The Challenges Facing China

Published: 26/11/2020
Draft Topic for our ‘Transformation, a Manifesto for Democratic Socialism
If you would like to make any comments on the document, suggest improvements or participate in a discussion on it, please go to this FB page: https://www.facebook.com/groups/1083231248713141/post_tags/?post_tag_id=1083239598712306

China’s economic growth in the last 40 years has shattered all historical records. So too has its success in reducing poverty. Never have we seen so many people – 850 million – lifted out of poverty and deprivation in so short a time. If there were no other justification for China’s version of a socialist economy then this would be it.

Naturally, many people ask how China has achieved such an astounding outcome. Earlier in our Manifesto we answer this key question. In particular, we examine China’s great ‘reform and opening up’ policy. A policy that slowly emerged in the late 1970s after the death of Chairman Mao. We show how it directly traced its origins to Lenin and Bukharin’s New Economic Policy in the 1920s in the Soviet Union. A policy which was based on an alliance between the workers and the peasants. That sensibly sought to combine socialist planning and state ownership of the commanding heights, with private cultivation of the land, and the importation of foreign capital and technology. A policy that in the Soviet Union was tragically abandoned by Stalin in 1928 in his ultraleft war against the peasants and the cadres of his own communist party. But was then wisely picked up fifty years later by the centrist wing of the Chinese Communist Party led by Deng Xaioping. And shown to be a winning formula for successful socialist economic construction in a largely agricultural country.

To give some idea of the spectacular growth that China’s New Economic Policy has achieved in the last forty years we only have to compare it to the United States, still the world’s largest economy. In the years 1979-2019 China’s national output grew by an incredible 5000%. In the same period, the United States grew by only 750%. And at the current rate of growth, China will overtake the US as the biggest economy in the coming decade.

At one time, America was the foremost nation for construction. The speed and scale of its output of ships, planes and tanks during the Second World War was unprecedented. Then, in the post-war era when we thought of the United States we used to think of skyscrapers, bridges and motorways. Now that baton has been passed to China. Indeed, in just two years, 2011-12, China used more concrete than the US in the whole of the 20th Century! Today, it produces more steel than the next 20 countries combined.

In terms of housing, living space has hugely expanded from three square metres per person in 1978 to about 30 square metres per person today. In the urban areas more than 80% own their own home with an even higher proportion in the rural areas. However, workers who migrate from the countryside to the towns face major housing problems. To address this, in the 2011-15 Five Year Plan 100 million were provided with low cost housing by the state. Although things are getting better, many migrant workers have major difficulty accessing city public services. But to compensate they often have a home and land back in their villages

As a consumer market, China is becoming the largest in the world. It sells the most cars. It is the only country with over 1 billion mobile phone users. And with more than twice as many internet users as the United States. Perhaps the most dramatic statistic can be found when we look at international tourism. As the chart below shows, not only are there more Chinese tourists travelling around the world than any other country, but they are spending far more abroad than any other national group.

Of course, a major factor in these incredible statistics is China’s massive 1.39 billion population, nearly a fifth of the world’s total. But large populations are no guarantee of economic preeminence. India has almost the same number of people, 1.38 billion, yet is only one fifth of the size of the Chinese economy.

Coronavirus Response
The advantage of China’s collective approach to its economic and social life has been dramatically demonstrated during this Coronavirus crisis. Unlike those neighbours – Japan, South Korea, Taiwan and New Zealand – whose response to Covid has been widely hailed, China was the first to face Covid-19. Nothing was known of the virus. What it was. How different it was from influenza. How infectious it was. Or how lethal.

As a result, mistakes by local Chinese authorities were made in the first month of discovery.And thus it was able to spread through Wuhan city, Hubei Province and then across China. Luckily for China’s neighbours, China was very prompt in reporting the new virus to international authorities, taking only three days to inform the World Health Organisation. This allowed the nearby countries to quickly suspend flights from China and prevent most cases crossing their borders. And to introduce test and tracing to identify and quarantine the relatively small number of cases that did arrive.

China, however, confronted a much bigger challenge. It was the first to face a mass outbreak of the virus. Once it realised how infectious and deadly the virus was, Instead of hesitating, or trying to prioritise business interests over the health of its people, China’s response was overwhelming and effective. In contrast to the slow and disastrous reaction to the virus in most of the world, China rapidly instituted a complete quarantine across the whole country. Rather than adopting the half-strategy of ‘flattening the curve’ as it became popularly known in most parts of the capitalist world where it was tried, China sought to completely defeat the virus. China did not try to slow down the transmission of the virus, but to stop it altogether. To achieve this, China organised a two-month complete lockdown to ensure that the virus could not continue to spread. To support this, it mobilised all of its resources including its community-level organisations to ensure that human-to-human contact outside the home was suspended. And that food and other services were delivered to households.

The excuse was made in the capitalist countries that China could only mount such a decisive, full quarantine because it was a dictatorship and its citizens were used to being ordered around. Yet, the real reason why a full Chinese-style quarantine was not implemented in the capitalist world was the desire of governments to keep sections of the economy going and through this to protect the profits of their backers. Thus, the virus was allowed to arrive in most countries because the governments there did not want to stop business travel and tourism. Then in the lockdowns measures, public transport was kept running and roads remained open so workers could keep going to offices, factories and construction sites. In this way, while the reproduction of the virus was significantly reduced, it was still allowed to continue circulating in the community. Only to resurge when the lockdown measures were lifted.

In fact, the response of most populations to the initial half-lockdowns was much better than expected by the politicians and the elites they represent. The public accepted staying at home for months. Millions volunteered to help deliver groceries, help neighbours etc. Yet, the option of a full quarantine was excluded from debate in the media and never tried. The alternative half-quarantines produced most of the pain with too little of the gain. Inevitably, the failure of the half-lockdowns has discredited quarantines and stoked widespread opposition and scepticism. And helped the virus spread once again. Thus, the attempt to limit the lockdowns in most of the capitalist world in order to protect the economy dragged out the crisis and caused even more economic damage.
The same indecision and incompetence affected the treatment given to Covid cases. Contrary to the irrational practices adopted elsewhere, China did not send sick people to shelter at home where they could get even sicker and spread the virus to other family members. Rather, they immediately isolated them at medical test centres where they could confirm the virus and immediately treat them for falling oxygen levels and other complications. This helped them minimise the fatalities.

In contrast to the results in Europe, the US, Latin America and India, China was able to bring the virus under complete control. With the largest population of any country, China suffered less than 5000 casualties compared to over 1 million in the rest of the world.

Of course, China continues to be vulnerable from infection from travellers returning home from abroad. To contain this risk, China has also instituted the biggest and most rapid test and trace programme anywhere. In a recent case, an outbreak of 12 cases caused the city involved to test all ten million of its citizens in just five days. In this way, the virus has no chance to revive in a second wave.

Despite the mistakes made at the beginning of the outbreak in China, and the sacrifices that the population had to undergo for two months at the outset of the epidemic, Chinese people are very satisfied with the decisive and comprehensive way that their government has dealt with the virus. Dahlia, a German research agency, found that 95% of Chinese think their government did a great job in handling the pandemic. Compare this to the high levels of dissatisfaction among most European countries and the US on the same issue.

Ironically, China’s decisive health strategy has also helped its economy. By eradicating the virus quickly rather than allowing it to continue to circulate and later resurge, economic losses were greatly reduced. China is now the only economy to show growth while most of the capitalist economies are suffering massive falls in output. This is likely to accelerate China’s rise to the number one spot globally.

Even when it comes to a vaccine for the coronavirus, China is showing the way forward. It’s vaccine research and testing is well advanced. And its willingness to supply it at cost to the world rather than trying to profit out of it, could be a model for vaccines for the future. China should pledge to put big resources into vaccine research from now on. Before this outbreak, too little vaccine research was being undertaken because it was not viewed as profitable by the drug companies. Thus virtually no resources have been allocated to producing a permanent influenza vaccine that could prevent the half million deaths it causes globally. In many cases, research is not even regarded as a priority because infectious diseases are mainly found in the poorer countries. Thus, one million die from malaria each year. Vaccine research for the world could be a way for China to turn this negative Coronavirus experience to a positive. And for China to become a global super health centre.

Can China Maintain its Future Growth?
There is continuous speculation in the media about China’s high growth rate. There is an assumption that China’s growth forecasts are just guesstimates that may or may not turn out to be accurate. Certainly in the capitalist economies growth forecasts are more often wrong than right. This is understandable given the unplanned nature of these economies and the ups and downs of their business cycles – the booms and slumps that have been an integral part of capitalism throughout its 250 year history. But China has a planned economy and does not suffer from an internal business cycle. Therefore, China’s high rate of growth is not a result of some kind of magic or trickery with statistics. It is a direct result of its extraordinary high rate of investment.

For example, between 1982 and 2011 China’s level of investment averaged 36.9% of GDP. This actually increased to 40% in the period from 2004 until today. China’s growth rates are directly linked to this level of investment, and the efficiency of the investment. Given that the Chinese government sets the level of investment in its plan, and controls this public investment through government bodies, it is able to determine and foresee much of the rate of growth in the economy. Indeed, it builds a considerable safety margin into its forecasts. Thus, its projections tend to be relatively accurate compared to the chaotic capitalist economies.

Little of this is understood or accepted in the West. Again and again they have been predicting that the Chinese economy is about to fail only to be embarrassingly proved wrong. As the socialist economist John Ross put it: “One leading capitalist economist or economic agency after another have made fools of themselves predicting a coming collapse. This is because they are applying capitalist yardsticks and substituting wish fulfilment for sober analysis.

Access to finance is a key component for investment. In the past, control of private capital lay in the capitalist centres of New York, London, Paris and Frankfurt. However, this is fast changing. China’s state banks have now become the biggest in the world. In 2000 the top four banks were Citigroup, Bank of America, HSBC Holdings and JP Morgan-Chase – three US and 1 UK bank. By 2020 this had become transformed with China holding all top four slots: Industrial Commercial Bank of China, China Construction Bank, Agricultural Bank of China and the Bank of China.

The same process is happening in the stock markets. Just this year, Chinese finance and insurance giant Ant Finance held the largest Initial Public Offering in history. It was launched on the Shanghai and Hong Kong Stock Exchanges rather than the New York stock market. Something that was highly unlikely only three years ago. Moreover, China now accounts for 27 percent of global venture capital, vital for the commercialisation of emerging technologies.

Chinese Debt
Another area for regular capitalist media criticism concerns China’s debt levels. We are constantly told that China’s debt is out of hand and will inevitably bring its economy down. But such predictions have been made for the last two decades without outcome.

Absurdly, these comments on China’s financial arrears are coming from capitalist countries awash with debt. For example, the United States with only one quarter of China’s population has four times its level of debt. It is only the fact that the dollar is the world’s reserve currency that is allowing the US to carry this level of debt without going into crisis. But for how long will the dollar continue to play this role?

Furthermore, the advanced capitalist countries have allowed their central banks to continue to keep on buying up debt through the policy of Quantitative Easing, and thereby pump in trillions of dollars into their economies. The unbelievable level of world debt has now reached $277 trillion dollars which amounts to 365% of world GDP. An unprecedented and dangerous level has only dramatically increased during the Coronavirus crisis.

China on the other hand is in a much better situation. For one thing, it has a massive foreign exchange reserve surplus of $3 trillion. In addition, its debts are mainly internal with only 16% owed internationally. This compares with the United Kingdom with 287% of its debt owed externally. Or the United States with 122% of its debt owed to foreign institutions. Ironically, China is America’s largest creditor with Washington owing Beijing between $1.5-2 trillion!

China also has an exceptional high rate of domestic savings which provides stability for its loans. Moreover, it can handle its debts because they mainly arise from real investment that help increase the economy rather than spent on speculation such as propping up the stock markets. And China’s rate of profit is relatively high which allows for a greater level of borrowing.

Most importantly, the Chinese government owns and controls its banks. This gives the government the ability to step in when needed and reorganise the financial sector and clear out its debts. In the capitalist economies it is the other way round. The banks control the governments. The difference was graphically demonstrated during the Great Economic Recession that broke out in 2008-9. The major capitalist banks around the world faced collapse and forced their governments to save them. But did they repay them in kind? No chance. After the banks were rescued they were given massive support in the hope and expectation that they would pass on their good fortune to the small and medium-sized businesses that were suffering in the crisis. Instead of doing so they just used these generous public funds to restore their balance sheets and reward their shareholders and directors. Even now, the US economy has not recovered back to the 2007 pre-crisis level. The opposite has happened in China. To avoid being dragged down by the capitalist crisis, Beijing launched a major public investment programme which built much-needed infrastructure, advanced the country and boosted the economy which is now dramatically bigger than in 2007.

Importance of Innovation
As we explained in our earlier Manifesto Topic on ‘Socialism and the Soviet Union’, the failure of the USSR to successfully prioritise civilian innovation and integrate it into its economy was a major factor in its failure to compete on the world market. China is determined not to make the same mistake.

In 2017, President Xi declared that innovation was the strategic force needed to promote China’s development, as well as the strategic underpinning to build a more modern economy: “We will promote basic research in applied sciences, to increase our achievements in science and technology projects, prioritizing innovation that generates key technologies, that break technological boundaries and modernize technological engineering; in short, that breaks technological paradigms”.

China has grown its research and development spending rapidly since 2000, at an average of 18 percent annually compared to the US where R & D spending has grown by only 4 percent.

This has only been accelerated by the ‘Made in China 2025’ strategy that is now in full force. This aims to raise investment in technology to 2.5% of annual GDP and to establish China as the world leader in the production of technological goods and services. In particular, to focus on new technologies in the fields of; numerical and robotic control tools; aerospace equipment; ocean engineering equipment and high-tech chips; railway equipment; energy savings and new sources of energy; electrical equipment; new materials; biomedicine and medical equipment; and agricultural machinery.

To this end, China has installed the highest number of high speed trains in the world; entered the passenger aircraft industry; encouraged the production of over 50% of global solar panels and electric cars; and installed 400,000 robots, far more than any other country. Likewise, China is the biggest investor in artificial intelligence.

A central part of China’s plan is to increase local content in technological products to 40% by 2020 and 70% by 2025, while still remaining within the World Trade Organisation’s guidelines – not to substitute Chinese for foreign technology by means of import bans or other trade restrictions, but by sheer force of superior technical excellence. To back up this drive for innovation, China has massively ramped up its investment in further education in science and engineering. It now has 4.6 million graduates in science and technology while the United States has only one-eighth that amount.

China could do even better if it was to open up its innovation process to its citizens along the lines we outline in our earlier topic ‘Democratic Public Innovation’.

Is China Stealing Technology?
A common accusation levelled against China is that it is advancing its economy by ‘industrial scale’ theft of technology from foreign companies. No doubt this was a feature of China’s past development, just as it was for all developing countries including the United States in its development phase. But copying or theft of technology is fast becoming a thing of the past. As the example of Huawei shows, Chinese companies are now often the ones with the leading technologies. This is backed up by statistics on the filing of patent applications. According to the World Intellectual Property Organization, of approximately 12 million patent applications made in 2018, 5.7 million were Chinese. Indeed, China now applies for more patents than the US, the European Union and Japan put together!

The same applies to legal protection for patents in China. Contrary to the impression conveyed by the international media, legal patent protection in China is now well catered for and the process is much quicker than it is anywhere else. Appeals being held in specialised intellectual property courts with the record of success by foreign companies being close to 100%.

The Five Year Plan
China has been drawing up five-year policy plans since 1953. It has been described as “China’s secret weapon to ensure stable development.”

The next Five Year Plan, China’s 14th, is currently being discussed for commencement in 2021. The Five Year Plan provides an overall direction for China’s development, sets overall targets and mobilises economic and social resources to achieve them. As such it provides a reliable guide for enterprises and individuals both in the state and private sectors. It is the main driver of China’s forward development and central to its success over its capitalist competitors: “The five-year plan is also one of the great achievements and characteristics of CPC governance as it maintains the consistency of policymaking and combines the superiority of socialist society with the market economy”.

Comparing China’s planned economy to the USA’s chaotic and short-termist approach, one western economist remarked that while China is making five-year plans for the next generation, Americans are planning only for the next election.

