Washing Brains: How to Understand Chinese Marxist Research

Some foreigners say that our ideological reform is brainwashing. As I see it, they are correct in what they say. It is washing brains, that’s what it is! This brain of mine was washed to become what it is. After I joined the revolution, [my brain] slowly washed, washed for several decades. What I received before was all bourgeois education, and even some feudal education … At that time, none of us knew anything about how the Chinese revolution was to be promoted! (Mao, Zedong. 1957. ‘Speech to Chinese Students and Trainees in Moscow’ )

I begin with this text from Mao Zedong, since it expresses very well an experience of my own from the last decade or so. Mao was addressing Chinese students studying in Moscow, when he was part of a 1957 delegation to the Soviet Union.

How is this text relevant for my own experience? Whenever you dig into research material on China, you soon encounter two different frameworks, two different languages. On the one hand, there is whole language that has been developed and is used by ‘China watchers’. They are typically informed by the Western liberal tradition and use terminology and assumptions deriving from this tradition. On the other hand, we have the Chinese Marxist approach, which is informed by the reinterpretation of thousands of years of Chinese history and thinking in light of an overall Marxist framework. The differences between the two frameworks and languages becomes clear when we look at a few examples.

1. History of the Reform and Opening Up, from 1978.

Among ‘Western’ historians, there is an overwhelming tendency to divide the Reform and Opening Up into two periods, with 1989 and the Tiananmen incident being the fulcrum. This division applies particularly to economic and political history.

By contrast, this periodisation does not appear in Chinese scholarship. This is not due to some mythical ‘repression’ of information – a beloved trope of ‘Western’ China watchers – but simply because 1989 does not mark a major turning point. For example, in my recent research on the socialist market economy, a three-fold periodisation is more common: the breakthrough, in which socialism can also engage in a market economy (1979-1982); the transition, in which planning and the market are combined (1982-1989); and the establishment of a socialist market economy (1989-1993).

2. Socialist and Post-Socialist.

Related to the previous point, it is reasonably common in ‘Western’ literature to find a distinction between the ‘socialist’ and ‘post-socialist’ phases of China’s recent history. The terms are left suitably vague, but they often turn on the distinction between a planned economy and a market economy. In this respect, they assume the old 1932 slogan from Count Ludwig von Mises: ‘the alternative is still either Socialism or a market economy’. The Count was of course one of the godfathers of a now defunct neoliberalism, but his deceptive slogan influences the distinction between socialism and post-socialism: socialism inescapably entails a planned economy, while a market economy is by definition capitalist.

When dealing with Chinese approaches, it is very soon clear that this distinction simply does not work. To begin with, China has by no means abandoned a planned economy; instead, both planning and market are components, or institutional forms, of an overall socialist system that determines the nature of the components. In this light, it is misleading to speak of ‘post-socialism’.

There is a further problem with this distinction: it seeks to draw Chinese developments into a European framework, where Eastern Europe and Russia are now in a ‘post-socialist’ phase. Few indeed are the ‘Western’ researchers who realise that this effort to align China with European history is distinctly unhelpful.

3. Approach to Politics.

This one is fascinating: when ‘Western’ interpreters deal with Chinese politics, they inevitably focus on what is perceived to be ‘factional’ struggle within the CCP. Why? The overwhelming assumption is that politics is antagonistic, that it must involve struggle between opposing camps. Of course, the effort to examine the inner workings of the CCP relies on hearsay, unnamed ‘sources’ and so on.

Occasionally, a ‘Western’ interpreter is forced to admit that the CCP has remarkably little factional struggle and that it a rather stable political party. This admission moves a small step towards Chinese approach, for which we should use the terminology already developed by Marx and Engels. When envisaging what socialist governance might look like, they speak of ‘de-politicising’ governance. What does this mean? More and more dimensions of governance are no longer determined by class struggle and antagonism. This applies to policing, law courts, policies and even elections.

Yes, elections can be and indeed are de-politicised in China. From local village and city-district elections (direct) to election (indirect) of the president, these are all based on qualifications and merit for office and not through populist rhetoric by opposing political parties. Even more, China’s 9 political parties do not engage in class-based antagonisms, but work in a consultative and critically constructive manner.

4. Deformation of Language.

This deformation is an ongoing problem in ‘Western’ approaches, but let me focus on one example. It is common to speak of ‘conservatives’ and ‘reformers’, in which the ‘conservatives’ are those who hold the Marxist-Leninist line (from Deng Xiaoping onwards) and the ‘reformers’ are those who would turn China into a bourgeois state with a capitalist system.

Obviously, Chinese research provides a very different framework, between communists who ensure that China follows Marxist policies, and liberals who seek to turn China into the chaos and populism of a ‘Western’ system. That the latter are also potentially guilty of treason should be obvious.

I could offer many more examples of the differences between the two frameworks and languages, but the point should be clear. Of course, within each framework there are many debates and differences of opinion, but one must assume the framework to engage in such activities.

A question remains: do the proponents of the two frameworks actually listen to one another? It is more common for Chinese researchers to engage extensively with Western liberal scholarship, but it is criticised and appropriated within a Chinese Marxist approach.

