Employees of the Sanli Engine Company, a privately-owned company based in Jinjiang, Fujian Province, assemble lawnmowers for sale outside of China(Photograph taken on August 10, 2009). More than three decades of reform and opening up have fueled considerable advances in China’s state-owned and private sectors, enabling various forms of ownership to develop side by side in a mutually-complementary fashion. / Photo by Xinhua reporter Zhang Guojun
From:English Edition of Qiushi Journal
Journal of the CC of the Chinese Communist Party
Vol. 6 No.3 July 1, 2014
Modernization is the dream of all developing countries. While many countries have pursued dreams of modernization, pushing themselves forwards to achieve development and progress, none have overcome as many difficulties and obstacles as China, which has succeeded in putting an economically and culturally backward country of 1.3 billion people on the fast track to modernization. In light of this fact, we may say that the Chinese path represents a successful attempt to overcome difficulties that developing countries commonly face in modernization.
I. The success of the Chinese path indicates that developing countries no longer have to rely on Western approaches to modernization
All developing countries, including China, face the challenge of identifying a path of development. Following the Second World War, the majority of the world’s developing countries—with the exception of socialist countries, as represented by the Soviet Union—opted to emulate the Western model of modernization.
The path that Western countries have guided developing countries towards takes its roots in neoliberalism—an economic philosophy that emerged in the 1920s-30s, the core ideas of which are marketization, liberalization, and privatization. In 1989, the US government and the Western financial world formulated a set of ten policy prescriptions aimed at guiding economic reforms in Latin America. Later dubbed the “Washington Consensus,” these proposals were essentially a continuation of neoliberal thinking. However, with the introduction of this so-called “consensus” into Latin America in the 1990s, Latin American countries began to experience a phase of continued economic and financial crisis, and have since been confronted with serious economic recessions, polarization, and intense social conflicts. Moreover, following the drastic changes that occurred in the Soviet Union and Eastern European countries, the “shock therapy” of neoliberalism was at one point the cause of serious economic recession in Eastern Europe. Therefore, it is fair to say that the global spread of neoliberalism has been the cause of bitter suffering in many developing countries.
As an approach to modernization that has been developed outside the capitalist system, the Chinese path represents a fundamental departure from the Western model of modernization that has previously been relied upon. Through its glorious achievements, China has shown the world a path of development that differs completely from the one predetermined by Western countries. As a result, the world has begun to shift its gaze to the East.
The Chinese path differs fundamentally from neoliberalism and the “Washington Consensus” in several regards. Firstly, the differences between the two can be seen from an institutional perspective. The socialist system with Chinese characteristics is founded on the fundamental political system of people’s congresses. This fundamental political system serves as the basis for China’s basic political systems, which include multi-party cooperation and political consultation. The socialist system with Chinese characteristics also comprises a basic economic system whereby public ownership is the mainstay while various forms of ownership are able to develop side by side. Secondly, the differences between the two are evident from the guiding principles they follow. China’s socialist market economy attaches great importance to the role of macro control, laying emphasis on exerting the strengths of both planning and market forces. Thirdly, the differences between the two are evident from the role of the government in economic activities. A great deal of research, including research by Western scholars, has argued that the success of the Chinese path is attributable to the fact that China not only boasts a “big government,” but also a “good government.” These features fundamentally distinguish the Chinese path from neoliberalism, which takes the capitalist political system and private ownership as its basic political and economic foundations, and which advocates “small government” that is governments that do not intervene in the economy. Other distinctive features of the Chinese path include export-oriented policies, high savings and investment rates, and an emphasis on education and human resource development. Together, the aforementioned features constitute the main aspects of the Chinese path.
Fact has demonstrated that the Chinese path—a path that differs from the developmental models advocated by the West—has been the strongest driving force behind China’s development. This path has enabled the Chinese nation to proudly reassert itself among the nations of the world. Moreover, it will guarantee that the Chinese dream of national rejuvenation will eventually come true. The Chinese path has delivered the message that every country should choose its own path of development in accordance with its own national conditions. It has demonstrated that the socialist system, a strong government, a mixed economy, and macro control are equally capable of becoming factors for successful modernization. In the future, the Chinese model will continue to shatter the myth that surrounds neoliberalism and the “Washington Consensus.”