In the 13th Five Year Plan that is just finishing more than 60 million new jobs were created in urban areas, and 55 million lifted out of poverty in rural areas. Major expansion was also made in welfare provision so that China now has the world’s largest social security system, including basic medical insurance for the whole population and basic old-age insurance for nearly 1 billion citizens.

For the new Plan, the Chinese leaders have acknowledged that the drive for maximum increases in output should no longer be the central target. That the aim should be for qualitative rather than quantitative growth. A significant factor in this is that the pressure on Party leaders to continuously create tens of millions of jobs per year is lessening in line with the falling working age population. Thus, there has been no official growth target so far included in this Plan. However, unofficially the expectation is for the growth rate to be around 5% per year. This will allow China to double its economy by 2035, if not earlier.

The new Five Year Plan will also be released under the shadow of the Cold War that has been launched against China by the United States. The US is clearly trying to slow down or even halt China’s technological progress. To this end, sanctions and other measures are being taken to prevent China purchasing various technological resources on the world market such as microchips. To overcome this, the Chinese leadership are taking steps to reduce China’s dependency on foreign technology and increase its self-sufficiency. And to balance its economy more towards domestic capacity and homegrown innovation. Such steps will form an important part of the new Plan.

Another core element of the next Five Year Plan is action on the environment. The last Plan saw major success in reducing the problem of atmospheric pollution that has plagued many Chinese cities. According to PollutionWatch, air pollution in Chinese cities has fallen by 50% since 2013. Images of smogs in Beijing and elsewhere have all but disappeared. Likewise with China’s waterways – industrial water pollution has fallen which has significantly helped increase tourism. But much more progress has still to be achieved especially in regard to the use of coal and soil pollution.

Recent Five Year Plans have succeeded in establishing China as the leading country for producing solar panels and electric vehicles. In some cities all buses and taxis are now electric. Moreover, China has committed itself to becoming carbon neutral by 2060 and the new Five Year Plan will include steps in this direction.

A new aspect in the new Plan is that for the first time it has been opened up to public input – over one million suggestions have been received. Additionally, symposiums on the Plan have been held all over the country for specialist groups to allow them to comment and contribute.

Looking further ahead, this new Five Year Plan is being put forward as part of a 2035 Vision. This is a recognition that while five year planning is greatly superior to the short-termism of the capitalist countries, the technological, social and environmental challenges facing China demand even longer term planning efforts.

Is China Capitalist?
It is all too easy with all the market and consumer trappings that are on view in modern day China to assume that it is capitalist. But to really understand the nature of China’s economy and society we have to see it in its historical context. How it has evolved from the Soviet model. Where it is going now. What are the behind-the-scenes mechanisms that are directing its forward movement. In other words, we have to understand China’s political economy.

Unlike many commentators on the Left we do not view China as a capitalist country. Rather we see it as a hybrid society in which the socialistic forms – the Communist Party-controlled state; the planned economy; the state-owned banks, land and enterprises – dominate the commanding heights of the economy and policy making. The smaller private capitalist sector operates within these boundaries and must follow the guidelines and regulations laid down for it.

As a result of this dominant role played by the socialistic economic forms, China does not experience the usual contradictions of capitalism such as the endemic problem of a falling rate of profit which eventually causes declining investment and cyclical upturns and recessions. The preponderance of public investment in China combined with its planning process has allowed it to bypass capitalism’s booms and slumps. For this reason, China does not suffer from capitalism’s chaotic and unplanned development which results in massive inefficiency and dislocation. It is this which explains why China has been able to have steady and continuous growth over the last forty years.

China has a stock of public sector assets worth 150% of annual GDP. This compares with most major capitalist economies which have less than 50% of GDP in public assets. Moreover, reflecting the dominant role of state-owned enterprises in China there is nearly three times as much stock of public productive assets to private capitalist sector assets. Compare this to the US and the UK where public assets are less than 50% of private assets. The same public sector dominant role is shown in investment with China’s public investment to GDP at around 16% compared to 3-4% in the US and the UK.

On the other side, there is no doubt that the private sector is playing an increasing role in the Chinese economy in recent years. But this can be easily overestimated especially if one is mainly looking at the highly visible retail sector, China’s stock exchanges and so on. As Michael Roberts, the well-known Marxist economist and online blogger explains with regard to China: “There has been a significant expansion of privately-owned companies, both foreign and domestic over the last 30 years, with the establishment of a stock market and other financial institutions. But the vast majority of employment and investment is undertaken by publicly-owned companies or by institutions that are under the direction and control of the Communist party. The biggest part of China’s world-beating industry is not foreign-owned multinationals, but Chinese state-owned enterprises.

Clearly, China is far from the form of socialist society we would want. But the undoubted faults and limitations of China’s system do not mean therefore that it is a capitalist society. A more realistic understanding of these economic labels must first begin by recognising that there are different kinds of ‘capitalism’ – primitive capitalism, developmental capitalism, advanced capitalism, dictatorial capitalism, democratic capitalism, and so on. All of which reflect the particular level of economic development, history and subsequent events in each country in which capitalism exists.

In the same way, why would we expect ‘socialism’ not to appear in various guises that also reflect the particular societies in which it arose, and the level of production it has reached? The Chinese accept this and still describe themselves as being in the ‘Primary Stage of Socialism’.

As we have explained earlier in this Manifesto, democratic socialism will only really emerge in an automated economy of abundance. A society where all the basic needs of humanity have been met and people can choose what activities to spend their time on. This is not a utopian vision but a realisable outcome given the current developments in material science, renewable energy, robots and artificial intelligence. But such a future society will take a long time and many struggles worldwide to achieve. It will not suddenly appear ready-made.

Capitalism had to develop side by side with feudalism, and even slavery, before it was able to replace them. It cohabited with these rival systems over many centuries. Sometimes peacefully, but more often not.

The same with democratic socialism. Any country embarking on the socialist road will need to deal with the existing capitalist world and to make compromises with it along the way. And to face inevitable conflicts until such time as the democratic socialist model becomes the dominant format globally.

Underlying the Left view that China is capitalist is a conception of socialism as some kind of utopian system which China obviously does not match up to. Socialism here is seen as a semi-perfect society. And anything short of this must be a form of capitalism.But just as capitalism went through various phases of development, China will take many generations to reach a level where it has the potential to abolish inequality, exploitation and alienation. And thus to proudly call itself a democratic socialist society.

How To Escape Backwardness?
The dilemma of how to move towards socialism in a poor and backward society presented itself starkly in China after the 1949 Revolution. In a society which had only recently abolished feudalism and landlordism, how could China be expected to bypass completely the economic processes that had made capitalism so successful? To somehow ignore and leap over the use of markets, private ownership of land, and the growth of small private and medium-sized enterprises. The steps that had been so essential in helping capitalism to increase the productive forces and leave its feudalist roots behind. How could a poor, populous society like China become an advanced socialist society in a few quick steps? Yet this is what Mao called for in his Great Leap Forward and then in his Cultural Revolution. Both campaigns failed miserably and in doing so dramatically set back the course of China’s development.

This was the lesson that the Chinese leadership learned and implemented once Mao had died and the ultra-left wing of the party was defeated. They realised that they had no choice but to unleash the forces of the market in the countryside if they were to give the peasants the necessary incentive to increase agricultural production and feed Chinese society. And then to lay the basis for the growth of light industry.

Likewise with the problem of technical backwardness. In a China with very limited financial resources, incentives or technological knowhow, how would it be possible to develop successfully without interacting with the far more advanced capitalist forces abroad? Without opening up to competition from international companies, importing their technology, integrating with them in joint venture companies, and utilising their capital. How else could China possibly catch up? Or to compete and in time defeat its capitalist rivals in the world market?

‘Keeping to the Socialist Road’
But such interaction dosen’t require a reversion to a capitalist system in China. Or the abandonment of the process of building a socialist society. As Deng Xaioping, the Communist Party leader who steered the reform process after Mao explained: “Our general principles are that we should keep to the socialist road… An invigorated domestic economy will help promote socialism without affecting its essence. As for the practice of absorbing foreign funds, it is a supplementary means of developing the productive forces, and we need not worry that it will undermine the socialist system… our socialist state apparatus can safeguard the socialist system. And from the economic point of view, our socialist economy already has a solid basis in industry, agriculture, commerce and other sectors.

No matter to what degree we open up to the outside world and admit foreign capital, its relative magnitude will be small and it can’t affect our system of socialist public ownership of the means of production… Of course, this will bring some decadent capitalist influences into China. We are aware of this possibility; it’s nothing to be afraid of… We intend to acquire advanced technology, science and management skills to serve our socialist production.

As Deng correctly anticipated, the hybrid mix of socialist and capitalist economic forms that developed in the Chinese experiment was bound to cause significant contradictions and conflicts.

On one side, the growth of a significant layer of wealthy capitalists in China began to create a faction in society that wanted to take the reforms much further in the direction of a restoration of capitalism. Even gaining support within a section of the ruling Communist Party. This tendency was greatly assisted by the rise of globalisation and neo-liberal ideology in the 1975-2008 period. And further strengthened in the wake of China’s entry into the World Trade Organisation in 2000. The signs of such a process became especially apparent in the period 2000-2007. This was the time when the Chinese constitution was amended to incorporate the principle of the protection of private property.

On the other side, a large section of Chinese society had a direct interest in defending the dominant socialist elements of the Chinese system. These included a majority within the Communist Party; the state and local government; the publicly-owned industries; the public sector agencies and public services. In practical terms many sections of the officials depended on these institutions for their continued existence. Such forces were very aware of the dangers of a capitalist restoration. They had seen the disastrous outcome of the reintroduction of capitalism in the Soviet Union and the dramatic collapse of the Soviet economy and society that it had caused. Reflecting this, from 2007 onwards we began to see a shift back towards the socialist side within Chinese Communist Party and government circles.

This shift was dramatically accelerated by the Great Economic Recession in the capitalist economies in 2008. Chinese authorities responded with a massive state stimulus package which successfully cushioned China from the effects of the global crisis. And in the process strengthened the public sector. The contrast between the deep downturn in the capitalist world with the continuing high growth of the Chinese economy decisively tipped the balance in China back to the Left. It gave the socialist elements much greater confidence in their policies and future. And this was reflected in the emergence of a more left-wing leader in the shape of President Xi Jinping.

Accordingly, in his first speech as General Secretary in November 2012, Xi Jinping insisted that: “Only socialism can save China, and only Chinese socialism can lead our country to development.”

Xi Jinping laid out his strategic thinking thus: “For a fairly long time yet, socialism in its primary stage will exist alongside a more productive and developed capitalist system. In this long period of cooperation and conflict, socialism must learn from the boons that capitalism has brought to civilization. We must face the reality that people will use the strengths of developed, Western countries to denounce our country’s socialist development. Here we must have a great strategic determination, resolutely rejecting all false arguments that we should abandon socialism. We must consciously correct the various ideas that do not accord with our current stage. Most importantly, we must concentrate our efforts on bettering our own affairs, continually broadening our comprehensive national power, improving the lives of our people, building a socialism that is superior to capitalism, and laying the foundation for a future where we will win the initiative and have the dominant position.

How the World Sees China
While many on the Left believe that China’s system is a form of capitalism this is not a view shared by the majority of people around the world. To them this appears to be a very strange characterisation of a country which describes itself as ‘socialist’ and is dominated by a Communist Party of nearly a hundred million members. Where students have to join the appropriate communist youth movement, wear communist clothing, learn revolutionary songs, chant communist slogans and study communist ideas. Thus in China, 130 million 6-13 year-olds join the Young Pioneers whose motto is “To fight for the cause of communism: Be ready! Always Ready!” Or the 110 million 14-28 year olds who move up into the Communist Youth League and march to the anthem: “Glorious! Communist Youth League of China. Mother named us with communism.” Or for those who go on to university and are required there to undertake serious study of marxism-leninism in order to graduate. This is all very strange behaviour for a so-called capitalist country!

Can China really be capitalist when its very Constitution* boldly declares “The People’s Republic of China is a socialist state under the people’s democratic dictatorship led by the working class and based on the alliance of workers and peasants.” A Constitution which clearly asserts that: “The State-owned economy, namely, the socialist economy under ownership by the whole people, is the leading force in the national economy.”? A society that glorifies its revolutionary socialist history and celebrates Marx, Engels and Lenin as its theoretical guides. And proclaims marxism-leninism as the official doctrine of the state.

In this debate over whether China is a form of capitalism or a form of socialism it is obvious to the vast majority of people across the world that China represents a very different system to capitalism. There is no need to dream up some artificial theoretical evaluation that flies in the face of the facts that everyone can see. As the popular expression goes: ‘If it walks like a duck, and quacks like a duck, then maybe it’s a duck!’

Nor do we have to go by how China describes itself. Let’s look at how its foremost critics define it.

Mike Pompeo, the US Secretary of State, addressed the question in July 2020: “We have to keep in mind that the CCP regime is a Marxist-Leninist regime. General Secretary Xi Jinping is a true believer in a bankrupt totalitarian ideology. It’s this ideology that informs his decades-long desire for global hegemony of Chinese communism. America can no longer ignore the fundamental political and ideological differences between our countries, just as the CCP has never ignored them.”

In this way, the neo-conservative wing of the US capitalists and their allies around the world correctly see the struggle against China as the continuation of an ideological conflict between capitalism and socialism.

A month earlier Robert C. O’Brien, US National Security Advisor, gave an equally clear outline of how US imperialism now views the Chinese system: “For decades, conventional wisdom in both U.S. political parties, the business community, academia, and media, has held that it was only a matter of time before China would become more liberal, first economically and, then, politically. The more we opened our markets to China, the thinking went, the more we invested capital in China, the more we trained PRC bureaucrats, scientists, engineers, and even military officers, the more China would become like us.

…As China grew richer and stronger, we believed, the Chinese Communist Party would liberalize to meet the rising democratic aspirations of its people. This was a bold, quintessentially American idea, born of our innate optimism and by the experience of our triumph over Soviet Communism. Unfortunately, it turned out to be very naïve. We could not have been more wrong—and this miscalculation is the greatest failure of American foreign policy since the 1930s. How did we make such a mistake? How did we fail to understand the nature of the Chinese Communist Party?

The answer is simple: because we did not pay heed to the CCP’s ideology. Instead of listening to what CCP leaders were saying and reading what they wrote in their key documents, we closed our ears and our eyes. We believed what we wanted to believe – that the Party members were communist in name only. Let us be clear, the Chinese Communist Party is a Marxist-Leninist organization.

Here we see how seriously the neo-conservative capitalists take the issue of China. They see it as an existential question. One that is even more of a threat to their system than that posed by the Soviet Bloc which while being a military superpower never threatened to defeat capitalism in the world market.

It is true that there is a section of capitalists internationally that take a softer line and favour cooperation with China, often for business reasons. Or in the persisting hope of persuading the Chinese leadership to move in a more capitalist direction. But these are increasingly in a minority both economically and politically. Post-Trump America may turn out to be less crude in its methods and propaganda against China, but the core direction of policy continues – China must be contained!

Despite this growing movement of capitalist political forces against China and the ideological terms in which it is being increasingly viewed, a section of the Left continue to pose the conflict as just another struggle between conflicting capitalist classes. Some on the Left even argue that the Communist leaders in China are capitalists who are maintaining all of this communist and socialist propaganda as some kind of “left mask”. But are we really supposed to believe that capitalists need to pretend to be socialists and communists, praise marxism-leninism and espouse the dictatorship of the proletariat? To pose the question is to show how absurd this idea is.

Missing a Great Opportunity
One of the downsides of this negative attitude of many on the Left towards China is their acceptance of much of the capitalist propaganda against it. Especially the means by which the capitalist media try to explain away China’s incredible economic success in terms of unfair competition, theft of technology and so on. Anything to avoid admitting the real reasons for China’s rise: its improved planning process, use of public investment, embrace of the importance of innovation, and state ownership of the commanding heights. All of these ensure that China’s ambitious plans are effective and implemented on time. Socialist economic forms that are proving greatly superior to the unplanned, chaotic and ineffective performance of the capitalist economies.

The Left could and should be trumpeting China’s unprecedented success in expanding the productive forces and raising living standards. And highlighting the socialist methods through which it has achieved these outcomes. Indeed, the Left should be celebrating a world where the leading capitalist countries are fast declining and being replaced by a system using socialist economic methods to expand and prosper.

