Technological Determinism & Socialism
with Chinese Characteristics: Pulling the Cart
without Watching the Road?
By Satya J. Gabriel
"The essential motivating force of
socialism is to advance the
forces of production, freed from the fetters of backward relations of
production, eliminate exploitation, end social inequality, and achieve the
ultimate goal of a common prosperity for all people."
Deng Xiaoping, from Selected Works, vol.3.
The lights of downtown
Nanjing are beautiful at night. The
pollution that hangs over the city has a way of giving an other-worldly
quality to the neon. The Taiwanese owned Golden Eagle department
store and hotel is like a space ship hovering in the distance,
ready to take-off, a monument to the occasional eccentricity
of builders in a city that, like most Chinese cities, is usually
content to simply put up rectangular concrete, steel, and glass
boxes. And until the Asian economic crisis hit in 1997, these
boxes were going up with extraordinary rapidity. Since that time
the so-called spidermen, rural migrant construction workers who
brave these structures to earn a meager living to support family
members still in the countryside, have not found as much work
and the pace of building has slowed markedly. There are lots
of idle cranes hanging in the Nanjing air. Nevertheless, this
relative calm can be misleading. In the factories, offices, and
other buildings of Nanjing and other Chinese cities there is
a technological transformation taking place with increasing speed. Computer based technology is being innovated throughout Chinese
society. The internet is becoming pervasive, and, despite public
proclamations to the contrary, the ability of Chinese citizens
to gain access to knowledge from beyond China's boundaries is
The computers and the internet cafes sprouting up all over
the place, as well as any number of other quite visible changes
in social life in China, are partly the outputs of a process
of a relatively unbroken period of economic re-formation that
began at the 3rd Plenary Session of the 11th Central Committee
of the Communist Party of China (CPC) in December of 1978 and
was reaffirmed at both the 3rd Plenary Session of the 12th Central
Committee of the CPC in October of 1984 and the 14th National
Congress of the CPC in October of 1992. It was at these meetings
that the predominance of the pragmatic modernists
Party was clearly demonstrated in the adoption, clarification,
and reaffirmation of a new economic development strategy based
upon decentralization of control over the state owned enterprise
sector, expanded market transactions to replace command and control
allocation, dismantling of the rural commune system (completed
in 1985), increased
use of material incentives in workplaces, and ultimately,
the "modernization" of the Chinese economic infrastructure
(as well as the military infrastructure). This last aspect of
their strategy represents more than a mere objective. "Modernization"
represents the mission of the modernists. Deng Xiaoping rejected
the Maoist (romanticist) tendency to forswear the technological trappings of
the so-called West (including "soft technology" in
the form of social relationships) and embraced the idea that
"modernity" required copying many of the traits of
the Western capitalist nations.
This was precisely the approach
that the Maoist Left described as "pulling the cart without
watching the road," implying that while such a strategy might
lead to technological advance, its social implications were
uncertain and potentially might reproduce the very social ills
that the revolution was fought to cure.
Nevertheless, the victory of the pragmatists at these meetings represented
not only a sea-change for China, but also a significant shift
in strategy for the pragmatic modernists, now led by Deng
who had decided to take a more "populist" approach
--- an approach that was grounded in decentralizing economic
decision making and, in the rural areas, fostering self-exploitation
(at least in the short-term) --- and abandoning "Stalinism."
As the appellation "pragmatic modernists" implies,
although this policy shift represented a change of strategy,
it did not represent a change in the underlying philosophy of
governance and economic development. The pragmatic modernists
remained commited to a politics and economics shaped in the
debates (and non-debates) of the Bolshevik version of communist
ideology (which was also a version of modernist thinking),
while in the realm of culture they embraced the ideology
of nationalism. In politics, the pragmatic modernists held
to a philosophy of governance based on the Leninist notion of
the "vanguard party" (an elite of communist leaders
determining what is in the best interest of the Chinese people).
But in foreign affairs, they rejected Leninist
Internationalism --- the idea of supporting communist
movements globally, in favor of the Zhou Enlai line of opening
to the "West" and embracing the idea of China as a Third World
country with common interests with other Third World nations.