II. The Chinese path has effectively overcome the “late starter’s disadvantage” that developing countries face in modernization
It is a widely-held view that developing countries enjoy a number of advantages as they are attempting to modernize: advanced scientific and technological achievements that can be borrowed from developed countries; a wealth of existing knowledge and experience with regard to modernization; open international markets; and abundant demographic and natural resource dividends. Capitalizing on these “late starter’s advantages,” some developing countries have formulated “catch-up” strategies, which have been successful in certain cases. However, in most circumstances, the “late starter’s advantage” is only seen during the early stages of modernization. Once a country has reached a certain level of economic and social development, this advantage will begin to diminish, being increasingly replaced by a “late starter’s disadvantage,” which severely obstructs the modernization process in that country. The “late starter’s disadvantage” is demonstrated in the following aspects.
Venezuela’s president Nicolas Maduro with Marta Harnecker at the award ceremony.
The speech was given by Marta Harnecker on August 15, 2014, accepting the 2013 Liberator’s Prize for Critical Thought, awarded for her book, A World to Build: New Paths towards Twenty-first Century Socialism; translated by Federico Fuentes
By Marta Harnecker
August 24, 2014 – I completed this book one month after the physical disappearance of President Hugo Chávez, without whose intervention in Latin America this book could not have been written. Many of the ideas I raise in it are related in one way or another to the Bolivarian leader, to his ideas and actions, within Venezuela and at the regional and global level. Nobody can deny that there is a huge difference between the Latin America that Chávez inherited and the Latin America he has left for us today.
That is why I dedicated the book to him with the following words:
To Commandante Chavez, whose words, orientations and exemplary dedication to the cause of the poor will serve as a compass for his people and all the people of the world. It will be the best shield to defend ourselves from those that seek to destroy this marvellous work that he began to build.
When Chávez won the 1998 presidential elections, the neoliberal capitalist model was already foundering. The choice then was whether to re-establish this model, undoubtedly with some changes such as greater concern for social issues, but still motivated by the same logic of profit-seeking, or to go ahead and try to build another model. Chávez had the courage to take the second path and decided to call it “socialism”, in spite of its negative connotations. He called it “21st century socialism,” to differentiate it from the Soviet-style socialism that had been implemented in the 20th century. This was not about “falling into the errors of the past”, into the same “Stalinist deviations” which bureaucratised the party and ended up eliminating popular participation.
The need for peoples’ participation was one of his obsessions and was the feature that distinguished his proposals from other socialist projects in which the state resolved all the problems and the people received benefits as if they were gifts.
He was convinced that socialism could not be decreed from above, that it had to be built with the people. And he also understood that protagonistic participation is what allows people to grow and achieve self-confidence, that is, to develop themselves as human beings.
I always remember the first program of “Theoretical Aló Presidente”, which was broadcasted on June 11, 2009, when Chavez quoted at length from a letter that Peter Kropotkin, the Russian anarchist, wrote to Lenin on March 4, 1920:
Without the participation of local forces, without an organization from below of the peasants and workers themselves, it is impossible to build a new life.
It seemed that the soviets were going to fulfil precisely this function of creating an organization from below. But Russia has already become a Soviet Republic in name only. The party’s influence over people … has already destroyed the influence and constructive energy of this promising institution – the soviets.
That is why very early on I believed it necessary to distinguish between the socialist project and a model. I understood project to mean the original ideas of Marx and Engels, and model to refer to one form that this project has historically taken. If we analysis Soviet-style socialism, we see that in those countries that implemented this model of socialism, one that Michael Lebowitz has recently called the socialism of conductors and conducted based on a vanguardist mode of production, the people were no longer the protagonist, organs of popular participation were transformed into purely formal entities, and the party was transformed into an absolute authority, the sole depositary of truth that controlled all activities: economic, political, cultural. That is, what should have been a popular democracy was transformed into a dictatorship of the party. This model of socialism, that many have called “real socialism” is a fundamentally statist, centralist, bureaucratic model, where the key missing factor is popular participation.
By John Ross
China.org.cn, August 22, 2014
August 22, 2014 is the 110th anniversary of the birth of Deng Xiaoping. Numerous achievements would ensure Deng Xiaoping a major position in China’s history – his role in shaping the People’s Republic of China, his steadfastness during persecution in the Cultural Revolution, his extraordinarily balanced attitude even after return to power towards the development and recent history of China, his all-round role after 1978 in leading the country.