It is far less common for ‘Western’ researchers to engage with Chinese Marxist research. Instead, their typical approach is as follows: they begin with a brief mention of official government positions, which are quickly dismissed as mere ‘rhetoric’ and ‘ideology’; they suggest they are dealing with ‘actual’ conditions, and then perhaps cite newspaper articles, occasionally providing the Chinese title to give an impression of ‘serious’ research; they may also cite one or two scholars with Chinese names to give the piece some ‘credibility’, but who typically live outside China, write in English, and assumes the same framework and language. Obviously, this is a rather shoddy way to undertake scholarly research, indicated by both the method – if it can be called that – and the conclusions reached.

To return to Mao Zedong: it is precisely this whole Western liberal framework, with its in-group language, that needs to be washed out of one’s brain to approach the material afresh.

China’s Socialist Market Economy (final article completed)

After some years of reflection and research, I have finally completed a longish study of China’s socialist market economy. A little earlier, I posted a short version of my study of East European market socialism. This was necessary background work, but it became clear that the Eastern European experiments were very preliminary and qualitatively different from China’s socialist market economy. Hence the present study. Copied below is the introduction, which outlines the main points of the argument. Since I have now submitted the article to a journal for consideration, the link that was previously here has been removed. Later, it will form a chapter in my book on Socialism with Chinese Characteristics.

China’s Socialist Market Economy: Introduction

When one engages seriously with Chinese Marxist philosophy on China’s socialist market economy, one soon notices a distinct disjunction: in China, key issues in the debate have largely been settled some time ago, while outside China significant misunderstanding remains. A major reason for this ignorance is that non-Chinese researchers remain disconcertingly uninformed concerning Chinese-language scholarship. Thus, the purpose of this study is to present the major developments of this Chinese-language scholarship. My focus is expository, providing contextual explanations material where necessary, but keeping my own assessment to a minimum. And given that the idiom of Chinese scholarship is different to that familiar to English readers, most of whom have been saturated with the Western liberal tradition, the exposition requires a process of ‘translation’ from one idiom to another. Throughout, the underlying motivation is that one cannot engage in serious debate without the preliminary step of seeking understanding and thus trust with interlocutors. To use a metaphor: one begins with open eyes and ears, while keeping one’s mouth shut; only after gaining understanding can one open one’s mouth in a considered and constructive manner.

The following study begins with the need to de-link a market economy from a capitalist system, as also a planned economy from a socialist system. This entails an engagement with Deng Xiaoping, plus a historical survey – beginning with Marx – on market economies throughout human history. Second, I delve into Chinese scholarship and its deployment of Mao Zedong’s contradiction analysis. The concern is to identify the primary contradiction in the context of socialist construction; or, rather, the manifestation of the contradiction between the forces and relations of production. For Chinese researchers, this manifestation is in terms of the overall socio-economic system and its specific components, or what may be called institutional forms, which include planned and market economies. Given that the primary purpose of socialism is to liberate the forces of production, the question now concerns what institutional form enables such a liberation. Initially, a planned economy was able to liberate productive forces, but later and in light of its unfolding contradictions a market institutional form becomes necessary – although planning does not disappear. The third section concerns the dialectic of universality and particularity, in which a market economy has universal or common features but its nature is determined by the particular socio-economic system of which it is a component. This section also seeks to answer the question whether the market economy in the context of socialism is indeed socialist, an answer that also entails a return to Marx and Engels. The final section deals with more recent developments concerning the dialectical sublation or transformation of both market and planned economies. Obviously, planning has not been abandoned, but it has been transformed to a qualitatively new level – as has the socialist market economy. By now it should be obvious that the framework is resolutely Marxist – or more specifically Marxist philosophy – for this is the approach that Chinese scholars use and have developed further in light of China’s specific conditions.

Interpreting phase one of the China-United States trade deal

Yesterday, Xinhua News carried an announcement that phase one of a trade deal between China and the United States has been agreed, subject to lrgal review, checking and translation.

If you read the report, the initial impression might be that China has ceded more ground than the United States. While the latter agrees to stop raising tariffs and to begin the process of winding them down, the Chinese side agreed to the following:

‘Implementation of the agreement will help enhance intellectual property rights protection, improve the business environment, expand market access, better safeguard the legitimate rights and interests of all companies including foreign firms in China’.

Various ideologues have been banging upon about the mythical ‘forced technology transfer’ to China, as well as breaches in intellectual property rights. I have commented earlier on how a thief always thinks someone else is a thief, as well as asking how a country that is now ahead in so many areas can ‘steal’ backward technology from someone else.

But as Sunzi said in ‘The Art of War’ quite some time ago, know your enemy better than he knows himself. The Chinese are happy to let the United States continue with its delusions, so that what seem like like concessions are not concessions at all. China has already taken the lead in intellectual propert rights (Alibaba, for instance, has won international awards for its stunningly high  levels of security), and when you use a Chinese-made phone – for instance – your privacy is protected far more than anywhere else in the world. If you see a paradox here, then you are right at one level: a communist state can protect your privacy far better than a bourgeois state. Indeed, all of the items mentioned above are part of the standard process in China, so no surprises.

