A Marxist Trap? The Danger of Economics Imperialism, or, How to Understand a Socialist Market Economy

I am slowly thinking through a framework for understanding a socialist market economy. Earlier, I have outlined the results of historical work, especially relating to market economies in ancient Southwest Asia and the ancient Mediterranean. In these contexts there were market economies, but not capitalist market economies (or a capitalist mode of production, as Marx puts it). Instead, the Persians had what may be called a military market economy, while the Greeks and Romans had a slave market economy.

The obvious point from this historical work is a profound mistake in current debates, which is to equate ‘market economy’ with ‘capitalism’. Let me change the terms to indicate how serious the mistake is: it as though one were equating ‘mode of production’ with ‘capitalism’. In fact, the danger – especially for Marxists economists – is that if you make this equation, you end up with a version of economics imperialism.

To explain: this imperialism first arose from the context of neo-classical economics, in which the specific history of the emergence of this particular branch of economic analysis, if not the history of its topic (capitalist mode of production), was conveniently erased. The result was a universalisation of the specific assumptions of capitalist market economics so that you could apply these assumptions to human economic activity throughout history. Thus, if you have markets in the ancient world, they must be capitalist. Or if you have markets in a socialist economy, they must be capitalist.

I have encountered a number of Marxists who make a similar mistake. They assume that ‘marketisation’ and ‘market economy’ mean capitalism. They use this assumption to hypothesise that China is a capitalist economy because it has markets. By now the trap is obvious: it might be described as a Marxist version of economics imperialism.

While thinking through some the implications of this move, I decided to reread a crucial section of the third volume of Capital. In chapter 36, entitled ‘Precapitalist relationships’ (pages 588-605), Marx examines markets in their earlier forms. He writes of a range of features found in ancient markets, whether Greek or Roman or European feudalism. Here we find commodities, money, capital, merchants, industry and usury, but Marx is very careful to point out that all of these individual components did not make up a capitalist mode of production, or – as I am putting it – a capitalist market economy. Why? The relationship between these various items and their social determination meant that they may have comprised components of a slave or feudal mode of production, but certainly not a capitalist one – which requires a very different organisation.

Extrapolating from this historical work, this means that you may find some or more of these items under socialism in power, but this does not mean you have a capitalist market economy. It is a very different reality, for which ‘socialist market economy’ is the best name.

The next step in thinking through a socialist market economy is to analyse the distinction between a ‘planned economy’ and a ‘socialist market economy’ (a crucial change made in the Chinese constitution in 1982). Currently, my sense is that a planned economy is one phase of the wider reality of a socialist market economy, but I have more work to do on this question. The mistake in this case is to equate a planned economy with a socialist economy.

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Xi Jinping’s Boao Forum speech: key ideas

The texts of this speech will be available soon, in many languages. In his first major international speech after being re-elected president, Xi Jinping presented a keynote at the Boao Forum, held in Hainan Province. It is known as the ‘Asian Davos’. A few of the key observations, remembering that 2018 celebrates forty years of the ‘reform and opening up’. Let me add that we are planning a conference later this year called ‘The Marxist Philosophy of the Reform and Opening Up’, especially since Marxism has become again the focus of so many researchers and the best students.

The reform and opening up, initiated by Deng Xiaoping in 1978, has significantly unleashed and enhanced productivity in China, blazed a path of socialism with Chinese characteristics, demonstrated the strength of the nation, and actively contributed China’s share to the world, according to Xi.

Over the past 40 years, China has recorded an averaged annual GDP growth rate of around 9.5 percent, fostered a middle-income population of 400 million, and lifted more than 700 million Chinese people out of poverty, accounting for more than 70 percent of the global total.

China contributed over 30 percent of global growth in recent years.

Hailing it as “China’s second revolution,” Xi said the reform and opening up had not only profoundly changed the country but also greatly influenced the whole world.

In terms used for none other than Chairman Mao (although the background picture of this blog suggests an older history):

As the country’s helmsman, Xi launched the new round of reform and opening up, the largest in scale around the globe, at a time when the giant vessel of China has entered “a deep-water zone.”

And any country that seeks to isolate itself will be consigned to the ‘dustbin of history’:

“Humanity has a major choice to make between openness and isolation, and between progress and retrogression. In a world aspiring for peace and development, the cold-war and zero-sum mentality looks even more out of place.”

“We must dispel the clouds to see the sun, as we say in Chinese, so as to have a keen grasp of the law of history and the trend of the world.”

Xi said we live at a time with an overwhelming trend toward peace and cooperation as well as openness and connectivity.

Xi said we also live at a time with an overwhelming trend toward reform and innovation, adding that those who reject them will be left behind and assigned to the dustbin of history.

No prizes for guessing to whom he might be referring. Sourced from Xinhua News and Global Times.

