China, Mao and the markets

‘Mao and Markets’ is an attempt to educate the US capitalist class about the peculiar character of China and to appeal to it to find a way to “productively live with it”. On one level it is an odd read because it attempts to ‘objectively’ explain Maoism in the past and today, and the role of the Chinese Communist Party (CCP), without having any real grasp of the historical processes, above all of the class forces at play. Nonetheless, it contains a lot of interesting information about China today, including on the attitudes of different sections of the Chinese capitalist class.

The starting point for the authors is that contrary to the earlier expectations of capitalism in the West, Xi has “pulled China back from decades of Western-style capitalist reform and embarked on a new path with heavy state intervention”. They do not argue that private capital has ceased playing an important role in China; on the contrary, “while there is significant state oversight and there have been some harsh crackdowns, particularly since 2020, private enterprises have increasingly been the engines of China’s growth. According to recent statistics, 90% of the firms in China – twenty-five million in total – are privately owned, and they are run by more than fifteen million entrepreneurs. These firms account for more than 50% of China’s tax revenue, 60% of its GDP, 70% of innovation, and 80% of urban employment”.

However, Mao and Markets argue that the CCP still maintains huge control of the private economy “via state investment” and “CCP branches” in most workplaces and that it “exerts economic control by demanding voting rights to appoint directors (for example, for ByteDance, the parent firm of TikTok, and Sina Weibo, the Chinese counterpart of Twitter) and veto power (for example, with DiDi, the Chinese counterpart of Uber)”. They also point out the large scale nationalisation that has taken place in recent years. “In 2018, 2019, and 2020, twenty-four, forty-one, and forty-four publicly traded firms, respectively, became nationalised, amounting to more than $100 billion in total assets”.

The authors’ analysis of why the Chinese regime has been empirically pushed towards greater state intervention correctly argues that, “recent economic crises in capitalist economies, such as the 1998 Asian Financial Crisis and the 2008 worldwide crisis, have further convinced the CCP’s leadership of the virtues of state ownership”. In addition, the role of the Chinese “trillion-dollar stimulus package in 2009” in limiting the effect of the Great Recession in China “further strengthened senior CCP-government leaders’ confidence in a state-led economy”.

A stable ‘hybrid’?

Mao and Markets characterises China as a “Chinese capitalist-communist hybrid”, and conclude that “democracy [by which they mean capitalist democracy] is not coming to China; its institutions and culture are deeply imbued with authoritarian socialism”. Marquis and Qiao point to some features of Maoism that they say have enabled the CCP to remain in power while moving to “a capitalist practice and economy”. They put emphasis on the considerable differences between the planned economies in Stalinist Russia and China in the past. For instance, the prices of only 1,200 commodities were set centrally in China while under the Russian plan, from 1966, 25 million prices were bureaucratically governed from the increasingly ossified centre. In China, much of the plan was always under the control of the provincial bureaucracies, which had considerable economic freedom of manoeuvre.

The authors also correctly point to how the CCP now and in the past relies on Chinese nationalism to rally support, as indeed did the Russian Soviet bureaucracy. Nowhere, however, do they explain – or appear to understand – where the authority of the CCP originally stemmed from: the mighty 1949 revolution. Based on the poor peasantry, it overthrew landlordism and capitalism in China, establishing a planned economy which, while bureaucratic from the start, nonetheless led to important gains for the working class and poor peasantry; particularly the ‘iron rice bowl’ (security of employment) plus education, health and welfare provision provided by state-owned enterprises and village communes.

However, unlike in the Soviet Union, where the initially democratic workers’ state degenerated as a result of isolation and poverty, from the beginning the Chinese regime was not based on workers’ democracy but was a Stalinist-Maoist bureaucratic regime. While defending the planned economy, the state was relatively independent from its inception, never subject to democratic control and checks by the working class.

Marquis and Qiao point out that “since 1978, the CCP government has moved to establish a more market-orientated economy, significantly encouraging the development of private enterprises”. These steps were taken empirically to try to overcome the economic crisis that had developed under the bureaucracy’s criminal mismanagement of the planned economy. In the aftermath of the collapse of Stalinism in the Soviet Union and Eastern Europe, as capitalism appeared to reign triumphant globally, the powerful Chinese state machine went much further in introducing capitalist relations on an enormous scale and setting out to ‘breed’ a Chinese capitalist class.