But there are some items worth noting. To begin with, any discussion of state owned enterprises has been dropped from the agreement. China will simply not budge on its socialist model, so the US side has clearly backed down. Further, the agreement explicitly states that there will be ‘bilateral assessment and dispute settlement’. Earlier, the United States had insisted that it would adjudicate on whether China had honoured its side of the agreement. No-one would accept this in an agreement, so this has clearly been dropped in favour of a bilateral process. Finally, a crucial sentence points out that the agreement will ‘protect the legitimate rights and interests of Chinese firms in their economic and trade activities with the United States’. This is a major move, since – if implemented and followed – arbitrary targetting of Chinese enterprises on bogus ‘national security’ issues will be far more difficult.

Worth noting also is the point that China has agreed to import more US goods, not merely agricultural goods but also high-quality goods. The United States does have a few high-quality goods left to sell, but for some time now China has been leaping ahead, and the trade war of the last two years has enhanced that process. The direction will increasingly be the other way.

There is one last point that the agreement makes clear: China no longer needs the United States for prosperity, while the United States clearly needs China. How so? The United States has suffered double the economic damage compared to China, which has withstood the stress test remarkably well. So the United States has increasingly been keen to settle a deal. For example, Chinese trade with the United States is now about 10 percent of China’s total. Yes, 10 percent. Before the trade war began, it was 20 percent, but China has adeptly diversified, with countries involved in the Belt and Road Initiative, Africa and Europe. Of course, China would like smooth trade relations with all countries, but the time of reliance on the United States is over. No wonder the United States wanted a deal.


A Forgotten History: East European Market Socialism

‘The alternative is still either Socialism or a market economy’ – these deceptive words come from Count Ludwig von Mises and they have haunted much economic thought concerning socialism and indeed communism ever since. They were initially uttered in 1932 in a moment of exasperation. Von Mises sought to respond to first successful communist revolution, in Russia, and what was then emerging as the Soviet Union, which was in the early stages of launching its ‘socialist offensive’ – the massive process of industrialisation and agricultural collectivisation. It would result in the Soviet Union’s leap into the modern era. However, in the rather different world after 1989, von Mises’s slogan of exasperation has become an apparent truism.

Why have the words of this slogan continued to haunt? In the now-faded triumphalism after the counter-revolutions in Eastern Europe, many – Marxists included – have clung onto the either-or dichotomy. You cannot have, they believe, a socialist system and a market economy. Such a combination is a hybrid, an oxymoron.

Why deceptive? Von Mises (and Count Friedrich von Hayek after him) restricted socialism to a fully planned economy, without any form of a market. And a ‘market economy’ was by definition a capitalist market economy. Deceptive, yes; persuasive, even more so. Today, it takes a significant mental effort for many to disconnect ‘market’ from ‘capitalism’, but the effort must be made.

The Initial Proposal

Over the last couple of months, I have been engaged in researching the various market socialist experiments in Eastern Europe, from the 195os to the 1980s. All of them – including the Soviet Union – attempted to develop versions of market socialism. Some were more tentative, such as the Soviet Union, Romania and Bulgaria, while some went much further, such as Poland, Hungary and Yugoslavia. The programs in these countries, which saw their role in the CMEA, or Comecon, as complementary rather than competitive, had distinct local variations, but they also evinced significant similarities that are still known as ‘market socialism’.

The initial model was proposed by Oskar Lange in the late 1930s (although there were stray precursors). He argued that under a market socialist system there would be neither a market in production nor in finance for enterprises, but individuals could select their own jobs and what they consumed. In this context, the Central Planning Board would set an initial price for products, to which enterprises would respond by two means: taking appropriate measures to minimise the average costs of production; levelling prices in relation to these costs of production and consumer preferences. Thus, while the state owned the means of production, workers would exercise freedom of choice in terms of where to work and what to consume, which would in turn influence the pricing mechanisms of the planning board. For Lange, this approach would achieve – through a perpetual cycle of trial and error – a viable form of socialist planning. This would overcome the inherent tendency of capitalist market systems to monopolies and state intervention, and enable the optimum outcome for the social good, as well as provide a way to make significant economic improvement. Lange’s proposal is usually seen in light of the ‘socialist calculation’ debate (including the two Austrian counts mentioned earlier), but this is to miss the profound impact of Lange’s model in Eastern Europe. There, it opened up crucial theoretical space for considering the role of markets within a socialist system, although each of the market socialist programs modified Lange’s proposal in various ways – particularly in terms of independent enterprises, the nature of prices and the law of value under socialism.

Lange was only the beginning, for in my research I have uncovered a significant trove of material that is mostly forgotten these days. For some, it is as though this important phase of economic theory and planning simply did not exist. But exist it did, particularly in in places like the GDR (East Germany), where a massive concentration of economic research opened up new paths in developing a Marxist political economy for the construction of socialism and a socialist economy. I do not need to go into all the material and references here (they are contained in a lengthy article which will be published in due time), but my focus is to draw out the most significant insights. I do so with an eye on the Chinese socialist market economy.

Economic Mechanism

There were three crucial insights that arose from Eastern European market socialism: the market as an economic mechanism; the relation between planning and market; and ownership, or what is really the connection between the relations and means of production.

The first breakthrough is often forgotten: a market economy is by no means equivalent to a capitalist market economy. Marx himself already points in this direction and historical analysis confirms Marx’s approach: market economies have existed in many different historical periods, and they have clearly not been capitalist market economies. Indeed, a market economy under a capitalist market system is but one historical form of a market economy.

