China, Neoliberalism, and the Crisis of Global Capitalism



China and the Global Class Struggle: Journey of Revolutions

Dr. Minqi Li, Assistant Professor

Department of Economics, University of Utah

Phone: 801-828-5279; E-mail: minqi.li@economics.utah.edu

Draft Chapter for Book Project on “The Home Fronts of Globalization: National Class Compromises, Re-composition of the Proletariat, and Transnational Opposition”

April 2007

There are three historical moments that have linked “China” (as an empire, a nation state, or a geographical area) to the historical development of the capitalist world system. First, China (and the East Asian trade system with China being the center) was not incorporated into the capitalist world system until the 19th Century and it was only with the incorporation of East Asia that the capitalist world system emerged as a global system. Secondly, the Chinese Revolution (1949-1976) was unique among the 20th Century socialist revolutions in its degrees of mass mobilization and radicalization, and had been an integral part of the “1968 World Revolution.” Thirdly, China’s economic rise since the 1980s has been re-shaping the world’s economic and geopolitical map rapidly and dramatically. On current trends, China will soon become the world’s largest economy (measured by purchasing power parity). What will then be the implications for the dynamics of the capitalist world system? What will be the implications for the global class struggle? To explore these questions, let us consider each of the three historical moments.

China and the 1848 World Revolution

Capitalism is a historically specific social system that can only exist under certain historical conditions. Like every other social system, its own very existence, and its operations, inevitably lead to the transformation of the underlying historical conditions that will in turn result in its own demise. Marx and Engels advanced this argument in the first political program they prepared for the coming world revolution – The Communist Manifesto.

In The Manifesto, Marx and Engels argued that just like Feudalism, the “modern bourgeois society” sooner or later would have to give way to a new social system as a result of the “revolt of modern productive forces … against the property relations that are the conditions for the existence of the bourgeoisie and of its rule.” In this case, the development of the productive forces under capitalism would create an increasingly larger and more powerful new social force – the modern proletariat. Moreover, capitalist development would prepare increasingly more favorable social and technological conditions for the proletariat to organize for economic and political struggles. In the long run, this would lead to a fundamental shift in the balance of power between the bourgeoisie and the proletariat to the favor of the latter, leading to the demise of the capitalist system:

The essential conditions for the existence, and for the sway of the bourgeois class, is the formation and augmentation of capital; the condition for capital is wage-labour. Wage-labour rests exclusively on competition between the labourers. The advance of industry, whose involuntary promoter is the bourgeoisie, replaces the isolation of the labourers, due to competition, by their revolutionary combination, due to association. The development of Modern Industry, therefore, cuts from under its very feet the very foundation on which the bourgeoisie produces and appropriates products. What the bourgeoisie, therefore, produces, above all, is its own grave-diggers. Its fall and the victory of the proletariat are equally inevitable (cited from Tucker 1978: 483).

The Communist Manifesto was completed on the eve of the 1848 Revolution, which Immanuel Wallerstein refers to as the “1848 World Revolution.” Uprisings of working classes and oppressed peoples broke out throughout Europe. The uprisings were crushed. But the underlying social forces and ideas evolved into the modern socialist and national liberation movements that were to shape the world history of the 20th Century (Wallerstein 1998: 14-20).

In the early 19th Century, China remained the world’s largest economy, accounting for about one-third of the global economic output (Maddison 2003). The China-centered East Asian trade system remained intact. In fact, the Chinese Empire was economically so competitive that the British East India Company had to export Indian opium to China to balance its books. To enforce “socially responsible trade,” the Chinese emperor sent his minister to Canton and burnt all of the imported opium, a gross violation of British and American merchants’ private property.

In response, the British Queen sent her gunboats. The “Opium War” (1840-1842) ended with China’s defeat. In addition to ceding Hong Kong and paying war indemnities, China also agreed to open five treaty ports. China and the rest of East Asia began to be incorporated into the capitalist world system.

In October 1858, about the time when British and French allied forces took Beijing, burnt and looted the imperial summer palace (during the second Opium War), Marx wrote to Engels:

The specific task of bourgeois society is the establishment of a world market, at least in outline, and of production based upon this world market. As the world is round, this seems to have been completed by the colonisation of California and Australia and the opening up of China and Japan. The difficult question for us is: on the Continent the revolution is imminent and will immediately assume a socialist character. Is it not bound to be crushed in this litter corner, considering that in a far greater territory the movement of bourgeois society is still in the ascendant? (cited from Tucker 1978: 676)

If, as Marx believed, in the “litter corner” of Western Europe, the advance of productive forces and proletarianization had already reached the point that socialist revolution became a real possibility, but the “specific task of bourgeois society is the establishment of a world market … and of production based upon this world market” and in the vast part of the world (including China) the process of modern industrial development and proletarianization had barely begun, how could this “difficult question” be resolved theoretically and historically?

Limits to Accumulation: Environment, Labor, and the State

Capitalist production seeks continually to overcome these barriers, but overcomes them only by means which again place these barriers in its way and on a more formidable scale. The real barrier of capitalist production is capital itself (Marx 1967: 250).