Certainly, this was the past hopes of the Chinese Communist Party leadership. In an interview between Deng Xiaoping and Tanzanian leader Julius Nyere in 1985, Deng outlined his hopes for China’s new course:
Our reform is an experiment not only for China but also for the rest of the world. We believe the experiment will succeed. If it does, our experience may be useful to the cause of world socialism and to other developing countries… and will place China in the front rank of nations. When we reach that goal, we shall not only have blazed a new path for the peoples of the Third World, who represent three quarters of the world population, but also – and this is even more important – shall have demonstrated to mankind that socialism is the only path and that it is superior to capitalism.

Certainly, China’s success is beginning to undermine the assumptions of capitalist economics and capitalist propaganda. It shows that an alternative path for development exists. Not surprisingly, significant sections of society, especially in the poorer countries, are now beginning to look to China for answers to their growing problems. They naturally ask the question: how is China achieving this fantastic success? And how can their own countries reproduce it? This process can only accelerate as China’s rise continues and it becomes the dominant economy in the world. This opens up the great potential for socialist economic policies to become highly popular and credible in the coming decades.

On the other side of the coin, if those sections of the Left who see China as a new form of capitalism are correct then a depressing and dystopian future opens up for humanity. If a new form of capitalism has really arisen that is willing to fully embrace planning, massive public investment and state intervention, then it has the prospect of overcoming many of capitalism’s contradictions. If a new form of capitalism has truly arrived that is willing to raise living standards and abolish poverty, while transforming people’s lives through advanced technology, why would most people be interested in a socialist alternative? To pose such strange questions is only to show how bizarre the idea is that China is some new form of capitalism.

That doesn’t mean that China represents the form of socialism that we want to end up with. In reality, China is a form of bureaucratic state socialism where decisions are taken at the top by the leading bodies of the Party and the state and the people are expected to then accept them. Clearly, China can develop a far better system for running its society. We will look at some ideas on this later in this paper.

The Campaign Against China
US President Donald Trump’s trade war against China did not come out of the blue. Nor was it dreamed up in his empty head. In fact, it was the previous President Barak Obama and his Secretary of State, Hillary Clinton, who began this campaign against China’s rising influence. In 2012 they launched a China containment policy entitled ‘Pivot to Asia’.

Although this containment policy is often dressed up in terms of defending democracy and human rights. Or for preserving the security of the US and its allies. The real reasons for the policy is to defend the hegemonic power of the United States and the dominance of capitalism globally. To this end, it looks like the US and its allies are too late. The undermining by China of the economic position of the US in the world economy has already taken place. This shift is dramatically portrayed in the following image:

This chart shows how China has reversed the balance of international trading power and is now the main trading partner of most countries globally. China is now the first or second trading partner of more than 120 countries. The US and its allies well understand that if this process is allowed to continue China will come to dominate the world economically and then politically.

This explains Trump’s trade war. But this economic war will not succeed as trade with the US only represents 2% of Chinese GDP. Indeed, contrary to what many think, the importance of exports to the Chinese economy is declining, having fallen from 25% to 17% in recent years. Thus, over 80% of the Chinese economy revolves around its internal market. So trade wars wont stop China.

Ironically, despite Trump’s tariffs and restrictions against Chinese exports, the trade deficit between the US and China has actually grown in the last two years, not fallen. And looking ahead, American financial services, which is the one area where the US has a big surplus with China, is likely to see a rapid fall as China’s financial institutions continue their inexorable rise.

The same is true with many of the measures that Trump’s administration has been taking against China on new technology, such as banning the sale of microchips and so on. All made in the spurious name of protecting national security. These restrictions have turned out to be very ill-judged as the US government began to realise how much damage this was going to do to the sales and profits of its own technology companies. And how they were only forcing China to develop a rival chip producing industry which would in due course further strengthen Chinese technology. Now, Trump’s administration has been forced to lift some of these restrictions with Huawei now allowed to buy American semi-conductors again. Even the banning of the highly popular Chinese online video site TikTok has now been delayed and put on the back burner.

Looking more broadly, China, as the world’s largest manufacturing and trading nation, lies at the heart of the highly integrated supply chains that tie global production together. As such it is proving well-nigh impossible to exclude it without inflicting serious damage on the profits of the multinational capitalist companies.

Yes, some companies have shifted production in recent years from China to other Asian countries such as Vietnam, Thailand etc. But these have tended to be for low value products where cheap labour is a necessity for profitable manufacture. China has long anticipated such developments and its main focus is on switching over to higher quality and higher value production. Such production is staying in China in order to maintain access to the rapid and sophisticated technical infrastructure and logistics that the producers can only find there. And to take advantage of the Chinese market which in one sector after another is becoming the largest in the world.

China’s Belt and Road Initiative
In 2013 President Xi Jinping announced the Belt and Road Initiative, China’s ambitious programme to help build infrastructure and industrial capacity across Asia and beyond. And through this to link China to Europe, the Middle East, Africa and now Latin America. To help build this new ‘Silk Road’ investments of $2.5 trillion have been made available. So far more than 100 counties have signed up to the BRI with 40 countries and international organizations entering into Cooperation Agreements to take advantage of it.

For China, the Belt and Road Initiative achieves a number of goals. For one it will greatly expand Chinese trade with its BRI partners which already stands at 3 trillion dollars. Plus, it uses up China’s spare construction capacity and utilises their extensive expertise in road, train, tunnel, bridge and airport building.

For China’s BRI partners it opens up the starting point for a new international economic and political order. “The BRI… is an exploration of a new model of global cooperation and governance, which not only seeks the development and prosperity of the world economy but also proposes a more just and reasonable system of global governance.”. This is clearly understood by the US and its allies and is yet one more reason for their growing determination to contain China before it is too late.

An accusation made against China is that its Belt and Road initiative is a form of imperialism. But this accusation doesn’t stand up to investigation. The traditional western model of colonialism and imperialism was for companies to seize land and resources backed up national military forces which imposed their claims. And to then use local peoples as cheap labour to extract the maximum profit. Where infrastructure was built, it was usually designed to develop each colony separately and connect them to the colonial centres. This is why there is virtually no transport across Africa which could have helped develop trade within each region and the continent as a whole.

Even the latest versions of neo-imperialism are usually based on multinational companies buying land and concessions cheaply and operating them with minimum benefit to the local countries they are based in. Taxes are regularly evaded and little invested in developing services for the native populations. Even where locals own their own land the multinationals pay them a pittance for their produce, and reap big profits from the high prices they charge to consumers in the richer countries.

In contrast, China’s approach is based on contracts that bring concrete benefits to the countries that are working with it. Thus, in exchange for minerals and other resources, China is helping its partner countries build railways, roads and airports. In Africa, for example, where 70% of roads are unpaved and many become impassable in bad weather, China has helped build ports and railway lines in East Africa which is making an East African regional economic zone a reality. Similarly, it is helping to build both a cross-Africa highway and a West coast motorway which will ensure continuous transportation for the first time between many of Africa’s main population centres. And take weeks off the time currently needed to move products around the continent.

China is also encouraging its BRI partners to form special economic zones where local industrial bases can begin to develop. Ethiopia, China’s closest partner in Africa is reaping the benefit with growth rates in excess of 10% a year, the best in the continent. China is also assisting developing countries to build facilities that process their raw materials locally into finished products rather than allowing the lion’s share of added value be enjoyed elsewhere. This is hardly the actions of an imperialist nation seeking to suck the lifeblood out of poor societies.

In fact, China is simply attempting to export its own successful model of infrastructure building and independent economic development to countries across the world that need it. And expecting that the increased economic activity thus generated in these countries will lead to rising trade between them and China.

Debt-Traps?
A major charge made against China’s Belt and Road Initiative by the United States and its allies is over the finances involved. They accuse China of lending large sums to its BRI partners for all these projects in order to create debt traps and turn them into dependent semi-colonies. These charges are rich coming from the advanced countries that deliberately sold the developing world high interest loans in the 1980s and 90s. And when they couldn’t repay them, they impoverished these countries by imposing privatisation and severe cuts in public services as part of ‘Structural Adjustment Programmes’.

Today, most of the poorer developing countries are seen as too high risk to attract capitalist investment. Only China is willing to lend them money for development. And does so on long term schedules and at relatively low rates. This is why these governments are happy to work with China and ignore the hostile propaganda being levelled against it.

Where countries have not been able to repay their loans on schedule to China, in almost every case China has shown a willingness to reschedule and renegotiate them on reasonable terms. The reason – it is not driven by commercial short-term concerns or by impatient private lenders. But is looking to build a long-term relationship based on continuously expanding trade and cooperation.

Much has been made of one particular case – China’s supposed swapping of debt in Sri Lanka for a long term lease on Hambantota, a new port that China had helped to build. The accusation is that China is now able to use it as a military port which is part of their aim to use its BRI partners to dominate the world. In fact, this whole story is a myth made up by the capitalist media. The port is not now owned by China but still owned by Sri Lanka and the security of the port is in the hands of the Sri Lankan government and navy. A long-term lease of 70% of the port was sold to a Chinese company but not as a ‘swap for debt’ deal. It was a commercial deal, with the $1.12 billion purchase price used by Sri Lanka to help make short term debt repayments on high interest dollar loans it had earlier taken out on the international money market. Thus far from selling part of its port to help pay off a loan to China it was to pay off loans to European and North American banks!

Ironically, China has been mocked for building the Hambantota port as a white elephant in the middle of nowhere with no prospect of viability. Yet China is building for the long term. Already contracts are beginning to arrive which are making the future of the port more viable.

More generally, debts to China in its partner developing countries make up only a fraction of their borrowings. For example, only 17% of the debts of its African partners are to China. The big majority of debts in the developing world are still with the West and at relatively high interest rates which continue to suck their resources away from desperately needed development. Yet nothing of this said by the capitalist media in their campaign against China.

Of course, not everything is perfect in China’s relationship with the developing world. One issue revolves around local employment. Complaints have been made that Chinese companies mainly employ their own people for their projects and therefore the people are not benefiting from these projects or skills being transferred. While there are some projects where local people have been fully involved, there are undoubtedly examples where they have not. Naturally, the Chinese state companies building these infrastructure projects will want to bring with them their construction expertise which is now the best in the world. In this way they can guarantee that the projects will be of the necessary quality and completed on budget and on time.

Similarly, local governments don’t want to see shoddy projects which are unfinished or fail. They have had too many such experiences in the past. Their main priority is with the long-term economic growth and benefits that this new infrastructure will open up for their economies rather than the short-term employment the actual construction will deliver. But there is a balance to be reached here. And there is no reason why China can’t insist that Chinese companies include a greater level of local employment in their deals abroad.

Likewise, China depends very much on its local partner governments. If they choose to use China’s loans corruptly or to continue to oppress their people then the original purpose of the loans for raising capacity and living standards will fail.

Another concern is with the behaviour of private Chinese companies. There are a number of reports of these companies riding roughshod over the interests of local people in developing countries. Being so far from Beijing, no doubt they feel that they can get away with all kinds of anti-social and exploitative activity.

China can’t wash its hands of its responsibility in such cases. It needs to develop a code of conduct for its companies operating abroad and enforce it rigorously. Or it will alienate the local populations and ruin its efforts to build strong and fruitful relationships there.

Foreign policy & Internationalism
Capitalism is based on competition between and exploitation of individuals and nations. If it is to mean anything, Socialism must be based on co-operation and sharing between people and nations. On a true policy of internationalism.

Given that Socialism is the official guiding principle of the People’s Republic of China, internationalism must be a key focus of Chinese government policy. To this end, China follows an official policy of peaceful coexistence and non-interference in the affairs of foreign governments. This is good because the people of each country have the right to determine their own future free from foreign domination and direction. It also contrasts with the approach of the rich capitalist countries who regularly try to overthrow the governments of countries they disapprove of or feel are threatening their interests. Usually they do so in the name of human rights and/or preserving democracy although all too often they end up installing corrupt oppressive dictators.

To overcome the capitalist approach to foreign policy, China argues for a new international economic and political order based on the ‘Five Principles of Peaceful Coexistence’. These principles agreed in negotiations with India back in the mid 1950s, are as follows: “1) mutual respect for each other’s territorial integrity and sovereignty; 2) mutual non-aggression; 3) mutual non-interference in each other’s internal affairs; 4) equality and cooperation for mutual benefit; 5) peaceful coexistence.”

This is a fine approach in theory but it doesn’t take into account the undeniable fact that capitalism is not willing to allow progressive governments to thrive, never mind socialistic ones. Capitalism and socialism may coexist side by side for a period but inevitably capitalism will seek to destroy socialism as we have seen in the past. And now see in the emerging cold war by the US and its allies against China.

After Mao died, China adopted a policy of keeping its ideological “light under a bushel”. Thus, China followed Deng Xaioping’s advice about being modest: “‘To observe and analyze calmly, to secure our position, to deal with issues with confidence, to hide our capabilities and wait for the right moment, to be good at keeping a low profile, never lead a claim, to carry out operations of modest nature.”

But times and the balance of power in the world has changed. President Xi Jinping now correctly talks of the Chinese model and offers it as a possible example for other nations to follow. As such, a policy of non-interference should not stop China from clearly explaining the basis of its success and offering to help other countries learn from its experience. As China becomes even more successful, it is inevitable that its economic model will become more popular in the poorer countries and even in some of the more advanced ones too. Towards this end, China is now training officials from many developing countries in a very different model of economic development through state-led growth. China is also inviting representatives from the main political parties in many countries to visit China and attend international conferences and events where they can share ideas. And learn from the Chinese experience.

However, many other Chinese officials including on CGTV, China’s important 24-hour English television channel, are still reluctant to properly explain or promote China’s economic model of planning, public investment and public ownership. As a result most people around the world have no understanding of China’s economic model or why China is succeeding. They are being left to the mercies of the capitalist media with all their outdated and false stories of Chinese cheap labour, theft of technology and unfair government support.

To make matters worse, these fainthearted Chinese officials and commentators incorrectly argue that China’s experience is unique and won’t necessarily work elsewhere. But this line is not fooling anyone. Certainly not China’s enemies who fully understand that China’s system is a threat to theirs. That the more China gets stronger and richer the more other countries will want to emulate it. And the more it will fatally undermine the capitalist model. After all, if China is already being attacked by capitalist politicians for wanting to export its socialistic model around the world, it might as well do it and gain the benefits.

In the battle for public relations, China regularly fails to match the efforts of the United States and its allies. Chinese official statements come across in a very wooden and stilted form. Often adopting a high-handed tone. For example, the reply of Hua Chunying, Chinese Foreign Ministry Spokesperson and Director-General of the Department of Information, to the important speech made against China by US Secretary of State, Mike Pompeo, in July 2020 took entirely the wrong tone: “Pompeo’s speech at the Richard Nixon Presidential Library suggests that he wants to present himself as the John Foster Dulles of the 21st century, launching a new crusade against China in a globalized world. What he is doing is as futile as an ant trying to shake a tree.

The arrogant implication here is that China is the “tree” and the US is the “ant”. Not the response that was needed. Nor did it answer any of America’s charges.

Sometimes the official Chinese reaction to criticism verges into threats. In an exchange over Hong Kong in November 2020, Chinese Foreign Ministry spokesperson, Zhao Lijian, challenged the ‘Five Eyes’ intelligence alliance of the US, Canada, UK, Australia and New Zealand: “No matter if they have five eyes or 10 eyes, if they dare to harm China’s sovereignty, security and development interests, they should beware of their eyes being poked and blinded.

Clearly, there is an important battle over China’s record taking place in international public opinion. In this propaganda war, China needs to come out with an effective public relations strategy based on real internationalism if it really wants to defeat this wave of hostile capitalist propaganda. Nor can this information battle be left up to Chinese government officials. It needs progressive people across the world to join the fray to ensure that the lies and slanders against China are exposed. And the good things that China is achieving are highlighted and better understood.

Arms & Reactionary Regimes
A significant contradiction in China’s policy of non-interference is its willingness to supply arms to reactionary regimes. These weapons are inevitably going to be used in internal or external conflicts. And often end up in the hands of combatants in other countries.

How can this be compatible with China’s policy of peaceful coexistence and non-interference? Certainly, anyone on the other end of such weapons will not consider their sale to their enemies as “peaceful” or “non-interference”. If China really wants to achieve peace and co-existence then it must cease supplying arms abroad while leading a massive international campaign against the arms trade. In this context, China should demand that the US scale back its military for matching reductions on the Chinese side. Among other benefits, this will clearly expose the massive imbalance in arms between the US and China, along with all this overblown propaganda against so-called Chinese aggression.