But one ensures him a position among a tiny handful of people at the peak not only of Chinese but of world history. This was China’s extraordinary economic achievement after reforms began in 1978, and the decisive role this played not only in the improvement of the living standards of Chinese people but the country’s national rejuvenation. So great was the impact of this that it may objectively be said to have altered the situation not only of China but of the world.
China’s economic performance after the beginning of its 1978 reforms simply exceeded the experience of any other country in human history. To give only a partial list:
• China achieved the most rapid growth in a major economy in world history.
• China experienced the fastest growth of living standards of any major economy.
• China lifted 620 million people out of internationally defined poverty.
• Measured in internationally comparable prices, adjusted for inflation, the greatest increase in economic output in a single year in any country outside China was the U.S. in 1999, when it added US$567 billion, whereas in 2010 China added US$1,126 billion – twice as much.
• During the beginning of China’s rapid growth, 22 percent of the world’s population was within its borders – seven times that of United States at the beginning of its own fast economic development.
Wholly implausibly, it is sometimes argued that this success was merely due to "pragmatism" and achieved without overall economic theories, concepts, or a leadership really understanding the subject (particularly with no knowledge of U.S. academic economics!). If true, then the study of economics should immediately be abandoned – if the greatest economic success in world history can be achieved without any understanding of the subject, then it is evidently of no practical value whatever.
In reality this argument is entirely specious. Deng Xiaoping’s approach to economic policy was certainly highly practical regarding application – the famous "it doesn’t matter if a cat is black or white provided it catches mice." But it was extremely theoretical regarding foundations – as shown clearly in such works as In Everything We Do We Must Proceed from the Realities of the Primary Stage of Socialism, We Are Undertaking An Entirely New Endeavour, and Adhere to the Principle to Each According to his Work. Deng Xiaoping’s outstanding practical success was guided by a clearly defined theoretical underpinning, which can be understood particularly clearly in its historical context and in comparison with Western and other economists.
As is generally known, after 1949 the newly created People’s Republic of China constructed an economy, fundamental elements of which were drawn from the Soviet Union. It is important to understand that there was nothing irrational in this – the USSR, up to that time, had the world’s most rapidly growing economy.
Indeed, the immediate post-1929 success of the USSR was of extraordinary dimensions. During 1929-39 the USSR achieved 6 percent annual GDP growth, which until then was by far the fastest ever achieved by a major economy, and almost twice the historical growth rate of the United States. Despite colossal destruction in World War II, by 1949 the USSR had already regained its prewar production level.
The elements which produced such historically unprecedented economic growth were clear. From 1929, Stalin, with the First Five Year Plan, launched the USSR on an economic policy never previously attempted in any country – construction of a national basically self-enclosed administered economy. Resources were not allocated by price but by material quantities – a steel factory did not buy iron ore on the market but had it allocated by administrative decision. Foreign trade was minimized. State ownership was applied even to small scale private enterprises such as restaurants. Farmers’ small holdings were eliminated and agriculture organized into large scale collective farms.
Despite verbal claims that this policy was "Marxist," Stalin’s economic structure was in fact radically at variance with that of Marx himself. To use the Marxist terminology common to both China and the USSR, Soviet economic policy in 1929, in a single step, replaced economic regulation by prices (exchange value) by allocation by material use (use value).
Schafik Handal, Hugo Chávez, Fidel Castro and Evo Morales, in Havana in 2004
By Roger Burbach
Telesur, July 1, 2014
Something remarkable has taken place in Latin America in the new millennium. For the first time since the Sandinista revolution in Nicaragua, radical left governments have come to power in Venezuela, Bolivia, and Ecuador, raising the banner of socialism. The decline of the US empire, the eruption of anti-neoliberal social movements, and the growing integration of the region on its own terms have created a space for the rejuvenation of socialism after the dramatic setbacks of the last century. Cuba is part of this transformative process as its leadership moves to update the country’s economy while the Cuban people experience new freedoms.
In what follows, the theoretical debates and the praxis of socialism in the twenty-first-century socialism will be explored. The intent is not to provide a singular theory of the new socialism, but to put forth some of the interpretations of the contemporary struggles that are taking place in Latin America.
