Prof. Gabriel's Home
PageProf. Gabriel's online papersProf. Gabriel's coursesSeminar in Comparative Economic SystemsAsian EconomiesMount Holyoke College Economics

Essay Number 22
August 2, 2003 

Making Capitalism in China for Dummies: The Video

by Satya J. Gabriel

I’ve argued in this essay series that China is undergoing an economic (class) revolution from a feudal to a capitalist social formation. I've rooted this controversial argument in definitions of feudalism and capitalism based on the production, appropriation, and distribution of the surplus fruits of labor. Nevertheless, in most people's minds, feudalism is a thing of the past, a particular past, in fact, and so is the transition from feudalism to capitalism. Both are now the province of historians, not social scientists (as epitomized by the pitiful excuse for a discussion of feudalism that can be found on Wikipedia). And understanding capitalism is just as problematic, with many people thinking capitalism is having the freedom to go to baseball games on the weekend or vote for the next president or be able to sell an old tennis racket on ebay.

There are several popular series of publications in the U.S. that are designed to attract people who want to understand subject matter that is perceived as too complicated for the average person to understand (perhaps because those who normally write or teach on the subject matter speak in a private language that is impenetrable by anyone not trained in the jargon). One of these series claims to be "for dummies," another for "idiots" and the oldest (I think) simply says the subject will be "made easy." Given the difficulties in demystifying capitalism, perhaps someone should create a do-it-yourself video called: Making Capitalism for Dummies.

The first thing it should show, if it really wanted to help all of us understand capitalism better, is that the term capitalism has its origins in Marx's attempt to make sense of a particular type of class process, which during his time was the next big thing. Perhaps the second thing one should show is that there has never been a generic approach to creating capitalism (anymore than there was/is a generic set of cultural and political attributes that make feudal society possible). Those who think that capitalism requires very specific combinations of political, cultural, or even economic processes (in other words, those who believe there is only one form of capitalism) would be mostly mistaken. For example, capitalism doesn’t need “free” markets, whatever the hay that means. Indeed, if one strictly defined free markets as requiring perfect competition (I didn’t create that term, the neoclassicals did), then there has never (and I do mean never) been free markets anywhere. And capitalism certainly does not and never has needed democracy (which seems to be more closely associated with social formations where large numbers of ancient (self-employed) artisans and farmers are or were concentrated). Sorry, Virginia, but there is no reason to assume that the rise of capitalism will spark a democratic revolution in China. Perhaps the video should highlight the many examples of prosperous and less than prosperous social formations that are both non-democratic and capitalist as a way of focusing viewers' attention on what is and is not fundamental about capitalism. (The latest twist on the smoke-and-mirrors approach to undefining capitalism, an earlier version of which equated democracy and capitalism, is to talk as if prosperity = capitalism. I'm convinced that many of the social commentators who invent these obfuscations do so in a conscious effort to divert our eyes from the class roots of the term capitalism.) This is not to say, however, that other social processes, including many that predate the rise of capitalism, might not conspire to promote more democratic processes of formulating public policy (particularly in the villages of China where productive self-employment has been an on-again, off-again, on-again phenomenon since the 1949 revolution).

Capitalism, as a class system, requires a class-based definition to allow us to see its uniqueness. A Making Capitalism for Dummies video would have to make this clear. I must warn you, however, that if you plan to create the Making Capitalism video keep in mind that you will be fighting against all the aforementioned obfuscations which, consciously or unconsciously, divert our attention away from the unique aspects of the social relationship at the core of the concept (sort of as if slavery stopped being about the relationship of slave to slave master and was defined as free markets or democracy). Your task would be easier making a video designed to convince PC users to adopt Linux as their primary operating system.