All class societies are based on the exploitation of the majority working population and the appropriation of the surplus product by a minority group. Capitalism is unique among the class societies in that under capitalism, a significant portion of the surplus product takes the form of profit (certain amount of money) and much of the profit is continually re-invested as “capital” in pursuit of more profit, leading to accumulation of capital on increasingly larger scales. In this sense, capitalism is a social system that leads to as well as rests upon the endless accumulation of capital.

Capital accumulation is inherently a risky process and capitalists are constantly under the potential threat of confiscation by state or non-state forces of violence. For capital accumulation to be a self-sustaining and ever-expanding process, the profit has to be sufficiently large from the capitalist point of view in relation to the value of capital invested or the value of total production, as well as sufficiently secure and predictable. If the disguise of money is to be unveiled, then essentially, out of the total labor time a society commits to production activities over a given period of time, the amount of the labor time that is committed to the production of the commodities corresponding to the capitalist “profit” (luxury consumer goods and additions to means of production) must be sufficiently large.

A portion of the total labor time has to be committed to the production activities required to re-produce the existing means of production consumed over a given period of time, or to maintain the simple reproduction of the existing economic system. The portion of labor time required for this purpose depends on the prevailing technological and social conditions, as well as the availability of resources and general environmental constraints.

Another portion of the total labor time has to be committed to the production activities required to produce the means of consumption to be made available to the non-capitalist population (primarily the working population or the working classes) over the given period of time. The size of this portion of labor time also depends on the prevailing technological and social conditions, but above all, depends on class struggle and the relations of forces between different classes.

A third portion of the total labor time has to be committed to the production activities required to produce the means of consumption as well as the means of destruction (such as military equipment) consumed by the prevailing state over the given period of time. It is necessary for the capitalists to pay the state such a protection fee so that the state can monopolize violence over a given territory and provide other “services.”

It is only after the above commitments have been made, the remaining labor time can be used in activities that may generate profit for the capitalists. Thus, for the profit to be sufficiently large, the payments of material inputs (or the environmental cost), the payment to labor (or the wage costs), and the payment to the state (or the taxes), have to be sufficiently small from the capitalist point of view. This will in turn require cheap and abundant supply of resources as well as “spaces” for pollution, cheap and abundant supply of labor, and favorable relations of forces between the state and capital from capital’s point of view.

As capitalist accumulation takes place in certain geographical areas, it tends to deplete the local resources as well as cause environmental damages that undermine the conditions of accumulation. Further, capitalist accumulation (as Marx and Engels have argued) tends to bring about social transformations so that a growing proportion of the labor force is proletarianized. The proletarianized working class tends to be organized and its economic and political bargaining power tends to grow over time. Thus, as capitalist accumulation proceeds, both labor and the environment tend to become increasingly more expensive.

Historically, capitalism has found “solutions” to these problems through geographic expansion. By incorporating new geographic areas into the capitalist world system and deepening their integration into the system, capitalism has been able to keep expanding through access to areas where labor and resources remain cheap and abundant, and where spaces for pollution remain available. However, in the long run, sooner or later these processes will reach their limits. At a global level, beyond certain point, it will no longer be possible to prevent the environmental cost and the wage cost from rising inexorably (Wallerstein 1998: 35-64; 2003: 58-64; 224-230).

Most of the pre-modern civilizations were “world empires” with a centralized political power dominating a large geographical area where basic production and division of labor took place (Wallerstein 1979). By the 16th Century, an unique historical situation emerged in Western Europe where several national states of approximately equal sizes and capabilities emerged and were consolidated. The condition of inter-state competition created a favorable political environment for capitalist groups as the competing state sought their financial support. Moreover, the emerging national states were motivated and pressured to provide active support for activities of capitalist accumulation (Arrighi, Hui, Hung, and Selden 2003).

While the inter-state competition is essential for maintaining favorable relations of forces between the state and capital and thus politically, the capitalist world system has to be an inter-state system, for the system to function and expand it is also necessary for the system to have certain institutions that could from time to time effectively regulate the inter-state competition and when necessary promote the system’s “common interest” that goes above and beyond the separate, immediate interest of each individual state. Without such institutions, the system could soon collapse as national states ruin themselves through ruthless competition that destroys vital physical and social infrastructure required for the functioning of the system.

Historically, it has been the successive hegemonic powers that have played this function. The hegemonic powers have played crucial and leading roles in securing “peace” in the world system as well as promoting other common interests such as managing global trade and finance, constructing global income distribution and social compromise, and regulating the global environment. As the capitalist world system expands geographically and grows in size and complexity, historically, the successive hegemonic powers have tended to become progressively larger in territorial size and more powerful in term of military force and organizational capabilities (Arrighi 1994).

China and the rest of East Asia was the last large geographical area that was incorporated into the capitalist world system. Since China was incorporated, for a long time, the inter-connections between China and the capitalist world-economy had remained relatively limited. China thus has served as a geo-strategic reserve for the capitalist world system. Towards the late 20th Century, much of China’s labor force remained in the rural areas and was readily available for capitalist accumulation on favorable terms. The political conditions in China were such that massive resources depletion and environmental pollution would meet with minimal resistance in the short and medium-run. Finally, as the US entered into its decline as the hegemonic power, China appeared to be a plausible candidate for the next hegemony.