Theories of Twenty-First-Century Socialism
Drawing on the wide-ranging discussions of twenty-first-century socialism taking place in the hemisphere, political theorist Marta Harnecker, who served as an informal adviser to Hugo Chavez, outlines five key components of what constitutes socialism. First, socialism is “the development of human beings,” meaning that “the pursuit of profit” needs to be replaced by “a logic of humanism and solidarity, aimed at satisfying human needs.” Secondly, socialism “respects nature and opposes consumerism – our goal should not be to live ‘better’ but to live ‘well,”’ as the Andean indigenous cultures declare. Thirdly, borrowing from the radical economics professor Michael Lebowitz, Harnecker says, socialism establishes a new “dialectic of production/distribution/consumption, based on: a) social ownership of the means of production, and b) social production organized by the workers in order to c) satisfy communal needs.” Fourthly, “socialism is guided by a new concept of efficiency that both respects nature and seeks human development.” Fifthly, there is a need for the “rational use of the available natural and human resources, thanks to a decentralized participatory planning process” that is the opposite of Soviet hyper-centralized bureaucratic planning.(1)
To construct a socialist utopia along these lines will be a long endeavor, taking decades and generations. Today different explorations, or counter-hegemonic processes, are at work throughout the hemisphere. As Arturo Escobar – a Colombian-American anthropologist known for his contribution to post-development theory– writes in ‘Latin America at a Crossroads’:
“Some argue that these processes might lead to a re-invention of socialism; for others, what is at stake is the dismantling of the neo-liberal policies of the past three decades – the end of the ‘the long neo-liberal night,’ as the period is known in progressive circles in the region – or the formation of a South American (and anti-American) bloc. Others point at the potential for un nuevo comienzo (a new beginning) which might bring about a reinvention of democracy and development or, more radically still, the end of the predominance of liberal society of the past 200 years founded on private property and representative democracy. Socialismo del siglo XXI, pluri-nationality, interculturality, direct and substantive democracy, revolución ciudadana, endogenous development centered on the buen vivir of the people, territorial and cultural autonomy, and decolonial projects towards post-liberal societies are some of the concepts that seek to name the ongoing transformations.” (2)
Orlando Núñez, a leading Marxist theorist from Nicaragua, amplifies our understanding of the long transition to socialism with a more orthodox approach. Rejecting 21st century socialism as a concept to describe what is occurring in Latin America today, he asserts that the region is in a very preliminary phase of “transitioning to socialism in which we should not pretend we are constructing socialism.” Rather we are confronting neoliberalism and each country in Latin America is “facing different conditions.” He adds, “new flags are appearing in the social struggle against the dominant system that cannot be resolved by the logic of capitalism.” It is “a post-neoliberal or post-capitalist struggle” against woman’s inequality and patriarchy, racial and ethnic discrimination, and the degradation of the environment. More fundamentally it is against “savage capitalism,” and “neo-colonialism,” both internally and externally. (3)
The Brazilian political scientist Emir Sader, in The New Mole: Paths of the Latin American Left, argues that the setback for socialism in the 20th century was so severe that it is still recuperating to this day. Socialism can be part of the agenda, but the priority must be on forming governments and political coalitions to dismantle neoliberalism, even if that means accepting the broader capitalist system for the time being.(4) This in part explains why the construction of socialism in the coming years and decades will be a diverse process – differing widely from country to country. There is no single definition or model–we are indeed witnessing, two, three, many transitions to socialism..
Part 2: Rise of the Social Movements and New Theories of Social Struggle
The origins of twenty-first century socialism are found in the wave of social movements led by peasants and indigenous organizations that swept the rural areas of Latin America as state socialism was collapsing. By the mid-1990s they had assumed the lead in challenging the neoliberal order, particularly in Ecuador, Mexico, Bolivia, and Brazil. These new organizations were generally more democratic and participatory than the class-based organizations that traditional Marxist political parties had set up in rural areas in previous decades. In general, they came to fill the gap left by a working class that was fragmented, disoriented, and dispersed due to the assault of neo-liberalism. With a broad range of interests and demands, including indigenous and environmental rights, these new social movements transcended the modernist meta-narratives of both capitalism and traditional socialism.