In any event, what do we need to show in a Making Capitalism video to get the viewers to see capitalism. The video has to show what it is that makes capitalism unique and, to try and revive a beat horse, that uniqueness comes from a very particular sort of social relationship that results in surplus value being created and then taken control over by non-workers. This relationship is, indeed, grounded in a particular sort of market (not the mythological free market, mind you). Capitalism requires a labor market (or, more accurately, a market in the buying and selling of labor power --- the potential to perform labor). In Marxian theory, any social relationship whereby workers produce surplus value that is taken control over by non-workers is called exploitation. There are three different kinds of exploitation, according to most versions of Marxian theory: feudal, slave, and capitalist. Capitalist exploitation is unique because it is the only form of exploitation where the workers freely sell their labor power to others, while having the choice to not do so. Thus, capitalism needs markets where this capitalist freedom prevails or it cannot exist.

Let's assume you do want to make this video, recognizing the enormous market potential or for artistic or scientific reasons or some combination of these (or whatever). You could either do the general Making capitalism video or you might narrow your approach to a specific case of making capitalism. You could just do the British transition from feudalism to capitalism. After all, Marx provides quite the blueprint in his three-volume Capital and other writings, including journalistic pieces. On the other hand, perhaps you want to join me in trying to liberate thinking about capitalism (and feudalism) by taking up the Making Capitalism in China case. I'm going to take a bit more license and assume you are excited by this prospect and decide to make a video titled Making Capitalism in China for Dummies. Now that is very exciting, indeed. Can't you see all the China watchers rushing down to Barnes and Noble or getting online to ordering up their copies of your video?

One of the steps you would need to show in your video is the one where the system of allocating labor in China is transformed from the bureaucratic set-up under state feudalism to the more free-wheeling, make-you-own-choices approach of the capitalist labor market. This is because a key step in the transformation of China into a capitalist social formation is the expansion of capitalist labor markets and the creation of social institutions supportive of those labor markets (to risk further repetition, these social institutions are NOT generic, but are shaped in the unique environment of the social formation in question). The creation of such supportive institutions is necessarily coincident with the destruction of institutions supportive of state feudal labor allocation. So you would need to show the bureaucratic allocation system to give your viewers a sense of what needed to be transformed/destroyed. You might start by panning across the façade of a bland governmental building (although you risk evoking memories of Cold War propaganda which is not necessarily conducive to clarifying the underlying class processes) and then inside the offices where bureaucrats were formulating policies for shaping the lives of workers, including hiring quotas, compensation systems, and workshop regulations. You could provide a graphic that illustrated the eight-grade pay scale that prevailed within the bureaucracy (that was later expanded to fifteen pay grades). This pay approach is similar to that within other governmental bureaucracies (including the U.S. government) and, although this may divert attention from the feudal nature of the overall system of exploitation, one might want to show the way the Chinese pay grade system has a parallel in the U.S. bureaucracy. Anyway, you might then edit together clips of various parts of the bureaucracy to show the paper trail as the hiring quotas, compensation systems, and workshop regulations were communicated to various parts of the bureaucracy, including secondary schools, communal offices, provincial agencies, and senior management of state run enterprises (SREs) and their related factories and workshops.

Perhaps if you wanted to pre-empt the attacks likely to come from those who argue that this state feudal bureaucracy represented socialism (and who think feudalism was a distasteful system populated by dour, unhappy workers), you might show some clips of secondary school graduates as they are assigned to jobs for life or of workers already toiling inside Chinese factories during the state feudal era. Are the faces of the workers beaming with the fervor often seen in those Mao-era posters? I doubt it. In any event, you are not going to convince the true believers by showing the faces of a few workers (or even a large number of workers), but it might be fun to do it in the video, just to give those who engage in debate with such devotees another piece of evidence to deploy.

