China's long march to capitalism – Part One

From a Marxist point of view the 1949 Chinese Revolution, in spite of its bureaucratic deformations, was the second most important event in human history after the Russian Revolution. It led to the abolition of landlordism and capitalism and the end of imperialist domination. Now, however, capitalism dominates in China. How did this happen? Here we present Part One of a document approved by this year’s world congress of the International Marxist Tendency which looks at events from the revolution up to the end of the Mao era.

[Note: The original draft of this document was written in April 2006 and was then discussed and voted at the July 2006 World Congress of the IMT]


After the October 1917 Russian Revolution the Chinese revolution in 1949 was the second most important event in history. It led to the abolition of landlordism and capitalism and with it the end of imperialist domination in a huge area of the globe.

However, whereas the Russian revolution led to the setting up of a relatively healthy workers' state established by the working class under the leadership of the Bolshevik party ‑ a revolutionary party with an internationalist outlook ‑ the 1949 Chinese Revolution led to the immediate setting up of a Stalinist deformed workers' state.

The most elemental conditions of workers' democracy were lacking right from the very beginning. There were neither Soviets, nor workers' control, nor real labour unions independent of the State, nor an authentic Marxist leadership. This was because the revolution was carried out under the leadership of the Stalinists at the head of a peasant army and was not based on the working class in the cities. The peasant army is the classical instrument of Bonapartist rule. Mao, basing himself on this peasant army, manoeuvred between the classes in Bonapartist fashion, using the Red Army as a battering ram, first against the landlords and later also against the capitalists.

The victory of the Chinese revolution was possible due to a series of peculiar objective circumstances. The main reason why the Chinese Revolution took the form that it did was first of all the inability of US imperialism to intervene. The second factor was the inability of China to advance under capitalism and under the utterly degenerate bourgeois regime of Chiang Kai Shek. The other factor was the existence of a mighty Stalinist deformed workers' state in Russia, on China's borders.

Mao Zedong and the Chinese Stalinists formed a state in China in the image of Stalinist Russia - a monstrous bureaucratic caricature of a workers' state and therefore the Chinese Revolution of 1949 began where the Russian Revolution ended.

We have to remember that the Chinese revolution abolished capitalism in China in spite of the perspectives of the leadership of the Chinese Communist Party. Mao's original perspective was that of one hundred years of capitalism. He had the Stalinist two-stages theory that stated that in a backward underdeveloped country socialist revolution was not possible and therefore the first stage would be "democratic", i.e. bourgeois. Only after capitalism had developed would the struggle for socialism become possible. This theory was to be disproved by what happened once the Chinese Communists came to power.

In the initial stages Mao formed a "Popular Front" with a series of bourgeois parties. This led some to believe that Mao would "betray" the revolution, as the Communist Party had done in Spain and other countries where the Popular Front was used to check the movement of the working class. There was however a fundamental difference in China in 1949. State power was in the hands of Mao; the "armed bodies of men" were not controlled by the bourgeoisie. The bourgeoisie fled together with Chiang Kai Shek to Taiwan. There was no effective bourgeoisie with which to form a real alliance.

In these conditions the Popular Front became a tool with which to curb the workers in the cities, to stop them going beyond the limits imposed by the Stalinist regime. But because there was no "progressive bourgeoisie" with which they could build a "democratic" capitalist China, that could run the country and the economy effectively, and because real state power was in the hands of the Red Army, they were forced to take over the commanding heights of the economy. This was, in a certain sense, a confirmation of the theory of the Permanent Revolution in a distorted manner.

In spite of the fact that the Chinese revolution did not take the form of a proletarian revolution, the Marxist tendency supported it for it freed the productive forces from the constraints of capitalism and feudalism and laid the basis for a development of the economy, which would not otherwise have been possible. The Marxists did however explain that although the Communist Party and the state bureaucracy would be able to play a relatively progressive role in developing China, these same bureaucratic deformations would mean that the Chinese masses would need to carry out a second, political, revolution in order to advance towards genuine socialism, genuine workers' power.