Return to the Source, May 20, 2014
Deng Xiaoping: A People’s Hero
After the fall of the Soviet Union, most of the socialist countries tragically fell to the onslaught of Western imperialism. Among the horrific blows dealt to the international communist movement, five socialist states resisted the tide of counterrevolution and, against all odds, maintain actually existing socialism in the 21st century.
Though each face very specific obstacles in building socialism, these five countries–the Republic of Cuba, the Socialist Republic of Vietnam, the Lao People’s Democratic Republic, the Democratic People’s Republic of Korea, and the People’s Republic of China–stand as a challenge to the goliath of Western imperialist hegemony. Among them, however, China stands unique as a socialist country whose economic growth continues to supersede even the most powerful imperialist countries.
Though an embarrassing number of Western “left” groups challenge the designation of any of these five countries as socialist, no country raises greater opposition than China. Many Western “left” groups claim that modern China is a full-fledged capitalist country. Owing their ideological heritage to bogus theoreticians like Leon Trotsky, Tony Cliffe, and Hal Draper, some groups argue that China was never a socialist country, claiming instead that the Chinese state is and has been state capitalist.
I counter their outrageous reactionary assertions with six theses:
First, Chinese market socialism is a method of resolving the primary contradiction facing socialist construction in China: backwards productive forces.
Second, market socialism in China is a Marxist-Leninist tool that is important to socialist construction.
Third, the Chinese Communist Party’s continued leadership and control of China’s market economy is central to Chinese socialism.
Fourth, Chinese socialism has catapulted a workers state to previously unknown economic heights.
Fifth, the successful elevation of China as a modern industrial economy has laid the basis for ‘higher’ forms of socialist economic organization.
And sixth, China applies market socialism to its relations with the Third World and plays a major role in the fight against imperialism.
From these six theses, I draw the conclusion that Marxist-Leninists in the 21st century should rigorously study the successes of Chinese socialism. After all, if China is a socialist country, its ascension as the premiere world economic power demands the attention of every serious revolutionary, especially insofar as the daunting task of socialist construction in the Third World is concerned.
Market socialism is a method of resolving the primary contradiction facing socialist construction in China: backwards productive forces.
Comrade Deng Xiaoping
The Chinese revolution in 1949 was a tremendous achievement for the international communist movement. Led by Mao Zedong, the Chinese Communist Party (CCP) immediately charted a course of socialist reconstruction in an economy ravaged by centuries of dynastic feudalism and imperial subjugation from both Europe and Japan. The CCP launched incredible campaigns designed at engaging the masses in constructing socialism and building an economy that could meet the needs of China’s giant population. One can never overstate the incredible achievements of the Chinese masses during this period, in which the average life expectancy in China rose from 35 years in 1949 to 63 years by Mao’s death in 1976. (1)
Despite the vast social benefits brought about by the revolution, China’s productive forces remained grossly underdeveloped and left the country vulnerable to famines and other natural disasters. Uneven development persisted between the countryside and the cities, and the Sino-Soviet split cut China off from the rest of the socialist bloc. These serious obstacles led the CCP, with Deng Xiaoping at the helm, to identify China’s underdeveloped productive forces as the primary contradiction facing socialist construction. In a March 1979 speech at a CCP forum entitled “Uphold the Four Cardinal Principles,” Deng outlines the two features of this contradiction:
First, we are starting from a weak base. The damage inflicted over a long period by the forces of imperialism, feudalism and bureaucrat-capitalism reduced China to a state of poverty and backwardness. (2)
While he grants that “since the founding of the People’s Republic we have achieved signal successes in economic construction, established a fairly comprehensive industrial system,” Deng reiterates that China is nevertheless “one of the world’s poor countries.” (2)
The second feature of this contradiction is that China has “a large population but not enough arable land.” Deng explains the severity of this contradiction:
When production is insufficiently developed, it poses serious problems with regard to food, education and employment. We must greatly increase our efforts in family planning; but even if the population does not grow for a number of years, we will still have a population problem for a certain period. Our vast territory and rich natural resources are big assets. But many of these resources have not yet been surveyed and exploited, so they do not constitute actual means of production. Despite China’s vast territory, the amount of arable land is limited, and neither this fact nor the fact that we have a large, mostly peasant population can be easily changed. (2)
Unlike industrialized Western countries, the primary contradiction facing China was not between the proletariat and the bourgeoisie–the proletariat and its party had already overthrown the bourgeoisie in the 1949 revolution–but rather between China’s enormous population and its underdeveloped productive forces. While well-intended and ambitious, campaigns like the Great Leap Forward would continue to fall short of raising the Chinese masses out of poverty without revolutionizing the country’s productive forces.
