Why Not the Capitalist Road???

In the 1930's Chairman Mao declkared that the capitlist road was not open to China in the twentieth century.

The Chinese revolution against internal feudalism and external imperialism, he said, could not be a democratic revolution of the old type like the British or the French, a revolution to open the road for capitalism, but must be a democratic revolution of a new type, one that would open the road to socialism. In the first place, the imperialist powers would not allow China to carry out any transformation aimed at autonomous capitalist development if they could possibly help it. Every time any section of the Chinese people rose up to challenge traditional rule the powers intervened singly or in unison to suppress the effort by force of arms. This predictable response led Sun Yatsen to ask, "Why don't the teachers ever allow the pupils to learn?" The answer was, of course, that the landlord class as a whole and the compradors in business and government served as the main props of imperialist power in China, hence the latter used all its financial and military might to support, inspire, foster, and preserve these feudal survivals.

    Moreover, capitalism was not an option, because as Mao said, "Socialism will not permit it." By this he meant that without allying with and winning support from all the socialist forces in the world -- first of all the Soviet Union and second the working classes and working-class movements of Japan, Britain, the United States, France, Germany, Italy, and other countries -- and the backing these provided through their own struggles against capitalism and imperialism, the Chinese revolution could not possibly succeed. In the modern era, defined by Mao as an era of wars and revolutions in which capitalism was unquestionably dying and socialism was unquestionably prospering, such an alliance and such support would come only as a response to a Chinese revolution of a new type, a Chinese revolution clearing the ground for working-class power and socialism and not for a Chinese revolution clearing the ground for bourgeois class power and capitalism.

    Finally, China's independent national bourgeoisie was weak and vacillating. It could not possibly take on both the Chinese landlords and the imperialists and their Chinese comprador partners without fully mobilizing both the working class and the peasantry. But mobilizing the working class meant putting certain limits on managerial power and meeting certain working-class demands, while mobilizing the peasantry meant carrying out land reform. This could not be done without confiscating the wealth of the landlord class from which the bourgeoisie had, in the main, arisen and to which it still maintained myriad ties. Furthermore, the confiscation of property in land threatened the foundations of all private property and caused the capitalists, much as they desired liberation from feudalism and imperialism, to vacillate. Over and over again the national bourgeoisie proved incapable of firm national leadership against the people's enemies, foreign and domestic. Leading the Chinese democratic revolution thus shifted, by default, to the working class, more numerous by far and older and more experienced than the bourgeoisie, and to the Communist Party that established itself as spokesman for all the oppressed.

New Democracy Proposed

    With the Communist Party assuming leadership in the revolution, mobilizing both workers and peasants by the millions, and threatening to confiscate not only all the land of the landlords but all the property of the imperialists and their comprador and bureaucratic allies, the first goal of the revolution could hardly be capitalism. Mao projected a new national form, a mixed economy heavily weighted on the side of public and collective ownership with the joint state-private and wholly private enterprises of the national capitalists playing a minor supporting role. Hence the concept of a New Democratic revolution, a New Democratic transitional period, and a New Democratic state founded after victory with a mandate to carry land reform through to the end and to nationalize the wealth (industrial, commercial, and financial) monopolized by the four ruling families. Once these projects had been completed, the overriding task would be to launch a socialist revolution.

    Given the world situation of the 1930s with capitalism in crisis, the Soviet Union booming with new construction, regional wars merging into all-out global war and the third world on the brink of revolution, Mao argued convincingly that China had no choice but socialism. Now fifty years later, at a time when resurgent capitalism demonstrates temporary stability while socialist construction flounders and the "four tigers of the Pacific Rim (Hong Kong, Taiwan, South Korea, and Singapore) take off, the seers are writing off Mao's compelling logic as anachronistic, irrelevant, even quaint.

    In full agreement with the West on the castigation of Mao, China's leaders, after ten years of national and civil war, thirty years of socialist construction, and ten years of capitalist-road reforms, still talk socialism. But they practice massive privatization as they integrate their country as fast as possible into the world market. Optimistic, confident, even arrogant as they were at the start, however, their policy has had enough appalling consequences to place its whole orientation in doubt. And so, like it or not, the old question of whether China can achieve the goal of becoming a strong, modern, independent nation by taking the capitalist road is shouldering its way back onto the agenda.

    My view is that autonomous self-generating national capitalism for China is no more viable an option today than it was in 1930, 1950, or 1970. Numerous obstacles stand in the way, some of them extensions of long-standing historical phenomena, others newly created in the course of revolution, land reform and thirty years of socialist construction. Crucial among them are the state of the world economy, the nature of the Chinese state, working-class resistance, and peasant self-sufficiency, the ability of the rural poor to survive on subsistence plots.

