ruquan, were arrested after police raided their apartments. A petition letter, initiated in the United States, to President Hu Jintao and Prime Minister Wen Jiabao, calling for their release, attracted over two hundred signatures—about one half each from inside and outside China.

This was an unprecedented show of support for leftist workers, especially given the potential risk for those who signed it, uniting Chinese intellectuals and activists with their international peers. Though the government did not respond directly to the letter, Zhang Ruquan was later released from prison, ostensibly for health reasons, which some activists believe was at least partially a result of the pressure generated by the petition and other related solidarity activities, such as the posting of sometimes extensive information and analysis regarding their case on left Web sites.

The Zhengzhou 4 represent the refusal of workers in China to passively accept the new conditions imposed on them by the party and state, the persistence of leftist ideology and activism in their ranks, and the growing support that they are gathering from others throughout the society and even abroad.

But this case also brought out the divisions as well as the renewed strength of the Chinese left. It was mainly the younger leftists who took the lead in signing the Zhengzhou 4 petition letter, using the Internet to circulate it widely, while criticizing those among their elders and mentors who, at least at first, had held back.

For the young generation, solidarity with workers who were taking a public stand on the left took precedence over concern with having the exactly correct line. For the older leftists, past divisions and struggles over ideology and policy often block unity for common action. In their case, it is harder to lay aside historical conflicts in order to face the new conditions of the present.

Market Socialism: Utopian or Historical?

The lines between these three groups, however, are by no means either rigid or mutually exclusive. In , a highly unusual meeting of four different political tendencies—organized by a former Red Guard leader in Zhengzhou who was imprisoned for many years after the reforms began, and is still an activist—was held at Beidaihe, the seaside town where the top leadership gathers each summer to plan strategy.

While they agreed to disagree on whether to oppose all of the reform policies, they were united in criticizing Deng Xiaoping for the extent of the recapitalization that he had introduced. More recently, a forum of very high cadre from several prominent institutes, universities, and agencies met to develop a Marxist analysis of the current situation—with the president of Beijing University introducing the session.

The hope was to turn this into an ongoing gathering. The old party member who was behind the organizing of this meeting explained that it could not have happened without at least some high-level support. Their common ground is a strong sense that the current direction of Chinese society and of official policies is not sustainable. Within the new NGOs, there are some with a strong leftist basis, who are working on such practical issues as providing schools for impoverished rural villages and promoting a more worker- and peasant-run society than mainstream foundations do.

This return of the left reflects the increasing strength of the popular struggle among the working classes, which has made it impossible any longer to avoid addressing the social crisis in China and the threat that it will only deepen without a radical change in current policies. It reopens the possibility, however distant it may seem today, of a renewal of the revolutionary socialism of the Mao era. Whether there was any direct relation between these two documents is unclear. This willingness of veterans of the earlier revolutionary struggles to come out so openly against the current policies of the party and state is a measure of the newer climate that is emerging.

As late as , our discussions with older leftists made clear how restrained they still felt they had to be in the face of the prevailing reform atmosphere. It is not just in theory, therefore, that the past continues to inform the present, and that the actions of one part of the left have an impact on others, but in practice as well. In a few cases, small in number but sometimes quite large in their influence, the socialist forms of organization of the Mao era continue to be implemented today, though necessarily in modified form to meet the new conditions of the market economy.

Thus even now some 1 percent of rural villages, accounting for several thousand overall—the numbers vary depending on who is doing the measuring and just what they consider as criteria—have never fully abandoned the collectivization of the commune era. Even a few that did implement the Deng reforms have moved back again toward collectivized production, becoming a model for others exploring alternatives for the rural economy. It upholds the egalitarian practices of the socialist era as well, such as paying its administrators no more than the wages of a skilled worker.

It also remains devoted to the political goals of Mao, whose photos and sayings, together with images of other revolutionary leaders—including Marx, Engels, Lenin, and Stalin—are prominently displayed throughout the village.

Here multistoried housing complexes, with light and airy apartments that are provided to each member family, are surrounded by spotlessly clean avenues, promenades, and gardens. The village has an attractive school and child care center. Such a setting is virtually unique in China—outside of the new compounds of the urban rich—and clashes sharply with the more typical rural environment found just beyond its walls and gates.