How did the Eastern European economists see the market? It should be seen as an instrument rather than inherently capitalist. The favoured term was ‘economic mechanism’, which entailed that it was like a neutral piece of machinery. As for the workings of this economic mechanism, the most influential proposal came from the Hungarian economist, János Kornai. He argued that an economic mechanism such as the market could exist in different forms of organisation, including socialist ones, and the way one deploys such a mechanism is through direct and indirect levers. The direct levers were the direction of production, the allocation of production materials, the regulation of foreign trade, and the appointment of managers. All of these were centralised through the state, although the problem thus far had been overcentralisation and thus the dominance of direct levers. Kornai also proposed four indirect levers: investment, the monetary system, the price system, and the wage fund. These were indirect because the government would provide the necessary environment for appropriate forms of activity, but not control them directly.

However, there was a catch with the economic mechanism argument. By and large, Eastern European economists did not move beyond the idea of a neutral instrument that could be used in different contexts. Of all the economists, only Branko Horvat (from Yugoslavia) went a step further: ‘It is not the market that determines a social system; it is, on the contrary, the socio-economic system that determines the type of the market’. In other words, a market economy is not merely a neutral instrument that could be used in different contexts; its nature, its constellation of components, was also shaped by the socio-economic system in which it operated. But Horvat made this important point in 1989, already under the acknowledged influence of earlier developments in Chinese economic theory.

Between Planning and Market

A second important breakthrough was made in terms of the planning-market opposition. We have already seen that Count Ludwig von Mises had – deceptively – suggested that planning and the market were diametrically opposed to one another. Eastern European economist struggled with this question as well, often being tempted to see them in tension. This opposition was posed in various ways, such as centralisation and decentralisation, state control and worker (economic) democracy, or vertical and horizontal relations. Given these oppositions, many saw them as working against each other, so that the enhancement of one side undermined the other – most often in terms of the state refusing to allow or even actively blocking the decentralising impetus of market relations.

Most attempted to find the correct balance between the ‘invisible’ and ‘visible’ hands, which was described by Włodzimierz Brus as ‘central planning with a regulated market’. Thus, significant marketisation would be possible, all the way from individuals to enterprises, from supply-and-demand price mechanisms to an economic bottom line for an enterprise’s viability, from division of labour to wage differentials, without it being a version of laissez-faire or even the capitalist model of social democracy. At the same time, the state would continue to own the core means of production, engage not in micro-management but in overall planning and direction of the economy via indirect levers, engage in price control in crucial areas and to prevent speculation during shortages, focus on efficient allocation, calculation and valuation, and have primary control over many areas that simply cannot be ‘marketised’, such as the mitigation of inequalities, overcoming poverty, social care, fostering talents through education, and environmental concerns, which were already becoming apparent in the 1970s

While this ‘balance’ approach dominated, there was at least one effort to go a step further. It comes from Branko Horvat: ‘without market there is no self-management and therefore no socialism’. With all members of society as ‘share-holders’, his point is more dialectical rather than simply seeking a balance of opposing forces. Or, as he puts it even more sharply: ‘a market is a planning device; without planning a market cannot operate efficiently’. In other words, planning and a market are not diametrically opposed to one another, but work in a dialectical way to enhance the other. Again, Horvat was by this time influenced by Chinese economic thought, where we find that Chinese economic planning has taken on a whole new reality in light of the development of the socialist market economy. Let me be clear: China has certainly not abandoned economic planning, for it now works at a qualitatively higher and more sophisticated level. And it does so through the socialist market economy, which is in turn a planning device.

From Ownership to Liberating the Forces of Production

It should not surprise us that Eastern European economists focused extensively on ownership of the means of production. The Communist Manifesto makes it clear that one of the first acts after a proletarian revolution is to abolish bourgeois private property and give workers control over the means of production. But the Eastern Europeans also began to examine what happens after bourgeois ownership has been overcome, and so they began to distinguish between individual private property (deriving from the Roman legal tradition) and public-social ownership. Non-bourgeois private property was quite possible in a socialist system, so much so that it caused little debate. Most of the debate was focused on the transition from public (or state) ownership to social ownership.

However, this debate had one significant shortcoming: the tendency to focus too much on the relations of production, specifically by defining socialist economics in terms of the ownership of the means of production, an emphasis that led at times from economic democracy to misdirected emphases on political ‘democratisation’ with a distinctly bourgeois aftertaste. This emphasis relegates to second place or indeed neglects what is arguably the primary issue of liberating the forces of production under socialism (as Deng Xiaoping saw). So let us see how the question of ownership looks in light of a focus on productive forces.

After a successful revolution, the historical evidence is clear that all communist parties moved to liberate productive forces through full-scale nationalisation of enterprises, abolition of bourgeois private property, industrialisation in light of ‘backward’ economic conditions, collectivisation of agriculture, and moves to a fully planned economy. As the dictatorship of the proletariat and peasantry, the new state has had to act decisively to destroy the previous system and instigate the economic structures needed for the initial phase after a communist revolution. As Engels put it in 1890: ‘Gewalt (i.e. state power [Staatsmacht]) is also an economic force [ökonomische Potenz]!’ I know of no case where this approach did not propel productive forces forward, now that they were freed from the bonds of a capitalist-landlord system. Even more, it enabled Eastern European countries that were – due to a much longer history – on the periphery of Western European development to break out of this peripheral status. This process is particularly clear with the Soviet Union, Czechoslovakia and East Germany, which became highly industrialised and dynamic economies, but the others also made considerable breakthroughs and significant growth (in the 1950s averaging 11 percent per annum). These are quite stunning results of the first phase, especially in what were comparatively ‘backward’ countries.