    In regard to the world economy the strategy of the reformers is to build China into a genuine NIC (newly industrialized country) by following the path pioneered by South Korea, Taiwan, Hong Kong, and Singapore -- that is, by taking advantage of the country's cheap labor to solicit foreign capital and start up large-scale manufacture of labor- intensive commodities -- primarily textiles but also electric and electronic appliances -- for the world market. To this end China created free-trade zones, invested billions in infrastructure, borrowed billions more, and entered the export arena full of hope. But so far China has failed to consolidate an appropriate market share.

    This failure has two main causes. First, the expansion of the world market, which once soaked up most offered goods, is now slowing up. As the 1980s wind down, glut not scarcity plagues the globe. The window of opportunity that South Korea and the other "tigers" leaped through is closing fast. Furthermore, they never would have been in a position to make that leap without the economic muscle provided by two protracted American wars for mainland staging grounds against China, wars that called forth decades of heavy American spending on China's open flanks. While many Chinese now look with envy at Taiwan and South Korea and conclude that China took the wrong road, what they fail to understand is that without the challenge which the Chinese revolution posed to the American Century there would be no "tigers" on the Pacific Rim today.

    Second, even if the window were still open, even if the market was as lively as ever, it could not hope to absorb the output of a country the size of China. It is one thing for small countries with workforces numbering in single digit millions to tool up for labor intensive exports, but quite another for a Chinese workforce numbering in tens, even hundreds of millions to do the same. It never was reasonable to expect that China could duplicate what small Pacific Rim countries had done. Only a few ever succeeded at it and even those are now moving toward crisis. Other contenders, such as Brazil, Mexico, and India, have run into serious problems without finding any viable road to solvency.

    The World Bank strategy of opening third world economies to international market forces by privatizing, liberalizing, making concessions to foreign investors, and concentrating on exports has sharply escalated their dependency on world markets and foreign bank loans. Unable to service their rapidly mounting debts, most of the countries involved have frozen wages, devalued currencies, and cut spending, including spending on vital inputs. Living standards have dropped precipitously. At the same time the cutbacks undermine the economies of the exporting countries, deepening the glut on the supply side of the market. The entire strategy is now clearly bankrupt.

    In the final decade of the century the only viable strategy for the third world is to reverse the whole process, diversify, develop internal markets for domestic goods and services and thus reduce dependence. To do this third world countries have to carry out land reform, set up progressive taxation, guarantee workers' rights -- all things that China did, was doing, and was doing well prior to the reform. Yet China's leaders still harbor illusions about the NIC model of development, and pin their hopes on a strategy whose time has passed and which for China, given the size of the country and the labor pool available, never could provide an adequate framework for development.

Rice Bowls: Bright, Hard, and Brittle

    The internal barriers to capitalist road development in China are today as formidable as the external ones. They can be summed up as (1) the "golden rice bowl"; (2) the "iron rice bowl"; and (3) the "clay rice bowl." The "golden rice bowl" refers to the prerogatives exercised by bureaucrats in office at all levels in the state system over the economy under their control and management and, as a consequence, over their own substantial salaries, fringe benefits, and illicit windfall profits.

    The power they wield is essentially feudal, with roots in the highest development of Chinese ancient society, the centralized bureaucratic state where power adhered not to wealth, landed or otherwise, but to government office. Now that, as a consequence of revolution, the government owns most of the economy, official position confers immense and unprecedented economic power. For this reason some young economists have begun to characterize the Chinese system as a "position-power economy." Hua Sheng, Zhang Xuejen, and Luo Xiaoping, writing in the magazine Economic Research, used this term recently to describe the present system, one that cannot move toward free market regulation because of government intervention. They bemoan China's failure to establish a functioning national market: "The root cause lies in our failure to separate political power from economic management. The Chinese economy today is, to a significant extent, manipulated by political power. . . . True price reform demands that the country's political as well as economic infrastructure be overhauled." They conclude that "genuinely market oriented reform re- quires the state to cede its power and responsibility over almost all economic fields to economic bodies. It should allow market participants with full control of their assets to oversee pricing and other economic decisions."[1]

    But one may ask: How can these omnipotent bureaucratic powerholders be expected to liquidate their own historical prerogatives and surrender control to technocrats and entrepreneurial upstarts operating under the vagaries of the market? History has no precedent for such behavior. Indeed, this point is argued well in another recent article: "However much the reformer-bureaucrats want to utilize market forces to break through bureaucratic immobilism, they cannot do so," writes Richard Smith, "because to permit real market forces to prevail would destroy the bureaucracy's means of existence and reproduction as a class."[2]

    So far the reform in China has ceded some central state power to lower levels such as provinces, major municipalities, and special trading zones, but this has only encouraged lower level bureaucrats to escalate self-enrichment by exercising their local monopoly of power. This often means protecting and advancing regional and sectional interests at the expense of neighbors and the nation. If the reform has dispersed some "position power" it has certainly not dissolved the power system as a whole. Meanwhile, the independent kingdoms where devolved power has come to rest are virtually immune to central control.