Recently, according to activists in Zhengzhou, including two who accompanied us on a visit to the village, it has faced serious financial difficulties, due largely to overexpansion into new and unfamiliar areas of production.

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But despite such limitations—inevitable in a situation where it is surrounded by a sea of capitalism and must compete in the market economy in order to survive—it serves as a focal point for those who still believe that another road is possible for rural China. Delegations come on a daily basis—sometimes made up of entire busloads of peasants or workers—from all over the country to study how it has continued to practice both collectivized production and distribution.

It has also received the blessing, and thereby the protection, of Henan provincial authorities. The open letter from leftist party veterans to Hu Jintao pointed to Nanjiecun as a model for what is still needed in the rural areas today. But even where the legacy of the Mao era is not so prominent, its experiences and concepts remain the background against which the conditions of the present are constantly being compared and analyzed.

A major development apparent in the summer of was a new movement toward forming agricultural cooperatives, in an effort to ameliorate the isolation and insecurity of family responsibility farms in the face of the global market. These coops are aimed primarily at achieving some economies of scale in the marketplace—through collective buying of fertilizer, for example, and greater leverage in negotiating prices for their crops—as well as offering financial support and security to their members.

Such efforts are a significant move away from the individualistic sink-or-swim policies of the reform period, even if they cannot begin to solve all of the dire aspects of the situation that faces the peasantry as a whole. Though they are not a return to the communes, and represent at most a kind of semi-recollectivization, they continue to draw not only on the experience of earlier coop movements from before the revolution, but on concepts from the Mao era as well, in which members are often well-versed.

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It is not unusual, therefore, to encounter those like the head of a coop that we visited near Siping, in northeastern Jilin province, who gave a very detailed comparative analysis of the rural and urban classes and their situation today, or the young member who delivered a long and in-depth discussion from a socialist standpoint of the situation of the country, not only internally, but in relation to the rest of the world.

The Chinese working classes not only have things to teach urban intellectuals about the real world of work and exploitation, therefore, they are also more experienced in the implementation of socialism in practice. And in many instances they are more fully developed in their understanding and application of the basics of Marxism-Leninism-Mao Zedong Thought, than some of the young, more educated leftists.

At the same time, the rapid polarization of society is moving many within the new middle class, regardless of their specific occupation or position, into conditions that more closely resemble those faced by workers and peasants, leading to a growing basis for unity between them, and helping to create a mass base for a revival of the left.

The capitalist system is devouring its own and rapidly generating ever-wider groups of the alienated. Today, even many Communist Party cadre in former state-owned enterprises end up being kicked out after they have helped to sell them off to private investors. Such newer understandings resulting from changing conditions in their own lives are common. We heard more than one story from those who had initially embraced the Dengist reforms—such as a progressive academic we talked with in Beijing—who are now moving back toward Mao and even reexamining the Cultural Revolution itself.

But such reevaluations have much deeper roots than just some personal experiences. For many, including among the intellectual elite, the various ideological tendencies that have flourished since the beginning of the reform era—from the rationales for marketization and privatization with special Chinese characteristics put forward by state and party propagandists, to Western liberal concepts found mainly in academic and NGO circles—are proving inadequate to explain what is happening in China today.

As a result, the critique of the capitalist road that Mao put forward during the Cultural Revolution once again seems increasingly relevant today, because these ideas, advanced in the last years of his life, continue to offer the kind of thoroughgoing analysis of the current system that gets to the root of its growing contradictions, and point to deeper solutions than just attempts at amelioration.

Many previous taboos among intellectuals are therefore beginning to fall. Even the Cultural Revolution, still largely anathema to most academics and others among the elite—we were told that any hint of a positive attitude toward it could lead to peer isolation and a ruined career—is once again becoming a topic of discussion and reexamination. This is especially true among young leftists who are doing their own historical research, digging up long neglected materials, conducting interviews with those who were active during that period, posting their findings on the Web, and in other ways challenging the official party line on the events of that era.

