Socialism, Capitalism, and Class Struggle: The Political Economy of Modern China

CHINA SINCE 1978Economic & Political Weekly EPW december 27, 200877Socialism, Capitalism, and Class Struggle: The Political Economy of Modern ChinaMinqi LiThis essay traces the evolution of the political economy of China from the 1949 revolution up to the triumph of Chinese capitalism in 1992. It first describes and discusses the tremendous achievements in the first quarter century after the revolution, and also the struggles during the Great Leap Forward and the Cultural Revolution. The essay outlines the context of the tussles that followed the death of Mao, the role of the “intellectuals”, the alliance or the lack of it with the urban working class during Tiananmen 1989 and how the forces represented by Deng Xiaoping were able to impose their writ on the economy and society of China.Minqi Li (minqi.li@economics.utah.edu) is with the Department of Economics, University of Utah Salt Lake City, USA.In recent years, China has emerged as a leading driving force of the global capitalist economy. The dynamics of class struggle and the possibility of socialist revival in China are issues of great importance not only for China but also for the world as a whole.To prepare for the future revolution in China, it is necessary to review the historical lessons. This paper discusses the experience of class struggle during revolutionary China and in China’s tran-sition from socialism to capitalism. It is hoped that by learning from these historical lessons, the Chinese working class will be intellectually better prepared in the future revolutionary strug-gle, and re-establish a new, socialist society in China in the not very distant future.The Capitalist World System and the Chinese RevolutionIn the early 19th century, China was still the world’s largest terri-torial economy and China’s GDP accounted for one-third of the gross world product.1 In the notorious Opium War (1840-42), China was defeated by Britain and was forced to pay war indemnity, open treaty ports, and cede Hong Kong to Britain. It marked the begin-ning of China’s incorporation into the capitalist world system. During the second half of the mid-19th century, China suffered successive major military defeats, lost large portions of territory, and was reduced to a less than sovereign semi-colonial state with foreign armies and navies stationed on her soil. By the early20thcentury, China was reduced to one of the poorest countries in the world.China’s incorporation into the capitalist world system not only led to the disintegration of the traditional social structure, but also prepared the conditions for China’s great revolutionary transfor-mation. From the mid-19th century to the mid-20th century, all major classes and social groups within the Chinese society had, at different moments of history, risen to China’s political stage and each had its own opportunity to lead China’s transformation.The peasant rebellion of Taiping Tianguo (1851-65) was crushed by the joint forces of the Chinese gentry-landlord class and western imperialism. The gentry-landlord class attempted to accomplish “self-strengthening” through the so-called “Westernisation Move-ment”, which was no more than an attempt of military moderni-sation. The Westernisation Movement failed miserably, as the Chinese army and navy were annihilated by rising Japanese im-perialism in the 1894-95 war.In the early 20th century, the national bourgeoisie was the in-disputable leader of China’s national liberation movement. How-ever, the Chinese bourgeoisie was numerically small and economi-cally weak. In its social background, it was intimately connected

CHINA SINCE 1978december 27, 2008 EPW Economic & Political Weekly78with the gentry-landlord class. It was largely a commercial and financial bourgeoisie that served as an intermediary between the Chinese market and the world market. The small indigenous industrial bourgeoisie was also dependent on foreign capital for finance, technology, and markets. Detached and alienated from the masses of workers and peasants, the Chinese national bour-geoisie was unable to mobilise the great majority of the population and lead fundamental social transformations.When the Manchu Qing dynasty collapsed, Sun Zhongshan and his nationalist comrades failed to establish an effective demo-cratic government. China soon fell into chaos and endless civil wars. By the 1930s, when the Nationalist Party ruled much of China, it had degenerated into a corrupt, military-bureaucratic clique.It was the general historical conditions in China and in the world as a whole in the first half of the 20th century which deter-mined that, only with the massive mobilisation of the broadest layers of the oppressed and exploited, led by fundamentally new revolutionary force, could China accomplish simultaneously social revolution and national liberation, and redefine its position in the capitalist world system.When the Communist Party of China (CPC) came to power, it was confronted with three major challenges. The first challenge was to reverse China’s long-term economic and geopolitical decline in the modern world system that had started in the 19th century, and catch up with the west. This challenge resulted from the fact that China had become a nation state within the capitalist world system, and therefore had to play by the rules