If you really want to reinforce this point about making capitalism out of the stuff of feudalism, then you might want to show the way workers in China were "tamed" by the feudal relationship, preparing the way for them to become the "voluntarily" exploited under capitalist relations. Perhaps it is precisely the creation of a tame, disciplined worker that makes feudalism such fertile ground for capitalism, not that the transition from feudalism to capitalism is natural or inevitable (as some die-hard teleologists would have us believe). But history has produced a culture, politics, and economics of such a transition and, given the "fertility" of feudalism (generating forms of social and work discipline unknown to class processes where the workers controlled their own work processes, such as ancientism and communalism), this may be sufficient to plant the seeds of capitalism. The Making Capitalism video could easily show the processes by which such discipline was formed in Chinese state feudalism. The “pre-reform” Chinese economic system was based in a mutual obligation of the employee and the employer, creating in the worker bonds of feudal fealty and dependence, and creating within the workplace the subsumption of the individual worker to the discipline of a hierarchically organized form of exploitation. You could have your narrator (preferably James Earl Jones, reprising his Darth Vader) read passages from any of a number of the loci classici of feudal-era historiography (but don't use these words!) to illustrate similar descriptions of other instances of feudalism (although this might be a bit too much of a Ken Burns moment for a "made easy" video).

The old system created a strong sense of hierarchy (which might very well have served the early capitalists), on the one hand, and a sense of marriage, on the other hand. It was the sort of marriage that still has currency in the Vatican: a marriage where neither party can initiate a divorce. The one could not quit and the other could not fire. The bonds of obligation were permanent. Perhaps you could show in time-lapse photography the life of a single state feudal employee who was assigned a posting at an SRE upon graduation from secondary school, through his life in a workshop and his gradual move up the seniority ladder, showing also the way his family life was intertwined with the life of the SRE, and culminating in his death. At every stage of this workers’ life, the bureaucracy is a key player, with most of his life dominated, in this respect, by the SRE component of that bureaucracy. The total immersion of the worker in the bureaucracy is reminiscent of other manifestations of feudal social formations (which some social scientists like to call a “total institution”). Perhaps one could find a clever way of showing the parallels, especially the way the foundational bond between worker and lord are typically based on customary (rather than formal contractual) ties of obligation or the way the political and economic are so intimately intertwined in a variety of manifestations (variant forms) of feudalism.

You have now set the stage for the transition by showing key features of the old system. You would then proceed to show how capitalism is built from this existing structure (a process of creative destruction (if the ghost of Schumpeter will please forgive me) to be sure). Your narrator might say something like: “Perhaps your first step would be to remove these feudal bonds of obligation of the worker to the state-run enterprise, at one level, and of the enterprise to the party-state at the highest level of obligation, while at the same time shifting the dependence of the worker on a specific enterprise to a dependence on the system for his livelihood.” You might want to edit that statement, break it down into three sentences instead of one to assist your narrator. The audience would, no doubt, appreciate the simplicity. And then you could show that breaking of feudal bonds and transfer of dependence from a single lord to the larger system of employers (choice!) is precisely what has happened in China with the growth in capitalist labor markets (complete with burgeoning unemployment options) and the corporatization of firms that had been part of the bureaucracy.

In capitalism, employment contracts are never permanent and allow the worker the freedom to quit and capitalist managers the freedom to fire (or, as an alternative, in the nuances of termination choices, to layoff). Your video might then show the process by which the enterprise is corporatized (moving from the official designation of guoying qiye or state-run enterprise to guoyou minying or state-owned enterprises, indicating that ownership is NOT the same thing as direct control over the processes of surplus value appropriation and distribution). The new state-owned enterprise qua corporation (SOE) has its own board of directors and its managers are vested with the power to hire and fire. This is the usual contemporary structure within which capitalist exploitation takes place and would be quite familiar to most of those watching your how-to video.

To reinforce the point, perhaps you might want to show the process of firing taking place within an SOE. The shock on the faces of the workers (not only the one being fired), as well as the reaction of his family to this strange turn of history, would provide the viewers with a poignant reminder of the radical departure of this process from anything these individuals have known to that point, as well as an indication of their sense of betrayal with the abandonment of the familial-like ties that had prevailed under the state feudal relationships. (see article from China Daily --- link added 2 February 2004)  It might surprise your viewers to see that the transition to capitalism wasn’t necessarily welcomed by workers and that one might need to do some work to mitigate the sense of betrayal. Many workers have taken to the streets in massive protests. Maybe this is where a bit of democracy (giving workers some additional "choices") might come in handy as a safety valve. Building capitalism isn’t quite as straight-forward as at first it might have seemed.