However, this approach – full state ownership and planned economies – has turned out to be an initial phase of socialist economic construction.  With the development of productive forces, older tensions that formerly could be managed now become threatening, while new tensions arise between the forces and relations of productive, which hinder further development.[1] Fully planned socialist economies have found that they reach a limit-point for further liberation, with eventually stagnating economic performance, supply-side structural blockages, a dwindling of creative solutions to such problems, and increasing contradictions in the relations of production that threatened to become antagonistic.[2] In short, the forces of production need a new burst of life, another form of liberation.

Historically, the way these problems have been tackled – with less and more success – is the development of a market economy in a socialist framework. The implications for the relations of production were in terms of the rise and spread of private property, of increasing competition between enterprises (even state-owned enterprises), and even of new levels of creativity and competition. Not unexpectedly, this new phase gave rise to a whole new series of contradictions that were handled in less or more competent ways.

Concluding Assessment

How do we assess the whole experiment, with the advantage of hindsight? While the initial phases of planned economies did indeed liberate the forces of production, the problem was that the market socialist reforms did not seem to provide the hoped-for breakthroughs. Economic development, growth and wages evidenced initial improvements equal to and beyond those of Western Europe, but then began to fall behind by the late 1970s and 1980s. Herein lies the initial problem: the desire to show that socialism was better than capitalism, so much so that the former would ‘catch up’ to and ‘overtake’ the latter. Many factors were sidelined in such assessments, such as natural resources, global economic crises (especially in the early 1970s), hostile external forces, social structures, cultures, and especially the longer history of Eastern Europe over some five centuries. This economic, social and political history, characterised by a smaller population in relation to territory, the phenomenon of re-feudalisation on the way to capitalism, and persistence of pre-bourgeois modes of governance, led to a situation in the twentieth century in which Eastern Europe found itself on the periphery of and lagging behind Western European capitalism. In terms of economic analysis, the focus on growth, prices, wages, innovation and efficiency in one or more small country bracketed out both the global situation and crucial socio-economic indicators such as worker-focused medical care, education, retirement pensions, full employment of both women and men, and a sense of the common good.

All the same, the various efforts at market socialism in Eastern Europe remained tentative, achieving no more than a half-way house between centralised planning and market economies. They were of course feeling their way along a path no one had before travelled. And the fact that they were forced into ‘shock therapy’ in the 1990s, precisely when many expected that they would finally be able to achieve a fully function market socialism, has cast a pall over the whole effort.

What have been the responses? One line was to retreat to the position that market socialism was a hybrid that would never work. This approach usually bifurcates along the old planned-market opposition. For pro-capitalists, only a capitalist market economy is viable. Thus, it matters not whether one has a fully planned economy or market socialism: they are both unviable. On the other side were Marxists who argued that socialism should never entertain any type of market economy, for only a planned economy is appropriate to socialism. Any effort at market socialism thus becomes an oxymoron, if not a ‘betrayal’ of Marxism – a narrative that is redolent with Western religious assumptions. The solution in this case is to enhance the efficiency and sophistication of such central planning. However, the problem with either approach is that it assumes the misleading slogan promoted by von Mises – ‘the alternative is still either Socialism or a market economy’.

The alternative is to grasp the dialectic: full marketisation – including the ‘hard budget constraint’ of bankruptcy – is a socialist project, and thus planning happens and is indeed enhanced through a market economy. It is not a case of either planning or markets, but a dialectical enhancement of both, with the attendant qualitative leap in the need for sophistication.[3] In this light should we understand Xi Jinping’s observation that China ‘resolved a major problem that other socialist countries had long failed to resolve’. Or, as Oskar Lange said at one point, ‘authentic free competition could only exist in socialism, because under capitalism monopolies put down all kinds of true competition’.

Thus far, I have mentioned China on rare occasions. This is a deliberate move, since the socialist market economy in China requires a distinct study on its own, since it is not really the same as East European market socialism and cannot be drawn into that historical path. Of course, as the Reform and Opening Up began, scholars and economists from China studied the Eastern European situations very carefully, with interchanges between China and Eastern Europe and even implementation of some early Chinese measures. While the Chinese learnt from Eastern European successes and failures, and while Eastern European scholars began to learn from China’s approach, the latter developed a distinct approach, designated by the term, ‘socialist market economy with Chinese characteristics’.

[1] Here Marx’s well-known insight from ‘A Contribution to the Critique of Political Economy’ (1859) also applies, although perhaps not quite in the way he expected during the construction of socialism: ‘At a certain stage of development, the material productive forces of society come into conflict with the existing relations of production … From forms of development of the productive forces these relations turn into their fetters’. Stalin would, of course, develop this point much further in his long study of economic problems under socialism.

[2] Specific problems included the unevenness of development – in terms of talents and distribution of productive capacity – over a very short period of time; overspending of national incomes for the sake of increasing production to meet consumption demands, a situation that led to constant tensions between expanding or modernising production; the contradictions of engaging in foreign trade, where essentially complementary production processes had to deal with capitalist competition.