On the battleground, when an army throws in its last reserve, it is on the verge of collapse (a situation Napoleon found himself at Waterloo or indeed, Bush found himself with the current “surge” in Iraq). As the capitalist world system mobilizes its last reserves (such as China and India), it may not be far away from its final demise.

China and the 1968 World Revolution

Like the other 20th Century socialist revolutions, the Chinese Revolution was confronted with an inescapable dilemma.

On the one hand, the revolution was based on the broad mobilization and support of the workers and peasants comprising the great majority of the population, and as a result, would necessarily reflect the interests and aspirations of the ordinary working people.

Between the 1950s and the 1970s, for about three decades, the Chinese workers and peasants enjoyed unprecedented gains in economic, social, and political rights as well as material living standards. The urban working class enjoyed a wide range of economic and social rights that include job security, free health care, free education, subsidized housing, and guaranteed pensions that together constituted what were referred to as the “iron rice bowl.” By the 1970s, more than 90 percent of the peasants had access to basic education and basic medical insurance. Towards the late 1970s, China’s health and education indicators had reached levels that were comparable to middle income countries. Women in both the urban and the rural areas made major advances in economic and social status. Workers and peasants or selected individuals from them to different degrees participated in the management of industrial and agricultural production, education and other public services, literature and arts, science and technology, and state affairs (Meisner 1999: 413-426; Wen 2005).

On the other hand, China remained a part of the capitalist world system, and was under constant and intense pressure of military and economic competition from imperialist states and other big powers. From the mid-19th Century to the mid-20th Century, China was reduced from the world’s largest economy to a peripheral member of the capitalist world system with one of the lowest per capita incomes. Since 1840, China had lost a series of wars against nearly every western power and was invaded by Japan twice with devastating consequences. Before the Communist victory, China barely functioned as a viable nation state.

As the communists won the “Liberation War” (the 1946-1950 civil war) and took over the national power, the immediate challenge was to re-build China as a viable and unified nation state. In the long run, this would require China to “catch up” with the West or the core states of the world system in economic and military terms. To accomplish this, China must engage in industrialization and rapid capital accumulation.

To mobilize resources for accumulation, surplus product had to be extracted from the workers and the peasants and concentrated in the hands of the state. This created opportunities for the state and Party bureaucrats to make use of their control over the surplus product to advance their individual power and interests rather than the collective interest of the working people. Further, industrialization required technical and managerial expertise, which was concentrated in a small group of intellectuals and “experts” that typically had capitalist or landlord family background (Meisner 1999: 103-128). Thus, as capital accumulation and industrialization proceeded, there were tendencies for a new privileged social class consisting of bureaucrats and technocrats to emerge that, if not effectively checked, would become increasingly alienated from the working people and evolve into the new capitalist class.

It was in this context that the Chinese Communist Party leadership was divided into two factions advocating two different “lines.” One faction, led by Liu Shaoqi and Deng Xiaoping, declared that the principal contradiction in socialist China was no longer between antagonistic social classes but “between the advanced socialist system and the backward social productive forces” (Meisner 1999: 303). It follows that the Communist Party should no longer focus on class struggle. Instead, the Party’s main task was to promote economic development. This would require the concentration of power and authority in the hands of those having technical and managerial “expertise,” as well as the widespread use of material incentives and market relations. Rising economic and social inequality was justified by the “socialist” distributive principle: “from each according to his ability, to each according to his labor.”[1]

Against the Liu-Deng “revisionist” faction, Mao Zedong argued that: “the socialist society is a rather long historical period. Within the historical period of socialism, classes, class contradictions, and class struggles continue to exist. There is the struggle between the socialist road and the capitalist road. There is the danger of capitalist restoration.” (Talk given at the Beidaihe Central Committee Working Conference and the Tenth Plenum of the Eighth Central Committee of the Communist Part of China, August and September 1962, originally cited from The Red Flag, 1967, Number 10)[2]

In 1964, after reading an on-site report on the “Socialist Education Movement” in a tractor factory, Mao made the following comments:

The bureaucratic class, and the working class, poor and lower middle peasants, are two sharply antagonistic classes. They are becoming or have become the bourgeois elements who suck the workers’ blood. How can they recognize [the necessity of socialist revolution]? They are the objects of struggle, the objects of revolution (Comments on Chen Zhengren’s report on Socialist Education Movement at Luoyang Tractor Factory, December 12, 1964 and January 15, 1965).

After several attempts to re-revolutionize the Party from within had failed, Mao made a direct appeal to the ordinary workers, peasants, and students, calling on them to rebel against the “capitalist roaders who are in authority in the Party,” that became the Great Proletarian Cultural Revolution.

