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	Workers Vanguard No. 875	1 September 2006

Defend Chinese Deformed Workers State!

For Proletarian Political Revolution!

China's "Market Reforms": A Trotskyist Analysis

Part Two

We print below the second and concluding part of this article. Part One appeared in WV No. 874 (4 August).

Martin Hart-Landsberg and Paul Burkett have very little to say about China in the Mao era in China and Socialism: Market Reforms and Class Struggle (which originally appeared as a lengthy article in Monthly Review, July-August 2004). And that little is confused and contradictory. They concede that “at the time of Mao’s death in 1976, the Chinese people remained far from achieving the promises of socialism.” But since a main theme of theirs is that capitalism has been “restored” in China, they clearly regard Mao’s China as socialist in some sense and as qualitatively different from and better than what exists in China today. In their rejoinder to Victor Lippit, which appeared in Critical Asian Studies (37:4 [2005]), they write of “China’s movement away from socialism.”

For his part, Lippit argues in the roundtable discussion of China and Socialism that appeared in Critical Asian Studies (37:3 [2005]): “Such a system cannot be called ‘socialism’; my own preference is to use the term ‘statism’.” Moreover, he maintains that socialism is not possible in the present historical epoch, especially in economically backward countries. Like Hart-Landsberg and Burkett, he does not define what he means by socialism. From the context he clearly means something close to full communism: a society in which the productivity of labor has reached a level sufficient to overcome economic scarcity.

Despite their profession of a Marxist theoretical framework, Hart-Landsberg and Burkett evidently do not consider the concept of the dictatorship of the proletariat to be relevant in understanding post-1949 China. Yet Karl Marx developed this concept to explain a post-revolutionary society still characterized by economic scarcity and inequality, differential wage labor and a coercive state apparatus:

“What we have to deal with here is a communist society, not as it has developed on its own foundations, but, on the contrary, just as it emerges from capitalist society; which is thus in every respect, economically, morally and intellectually, still stamped with the birthmarks of the old society from whose womb it emerges. Accordingly, the individual producer receives back from society—after the deductions have been made—exactly what he gives to it….

“Between capitalist and communist society lies the period of the revolutionary transformation of the one into the other. Corresponding to this is also a political transition period in which the state can be nothing but the revolutionary dictatorship of the proletariat.”

—Critique of the Gotha Program (1875); emphasis in original

Manifestly, the People’s Republic of China, from Mao Zedong to Hu Jintao, was and is very different from the normative concept of the dictatorship of the proletariat developed by Marx in the latter part of the 19th century. China is a nationally isolated and bureaucratically ruled workers state in an economically backward country confronting hostile and more powerful capitalist-imperialist states.

As is well known, Karl Marx and Friedrich Engels believed that proletarian revolutions would first occur in West Europe and would then extend to North America. Hence, they envisioned the dictatorship of the proletariat as a relatively brief, harmonious transition to socialism. The actual course of history, beginning with the first successful socialist revolution in economically backward Russia in 1917, turned out to be more complex and contradictory. Nonetheless, the Bolshevik Party of V.I. Lenin and Leon Trotsky never thought that socialism could be built in Russia alone. In fact, they directed their entire activity, from the founding of the Third International on, to the construction of revolutionary workers parties across the globe to lead the struggle for the proletarian overthrow of capitalist rule internationally.

However, the failure of international revolution, particularly the defeat of the 1923 German revolution, and the increasing isolation of the young Soviet workers republic, combined with the devastation of World War I and the Civil War, laid the material basis for the growth of nationalist bureaucratism. Beginning in 1923-24, the Soviet Union underwent a bureaucratic-nationalist degeneration under the increasingly despotic rule of Joseph Stalin. Nonetheless, Soviet global power remained a partial counterweight to world imperialism, thus making possible the Chinese Revolution of 1949 and the consolidation of the bureaucratically deformed workers state that emerged from it. During the Korean War of the early 1950s, the U.S. rulers not only threatened but actually considered using nuclear weapons against Red China. They did not do so mainly for fear that this might lead to war with a nuclear-armed USSR.