China’s Relationship with its Neighbours
Another subject on which the capitalist media is constantly attacking China is over its relationships with its surrounding countries. However, it is not generally known that since the Revolution of 1949, China has settled 17 out of the 23 outstanding centuries-old territorial disputes with its neighbouring nations. In these settlements it made generous concessions which resulted in its neighbours receiving more than 50% of the land in question.

However, China still faces a number of unresolved land and sea border disputes. Contrary to the existing international rules on land and sea borders which are based on rival nations asserting their interests, China should openly champion a new world order based on the socialist international values of cooperation, sharing, assistance, and partnership. Within this frame of reference, China needs to publicly reach out to the peoples of its border countries where it has outstanding disputes and show a willingness to make concessions, share resources, and cooperate in joint development. This is fully in line with its Belt and Road Initiative. And is the best way to move towards resolution of these disputes and to undermine the ongoing capitalist propaganda that China has adopted an aggressive foreigh policy stance in the region.

India & Bhutan
Unlike many of China’s other neighbours, India (and Bhutan, India’s small satellite state) have not sought to settle their border disputes with Beijing. This has led to conflict including the 1962 China-india border war.

More recently, a violent skirmish in the Himalayas led to the loss of life on both sides. On the Indian side 20 soldiers died, the majority caused by the collapse of a road. The Indian authorities made great publicity out of the fatalities and the funerals in order to stir up public animosity to China. This is part of Modi’s racist approach to politics. In contrast, China did not give any information about its own casualties in an effort to minimise public outrage and racist reaction at home. In fact, the Chinese government pursues a strong policy against racial conflict and division in society which is one of the main reasons it banned Facebook for being unwilling to remove anti-islamic sites put up after the many Uygur terrorist attacks in China in the 2013-2016 period.

On the other hand, China has approached the conflict in the Galwan Valley in a too aggressive and militaristic fashion, just as India has. This area high in the mountains is uninhabited and of little economic or strategic value. However, the conflict between the Chinese and Indian forces over it has caused a major rift between the two countries and a massive shift in Indian public opinion against China. This has provided the excuse the Indian government wanted to take economic sanctions against China, withdrawing from joint projects and stopping the sales of various products, use of computer apps etc. This has all played into Modi and the US strategy of isolating China. Such conflict with India is not at all in China’s interests.

Since the conflict a Disengagement Plan has been agreed. It includes the dismantling of new construction made since April and the withdrawal of military equipment in the disputed areas. No patrolling activity will take place along the Line of Actual Control. China will pull back from a disputed observation post. This agreement is designed to cool down the conflict. But the damage to China’s image among the Indian population will take much longer to repair.

Instead, China needs to be willing to go further in its approach towards India and offer major concessions as part of a well-publicised campaign offering cooperation and sharing of resources in the disputed areas. It needs to go well beyond the usual cautious diplomatic language and appeal directly to the Indian public so that they know that China greatly regrets what happened and genuinely wants to take steps to resolve the issues involved.

India may rebut such an approach as it now suits Modi to look for reasons for conflict with China, which it sees as a serious competitor. That is why it now seeks an alliance with the United States. But it is important that the offer is clearly made by China in order to lay down a marker for a future change of government in India.

Of course, there is no reason why India should not also see the United States as an equally formidable competitor. Recent trade actions by America bear this out. Indeed, the US has no interest in seeing India become a major economic power and the Indian masses brought out of poverty. This would just create another competitor for US goods and services and further accelerate America’s decline. On the contrary, India would gain far more by joining forces with China and fully participating in the Belt and Road Initiative. The latter would help unite India with its surrounding countries through the building of various road, rail, power and telecommunications links.

In the short-term, in order to reduce the constant danger of further clashes on the borders between China and India, China should suggest the formation of a demilitarized zone in the same form that exists between North and South Korea. This would prevent Chinese and Indian forces from coming into physical contact with all the potential conflict this implies.

South China Sea
In recent years, China has strongly asserted its historical right to sovereignty over the South China Sea. In doing so it has come up against conflicting claims from the bordering countries: Vietnam, Malaysia and the Philippines. Using its superior naval forces, China has prevented the operation of traditional fishing boats from its neighbours and started to create and expand atolls into islands on which it is building airfields, docks and other facilities. Irrespective of the historical justifications involved, China should not be approaching these questions in a national way or enforcing its claims by means of military strength. Instead, China should be proposing ways for it to share sovereignty and resources with its neighbours and offering its massive infrastructure resources and expertise in order to help develop the maritime region. Such partnership would undercut the efforts of the United States and European navies to use this issue against China and remove their justification for regular provocative naval patrols through the area.

China’s Internal Disputes

Taiwan
After the 1949 Revolution the right-wing nationalist forces under Chiang Kai-shek retreated to the island of Taiwan which they continue to laughingly call the ‘Republic of China’. Since then, the island has greatly developed economically and now has a population of 24 million. There still remains a small native population but 95% are Han Chinese and Mandarin is the main language. So the potential for reintegration with the mainland remains not only the ideal course but a highly viable option. Ironically, the governments on both sides favour integration between the island and the mainland but only on the basis that the other side adopt their system. However, in recent times there is a movement in Taiwan for independence from China. This has been unofficially encouraged by the United States, who have been increasingly supplying Taiwan with sophisticated military equipment. The US regularly patrols the island by sea and air which China naturally regards as provocative moves against it.

China is naturally very unhappy about this militarisation of the island and possible moves towards independence. Its response has been to threaten military action. To fire warning missiles over the island and mount military exercises based on a possible invasion. On the other hand, President Xi Jinping very recently called for the “peaceful reunification” of the island into China. This is clearly sending contradictory signals to the Taiwanese people and internationally. After all, peaceful reunification is hardly likely to come about in an atmosphere of military threats.

Indeed, this is a counterproductive strategy which just plays into the hands of China’s enemies and provides further propaganda for the opponents of integration with the mainland. Logically, China should stop issuing military threats and make clear to the people of Taiwan that it is their right to decide on integration without fear from any side. In the meantime, China should rely on future advances in economic and social conditions on the mainland to convince the Taiwanese of the benefits of reunification.

Hong Kong
The relationship between Hong Kong and mainland China is another area of conflict which the capitalist media is amplifying in order to discredit China. We have examined the history and issues involved in the Hong Kong dispute in some detail in our article ‘Hong Kong – the Real Story Behind the Protests’.
Among our conclusions we recognised that foreign intervention designed to damage China has become a major factor in the conflict. Accordingly, we demanded that the US, UK etc. stop interfering in Hong Kong and stop trying to use its citizens as pawns in their rivalry with China.

On the other hand, China needs to operate with full transparency. The way that they rushed their new Security Law for Hong Kong through the Chinese People’s Congress without prior consultation was not the right approach. China should be using its powerful position to expose the past colonial role and racism of the British in Hong Kong and the elite they have left behind. To argue against HK independence from China and for greater economic integration with the mainland. For the improvement of living standards in Hong Kong that would result from joint development with Macau and Shenzen in the Guangdong regional Bay Area project. A project that would bring well paid manufacturing jobs to a Hong Kong suffering from rising unemployment, poverty and an increasing housing crisis.

China should launch a major public inquiry into the links between the US and UK intelligence agencies with the Hong Kong protest leaders. Likewise, they should ban large donations to political parties and take other measures to cut the HK tycoons down to size and remove their influence in local politics.

China urgently needs to end private ownership of the media and social media in Hong Kong and replace it with democratic and accountable alternatives. Above all, Hong Kong needs a real participatory democracy not a billionaires democracy version of it. A real democracy from which China can learn lessons and apply them to the rest of the country.

Xinjiang & the Uyghur Muslims
One of the current avalanche of accusations against China is over its treatment of ethnic minorities. In particular, China is accused of oppressing the Uyghur Muslims in its western region of Xinjiang. Among the many charges, China is supposed to be imprisoning millions of Uyghurs; sterilising the women; suppressing their language and religion; and forcing them into slave labour.

We will be forgiven for questioning these reports in the capitalist media which are very much like past western-based propaganda campaigns. Campaigns aimed at demonising political enemies as part of ‘regime change’ operations. After all these lies by politicians and their echoes in the media justifying sanctions, coups and wars in the Middle East, in Africa and Latin America, we just don’t believe them anymore. All their deceitful talk about protecting human rights and upholding democracy should no longer be taken seriously by left-wing minded people or even liberals. And the facts they report about abuse of human rights should be treated with the greatest suspicion and distrust.

 It is all too easy for the neo-conservatives in America and its allies to orchestrate this propaganda war against China by focusing on a far-off and little known area in the middle of the Asian landmass. Levelling lurid accusations against China in an area that few have visited or really know anything about.

In this case, one’s sceptical antennae immediately rise when all the reports conveniently remain silent on the underlying issue that began this story. As any objective account would acknowledge, the problem in the Xinjiang region revolves around a long-running secessionist movement which seeks to break the region away from China. And to create a new country called East Turkestan. In time, this movement, calling itself the East Turkestan Islamic Party (ETIM), became greatly affected by the development of political islam in neighbouring Afghanistan, with Uygur militants later being encouraged and trained by Al-Qaeda in terroristic methods. Now their aim is to create a new nation based on Sharia (fundamental Islam).

These ETIM militants have been launching terror attacks against local Chinese government targets as far back as 1992. But in 2013 the attacks reached a higher level of intensity and took the form of horrific attacks on individual Han Chinese civilians across China. Yet the current media criticisms of China’s treatment of the Uygurs repeatedly fail to mention this key background to the situation.

The response of Chinese authorities to these terror attacks has been a combination of security measures – clampdowns, arrests and surveillance – with attempts to re-educate local people away from islamic fundamentalism. Accompanied with steps to economically develop the region which is China’s poorest.

Inevitably, some actions taken by the Chinese government to deal with the situation will have been heavy-handed and overreaching. Just as they have been in Western responses to terrorist attacks. More importantly, the local Uygur muslim community, the overwhelming majority of which oppose the terrorist attacks, should have been fully involved in deciding on the measures taken to deal with the terrorism problem. Indeed, there is no reason why China can’t begin to do this now. It would certainly be a welcome contrast to the failure of the West to involve its muslim communities in designing and implementing its efforts to combat terrorism.

On the other hand, we should not be lending credence to these wildly exaggerated US-funded reports about millions in camps, mass forced sterilisation and genocide. If this was really the situation in Xinjiang we would be recording a falling Uygur population instead of a rising one. We would be seeing masses of refugees streaming out of the region. We would be hearing many reports of this oppression from the many foreign visitors and delegations who are regularly visiting the region. Instead, Uyghurs are regularly travelling in and out of Xinjiang, along with tourists, business people and so on. Hardly behaviour that matches these extreme reports.

All these disturbing narratives in the capitalist media are specifically designed to make China appear racist towards its 55 ethnic minorities. And to muslims in particular. In fact, China has a better record than the West in dealing with its ethnic minorities: encouraging and supporting their languages and cultures; providing political representation; supplying economic support; and arranging affirmative action in education etc. Its treatment of muslims is no different. It is ironic that the United States and the rest of the West should be shedding false tears about China’s treatment of muslims when it has so clearly implemented racist measures against muslims and allowed Islamophobia to flourish.

On the re-education camps, the thinking of the Chinese authorities is not to lock up the Uygur population which would be neither practical or effective. Rather, it is to educate local people away from religious extremism and encourage them into long-term employment and prosperity. But, to be effective and acceptable this policy of reducation should be done jointly with the local muslim community. This would reassure everyone that there is no suppression of religion, language or rights.

The Chinese authorities are using these camps to provide young people in Xinjiang with occupational training so that they can move out of poverty. To complement this, they are investing heavily in the region’s infrastructure and redirecting factories to the area so that jobs are available to local people. This contrasts favourably with the inaction of western countries who continue to leave the majority of their ethnic minority populations in conditions of high unemployment and relative poverty.

One of the most potentially damaging aspects of the false propaganda campaign being organised by Western governments over the Uygur Muslims is its latest campaign to persuade foreign companies to pull out of Xinjiang over the non-existent issue of “slave labour”. If this campaign is successful it will lead to unemployment among the very Uygur people they claim to care for.

Human rights in China
China is often portrayed as denying human rights by critics in the richer countries. But this concept of human rights in the advanced countries has a very narrow definition. It tends to focus entirely on higher level political, ethnic and religious rights, and misses out on the human rights to a basic level of existence. For example, what about the human right to have enough to eat? Or to have employment so that one has sufficient income? Or to have shelter for oneself and one’s family. Or clothing, education, health services, transportation and so on. If we were to create a scale of human rights surely these must be at the very top. And political rights etc. would be much lower down. After all, you can hardly exercise political rights if you are starving, or cold, or isolated, or sick. Of course, if you already have such basic human rights – the situation in the richer countries where the majority of people enjoy such conditions – then you can easily come to take them for granted.

It is on these basic human rights for living that China has achieved so much. Lifting 850 million out of extreme poverty is not something that can be dismissed lightly or set aside in any consideration of human rights in China. It is an incredible achievement by the Chinese Communist Party-led regime which has greatly uplifted the human rights of the people. As we can see in speech after speech by Chinese leaders, and in their policies, the Chinese government makes the prosperity of its people the main priority.

We can see this priority reflected back in the attitudes of Chinese people to their government and its achievements. Most Chinese people are very happy with the way that their country is developing. This contrasts greatly with the widespread discontent in the leading capitalist countries. In a 2019 survey of Chinese people, UK Polling company Ipsos found that 91% thought that “China was on the right track”. When the same question was asked of the American population only 41% thought that “America was on the right track” (and this was artificially boosted by a large Trump minority). When the same question was asked in the UK only 21% thought that “Britain was on the right track”.

How China can be Improved

So far, we have refuted many of the charges being made against China. Albeit with some recommendations for China to take a new course on some issues. But life in China is not all sweetness and light. While things are definitely getting better for most citizens, and at a very rapid pace, there are problems in the country that left unresolved could cause future disruption and discontent.

Inequality
Inequality in China is a major and growing problem. China has gone from being one of the most equal countries in the Mao era, to one of great inequalities today. Credit Suisse’s annual wealth survey in 2019 reported that “there were 100 million Chinese people among the world’s top 10% of richest people, compared with 99 million in the US”. Apparently, out of the world’s billionaires China now has a third, even more than the 626 billionaires in the US.

The first qualification about this growth of wealth for the rich in China is that it has not been accompanied by a fall of living standards for the rest. Despite the spectacular growth in wealth for a small minority, China has also seen a massive increase in living standards for the rest of the population. The reason for this lies in the actions of the Chinese government which has made poverty reduction, full employment and rising living standards its primary goal: “making China a prosperous country” as they put it. This contrasts with the capitalist governments which in recent decades have presided over a stagnation in living standards and a rise in poverty. A process that has rapidly accelerated since the Great Economic Recession when the Western governments transferred the costs of the mistakes and fraud of the ‘banksters’ onto the shoulders of working people through a long and continuing policy of austerity.

That said, inequality in China definitely has its major downsides. The incredible wealth held at the top has to have come at the expense of the rest of the population – the top 1 percent in China own more than one third of national net personal wealth while the poorest 25 percent own less than 2 percent of total household wealth. While the rest of society has made progress it could have been even more if the trillions held by the rich in China had had not been sucked out of the economy and society deprived of these resources. For example, living standards for the majority could now be higher. While health and social security could be much more generous.

This accumulation of great wealth has other major disadvantages for society. Money usually translates into power. This is certainly the case in the capitalist countries. There the billionaires run society from behind the scenes, funding the politicians and the media that promotes them. In China things run differently. The rich in China today are unhappy with their lack of political power. Even the richest in China can find themselves behind bars and their fortunes confiscated if they step out of line.

But for how long? The ownership of great wealth in China is an ever present threat to good governance for the many. The super-rich can utilise their wealth and staff to secretly influence opinion, Party and government decisions. And even without this, the super wealthy have their own power over the millions among their workforces, consumers, suppliers and so on.

Great wealth also invites corruption. The big majority of corruption cases that have been revealed in the anti-corruption drives in China have involved rich people giving bribes to state officials.