[3] Such detail and complexity is theoretically possible but in practice it proved immensely difficult, not least because the computational methods and extraordinary flexibility developed later – as with China – were not yet available.

From Germany embracing Huawei’s 5G to Chinese economic prowess

While I have been researching Eastern European market socialism, with its breakthroughs and logjams, have not posted so much recently. But there are some interesting recent developments.

First, despite all the hype about Huawei in small corners of the world, business is booming with company sales improving more than 25 percent compared to last year. Its new phone, the Mate 30, simply challenges you to do without the nefarious dealings of Google. For some time now, I have not been using any of the Google items, so this is good news. Further, Germany has decided that Huawei poses no risks whatsover, and indeed that it helpfully prevents US spying, so the company that has most global patents in 5G will be integral to Germany’s development.

On a related note, despite all the uncertainties of the global situation and with a new wave of US-driven nationalistic protectionism, the Chinese economy is moving ahead solidly. Chinese experts have have been predicting a gradual slowing of growth for some time, as China makes a transition from high volume to high quality, and with a focus on ecological civilisation (shengtai wenming). Then again, 6 to 6.5 percent growth now in China is equivalent to 15 percent 10 years ago, and it is way above standard levels elsewhere.


While you were looking elsewhere … China now builds the best bridges in the world

While you may have been distracted by the way ‘Western’ countries (that is, a small group of former colonisers) are tearing themselves apart, China has quietly become a world leader in another area: bridge building.

You may know that the best and most advanced mobile phones are designed and contructed here (Huawei Mate 30), or that China is now the leading innovator and constructor of high-speed rail in more and more places throughout the world, or that China leads the world in re-afforestation and consistently wins awards for environmental protection, or that it offers a more stable model of governance, or that … the list could go on and on and it increases at a stunning rate.

But bridges? Given that most of China is quite mountainous, bridges are an absolute must (as are tunnels). And since a crucial feature of the poverty alleviation program, let alone the Belt and Road Initiative, is the construction of rail and road, bridges cannot be avoided. The outcome is that China is now the world leader in bridge technology and construction.

For example, China has recently constructed the world’s longest sea bridge in Fujian province connecting five islands and the mainland.

It will not be long before the island of Taiwan is connected with the mainland by such a bridge.

At the same time, the country’s bridge building is winning international awards. The showcase is Beipanjiang Bridge, on the border between the mountainous Guizhou and Yunnan provinces. More than half a kilometre above the gorge it spans, it required significant innovation to deal with complicated geographical conditions. It won the Gustav Lindenthal Medal in 2018 and the special merit award by the International Federation of Consulting Engineers (FIDIC) in 2019. Not a bad result in a country that in 1978 was one of the poorest in the world, with more than 95 percent below the poverty line. Not any more.

On State Capitalism

The following is the fourth part of the lecture on why foreign scholars are as yet unable to understand China’s socialist market economy. It deals with ‘state capitalism’, which is probably the most widely used term in both Marxist and non-Marxist traditions. As will become clear, what they mean differs considerably.

By 2008’s Atlantic financial crisis, or what is now called ‘The Great Recession’, the neoliberal project effectively came to an end. Since then, it has been in retreat, to the consternation of the true believers. The WTO is no longer setting the agenda in the way it used to do, for it is being changed from within, the ability of the United States to coerce others is in noticeable decline, the United States and Europe no longer see eye to eye, and a series of alternative international structures have gained significant influence, such as the Asia Infrastructure Investment Bank, the Shanghai Cooperation Organisation and the Belt and Road Initiative. How to make sense of these developments? On the back foot, more and more neoliberal true believers have begun once again to speak of the spread of ‘state capitalism’, with dire warnings as to its effects. By state capitalism they mean that the state is a large and influential corporation in its own right, a business enterprise and indeed core component that controls significant parts of a capitalist market economy.

But I have leapt ahead of myself, for the terminology of ‘state capitalism’ was developed mostly in the Marxist tradition, particularly in Lenin’s hands. The term itself may be older, used in relation to Bismarck’s project in Germany, but it is from the Marxist tradition that its most sophisticated sense arose. So let us consider Lenin’s contribution, after which I analyse a number of different paths that arose after Lenin.

Towards the end of his life, Lenin used ‘state capitalism’ on quite a number of occasions (Lenin 1918 [1965]-b, 1918 [1969]-b, 1918 [1965]-a, 1918 [1969]-a, 1921 [1965]-a, 1921 [1970]-a), but the fullest statement may be found in the key work, ‘The Tax in Kind’ (Lenin 1921 [1965]-b, 1921 [1970]-b). Lenin argued that in light of the sheer devastation and economic collapse caused by the First World War and the Civil War, as well as the very premature state of socialism in Russia, a measure of private enterprise was necessary to get the economy moving again. Peasants could sell the grain left over after paying the ‘tax in kind’, small private light-scale industry could be established, and concessions and leases would be given to foreign capitalist enterprises. All of this would entail the extraordinary dialectical point of building socialism through capitalism, or of private capital helping socialism.[1] How so? It would enable the initial impetus for the ‘development of the productive forces’ (Lenin 1921 [1965]-b, 342-43, 345-46).