The growth of the Chinese economy after 1949 was spectacular. It is sufficient to compare economic development in China and India in the period 1949-1979. Both countries started off more or less on the same level, but growth in China was far higher throughout this period. This can only be explained by the fact that China had a centralised, state-owned, planned economy. Although under a regime of genuine workers' democracy far more could have been achieved, the planned economy under Mao was a huge step forward and the growth that it permitted is the base upon which modern China rests today.

However, the bureaucracy had many shortcomings. In particular it had a narrow nationalist outlook which was characteristic of all the Stalinist regimes. Had China and Russia been genuine workers' states they would have come together in a Socialist Federation with the countries of Eastern Europe and developed an international plan of production using in a combined and rational manner the human and material resources of all these countries. Instead ‑ as the Marxists had predicted ‑ the national outlook of both the Chinese and Soviet bureaucracies eventually brought about a conflict.

This led to the Sino-Soviet split in 1960. The Soviet bureaucracy had attempted to bring China within its "sphere of influence". This the Chinese bureaucracy could not tolerate and as Mao had not come to power on the basis of an advancing Russian army (as in most East European countries) he had his own independent base similar to that of Tito. The Marxists in fact pointed out at the time that Stalin would have another Tito on his hands. As the conflict erupted, the Russian Stalinists withdrew all their aid, experts and so on, dealing a serious blow at Chinese development at the time. It was after this that the Chinese bureaucracy embarked on the utterly reactionary road of autarchy, isolating China from the rest of the world economy and thus from the international division of labour.

Mao attempted to disguise what he was really doing by denouncing the "revisionism" of the Soviet bureaucracy, as he needed some ideological and theoretical justification for the split with the Soviet Union. But in essence the Chinese bureaucracy was no different from its Soviet counterpart. It attempted to build its own version of "socialism in one country", something which is impossible to achieve even in a country of continental dimensions.

Thus a backward, isolated China was forced to develop the means of production starting on a very low level and without even the help of the more advanced technique available in Russia at the time. This meant that the development of China was achieved at a huge cost, both in terms of human and material resources. Nonetheless, China, from a backward colonial country, the playground for the imperialists, was transformed into a mighty power.

In spite of its shortcomings, the Chinese bureaucracy managed to achieve what the effete Chinese bourgeoisie had abysmally failed to do, to create genuine national unity and a modern state for the first time in the history of the country. The agrarian revolution was also achieved in one sweep and the nationalisation of the means of production laid the basis for the development of the Chinese economy on an unprecedented scale.

Between 1949 and 1957 average annual growth rate of the Chinese economy was 11%, and in the period from 1957 to 1970, industrial production continued to grow at 9%, far higher than in the capitalist world (in the same period India's growth rate was less than half that of China's.) In 1952 China was still only producing 1000 tractors per year, an indication that agriculture was still very primitive. By 1976 China was producing 190,000 tractors per year.

All this was achieved in spite of the disruption of adventures such as the Great Leap Forward in 1958 and the Cultural Revolution in 1966. The Great leap Forward was responsible for a serious drop in agricultural production, leading to a famine that took the lives of 15 million Chinese and between 1967 and 1968 there was a fall of 15% in industrial production, producing a sharp fall in the living standards of the masses. After these two major disruptions in economic development, the economy recovered thanks to the state plan.

Even in 1974, when the rest of the world was in recession - the first simultaneous world recession since the Second World War, when there was an overall fall in world production of 1% ‑ China grew by 10%. This is comparable to the USSR in the 1930s and reveals the real advantages of a planned, nationalised economy.

The effect of all this changed Chinese society and brought it into the 20th century. Before 1949, the illiteracy rate in China stood at 80%. By 1975, 93% of children were attending school. There was a tremendous development of healthcare, housing, etc. The terrible poverty that existed prior to the revolution was eradicated, with a general improvement in living standards and also a series of important social gains. Life expectancy in 1945 was 40, but by 1970 it had reached 70, close to what it was in the most developed capitalist countries. The position of women also improved tremendously as the example of the abolition of the binding of women's feet and other reforms demonstrates.