    How to create a national market in the face of such powerful bureaucratic intervention is a big unresolved problem. No one familiar with Chinese history can be too sanguine about blunting, not to mention abolishing, traditional bureaucratic prerogatives. The whole phenomena poses as big an obstacle to developing socialism as it does to developing capitalism -- which is one major reason why Mao launched the Cultural Revolution.

    The "iron rice bowl" refers to the guaranteed lifetime jobs and benefits to which all regular workers in state enterprises are entitled. The reformers view these guarantees as the major stumbling block to raising labor productivity and modernizing the economy. "Working slowly is fairly common in state-owned factories," write Hua, Zhang, and Luo. "In return for their dependence [on the state] people actually monopolize the work posts they fill. . . . They are guaranteed lifelong tenure and needn't worry about unemployment or bankruptcy."

    1. Hua, Zhang, and Luo, cited in "Top Economists Look Back Over Decade of Reform," The China Daily, four-part series, December 1988, pt. 1.
    2. Richard Smith, "Class Structure and Economic Reform," paper presented at the Columbia Seminar on Modern China, September 12, 1987, p. 7.

    Reformers long to apply the "stick" of job competition and enterprise failure to these people. They want to transform the relations of production in ways that will force tenured workers onto the labor market and turn their labor power into a commodity -- as it must be in any capitalist country.

    But from the workers' point of view lifelong job security and its accompanying prerogatives are among the primary accomplishments of the revolution. They are something to cherish and defend. They are what gives meaning to the phrase "the workers are the masters of the factories." If bosses can hire and fire at will, if the reserve army of the unemployed waits to swallow all those rendered redundant for whatever reason, what is left of workers' rights? What is left of socialism?

    "Focusing on the lack of free and independent trade unions and the right to strike, [outsiders] assumed that the working class was a helpless controlled victim of the party apparatus," writes James Petras.[3] "A closer view of Chinese factory reality, however, reveals that the Chinese working class operates within a tight network of relations that protect workers from firings, speedup, and arbitrary managerial initiatives, job safeguards that far exceed those found in most Western democracies and would be the envy of many unemployed steel workers." Petras concludes that the reforms are "not only economic reforms but can be more accurately described as socio-political measures designed to restore managerial prerogatives and dismantle the dense network and norms that have been in place since the Revolution."

    Viewed realistically, the slowdown on the plant floor is not the inevitable result of the "iron rice bowl," the wonderful job security the revolution has provided for workers, but a response to the "golden rice bowl" of the officials, the managers, the bosses. When cadres take advantage of "position power" to enrich themselves and their offspring "to establish connections to get rare goods, desirable apartments, opportunities for going abroad, promotion and so on,"[4] why should wage workers break their backs? In the past those state leaders who were motivated by socialist norms could mobilize the working masses for socialist competition. They could inspire socialist production enthusiasm and achieve "better, faster more economical results." But to do this they had to apply the same set of standards to all. They could not practice self-enrichment up above and expect serve-the-people, build-the-country commitment down below. Unfortunately such officials were far too few in the past and all but nonexistent today.

    3. James Petras, "Contradictions of Market Socialism in China," unpub. ms., 1987, pp. 5-6.
    4. Hua, Zhang, and Luo, The China Daily.

    The reformers, however, do not address the "golden rice bowl" problem. Just the opposite. While paying lip service to socialist morality, they put their faith in making management prerogatives preeminent across the board at the expense of workers' rights and entitlements. They insist on confronting workers with the threat of summary dismissal or job loss due to bankruptcy. They place their faith in fear as the prime source of diligence.

    This attitude will inevitably lock the reformers into a showdown battle with a working class that has experienced three decades of socialist relations of production and will not surrender any hard-won right easily. It is a battle that has only just begun, and one which the reformers have no assurance of winning.