Of course, Lenin had to overcome ‘left-wing’ opposition to do so, making two crucial points. First, he mapped out a process of transition, since it was not possible to move from a backward, imperialist situation immediately to full-blown socialism. Thus, he envisaged a series of transitions, from petty-bourgeois capitalism (and later from ‘War Communism’), through state capitalism, to socialism itself, during which elements of capitalism would remain.[2] Or, as he puts it more simply, from capitalism, through state capitalism, to socialism. Second, it all depends on the over-arching socio-economic and political system. His two examples are Germany (after Bismarck’s reforms) and Russia after the October Revolution. In Germany, this ‘state capitalism’ was firmly in the hands of ‘Junker-bourgeois imperialism’; by contrast, in Russia the socialist system already emerging was the key, with the nature of the socialist state and the proletarian dictatorship playing the major roles. Thus, argued Lenin, it would be highly advisable to learn from the German model and locate it within the Russian socialist system.

What has been the fate of Lenin’s insights? Four paths may be identified. First, some Western Marxists have sought to use ‘state capitalism’ to speak of socialist countries, albeit without acknowledging Lenin’s careful development of the idea. Thus, they have applied ‘state capitalism’ to both the Soviet Union and China in a purely negative sense. They do by ignoring Lenin’s key insights and understand ‘state capitalism’ as a system – with its new ‘bourgeoisie’ as exploiters – that is diametrically at odds with socialism, let alone communism (Cliff 1948 (2003); Pannekoek 1937; Norman 1955; Crump and Buick 1986; James 1986; Weil 1996, 26-27; Hooper 2017). Common to these works is a Western ‘betrayal narrative’, trying to find some moment when the Marxist tradition was ‘betrayed’ (see more below).

Intriguingly (and this is the second path), they also come close to a more recent group of non-Marxist scholars, who have begun to use ‘state capitalism’ in relation to a significant number of countries – including socialist ones – that have either refused or turned away from neoliberal approaches. In more detail, they see state capitalism as significant and long-term ‘intervention’ of the state in ‘the market’, by which they mean an entity separate from society and the state. They are also fond of using tired old categories, such as the opposition between ‘autocratic’ and bourgeois ‘democratic’, inefficient and efficient, so that state capitalism means inefficient ‘authoritarian’ capitalism and is contrasted with efficient ‘free-market’ capitalism. It should be no surprise that they see the spread of such state capitalism as a threat and hope to identify its shortcomings. Although they often focus on China as a favoured example (Haley and Haley 2013; MacDonald and Lemco 2015, 43-69; Naughton and Tsai 2015; Kurlantzick 2016; Chen 2015; Hundt and Uttam 2016, 189-220), this type of ‘state capitalism’ in certainly not restricted to China. The number identified is relatively large, whether one offers an analysis of the current situation or takes a historical perspective. In terms of the current context, the list includes most countries in East Asia, Central Asia, more and more Latin American and African countries, Russia and some Scandinavian countries. Historical surveys like to begin with modern state forms in Europe after the Peace of Westphalia of 1648, and then identify various forms of state capitalist ‘intervention’ in mercantilism, European colonialism, the Soviet Union and Eastern Europe, the welfare state in Europe (especially Scandinavia), many post-colonial states in Africa and Asia, and the Asian economic rise in the last 30 years or so, with particular focus on Singapore and South Korea (Kurlantzick 2016, 49-63; see also MacDonald and Lemco 2015, 17-42). One does begin to wonder whether ‘state capitalism’ has become a catch-all category that can be applied to all states to a greater or lesser degree.[3] Ultimately, this tendency is less of a problem than the fundamentally flawed assumptions and its oppositions – state versus market, autocracy versus bourgeois democracy, efficiency and inefficiency – that arise from the Western European liberal tradition, a tradition that has for too long seen the rest of the world in its own image. Unable to think outside this tradition, unable to seek truth from facts, they have resorted to the category of ‘state capitalism’ to try to understand the global shifts that became apparent in 2008.

Third, a few foreign Marxist scholars have continued to use the term, and to their credit they do so through careful engagement with Lenin and the New Economic Policy (which ran for almost a decade in the 1920s). More specifically, they propose that China’s Reform and Opening Up is a longer version, developed in terms of specific conditions, of the NEP (Kenny 2007). This brings us to the fourth direction arising from Lenin’s work, concerning which I need to mention Chinese scholarship. These scholars have pointed out that part of the inspiration for Deng Xiaoping’s breakthrough with the Reform and Opening Up was precisely Lenin’s New Economic Policy (Yang and Li 1998; Le 2000; Wang 2001; Tao 2008).[4] But there is one very important feature of this argument concerning the influence on Deng Xiaoping: the scholars in question rarely, if ever, use the term ‘state capitalism’. Let me put it this way: as we look back after a century, we can see certain shortcomings in Lenin’s approach. Notably, he assumed that private enterprise and market exchange were by definition capitalist, while public ownership and a planned economy were necessarily socialist. We now know that this is not the case, for market economies have existed under many different – and non-capitalist – conditions (as Marx already argued in his analysis of ancient Greece (Marx 1894 [1998], 588-605; 1894 [2004], 583-99)). At the same time, Lenin did make the crucial point that everything depends on the underlying system within which a market economy works. But in order to understand how this point remains relevant, we need to clarify the terms. Lenin called this ‘state capitalism’, in light of the evidence and knowledge available at the time, especially from Germany. But in light of subsequent historical research and current experience, especially in China, it would be better to speak of a market economy as a component of a larger socialist system (Huang 1994). Let me emphasise that this point is not made by foreign scholars, since they tend not to use Chinese sources for their work.