Several historical factors contributed to the failure of the Cultural Revolution. First, China remained a part of the capitalist world system and intense inter-state competition was a constant constraint. After 1969, the Maoists and the rebels were forced to retreat from the fights for provincial and local powers, re-stabilizing domestic political and economic order and preparing for international wars. The “old cadres” were rehabilitated and again in control of much of the Party and state bureaucracy as well as the military. Secondly, despite Mao’s personal charisma and seemingly unquestioned authority, the Maoists did not have effective control over the army. The “old cadres” were often able to receive support from local army units and repress the rebels by force.[3] Mao made a tactical pact with Lin Biao to secure the army’s neutrality. After Lin Biao’s coup attempt failed, Deng Xiaoping (who had led a large field army during the civil war) became the most influential among the remaining army leaders.

The unique Maoist theoretical contribution was that there must be “continuing revolution under the dictatorship of the proletariat.” However, in the 1950s Mao and his comrades could benefit from no or very little historical experience. The Soviet Union was regarded as the leader of the world socialist revolution and the successful example of “socialist industrialization.” It was not until the early 1960s that Mao had reached a better and deeper understanding of the class contradictions and class struggles in the new “socialist society.” By then the privileged bureaucrats and technocrats had already to a large extent consolidated their power.

Finally, the ordinary Chinese workers and peasants were politically inexperienced and unprepared. Despite the Maoist warning of the danger of capitalist restoration, the Marxist-Maoist theoretical reasoning appeared to be detached from the daily experience of the ordinary workers and peasants. To the ordinary Chinese workers and peasants in the 1970s, it must have seemed to be a quite remote and extremely unlikely prospect that the capitalist property relations could someday return with full vengeance and that the workers and peasants would have lost all of their socialist rights and be reduced to working slaves subject to the most ruthless capitalist exploitation.

Exhausted by the inconclusive power struggles, the urban working class became politically passive and was caught off guard by the 1976 counter-revolutionary coup. With the defeat of the Maoists, the working class lost ideological and organizational leadership. Confused and de-politicized, the Chinese working class was to be taken advantage of by both the ruling elites and the opportunistic middle class “democratic movement”, paving the way for the tragic defeat of 1989.

The Chinese Cultural Revolution was part of the “1968 World Revolution.” In January 1968, Shanghai workers took over power from the city Party bureaucracy and declared “Shanghai Commune.” In May, the French workers and students were in effect controlling the country. The French capitalist system was on the verge of collapse. Revolutionary waves swept through the core, the periphery, and the “socialist camp.” The Maoist critique of “revisionism” was one of the ideological weapons that the “new left” used to criticize and reject the “old left” that had been co-opted by the global reformism. The global revolutionary upsurge started to retreat only after the defeat of the Chilean revolution in 1973 and the Portuguese revolution in 1975.

The 1968 World Revolution exposed the limit of social reforms within the capitalist world system (Wallerstein 2000: 355-373). After WWII, in response to the growing threat of working class movements and national liberation movements, the US imperialism (at peak of its world hegemony) attempted to build a new global social compromise that could effectively divert the political threat from the now powerful socialist movements and national liberation movements.

Internally, under the “new deal” democrats, the US undertook Keynesian macroeconomic policies and certain social reforms that ushered in an era of “capital-labor accord” characterized by rapid expansion of employment and real wages (Bowles, Edwards, and Roosevelt 2005: 164-169). Further, the US allowed (and to some extent, encouraged through Marshall plan and investments by US corporations) Western Europe and Japan to develop similar and in some cases, more generous programs of social reform.

To accommodate the growing aspirations and mobilization abilities of the indigenous capitalists, the middle classes, and the urban working classes in the periphery, and to further expand the market for the US corporations, the US also pushed for de-colonization of the periphery and offered financial and technical assistance to support “economic development.” It should also be pointed out that in the 1950s and the 1960s the US took a relatively liberal attitude towards import-substitution or state capitalist development programs.

Through the Yalta arrangement, the US allowed the Soviet Union to have its own “sphere of influence.” In exchange, the Soviet Union implicitly agreed to act as a “responsible” super power and abandoned the support of revolutionary communist movements outside its sphere of influence. This was immediately effective in Greece. It also played a role in the disarming of the French and Italian communists. Both the Chinese Revolution and the Cuban Revolution were against the will of Moscow (Wallerstein 2000: 374-386).

The period 1950-1973 is widely referred to as the “golden age” of capitalism. The core states experienced unprecedented rapid economic growth. In the early 1950s, capitalist accumulation in the core states could still draw upon the sizeable surplus labor force in the rural areas. However, towards the late 1960s, the process of proletarianization was nearly complete throughout the core zone. The welfare state institutions and the Keynesian macroeconomic policies further enhanced the bargaining power of the working classes. Labor militancy was growing everywhere. After the mid-1960s, the profit rate declined precipitously throughout the capitalist world-economy.

The semi-peripheral states (primarily Latin America, Eastern Europe and the Soviet Union) were under similar pressures from the more militant working movements. By the 1970s, both the import-substitution industrialization model and the “socialist industrialization” model were clearly in trouble. The semi-peripheral states attempted to prolong the phase of rapid accumulation by borrowing heavily the “petro-dollars” through western banks, a move that eventually led to the 1980s debt crisis.