One of the reasons for this revolution from above is certainly the desire of the leadership of the old feudal bureaucracy (Party-state) to free themselves of the obligation of supporting an expensive structure of state-controlled firms (some of which turned over far too little surplus value to be worth the effort and others were in such dire straits as to require that surplus be turned over to them!). You might want to show the happy faces of the Party delegates at the recent 16th Party Congress as they decided to free up some of these pitiful feudal underlords from the bureaucratic nest and allow them to fail, throwing millions more into the lower reaches of the capitalist labor market. Ending feudalism can be fun!

But after showing this “downside” of the transition, you might then want to take a more up-beat tone. You could show how the old feudal labor allocation system provided workers and firm management with virtually no labor allocation choices (the choices being made bureaucratically and then relatively fixed) and that the new capitalist labor markets are fundamentally about choices. Can you hear the up-beat music? And it is important to note visually that these choices are voluntary, in the sense that there is no direct coercion. Workers learn to search for jobs, prepare themselves to meet the requirements of potential employers, and then go about the process of trying to get hired. Employers learn to communicate the availability of jobs and their job requirements, as well as to set up processes for filtering through applicants to find the “right” ones to meet their needs. This shows your viewers how capitalist labor markets are unlike the feudal labor allocation system in that they are predicated upon the voluntary employment seeking behavior of the worker (or potential worker) and the presence of choice of employers. “If you want to make capitalism,” your narrator says, “then you must create choice.” Capitalism has its own unique types of drama, then. Will the worker find a job? Will the managers at the firm find the sort of employee they need to gain more surplus value, to become “competitive?” Perhaps you could end this segment of the video with Milton Friedman’s words “free to choose.”

It is not uncommon for it to be assumed that the flexibility that comes with the capitalist labor allocation system (allocation within labor markets) must be somehow fundamentally more efficient than the bureaucratic allocation system that prevailed under state feudalism. In other words, and in the specific case of China, it is assumed, all other things being equal, that this revolutionary change in class processes has generated and will continue to generate more surplus value for Chinese economic growth and development than would be possible under the old system. Here you can segue into visuals of new superhighways, airports, and yuppies with cell phones. The narrator could ask: “Would it be possible for China to grow so rapidly without capitalist exploitation providing the necessary surplus value?”

The evidence in China does seem to support this assumption about the relative effectiveness of capitalist exploitation. Indeed, some of the most dramatic transformations in economies have occurred with similar transitions from feudalism to capitalism, including the Meiji Restoration in Japan which was probably most similar to the transformation of China in that it was orchestrated by the existing feudal (economic-political) elite. Under the previous system, Chinese workers were bound by ties of fealty to the bureaucracy and, more specifically, to a particular SRE or commune. The ties of feudal bondage formed the basis for the production and appropriation of feudal surplus value, but also constrained the size of that surplus value. In particular, the feudal danwei system dampened worker motivation (or, at least, this is the standard assumption), such that the level of average worker effort was less than under capitalist exploitation. Your video can demonstrate this by showing that the hardly working worker of the danwei system could be admonished, even punished in certain ways, but not terminated, and therefore tended to shirk. The same worker, under capitalism, can be thrown out of the SOE. Perhaps you can visually demonstrate how this acts to motivate the workers to greater effort (and, therefore, higher productivity) than the mostly moral suasion (of "socialism") under the old system.

You could also show all the wonderfully colorful posters that were used as part of a general cultural process to motivate workers under the old system. This was all part of the rhetoric of socialism. But, alas, the rhetoric did not quite work; at least the end results were not satisfactory to the Chinese military and the rest of the bureaucracy. It did not result in sufficient surplus value to finance “modernization” and to push China closer to the West. At the end of the day, the cultural tools of Maoist Marxism failed, in part, because workers simply knew better: China’s “socialism” left them feeling alienated and exploited. I do not think it would be difficult to demonstrate this on the Making Capitalism video.