In economics, they held to a strategy of economic development
based on the notion that the teleological path to more advanced
social relationships was a function of the continuous adoption
of "more advanced" material technology (where "advanced"
is defined in terms of more efficiently meeting the technological
objective of automation).
The pragmatic modernists, like the original Soviet Stalinists,
believed that the
more radical elements of the party fundamentally misunderstood
social/technological evolution and were prone to making serious
mistakes by attempting "leaps" in social development
prior to having achieved the development of technology that might
be consistent with such an advance in social relations. We shall
come back to this point later.
It has now been a little over four months since my
family left China. That's
not really enough time for my dreams to make the transition to
the United States (or our summer home in Vancouver, Canada).
It was only a few nights ago that, in a dream,
I saw the Golden Eagle once again. I had not been back to China
for over ten years (not counting my relatively frequent trips
to Hong Kong) when we recently decided to spend two years there.
The China that we experienced in this 1996-1998 period was vastly
changed from the one I had seen in 1983 and 1985. I was amazed
to find newly constructed freeways and airports that would have
been welcome in many parts of the United States (where infrastructure
has not been much of a priority of late). Computers (including
up-to-date servers) are popping up all over the place. Joint-venture
firms making everything from laundry detergent to cell phones to jumbo jets are operating
efficiently, albeit within a certain degree of legal ambiguity,
in most of the major cities of China (including Nanjing). The
last nearly twenty years of economic reforms has left only residual
traces of the Maoist era, at least in the superficial surface
manifestations of Chinese culture and society. The blue "Mao"
jacket and cap, obtained in 1983, that's now tucked away in a
closet has become a sort of collectors' item. But no doubt deep
below the surface of change in 1998 China, the Maoist influence
continues to course through the veins of Chinese society. This
is the impression I get listening to some of my colleagues at
Nanjing University and elsewhere, and, to a lesser degree, in
certain perspectives heard in casual conversations with students.
It is not difficult to find people who continue to be concerned
with the problems of inequality, elitism, "capitalism,"
corruption, and increasing foreign involvement in China's economy.
On the other hand, Maoism is clearly less alive in the thinking
of the managers I spoke with at state owned enterprises and joint-venture
enterprises, where the language of contemporary M.B.A. programs
has become pervasive. For these managers the concerns are with
reducing operating costs, improving the technology deployed in
their operations, getting their workers to work harder, training
personnel, getting the government off their backs, and other
Nevertheless, one has to ask: Why is the Maoist perspective
still alive despite a great effort to relegate Mao to the status
of a no longer relevant "founding father" of the new
China: something less than a god-like figure but not quite ordinary,
either? The persistence of Maoist thought shouldn't be that surprising.
Mao was an unrepentant critic of the very power structure that
he, at various moments in recent history, dominated. Bureaucratic
power continues to be an every day fact of life in China, even
with the various reforms. It can feel a bit like the smothering
smog that hangs over Nanjing and most Chinese cities. Oppressive.
Many Chinese citizens share the Maoist perspective that this
bureaucracy is a problem, even if few have the stomach for the
"class struggle" of Mao's "permanent revolution"
to tame and control bureaucratic elitism (in order to push forward
socialism?). It's a bit like an antagonistic ambivalence toward
the bureaucracy and the Party that wields power over the bureaucracy.
In this sense, the attitude that seems pervasive in China is
not unlike what one finds among many Americans who believe, despite
the trappings of democracy, that their government is not really
This sentiment poses a bit of a problem for the current Chinese
leadership as it attempts to redefine "socialism" as
"socialism with Chinese characteristics," which actually
seems to mean "capitalism with Chinese characteristics."