The global ruling elites moved to organize a major counter offensive that is now generally known as “neoliberalism.” Monetarist and free market policies were first implemented in Chile after the installation of the Pinochet fascist regime in 1973. In the core states, monetarism did not prevail until Thatcher came to power in the UK in 1979 and Reagan came to power in the US in 1980. Monetarism is essentially a program to destroy the working class’s bargaining power by creating high unemployment under the excuse of fighting inflation.

Other neoliberal policies include rolling back the welfare state, labor “flexibility”, deregulation of product and financial markets, and trade liberalization. But the core zone working classes managed to fight a defensive battle (more effective in Western Europe than in the US) that has limited the damages of the neoliberal policies. It is in the semi-periphery where neoliberalism, under the programs of “structural adjustments” or “shock therapy”, was fully carried out and delivered the most devastating social consequences.

“Globalization” is an indispensable component of neoliberalism. Through greater and deeper integration of the peripheral and semi-peripheral economies into the capitalist world-economy in the form of trade and capital flows, capital in the core zone can be re-located to the periphery and semi-periphery where large reserves of cheap labor force are available and there are no or little political constraints to resources depletion and environmental degradation, thereby raising the global profit rate.

The “rise of China” or the “rise of India” needs to be understood in this context. The neoliberal project brings about devastating consequences to the working people in the world. But, politically and economically, it is also very costly to the global capitalists. Without the opening up of China and India and the following economic boom, neoliberalism could prove to be too costly not only for the workers but also for the capitalists and end up being very short-lived.

China and the 1989 World Counter-Revolution

All great historical figures are conscious of not only their own historical contributions but also their own historical limitations. As Mao approached the end of his life, he was quite conscious that the historical relations of forces were against him, even though his optimism about the long-term prospect of the world revolution was by no means diminished. Meeting with the visiting Danish Prime Minister, Mao said:

To summarize, China can be characterized as a socialist state. Before the Liberation, it was not very different from capitalism. Now there is still the eight-grade wage system, distribution according to labor, exchange with money, all of these are not very different from how things were in the old society. Only that the property relations have changed. … Now there is the commodity system in our country, and the wage system is an unequal one, there is the eight-grade wage system. These can only be restricted under the dictatorship of the proletariat. Therefore, if Lin Biao and his likes come to power, it will be very easy to restore capitalism (originally cited from People’s Daily, February 22, 1975).

Between October 1975 and January 1976, Mao had the following comments:

Is there class struggle in a socialist society? … Class struggle is the key, the rest will follow. Stalin made a big mistake on this, but not Lenin. Lenin said, petty production generates capitalism every day, every hour. Lenin talked about building a bourgeois state without the bourgeoisie, to secure the bourgeois rights. We ourselves have exactly built such a state, not very different from the old society …

Some comrades, mainly the old comrades, their thinking has not moved beyond the bourgeois democratic revolution. They do not understand the socialist revolution, they have resentments, they even oppose [the revolution], … and want to settle accounts with the Cultural Revolution. … After the democratic revolution, the workers and the poor and lower middle peasants did not stop, they want revolution. However, some of the Party members did not want to proceed any more. Some even moved backwards, opposed the revolution. Why? They have become big bureaucrats, and want to protect the interest of big bureaucrats. They have good houses, cars, high salaries, and servants, [they] live even better than the capitalists. Now socialist revolution comes to themselves, … they do not like the criticism against bourgeois rights. To have socialist revolution, but do not know where the bourgeoisie is, it is within the Communist Party, it is the capitalist roaders who are in authority in the Party. The capitalist roaders are still on the [capitalist] road.

Mao died in September 1976. About a month later, the new Party Chairman Hua Guofeng, a political opportunist, undertook a coup and arrested the radical Maoist leaders (the so-called “Gang of Four” led by Jiang Qing, Mao’s wife), with the backing of the “old cadres” and the implicit support of Deng Xiaoping. Hua soon proved to be politically useless and by 1979, Deng was effectively in charge of the Party and the state and started the “economic reform.”

The early economic reform actually brought about immediate material benefits to nearly every social layer. In the rural areas, the “family contract system” was implemented which in effect privatized the agriculture. In the early 1980s, as the use of chemical fertilizers and pesticides surged, and with the help of the infrastructure built under the collective era, agricultural production expanded rapidly. The peasants’ incomes also grew rapidly and in fact, more rapidly than the incomes of the urban households in this period. As the availability of food and other agricultural goods improved, the urban working class also enjoyed rapid improvement in living standards and began to have access to various modern consumer goods (Meisner 1999: 460-469; Wen 2005).

With these temporary concessions made to the workers and the peasants, Deng Xiaoping and the “reformers” were able to consolidate their political power. By the mid-1980s, the “reformers” were in firm control of the Party and the state. They began to push for labor disciplines and market reforms in the state owned enterprises, the stronghold of China’s urban working class. The 1988 “enterprise law” provided that the state owned enterprise managers had the full authority to dictate everything within an enterprise, including the power to fire or lay off the workers. The development of market relations also provided ample opportunity for sections of the privileged bureaucrats to enrich themselves. A new bureaucratic capitalist class emerged (Meisner 1999: 469-479).