of the system by competing with the rest of the world (and especially the major imperialist powers) industrially and militarily.The existence of the capitalist world system constitutes a set of historical constraints that would apply to all states at all times during the lifespan of capitalism. However, the new People’s Republic would have to operate within not only the constant con-straints imposed by the world system, but also the constraints that were the direct outcomes of the Chinese Revolution. To the extent that theCPC came to power as a result of broad and sys-tematic mobilisation of the peasants and workers, the new revo-lutionary state would have to reflect the desires, hopes, expecta-tions, and aspirations of the great masses of working people.It was the set of historical constraints imposed by the Chinese Revolution that led to the second and third challenge for the CPC. The second challenge was to provide the necessary material and social conditions to meet the historically determined “basic needs” of the Chinese working people. The third challenge, was to accomplish fundamental transformation of political, economic, and social relations in China as well as in the world system, to build and consolidate socialism (a much more egalitarian and democratic social system) in China and in the world as a whole.It turned out that Revolutionary China was able to meet the first and second challenge with great success. It also made a great heroic attempt to meet the third challenge but failed.Socialism and AccumulationFor China to stabilise its position in the capitalist world system and potentially climb up the ladder catching up with the west, two conditions were required. First, China had to mobilise all potentially available economic surplus to accelerate the accumu-lation of capital. Second, while China could not be outside of the capitalist world system, nor could it change its peripheral status in the system in the short run, it could manage to minimise the transfer of surplus from itself to the core states that would result from unequal exchange and cross-border capital flows.By eliminating the gentry-landlords, bureaucratic capitalists, and foreign capitalists, the available economic surplus was con-centrated in the hands of the state and the first condition was met. In 1952, China’s accumulation rate (accumulation as a shareof national income) had already risen to 21%. By the 1970s, the accumulation rate had increased to more than 30% (State Statistical Bureau of China 1985). To meet the second condition, China had followed the classical Soviet strategy in the form of state-ownership of the means of production and centralised economic planning, in effect, a complete state monopoly over the domestic market.According to Angus Maddison, from 1950 to 1976, China’s GDP grew at an average annual rate of 4.7% and China’s per capita GDP grew at 2.6%. The Chinese economy more than tripled over about a quarter of century. China grew more rapidly than North America, western Europe, Africa, and the average of east and south Asia, and only lagged behind Latin America. If the Chinese official growth rates are used, China would rank as the fastest growing large economy in the world in this period. Overall, China succeeded in stabilising and possibly improving its relative position in the capitalist world system, reversing the long-term decline that had started in the early 19th century (Maddison 2003 and State Statistical Bureau 1985).2More important than the growth rates were the successes of the Maoist period in the building of capital stock and technical capabilities that prepared the conditions for China’s growth “miracle” after the 1980s. In the Maoist period, the state and the people’s communes made enormous investments in irriga-tion, heavy industry, transportation, and social capabilities. The central planning system was very effective in the diffusion of industrial and agricultural technologies and economic “self-reliance” meant that by the 1970s China was able to produce a wide range of industrial goods at various levels of technological complexity.Socialism and Basic NeedsIn 1956, with the state-ownership of the means of production established in the cities and collective ownership established in agriculture, the Eighth Congress of theCPC officially pronounced that exploiter classes had been eliminated and China had become a socialist state.In this paper, the concept of “socialism” is used in a specific theoretical and historical sense. It is clear that Revolutionary China that existed in the period 1949-76 remained a part of the capitalist world system and was bound by the basic laws of mo-tion (“the law of value”) of the system. Further, as the Maoists argued, throughout the entire historical period of Revolutionary China, there were class antagonisms and class struggles.On the other hand, the Soviet Union, Revolutionary China, Cuba, and other historical socialist states, represented a distinct