Trotsky on the bureaucracy

In spite of the huge successes the bureaucracy was not a historically necessary social layer in the development of the Chinese economy. The plan did not need the bureaucracy to function. On the contrary the plan worked in spite of the bureaucracy. In Trotsky's collection of articles and letters published as In Defence of Marxism in a text written in October 1939, we find the following:

"If the Bonapartist riffraff is a class this means that it is not an abortion but a viable child of history. If its marauding parasitism is ‘exploitation' in the scientific sense of the term, this means that the bureaucracy possesses a historical future as the ruling class indispensable to the given system of economy."

Trotsky explained that on the contrary the bureaucracy had no historical future. It was born out of the degeneration of the Soviet Union under conditions of extreme backwardness and isolation. The Chinese regime was modelled on that of Stalinist Russia and the Chinese bureaucracy played the same role as its Soviet counterpart.

The existence of this bureaucracy meant that, in spite of all the rhetoric, there were social privileges and inequalities within Chinese society. In 1976, for example, the industrial wage of a worker working 48 hours a week was $12 a month. Professionals earned $120 or more. There was a wage differential of 10 to 1.

In the USSR, Lenin had accepted a differential of 4 to 1 - a "bourgeois compromise" as he defined it - as a way of getting the economy moving, but it was seen as a temporary measure, as the Bolsheviks waited for the world revolution to unfold. The Bolsheviks had an internationalist outlook and saw their only real salvation in the world revolution. Their perspective was that once the proletariat of the more advanced countries overthrew capitalism then a harmonious development of the economy would be possible, as the more modern technique in these countries would become available to backward Russia. Unfortunately the revolution was defeated in one country after another and Russia remained even more isolated, thus putting the final seal on the process of bureaucratic degeneration.

The Chinese bureaucracy did not view differentials in the same way as the Bolsheviks had done. Wage differentials after the Chinese revolution were not seen as a temporary "bourgeois" compromise imposed by the isolation of the revolution and the underdeveloped nature of the economy, but as the consolidation of the wealth and privileges of the bureaucracy. Bureaucrats lived well above the conditions of ordinary workers. Implicit in such a situation was the possible restoration of capitalism at some stage.

Insofar as the planned economy guaranteed them their power, income, privileges and prestige, they defended it. But, as Trotsky had pointed out in the Soviet Union, the bureaucracy would not be happy to simply benefit from privileges based on their administrative position in society, they would want to be able to pass these on to their children. For this to become possible property relations would have to change. He explained in Chapter 9 of The Revolution Betrayed:

"Let us assume to take a third variant ‑ that neither a revolutionary nor a counterrevolutionary party seizes power. The bureaucracy continues at the head of the state. Even under these conditions social relations will not jell. We cannot count upon the bureaucracy's peacefully and voluntarily renouncing itself in behalf of socialist equality. If at the present time, notwithstanding the too obvious inconveniences of such an operation, it has considered it possible to introduce ranks and decorations, it must inevitably in future stages seek supports for itself in property relations. One may argue that the big bureaucrat cares little what are the prevailing forms of property, provided only they guarantee him the necessary income. This argument ignores not only the instability of the bureaucrat's own rights, but also the question of his descendants. The new cult of the family has not fallen out of the clouds. Privileges have only half their worth, if they cannot be transmitted to one's children. But the right of testament is inseparable from the right of property. It is not enough to be the director of a trust; it is necessary to be a stockholder. The victory of the bureaucracy in this decisive sphere would mean its conversion into a new possessing class."