Tibet pulling its weight as part of China

In his book on China’s ethnic minorities, Colin Mackerras writes in regard to Tibet: ‘However, what strikes me most forcefully about the period since 1980 or so is not how much the Chinese have harmed Tibetan culture, but how much they have allowed, even encouraged it to revive; not how weak it is, but how strong’. But cultural realities can never be separated from economic questions, especially in light of the Chinese Marxist emphasis on the human right to economic wellbeing.

What do Tibetans themselves have to say about all this. An insight is provided by Tibetan delegates as the two sessions of parliament this year in Beijing. As the Global Times reports:

Kelsang Drolkar, a deputy of the National People’s Congress (NPC) and a village Communist Party chief in Chengguan district of Lhasa, told the Global Times on Monday that she was glad to see Tibet has not become a forgotten area when the country is moving forward to a moderately prosperous society.

National policies, as well as support from other regions across China, have helped the region achieve tremendous changes in the medical, economic and education sectors, and made local people “live a happier and safer life,” she said.

Tibet registered 10 percent GDP growth year-on-year last year, marking the 25th straight year of double-digit growth. Its GDP reached 131.06 billion yuan ($20.5 billion) in 2017.

In 2018, Tibet set a target to achieve GDP growth of about 10 percent, with an 18 percent increase in fixed-asset investment as well as increases of more than 10 percent and 13 percent for urban and rural per capita disposable incomes respectively, the Xinhua News Agency reported.

In 2013, the average yearly income in her village was 10,540 yuan per capita. That number almost doubled last year to 19,550 yuan, Drolkar said.

The Chengguan district has implemented a 15-year compulsory education system from kindergarten to high school. Last year, 93 students from the district were admitted by universities across China, with government covering most of their tuition, Drolkar said.

Bilingual education in schools also contributes to ethnic unity in the region, as learning Putonghua helps Tibetan people understand more about the country and its policies, she said.

Other NPC deputies from Tibet praised past legislative work on national security.

“Laws on national security, counter-espionage, anti-terrorism, activities of overseas NGOs, cybersecurity and national intelligence have provided significant legal support to safeguard national security and the country’s core interests,” Sodar, an NPC deputy and head of Tibet’s higher people’s court, said at a Monday group discussion during the ongoing session of the NPC.

The legislation also provided powerful legal support to combat separatists, terrorists and the Dalai Lama clique, said Sodar.

Tibet had a prospering economy in 2017, with about 44,000 new market entities established in the region, according to local authorities.

The figure brought the total number of registered businesses in the region to 227,000, a year-on-year growth of 19.1 percent, according to Xinhua.

Even the World Bank is starting to take notice: China’s ‘unprecedented poverty reduction’ and the role of the CPC

A detailed report from the World Bank, called Towards a More Inclusive and Sustainable Development has been raising interest in some quarters. Among many features of the report, it notes that China’s policies have enabled the “extreme poverty rate, based on the international purchasing power parity (PPP) US$1.90 per day poverty line, to fall from 88.3 percent in 1981 to 1.9 percent in 2013. This implies that China’s success enabled more than 850 million people to escape poverty.” Over the last four decades, 7 out of 10 people who moved out of poverty were Chinese. The report does not hesitate to point out that this is “unprecedented in scope and scale.” This figure is up from the 600-700 million mentioned earlier, which has already been called one of the greatest human rights achievements in world history. The aim in China – in line with the target of a “moderately prosperous society” by 2020 – is to enable the remaining 25 million to escape poverty.

Add to this the systematic growth of welfare and social protection, with the result that the Gini coefficient has been falling since 2008:

China has made remarkable progress in putting in place the core elements of a social protection system. Since the 1990s, China has introduced an array of social protection programs at a speed that is unprecedented internationally. Among other reforms, these include pension and health insurance programs for urban and rural populations; unemployment, sickness, workplace injury, and maternity insurance for urban formal sector workers; and the dibao program, a means-tested national social assistance scheme that now covers around 60 million people. This is a feat that took decades to achieve in OECD countries, and one that many middle-income countries have not realized.

A key component here is the CPC, or in World Bank speak, “China’s unique governance system”:

China has built well-functioning institutions, in unique and context-tailored forms, through a long process of institutional evolution. China’s cadre management system is a good example. Drawing on a long legacy of high state capacity, China has refined its cadre management system to shape the core of a high-performing bureaucracy by integrating features of party loyalty with professionalization of the civil service in a unique way. This has been critical to unlocking growth, promoting results through competition among local governments and anticorruption policies designed to prevent abuse of office. The cadre management system has built strong upward accountability and has provided incentives through promotion and rewards to bureaucrats and local officials in return for their attainment of growth and job creation targets. This system differs significantly from the typical Western governance model and has allowed China to find a unique way of “discovering” growth-enhancing policies through local experiments.

Much more in the report, but it errs in calling this a “market-based system,” assuming that it is a capitalist market economy. Of course, it is not, for China has developed a socialist market economy, which the report actually outlines in some detail. The report also outlines the challenges ahead, of which the government is acutely aware.

Incidentally, it is worth noting that the EU now recognises that China is a socialist market economy, although the EU errs in understanding this system in terms of government “intervention” in the market.