CHINA SINCE 1978Economic & Political Weekly EPW december 27, 200879form of state organisation. These states were the historical product of great workers’ and peasants’ revolutions and their internal economic and political relations were relatively favourable for the working people. It was in their abilities to meet the “basic needs” of the greatest majority of the population that China and other historical socialist states distinguished themselves from the rest of the peripheral and semi-peripheral states in the capi-talist world system.After a continent by continent comparative study of the popu-lations’ health conditions in socialist and capitalist states, Vicente Navarro (1993) concluded that: “at least in the realm of under-development, where hunger and malnutrition are part of the daily reality, socialism rather than capitalism is the form of or-ganisation of production and distribution of goods and services that better responds to the immediate socio-economic needs of the majority of these populations”. While the struggle for accumulation conforms fully to the laws of motion of the capitalist world system, the pursuit of basic needs raises fundamental questions regarding the rationality of the existing system. The defining feature of the capitalist world system is the endless accumulation of capital. Within the existing system, individuals, groups, and states have been under the constant and relentless pressure, to accumulate, and to always pursue “more”. But to what end?“Economic development” is supposed to deliver well-being to the general population. But how can “well-being” be defined and measured? Amartya Sen made the distinction between human achievements or “functionings” and the ownership of the com-modities. While the command over commodities is a means to the end of well-being, it shall not be confused with the end itself. Sen proposed using indicators of capabilities rather than money income or wealth as the measure of well-being or living standard (Sen 1999).The population’s life expectancy at birth is a good summaris-ing indicator that can properly reflect a country’s achievement in approaching its population’s physical potential. According to the World Bank data, between 1960 and 1980, China’s life expectancy at birth rose by 30.5 years. The rate of improvement tripled the average rate of improvement for low-income coun-tries. By 1980, China’s life expectancy had risen to 67 years, fully 13 years ahead of India and better than the middle-income average. The success of the Chinese socialism in advancing the general population’s health conditions is indisputable. In the Maoist era, China also achieved larger improvements in adult literacy and basic education than most of the peripheral countries.What may be more revealing is to compare China’s perform-ance in the Maoist socialist period with the period when China undertook the transition to capitalism. According to World Bank data, between 1980 and 2000, China’s life expectancy improved only by 3.5 years despite the very rapid economic growth, and China’s improvement in life expectancy in this period was smaller than the world average and the average for low-income countries.The achievements of Revolutionary China in advancing people’s physical and mental potentials were nothing short of a spectacular success. It demonstrated convincingly the superiority of socialism over capitalism from the working people’s point of view in the context of periphery and semi-periphery.Basic Contradictions of Chinese SocialismChinese socialism was the historical product of a great revolu-tion, which was based on the broad mobilisation and support of the workers and peasants comprising the great majority of the population. As a result, it would necessarily reflect the interests and aspirations of the ordinary working people. 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 against other big powers. To mobilise resources for capital accumulation, surplus product had to be extracted from the workers and peasants and concentrated in the hands of the state. This in turn created opportunities for the bureaucratic and technocratic elites 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. This was the basic historical contradiction that confronted the Chinese socialism as well as other socialist states in the 20th century.In a “normal” class society, the use of outright coercive force is often the primary method of surplus extraction. In the core states of the capitalist world system, and to some extent also in the pe-riphery and semi-periphery, where labour is “free” in the sense that the workers can sell their labour power at the prevailing prices determined by the supply and demand in the labour mar-ket, the “reserve army of labour” or a large pool of unemployed or underemployed workers plays an indispensable role in depress-ing the wages and disciplining the labour force. In a socialist state, however, both approaches of surplus extraction were either absent or substantially weakened. As theCPC rose to power as a result of the broad political mobi-lisation and awakening among the Chinese workers and peas-ants, the construction of the new revolutionary state involved a “social compact” or a set of “historical compromises” that were radically different from what were typically found in other states of the capitalist world system. From the 1950s to the 1970s, the urban working class enjoyed a wide range of economic and social rights that included job security, free healthcare, free education, subsidised housing, and guaranteed pensions that together con-stituted what were referred to as the “iron rice bowl”. In the rural areas, with the consolidation of the people’s communes, the peas-ants were provided with very basic, but a wide range of public services including healthcare, education, care for the disabled, and care of the old people without children. Collective organisa-tion of work and distribution of income protected the peasants from the worst outcomes of natural disasters as well as the social pressure and polarisation that would arise from spontaneous market activities.These social arrangements (in effect the constitutional rights for the Chinese workers and peasants) not only provided the Chinese workers and peasants with a guaranteed minimum income and access to certain basic public services, but also greatly limited the range of surplus extraction techniques available for the state and its economic managers. The Chinese workers and peasants thus had got a far greater degree of control