Great wealth inevitably undermines fairness in society. The wealthy will almost always seek to buy advantages for their children and family relations. Advantages in education, in employment, in government positions and so on. Advancement of individuals then becomes less based on merit and more on “who you know, not what you know”.

Last but not least, great wealth held in the hands of a few depresses economic demand as the wealthy tend not to spend their wealth unlike the ordinary people who have no choice but to do so.

Unlike in the USA where the rich are often celebrated, in China they are not popular. Most Chinese correctly believe that the billionaires have only become super-rich by means of tax avoidance, corruption or exploitation of labour and consumers. Certainly most of them couldn’t have inherited their money given the ‘equality in poverty’ that existed under Mao. And no-one is capable of earning a billion through simple hard work.

But even in the USA there is a growing reaction to the rise of the billionaires. Questions are being asked: who needs 1000 million dollars? Who could spend such excess in their lifetimes? Should we allow billionaires in the first place?

And if these questions arise in capitalist America how much more relevant are they in socialist China?

The answer in China is simple: use its tax structure, inheritance rules and legal system to introduce strict limits on wealth. China needs to end the possibility of becoming a billionaire and to redistribute the excess wealth of the existing billionaires to the rest of society. This will generate a huge amount of economic growth and help China reach its goals of a prosperous society even faster than 2049.

No doubt, there will be scepticism about the feasibility of such a change. But there was such scepticism about China’s drive to end extreme poverty which was achieved ahead of schedule. Now let’s shift the campaign from ending extreme poverty to ending extreme wealth. Just as China cracked down on corruption in the last decade, let’s launch a major campaign against extreme wealth and the causes of extreme wealth. A campaign that emphasises the socialist principles of sharing, of fairness, of service.

To begin such a campaign, the existing rules governing movement of money will need tightening so that the wealthy cannot hide their wealth, move it outside of China or into tax havens. Alongside this is the need to ensure that wealth is much more transparent in Chinese society. Such transparency to include an open register of property, public transparency of ownership of companies, a requirement to make all wealth holdings open to inspection by government officials, journalists etc. Once the population understands the scale of the problem and the excesses indulged in by the super-rich, there will be no problem in gaining full support for the measures needed to reduce inequality in society. Among such measures will be the introduction and enforcement of stiff inheritance taxes for the wealthy. With no loopholes. China needs to adopt the socialist principle that the gains made by an individual should not unduly privilege their offspring.

Of course, the soon to be ex-billionaires in China will not like the new rules. But they can be posed not in terms of punishment or envy. Rather in positive terms of voluntarily ‘giving back to society’, helping the poor and disadvantaged. After all, the rich give large sums to private charities. Why not to society as a whole?

Media & Censorship
The image is presented in the West that Chinese people are living in some kind of prison, forced to conform like robots under an oppressive level of surveillance. The reality is very different. With Facebook, Whatsapp and Youtube excluded from China, Chinese people are mercifully free from the fake news which floods social media elsewhere and is confusing and dividing people from each other.

That is not to say that censorship from above is a great system. What is needed is for a democratic media system that involves viewers and listeners, writers and readers in deciding on its output. With accountability governed by democratic criteria drawn up by the wider population. Details of how such a system could function effectively are included in our Manifesto.

On the other hand, the volume of anti-China propaganda that floods the capitalist media is reaching new heights. It even gives credence to crazy stories of how the Chinese government is encouraging forced organ harvesting. So bad is this propaganda that a growing number of foreigners living in China have become video bloggers and self-taught journalists in order to counter all the lies and hostile reports from the capitalist media.

Surveillance & Privacy
Another common attack on China concerns its video surveillance of its population. Yet, surveillance capitalism is a common feature in the West. As ex-government security consultant Edward Snowden revealed, the United States and its four allied countries in the Five Eyes network are snooping on everyone in the world. Every email, phone call and internet click on the planet is monitored and recorded by this network. Indeed, the plan to ban Tiktok in America was not to prevent the Chinese getting its hands on the personal data held by this online video service. Rather it was to allow the United States National Security Agency to get hold of this data and merge it with all of the material it already gathers up from Instagram, Youtube, Facebook, Google and so on. No doubt the US is working on technology to be able to scan and record every public video camera of which there are rapidly increasing numbers in every country.

So the problem of surveillance is not at all restricted to China. It is a common and growing problem across the world. Surveillance itself can be used for good or bad purposes. It need not be a threat but just an aide to stopping crime, reducing traffic and so on. The key question is who is viewing and recording this data and what are they using it for. In the capitalist countries the answer to these questions is unknown as these operations are highly classified. China should respond to these charges of threatening surveillance of its people by opening up its surveillance processes to full public scrutiny and accountability. And challenge the West to respond in kind.

The Private Sector
Many of the problems in China must be laid at the door of the private sector. It is mostly the private and not the public sector that has caused economic inequality, corruption, exploitation and the degradation of the environment.

Further, the emergence of a super-rich layer in China enriching themselves at the expense of the rest of society is a direct outcome of the private sector – almost all examples of public corruption have involved the bribing of officials by private companies or private individuals.

Likewise, the exploitation of workers with long hours and poor wages is almost entirely found in the private sector. This is especially true for the migrant workers from the countryside who have no choice but to take up work in the private sector when they arrive in the cities.

Last but not least, there is a danger that the rising wealth and power of the capitalists and the private sector in China will come to undermine the public sector and the state. For some time, billionaires have been allowed to sit in leading bodies of the Communist Party. The idea being that in this way the Party can control them. But participation in this way can work both ways. How long before the tail starts to wag the dog? And why are the rich being given privileges not open to the rest? It is our view that the rich should not be in the leading bodies of the Communist Party. That people should be in the leadership by virtue of their ability and the leading role they play in society not by their wealth.

Another means by which the Communist Party tries to control the private companies is by creating Party cells and units within them. This attempt at establishing dual power in the larger public companies won’t work if the company owners continue to have the main power and wealth in the company. Indeed, such a system risks corrupting the leaders of the CCP cells. Also, even if the communist units in the companies have some influence, what about input from the rest of the workforce, the consumers, suppliers etc? The existence of Party units inside the private companies offers no guarantee of social responsibility.

Despite the many problems posed by the private sector in China, it performs a necessary role at this stage of development. Certainly, the existence of small and medium-sized companies play a key part in providing employment and delivering services. A part that the larger publicly-owned enterprises are often not best suited to perform. Although co-operatives could certainly take on more of such a role in China. And stronger regulations and common standards could help to cut back on the negative results of private sector operations.

The bigger problem exists with the larger private companies in China. Once they reach such a size that they become essential to the public good they logically need to be incorporated into the public sector. But how to do this without losing their current levels of efficiency and innovation? Is it possible to introduce a new model of governance to the public sector and society as a whole?

Capitalist Democracy or Bureaucratic Rule
The main charge laid against China by the advanced capitalist countries is its lack of democracy. The fact that it does not operate a western-style system of competitive parties and competitive elections. Yet, western style democracy is rapidly descending into a farce. A century or more ago the wealthy elite in the capitalist countries opposed giving everyone the vote. They feared that the majority would understandably use their voting power to support the transfer of wealth from the few to the many. Yet in most countries this didn’t happen. The elite found that through their wealth they could bribe or compel the politicians, and greatly influence the public via the capitalist media.

Nevertheless, through this limited democracy the elite lost ground, both in terms of share of the national income and in services to working people. That is until the rise of neo-liberalism and a new array of public relations techniques. Now the elite have found themselves able to more and more manipulate the agenda, and effectively undermine the limited democratic rights of working people. As a result the past gains of the majority are increasingly being taken away. And almost all new wealth flows upwards to the super-rich.

It is becoming more and more apparent that the capitalist form of democracy is working against the interests of the vast majority who vote in them. Elections in the capitalist countries are becoming more and more of a circus with those elected tending to be the most effective in marketing themselves and their parties. Promises are scattered around before election day, and abandoned immediately afterwards. The election of Donald Trump was only the most extreme example of this phenomena. The same thing happened in France with Macon abandoning his promises within weeks of the election. So too with Boris Johnson in the UK, Modi in India and Bolsonaro in Brazil.

Although China’s government is not elected by the public, the Communist Party is far more responsive to public pressure than in the West. Ten years ago there were a series of strikes in China. In response the Party took steps to raise living standards which are continuing to go up by around 10% a year. As a result, strikes in China have greatly declined. Indeed, one of the main criteria for promotion to higher positions for all Communist Party cadres is whether they have been able to avoid public discontent in their area of responsibility.

Contrast this with the advanced capitalist countries. In the wake of the 2008-9 banking crisis working people suffered from the imposition of a programme of unpopular austerity measures. These resulted in deep cuts in living standards and public services. Naturally, there were waves of protest and public opposition to these measures. Yet the politicians have just ignored the distress and anger. And used their control over the media to shift the blame for the crisis onto immigrants and ethnic minorities; the unemployed and the poor; the old and disabled. The result: deep anger and toxic divisions among the population of the West.

But China’s top-down, bureaucratic governing system is far from the best structure for running society. The argument often advanced for China’s governing system is that it is based on a meritocracy where the top leaders have only achieved their position by proving themselves at the lower levels. Yet this assumes that promotion is always made on performance, and not influenced by favours, friendships or ideological faction. The modern history of China demonstrates that the latter is as important as the former. In fact, the meritocratic elements of China’s government system are reported to be in decline. According to a recent study of the survival of local party secretaries and their promotion during the current campaign against corruption, it has become apparent that meritocracy is giving way to patronage. In some ways this is an inevitable consequence of President Xi Jinping’s growing power.

Likewise, Xi Jinping’s increasing supremacy is now replacing the earlier concept of collective government. This concept arose as a reaction to the damage caused by Mao Zedong’s dominance of the Party and the state. The recent elevation of Xi Jinping’s ideas to one of ‘Xi Jinping Thought’ and their incorporation in the Constitution, as was done before with Mao, is another worrying indicator of Xi’s increasing dominance. Xi is clearly a very intelligent, tough and progressive leader. And maybe this is what is needed for this developing struggle with the capitalist powers. But undisputed lifelong power inevitably encourages fawning and flattery. It creates an echo chamber around the ‘all-knowing leader’ who can easily become overconfident and make major mistakes. Thus, what is a strength now, could turn into a weakness later.

At the lower levels, the Chinese system of ‘rule from above’ inescapably leads to corruption. With so many licences and permissions to grant, often without effective transparency, rule by the officials is bound to encourage the giving and taking of bribes. As evidence, we just have to see the scale of corruption exposed by the current anti-corruption campaign – 1.5 million officials so far have faced charges and discipline. But how far up does the corruption go? There are reports of some top Party leaders being billionaires. If true, such wealth can only have been secured through payoffs or insider trading. Yet, they have retained their positions despite the anti-corruption campaign. No doubt because they are seen as loyal to the leader.

China’s ‘rule from above’ system leads to many other abuses of power. Where decisions are taken that damage the interests of the citizens either for the convenience of the official or to benefit someone that official favours. There have been untold cases of such abuses in China. The result is passive discontent among the citizens; or active protests, strikes and so on.

The main response of the system to these problems is to discipline officials for abuse of office or corruption. But this only deals with the extreme cases and leaves the others in place. Besides, it relies on higher officials to know what is really happening underneath them which is often not the case. Or to be willing to take action against officials guilty of misconduct, rather than covering up for them because of family, friendship or past favours. Where officials are disciplined this is usually done after some time, often years later when the damage has been done and can’t be easily reversed or compensated for.

The bureaucratic system in China also leads to inefficiency and major distortions. Without input from the ordinary citizens who are affected by decisions, officials regularly make mistakes, sometimes big mistakes. The latest move to hold consultations with specialist groups of citizens on the new Five Year Plan is a welcome recognition that top-down planning and decision-making is not the best way to prepare and implement policy. This points the way to a new way of governing China.

Democratic Public Power
So far we have looked at the deep problems of competitive capitalist democracy in the West and the top-down bureaucratic system in China. If neither are the way forward, what is? In our view, China needs a system of Democratic Public Power. It needs a system of participatory democracy where all the people affected by decisions are involved in making those decisions. Where the running of each public service begins to involve accountable representatives of the service users, the staff, and other stakeholders currently only on the receiving end of decisions and regulations. Where state-owned enterprises incorporate their workforce, customers and suppliers as key partners in decisions on the price, quality and design of products; production methods, forward investment and so on. Where every layer of state gives the people a key say in the design and implementation of policy.

Not only would such an extension of democratic participation drastically reduce the alienation and exploitation of citizens who currently just have to passively accept most of the decisions that affect their lives. It would also greatly increase efficiency in governance and in economic management. The knowledge and potential ingenuity of workforces would no longer be excluded but brought directly into the running of services and public enterprises. The needs of customers would no longer be ignored in the existing ‘take it or leave it’ approach, but directly represented to ensure fair pricing, high quality and innovative design. The interests of citizens would no longer be left out in behind-closed-door agreements made by government officials. Instead of trying to discipline officials for bad decisions after the fact, let’s involve the people so that these bad decisions are not made in the first place.

There continue to be strikes and protests in China. Each one of these are an indication that the current system is not working properly. That decisions are being taken without the participation of the people affected by them and against their wishes and interests. Moving China towards a system based on democratic public power offers a new alternative beyond the old choices of top-down rule by public officials, or private control by capitalists. It offers the chance to unlock the creativity of the people and utilise their potential through mass participation via online technology.

For the state-owned enterprises, democratic public power offers a way to dramatically improve their efficiency, innovation and customer service.

The idea of giving citizens a voice is not entirely new to the People’s Republic of China. Elected Village Committees exist in the countryside. But too often they are burdened with the tasks of government and end up being seen as agents of the higher bodies and divorced from the interests of the local people they are supposed to represent.

As we will explain in detail in our forthcoming Manifesto, a system of Democratic Public Power combines the best of traditional representative democracy with the potential benefits of modern direct democracy. In this way it delivers the most practical way of incorporating the views of all those affected by decision-making.

Of course, it would not make sense to try to introduce this new form of governance overnight across the board. Like other major changes in China made since the great ‘reform and opening up’ process began at the end of the 1970s, careful and extensive experimentation and fine-tuning would be needed. First in a couple of national public services, in a few state-owned enterprises, and in some local government areas. If successful, it could then be spread across into more and more areas of Chinese life.

Naturally, there will be reluctance and resistance in many levels of Chinese government. It is hard to share power with the people when you have been used to exercising it alone. But the Chinese Communist Party has to trust its citizens and take this next step if it is to overcome today’s challenges and establish a genuinely democratic socialist future. Such a major step is not only relevant to China but to the whole of the socialist project worldwide. As such, this experiment in real democracy addresses the powerlessness that exists everywhere. And its outcome will be of great relevance to the future of humanity as a whole.

+++++++++++++++++++

* Relevant Articles from the Chinese Constitution
“Article 1: The People’s Republic of China is a socialist state under the people’s democratic dictatorship led by the working class and based on the alliance of workers and peasants. The socialist system is the basic system of the People’s Republic of China. Disruption of the socialist system by any organization or individual is prohibited.

Article 6: The basis of the socialist economic system of the People’s Republic of China is socialist public ownership of the means of production, namely, ownership by the whole people and collective ownership by the working people. The system of socialist public ownership supersedes the system of exploitation of man by man; it applies the principle of “from each according to his ability, to each according to his work”.
In the primary stage of socialism, the State upholds the basic economic system in which the public ownership is dominant and diverse forms of ownership develop side by side and keeps to the distribution system in which distribution according to work is dominant and diverse modes of distribution coexist.

Article 7: The State-owned economy, namely, the socialist economy under ownership by the whole people, is the leading force in the national economy. The State ensures the consolidation and growth of the State-owned economy.

Article 24: The State advocates the civic virtues of love of the motherland, of the people, of labour, of science and of socialism. It conducts education among the people in patriotism and collectivism, in internationalism and communism and in dialectical and historical materialism, to combat capitalist, feudal and other decadent ideas.”

China’s New Economic Policy 1977 – today

Deng Xaioping’s reforms prepared the ground for China’s meteoric rise

Published: 16 October 2020
Draft Topic for our ‘Transformation, a Manifesto for Democratic Socialism’

In the post-Mao era, the Chinese Communist Party leadership was to learn from both the mistakes of Mao and from the experience of the Soviet Union.