And he went on:

"To define the Soviet regime as transitional, or intermediate, means to abandon such finished social categories as capitalism (and therewith "state capitalism") and also socialism. But besides being completely inadequate in itself, such a definition is capable of producing the mistaken idea that from the present Soviet regime only a transition to socialism is possible. In reality a backslide to capitalism is wholly possible. A more complete definition will of necessity be complicated and ponderous. [Our emphasis]

"The Soviet Union is a contradictory society halfway between capitalism and socialism, in which: (a) the productive forces are still far from adequate to give the state property a socialist character; (b) the tendency toward primitive accumulation created by want breaks out through innumerable pores of the planned economy; (c) norms of distribution preserving a bourgeois character lie at the basis of a new differentiation of society; (d) the economic growth, while slowly bettering the situation of the toilers, promotes a swift formation of privileged strata; (e) exploiting the social antagonisms, a bureaucracy has converted itself into an uncontrolled caste alien to socialism; (f) the social revolution, betrayed by the ruling party, still exists in property relations and in the consciousness of the toiling masses; (g) a further development of the accumulating contradictions can as well lead to socialism as back to capitalism; (h) on the road to capitalism the counterrevolution would have to break the resistance of the workers; (i) on the road to socialism the workers would have to overthrow the bureaucracy. In the last analysis, the question will be decided by a struggle of living social forces, both on the national and the world arena. [Our emphasis]

"Doctrinaires will doubtless not be satisfied with this hypothetical definition. They would like categorical formulae: yes-yes, and no- no. Sociological problems would certainly be simpler, if social phenomena had always a finished character. There is nothing more dangerous, however, than to throw out of reality, for the sake of logical completeness, elements which today violate your scheme and tomorrow may wholly overturn it. In our analysis, we have above all avoided doing violence to dynamic social formations which have had no precedent and have no analogies. The scientific task, as well as the political, is not to give a finished definition to an unfinished process, but to follow all its stages, separate its progressive from its reactionary tendencies, expose their mutual relations, foresee possible variants of development, and find in this foresight a basis for action."

As we can see, in Trotsky's perspectives the return to capitalism was a concrete possibility. He pointed out that the nationalised planned economy was not safe in the hands of such a bureaucracy and this implied the threat of capitalist restoration at some stage.

A deformed workers' state is by definition a transitional regime between capitalism and socialism, which will either be overthrown by political revolution or slip backwards to capitalism. Historically it first came into existence on the basis of the degeneration of the Russian Revolution. It is an unnecessary phase in the development of the productive forces. It was not an inevitable phase or necessary social form. Had the Russian revolution spread to the advanced countries in the 1920s, Stalinism would never have come into being.

In spite of their limitations, however, these regimes did develop the means of production to an unheard of extent. In that sense they had a progressive content. This flowed from the state ownership of the means of production and the planned economy. Trotsky analysed this in the Revolution Betrayed and made a prediction: so long as this regime could develop the economy of a backward country, it could achieve some success. But the more sophisticated the economy became, the more the bureaucracy would become a fetter on its development.

As the economy grew the bureaucracy began to consume a greater and greater proportion of wealth. With this came waste, corruption and plunder on a vast scale of the wealth produced by the working class and peasants. More importantly, as the economy developed and became more sophisticated it became evident that the bureaucratic command system of such a regime could not manage every detail of an increasingly complex economy. The bureaucracy from being a relative fetter on the development of the productive forces became an absolute fetter.

Trotsky also laid stress on the question of productivity. As we will see this turned out to be a key element in understanding how and why the Stalinist regimes collapsed in Eastern Europe and the Soviet Union. Trotsky explains in Chapter 1 of The Revolution Betrayed:

"The dynamic coefficients of Soviet industry are unexampled. But they are still far from decisive. The Soviet Union is uplifting itself from a terrible low level, while the capitalist countries are slipping down from a very high one. The correlation of forces at the present moment is determined not by the rate of growth, but by contrasting the entire power of the two camps as expressed in material accumulations, technique, culture and, above all, the productivity of human labour. When we approach the matter from this statistical point of view, the situation changes at once, and to the extreme disadvantage of the Soviet Union."

