[Militant No. 820, 24 October 1986 p. 10]
Do the current reforms raise the spectre of capitalist restoration? Even Reagan now refers to Deng’s group as ’so-called Communists‘, perhaps believing that they have seen the light.
Those who argue this, whether eager capitalists or apprehensive socialists, greatly exaggerate the scope of the reforms. They are leaving out of account the fundamental economic and social relations established by the revolution, which will not be transformed overnight by superficial reforms.
The barriers to a return to capitalism can be summarised under four headings.
(1) The means of production are still dominated by nationalised property, controlled by the state.
In the countryside, while most farming and other production is managed by households, land ownership remains a state monopoly: the regime still has the ultimate power to redirect productive activity.
Hybrid
In industry, the big state enterprises continue to dominate all key sectors, and are still subject to central planning agencies. While market features have been introduced into the state sector and private firms are allowed more scope, the economy will still be under the control and direction of the central apparatus.
(2) Attempts to graft market elements on to the centrally planned system, as the experience of Russia and Eastern Europe has shown, produces a distorted hybrid. It may flourish initially but later produces sour fruit. Similarly, moves towards decentralisation inevitably conflict with the economy’s basic centralised mechanism.
Rapid investment, drawing on state firms‘ retained profits and bank loans, has stimulated consumer industries. But almost immediately it led to ‚overheating‘ – shortages of materials and skilled labour, wasteful duplication of projects, and excessive absorption of wages and savings by ‚luxury‘ goods.
‚Flexible‘ pricing has boosted the black market. The most serious symptom is the appearance of inflation, which has risen to about seven per cent in the countryside and 14 per cent in the towns, a high level by recent standards.
Deng’s reforms have already been punctuated by a stop-go rhythm. In 1980-81, after the initial phase, the leadership put the brakes on, curbing adventurous investments and price increases. Deng was also forced to stamp down on ‚economic crimes‘ , corruption, black marketeering and speculation.
One leading Chinese economist, Jiang Yiwei , writing in Social Sciences in China, 1980, summed up the problem: „centralism leads to rigidity, rigidity leads to complaints, complaints lead to decentralisation, decentralisation leads to disorder, and disorder leads back to centralisation“.
In 1983, the leadership edged forward again, applying new reforms. But then 1986 was declared ‚Year of Consolidation‘.
This summer the Shanghai-based World Economic Herald said that: „The power which was transferred (in 1984) to the enterprises has actually been withdrawn.“ The journal claims that the regime has, in effect, now abandoned its reform policy by applying retrenchment policies identical with the old administrative controls.
Massive swing
Far from opening up ‚the capitalist road‘, recent measures will sooner or later produce a massive swing back in the other direction. There are already pointers towards this.
(3) Economic reforms· inevitably come into collision with the social interests of the ruling bureaucracy. Most party and state bosses undoubtedly welcomed measures to revive a stagnant economy. They certainly have no objection to the increased perks that accompany more emphasis on ‚incentives‘. However, if decentralisation and managerial initiative go too far, the authority of the bureaucracy is undermined. If market methods produce dislocation and stimulate popular discontent, the bureaucrats inevitably move to tighten their grip on the levers of power.
Deng’s reform programme, reported the Wall Street Journal (9 September) is being subverted by „political and economic losers and Communist ideologues.“ A major problem, the Journal (3 September) commented, „is that middle- and lower-ranking officials are blocking economic reform efforts for fear of losing power and privileges.“ The emerging problems have strengthened opposition amongst a section of the bureaucracy. Chinese children drink American coke, but the private enterprise system cannot return.
(4) The enormous gains of the revolution of 1949 are embedded in the experience of many millions of workers and peasants, who represent a class bulwark against the restoration of capitalist exploiters. Life is still quite austere for most people, and discontent with ‚get rich‘ market policies will awaken new demands for socialist measures. Great expectations have been awakened by Deng’s reforms : everyone welcomes the prospect of improved living standards. But the rural poor and many urban workers and youth are now feeling some of the negative effects.