Most of my Chinese students seem to understand this little trick
of words and are not at all put off by the recognition that China
is being steered more forcefully into an economic and social
system that more closely parallels the system that prevails in
the formerly hated capitalist West. Most of them see this as
a good thing. After all, capitalism and socialism have never
been theoretically incompatible. Socialism is simply a transitional
state between capitalism and communism. Socialism is understood,
in traditional Marxian thought, as a political façade
over the economic structure of capitalism. The government, under
socialism, is supposed to use its powers to direct the resources
of capitalism toward the construction of conditions for communism,
a social formation within which full economic and political democracy
would be attained. I'm not quite sure how one is supposed to
ascertain whether or not a government is actually doing this
--- working for the creation of such a fully democratic society
--- but I would guess that one would want to see some indication
that working people are being both prepared for taking over control
of their economic and political life and that actual steps are
taken to give them this power. Mao thought the way to do this
was "permanent revolution" wherein the institutions
of bureaucratic power were always subject to attack from "the
people" to make sure the path to communism was not sabotaged.
It was by a "permanent revolution" that the Chinese
people would be able to arrest the growth of the aforementioned
problems, such as inequality (which is becoming increasingly
apparent), elitism and growing "Western" involvement
in the Chinese economy (which some view as a rebirth of the old,
hated imperialism that Mao is credited with having destroyed).
It is likely that there remains a significant percentage of Chinese
who are concerned with these issues. However, even among those
who might be sympathetic to the Maoist Left, few would probably
support Mao's version of a "permanent revolution"
and many would find Mao's visions of a leap into communism
to be a dangerously romantic idea about social evolution.
This is to the advantage of the pragmatic modernists, who
recognize that their opposition to the "chaos" of Mao's
Great Proletarian Cultural Revolution (the epitome of the permanent
revolution) is shared by the vast majority of the Chinese population, who would much prefer "pulling the cart without watching the road" to
taking another giant leap into some unknown revolutionary ditch.
In identifying this weakness in the Maoist Left, the pragmatic
modernists have been able to forge a ruling coalition of
within the CPC, including the leadership of the People's Liberation
Army and the intelligentsia (many of whose members had been targeted
during the Cultural Revolution). The pragmatic modernists
have made deft use of this opposition to the Maoist Left strategy
of political disruption to push their own agenda, which is based
upon the proposition that the foundation for socialism is not
"class struggle" but the role of the vanguard party
in "modernizing" China, where "modernizing"
means adopting the technology deployed in the "advanced
capitalist" nations of the West. By focusing on Zhou
enlai's "four modernizations," the pragmatists have
articulated a vision of where they are leading the country,
albeit one without a direct connection to communist social
relationships. The connection is, nevertheless,
implicit. A modern, technologically advanced society (the Emerald City?)
led by the CPC would, in the end, produce the much waited for transition
to a communist society. This logic is, after all,
Marx's arguments that the social relations of production
would necessarily need to be consistent/compatible with the
forces of production (technology). Marx ultimately provided
the theoretical foundation for modernist Marxism just as
surely as he provided the foundation for Mao's "class struggle" conception of
If one agrees with the modernist Marxist view of a
teleology, then the pragmatic modernists might be better
as pragmatic socialists, since their policy actions, by advancing
the "modernization" of China, are creating the conditions
that make the attainment of communism (at some unspecified date
in the future) possible. In other words, since the current leadership
believes that communism can never be attained if China remains
technologically backwards, then their efforts to improve technology
is "revolutionary." The modernist Marxism of the
current ruling clique within the CPC is then pursuing its own version of
a permanent revolution.
The "permanent revolution"
of the pragmatic modernists is reflected in the new
computers, highways, airports, glass towers, cell phones, and
relatively sophisticated machinery deployed in the joint venture
The technological determinism at the core of the pragmatic
modernist ideology of the current Chinese leadership must
be grasped in order for one to understand why they feel confident
that their actions remain "socialist" and "correct"
despite criticisms from both an internal leftist element and
from a wide range of "free market" critics, both inside
and outside of China. The fact that the Chinese economy has grown
at rates that have astounded their critics doesn't hurt their
case. China's gross domestic output has been growing at rates
just below ten percent for almost twenty years. 
Since GDP growth has tended to be the primary gauge of success among Western economists,
then it is hard to argue with those numbers. From a Western point
of view, the Chinese leadership has been doing something right.