The urban working class was politically passive and disoriented. But it remained quite powerful at the factory level. Despite the provisions of the 1988 enterprise law, the power to fire workers was rarely exercised by the management in the late 1980s. On the contrary, with the “iron rice bowl” still intact, the state sector management was forced to use generous material incentives to motivate the workers to increase productivity. The second half of the 1980s saw rapid increase in urban workers’ wages. To maintain profitability, the state owned enterprises raised prices trying to pass the costs to the consumers, leading to general acceleration of inflation.

On the other hand, to meet the growing demand for modern consumer goods from the new capitalist class and the middle class, but also from the urban working class, China’s imports of modern consumer goods and the capital goods to be invested in the “import substitution” consumer good industries surged. Unlike in the 1990s and later years, China was running large trade deficits in the late 1980s. The overall economic situation was not unlike Latin America or Eastern Europe in the late import substitution years, and had become increasingly unsustainable.

Back to the 1980s, the word “intellectuals” broadly referred to any one that had had a higher education in China, including university teachers, engineers, doctors, writers, artists, and even university students, who were to become China’s emerging urban middle class.

The intellectuals were traditionally a privileged social group in China. Their material privileges were significantly reduced under Revolutionary China (but did not completely disappear). Most of the Chinese intellectuals in the 1980s were from families that were capitalists or landlords before the Revolution. Their resentments against the revolution (especially the Cultural Revolution) were strong and they often did not hide their contempt and hatred of ordinary workers and peasants.

The intellectuals were in favor of the growth of market relations. They hoped to gain in material privileges with greater degrees of social and economic inequality. They also hoped that through greater integration into the global capitalist market, their incomes and living standards could approach their counterparts in the core states. Towards the late 1980s, many of them openly called for full-scale privatization and free market capitalist system.

While the intellectuals and the ruling elites shared the broad objective of transition to capitalism, there was no agreement on how the political power and the economic benefits of capitalist transition should be divided between them. The intellectuals were dissatisfied with the fact that as wealth started to be concentrated in the hands of bureaucratic capitalists and private entrepreneurs, they did not have a share of this newly accumulated capitalist wealth. Many of them complained that their income growth was not more than that for the urban workers.

All of these were behind the intellectuals’ call for “freedom and democracy.” In effect, the Chinese intellectuals were asking for a bigger share of the power and wealth as China moved towards capitalism. Some of them explicitly called for “neo-authoritarianism,” taking Japan, Taiwan, Singapore, and South Korea as the model, advocating a capitalist model that would be repressive towards the working class but could secure “property rights” for the capitalists and “civil liberty” for the intellectuals (Meisner 1999: 493-499).

Throughout the 1980s, there were several waves of intellectual criticisms of the Communist Party (sometimes backed by university student demonstrations) followed by official movements against “bourgeois liberalization.” The intellectuals and the ruling elites were testing forces before a dramatic showdown that would settle the terms under which they would unite in a general offensive against the urban working class.

The ruling elites were divided into three factions. The right wing (usually referred to as “radical reformers” in the western literature) was led by Zhao Ziyang, the Party’s General Secretary as well as the Prime Minister. These “reformers” actually represented the most corrupt sections of China’s bureaucratic capitalists that had gained the most in the early years of China’s capitalist transition. Zhao was in favor of a Chinese version shock therapy: full-scale liberalization and privatization right away. The slogan at the time was: “let the prices make one jump over the river,” meaning immediately remove all social subsidies and liberalize all prices.

The “left” wing (usually referred to as “conservatives” in the western literature) was led by Chen Yun, who grew up in a workers’ family and was a veteran communist leader. Chen represented the veteran communists in the Party who, although by no means were opposed to the privileged bureaucratic system, nevertheless maintained some affection with the original revolutionary goal. Chen was in favor of “socialist planned commodity economy” (as supposed to “market economy”) where the state would control the commanding heights. Politically, Chen advocated slogans such as “[The Party] must wholeheartedly rely upon the working class.” In fact, Chen was advocating a state capitalist model that would rest upon a social compromise between the capitalist class and the urban working class.

But the master of the Chinese politics was Deng Xiaoping. Although Deng had officially “retired,” he kept the crucial position of the Chairman of the Central Military Committee and had the backing of the majority of the bureaucracy and the army. Deng understood that the state capitalist model proposed by Chen was politically and economically unsustainable. For China to complete a successful capitalist transition and for the bureaucratic capitalist class to secure its fundamental political and economic interest, the remaining power of China’s urban working class must be broken. For that, the ruling elites did need to have the support of the intellectuals or the urban middle class.

However, Deng was politically experienced enough to know that Zhao’s strategy amounted to a political suicide. The implementation of shock therapy without breaking the working class’s political power would immediately lead to a general working class rebellion. Further, while a political alliance between the bureaucratic capitalist class and the urban middle class was necessary to defeat the working class, the intellectuals must first be taught a lesson so that they would settle for no more than a junior position in the pro-capitalist political alliance.