From this contradiction, Deng proposed a policy of “socialism with Chinese characteristics,” or market socialism.
By Harry Targ
Committees of Correspondence for Democracy and Socialism (CCDS)
For presentation at the upcoming “Moving Beyond Capitalism” Conference, Center for Global Justice, San Miguel de Allende, Mexico July 29-August 5, 2014
The deepening 21st century crises of capitalism-from growing economic impoverishment to neo-fascism to literal destruction of planet earth-demand movements and visions of change unparalleled in quantities and qualities of response. Anti-capitalist responses to these crises range from helplessness to spontaneous activism. Often political reactions ignore the history and context of the crises and the movements that have come before that have planted the seeds of fundamental social change. This paper will survey movements of social change in the era of neoliberal globalization suggesting both the breadth of such movements and the historical context from which they came. The tasks for today still require an analysis of the nature of existing systems and responses, visions of desirable alternatives, and contextualized discussions of moving from here to there. “Moving Beyond Capitalism” requires such a grounding of the future in the past and the present.
21st Century Imperialism: Post-Cold War Perspectives on Global Political Economy
The collapse of the Soviet Union transformed world affairs, scholarly analyses of international relations, punditry, and rationales for imperial foreign policies. A new buzzword became part of political discourse to describe the international system: “globalization.” Almost immediately a large literature was generated suggesting that the world had changed. Globalization was replacing the system of often hostile nation-states that had characterized the world since the sixteenth century.
While interpretations of globalization varied, the common conception of the term suggested that a process of relations was occurring in which interactions between nations, business and financial organizations, groups, and peoples had become so frequent and intense that they were creating one global society. Major globalizing institutions included multinational corporations, especially the 200 largest global corporations with production, distribution, and decision-making facilities in many countries, and international financial institutions engaged in speculative activities all across the globe. At the cultural level a handful of media conglomerates produced a large percentage of the cultural products, images, artistic endeavors, and print and electronic information that the world consumed. Finally, international institutions such as the World Bank, the International Monetary Fund, and the newly created World Trade Organization brought international influence to bear on states that resisted the globalization process.
Photo: Workerless Factory
[Editor's Note: The author skims the surface of capitalism's endemic problem of the growing organic composition of capital (better tools) in relation to the decrease in living labor (fewer workers and less labor time). One reason noted by Marx is that it has no strategic reform solution , but it does set the conditions for socialism, and beyond that, the classless society of communism].
By Jason Perlow
SolidarityEconony.net via Tech Broiler
Open Source. The backlash against Software Patents. Cloud Computing. Bitcoin. 3D Printing. Post-PC. Cord-Cutting. Electric Vehicles and Alternative Energy.
There are ideological and social drivers that are unique to every single one of these things, and yet there is a common thread that ties them together. I call this trend “anti-spendism”.
Anti-spendism is not necessarily a social movement that is tied to the betterment of society as a whole. It’s not like socialism or communism, where we are talking about a desire to more equitably distribute wealth to the have-nots.
It is by definition, the personal, self-centered desire not to expend capital at all. Or to put a more modern take on it, rapid advances in technology have so lowered our perceptions of what things should cost, that ultimately many goods and services have become devalued far below what people are willing to pay for them.
To put it bluntly, anti-spendism is “Hell no, we won’t pay” syndrome.
And while a case could be made that thriftiness in the trade of goods and services has always existed, even before money itself existed, there has never been a time in our history where thriftiness has overwhelmingly been driven by technology itself, or vice-versa.
The rise of FOSS
It is difficult to say where this all began, but I suspect that it emerged as a confluence of events beginning with the rise of the Free/Open Source Software (FOSS) movement in the late 1990s which planted the seeds among the technorati that you could get something of value (Software) for free.
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By Joseph Stiglitz
Social Europe Journal
March 3, 2014- No country in recorded history has grown as fast – and moved as many people out of poverty – as China over the last thirty years. A hallmark of China’s success has been its leaders’ willingness to revise the country’s economic model when and as needed, despite opposition from powerful vested interests. And now, as China implements another series of fundamental reforms, such interests are already lining up to resist. Can the reformers triumph again?