The new leader of the Party, Deng Xaioping, was determined not to return to Mao’s ultraleft policies of war communism, purges and ideological purity. For a detailed account of these go to the Background section of this Topic ‘Socialism and China – the Maoist Era.

To begin with, Deng simply proposed that the Party adopt the basic position of ‘Boluan Fanzheng’ – “eliminating chaos and returning to normal”.

Deng then went on to challenge the slavishly pro-Mao philosophy of the Party encapsulated by the ‘Two Whatevers’ approach: “Whatever Chairman Mao said, we will say and whatever Chairman Mao did, we will do“. This had even been incorporated into China’s constitution. Deng famously counterposed to this a very different approach based on two simple principles: “seek truth from facts” and “practice is the sole criterion for testing truth“.

The first step in the post-Mao healing process was to restore the rights and reputation of the victims of the purges of the previous 20 years – over three million cases were reviewed and rehabilitated.

Deng’s next step was to approach the economic management of the Peoples Republic in a pragmatic, open-minded way. One that was aimed at achieving prosperity. That was willing to try out new things and then to implement what worked.

To this end, Deng and the team of economists who soon surrounded him, began by surveying the various experiences of socialist economy in the Soviet Union and Eastern Europe. It was during this process that they identified the continuing relevance to China of Lenin’s New Economic Policy (NEP), the economic policy that had operated in the USSR for much of the 1920s. And of its chief theoretician, Nicolai Bukharin.

In Moscow, Deng himself had personally studied the NEP in 1926 and Bukharin’s interpretation of it. As one of his biographers put it: “The theory of reform and opening that Deng developed several years after Mao’s death, in the late 1970s and early 1980s, did not originate with him. It was rooted in… Bukharin’s interpretation of Lenin’s New Economic Policy aimed at developing a market economy under the control of the Communist Party. Deng studied this concept in the mid-1920s in Moscow during his sojourn as a student at a Comintern school… The evident superiority of NEP-style socialism was confirmed by his reading of Marxist-Leninist books and articles as well as contemporary speeches by Stalin and Bukharin, which made a deep impression on Deng’s worldview.”

Deng’s direct experience in the Soviet Union confirmed the effectiveness of the NEP. The economy was booming. Markets were increasingly filled with goods produced by state and private enterprises. New stores, restaurants, and cafes were opening all the time. “We were never short of chicken, duck, fish, and meat,” recalled one of Deng’s classmates.

Deng Xiaoping drew on the ideas from NEP when he spoke of his own reforms in China. In 1985, he openly acknowledged that “‘perhaps’ the most correct model of socialism was the New Economic Policy of the USSR.

Bukharin’s Influence On China’s New Economic Policy
In July 1979 at the behest of Deng and Hu Yaobang, Party General Secretary, a special Institute on Marxism-Leninism and Mao Zedong Thought was established to begin a serious study of the Yugoslav and Hungarian experiences in building socialism. But their main attention was devoted to the Bolsheviks’ NEP and the works of Nikolai Bukharin, its main theoretician.

The fact that Bukharin had been repressed and executed by Stalin actually increased their interest in his works and in his person. Having lived through the Cultural Revolution, the intelligentsia hated any kind of terror. Interest in Bukharin was particularly stimulated by an international conference on him organized by the communist movement in Italy. In September 1980 an academic forum on Bukharin was held near Beijing: “About sixty social scientists gathered and over many weeks discussed the theory of NEP, trying to understand why it was not fully implemented in the USSR and how applicable it is to China.” The conference agreed to translate and seriously study Bukharin’s works. To this end, Hu Yaobang allotted the entire upper floor of the Beijing Party School to the task. Thirty seven of Bukharin’s works were published in Chinese including his biography. Several Chinese Bukharin specialists began to give lectures at the newly established Department of Foreign Socialist Studies at the Higher Party School, and a national tour on the subject was organised. Within intellectual circles, there was enormous interest: “The halls were jam packed. People sat on the window sills, and everybody wanted to hear something new.”
In 1981 Chinese scholars began publishing their own articles on Bukharin. They noted “his insistence that the growth of industry directly depended on the growth of agriculture. And his support of the harmonious combination of planned and market regulations“.

How To Move Forward
Armed with a general economy strategy, Deng Xaioping and the increasingly collective leadership had to work out how to move forward. Despite being the fourth largest country in the world, and having by far the biggest population at 956 million, China’s output in 1978 was only ranked at 34th place. Its population was hard put to even feed itself with extreme poverty levels above 60%. How was the party to tackle such massive problems and unleash the system’s potential?

In the face of what seemed insurmountable problems, socialist China had some major advantages over its capitalist rivals:

  • A political system geared to public benefit for all, not private profit for the rich
  • A willingness to consciously develop the economy through planning and experimentation
  • The necessary tools for implementation of economic policy through public ownership of the banks and key industries
  • A stable and powerful government able to collect taxes and implement long term policies

But how were such advantages to be best put to use?

After the almost constant upheavals of the Maoist era with its artificial political ideology of class struggle from above, the party leadership recognised that future change would have to be gradual and experimental. Thus Deng’s famous expression “Crossing the river by feeling the stones” became China’s approach, implementing reforms in a trial-by-error manner.

Often such reforms would start in a few regions, and if successful then be extended throughout China: “This gradual strategy reinforced the credibility of reform over time. By making reforms one step at a time, and starting with those most likely to deliver results, the government built up its reputation for delivering on reform. With every successful reform, the likelihood that the next one would be a success as well undoubtedly increased. It also gradually built up the experience and skills for the design and implementation of reforms.

Countryside the First Priority
Change had to come first in the countryside where the overwhelming majority of Chinese people lived. And it had to end the problem of food shortages and malnutrition. This was a major change from the Soviet economy which prioritised industry over agriculture. A model that China had followed in the first three decades of its revolution.

The first step in the new strategy was to recognise that Mao’s experiment in collective agriculture had failed. In 1979, in response to local demand, elements of individual private farm production and sale through a ‘Household Responsibility System’ were allowed in a few areas. Facing ideological resistance from conservative members in the Party, the leadership held back from making such changes official. However, just as Lenin had experienced when introducing the NEP in Soviet Russia, the peasants in China took matters into their own hands. The new system started to rapidly spread across the countryside. Within three years, approximately 73% of rural farms had been de-collectivised and the Household Responsibility System became the official policy for all of China. 

The results were astounding. By 1984, annual agricultural output increased more than tenfold from what it had been in the years of the Cultural Revolution. For the farmers this translated into an increase in their average income of 166%.

Rural Industrialisation
The big increase in rural income for the peasants naturally led to an increased demand for agricultural equipment for the farms, as well as consumer goods for the home and the individual peasant. In a natural way, rural enterprises nearby began to develop to meet the demand. In most cases these were owned by the old communes and in time became the property of the succeeding local authority bodies. They came to be officially known as Township and Village Enterprises (TVEs) producing a wide range of items. The state banks helped the formation of these enterprises with cheap loans. Already by 1985 there existed 12 million TVEs.

Fortunately, the fast growth of productivity in the agricultural sector was releasing large amounts of labour which was taken up by these rural enterprises. In this way the total number of employees in the Town and Village Enterprises rose rapidly from 28 million in 1978 to 94 million in just a decade. This was soon reflected in China’s national income which by 1996 saw the share from non-agricultural activities jumping to over 30%.

Just as Bukharin had predicted for the Soviet Union’s New Economic Policy if it had been allowed to develop, China saw a natural process of industrialization in the countryside. A process that expanded organically from the field to the city rather than the other way round. And this process didn’t just stop at the borders of the Chinese domestic market but with provincial and national encouragement began to expand into production for export. The TVEs even managed to become major international brands such as Haier supplying half of the US home refrigerator market. In their heyday, the TVEs came to account for 40% of China’s industrial production and 27% of the country’s exports.

As one commentator put it: “Agriculture in China grew steadily with favourable tax policies and other encouragements from the state and advances in processes of mechanization and productive specialization leading to record harvests. In contrast to the continuing weakness of Soviet agriculture, the Chinese farming sector while declining as a relative factor in the economy became a success story that helped the country’s development rather than hindering it.

Opening Up a Closed Economy
Another side to the economic reforms in China was the policy of opening up the economy to outside investment and foreign technology. In line with its cautious and experimental approach to reform, the Party leadership thought it best to test out the new open policy in a few limited areas. To this end, between 1980 and 1984 China established what came to be known as Special Economic Zones in Guangdong and Fujian Provinces, and the island of Hainan. Such zones allowed foreign companies to come and set up jointly-owned operations with Chinese companies. The results were effective with many overseas wealthy Chinese investing in the new Zones to take advantage of China’s huge supply of cheap labour. Soon after, capital from the advanced capitalist countries began to take an interest. Having proven the concept, the government decided to increase the number of zones. In 1984, China opened 14 other coastal cities to overseas investment including Shanghai. Then in 1985, the central government established a series of such economic zones further inland including the Beijing area.

Tiananmen Square Protests
The success of the big economic reforms in the countryside and the special zones during the 1980s had its downside. The transition from an almost completely state-owned, centrally controlled, closed economic system to a more decentralised and hybrid economy was bound to create transitional stresses and distortions. The massive growth of rural and special zone business and trading made it possible for individuals to make fortunes. And created all sorts of opportunities for corruption for Party and state officials.
Equality which had been a hallmark of the maoist years began to be replaced by new wealth and ostentatious consumption. This wealth was unequally distributed with uneven results between the countryside and the cities. And with the growing wealth of the Eastern coastal areas leaving behind many other regions.

Worse still was the lifting of some price controls that had kept prices stable and low for decades. For example, between 1987 and 1988 prices rose by 30% in Beijing leading to panic among salaried workers that they could no longer afford staple goods.

Moreover, unprofitable state-owned enterprises were being pressured to cut costs and lay off staff. This threatened many urban workers who relied on the ‘iron rice bowl’ – the wide range of housing, medical and other benefits that usually came with state employment.

Another discontented group were students and academics. Facing a dismal job market and limited chances of going abroad, intellectuals and students began to voice their criticisms. Avenues for such expression had significantly grown in the previous decade. A large number of private publications had emerged which supported the reform process. For Deng and the leadership team around him, this was useful in their ongoing struggles with the anti-reformist conservatives in the Party. 
There was widespread public scepticism over the country’s future. The communist certainties of the old Maoist era were fast disappearing. People wanted change, yet exclusive power to shape events still only remained in the hands of the top Party officials. And these officials were themselves divided over the direction, scope and speed of the reforms:

The reformers (“the right,” led by Hu Yaobang) favoured political liberalization and a plurality of ideas as a channel to voice popular discontent, and pressed for further reforms. The conservatives (“the left,” led by Chen Yun) said that the reforms had gone too far, and advocated a return to greater state control to ensure social stability and to better align with the party’s socialist ideology. However, both sides needed the backing of paramount leader Deng Xiaoping to carry out important policy decisions.

The divisions at the top of the Party were reflected in the media which had become more numerous and diverse. Inevitably, the wider citizenry became drawn into these debates on the problems facing the country. And began to surface openly. Public manifestations of discontent arose in the form of student demonstrations in the capital in April and May 1989. These were sparked by the death of pro-reform former Party General Secretary Hu Yaobang.

A protest encampment was organised in Tiananmen Square which then turned into a popular hunger strike by some of the students on the 13 May in a demonstration attended by 300,000 people. This was only two days before a welcoming ceremony was scheduled in the Square for the highly publicized state visit of Soviet leader Mikhail Gorbachev. The students were hoping to use this to force the Party leadership to negotiate with them, a demand supported by some of the more liberal Party leaders. However, Deng joined forces with the Conservatives and decided to crush the protests which they thought threatened to unravel the Party’s control of society.

Actually, the students themselves were divided over their aims. Those who actually wanted to move China in the direction of capitalism and an American-style democratic system appeared to have been very much in the minority. The large majority restricted themselves to demands for an end to corruption, more democratic freedoms etc.

Nevertheless, the majority of Party leaders feared that the protest movement could escalate in the direction of capitalist restoration, a fear that now seems justified in retrospect with the fall of the Berlin Wall some five months later. The event that sparked off the rapid collapse of the state socialist regimes in Eastern Europe and later the Soviet Union itself.

On the 3-4th of June the Party sent in the army to reach Tiananmen Square and clear it of the protestors. In the approaches to the Square there were violent clashes between the army and Beijing residents who supported the students. Then after repeated appeals from the soldiers, the students left Tiananmen Square and the protest movement was suppressed.

On June 9, Deng Xiaoping, declared that “the goal of the movement was to overthrow the party and the state. “Their goal is to establish a totally Western-dependent bourgeois republic,” Deng argued that protesters had complained about corruption to cover their real motive, which was to replace the socialist system… “the entire imperialist Western world plans to make all socialist countries discard the socialist road and then bring them under the monopoly of international capital and onto the capitalist road.

Deng’s action in suppressing the protests turned out to be highly unpopular at the time. And he ended up taking much of the blame for it. As a result he was forced to withdraw from his various state and Party positions. However, behind the scenes he was still accepted as the final arbiter between the factions.

The 1990s
The crushing of the Tiananmen Square protest movement represented a victory for the conservatives in the Party leadership. These conservatives felt that the economic reforms had introduced elements of capitalism which were to blame for the outbreak of dissent and threatened the future of socialist China. The collapse of Eastern Europe and the Soviet Union which soon followed only seemed to confirm their fears. Unsurprisingly, the economic reform process stalled.

While Deng Xaioping no longer held any official positions in the party and the state, he was still regarded as the ‘paramount leader’. His conclusions from the fate of the Soviet Bloc was not to halt the reforms but the exact opposite: to accelerate the process. For this purpose, Deng embarked on a highly publicised tour of the southern Special Economic Zones in 1992 ending up in Shanghai. In the tour Deng commented on the various debates about socialist or capitalist ownership with what became one of his famous catchphrases: “I don’t care if the cat is black or white, so long as it catches mice“. He urged the provincial governments to “be bolder in carrying out the Reforms and Opening-up, dare to make experiments and should not act as women with bound feet“. The public reaction was very enthusiastic. Taking advantage of this Deng bluntly threatened that “those who do not promote reform should be brought down from their leadership positions“.

The official Party leadership bowed to the pressure and resumed the reform process. This was supported later in the year at the Party Congress which officially accepted that China must create a ‘socialist market economy’. Continuity in the political system but bolder reform in the economic system were set as the goals of the 10-year development plan for the 1990s.

Meanwhile, from 1995 onwards inflation dropped sharply as the government tightened monetary policies and food price controls. The following year, the state banking system was modernised.

Another major problem facing the Chinese economy was the large number of state owned enterprises, many of which were inefficient and loss making. In September 1997 plans were announced to merge, close or sell off many of them. Over the next three years up to 28 million SOE workers lost their jobs as the government strove to make large state-owned enterprises profitable.  

As such, the 1990s turned out to be a period of major economic change in China. It became the second biggest recipient of foreign investment after the US and national output really took off.

As we can see from the graph below, the results speak for themselves.

If we just compare China to India, a country with a similarly sized population and level of GDP back in 1990. Now, three decades later, national output in China has reached nearly five times that of India.

The Power of Planning
A key to China’s amazing economic achievements has been its five-year planning process. The ability of the government to consciously assess the country’s performance and direct its resources where they are most needed has given China a massive advantage over its capitalist rivals. Part of this has been China’s willingness to incorporate foreign capital as part of its plan.  

A good example can be seen in the auto production sector. China was once famous for its bicycles which were the main mode of transport in the maoist era. Then in the 1980s the new wealth that began to flow from the reforms led to increasing purchase of car imports mainly from Japan. By 1985 the country was spending some $3 billion a year to import more than 350,000 vehicles. This was beginning to create a severe trade deficit. To overcome this, Chinese authorities decided to include an ambitious auto production sector in its plan. The problem was that China did not have the technology to produce modern motor engines and auto bodies. So, it had no choice but to invite foreign capitalist manufacturers to come and produce in China. However, the result of these efforts was dramatic. The number of vehicles produced in China rose from only 5200 in 1985 to 26 million in 2019, 28% of the world’s total and more than the output of the US, Japan and the European Union combined!

Within this total local Chinese brands have a major share of the Chinese market made possible by the joint ownership arrangements that were an original condition for the foreign companies to produce in China. This trend is likely to rise as the government has taken major steps to encourage local manufacturers to produce electric cars and establish Chinese brands as world leaders in this new technology sector.