And even with the current global capitalist crisis, centered
in Asia, China has remained relatively unscathed, while the more
"free market" economies of the region have suffered
severe economic contractions and political turmoil. China's gradualist
approach to market reforms seems, on the basis of macro-economic
statistics, more successful than more radical free market approaches.
The pragmatic modernists believe that the key to economic
success is technological innovation (in terms of both hard
and soft technology), not market exchange.
relationships are merely a tool for achieving increased technological
innovation. In other words, from the standpoint of the current
Chinese leadership, orthodox American economists have
causality wrong (market exchange is not the catalyst
for economic prosperity --- if it was then Afghanistan,
where governance is minimal and
just about anything under the sun can be bought and sold,
would be among the world's most prosperous nations).
It isn't that free markets create economic success, but rather
technological innovation. Sometimes freer market transactions
can help bring about such innovation, but not always. The
reforms in the industrial sector, for example, have been
carefully engineered, with very moderate and carefully added
doses of "free market" competition and harder budget
constraints for the dominant state-owned
enterprises (SOEs). The trend is certainly towards more market
transactions and less bureaucratic allocation, although this
is shaped as much by a desire of the central government to
free itself from the budgetary constraints of subsidizing the
state-owned industrial behemoths and pushing the SOE managers
to be more creative in generating surplus value as it is about
creating a "market economy," despite the fact that the term
"market economy" has become a legitimizing metaphor, both for
internal constituencies and for external observers. It
certainly sounds better than "state and private capitalist
Indeed, markets are not always well behaved. They
have the potential for chaotic movements which can
actually result in a deterioration in technological innovation. And, according
to the logic of the pragmatic modernists, sometimes it is
only via regulation (or, at the extreme, command and control
systems, as in the early stage of industrialization in the USSR
and China) that technological innovation is fostered.
Is it possible that the technological determinism of the pragmatic
modernists is correct? Is technology the cause (sui generis)
of economic and social development (including movements from
the prevalence of one form of class process to the prevalence
of some other form of class process, e.g. from feudalism to capitalism)?
Is it primarily technology that will determine the path to building
a more democratic (in both economic and political terms) China?
In other words, if the policies of the pragmatic modernists
have resulted in the innovation of more advanced technology in
China, does this necessarily mean they have moved China closer
to communism? Or have the reformist policies simply been successful
in pure GDP terms without also being successful in terms of the
building of socialism? And, even if these policies have been
extraordinarily successful (in GDP terms) over the past nearly
twenty years, is this the basis for sustained long term growth
and development of the Chinese economy? And why have these policies
been successful? Is the ultimate goal of technological transformation
(captured in popular rhetoric by the phrase "modernization")
actually being served by these policies? These are questions
for us to ponder. In order to get a better handle on what the
pragmatic modernists have done over this period of economic
reform, lets examine the specific changes that have been made.
The Maoist period, from roughly 1949-1978 (Mao died
in 1976) was marked by the various struggles discussed in earlier
essays. The rightists in the CPC had, more or less, kept to a
Stalinist line (which is probably the basis of their continued
adherence to technological determinism) of supporting command
and control mechanisms, a highly centralized administrative structure,
and monopolistic control over the surplus generated in industrial
enterprises by the central government (the surplus was ultimately
appropriated by various ministries who then redistributed the
surplus to satisfy the reproductive needs of the system, including
distributing a portion of the surplus to the central treasury
to support the general budget of the government). Under the Stalinist
approach, the general managers of industrial enterprises had
limited powers and were always subject to the dictates of the
Party (via a Party operative within the enterprise), including
production quotas, allocations of inputs (determined by the ministries),
and pre-determined limits on how much of the enterprise's funds
could be expended to pay for wages and other costs of production.
Wage scales, personnel decisions, and a wide range of work
rules were all shaped within this single bureaucratic maze of
firms and state agencies.
The Maoists fought periodically to decentralize administration
and to shift the loci of economic decision making and surplus
appropriation to unorthodox sites, such as the rural communes.