CHINA SINCE 1978december 27, 2008 EPW Economic & Political Weekly80over their own labour processes, in term of the pace, style, and intensity of their labour, in comparison with their counterparts in the capitalist states.This was quite obvious for the urban sector workers whose iron rice bowl could not be broken. For agriculture, although the state had monopolised the agricultural markets and could influence the rate of surplus extraction through control over agricultural prices, the level of the total agricultural output (and therefore thesurplus that could be extracted from the agriculture) had to depend on the peasants’ productive effort. Collective organisa-tion of the agricultural work and the relatively egalitarian income distribution within the rural collectives had moreover removed competition among individual peasants as a potential disciplin-ing mechanism that could force the peasants to deliver a higher level of labour input.Therefore, for a socialist state, accumulation and surplus ex-traction had to rely primarily on the working people’s willingness to make a sufficiently large labour contribution. That is, it had to rely upon the socialist consciousness. To the extent the workers and peasants identified with the socialist state and considered the state’s control over the surplus to be in their own long-term common interest, surplus extraction could be relatively effective and accumulation could proceed at a reasonable pace. But if this failed to happen, then surplus extraction became difficult and crisis of accumulation would follow.Other than the socialist consciousness, the state bureaucrats and economic managers could also use “material incentives” as an alternative technique of surplus extraction. In theory, the payments of income to the workers could be structured in such a way so that they were proportional to the workers’ labour contri-butions. In reality, a system of material incentives would create an internal labour market within any socialist work organisation. It led to divisions within the working class, undermined workers’ control over their own labour processes, allowed some skilled workers to emerge as a labour aristocracy, and provided justifica-tion for the material privileges of bureaucratic and technocratic elites. Unlimited and inappropriate use of material incentives and distribution according to labour would seriously undermine the social basis of the collective socialist consciousness.In theReading Notes on the Soviet Textbook of Political Economy (1961-62), Mao criticised the excessive dependence of the Soviet socialism on material incentives. Mao argued that a socialist economy would have to, first of all, emphasise the interest of society as a whole, the collective interest, the long-term interest, rather than the short-term individual interest. The purpose of socialist work is to serve the people, serve the collective interest, and con-tribute to the building of socialism, rather than to earn more money. Excessive emphasis of material incentives and individual interests would make capitalism unbeatable (Mao Tse-tung 1979).For the workers and peasants to identify with the socialist state, they had to have confidence that the party and state bureaucrats, economic managers, and other technocrats were indeed using and allocating the society’s surplus product in a way that would contribute to the working people’s long-term common interest. But for this to happen, the material privileges of the bureaucratic and technocratic elites had to be subject to strict limits, and in some cases, be completely eliminated. The elites would have to make an explicit and serious effort to demonstrate their willing-ness to connect with the “masses” and their commitment to the working people’s interest (for example, through regular partici-pation in productive labour). Conditions had to be created to deepen and widen the workers’ and peasants’ participation in the management of the state’s political and economic affairs. It would be possible for these conditions to be met so long as a substantial portion of the party and state bureaucrats were com-mitted to the revolutionary ideal and were willing to sacrifice their individual interests for the common interest of working people. However, the historical tendency in the socialist states had been that a growing proportion of the bureaucratic and techno-cratic elites tended to become, and some former revolutionaries tended to degenerate into, selfish careerists who were only inter-ested in the expansion of individual wealth and power. Once these selfish careerists had become the majority in the elites and managed to consolidate their material