However, learning from the implosion that had taken place in Russia they strove to keep it under state direction. As the authors’ examples illustrate, even today the regime is not simply the repressive agent or servant of the, historically speaking, newly-formed Chinese capitalist class. The Chinese state, a product of Maoism-Stalinism, has a large degree of autonomy in fostering and steering the development of capitalist relations in the way that best preserves its own power.

Wrongly, Qiao and Marquis think that this ‘hybrid’ is stable “because of China’s blend of communist political governance and capitalist markets, the traditional dichotomy of communism and capitalism does not apply”. In part, they are probably deliberately exaggerating the stability of Xi’s regime because they think US imperialism should accept that it has to cooperate with it. However, it also stems from their mistaken and ultimately idealist analysis.

Base and superstructure

There is no historic analogy that fully applies to China today. However, Marx and Engels described the complex relationship between the state ‘superstructure’ and its economic foundations. While the state cannot be ‘neutral’ or ‘independent’ from the ruling class in society, there can, under certain conditions, be the development of a powerful state balancing between social classes – a ‘Bonapartist’ state. Such a state can for a period play an autonomous role.

The Chinese state has fostered the development of a capitalist class, resulting in the rise of huge inequality. China is now home to 626 billionaires, second only to the US. However, the state – which has created this capitalist class – still rules in the name of socialism and Marxism! The CCP justifies this by arguing that, given China’s undeveloped economy, the development of market relations is a necessary precondition for a ‘higher level’ of socialism at some unspecified future point. For the regime, the continued use of ‘Marxist’ terminology is important. The book quotes Xi saying at a meeting of top-level CCP leaders on January 5, 2013: “Why did the Soviet Union disintegrate?… An important reason was that… the Soviet Union completely denied its history, the history of the Communist Party, Lenin, and the Party was scattered, and the Soviet Union, an enormous socialist country, disintegrated. This is a cautionary tale!”

Such a situation cannot, however, continue forever. It would be wrong to imagine, as Marquis and Qiao do, that the Chinese capitalist class will indefinitely accept the constraints put on them by the Chinese state. In fact, the book does point to tensions that already exist. The authors quote unnamed Chinese businesspeople on their frustration that “state-owned capital takes up shares, and it does not care about gains or losses. It is equivalent to the money the government owes us, and then cannot return it to us. It is relatively difficult for state-owned capital and private capital to work together”. And “there are often ideological fights and collisions, because [the deployment of] state-owned capital is determined based on the state system”.

More broadly, they talk about how “many Chinese entrepreneurs sought to leave the country after they became rich, either because they feared their personal and financial security or because they had committed crimes and wanted to escape punishment”. Overall they estimate that, “more than a quarter of China’s entrepreneurs have left the country since they became rich, and reports suggest that almost half of those remaining are thinking of doing so”.

Principle-based stability?

Nonetheless, Marquis and Qiao’s overall thesis is that China’s stability will be ensured by “business leaders” exposure to the “ideological principles” of Maoism throughout their lives. This means that they have “deeply held values and cognitive frameworks that affect their economic decision making” and “Chinese markets and politics reflect Maoist principles more generally”. Lots of examples are given of Chinese CEOs engaging in ‘social philanthropy’. While they accept that “fear of government coercion” is a partial explanation of, for example, Alibaba and Tencent promising “to donate billions of US dollars” to Xi’s ‘common prosperity’ campaign, they put more emphasis on the ideological influence of Maoism as providing “guard rails” for the whole of society.

It is true that CCP propaganda, together with their own education and upbringing, will have an effect on the outlook of many Chinese capitalists. Marquis and Qiao estimate that “30-35% of all entrepreneurs” are CCP members. Many of the big capitalists, ‘the princelings’, are literally children of CCP leaders. Ultimately, however, their own material class interests will be decisive in the outlook of the Chinese capitalists. When Stalinism in Russia and Eastern Europe collapsed, no amount of schooling in Stalinism prevented the looters – now known as the oligarchs – from stealing as much of the state’s resources as they could lay their hands on. The primary reason that the majority of the Chinese capitalist class accept CCP constraints is because, up until now, the rapid growth of the Chinese economy has made it worth their while to accept the existing order.