To sum up, state capitalism has an intriguing and complex history, with its initial development in the Marxist tradition through Lenin, its subsequent misuse by a number of Western Marxists in relation to the Soviet Union and China, its redeployment (without knowledge of the Marxist tradition) to try and understand the turn away from the neoliberal project, its Leninist sense by a small number of Marxists in relation to China, and then Chinese scholarship that fully acknowledges Lenin’s influence on Deng Xiaoping but then takes his insights a significant step further.


Chen, Zongshi. 2015. The Revival, Legitimization, and Development of Private Enterprise in China: Empowering State Capitalism. New York: Palgrave Macmillan.

Cliff, Tony. 1948 (2003). ‘The Nature of Stalinist Russia’. In Marxist Theory After Trotsky, Selected Writings, Vol. 3, 1-138. London: Boomarks.

Crump, John, and Adam Buick. 1986. State Capitalism: The Wages System Under New Management. New York: St. Martin’s.

Deng, Xiaoping. 1985 [1993]. ‘Reform is the Only Way for China to Develop Its Productive Forces’. In Selected Works of Deng Xiaoping, Vol. 3, 140-43. Beijing: Foreign Languages Press.

———. 1985 [2008]. ‘Gaige shi zhongguo fazhan shengchanli de biyouzhilu (1985.08.28)’. In Deng Xiaoping Wenxuan, Vol. 3, 136-40. Beijing: Renmin chubanshe.

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———. 1918 [1965]-b. ‘Session of the All-Russia C.E.C., April 29, 1918’. In Collected Works, Vol. 27, 279-313. Moscow: Progress Publishers.

———. 1918 [1969]-a. ‘O “levom” rebiachestve i o melkoburzhuaznosti’. In Polnoe sobranie sochinenii, Vol. 36, 283-314. Moscow: Izdatel’stvo politicheskoi literatury.

———. 1918 [1969]-b. ‘Zasedanie VTSIK 29 aprelia 1918 g’. In Polnoe sobranie sochinenii, Vol. 36, 239-76. Moscow: Izdatel’stvo politicheskoi literatury.

———. 1921 [1965]-a. ‘Report on the Tax in Kind Delivered at a Meeting of Secretaries and Responsible Representatives of R.C.P.(B.) Cells of Moscow and Moscow Gubernia, April 9, 1921’. In Collected Works, Vol. 32, 286-98. Moscow: Progress Publishers.

———. 1921 [1965]-b. ‘The Tax in Kind (The Significance of the New Economic Policy and Its Conditions)’. In Collected Works, Vol. 32, 329-65. Moscow: Progress Publishers.

———. 1921 [1970]-a. ‘Doklad o prodovolʹstvennom naloge na sobranii sekretareĭ i otvetstvennykh predstaviteleĭ iacheek rkp(b) g. moskvy i moskovskoĭ gubernii 9 aprelia 1921 g’. In Polnoe sobranie sochinenii, Vol. 43, 146-61. Moscow: Izdatel’stvo politicheskoi literatury.

———. 1921 [1970]-b. ‘O prodovolʹstvennom naloge (Znachenie novoĭ politiki i ee usloviia)’. In Polnoe sobranie sochinenii, Vol. 43, 205-45. Moscow: Izdatel’stvo politicheskoi literatury.

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———. 1894 [2004]. ‘Das Kapital. Kritik der politischen Ökonomie. Dritter Band. Hamburg 1894’. In Marx Engels Gesamtausgabe, Vol. II:15. Berlin: Akademie Verlag.

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[1] It was in ‘The Tax in Kind’ – as noted earlier – that Lenin subsumed his earlier usage of ‘state monopoly capitalism’.

[2] In an insightful section, Lenin identifies the many components present in Russia at the time, in which petty-bourgeois production (mainly peasants with their patriarchal tendencies) and private capitalists were at war with a coalition between state capitalism and socialism (Lenin 1921 [1965]-b, 331; 1921 [1970]-b, 207). Indeed, Lenin argued frequently that many aspects of approaches first developed under capitalism would also have a proper function under socialism: ‘Socialism is inconceivable without large-scale capitalist engineering based on the latest discoveries of modern science. It is inconceivable without planned state organisation which keeps tens of millions of people to the strictest observance of a unified standard in production and distribution. We Marxists have always spoken of this’ (Lenin 1921 [1965]-b, 334; 1921 [1970]-b, 210).

[3] Earlier, I noted the effort by Kurlantzick to limit the meaning of state capitalism in terms of an implicit state monopoly capitalism.

[4] Deng Xiaoping hints at this influence in 1985: ‘What, after all, is socialism? The Soviet Union has been building socialism for so many years and yet is still not quite clear what it is. Perhaps Lenin had a good idea when he adopted the New Economic Policy’ (Deng 1985 [1993], 143; 1985 [2008], 140). Apparently, Zhou Enlai had advocated learning from the NEP already in the 1950s (Lüthi 2010, 36).