Small Plot Security

    The "clay rice bowl" refers to the use-rights to the land, which the peasants still retain as the legacy of their land acquisitions during land reform. I call it a clay bowl because the income derived from this source is fragile. Unlike the wages of workers and the salaries of officials, returns from the land depend, in great measure, on sweat, pests, and the weather. Peasants fertilize, till, plant, hoe, and harvest but what they reap will always be, for the most part, beyond their individual control. Their clay rice bowl may reward them bountifully or return nothing at all. Unlike gold or iron it is vulnerable to outside forces and at the mercy of "heaven."

    In order to establish capitalism and make the market supreme China's rulers must create conditions for primitive accumulation, which means, first and foremost, separating large masses of peasants from the land and making sure they have nothing to sell but the skills of their hands -- in short, turning their labor power into a commodity.

    But during the New Democratic revolution in the early 1950s every peasant got a share of that most precious and basic means of production, the land. During the cooperative period they pooled their plots, village by village, to form collectively owned and tilled fields. Decades later the state began to treat collective ownership as public ownership. Thus, when the reform began, what each peasant got was a renewable right to use small plots of publicly owned land for a limited period of years. Quite commonly, during the reform drive, communities first allocated per capita shares, what could be called subsistence plots, to every man, woman, and child, then contracted whatever land remained to those families interested in farming for a living, to those who were willing to raise grain for sale -- quota grain for sale to the state at contract prices and surplus grain for sale to the market at whatever price it might bring. Under this system a substantial proportion of the cropland in China lies outside the sphere of commerce. It provides a food source of last resort to the rural masses regardless of conditions in the general economy. The underemployed and ill-equipped peasants, given good weather, can probably survive on these miniscule holdings. To prosper, however, the ablebodied laborers among them must set up nonfarm sidelines or seek work beyond the village. Either way, they tend to neglect the land, farming it indifferently, even letting it lie idle when wage work expands, transport booms, and peddling pays, then skimming off whatever crop they can coax from the neglected soil when the downturn comes.

    The reformers hoped and planned that after the break-up farming specialists would be able to contract use-rights from less committed neighbors and create holdings of scale suitable for mechanization and scientific management. But since most small holders regard their plots as social insurance against unemployment, enterprise failure, or other personal disaster such as illness or old age, few have been ready to yield up their per capita use-rights to others even when they do not exercise them themselves. What this means overall for Chinese agriculture is that a substantial part of the nation's scarce cropland, all of which ought to produce to the utmost, will produce at far below its potential for a long time to come.

    Recent developments -- the sudden withholding of credit, the shutting down of thousands of construction sites, the failure of thousands of small rural enterprises -- threw millions of peasants out of off-farm work. This demonstrated as nothing else could that peasant reluctance to part with per capita land-use rights was shrewdly grounded. But this same reluctance also means that the conditions for primitive accumulation in China cannot easily be satisfied. The reforms cannot easily reduce peasant labor power to a commodity in the usual sense, nor can they easily make all land marketable. Per capita land use rights as distinct from contracted rights, though theoretically subject to lease or purchase, are not often surrendered. In the long run food production suffers serious erosion. Those who control the use-rights, the peasant masses, cannot and do not utilize them to the full, while those who might develop their potential, the crop-raising specialists, cannot get their hands on them

Crop specialists, on their part, contracting only the land that is left after the per capita distributions, also work only scattered strips of land, the pathetic "noodle strips" that now characterize Chinese farmland; hence their labor productivity is extremely low. Few can make as much money by farming as they can by leaving the land. Consequently, to keep people farming community after community has to subsidize the contractors with free materials and services.

    Privatization has thus created a situation that all but guarantees agricultural stagnation. Without a sound agricultural base there is little chance for the rest of the economy to prosper. Beijing authorities are blaming this year's chronic power shortages on lack of coal, which in turn they blame on lack of transport, which in turn they blame on lack of power. But if one looks more deeply into the problem one finds that Shanxi coal has been in short supply all winter because the itinerant miners who staff the private and the collective mines responsible for half the province's production have quit in droves because they could not afford grain at this years inflated free market prices. So the power shortage really stems from the grain shortage. All the above phenomena -- the glut on the commodity markets of the world, especially in labor-intensive industrial goods, the "golden rice bowl," the "iron rice bowl," and the "clay rice bowl" -- none of which are easy to exorcise -- make the capitalist road a very arduous and uncertain one for China to take.

    Even if China could somehow overcome the barriers en route, it would still only achieve, as Petras has pointed out, an economy plagued as other third world economies have been by "short-term growth punctured by long-term stagnation; foreign dependence, leading to capital inflow in boom periods and outflow during crises; and management controls that maximize competitiveness but provoke adversarial class relations."[5] These are hardly consequences that favor the creation of an autonomous self-generating economy capable of providing a reasonable level of prosperity for a majority of the Chinese people.