He added the following significant point:

"But in its essence the question, Who shall prevail-not only as a military, but still more as an economic question-confronts the Soviet Union on a world scale. Military intervention is a danger. The intervention of cheap goods in the baggage trains of a capitalist army would be an incomparably greater one." (Revolution Betrayed, Chapter 9)

Trotsky as early as August 1925 wrote a very farsighted and sharp analysis of the problems facing the young Soviet state, Whither Russia? (later to be known as Towards Capitalism or Socialism?). In this work Trotsky poses the question bluntly, "What is our rate of development when viewed from the standpoint of world economy?" And in answering his own question Trotsky says the following:

"Precisely because of our successes we have gone into the world market, i.e., we have entered the system of the universal division of labor. And at the same time we have remained encircled by capitalism. Under these conditions, the rate of our economic development will determine the strength of our resistance to the economic pressure of world capitalism and to the military-political pressure of world imperialism." (The Challenge of the Left Opposition - 1923-25, Pathfinder, 1975, page 330)

Trotsky laid great emphasis on this question of the rate of growth of the Soviet economy in 1925. He stressed that, "...the rate of advance is precisely the decisive element!" And added:

"It is quite evident that as we become part of the world market, not only our prospects but also our dangers will increase. The source, as of so many other conditions, is here again the dispersed form of our peasant economy, our technological backwardness, and the present immense productive superiority of world capitalism as compared with us... (ibid. page 344)

"The fundamental economic superiority of bourgeois states consists in the fact that capitalism at present still produces cheaper and better goods than socialism. In other words, the productivity of labour in the countries that are still living in accordance with the law of inertia of the old capitalist civilization is for the present still considerably higher than in that country which is beginning to apply socialist methods under conditions of inherited barbarism.

"We are acquainted with the fundamental law of history: the victory ultimately falls to that system which provides human society with the higher economic plane.

"The historical dispute will be decided - and of course not at once - by the comparative coefficients of labour productivity." (ibid. page 345)

What Trotsky says here is of tremendous importance in understanding what was to happen decades later in the former Stalinist countries. Although the planned economy allowed the Soviet Union to make tremendous progress in the development of the means of production, it still lagged far behind the advanced capitalist countries. But so long as the bureaucracy was developing the productive forces a relative stability was guaranteed to the Stalinist regime. Indeed in the 1930s not only were the productive forces being developed, they were developing at a much faster rate than in the capitalist world. This explains the resilience of the Stalinist regime in that period and also why the pro-capitalist tendencies within the bureaucracy could not yet crystallise into a viable force.

Trotsky, however, also explained that at a certain stage in its development the bureaucracy, from being a relative fetter, would become an absolute fetter on the development of the means of production. The rate of growth would slow down and this would reopen the possibility of capitalist restoration. This is what happened in the 1960s and 1970s. Economic growth in the Soviet Union first slowed to a level comparable to that of the capitalist West and then ground to a halt.

Once that point was reached, according to Trotsky, there were two possibilities: either the workers would overthrow the bureaucracy, while preserving the planned economy under democratic workers' control and management of production, or there would a counter-revolutionary return to capitalism.

History has shown that the latter was to be the fate of these regimes. In Russia and Eastern Europe, which had been in crisis since the 1970s, we saw a collapse of the system once it became clear that it could no longer develop the economy. In Russia, the system collapsed quite suddenly and it took several years before the economy finally stabilized and began to develop once more on a capitalist basis.