In answering that question, the crucial point to bear in mind is that, as in the past, the current round of reforms will restructure not only the economy, but also the vested interests that will shape future reforms (and even determine whether they are possible). And today, while high-profile initiatives – for example, the government’s widening anti-corruption campaign – receive much attention, the deeper issue that China faces concerns the appropriate roles of the state and the market.
When China began its reforms more than three decades ago, the direction was clear: the market needed to play a far greater role in resource allocation. And so it has, with the private sector far more important now than it was. Moreover, there is a broad consensus that the market needs to play what officials call a “decisive role” in many sectors where state-owned enterprises (SOEs) dominate. But what should its role be in other sectors, and in the economy more generally?
Many of China’s problems today stem from too much market and too little government. Or, to put it another way, while the government is clearly doing some things that it should not, it is also not doing some things that it should.
Worsening environmental pollution, for example, threatens living standards, while inequality of income and wealth now rivals that of the United States and corruption pervades public institutions and the private sector alike. All of this undermines trust within society and in government – a trend that is particularly obvious with respect to, say, food safety.
Such problems could worsen as China restructures its economy away from export-led growth toward services and household consumption. Clearly, there is room for growth in private consumption; but embracing America’s profligate materialist life-style would be a disaster for China – and the planet. Air quality in China is already putting peoples’ lives at risk; global warming from even higher Chinese carbon emissions would threaten the entire world.
There is a better strategy. For starters, Chinese living standards could and would increase if more resources were allocated to redress large deficiencies in health care and education. Here, government should play a leading role, and does so in most market economies, for good reason.
America’s privately-based health-care system is expensive, inefficient, and achieves far worse outcomes than those in European countries, which spend far less. A more market-based system is not the direction in which China should be going. In recent years, the government has made important strides in providing basic health care, especially in rural areas, and some have likened China’s approach to that of the United Kingdom, where private provision is layered atop a public base. Whether that model is better than, say, French-style government-dominated provision may be debated. But if one adopts the UK model, the level of the base makes all the difference; given the relatively small role of private health-care provision in the UK, the country has what is essentially a public system.
Likewise, though China has already made progress in moving away from manufacturing toward a service-based economy (the GDP share of services exceeded that of manufacturing for the first time in 2013), there is still a long way to go. Already, many industries are suffering from overcapacity, and efficient and smooth restructuring will not be easy without government help.
China is restructuring in another way: rapid urbanization. Ensuring that cities are livable and environmentally sustainable will require strong government action to provide sufficient public transport, public schools, public hospitals, parks, and effective zoning, among other public goods.
One major lesson that should have been learned from the post-2008 global economic crisis is that markets are not self-regulating. They are prone to asset and credit bubbles, which inevitably collapse – often when cross-border capital flows abruptly reverse direction – imposing massive social costs.
America’s infatuation with deregulation was the cause of the crisis. The issue is not just the pacing and sequencing of liberalization, as some suggest; the end result also matters. Liberalization of deposit rates led to America’s savings and loan crisis in the 1980’s. Liberalization of lending rates encouraged predatory behavior that exploited poor consumers. Bank deregulation led not to more growth, but simply to more risk.
China, one hopes, will not take the route that America followed, with such disastrous consequences. The challenge for its leaders is to devise effective regulatory regimes that are appropriate for its stage of development.
That will require the government to raise more money. Local governments’ current reliance on land sales is a source of many of the economy’s distortions – and much of the corruption. Instead, the authorities should boost revenue by imposing environmental taxes (including a carbon tax), a more comprehensive progressive income tax (including capital gains), and a property tax. Moreover, the state should appropriate, through dividends, a larger share of SOEs’ value (some of which might be at the expense of these firms’ managers.)
The question is whether China can maintain rapid growth (though somewhat slower than its recent breakneck pace), even as it reins in credit expansion (which could cause an abrupt reversal in asset prices), confronts weak global demand, restructures its economy, and fights corruption. In other countries, such daunting challenges have led to paralysis, not progress.
The economics of success is clear: higher spending on urbanization, health care, and education, funded by increases in taxes, could simultaneously sustain growth, improve the environment, and reduce inequality. If China’s politics can manage the implementation of this agenda, China and the entire world will be better off.