A New Planning Process
In the Soviet Union, planning was essential in helping to build up its economic strength. But it ultimately failed because of its rigidity, centralisation and lack of innovation. In the maoist era, the soviet planning model was used in China demonstrating many of the same limitations but made much worse by political upheavals which often rendered the plans ineffective.

After Mao’s death, the Chinese planning process slowly evolved into a much more open, effective and flexible system. As with his approach to the NEP, the Chinese leaders took on board Bukharin’s approach to planning which was to: “establish the conditions for dynamic economic equilibrium. Essentially the task of working out a national economic plan, more and more resembling a balance-sheet of the whole economy… a consciously outlined plan, which will at one and the same time be a forecast and a directive.

In particular, from 1993 onwards central planning in China was relaxed, with competition among regions and their enterprises becoming possible. This decentralisation turned China into a laboratory for experimentation. And vitally, room for experiments and trials became integrated into the planning process. This provided vital feedback during the period of the Plan, allowing for changes and fine-tuning to be made as the plan progressed, rather than having to wait for the plans to finish. “This distinctive Chinese approach to bottom-up program adjustment is very different from both Soviet-style command economies and Western legislation-driven policy making. The decentralized generation of policy options represents a crucial asset for innovation that had never been realized in top-heavy, centralized Soviet-type party-states.

Moreover, the Chinese planning process has become increasingly sophisticated, involving experts in China and internationally to identify and advise on developing technologies and rising sectors. Now, the world’s fastest supercomputers are used to put the plan together.

The Plan is not just of use to the state sector but also of great benefit for the private sector too. It removes much of the uncertainty typical of capitalist economies, and allows business to focus on meeting the needs of the plan rather than having to work on its own forecasting.

Last but not least, there is a direct link between China’s Plan priorities and the party’s control over the leaders of major institutions and state-owned enterprises. This is known as the ‘plan-cadre nexus’. The ability of officials to achieve Plan targets is an essential part of their cadre evaluation and their prospects for promotion. Criteria for this is largely based on achieving growth, creation of employment, attraction of Foreign Direct Investment (FDI), and control of social unrest.

This ties the bureaucracy directly into the content and outcomes of the Plan.

The Advantages of Public Ownership
Although Deng Xaioping’s reforms introduced private ownership and business into China’s economic mix, it retained a central role for public ownership. Through the state owned enterprises and state banks the government maintains direct control over a majority of the economy. This gives China major advantages in its economic development.

For one thing, it provides the government at national and local level mechanisms through which to invest at scale and for the long-term, both areas that risk averse and short-termist private investors avoid like the plague. In this way, the Chinese public sector has been able to develop infrastructure on a level unseen in human history. The same with public housing and education. And so too in mobilising investment in new technology.
Secondly, the large-scale nature of public ownership in China – in 2020 mainland China overtook America in the Fortune Global 500, with its state-owned enterprises now being 124 out of the largest companies in the world (the US coming second at 121). Among these, China now has three of the top five most highly valued companies in the world. Such massive state companies gain great economies of scale being able to buy resources more cheaply, carry out more research, employ more specialists, and influence the market, than many of its multinational capitalist rivals. These advantages will become more apparent in the coming years.

Thirdly, the government sees the state-owned enterprises as a necessary way to maintain social stability, without which the economy cannot function properly. By providing secure employment and good employee social benefits, periods of dislocation in the private sector and transitions between various technologies can be smoothed out more easily.
Finally, the government uses the state sector to maintain control over the ‘commanding heights’ of the economy. Through this instrument, the government can ensure its planning decisions are implemented and not just ignored as is so often the case in the capitalist economies.

Effects of the 2008-9 Capitalist Great Economic Recession
The entry of China into the World Trade Organisation in 2001 ushered in high hopes among capitalist leaders that China would evolve into a western-style capitalist economy with liberal multiparty institutions to match. Such hopes found their echoes in China itself. Indeed, some in the private sector, academia and inside the Communist Party itself began to argue for China to take its reforms to what they saw as their logical conclusion. They wanted to close down the state-owned enterprises, privatise the state banks and create a full blooded capitalist economy. Among other things, they drew inspiration from the formal inclusion of the right to private property that was written into the country’s constitution in 2004 and carried into law in 2007.

However, events were soon to dash such hopes and expose them as the delusions they really were. Specifically, the financial crisis which sparked off the Great Recession of 2008-9 in America and Europe dramatically highlighted the weaknesses of the capitalist model. And confirmed the strengths of China’s dominant public sector / supportive private sector model.

In China, the initial impact of the capitalist crisis was to threaten the crash of China’s export-oriented industries and create mass unemployment within them. To avoid this, the government launched the Economic Stimulus Plan, a package of massive infrastructure projects. These included new airports, motorways, major water projects, high speed rail lines and so on. Plus, a large house building programme which extended even to whole new cities.

Secondly, the central government loosened credit for local government and private projects. These anti-crisis measures not only boosted the Chinese economy but delivered facilities that were very valuable in themselves, generating future revenue and efficiencies for the country. But in the capitalist countries such state investment is usually blocked as it creates impossible competition for the private sector. And the private sector is their main concern not the benefit of society as a whole.

In the US fixed investment in the Great Recession fell by over twenty five per cent, while in China urban fixed investment rose by over thirty per cent. No wonder that China’s economy sailed through the crisis virtually unscathed, while the USA has not been able to fully recover even by 2020. Even in the previously developmental states of South Korea, Taiwan etc. no significant positive response to the Great Recession was enacted.

The Great Recession turned out to be a historic turning point for the world economy: China surpassed Japan as the second biggest economy of the world; it passed Germany as the greatest trading nation; and the US as the largest manufacturer. In the latter case, China has become known as the “world’s factory” which obviously evokes memories of Britain’s ‘workshop of the world’ label in the 19th century.

The Great Recession also represented a reversal of fortunes for the previously growing private sector in China. Many private Chinese companies went bankrupt or were bought up by their state rivals. The phrase: ‘Guo jin min tui’ ‘the state advances, the private sector retreats’ summed up the process that took place as a result of the crisis.

Living Standards
Over the last four decades, the miracle that is China’s economy, has translated into a massive increase in living standards for the people, albeit from a very low level. While there has been a large increase in inequality, unlike the capitalist countries the growth in the economy has also been shared by the rest of the population. Annual personal disposable income, the amount of money that households have available after income taxes, rose from only $263 per person in 1986 to $4462 in 2019. Given the size of China’s population this is an incredible achievement. Yet, it also underscores how far China still needs to go to catch up with and overtake living standards in the advanced capitalist countries. This is not planned to happen until around the hundredth anniversary of the Chinese Revolution in 2049.

Another way of measuring living standards is to look at increases in household consumption – China’s rapidly growing numbers of smartphones, cars, internet users, those taking foreign holidays and so on clearly reflect its improving living standards which in 2019 were currently rising at three times the rate of the USA. Living standards are also reflected in rising life expectancy. Starting at only 36 years in 1949, by 2020 China had reached 77.3 years, just behind the USA at 78.54. Indeed, Chinese people will likely be living longer than their US counterparts by 2025, if not sooner.

Perhaps the most amazing achievement in modern China has been the huge fall in poverty among its population. Above all, this reflects the priorities of China’s socialistic policies. In late 1978 when the reforms began, the number of extremely poor rural residents was nearly 770 million. By 2019 this had been reduced to only 5.51 million or 1.7% of the population. Nonetheless, President Xi Jinping announced a serious goal of completely eradicating extreme poverty in time for the centenary of the Communist Party in July 2021. To achieve this, every person and family affected was visited, assessed and assisted on a continuous basis. And it appears that the goal was already met by 2020.

Conclusions
The last four decades of China’s economic development and the dramatic impact it has had on the well being of the Chinese people, has forcefully confirmed the effectiveness of Deng Xaioping’s reforms and his wisdom in adopting the strategy of Lenin and Bukharin’s New Economic Policy. By recognising that agriculture was the first priority in a rural country and accepting the need for private initiative to move it forward, Deng and his circle of advisers opened up the way for the farmers and the socialist state to work together to solve its problems. Through this, China was able to create a solid foundation on which to build industry, first in the countryside and then in the urban areas. Moreover, the combination of state planning and public ownership with foreign capital and technology, as well as local private enterprise, has allowed China to achieve incredible growth rates for the economy and living standards. As such, China’s experience of socialist economic reform represents a new way forward for poorer, largely rural economies across the globe.

The mix of dominant socialist and subordinate capitalist forms that has evolved in China has secured stunning achievements and moved China into the front rank of nations. To such an extent that the advanced capitalist countries fear its continuing growth and innovation. And see it as a serious threat to their system.

However, nothing stands still. And China faces many challenges ahead. We will address these challenges later in this Manifesto and suggest some possible positive and far-reaching solutions to them – see ‘The Challenges Facing China’.

‘Socialism and China’ – ‘The Maoist Era’

Mao tried to follow in Stalin’s footsteps

Published: 16 October 2020
Draft Topic for our ‘Transformation, a Manifesto for Democratic Socialism’

The economic transformation of China over the last four decades has seen the fastest ever growth of any nation with a 47-fold increase in output. During this expansion over 800 million people have been taken out of poverty, the greatest poverty reduction in world history. The obvious question to ask is how has this been achieved.

We hope in the following pages to explain the basis of this success. And to show how it flowed directly from the experience of the Soviet Union, both bad and good. For details on this experience go to our Topic: ‘Socialism and the Soviet Union’

The declaration of the founding of the People’s Republic of China in October 1949 and the socialist revolution that it brought represented a great victory for the Chinese people. China’s ‘October’ was the culmination of a long and gruelling struggle by China’s communists. A struggle against the vicious and corrupt nationalist forces who represented the landlords and the smaller capitalist class. And against the Japanese imperialist invaders who had sought to subjugate China and steal its natural resources.

As with many countries, the growth of a communist movement in China was first inspired by the socialist revolution in Russia. Thus, the Communist Party of China was founded in 1921. Finding support first among the intelligentsia, the communists soon began to recruit widely among the fast growing Chinese proletariat. Mass strikes and demonstrations led by the communists in the towns and cities soon established them as a serious political force.

However, they faced a major problem in the shape of a very large and militarised nationalist movement, the Kuomintang. This had been formed ten years earlier during the creation of the Republic of China.

Acting under the advice of the Soviet leadership, the Chinese communists sought to establish a positive relationship with this nationalist movement. But it was not to last long. In 1927 the Kuomintang under Chang Kai-shek, turned on the communists and massacred them in Shanghai. This sparked off a long and vicious civil war between the nationalists and the communists.

Civil War and Foreign War
In order to defend themselves against attacks by the nationalists, the communist forces organised themselves into a Chinese Workers’ and Peasants’ Revolutionary Army. At first they fought back against the greatly superior nationalist forces using conventional military methods. These methods met with disastrous results. However, one of the leading communists, Mao Tse Tung, began to develop a new approach based on peasant guerilla warfare. This proved far more successful and after a long period Mao emerged as the leading figure in the Party.

The civil war between the communists and nationalists continued until 1937 when the increasing success of the Japanese invasion of China forced the nationalists to declare a truce with the communists so that a united struggle against the foreign invaders could be waged. This truce came to an end with the defeat of the Japanese in 1945.

Almost immediately, the civil war between the communists and the nationalists restarted. The United States supplied the nationalist armies with arms, while the Soviet Union did the same for the Chinese communists. The decisive factor between the two sides turned out to be one of motivation. The communists forces were inspired by the idea of a new China free of oppression and exploitation. The nationalist troops under their corrupt and reactionary leadership fought for the status quo. And suffered from low morale accordingly. Mass desertion and defeat was the inevitable result. Within four years the communists had won control of most of the country. By October 1949 the Chinese Revolution was declared victorious by Chairman Mao, speaking in Tiananmen Square in Peking.

Land Reform
China was marked by absolute backwardness and poverty. Average life expectancy was only 36. The central issue facing the revolution was land. Therefore, one of the first acts of the new communist government was a radical land reform. Village meetings were held all over the country at which landlords were paraded, denounced and in many cases killed. It is estimated that up to 2 million of them died in the process.  Poor peasant debts were written off and rents abolished. Large landholdings were divided up increasing the typical farm from just under one acre to three. Land was distributed to the landless. Producer cooperatives were then introduced to link the farms together. This opened up the potential for great growth in productivity and output in Chinese agriculture and initially there was a significant increase in production.

However, the focus of the new government, in line with socialist ideology, was on the need to build up industry over agriculture. And here China naturally turned to the Soviet Union for assistance. 

A Potential Partnership
The Chinese communist revolution opened up a wonderful opportunity for the peaceful and prosperous development of the East. Its communist neighbour, the Soviet Union was the largest country in the world. China, the most populous. Including Soviet-controlled Mongolia, they shared a border of nearly 9000 kilometres. The combination of Soviet geography and natural resources, with China’s enormous reserve of labour, offered the possibility of a great future for socialism on a global scale. The Soviet Union had greatly progressed in industry and technology. And began by offering major help to China to move out of its poverty and backwardness. But sadly, this was not to last.

At the outset, Moscow gave considerable assistance to China. But behind the public displays of unity and solidarity there was deep distrust. Some of this came from the many disagreements between Stalin and Mao in the pre-revolutionary period. But it was further stoked by the ill-judged Korean War. In the summer of 1950, at the request of the Soviet Union, China entered the war against US and South Korean forces. But Stalin reneged on his promise of air cover for the Chinese army which brought inevitable defeat. And the death and injury of nearly one million Chinese soldiers. This was an inauspicious start to the relationship.

First Five Year Plan 195357
After initial hesitations, the new Chinese regime adopted the Soviet economic model, based on state ownership in the industrial sector and centralized economic planning.
The First Five-Year Plan was quite successful. Soviet planners helped their Chinese counterparts formulate the plan. As in the Soviet economy, the main objective was a high rate of economic growth, with primary emphasis on heavy industry and capital-intensive technology. With the help of Soviet loans and thousands of Soviet engineers including entire plants purchased from the Soviet Union, a solid foundation was created in iron and steel manufacturing, coal mining, cement production, electricity generation, and machine building. As a result, industrial production increased at an average annual rate of 19% between 1952 and 1957, and national income grew at a rate of 9% a year.
Government control over industry was increased during this period by offering inducements to owners of private, modern firms to sell them to the state or convert them into joint public-private enterprises under state control. Where they showed reluctance, various pressures were applied to them to comply. Thus, by 1956 approximately 68% of all modern industrial enterprises were state owned, and 33% were under joint public-private ownership, with no privately-owned firms remaining. During the same period, the handicraft industries were organized into cooperatives, which accounted for 92% of all handicraft workers by 1956.
Despite the lack of state investment in agriculture, agricultural output increased substantially, averaging increases of about 4% a year. This growth resulted primarily from the productivity naturally arising from the redistribution of land from the landlords to the poor farmers. There were also gains in efficiency brought about by reorganization and cooperative farming – by 1957 about 94% of all farm households had joined these cooperatives.

As the First Five-Year Plan wore on, however, Chinese leaders became increasingly concerned over the relatively sluggish performance of agriculture. In particular, the inability of state trading companies to significantly increase the amount of grain procured from rural units for urban consumption, and for funding the many large urban industrialization projects. This formed the basis for a disastrous, ultraleft turn in economic management led by Mao.

Mao’s Character
Unlike the coarse figure of Stalin, Mao had been an educated and charismatic communist activist with a love of poetry and philosophy, both of which he utilised to great effect in his propaganda. However, in practice he ended up imitating Stalin – like all other communist party leaders he followed Stalin’s example and encouraged a personality cult around himself. And came to run his Party as a dictatorship. This process was greatly reinforced by the circumstances around him – first brutalised by leading the Red Army from 1927-1949 during a long period of vicious civil war. And then in many years of leading the fight against the merciless Japanese. As later events were to show, during the decades of military conflict Mao lost any element of empathy he may have had in his youth.
Moreover, Mao and the whole Communist Party leadership became used to operating according to orders – either giving them or obeying them. It was natural that when they took over China they would continue with this same approach and apply it to the civilian population.
Mao’s callousness towards loss of life even shocked other communist leaders. Khrushchev recounts how when they met in 1957 Mao had told him: “We shouldn’t be afraid of atomic missiles. No matter what kind of war breaks out, conventional or nuclear, we will win… If the imperialists unleash war on us, we may lose more than 300 million people. So what? War is war. The years will pass and we will get to work making more babies than ever before.” This chimed in with Mao’s irresponsible encouragement of families to have as many children as possible in the belief that population growth empowered the country.