There are other highly significant signs of this growing revival of the left and of its expanding ties with the working class struggle. In , we visited with students at Qinghua University in Beijing—often referred to as the MIT of China—who were taking part in a small Marxist study group, one of a few that had sprung up recently, especially at the more elite universities. I remarked at the time that to be effective, they would have to find a way to get outside of their campuses and link up with the working classes, something that the Tiananmen student movement of had initially failed to do.

Chinese economic reform

In that struggle, though many workers in Beijing, at least, later joined in—and in turn suffered the brunt of the murderous violence and repression that brought it to an end—the gap between the students and working classes had not been fundamentally bridged. In Changchun in the northeast, for example, where a smaller version of the same movement took place, workers at the vast First Auto plant refused to join the students who walked out of the universities—a bitter experience that had left the latter exposed to very harsh repression and led them to reevaluate their own isolation from the working classes.

In the end, as has happened so often in Chinese history, it was the largely peasant army from the outlying provinces that was brought in to crush the movement in Tiananmen—after the regiments stationed near Beijing had resisted doing so. The lessons of that time have not been lost on the current generation of young student leftists, and the change by the summer of could not have been more dramatic. Today, activist students in significant numbers are leaving the university campuses to make contact with the working classes, to study their conditions, offer them legal and material support, and carry reports of what is happening in the factories and on the farms back to their schools.

One veteran Red Guard from the Cultural Revolution who is still a key leftist organizer in Zhengzhou explained how there has been a big change in the student-worker relationship. Beginning as far back as , students from the Marxist study group at Beijing University, the leading higher education institution in the country, came to visit factories in that city. From to the present, student groups from Qinghua University have come every year. In , as many as eighty students came from yet another major Beijing campus to Zhengzhou. The national authorities are fearful of these growing contacts and are attempting to discourage them.

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In contrast to the free train rides and other encouragements offered to students wanting to move around the country during the Cultural Revolution, the government today tries to stop this flow, even refusing to sell tickets to the student delegations, or denying them the right to get off in Zhengzhou—but they still come.

They go to the factories, and some even lived in them during the earlier stages of the struggle in that city, to try to help stop the plant closures. After this movement started in Zhengzhou, it spread to the northeast, as well as to other parts of the country. It also extends to the rural areas, where students go to the villages to carry out similar activities, bringing materials, setting up contacts, offering legal support, and generally breaking the isolation that many peasant activists feel.

A leftist activist we met with in , who at that time seemed virtually alone in directly investigating working-class conditions and encouraging others to do so, explained that by the students seemed highly self-motivated, no longer needing leadership from those like him. Now, it is they who are taking the initiative.

This movement is both driven and facilitated by the changes in the makeup and conditions of the university student body itself. With a tripling of college enrollments since , larger numbers of students are drawn from working-class families and many of them face ever greater difficulty in financing their education and finding work after graduation. The result is an expanding social basis for empathy and unity among many university students and workers and peasants.

Recent third plenums have run approximately four days. In addition to the official participants, other Chinese officials will play a role in preparing the meeting agenda and reports. In general, the new leadership has often used the third plenum to unveil its policy plans and priorities and to launch political and economic reforms.

The full schedule of discussions has yet to be announced and can vary considerably from plenum to plenum. At the third plenum of the 17th CCP Congress, for example, topics included rural reform and development, financial reform related to agriculture, and the impact of the global financial crisis on China.

Macroeconomic reform in China: laying the foundation for a socialist market economy Macroeconomic reform in China: laying the foundation for a socialist market economy
Macroeconomic reform in China: laying the foundation for a socialist market economy Macroeconomic reform in China: laying the foundation for a socialist market economy
Macroeconomic reform in China: laying the foundation for a socialist market economy Macroeconomic reform in China: laying the foundation for a socialist market economy
Macroeconomic reform in China: laying the foundation for a socialist market economy Macroeconomic reform in China: laying the foundation for a socialist market economy
Macroeconomic reform in China: laying the foundation for a socialist market economy Macroeconomic reform in China: laying the foundation for a socialist market economy
Macroeconomic reform in China: laying the foundation for a socialist market economy Macroeconomic reform in China: laying the foundation for a socialist market economy
Macroeconomic reform in China: laying the foundation for a socialist market economy Macroeconomic reform in China: laying the foundation for a socialist market economy

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