Chinese bureaucracy draws lessons

In China things have developed somewhat differently. The Chinese bureaucracy observed carefully what was happening in Russia. That wing of the bureaucracy represented by Deng drew lessons from the Russian experience and from their own recent past. China is of continental dimensions with a huge population, but even this immense country could not develop in isolation from the rest of the world economy. "Socialism in one country" had been proved to be a failure. The autarchic regime that the bureaucracy under Mao had attempted build had finally revealed all its limitations

The Deng wing observed Russia and Eastern Europe entering into crisis and the tumultuous events of 1989-1991 in which one after another all these regimes collapsed and the transition to capitalism was ushered in. They saw this once monolithic, all-powerful Russian bureaucracy collapse like a house of cards. In all of the former Stalinist countries of Eastern Europe and the Soviet Union - and especially in the former Soviet Union - the economy was thrown backwards with a huge destruction of the productive forces and the bureaucracy lost control of the process. It took some time before the economy stabilised and began to grow again. In these events the Chinese bureaucracy could see its own possible future. Therefore they drew the conclusion that they could not allow that to happen in China and that some change in policy was needed to avoid a similar collapse in their own country.

In the same period the Tien An Men events revealed that the Chinese bureaucracy could at some point face a similar fate. This, coupled with the collapse of the Soviet Union, had a tremendous impact on the thinking of the Chinese bureaucracy, and pushed them to move from the earlier stage of using market mechanisms to achieve an increase in productivity, while upholding the principle that the state sector should dominate, to an acceleration of the process that was to finally lead to today's position where the private sector dominates.

In China similarly to what had happened in the Soviet Union, as the economy grew under Mao so did the appetite of the bureaucrats and also the lack of coordination between different sectors of the economy was magnified. That explains such phenomena as "The Great Leap Forward" and the "Cultural Revolution". Mao was attempting to push the economy forward with these methods while at the same time trying to curb the excesses of the bureaucracy which were endangering the stability of the system.

The excesses of sections of the bureaucracy can put at risk the interests of the bureaucratic caste as a whole. In this sense this was similar to what Stalin did in the 1930s who dealt blows against elements within the bureaucracy, but always with the aim of preserving the stability of the regime. Stalin even had bureaucrats shot - striking blows against the most corrupt wing in order to save the bureaucracy as a whole. There was an element of this in the Cultural Revolution, when a layer of the Chinese bureaucracy came under attack. Demagogically, Mao attacked the "capitalist roaders" to consolidate his own position while at the same time curbing the more extreme forms of corruption that were undermining the whole system.

In essence the Cultural Revolution was not, as some claimed in the west, a movement of the workers and youth imposing their will on the bureaucrats. Mandel and co., compared the Cultural Revolution to the Paris Commune, thus showing their utter inability to understand what was really happening. They confused a movement unleashed by one wing of the Chinese bureaucracy aimed against another wing, with a genuine uprising of the workers in Paris in 1871. They did not understand that the Cultural Revolution was always controlled from the top, by Mao, the supreme arbiter. As we have already explained, with his methods Mao, far from pushing the economy forward, only achieved huge dislocation and chaos. For three years there was a complete collapse of both agricultural and industrial production, and all the schools and universities were closed. The wing led by Deng Xiaoping was horrified and began drawing conclusions also from these experiences.

We have to understand that a planned economy can only work efficiently if there is the check at all levels of the working class. The plan must be discussed at all levels by the workers. That is why workers' democracy, workers' control and management, are essential elements in the functioning of a plan. The workers, who are also the consumers, have a material interest in making sure that the plan works efficiently at all levels. The bureaucrat is only interested in meeting his quota ‑ regardless of quality or whether this is coordinated with the rest of production - so that he will get his bonuses. Furthermore, a centralised bureaucracy cannot decide on every aspect of production. Terrible distortions and inefficiencies are produced when everything depends on bureaucratic central command. The overall plan must be checked at all levels by the workers. This explains why the "The Great Leap Forward" and the "Cultural Revolution" failed. You cannot fight the bureaucracy with bureaucratic means. Thus these two episodes merely ended up adding to the disruption caused by the bureaucracy.