It is unclear whether there was a free labor market during the
vast majority of this period. It seems likely that China was
also oscillating between capitalist industrial relations and
feudal industrial relations as the government exerted greater
or lesser control over the mobility of labor. The oscillation
between these various tendencies --- between the Stalinist centralization
of command and control and the Maoist decentralization and between
capitalist industry and feudal industry --- created a great deal
of uncertainty in economic agents in China, as well as in economic
agents outside of China who hoped to "do business"
in the Chinese economy.
Over the period from the Great Leap Forward through the Great
Proletarian Cultural Revolution, the pragmatic modernists
shifted its priorities away from the centralized, command and
control system (ccc system) to a more market oriented approach
to economic development. They seem to have made the strategic
decision that the ccc system had helped to provoke the leftist
reaction of radical decentralization and institutional experimentation.
They had certainly come to understand the unpopularity of the
ccc system. Indeed, it had few supporters. The rightists were
determined not to continue making the same mistakes and they
recognized that any policy orientation would have to be accepted
by a wide range of economic agents to be effective. In order
to develop a strategy that would raise productivity in the economy,
improve the prospects for financing technological development
and industrialization, and reduce the potential for social unrest,
the pragmatic modernists decided to adopt a New Economic
type (NEP-type) approach to economic reform. This is no minor
matter. Basically, the pragmatic modernists decided to adopt
a more "populist" strategy. This strategy, by starting
with reforms in the countryside, would gain them the support
of large numbers of "peasants," the traditional base
of support for the CPC, who wanted the right to engage in self-exploitation
and who were never very keen on the ccc system (which was
represented in rural China by the feudal commune system).
In addition, many enterprise general managers wanted greater
freedom to make decisions on management strategies, deployment
of the enterprise surplus, wages and bonuses, etc. These general
managers would also be supportive of the NEP-type approach.
Thus, the first wave of reforms and the most "populist"
were those that took place in the rural areas. These are discussed
extensively in the paper, "China: The Ancient Road to Communism."
The rural reforms were designed to replace the commune system,
which was completely dismantled by the time I returned to China
in 1985, and which I now understand to have been feudal in class
process terms (see earlier essays). The government gave individual
rural direct producers the right to engage in self-exploitation,
as well as the means of production (particularly land) with which
to do so. In other words, rural direct producers gained the right
to control ex ante production investment decisions (under certain
constraints about the type of output that had to be produced
--- constraints that would be gradually relaxed) and ex post
decisions about the distribution of surplus, displacing much
of the economic power of commune administrators. The establishment
of a dual (or, more accurately, tri-partite) pricing system provided
rural direct producers with an opportunity to sell some portion
of their output in "free markets" in the villages and
towns and the portion of their output that was part of the central
government's agricultural plan (basic agricultural goods that
the direct producers were required to supply at fixed and below
market prices to the central government) was gradually reduced.
Use rights to land were contracted to individual producers and
there is a lively debate today over how to change the terms of
these contracts in ways that promote further development of agricultural
In keeping with the technological determinism of
the pragmatic modernists, it is believed that only through
fostering more productive investment in agriculture can that
sector be "modernized" and contribute to the overall
advancement of the Chinese economy. Evidence indicates that the
transition from the feudal communes to self-exploitation did
raise agricultural productivity (although there is also evidence
that technological inventiveness and innovation during the commune
period, particularly the development of "intermediate"
technologies, and, more generally, the process of rural
industrialization and mass mobilization of labor for the
construction of rural infrastructure, were significant positive factors for
long-term growth in rural China, and preconditions for the
double-digit growth rates that China has experienced in the
post-Maoist reform era from 1979 to the present.)
However, there is an alternative explanation for the rapid
growth in agricultural output during the early period of rural
economic reforms. The current debate over how to encourage
more investment in agriculture may be ignoring a critical issue
--- was the increase in agricultural productivity,
an important catalyst for income growth in rural China, a
function of changes in class processes, in particular
increasing self-exploitation in agriculture? If so, will self-exploitation
continue to prevail in Chinese agriculture or is Chinese agriculture
moving away from self-exploitation towards capitalist exploitation?