In the Communist Manifesto Marx and Engels rightly argue that “the history of all hitherto existing society is the history of class struggles”. The class struggle remains the driving force of society. This does not mean that class conflict is always apparent. Marx and Engels analysed a process of revolutions that overthrew feudalism and then established and consolidated a new capitalist order. The merchants and guilds that had been the nascent capitalist class worked within the framework of feudalism for a long period before it became an unbearable hindrance for them. The result was revolution. China today is, of course, very different. The capitalist class dominates the world, and the economy in China. It will not accept the yoke of the CCP-state for generations. And, of course, as Marx explained, at the dawn of capitalism, the developing capitalist class, drawing behind them the poor masses, played a historically progressive role.

No vestige of that remains today, when capitalism is incapable of advancing humanity. But nor does the CCP-state that has overseen the development of capitalist relations in China offer a way forward. It is the mighty Chinese working class, now potentially the most powerful in the world, which could develop society.

Role of the working class

The crucial task for the Chinese working class will be to develop its own organisations – with further steps towards the development of independent trade unions and of a genuine revolutionary party, armed with a programme for workers’ democracy, including defending the rights of all oppressed groups, linked to the socialist transformation of society. This will require fighting for the nationalisation of the big private corporations and banks, combined with a programme of democratic workers’ control and management drawing together the state sector in a real socialist plan of production, ending the privileges of the ruling elite and capitalists. In other words, implementing the authentic programme of Marxism and thereby opening up a new chapter in the struggle for genuine socialism worldwide.

Fear of the working class entering the scene of history is an important factor constraining the tensions at the top in China. That will not prevent them indefinitely, however. Nonetheless, they may initially appear in a partially disguised way. In the Eighteenth Brumaire of Louis Bonaparte, Marx makes the point that, while the nascent bourgeois may have adopted the language of previous generations, they used it for different ends. “Cromwell and the English people had borrowed from the Old Testament the speech, emotions, and illusions for their bourgeois revolution”.

It is certainly true that future more open divisions between the current Chinese regime and elements of the Chinese capitalist class are not likely to take the simple form of the Communist Party on the one side and pro-Western capitalists on the other. Much more likely split in the CCP, which in 2022 had “just over ninety-five million members, which is 6.6% of the total Chinese population”, with all wings arguing, at least initially, that they represent the interests of the Chinese nation and even the Communist Party.

Splits could well develop partially on a regional basis given the huge variation between them. Although under Xi the regime has consciously moved to develop the interior regions, the south coast’s share of national GDP was still a huge 35% in 2018, at that stage attracting 87.5% of foreign direct investment (FDI) and achieving annual productivity growth of 7.5%. However, whatever the initial basis for conflict or the language used, class struggle will lie at the root of future crises in China.

The growth of the Chinese economy has allowed the Chinese state to manage the tensions between different class forces in society, effectively balancing between them, striking blows in different directions in order to maintain its own power. Marquis and Qiao give a small example of this, pointing to how the regime is “as likely to quash communist discussion that is too hard line as it is capitalist discussion. For example, a famous leftist website called Wuyouzhixiang (Land of Nothingness) was suspended for one month due to its promotion of a new cultural revolution”. However, “at the same time, the CCP-government has been supportive of Wuyouzhixiang’s propaganda against the West, which it deems is needed”.

At a certain stage, the CCP state could strike more serious blows against the capitalist class in order to cut across a revolutionary upsurge from the working class and poor peasantry. Or conflict could be triggered by a section of the capitalist class openly mobilising against the Chinese regime’s limiting their freedom to make profits unencumbered. They could attempt to mobilise the middle and working class around demands for democracy and, for example, LGBTQ+ rights. In such a situation, the Chinese regime, or a section of it, could be pushed to take stronger measures against the capitalist class in order to try and shore up its base among the working class. Such a crisis may begin at the top, but would certainly lead to mass revolt below, although its character in the first stages may be confused. Whatever the character of the coming revolt in China, long-term stability is ruled out on the basis of the developing economic and social crisis.

