Prof. Gabriel's Home Page Prof. Gabriel's online papers Prof. Gabriel's courses Seminar in Comparative Economic Systems Asian Economies Mount Holyoke College Economics

Essay Number 8
October 1998  

Technological Determinism & Socialism with Chinese Characteristics: Pulling the Cart without Watching the Road?

thin rule
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 relatively unfettered.

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 within the 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.[1]   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 Xiaoping, 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). [2] 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).[3] 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 such issues.

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 their government.

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 forces 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, consistent with 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 Marxism.

If one agrees with the modernist Marxist view of a technologically determined teleology, then the pragmatic modernists might be better described 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 factories.

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. [4]  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.

Market 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 economy."

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 Policy 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 productivity.

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 terms).

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 enterprises (SOEs) 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.[5] 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 in class.

Return to top of page

Previous Web Essay    Next Web Essay



[1] 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.

Return to Essay


[2] 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.

Return to Essay


[3] 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.

Return to Essay


[4] 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.

Return to Essay


[5] (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 enterprises.

Return to Essay


Return to top of page

Previous Web Essay    Next Web Essay


Copyright © 1999 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. "Capitalism, Socialism, and the 1949 Chinese Revolution: What Was the Cold War All About?" 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.