If capitalist exploitation in agriculture is increasing will
this have an independent impact on agricultural productivity
(positive or negative), irregardless of the technology deployed?
But rural development is not simply agricultural development.
If that was the case, then it is highly doubtful that the
Chinese leadership could have achieved the double digit growth
rates of the first twenty years of the reforms. During this
period agriculture grew at single digit rates. It was rural
industry that took off (to borrow the imagery made famous by
W. W. Rostow), growing at astounding rates (in excess of 20%
per annum). Rural industry and the infrastructure that
supported it is an artifact of the Maoist era.
The Maoist Left had attempted to advance industrialization of
the countryside by the deployment of "intermediate"
forms of technology ("appropriate technology") and
the development of rural industry. The process of rural
industrialization was well developed in the commune period, as
was the development of rural infrastructure. These Maoist-era
achievements provided the basis for one of the most successful
economic growth strategies in the reform era: the creation of
township-village enterprises (TVEs).
TVEs, particularly those located in the far eastern coastal region,
have proven to be a major contributor to the rapid growth
in GDP in China (by 1991 these enterprises were producing almost
60% of the total output in the countryside, as measured in market
TVEs are typically owned, in whole or in part, by towns or
villages and are therefore defined as "collective" enterprises.
However, the prevalent
class process within these enterprises is clearly capitalist
(wage laborers performing surplus labor for others in an environment
of voluntary labor contracts) and, in many cases, these enterprises
are operated in a manner that is not that different from private
capitalist enterprises (some TVEs are privately owned), with little or no direct governmental involvement
in the appropriation and distribution of the surplus value generated
in the firm. The surplus is, instead, controlled by private
parties who have entered into a contract with the local
government: the contract grants these private parties the
right to determine enterprise investment and management in
exchange for providing the local government with a cut of the
action --- specific percentages of cash flow and/or guaranteed
payments out of cash flow.
The partnership between private economic agents and local governments
provides for an "efficient" solution to the problem
of navigating the often complex rules of local economic relationships,
providing the firm that has been established as a TVE with easy
access to services and inputs necessary to economic success.
On the other hand, the private nature of the actual control over
many of these TVEs provides an "efficient" solution
to the problem of internal governance and motivation. Privately
hired managers have a great deal of flexibility about how to
reward (or punish) productivity of wage laborers in the firm.
The productivity gains in the TVEs seem to be primarily a function
of these special efficiency gains, but are probably also a result
of improved technology (both material technology and the reorganization
of the social relations of production to foster more cooperative
forms of production) and, therefore, is in keeping with the overall
goal of the reforms. The pragmatic modernists can point to
the TVEs as an example of how their approach is, indeed, creating
certain necessary technological (and social) conditions for the
transition to communism, if it is agreed that advanced technology,
including cooperative production relations, are pre-conditions
to communism. What do you think?
In the urban areas, the pragmatists reversed their earlier
tendency towards centralization by granting enterprise general
managers greater control over the enterprise surplus (and later
this power would be vested in enterprise boards of directors,
with general managers serving as the executive authority appointed
by the board --- as in most Western corporations) and devolving
greater control over regulating enterprises (and, perhaps, more
importantly the appointment of enterprise directors) to provincial,
autonomous regional, and municipal governments. The central government
gave up the right to appropriate the surplus of each enterprise
and established a fixed tax rate as the means of revenue collection.
It was anticipated that granting general managers greater autonomy
could improve the financial performance of state owned enterprises
such that the potential tax revenues might be greater than the
net surplus retained by the government under the old system.
This assumption was based on the belief that these general managers
would have a better sense of what the firm needed to do to become
more efficient (and, by definition, more "modern").