What happened in the Cultural Revolution is significant in understanding the later development under Deng. The Maoist bureaucracy had leaned on the masses to strike blows against a section of the bureaucracy. In doing so, in Bonapartist manner, they had unleashed forces from below, but there was a risk involved in this. To have allowed the masses to go any further implied the possible loss of control on the part of the bureaucracy. Once they had curbed the excesses of a wing of the bureaucracy, Mao and his followers clamped down on the very movement they had unleashed, and in 1969 reined it back in. Thus, the main slogan, from "The masses are right, what the people say is right" became, "What is right is what is in the mind of Chairman Mao".

By clamping down on the masses, the balance of forces inevitably swung back towards the pro-capitalist wing. Once Mao had curbed the masses, then the balance of forces was determined within the bureaucracy. Mao had good reason to worry about the masses, because there had been different waves of strike action and movements from below in the preceding period, the last of these being in 1966-67 and 1976 when there was an upsurge of workers' organisations to redress their grievances on wages and conditions. What we saw here was the tendency of the working class to go beyond the limits established by the bureaucracy. The point we have to understand is that the Maoist bureaucracy in defending the state plan could not go so far as to give power to the workers. This would have meant the loss of their privileges.

However, they were still faced with the problem of developing the economy. From a genuine Marxist point of view the only solution would have been to introduce genuine workers' democracy, which of course was the last thing the bureaucracy would do. We must not forget that that wing of the bureaucracy that did defend the plan did it to defend their own interests, their own privileges. Trotsky explains the situation very well in In Defence of Marxism. He says, "The bureaucracy is first and foremost concerned with its power, its prestige, its revenues. It defends itself much better than it defends the USSR. It defends itself at the expense of the USSR and at the expense of the world proletariat." That is in essence the nature of the bureaucracy.

A wide layer of the bureaucracy breathed a sigh of relief when the Cultural Revolution was brought to an end - they wanted to return to stability and enjoy their privileges within the system. What is clear is that there was already a wing of the bureaucracy that was discussing the idea of introducing some kind of market stimulus to the economy.

End of the Mao era

Once Mao was dead this "capitalist roader" wing of the Chinese bureaucracy went on the offensive and raised the question of the market, of the world market. In actual fact Deng Xiaoping and the others had a point, i.e. that it was impossible to separate China from the world economy and that it should participate on world markets. That was the original idea. In the absence of workers' democracy, the world market can serve as a rough check on mismanagement and inefficiency.

In the conditions which prevailed in China in the 1970s a kind of NEP would not have been excluded even by a revolutionary Marxist party, as the Bolsheviks had done in the early 1920s. As long as the main levers of the economy remain under state control, under the guidance of the plan, these methods can be used to stimulate and develop the economy in an isolated workers' state.

Lenin considered something similar when he offered the western capitalists concessions in Siberia where there were lots of raw materials, but the economy was underdeveloped. The weak, young workers' state did not have the means to develop Siberia. So Lenin insisted that in such a situation the only way of getting the investment, the technology that was needed to develop the productive forces, was to grant concessions to foreign capital. The idea was that by guaranteeing the capitalists profits, they could develop the region, obtain the new means of production, the technique and so on, and this would be to the benefit of the revolution.

In 1918 in his "Left-wing" Childishness and the Petty-Bourgeois Mentality Lenin points out that, "We, the party of the proletariat, have no other way of acquiring the ability to organise large-scale production on trust lines, as trusts are organised, except by acquiring it from first-class capitalist experts." The following year on February 4, he presented a resolution to the Council of People's Commissars in which he stated that, "The CPC... considers a concession to representatives of foreign capital generally, as a matter of principle, permissible in the interests of developing the country's productive forces..." The difference of course was that on 1918-19 there was no doubt about the nature of the Soviet Union. It was a healthy workers' state - or at least a relatively healthy workers' state - where such concessions would be used to strengthen the workers' state not weaken it.

We have also to remember that it was the delay of the world revolution that forced the Bolsheviks to make these compromises. These were acceptable so long as state power remained in the hands of the working class and this state maintained control of the commanding heights of the economy. The problem however, was that the foreign capitalists, far from reaching economic deals with Soviet Russia in 1921, wanted to crush it. With the Chinese bureaucracy it was another matter. With this privileged caste they could make deals. Even the arch-reactionary Nixon had no problems in coming to agreements with the Chinese bureaucracy.