To accomplish this, the ruling elites should force the intellectuals into a political showdown (which the “democratic” intellectuals were smart enough to give them the chance) and then call the bluff, as the intellectuals would not dare or want to really mobilize the working class and without the political mobilization of the working class, the intellectuals would be nothing but powerless.[4]

After teaching the intellectuals a lesson, the ruling elites then could move to build the alliance with the intellectuals under the banner of “reform and openness.” With such an alliance, the bureaucratic capitalist class (now with the political and ideological support from the intellectuals) would be ready for a full-front attack on the urban working class. Most of the state owned enterprises were to be privatized, tens of millions of workers were to be laid off, and the remaining socialist rights were to be dismantled. Moreover, the dismantling of the collective system and the collapse of the rural public infrastructure would force hundreds of millions of peasants into the cities and become the “migrant workers.” A huge cheap labor force would be created that, in the short to medium-run, would work for the Chinese and foreign capitalists at the lowest possible wages under the most demeaning conditions. The massive inflows of foreign capital would in turn create a huge export boom – producing a Chinese “economic miracle.”

In retrospect, Deng’s political plan worked marvelously well. [5]

The year of 1989 saw the crash of China’s “democratic movement.” It also saw the fall of the Berlin Wall. In both cases, the working classes lost. The following “economic reforms” carried out by the “democratic” governments in the Eastern Europe and the former Soviet Union or the “communist” government in China brought about enormous sufferings to the working classes. The advocates of the existing world system could therefore celebrate the “end of history.”

But, has history ended?

China and the End of the Capitalist History

In the short and medium-run, China’s deeper integration into the global capitalist market brought in a huge reserve of cheap labor force. China’s cheap labor force creates opportunities for the capital in the core states to relocate, either physically or through outsourcing, and profit from China’s low wages and the lack of environmental regulation. Such a development, objectively, greatly undermines the bargaining power of the working classes in the rest of the world (but especially in the core zone) and has contributed to the reign of neoliberalism.

But in the long run, capitalist accumulation will certainly bring about enormous transformations to the Chinese society. As hundreds of millions of rural migrant workers move to the cities, in one, two, or three decades, a large, numerically majority proletarianized working class will have taken shape. This working class, will follow the footsteps of the working classes in other parts of the world, learn and start to get organized, demanding economic and political rights, and forcing the capitalist class to make more and more concessions. In short, the Chinese working class will no longer be “cheap.”

What could the Chinese capitalist class do then? They might want to follow the example of their western counterparts, looking for new spaces with cheap labor force. But by then maybe the Indian working class will have become as “expensive” as the Chinese. Where else in the world could the Chinese or the western capitalists find a cheap labor force that is nearly as large as the Chinese or the Indian working class?

In the end, Marx could prove to be right after all. As capitalist accumulation keeps generating its own grave-diggers in the form of proletarianized working classes throughout the world, eventually we will move towards the end of the capitalist history.

But the end of the capitalist history might come sooner than the completion of the world-wide proletarianization. Already, China is suffering from the world’s worst environmental degradation and because of China’s enormous size, it has by now become a major global force in resources depletion and environmental destruction. It is completely possible that even before the Chinese capitalism is hit by a general explosion of social crisis, it is first brought down by a food crisis, an energy crisis, or a general collapse of the ecological system.[6]

In the past, the rise of a new hegemonic power has played an indispensable role in resolving the system-wide crisis of the capitalist world system. Now there is clear evidence that the US hegemony is declining in industrial, financial, and military terms. The US is no longer willing or able to act in the interest of the system as a whole. On the contrary, the attempt by the US imperialism to preserve its remaining influence has generally tended to bring about greater instability and chaos to the whole system. But who among the big powers, the European Union, Russia, China, India, or Brazil, is even remotely close to replace the US and function as the effective leadership of the capitalist world system? To play such a role, the new hegemonic power must not only establish unquestioned industrial, financial, and military advantages over the other big powers, but also act in the interest of the system as whole and provide genuine solutions to the system’s economic, geopolitical, and environmental crisis.

The fact that such a new hegemonic power is nowhere in sight, again signals that we are not far away from the end, of the capitalist history.

As any great and genuine revolutionary would do, Mao Zedong, as a soldier, a fighter, a dialectical materialist and historical materialist, was always prepared to look forward to victory exactly when the immediate relations of forces were unfavorable.

In 1962, as the Sino-Soviet split over the general direction of the International Communist Movement became inevitable, Mao said:

In China, or in other countries in the world, in the last analysis, more than ninety percent of the people eventually will support Marxism-Leninism. In the world, there are still many people, who are deceived by the Social Democrats, by the revisionists, by imperialism, and by the reactionaries of different countries. They are not yet awaken. But sooner or later they will be awaken, will support Marxism-Leninism. The truth of Marxism-Leninism is irresistible, the masses of people sooner or later will want revolution. The world revolution sooner or later will be victorious (Talk at the 7,000 people conference, January 30, 1962, originally citied from People’s Daily, April 22, 1970).