The victory of the Communist-led, peasant-based “Red Armies” over the bourgeois-nationalist Guomindang in 1949 destroyed the military apparatus of the semicolonial Chinese capitalist state. Chiang Kai-shek and his cohorts fled with the remnants of their armed forces to the island of Taiwan under the protection of American imperialism. The new Chinese Communist Party (CCP) regime immediately established a monopoly of political power and organization. The Chinese bourgeoisie was thus politically expropriated, and a few years later the economy was nationalized. At the same time, any movement on the part of the working class toward independent political activity was ruthlessly suppressed. Mao and his colleagues proceeded to construct a state modeled in its basic economic and political structures on the Soviet Union under Stalin.

Mao’s China: Ideology and Reality

During the 1960s, Maoism, with its appeals to egalitarianism, mass mobilizations and moral as against material incentives, was attractive for many left-wing intellectuals around the world. Hart-Landsberg and Burkett reprise that attitude, though they are much more critical of Mao’s China than was the earlier generation of Western Maoist intellectuals, such as Paul Sweezy. Still, they describe China in the Mao era as “achieving full employment, basic social security, and generalized equality for Chinese working people.”

Certainly, income distribution in China was far more egalitarian than in the neocolonial capitalist countries of Asia like India and Indonesia. But it was not more egalitarian than in the Soviet Union in this period, and was actually less so in certain important respects. In the mid 1950s, China instituted a wage and salary structure in state-owned enterprises modeled on that of the Soviet Union, and that structure was maintained throughout the Mao era. The income ratio of the top administrative grade to the lowest working-class grade was 15 to 1. Moreover, as in the USSR, high-level party and government functionaries, enterprise managers and the like in China could and did supplement their official income through various forms of parasitism and corruption.

The widening socioeconomic gulf between rural and urban China did not begin with the market-oriented “reforms” of Deng Xiaoping. It was already pronounced in the last years of the Mao era. Between 1952 and 1975, the non-agricultural population’s average per capita consumption increased by 83 percent compared to only 41 percent for rural toilers (Carl Riskin, China’s Political Economy: The Quest for Development since 1949 [1987]). In 1980 (at the start of the “reform” era), city dwellers consumed 60 percent more food grain per capita and ate almost two and a half times as much meat as members of the rural communes. The difference in ownership of manufactured consumer goods (e.g., watches, sewing machines, radios) was even greater. Overall, average consumption in urban China was two to three times as much as in the countryside.

By contrast, in the Soviet Union during the 1960s and ’70s there was an appreciable narrowing of the gap between the living standards of the rural and urban populace. A large fraction of collective farms voluntarily transformed themselves into state farms whose workers received uniform wages and benefits not dependent upon fluctuating agricultural output and government procurement prices. By the early 1980s, the earnings of farmers in the USSR were actually increasing at a faster rate than those of factory and office workers. This greater degree of egalitarianism was possible only because the Soviet Union had by then attained a productive level far greater than that of China.

The economic strategy pursued by the CCP bureaucracy during the Mao era was basically similar to that of Stalin’s Russia in the 1930s. Consumption levels of both peasants and workers were held down to maximize the economic surplus, which was then concentrated in heavy industrial investment. Between 1952 and 1975, industrial growth averaged 11 percent a year. At the beginning of this period, industrial output accounted for 20 percent of China’s net material product; at the end, the figure was 45 percent. The construction of a substantial, relatively modern heavy industrial sector during the Mao era laid the basis for the high rates of economic growth and the overall improvement in living standards under Deng and his successors. However, the highly capital-intensive nature of this industrial investment limited the expansion of the urban working class and the corresponding reduction in the social weight of the peasantry. Between 1952 and 1975, the non-agricultural component of the labor force only increased from 16 to 23 percent.