A new world disorder

China’s prolonged period of growth, quantified by Mao and Markets – from 1978 to 2019 “annual Gross Domestic Product (GDP) growth rate averaged 9.45%, while its GDP per capita grew an astonishing sixtyfold” – was possible on the basis of an exceptional set of circumstances. Key has been the unique role of the state in China, which has enabled it to develop far more quickly than other, superficially similar, economies. The Western capitalist press has had numerous articles suggesting that India could be ‘the next China’. However, in 1990 China’s per capita income was slightly smaller than India’s. In 2019 China’s per capita income was five times that of India. There is no possibility of India following the same path on the basis of the feudal-capitalist system that prevails. The role of the state in fostering industry and developing infrastructure, plus the level of education of the population, has put China on a qualitatively different plane than other ‘semi-developed’ economies.

The other unique factor, which is now changing, was the role that China played in the world capitalist economy over the last thirty years. When Stalinism imploded in the Soviet Union and Eastern Europe, US imperialism briefly bestrode the world as a hyperpower, able to call the shots. As Mao and Markets drives home, its hubris included being confident that China’s entry into the World Trade Organisation (WTO) in 2001 would lead to China’s long-term development as an assembly plant for Western capitalism. For a whole period, it did play that role. Globally the capitalist class was able to restore profits by driving down the share of wealth taken by the working class. A big element in their success in doing so was the entry of a billion plus additional very low-paid workers into the world capitalist economy, above all from China.

Over subsequent decades China and the US have remained locked together. China has become the world’s manufacturing superpower, responsible for 28.7% of global manufacturing output, with the US acting as the market of last resort. In 2022, the US trade deficit with China reached a record $309 billion. Initially, Chinese manufacturing was largely assembling Western products. In 2011, for example, the US imported $4 billion of iPads from China, but China only added $150 million in value, after US product design, software and retail costs, and South Korean display and memory chips, were accounted for.

Strategic rivalry

However, under Xi, the Chinese regime is determined to move from assembling Western commodities to being an advanced manufacturing economy. Measures it is taking include attempting to increase the domestic market by sanctioning wage rises, particularly in the Southern coastal provinces, where foreign capital is concentrated. When China entered the WTO, the average wage of a Chinese car worker was 59 cents an hour, less than 3% of US car workers’ wages. Today a US car worker earns 3.5 times his or her Chinese counterpart. Alongside this, Xi’s 2015 ‘Made in China 2025’ policy is a major reason for the increased nationalisation and state intervention that Marquis and Qiao refer to, as China drives to develop ten strategic sectors from next-generation IT to agricultural machinery.

These processes are very far from complete and US capitalism is determined to make sure they remain so. At this stage, China’s domestic market is still limited. The consumption share of Chinese GDP was just 2% higher in 2019 than it was in 2007. At the same time, China still has a very limited capacity to produce some of the most advanced technology. It remains reliant, for example, on importing the most advanced computer chips. For US imperialism, still the most powerful economy on the planet, but in decline, it is imperative to block the rise of its nearest rival China. Marquis and Qiao’s pleading with the US capitalist class not to take this road is as utopian as their perspective that China will remain stable. The CHIPS and Science Act introduced by the Joe Biden administration is an indication of US imperialism’s determination to stop China from clawing its way up the value chain.

That does not mean Western capitalist powers, including the US, are about to ‘decouple’ from China, given the levels of integration that exist. For example, over 80% of the mobile phones the US imports are at least partially assembled in China. More than 95% of rare earth materials or metals come from or are processed in China. Nonetheless, the direction of travel in this increasingly multi-polar world is for exacerbated tensions between the major powers, above all between the US and China.

In this situation, there is no prospect of China acting in the developing world economic crisis as it did in the Great Recession – as a prop for the world economy, while the US was the banker of last resort. On the contrary, increased inter-imperialist rivalry, instability, and conflict are on the rise and are acting to massively increase economic instability and crises.

This is also true within China. Its still limited domestic market means it remains highly reliant on exports and is hit hard by increasing global tariffs and barriers, and by economic slowdowns elsewhere. The post-Covid lockdown economic rebound has been weaker than hoped, leading to the People’s Bank of China starting to cut interest rates in order to attempt to encourage growth. Meanwhile, youth unemployment has soared to over 20%. Against the background of growing crisis no amount of dedication to ‘Maoist ideology’ is going to prevent huge social explosions.

Mao and Markets: The Communist Roots of Chinese Enterprise

By Christopher Marquis and Kunyun Qiao

Published by Yale University Press, 2023, £20

 

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