Four years later, as Mao entered into the last major battle in his lifetime, he wrote to his wife and comrade, Jiang Qing:

From great chaos under the heaven, to great peace under the heaven. … I am somewhat like a tiger, this is the primary aspect, I am also somewhat like a monkey, this is the secondary aspect. … I am ready to be broken into pieces. There are more than 100 [Communist] Parties in the world, most no longer believe in Marxism-Leninism. Marx, Lenin, have been broken into pieces, not to say ourselves. … If anti-communist rightist coup were to take place in China, I am sure they will not be able to live in peace, they are likely to be short-lived, because all the revolutionaries that represent the interest of more than ninety percent of the people will not tolerate them. By then, the rightists might use some of my words to prevail for a while, but the leftists will inevitably use some of my other words to get organized, and overturn the rightists. … The Cultural Revolution, … is a general rehearsal, the leftists, the rightists, and the wavering middle-of-the-roaders, will each receive their own lessons. Conclusion: the future is bright, but the path is tortuous (Letter to Jiang Qing, July 8, 1966).

References

Arrighi, Giovanni. 1994. The Long Twentieth Century. London; New York: Verso.

Arrighi, Giovanni, Po-keung Hui, Ho-fung Hung, and Mark Selden. 2003. Historical Capitalism, East and West. In Giovanni Arrighi, Takeshi Hamashita, and Mark Selden (eds.). The Resurgence of East Asia: 500, 150 and 50 Year Perspective, pp. 259-333. London; New York: Routledge.

Bowles, Samuel, Richard Edwards, and Frank Roosevelt. 2005. Understanding Capitalism: Competition, Command, and Change. New York; Oxford: Oxford University Press.

Li, Minqi. 1996. “China: Six Years after Tiananmen.” Monthly Review 47(8): 1-13.

Maddison, Angus. 2003. The World Economy: Historical Statistics. Paris: OECD.

Meisner, Maurice. 1999. Mao’s China and After: A History of the People’s Republic. New York: The Free Press.

Marx, Karl. 1967. Capital, volume 3. New York: International Publishers.

Tucker, Robert C. (ed.). 1978. The Marx-Engels Reader (Second Edition). New York; London: W. W. Norton & Company.

Wallerstein, Immanuel. 1979. The Capitalist World-Economy. Cambridge: Cambridge University Press.

____. 1998. Utopistics: Or, Historical Choices of the Twenty-first Century. New York: The New Press.

____. 2000. The Essential Wallerstein. New York: The New Press.

____. 2003. The Decline of American Power. New York; London: The New Press.

Wang Dan, Li Minqi, and Wang Chaohua. 2003. A Dialogue on the Future of China. In Chaohua Wang (ed.), One China, Many Paths, pp. 313-358. London; New York: Verso.

Wen, Dale. 2005. Reforms That Make A Few Rich: China and the Path to Economic Globalization. Paper prepared for the International Forum on Globalization.

Wen, Dale and Minqi Li, 2006. China: Hyper-Development and Environmental Crisis. In Leo Panitch and Colin Leys (eds.), Socialist Register 2007: Coming to Terms with Nature, pp. 130-146. London: The Merlin Press; New York: Monthly Review Press; Halifax: Fernwood Publishing.

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[1] In Critique of the Gotha Program, Marx argued that: “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, … still stamped with the birthmarks of the old society from whose womb it emerges. … [A]s far as the distribution of [individual means of consumption] among the individual producers is concerned, the same principle prevails as in the exchange of commodity equivalents: a given amount of labour in one form is exchanged for an equal amount of labour in another form. Hence, equal right here is still in principle – bourgeois right … This equal right is an unequal right for unequal labor. … [I]t tacitly recognises unequal individual endowment and thus productive capacity as natural privileges. … In a higher phase of communist society, … after labour has become not only a means of life but life’s prime want … only then can the narrow horizon of bourgeois right be crossed in its entirety and society inscribe on its banner: From each according to his ability, to each according to his needs!” (cited from Tucker 1978: 529-531)

[2] The various quotations of Mao Zedong citied in this paper were found from various Chinese websites. This author is responsible for all possible errors in the Chinese text as well in translation.

[3] In the mainstream western literature, the Chinese official literature, most of the literature on the Cultural Revolution by China’s liberal intellectuals, and numerous novels, poems, memoirs, and movies often written by the sons or daughters of former privileged bureaucrats, the violent crimes committed by the conservative Party and state bureaucracy (supported by the “royalist” red guards) are often loosely attributed without any clarification to all red guards, thus in effect putting the blame on the Maoists and the radical “rebel” red guards.

[4] There is an old Chinese saying: a Confucian Scholar who pretends to rebel [against the emperor], would never make it.

[5] On further discussions about the classes and their relations inChina in 1989, see Li (1996), Meisner (1999: 449-513), and Wang, Li, and Wang (2003).

[6] On China’s environmental crisis and its global impact, see Wen and Li (2006).

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