The success of this decentralization remains a question, given
the enormous financial difficulties of the state owned enterprise
sector. It appears likely that the government may have miscalculated
the benefits from devolving control to managers and lower levels
of government. State-owned enterprises appear to remain far more
inefficient (from the standpoint of the value of outputs generated
with a given value of inputs) than the aforementioned TVEs, joint-venture
firms, or private sector firms. Why haven't the state owned
been able to improve their efficiency in ways similar to that
described for the TVEs? Perhaps part of the reason is that
decentralization and marketization are not sufficient
conditions for improving the decision-making process within
the SOEs. Many SOEs continue to receive heavy subsidies from
the central government, which is fearful of letting these
firms go bankrupt with the resultant sharp rise in
unemployment. However, as long as SOE managers can avoid
suffering directly the consequences of bad decisions then
there is little incentive to make good decisions. Thus, it
may be necessary to not only decentralize administrative authority,
but to go further and impose genuine "market discipline" through the bankruptcy risk.
This may be less a lesson about "socialism" than about variant
forms of capitalism. The same sort of problem has arisen from
time to time in every capitalist nation where some form of
moral hazard and the agent/principle problem coexist.
In some areas, this policy of encouraging "modernization"
by decentralizing the investment decision making has come via
the advancement of unambiguously private capitalist appropriation
of surplus value. More private capitalist firms have been allowed
to function within the Chinese economy and the numbers of such
firms is growing rapidly. In addition and particularly since 1991, the government has encouraged
the growth of joint-venture enterprises (where one of the partners
is a foreign corporation) and in wholly owned foreign firms operating
in special economic zones (where the normal rules of economic
conduct in China do not apply). Foreign investment,
particularly from Taiwan, has become a major contributing
factor in overall
domestic investment in China and investment growth has been a
key factor driving overall economic growth.
These policies are understood
as "fostering greater international cooperation in the development
of modern technology in China." Despite the hope that foreign
firms will introduce the most up-to-date technologies into China,
there is ample evidence that foreign direct investment has tended
towards less advanced forms of technology. And some leftists
in the Party are unhappy with these policies because they are
uncomfortably reminiscent of the days under the Guomindang when
foreign firms operated freely in some Chinese cities, ignoring
Chinese laws and habits, and exploiting Chinese laborers and
natural resources with little or no benefit to the Chinese people.
The Pragmatic rightists counter that this new case of foreign
direct investment in China bears no real resemblance to the earlier
"imperialistic" days because the foreign firms now
operate in an environment controlled by a strong Chinese state.
The failure of the state owned enterprise sector to fully
realize the expected benefits from decentralization (demonopolization
of surplus appropriation) was a blemish on an otherwise sterling
record of economic performance under the new reformist strategy.
The pragmatic modernists were able to further consolidate
their control over public policy in 1984 and to beat back the
complaints of Party members who remained skeptical about their
strategy. At the 1984 meetings of the Central Committee of the
CPC and the 1992 National Congress of the CPC, new series of
reforms, designed to further establish a "socialist market
economy," were approved. This strategy of "socialism
with Chinese characteristics" would be further developed
by continuing the process of decentralization of control over
state owned enterprises, forcing such enterprises to live under
"hard budget constraints" (which means that the central
government would no longer subsidize firms that lose money),
and extensive deregulation of market conditions to allow for
greater competition between firms. The Party also affirmed that
priority would be given to increasing export earnings to finance
the further modernization of the Chinese economy (and military).
Overall, the pragmatic modernists feel pretty good about
the successes of their policies. The proof, as it were, is in
the pudding and the pudding is economic growth.
In this current period of region wide economic crisis, the Chinese
leadership can feel even better about their approach, having
been able to weather the most serious storm that global capitalism
has been able to muster in the Asian region. And as for the technological
determinist argument, well, there is plenty of evidence of advancing
technology in Chinese firms and households, although I am often
perplexed at the slowness of the government bureaucracy and the
banks when it comes to innovating new technology. But perhaps
that is a blessing in disguise. As for whether this advancing
technology will help to bring about a transformation in China
towards greater economic and political democracy (towards real
communism?), I haven't a clue, although I suspect that ultimately
improved technology is not sufficient to guarantee such a transformation.