By the last years of the Mao era, the regime’s economic strategy was encountering increasing obstacles and contradictions while generating popular discontent. In large measure due to the inefficiencies of bureaucratic commandism, labor productivity had stagnated since the mid 1950s, rising less than 1 percent per year. To offset this, an ever-larger fraction of total national income was expended on investment in heavy industry, rising from 24 percent in the mid 1950s to 33 percent in the early 1970s. The massive economic resources devoted to industrial expansion were mainly extracted from the peasantry through heavy taxation and compulsory deliveries of grain and other agricultural produce at artificially low prices. In addition, the real wages of urban workers were essentially frozen for two decades. The American left-wing intellectual Maurice Meisner, who is generally quite sympathetic to Mao’s China, nonetheless recognized:

“As consumption and popular living standards suffered, the accumulation rate rose to maintain the high pace of heavy industrial development. Without real gains in productivity, it is unlikely that these high levels of accumulation and investment could have been sustained much longer without further impoverishing the population.”

—The Deng Xiaoping Era: An Inquiry into the Fate of Chinese Socialism, 1978-1994 (1996)

In their condemnation of China during the “reform” era, Hart-Landsberg and Burkett ascribe great importance to the elimination of guaranteed lifetime employment in state-owned enterprises as a decisive step toward the supposed restoration of capitalism. They write in their rejoinder to Lippit: “Such material insecurity is, in fact, the essence of capitalism’s social separation of workers from the conditions of their production.”

Certainly, Chinese workers regarded guaranteed lifetime employment and benefits (called the “iron rice bowl”) as one of the main social gains of the 1949 Revolution. However, a country as poor and economically backward as China obviously could not provide hundreds of millions of peasants with jobs in state-owned industrial enterprises, much less ones that were guaranteed for life and at a level of wages and benefits two to three times that of the income of members of the rural communes.

In order to maintain social order, the CCP regime during the Mao era forcibly prevented peasants from migrating to the cities in search of jobs. Moreover, the regime did not provide jobs in the state sector to all members of the increasing urban labor force. During the Cultural Revolution, some 17 million urban youths upon graduating from school were shipped off to the rural communes, forcibly separating them from family and friends. If they had been given a choice, how many of these youths do Hart-Landsberg and Burkett think would have opted to work on a collective farm rather than take almost any job in the city where they lived, even if it didn’t come with a lifetime guarantee and was paid below the prevailing wage? By the last years of the Mao era, the rural communes had become a massive reservoir of disguised unemployment and underemployment.

Part of the purpose of the Cultural Revolution was to cut back the living conditions of the working class in the name of a phony “socialist egalitarianism.” Furthermore, guaranteed lifetime employment in a given enterprise was not economically rational and increasingly impeded maximizing labor productivity through new investment. A large fraction of China’s industrial plant was built during the First (and most successful) Five Year Plan in the mid 1950s. This embodied the most up-to-date technology then available to China via the Soviet Union. By the 1970s, many industrial enterprises had become technologically obsolescent. Maximizing labor productivity for a given level of investment required shutting some enterprises and replacing them with new ones or retooling with newer, labor-saving technologies. In either case, a large number of specific, existing jobs would be eliminated.

A genuinely socialist government would re-employ the redundant workers elsewhere at comparable wages and benefits, including providing relocation and retraining at state expense. Of course, Deng and his successors did not do that. Workers laid off from state-owned enterprises were left to fend for themselves, and many suffered real deprivation. But then again, the Mao regime effectively kept real wages frozen for two decades through bureaucratic commandism and police-state repression.

The market-oriented reforms initiated by Deng were an attempt to address within the framework of Stalinist bonapartism the inefficiencies of bureaucratic commandism. As we wrote in the 1980s:

“Within the framework of Stalinism, there is thus an inherent tendency to replace centralized planning and management with market mechanisms. Since managers and workers cannot be subject to the discipline of soviet democracy (workers councils), increasingly the bureaucracy sees subjecting the economic actors to the discipline of market competition as the only answer to economic inefficiency.”

—“For Central Planning Through Soviet Democracy,” WV No. 454, 3 June 1988; reprinted in “Market Socialism” in Eastern Europe (July 1988)

Contradictions of the “Reform” Era

When Mao died, China, while having constructed a substantial, relatively modern heavy industrial sector, was still a predominantly rural, peasant country. Over three-quarters of the labor force was engaged in farming and over 80 percent of the population lived in the countryside. One impetus for the “market reforms” was that agricultural output had failed to keep pace with industrial growth; indeed, the low level of agricultural productivity was a fundamental barrier to rapid and extensive industrialization. Today, over 50 percent of the labor force is employed in manufacturing, construction, transport and the service sector, and 40 percent of the population is urbanized. From a Marxist standpoint, this is a progressive development of historic import. So too is the corresponding quantitative and qualitative expansion of China’s industrial capacity.