In addition, the feudal obligation of the worker to toil for a single employer had a flip side, the obligation of that employer to provide not only lifetime employment for the worker but also to provide for the welfare of the worker and his/her family, providing health care, education for children, subsidized food, housing, and so on. Thus, not only was the production of surplus value constrained by the motivational problems associated with the feudal danwei system, but the distribution of surplus value was constrained by a heavy commitment to fund social services for the feudal work force (“the iron rice bowl”). Capitalist labor allocation is understood to have solved the motivational problems by eliminating the entire system of feudal obligation, the danwei system, and replacing it with a capitalist contingency: employment is always contingent on the satisfaction of both parties and can be relatively quickly terminated and capitalist obligations are limited to those negotiated in the labor market.

In order for this new arrangement to work, new social processes were created both within the formerly state run enterprises, now formally state owned enterprises (SOEs), and within the larger social formation. As an example of this, the Making Capitalism in China video could show the xia gang system of laying off workers (yet keeping them officially on the employment rolls of the firm). Cut to a stream of workers leaving the factory grounds. The xia gang system provides managers with the flexibility to remove redundant workers, yet by keeping those workers on the list of employees it creates a hopefulness that the old obligation isn’t completely severed and is, therefore, less likely to spark severe reactions from workers than outright firing. To further mitigate the break in the feudal obligations of the firm to take care of its workers for life, many of the SOEs are providing minimal financial support to their xia gang unemployed, taking a bite out of the surplus value generated by workers still employed. This takes away some of the punch of the unemployment mechanism, reducing the efficiency of the shift to capitalist labor allocation. Nevertheless, this new way of doing things is unambiguously capitalist. It represents precisely the sort of flexibility in employment that is a basic feature of the capitalist labor allocation system. And over time workers have come to understand that it really is a breaking of the old obligations. The video could show a large-scale street demonstration by xia gang workers (although you will, no doubt, have to stage this demonstration since the Chinese authorities do not typically allow Westerners within close sight of these events, much less allow them there with camera equipment in hand, although if you set up shop in Liaoyang or Shenyang, in Liaoning Province in the old rust belt of Northeast China, where many old and very large state run enterprises have not survived the transition to private capitalism, you stand a good chance of observing a real demonstration).

At the end of the day, are capitalist labor markets the best way to allocate labor power and to motivate labor? In China, as elsewhere, it does appear that it is superior to feudal allocation and obligations. The rather unique processes of voluntary labor contracting and the flexibility of capitalist labor markets seem to serve both as a wonderful motivator (resulting in higher levels of surplus value) and as a tool for management to “rationalize” production. But despite all sorts of discussion over the years, no clear understanding has ever emerged of just why such processes should in the end actually lead to the optimal allocation of talent and human energy or to the best path to economic growth and development. To say that capitalism is better than feudalism is not to say that there are no superior alternatives to both. Some have tried arguing that China was trying such an alternative that failed. However, when I’ve deployed the concepts of class processes described in these essays I have not found any such alternatives to have ever been tried in China. Instead, what I find is the same transition from feudalism to capitalism that has epitomized a number of other social formations, in particular Great Britain and Japan. Now, don’t get me wrong, I think this is a big deal and well worth a rather dramatic finish to your Making Capitalism in China for Dummies video.

Previous Web Essay     Next Essay


Copyright © 2003 Satya J. Gabriel, Mount Holyoke College. All Rights Reserved.

Permission is granted to use this text, with proper credit to its author, for non-commercial educational purposes, provided that the content is not altered including the retention of the copyright notice and this statement. If you excerpt text from this or other essays or papers on this web site, you should follow normal protocols for proper citation. Below is an example of such a citation:

Gabriel, Satya J. "What Do You Mean China is Socialist?" Satya Gabriel's Online Papers: China Essay Series
Please make links to this document instead of copying it onto your server. For permission to use it in other ways please contact the author by e-mail.