In the countryside, where a minority has been encouraged to ‚lead by getting rich‘, incomes are being sharply polarised. Per capita income of rich regions is estimated to be 20 times higher than the per capita income in the poorest farming communities. There are also differences within communities, however, and a rich peasant-entrepreneur in a prosperous area may have an income 100 times that of a poor peasant household in a poor region. As commercial farming takes off, many millions will lose out. But the prospects of them finding jobs in the cities are extremely limited.
The conditions of most urban workers have improved since 1978 but many now feel threatened by moves to abolish the ‚iron rice bowl‘, the system of job security and guaranteed income. There is deep resentment at the phenomenal growth of perks for factory managers, top functionaries and new rich entrepreneurs. An end to the adequate supply of lower priced basic foods and other necessities, previously the great strength of the Chinese economy, will especially fuel mass discontent.
For all these reasons talk of a return to capitalism is fanciful. Apart from the social barriers, rooted in China’s class relations, worldwide economic crisis and political upheavals testify to the inability of capitalism to develop the productive forces of the underdeveloped lands. (The apparent success of capitalism in Japan, South Korea, Taiwan, and similar states, will not save these countries from explosive social crises in the coming period.) It is only on the basis of the foundations laid by the post-1949 development of agriculture and especially heavy industry under the nationalised, planned economy, that the Western banks and multinationals can now intervene to implant segments of modern technology and production.
New phase
Until now, the bureaucracy in China has been relatively secure, surviving even the explosive upheaval of the Cultural Revolution relatively unscathed. Although acting as an oppressive political caretaker for a hitherto weak and isolated working class, the bureaucracy has played a relatively progressive role in developing China’s productive forces.
However, the economy has now entered a new phase. Deng’s programme shows that the bureaucracy can no longer follow a policy of national self-sufficiency, concentration on heavy industry and crude coercion of the workforce. That line reached its limits, producing chronic stagnation, which is why the top leadership had to try another solution.
The only real solution, as in the other Stalinist states, is for the working class to take over democratic control and management of production and the state. This is the one approach the parasitic bureaucracy will never take, and therefore they are forced to turn to the capitalist West for help. This in itself is a reminder that their progressive role is far from unlimited. Meanwhile, any development which is stimulated by the reforms can only strengthen the working class – the force which will eventually take the future into its hands.
Box: Deng’s reforms
Beginning in 1978, the Deng leadership introduced a series of economic reforms. These revived a stagnant economy, and initially produced marked – if uneven – gains in agricultural and industrial output.
After a retrenchment, renewed reform in 1984 produced a peak annual growth rate of over 20 per cent in the first half of 1985. But the new policies have produced shortages, inflation, and discontent amongst those who have not shared in the new prosperity.
In agriculture, which still accounts for about two-thirds of the labour force and a third of gross national product, the government boosted output by raising ‚procurement prices‘ – the level of payment for mandatory state purchases of staple foods.
After 1983, the government gave way to massive pressure from below for de-collectivisation of agriculture. Retaining ownership of all land, the state now allows the leasing of plots to households. Under the ‚responsibility‘ system, involving a contract to sell a quota to the state, farmers can sell grain and other crops on the market. ‚Specialist‘ households are allowed to run manufacturing and service enterprises employing labour.
In industry, the reforms have been more complicated, and problems have forced the leadership to make modifications. The ‚commanding heights‘ remain under central control, but state enterprises are allowed to trade part of their output at ‚flexible prices‘. After paying tax, state firms are allowed to retain profits to invest in their own projects. Both ‚collective‘ and private enterprise have been allowed to raise capital and sell goods and services on a market basis. Administrative controls were relaxed and much more initiative allowed to local managers. Emphasis shifted from ‚red‘ to ‚expert‘, with attempts (not wholly successful) to introduce individual incentives and flexibility of labour.
In external economic relations there was a sharp turn away from Maoist autarky. From 1978 growth was linked to the import of modern technology and capital goods from the West. The state sanctioned large scale borrowing from foreign banks and agencies. After 1979 a number of Special Economic Zones were established around the coastal cities, and the tax and tariff rules for foreign investors were relaxed.
The ‚open door‘ is a vital part of the reform programme, but it has contributed to a massive budget deficit and the rise in inflation.
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