At the same time, the policies of the Beijing Stalinists have victimized and immiserated significant sections of the working class and rural toilers, widened the gulf between rural and urban China, spawned a class of capitalist entrepreneurs with familial and financial ties to the CCP officialdom as well as offshore Chinese capitalists, and generated an affluent managerial/professional/technocratic stratum enjoying Westernized lifestyles.

Hart-Landsberg and Burkett on the one side and Lippit on the other express the opposite poles of that contradiction. The former select evidence to argue that everything has gotten worse for the working people of China. They point to the stark and increasing social inequalities, the growth of urban unemployment, the deterioration in public health care and primary education. Lippit selects evidence in the opposite direction. He points out that the large majority of working people—rural as well as urban—have experienced a considerable improvement in their living standards, though at greatly uneven rates. He cites studies showing that hundreds of millions of peasants have been lifted out of poverty during the past few decades.

In neither China and Socialism nor in their rejoinder to Lippit do Hart-Landsberg and Burkett cite the easily accessible statistics indicating the basic measure of changing economic conditions of the working class. Between 1979 and 1998 there was an average annual increase in the price-adjusted earnings of manufacturing workers of 4 percent. Only in 1988 and 1989 was there a decrease because of the exceptionally high rate of inflation at that time. Between 1999 and 2002 (according to the 2003 China Labor Statistical Yearbook) wages increased at an annual average of close to 12 percent. In the past few years, major industrial centers like Shenzhen and Shanghai have actually begun to experience a labor shortage, especially among skilled workers. As a consequence, employers are offering higher wages and improved benefits to attract labor. Hong Liang, an economist with the Wall Street firm Goldman Sachs, commented, “We’re seeing an end to the golden period of extremely low-cost labor in China” (New York Times, 3 April).

However, despite China’s economic growth rate of close to 10 percent for more than two decades, not all sections of the Chinese working class have experienced an improvement in their living standard. Quite the contrary. Beginning in the mid 1990s, small and medium-sized state-owned industrial enterprises were privatized, typically sold off to their former managers at giveaway prices. As a result of these privatizations, along with mergers and outright closures, some 20 to 30 million workers, disproportionately women, were laid off. Those who were fortunate found new jobs, mainly in the private sector, but generally had to take a cut in pay and received little or none of the extensive benefits provided by state-owned enterprises.

One major region was especially economically devastated by the closures: the northeast “rust belt,” where a large fraction of older industrial plants was concentrated. Here as much as 40 percent of the working class is jobless. Overall, unemployment is estimated to range from 6 to 13 percent of the economically active urban population. The National Development and Reform Commission, a government agency overseeing economic policy, projects that if the economy grows by 8 percent this year, China will generate an additional eleven million jobs. That is less than half of the official number of 25 million urban unemployed plus new entrants into the workforce (Economist [London], 25 March).

It is generally recognized that the “reform” era has seen a widening of inequalities, both within the cities and between urban and rural areas. In addition to the new class of rich capitalists, urban China now has a significant layer of petty-bourgeois professionals whose living standards are broadly similar to those of their equivalents in advanced capitalist countries. Meanwhile, according to the China Human Development Report 2005, put out by the United Nations Development Program, the gap between the average disposable income of urban and rural Chinese has reached 3.2 to 1.

Such statistics should not obscure the fact that in important respects there has also been a substantial improvement in the conditions of the peasantry. The consumption of electricity in rural areas increased almost eightfold between 1978 and 1997. Most peasant families possess some household appliances. Lippit points out that by 1997 two-thirds of rural households had at least a black and white television set, a basic means of access to modern cultural life.