privileges and power, then a new exploiter class in the form of privileged bureaucrats, privi-leged technocrats, and bureaucratic capitalists, alienated from the worker and peasants, would have taken shape.The fundamental solution to this contradiction lies with the complete overthrow of the existing world system and its replace-ment by a new socialist world system based on egalitarianism and global democracy. However, so long as the capitalist world system continues to operate and exist, there is no easy solution to this contradiction. For a socialist state within a capitalist world-economy to survive as a socialist state, it must engage in constant and persistent struggle, by mobilising the masses of workers and peasants, to fight against its own tendency towards degeneration and “capitalist restoration”, while supporting revolutionary movements in other states to accelerate the victory of the world socialist revolution.Socialism and Class StruggleTheCPC came to power after 28 years of arduous and heroic revo-lutionary struggle. Millions perished or gave up on the way. Among the remaining communists, many of them were indeed highly committed, mostly selfless revolutionaries.Once the party was in power, instead of attracting and recruit-ing committed revolutionaries, it increasingly attracted people who saw party membership as the path to power and material privileges. Industrialisation required technical and managerial expertise, which was concentrated in a small group of intellectu-als and “experts” that typically had capitalist or landlord family backgrounds. The social composition of the party had shifted from the workers and peasants to the intellectuals and techni-cians. By 1957, the workers were already outnumbered by the in-tellectuals in the party.Some of the former revolutionaries had also become careerist bureaucrats who were primarily interested in their individual material interests. In the first few years of the people’s republic, the party-member cadres continued to live in a relatively egali-tarian way, with the government directly providing them with the basic necessities and a small amount of monetary allowance. After 1955, all cadres were divided into 26 ranks with monthly

CHINA SINCE 1978Economic & Political Weekly EPW december 27, 200881salaries ranging from 30 yuan to 560 yuan. The CPC had thus been transformed from a revolutionary organisation into a bu-reaucratic organisation that was increasingly alienated from the ordinary working people (Meisner 2003).It was in this context that theCPC leadership was gradually 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”. It followed that the CPC would no longer focus on class struggle. Instead, the party’s main task was to promote economic development.While the First Five-Year Plan was an economic success, some of the problems of the Soviet-style centralised planning were al-ready apparent. Mao Zedong criticised the Soviet-style planning for its bias towards heavy industry, coastal provinces, and cen-tralisation, to the neglect of agriculture, light industry, hinter-land provinces, and local initiatives. Partly in response to these problems, the Great Leap Forward was launched in December 1957. In the rural areas, people’s communes were formed to mobi-lise the vast underutilised labour force to build large-scale agri-cultural infrastructure and develop rural industries that were oriented towards local needs. The planning process was decen-tralised to allow greater initiatives from provinces, localities, and grass roots workers.The Great Leap Forward accomplished many important achievements. There were many technological breakthroughs, an enormous amount of industrial and agricultural infrastruc-ture was built (much of it continues to be used even today), and hundreds of millions of peasants gained preliminary experience and knowledge of modern industrial production.The economic surge in 1958, however, was followed by several years of major economic difficulties and widespread food short-age, a period that was known to the Chinese as the “three diffi-cult years”. The conventional story about the Great Leap Forward and its failure was that Mao Zedong imposed his utopian version of communism upon the party leadership. Under Mao’s pressure, provincial and local party leaders imposed wildly unrealistic production targets on the peasants. The breakdown of effective communication and ill-advised decentralisation led to nation-wide economic chaos and massive misallocation of resources. Peasants’ incentives were further undermined by excessive level-ling of income under the new commune system. All of these contributed to the major crop failures from 1959 to 1962. The situation was then made worse by the high requisitioning of grains from the countryside as the central government failed to realisethatthe actual level of grain production was much lower than reported. The result was, according to some, the largest famine in the human history(Meisner:214-44). It is not the purpose of this paper to conduct a careful and detailed study of what actually happened during the Great Leap Forward and its aftermath. However, it is important to point outthat now there is a growing body of evidence that seriously challenges the conventional story. Both Joseph Ball (2006) and the late William Hinton (2006) questioned the reliability and the internal consistency of the data