What do you think? I'll look forward to hearing your opinions
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 This was not a new idea for leaders in a communist movement.
Joseph Stalin had a similar belief in the superiority of "Western"
technology, particularly the form that was prevalent in British
industry. Stalin pushed Soviet industry to replicate the British
industrial machine but to do so on a larger scale than the original.
Also, note that the "Four Modernizations" was first put
forth as an objective of the CPC by Zhou Enlai in 1975 (not Deng Xiaoping,
as is often thought). See Immanuel C-Y Hsu's China Without Mao,
1983 or the
online essay (based on Hsu's text) by Thayer Watkins.
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 Marx had not anticipated that a pro-communist revolution
would take place in less industrialized, less technologically advanced
nations, such as Russia and China. He believed the dynamics of capitalist
development would lead to revolution and therefore be more likely to
happen in those nations where capitalist relations were more pervasive, such as England or Germany. He saw the revolution as springing up from the so-called proletariat or working class who had
gained a consciousness of collective action and organization through
their participation in large-scale capitalist manufacturing. Lenin recognized
that the conditions that Marx viewed as necessary (though not
sufficient) to bringing about a pro-communist revolution were not present
in Russia and he did not trust the "backward" peasantry and
"underdeveloped" Russian proletariat to lead a progressive movement for
change. His invention of the vanguard party concept was his
solution to the problem of revolution in the midst of what he saw as
backwardness: a pro-communist intellectual elite would make the correct
decisions for the workers and peasants, against their backward
judgments. It was an ideological convention that made it all the easier
to suppress popular democracy in favor of totalitarian rule of the few
over the many. Thus, Lenin sowed the ideological seeds that Stalin was to
later harvest in abundance and that provided the leadership in China with
an important precedent for undemocratic methods of rule that were,
nevertheless, accepted as consistent with socialism.
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 Under competitive capitalist social
relationships (grounded in the free wage labor contract), automation
provides for replacing living laborers with more predictable
machines and therefore reducing the risk to future surplus value/cash
flow. Lower risk, all else being equal, increases the net present value
of productive investments and therefore the overall value of the
capitalist firm. This higher value may be reflected, under conditions of
commoditized ownership, in higher market values for capitalist firms. To
the extent that this is the case, then corporate finance theory and
Marxian theory are in agreement on the tendency for capitalist firms to
constantly increase the capital intensity of production.
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 During the Maoist era growth was healthy but
far less than has been the case during the Reform era. The growth rate
from 1957 to 1977 has been estimated at from 5-6%, while the growth rate
for the first stage of the Reform era, from 1978-1989, has been estimated
at 9.5% and the growth rate in the post-Tiananmen 1990s has been estimated
at 11%. Attempts to critique the Chinese statistics on growth has been
mixed, but some of these alternative estimates have even produced higher
growth rates than the official Chinese numbers. And most of those that
have produced lower numbers have not deviated significantly from the
official estimates (many are within reasonable statistical margins of
error). The widest deviations from the official numbers have been the
result of using much higher estimates of pre-reform GDP, using alternative
inflation deflators, and alternative weights on the component parts of
GDP. Nevertheless, by any measure Chinese economic growth in the
post-1978 period has been extraordinary, particularly given the massive
size of the Chinese economy.
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 (Note added December, 2003) Both the savings
rate and gross investment rate in China are relatively high. Gross
investment is almost 40% of GDP in China (compared to about 25% for South
Korea). According to studies done by the IMF (and cited in an essay by
Martin Wolff, accessed via Singapore Straits Times Interactive and
originally published in the Financial Times), most of the growth in
China can be explained simply
by capital formation and shifts of labor from low productivity agriculture
to higher productivity industry. Krugman and others have argued that this
type of "cheap" growth eventually plateaus as the supply of surplus
workers in agriculture runs out. Nevertheless, even if this is true,
according to Wolff essay, there remains "at least 160
million" surplus workers in the rural areas and in state-owned
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Copyright © 1999 Satya J. Gabriel, Mount Holyoke College.
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