However, in other important respects the conditions of the peasantry have worsened. The rural communes of the Mao era provided rudimentary medical care, primary and secondary schooling, old-age pensions and other social programs. Between 1980 and 1983, the Deng regime dissolved the communes, replacing them with family farms with long-term leases—the “household responsibility system.” The social programs formerly provided by the communes were supposed to be taken over by the local government. Given the extreme decentralization of China’s system of government finance, the meager revenues of rural townships and villages were wholly inadequate for this. Peasant families had to pay out of pocket for medical care and schooling for their children. The social consequences were predictable:

“Despite commendable progress in providing access to education, serious imbalances remain. Rural areas lag far behind cities and China’s illiterate population is concentrated in rural areas. Great differences remain in school quality, and the gap in educational opportunities widens as students get older.

“Significant gaps also remain in the health of urban and rural residents and among residents of various regions. Rural child and maternal mortality are twice as high in rural areas as in cities.... All indicators point to distinct gaps in nutrition between rural and urban children.”

—China Human Development Report 2005

There has been a sharp upsurge in what are officially called “mass incidents of unrest” in the countryside. These peasant protests and riots have been directed against the seizure of land by local officials without proper compensation and against arbitrary taxation, corruption and other bureaucratic abuses. In response, the Hu Jintao regime has promised, under the slogan of a “new socialist countryside,” to improve the conditions of the peasantry. The tax burden has been reduced, tuition fees at primary and secondary schools will be eliminated for many rural students, and the central government is slated to spend more money in rural areas for social programs and investment in infrastructure. However, as the Economist (11 March) pointed out:

“These measures do not herald any remarkable policy shift. Central-government spending on the countryside will still amount to only 8.9% of total government expenditure, up from last year’s 8.8% but down from 9.2% in 2004. Abolishing the agricultural tax and other fees imposed on peasants will save each rural dweller an average of 156 yuan ($19) a year—about 4.8% of net income.”

A real narrowing of the gap between rural and urban China will require a massive redistribution and reallocation of economic resources. The introduction of modern technology in the countryside—from combines to chemical fertilizer to the whole complex of scientific farming—would require a qualitatively higher industrial base than now exists. In turn, an increase in agricultural productivity would raise the need for a huge expansion of industrial jobs in urban areas to absorb the vast surplus of labor no longer needed in the countryside. Clearly, this would involve a lengthy process, particularly given the still limited size and relatively low level of productivity of China’s industrial base. Both the tempo and, in the final analysis, the very realizability of this perspective hinge on the aid that China would receive from a socialist Japan or a socialist America, underlining the need for an international proletarian revolution.

China’s Proletariat and World Socialist Revolution

While Hart-Landsberg and Burkett argue that conditions have worsened for the peasantry and the working class of China during the “reform” era, the crux of their position lies on a fundamentally different plane. They condemn the development of the largest industrial working class in the world and identify this with the “restoration” of capitalism. Here their anarcho-populist outlook is directly counterposed to a Marxist understanding of social progress and the class difference between workers and peasants. In their rejoinder to Lippit, they quote with approval a statement by Tai-lok Lui, a leftist academic who participated in the discussion on China and Socialism in Critical Asian Studies: “The post-1978 economic reform has brought about the real proletarianization of China’s workers and farmers. They have been truly subordinated to the market and separated from the ownership of the means of production.”

What does Tai-lok Lui, who equates “market reforms” with the restoration of capitalism, mean when he writes that the enormous growth of China’s proletariat has been accompanied by their separation from “the ownership of the means of production”? What he is presumably referring to, in addition to privatizations in industry, is the liquidation of the rural communes of the Mao era that encompassed the large majority of the population. These communes were basically an aggregation of backward peasant holdings utilizing labor-intensive methods and relatively primitive technology. Insofar as China under Mao was relatively more egalitarian than under Deng and his successors, this was an equality of poverty in an overwhelmingly rural society.