used by people who argued that a massive famine took place.In recent years, as a growing proportion of the politically con-scious young Chinese intellectuals and students move to the left, there has been a growing influence of Maoist ideas in China. Many young Maoists have joined force with Maoist revolutionary veterans to defend the social and economic records of the Maoist period. There has been a lively debate on the internet about the actual historical course as well as the short-term and long-term consequences of the Great Leap Forward.Zhang Hongzhi, a veteran of the People’s Liberation Army who had participated in both the Liberation War (the 1946-50 civil war) and the Korean War, was a leading defender (but by no means the only one) of Mao for the Great Leap Forward period. Zhang collected a large body of evidence that convincingly demonstrated that, it was Liu Shaoqi and Deng Xiaoping (who were in charge of the party’s and the state’s day-to-day affairs), who were primarily responsible for the “communist wind” (the excessive levelling of income within and between communes which seriously undermined the peasants’ work incentives) and the “exaggeration wind” (the artificially high production targets which led to pervasive concealing and distortion of information). Zhang also argued that it was Mao who most actively led the effort to correct these policy errors but Mao’s effort was sabotaged by Liu and Deng (Zhang undated).The failure of the Great Leap Forward reflected the fact that by the late 1950s, a privileged bureaucratic group had already taken hold. The communist party had evolved from a revolutionary organisation, the members of which were committed to revolu-tionary ideals, committed to the interest of working people, and willing to make self-sacrifices, into one that included many careerists who were primarily concerned with personal power and enrichment.Given the political situation in China at the time, from time to time, these privileged bureaucrats and careerists were still under the pressure from the workers’ and peasants’ revolutionary initia-tives on the one hand, and from the remaining revolutionary elements in the party on the other hand. During the Great Leap Forward, these privileged bureaucrats and careerists responded to these pressures in ways that would help to advance their own ambitions given the political environment, but cared very little about the working people’s genuine interest. Their behaviour led to disasters for the ordinary Chinese people.Having failed to advance the “social productive forces” in the Great Leap Forward through the “communist wind” and the “exaggeration wind”, Liu and Deng moved from an “ultra-leftist” approach to a “pragmatic” or right opportunist approach. In the rural areas, they allowed the peasants to have bigger private plots and sell their outputs on free markets, diverting peasants’ labour effort away from the collective work. The collective work itself was partially privatised as a result of the “contracting production to the family” policy. This new partial privatisation had led to rising inequality among peasants as well as growing corruption among the rural cadres.In the cities, the industrial sector was reorganised to concentrate power and authority in the hands of managerial and technical

CHINA SINCE 1978december 27, 2008 EPW Economic & Political Weekly82experts. Bonuses and piece rates were widely introduced to promote economic efficiency. The rising economic and social inequality was justified by the “socialist” distributive principle: “from each according to his ability, to each according to his labour”, which Marx considered to be a remnant of the “bourgeois right”.Thus, by the early 1960s, a revisionist faction within the com-munist party leadership, led by Liu Shaoqi and Deng Xiaoping, had been formed. In the 1950s, there were still some conflicts of interests between those elites who came from intellectual and technician backgrounds (which often meant former capitalist and landlord backgrounds) and those former revolutionaries who had degenerated into careerist bureaucrats, as was reflected by the anti-rightist movement in 1957 when Liu, Deng joined Mao to meet the challenge from the intellectuals with ideological sup-pression. By the early 1960s, the interests of the two groups of elites had very much converged as the revisionist party leaders relied upon technocrats with their “expertise” to advance the productive forces.Against the Liu-Deng revisionist faction, Mao argued that: “thesocialist 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 Party of China, August and September 1962).In 1964, after reading an on-site report on the “Socialist Educa-tion Movement” in a tractor factory, Mao made the following comments: “The bureaucratic class on the one hand, and the working class and the poor and lower middle peasants on the other hand, are two sharply antagonistic classes. They are be-coming or have become the bourgeois elements who suck the workers’ blood. How can they recognise [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, 12 December 1964 and 15 January 1965).After several attempts to re-revolutionise 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 “cap-italist 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 interstate competition was a constant constraint. In the absence of a swift political victory for the