After Mao's death, the idea of opening up the country to foreign investment gained force among the bureaucracy and Deng Xiaoping personified this idea. What this reflected was the fact that the bulk of the bureaucracy had drawn the conclusion that autarchy had failed, that China could not develop in isolation.

Deng had been general secretary of the party but was then removed from the leadership during the "Cultural Revolution". But by January 1974 he was once again a member of the Politburo. Before being stripped once again of all his positions, Deng was not only Prime Minister, but also vice-president of the party and chief of the Supreme Military Staff, the second man in China after Mao. In spite of his high ranking positions he was denounced as a "monster" and a leader of a counter-revolutionary conspiracy which was following "a capitalist policy." What was significant however is that he was able to keep his Party card. Normally anyone who fell out of favour with the "great leader" would have been expelled, or worse. This didn't happen to Deng because he had big support within the bureaucracy. With hindsight we could even hazard a guess that the majority of the bureaucracy - at least among the upper layers ‑ supported Deng, but could not move because of the position held by Mao.

This widespread support for Deng within the bureaucracy was confirmed after Mao's death. The "Gang of Four", which included Mao's widow, was playing with the idea of a continuation of the "Cultural Revolution". However, the real views of the dominant wing of the bureaucracy were clear. The "Gang of Four" was arrested on October 6, 1976 and never regained positions of power, and Deng emerged as the leader of the party in 1978.

It is in that period that we have the roots of the current situation. The debate inside the Communist Party on opening up the economy to foreign investment started in 1977-78. The Deng wing came up with the term "market socialism" to describe what they were proposing. They argued that the Mao era had left the economy in a mess. This was not quite the truth, for in spite of the upheavals, for about 25 years the economy had been growing quite rapidly.

What is true however is that as the economy became more sophisticated the bureaucratic command system began to show its limitations. Just as in the Soviet Union, there was lack of coordination between the different sectors, investment imbalances between different sectors, with overproduction of certain goods and underproduction of others. There was bungling, corruption, sabotage, waste and chaos on a grand scale. Productivity in industry was declining. There were inflationary tendencies, scarcity of consumer goods and social discontent.

This was starting to have an impact on the needs of the workers and peasants who were becoming restless. All this could have been resolved through the introduction of genuine workers' control and management of the economy, but for that to happen it would have required a political revolution; the bureaucracy would have had to be removed from power. But the bureaucracy was not going to renounce power that easily. Deng's view, and that of the wing of the bureaucracy that he represented, was that in order to continue the task of building the productive forces and improving productivity market stimuli were necessary.

Although they had already overtaken countries like Britain in terms of absolute production, in terms of productivity of labour both China and Russia were a long way behind the capitalist West. In Russia the crisis had already become evident with a significant slowdown in growth. In China the Deng wing of the bureaucracy understood the need to introduce the most advanced techniques into the Chinese economy. This could only be done by opening up China to foreign investment and participating on the world market.

Had state power been in the hands of the workers they could have curbed the tendencies towards capitalist restoration. But state power was in the hands of the bureaucracy, and in these conditions the introduction of capitalist incentives posed the real danger of the total destruction of the planned economy over a period.

We should, however, not have a mechanical approach to this question. It would be easy with the benefit of hindsight to say that ever since Deng came to power in 1978 the bureaucracy had a clear objective of introducing capitalism, but this would be wrong. The bureaucracy moves empirically, depending on the needs of any given moment. Even in Stalinist Russia there were periods of greater openness to market forces and decentralisation, followed by periods of recentralisation. They represented attempts on the part of the bureaucracy to get the economy moving. The bureaucracy was aware of the fact that if it did not develop the means of production their own privileged position was at risk.

Part 2 >>

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