To understand the historical significance of the transformation of a large fraction of China’s peasantry into proletarians, it is useful to look back at Karl Kautsky’s The Agrarian Question (1899). Lenin considered this a very important contribution to an understanding of the modern world economy. (Kautsky’s later rightist revisionism and hostility to the Bolshevik Revolution do not negate the value of his earlier works.) There is, of course, a fundamental difference between the class character of the late 19th-century imperial Germany that Kautsky described and the People’s Republic of China. Nonetheless, there is a parallelism in the social effects of the proletarianization of China’s peasantry under the “market socialist” economy. As Kautsky wrote:

“By bringing together the dispersed workers, the factory promotes their mutual communication; by developing the system of transportation and bringing more intellectually developed workers from the towns into the village, it brings the factory village into closer contact with the outside world. It is, therefore, a means for bringing part of the rural population closer to the urban proletariat, of gradually awakening their interest in and understanding of the latter’s struggle for emancipation. And finally, under favourable circumstances, it allows them to participate in this struggle.”

In fact, migrant workers from the countryside have been in the forefront of recent labor struggles in China. In the southeast, many young migrant women have gone on strike or otherwise refused to work under horrible sweatshop conditions, producing a severe labor shortage since the summer of 2004. In Shanghai and Beijing, migrant workers, who make up 80 percent of the labor force in the booming construction industry, have fought for and won better working conditions.

While restrictions on the movement from rural to urban China have been relaxed over the past few decades, they have not been eliminated. Migrants, forced into the most dangerous and menial work, lack the rights of legal city residents and are typically forced to live in segregated areas. Many urban workers look down on migrants, who are seen as stealing jobs and depressing wages. A revolutionary vanguard party in China today would struggle to unify all sectors of the working class in alliance with the rural toilers and urban poor. Integral to the perspective of a proletarian political revolution is the fight for migrants to receive all the rights enjoyed by legal residents, including access to health care, housing and public education, as well as equal pay for equal work.

In their debate over China and socialism, the liberal Lippit and the self-professed Marxists Hart-Landsberg and Burkett share a fundamentally false framework. At an economic level, both reject the Marxist understanding that capitalism is a fetter on the global development of the productive forces and that the latter can only progress on the basis of a planned, international socialist economy. At a political level, both reject the perspective of world proletarian revolution as the only road to achieving such a society, finally resolving the problem of scarcity.

In his seminal examination of the Stalinist degeneration of the USSR, The Revolution Betrayed (1936), Trotsky cited Marx’s comment in The German Ideology (1846) that “A development of the productive forces is the absolutely necessary practical premise [of communism], because without it want is generalized, and with want the struggle for necessities begins again, and that means that all the old crap must revive.” By “all the old crap,” Marx meant class oppression, inequality and exploitation. Flatly repudiating this materialist understanding, the Stalinists preached the idiocy that socialism could be built in a single country if only imperialist military intervention were thwarted. The corollary to this perversion of Marxism was the Stalinists’ betrayals of proletarian revolutions internationally. In the Soviet Union, the end result was devastating capitalist counterrevolution. In China, Stalinist misrule has produced a society rife with contradictions and social discontents.

The People’s Republic of China today exhibits both the tremendous advantages that are a consequence of the overthrow of the capitalist system—centrally, a level of economic growth far outstripping that of capitalist neocolonies like India—as well as the profoundly negative fruits of Stalinist bureaucratic rule. The latter include sharply increased inequality, the growth of new bourgeois forces intertwined with the parasitic bureaucracy, and the looming threat of a capitalist counterrevolution that would destroy the gains made by China’s worker and peasant masses. A Leninist-Trotskyist party must be forged to lead China’s huge and powerful working class, at the head of the peasants and urban poor, in a proletarian political revolution. As Trotsky wrote in The Revolution Betrayed:

“It is not a question of substituting one ruling clique for another, but of changing the very methods of administering the economy and guiding the culture of the country. Bureaucratic autocracy must give place to Soviet democracy. A restoration of the right of criticism, and a genuine freedom of elections, are necessary conditions for the further development of the country. This assumes a revival of freedom of Soviet parties, beginning with the party of Bolsheviks, and a resurrection of the trade unions. The bringing of democracy into industry means a radical revision of plans in the interests of toilers…. ‘Bourgeois norms of distribution’ will be confined within the limits of strict necessity, and, in step with the growth of social wealth, will give way to socialist equality…. The youth will receive the opportunity to breathe freely, criticize, make mistakes, and grow up. Science and art will be freed of their chains. And, finally, foreign policy will return to the traditions of revolutionary internationalism.”