Maoists, China could not remain in conditions of political chaos for long without seriously undermining its position in the world system and its ability to prevent unfavourable external intervention. After 1969, the Maoists were forced to retreat from the fights for provincial and local powers, to re-establish domestic political and economic stability. The “old cadres” were rehabilitated and again in control of much of the party and state bureaucracy as well as the military.Second, despite Mao’s personal charisma and seemingly un-questioned authority, the Maoists did not have effective control over the army. The “old cadres” were often able to receive sup-port from local army units and repress the rebels by force. Mao made a tactical pact with Lin Biao to secure the army’s neutrality. After Lin Biao attempted an abortive coup and was killed in an air crash, 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 to the international communist movement was that there would have to be “continu-ing revolution under the dictatorship of the proletariat”. How-ever, 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 industrialisation”. 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 did not seem to fully conform with the daily experience of many ordinary workers and peasants. While there were pervasive resentments among the workers and peasants against corruption and bureaucratic material privileges, to the ordinary Chinese workers and peasants in the 1970s, it must have seemed a quite remote and extremely unlikely possibility that the capitalist property relations would one day return with full vengeance and that the workers and peasants would have lost all of their socialist rights and be reduced to working slaves sub-jected 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 organisational leadership. Confused and de-politicised, 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 their tragic defeat in the 1990s.The Triumph of Chinese CapitalismMao died in September 1976. The new 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 use-less and by 1979, Deng was effectively in charge of the party and started “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 privatised agriculture. In the early 1980s, as the use of chemical fertilisers and pesticides surged, and with the help of the infra-structure built under the collective era, agricultural production

CHINA SINCE 1978december 27, 2008 EPW Economic & Political Weekly84“comparative advantage” so that it could prosper through export-oriented accumulation.The ruling elites were divided into three factions. The right wing (usually referred to as the “radical reformers” in western literature) was led by Zhao Ziyang, the party’s general secretary as well as prime minister. These “reformers” actually represented the most corrupt sections of China’s bureaucratic capitalists. Their sons and daughters had gained the most in the early years of China’s capitalist transition. Using their political influences and connections, they profited from import-export trade, ar-ranged deals for foreign capitalist firms, and established ties with international capitalist conglomerates. Zhao was in favour of a Chinese version of shock therapy: full-scale liberalisation and privatisation right away. The slogan at the time was: “let the prices make one jump over the river”, meaning immediate re-moval of all state social subsidies and liberalisation of all prices.The “left” wing (usually referred to as the “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 general direction of the capitalist-oriented reform, nevertheless maintained some linger-ing affection with the original revolutionary goal. Chen was in favour of a “socialist planned commodity economy” (as supposed to “market economy”) where the state would control the com-manding 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 the expansion of domestic markets, which would in turn require a social compromise between the capitalist class and the urban working class.But the master of Chinese politics was Deng Xiaoping. Al-though Deng had officially “retired”, he kept the crucial position of chairman of the Central Military Committee and had the back-ing of the majority of the bureaucracy and the army. Deng under-stood that the state capitalist model proposed by Chen was politi-cally and economically unsustainable. For China to complete a successful capitalist transition and for the bureaucratic capitalist class to secure its fundamental political and economic interests, the remaining power of China’s urban working class would have to be broken. For that, the ruling elites would need to have the political support of the intellectuals or the urban middle class.However, Deng was politically experienced enough to know that Zhao’s strategy amounted to political suicide. The implemen-tation of shock therapy without breaking the working class’s power would immediately lead to a general working class rebel-lion. Further, while a political alliance between the bureaucratic capitalist class and the urban middle class was necessary to de-feat the working class, the intellectuals had to be first taught a lesson so that they would settle for no more than a junior position in the pro-capitalist political alliance. In retrospect, Deng’s politi-cal plan worked marvellously well.Greenleft

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