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Is China’s extraordinary rise a model of economic reform without political reform? Is China’s Achilles’ heel its political system? Is China’s one-party governance doomed in the face of mounting challenges from a more diversified economy and demanding society?
China’s political governance, adapting itself constantly to new challenges through many minor reforms, has proven crucial for China’s economic success.
These are questions in many Western minds whenever China is mentioned. But the assumptions behind these questions may be misplaced, as one’s understanding of China could be vastly different if a Chinese perspective were adopted. China’s political governance, adapting itself constantly to new challenges through many minor reforms, has proven crucial for China’s economic success. The following five aspects of China’s political governance merit special attention:
First, one-party governance. In fact, there is nothing new about one-party governance in China: in most of the past two millennia since its first unification in 221 BC, China almost always practiced a kind of one-party rule, or rule by a unified Confucian ruling elite selected through public exams (the Keju), claiming to represent — or genuinely representing — most if not all under heaven. Furthermore, in most of the one-party-rule era, China was arguably a better governed country and a more prosperous economy than Europe of the same epoch. China only began to lag behind Europe when it closed its door to the outside world and missed the Industrial Revolution of the 18th century, but the country is now catching up fast.
The Communist Party of China has to a great extent followed this tradition and built an impressive system of selecting its leaders based on merit and performance. For instance, its top decision-makers (6 out of 7 Politburo’s Standing Committee members) all worked at least twice as much as party secretaries or governors at the provincial level, which means they have on average administered a population of about 100 million before being promoted to their current positions in Beijing.
The CPC today, like its predecessors in China’s long past, also claims to represent the whole nation, but with a mission to restore the country’s premier world-class status. Key independent surveys, including those by the Pew or the Asian Barometer over the past decade, show a consistent pattern in which the Chinese central authorities command a high degree of respect and support (above 75 percent) within the country. Depicting China’s polity as being on the verge of collapse, as appears so often in the Western media, is out of touch with China’s reality.
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By Heiko Khoo
March 6, 2014 – The leaders of the Communist Party of China (CPC) view the battle against corruption as a struggle of life and death that will determine China’s fate. The Party’s capacity to control the abuse of power is the defining issue that will shape future relations between the Party and the masses. To avoid the type of collapse that brought down Communist Party rule in the Soviet Union and Eastern Europe, the CPC must stamp out corruption and empower the working masses to create a socialist future.
Last year, Xi Jinping, general secretary of the CPC Central Committee, vowed that the "color of red China will never change." Strict measures to clean up the behavior of officials were released and enforced, and many displays of official extravagance eradicated. Xi explained, "The Party cadres should be firm followers of Communist ideals, true believers of Marxism and devoted fighters for the socialism with Chinese characteristics." State and Party leaders initiated the campaign by self-criticism and pledged their support for the "mass-line:" to connect as closely as possible with the masses and promote a frugal, honest, hardworking and clean government.
Xi explained that an understanding of revolutionary history is the "best nutrient" for Party members. In Mao Zedong’s time, China’s revolutionaries and state functionaries were known worldwide for their Spartanic lifestyles and their closeness to the masses. Wage inequality was minimal and a collectivist spirit pervaded society. This anchored communist ethics deep in the minds of workers and peasants. So, even when catastrophic policy errors occurred, the Party could draw on deep wells of social support. The people and Party believed they were transforming China, and that the world was moving towards a communist future.
Deng Xiaoping’s policies permitted markets, foreign investment and indigenous private ownership. This provided access to foreign capital and technology and actually developed indigenous capital: generating the most rapid modernization — as well as economic growth and reduction in poverty — of any major economy in world history. This happened because the CPC retained its control over the macro economy by means of the public ownership of the banks and the commanding heights of the economy.
However, the accompanying rise in inequality produced grotesque disparities in life styles and opportunities. Urban life in China appeared to become similar to that of many developing capitalist countries: beggars and billionaires pass each other in the country’s great cities; capitalists in Ferraris race past migrant workers who build five star hotels on poverty wages. However, in the minds of broad layers of the working classes, capitalism is associated with technical advance and dynamic development. The working class has become China’s largest social class. Workers with urban registration have adjusted to new forms of global, private and state capital investment, as well as to new types of employment. Migrant workers have been drawn into the global chain of production and consumption.