Purges
In the initial period of communist rule there were understandable purges against remnants of the nationalists. But then on the first of July 1955, the Party’s Central Committee turned inward against its own ranks. Launching a drive against suspected dissidents members of the Party, the governing bureaucracy and the military. Using the old Soviet methods of confession and self-criticism, it is thought that over 1.4 million intellectuals and officials were persecuted in this campaign. Even more serious, out of total of 214,000 people arrested it is estimated that 53,000 died of whom 22,000 were executed.

Kruschev’s 1956 speech Against Stalin
In February 1956 Kruschev, the Soviet leader who had taken over after Stalin’s death, launched an unexpected expose of Stalin’s crimes against the people. Mao was highly disturbed by this attack on a figure he had followed for decades. In particular, Mao was worried about the attack on Stalin’s Cult of Personality, which he had also cultivated around his own leadership. 
Perhaps, reflecting his own insecurity following Stalin’s denunciation, Mao and the leadership launched a campaign at the end of 1956 entitled ‘Let a Hundred Flowers Bloom’. This was designed to promote pluralism of expression with party members and citizens encouraged to constructively criticise government policies. The only problem was that the campaign began to gain its own momentum with millions of letters arriving at government offices. Posters appeared on walls, rallies were held, unauthorised articles were published. Criticisms were voiced against the harshness of the purges and “the slavish following of Soviet models, the low standards of living in China, the proscription of foreign literature, economic corruption among party cadres, and the fact that ‘Party members [enjoyed] many privileges which make them a race apart’.” The final insult came with criticisms of Chairman Mao himself.
In July 1957 the openness campaign was put into reverse with the launch of another purge entitled the Anti-Rightist Movement. Most of the accused were intellectuals who had voiced their opinions in the Flowers campaign. The penalties against them included criticism and re-education, long prison sentences and hard labor, and in some cases execution. The actual number of victims of the purge is thought to have been somewhere between 1-2 million with an estimated 10 percent of intellectuals, engineers and technicians labeled as rightists. Deng Xiaoping later admitted that there were mistakes during the Anti-Rightist Campaign, and most victims have since been rehabilitated. Despite this, Chinese authorities and media omit references to this period which they deem to still be too “sensitive” to mention.

The Great Leap Forward
It was in these circumstances that Mao decided to imitate the worst of Soviet economic mistakes and launch ‘The Great Leap Forward’. This was an attempt to dramatically increase Chinese agricultural output and industry not with practical and realistic measures but by force of revolutionary will. Just as with ‘War Communism’ in the Soviet Union in the 1920s and 30s, Mao and the bulk of the Party leadership who followed him, wanted to skip the long process of accumulation that was required in the transition to socialism. Instead, they sought to reach the promised land in a few short bounds. And in doing so to surpass their capitalist rivals in record time – Mao forecast that within 15 years of the Great Leap China’s industrial output would surpass that of Britain. It was to take 50 years.
In part, Mao was motivated by rivalry with the Soviet leadership – relations with the Soviet leader Kruschev had sharply deteriorated. In a desire to outbid the Soviets and establish China as a rival leader of the international communist movement, Mao effectively set aside the forthcoming Second Five Year Plan and introduced a number of special measures to dramatically speed up China’s development. And to use the peasantry to pay for it.
Starting in 1958, the government decided to take full control of agriculture and establish a monopoly over grain distribution and supply. This would allow the state to buy at a low price and sell much higher, thus raising the capital necessary for the industrialization of the country at the expense of the peasantry. Part of the process was a campaign to reconstruct the country from an agrarian economy into a communist society. Private farming was prohibited, and those engaged in it were persecuted and labeled counter-revolutionaries. Individual farms and cooperatives were merged into huge agricultural collectives called ‘People’s Communes’. In this way the peasants would be brought under tighter Party control along with the sharing of tools and draft animals. A policy that closely matched Stalin’s disastrous collectivisation drive of the early 1930s.
In particular, Mao saw steel production and grain production as the key pillars of economic development. For example, it was decided that steel production would be doubled in just one year. With no personal knowledge of metallurgy, Mao encouraged the establishment of small backyard steel furnaces in every commune and in each urban neighborhood. Peasants were diverted from vital work in the fields to tend to the furnace. And a call was put out for every piece of scrap metal that could be found to be melted down. People even donated their old cooking woks to the effort. The inevitable result was a mess of unusable brittle and soft metal. 
Things were even worse in the fields. A series of radical and controversial agricultural innovations based on the ideas of now discredited Soviet agronomist Lysenko were promoted at the behest of Mao. These untested innovations generally led to decreases in grain production rather than increases. As a communist, Mao considered himself a scientific socialist. Yet, the scientific approach means to carry out experiments and observe and learn from the results. Why then did Mao and the Communist Party leadership impose all these new ideas and methods across the whole of China without trying them out first in a few areas? This was to be a bitter lesson that later informed much of the reform process in the 1980s and 90s.
Perhaps the most ridiculous example of ill-thought out and untested policies applied in the Great Leap Forward was the ‘Great Sparrow Campaign’. The Chinese population was mobilised to beat trees and make noise over many days in order to wipe out the sparrows which were thought to be responsible for significant crop loss. The campaign was dramatically successful in reducing the bird population. The only problem was that the birds had also been responsible for keeping down insect levels. In their absence, there was an explosion of insects including a huge locust infestation which destroyed many crops across the country.
Last but not least, there were three years of serious drought which the Party’s campaigns only made worse including overambitious irrigation schemes which often failed through lack of expert management.
All of these problems came together in a huge decrease in food production. By 1961 agricultural output fell by 30 percent, the lowest point since 1952. With the population having risen by 100 million since then, the scale of the crisis was clear.
To make matters worse, local leaders were pressured into falsely reporting ever-higher grain production figures to their political superiors: “Local officials were fearful of Anti-Rightist Campaigns and competed to fulfill or over-fulfill quotas based on Mao’s exaggerated claims, collecting “surpluses” that in fact did not exist and leaving farmers to starve. Higher officials did not dare to report the economic disaster caused by these policies, and national officials, blaming bad weather for the decline in food output, took little or no action… Participants at political meetings remembered production figures being inflated up to 10 times actual production amounts as the race to please superiors.

The Great Chinese Famine
Already by the end of 1958 human losses were becoming apparent. But the long years of military and political struggles had caused the leadership of the party to become hardened to suffering among the masses. A comment by Foreign minister Chen Yi in November summed up their lack of empathy:  “Casualties have indeed appeared among workers, but it is not enough to stop us in our tracks. This is the price we have to pay, it’s nothing to be afraid of. Who knows how many people have been sacrificed on the battlefields and in the prisons [for the revolutionary cause]? Now we have a few cases of illness and death: it’s nothing!
The problem was that these few cases soon turned into a torrent. The Great Leap resulted in mass starvation, with estimates ranging between 18 million and 45 million deaths, making the Great Chinese Famine the largest in human history.
The economy, which had improved since the end of the civil war, was devastated by the Great Leap Forward. As can be clearly seen in the graph below.

As Deng Xiaoping admitted later: “We acted in direct contravention of objective laws, attempting to boost the economy all at once. As our subjective wishes went against objective laws, losses were inevitable.
Already by 1959, the economic and human disaster was apparent to the leadership and the country. In recognition of his failure, Mao stepped down as State Chairman on April 27. But remained Party Chairman, the far more important position. Mao’s Great Leap Forward policy was openly criticized at the Lushan party conference by Minister of National Defense Peng Dehuai, who accused unnamed party members of attempting to “jump into communism in one step.” Mao was incensed by the veiled criticism and used his continuing domination of the Party to remove General Peng from all positions. Mao never forgave Peng who died in prison in 1974 following many years of persecution.

Despite standing down from his government positions, Mao’s continued to expound his ultraleft stance. At the International Meeting of Communist and Workers Parties held in Bucharest in November 1960, Mao ridiculed Khrushchev’s promises of consumer goods and material plenty for the Soviet people, declaring that it would make them “ideologically soft and un-revolutionary”.

Return to Sanity
The dramatic failure of Mao’s extreme programme caused a swing back towards more pragmatic, less ideological policies. After three fateful years, the agricultural approach of the Great Leap Forward began to be halted. Grain exports were stopped and imports brought in from Canada and Australia to help reduce the impact of the food shortages.

Still Mao did not retreat from his policies, blaming the failures on bad implementation and “rightists” for opposing him. “On the eve of the conference, meeting with the first secretaries of the provincial party committees, he bellowed, “Are you for socialism or capitalism?! . . . Now some persons are in favor of introducing the contract system throughout the country, including dividing up the land. Does the Communist party favor dividing up the land?… Individual peasant proprietorship inevitably leads to polarization, and this will not take two years, stratification will begin in just one year… Khrushchev himself did not dare openly to dissolve the collective farms.
It was almost as if Stalin with his former fantastical fear of the kulaks and capitalist restoration was speaking from the grave.

However, by 1962, it was clear that the party had changed away from the extremist ideology that led to the Great Leap. At the Seven Thousand Cadres Conference in early 1962, Mao was forced to self-criticise and re-affirm his acceptance of democratic centralism. During the conference, Liu Shaoqi, the 2nd President of China, accepted that the main blame for the famine was the far-left policies of the Great Leap Forward, and blamed it on Mao’s cult of personality.
It was decided that planning and economic coordination were to be revived and investment priorities reversed, with agriculture receiving first consideration, light industry second, and heavy industry third. Planning rather than politics would once again guide production decisions, and material rewards rather than revolutionary enthusiasm become the leading incentive for production. This was exactly the approach that had guided the Soviet Union’s New Economic Policy in the 1920s until it was abruptly ended by Stalin. Thus, we see the parallels between the two country’s economic and political choices playing out in different historical periods.    

Withdrawal of Soviet specialists
As if things could not get worse for the Chinese economy, the worsening ideological and foreign policy disputes between China and the Soviet Union led Moscow to start withdrawing its engineers and scientists from 1960 onwards. “In response to the insults, Khrushchev withdrew 1,400 Soviet technicians from the PRC, which cancelled some 200 joint-scientific-projects meant to foster Sino-Soviet amity and cooperation between socialist nations.” Then in late 1962, China ended its relations with the USSR, “because Khrushchev did not go to war with the U.S. over the Cuban Missile Crisis.”

To try to overcome the gap created by the Soviet withdrawal, major imports of advanced foreign machinery were arranged with Japan and Western European but at a much higher cost.

During the 1961–65 readjustment and recovery period, economic stability was restored, and by 1966 production in both agriculture and industry had recovered. Between 1961 and 1966, agricultural output grew at an average rate of 9.6 percent a year. Industrial output was increased in the same years at an average annual rate of 10.6 percent with successful growth of rural, small-scale industries. In agrarian policy, there was gradual de-collectivization in the 1960s.

Meanwhile, Mao did not accept his humiliation and loss of control of the direction of the Party and the state. Istead, he bided his time and began to lay the ground for a recovery of his absolute power.

To this end, he encouraged the formation of the Socialist Education Movement in 1963 with the idea of reasserting ideological purity in the Party.

Mao criticized the economic reforms carried out by President Liu Shaoqi and others, describing them in February 1964 to foreign leaders as “attempts to undermine socialist collectivism and destroy socialism“.

The Cultural Revolution
In 1966 Mao Zedong launched the Great Proletarian Cultural Revolution. Officially this was to counter the Soviet-style bureaucracies that had become established in education, agriculture, and industrial management. But it was really to re-establish Mao’s personal supremacy in the Party and the state.

To achieve this outcome, Mao cynically tapped into the natural radicalism of Chinese youth and used them as a battering ram against the existing Party leadership. Students at all ages, from primary school to university were mobilised to protest and attack and overthrow his rivals in the Party.

The stated goal of this bogus socio-political movement was supposedly to enforce communism in the country by removing capitalist, traditional and cultural elements from Chinese society. Under the slogan of ‘The Destruction of the Four Olds’ – Old Customs, Old Culture, Old Habits, and Old Ideas – were all to be destroyed. The task fell largely on the students, now known as Red Guards, who eagerly followed Mao’s urging to destroy cultural artifacts, Chinese literature, paintings, and religious symbols and temples. People in possession of these goods were punished as well as Intellectuals, party and state officials. All were targeted as personifications of the Four Olds, resulting in their persecution and removal from office.

None, even the highest officials were exempt from this persecution. President Liu was persecuted to death as a “traitor” as well as a “capitalist roader”, while Deng Xaioping was also purged twice. The campaign penetrated into the factories and workplaces: “virtually all engineers, managers, scientists, technicians, landlords and other professional personnel were “criticized,” demoted, “sent down” to the countryside to “participate in labor,” or even jailed, all of which resulted in their skills and knowledge being lost to the enterprise.” All of which strongly recalled Stalin’s Great Terror in the 1930s.

The longer the Cultural Revolution campaign proceeded the more intense it became. In 1968 under the banner of the ‘Cleansing of Class Ranks Campaign’ around 30 million people were persecuted, with an estimated death toll of 0.5-1.5 million. In later years the Party and the state admitted that many of the cases in the Cleansing movement were “unjust, false, mistaken” cases.”

Not only did the Cultural Revolution paralyze the country politically but it also seriously affected the economy especially in the urban centres. The most direct cause of production halts was the political activity of students and workers in the mines and factories. A second cause was the extensive disruption of transportation resulting from the requisitioning of trains and trucks to carry Chinese Red Guards around the country. Output at many factories suffered from shortages of raw materials and other supplies.

The effect was a 14-percent decline in industrial production in 1967. And a stagnation in agricultural output.

As the Cultural Revolution proceeded, it began to descend into chaos and infighting between various factions of the Red Guards. Mao recognised that it had done its work in removing his rivals and enemies in the bureaucracy and decided to call a halt. Firstly, elements of order were restored by the army in late 1967 and 1968. Complementing this, a ‘Down to the Countryside Movement’ was initiated in which the Red Guards were dissolved and sent into remote rural areas to “learn from the peasants.”

In June 1981 the Communist Party unanimously passed a resolution drafted by Deng and others which comprehensively invalidated the Cultural Revolution, calling it “a domestic havoc launched mistakenly by the leader and taken advantage of by the counter-revolutionary gangs” and that it “was responsible for the most severe setback and the heaviest losses suffered by the Party, the country, and the people since the founding of the People’s Republic“.

The economy then began to recover with the industrial sector returning to a fairly high rate of growth in 1969.

War with Soviet Union
Another effect of the Cultural Revolution was its effect on China’s foreign policy which became more and more anti-soviet. In response, the Soviet Union made incursions on China’s border in two disputed locations. And China responded in kind. As the conflict escalated the Soviet leadership began to seriously contemplate a pre-emptive nuclear attack on China and moved nuclear weapons into position on the border. Thus, the dream of socialist brotherhood and cooperative development between two major nations had degenerated into a conflict between two stalinist bureaucracies to the point that one of them was contemplating a nuclear attack on the other.

In an ironies of ironies, the Soviet leadership were only persuaded to pull back by the intervention of the United States: “The Nixon administration warned that such an attack on the PRC would provoke a Third World War.”

This was a threat the Soviet leadership took seriously, causing them to withdraw their nuclear missiles and come to agreement with China. 

China reacted to this chain of events by moving closer diplomatically to the Americans who they sought to use as a foil against Moscow. After a series of secret visits in 1971 by US National Security Adviser Henry Kissinger, it was arranged for President Richard Nixon to visit China in early 1972. This opened the way for economic cooperation between the two countries, a cooperation that significantly helped the reform process that was to come.

Mao Dies
In September 1976 Chairman Mao died. In his final years he had balanced between the radical and reformist wings of the Party. Once he left the scene an intense struggle broke out between the two factions. At first the radical wing, led by Mao’s wife and known as ‘The Gang of Four’ appeared to be in the ascendent. They began to take steps to revive aspects of the Cultural Revolution and a drive for ideological fervour. But the intervention of the leadership of the army swung the balance decisively back towards the reformist faction. Thus, the Gang of Four were arrested in October and later put on trial.

Within a year the leading reformist, Deng Xaioping, was in charge. He reaffirmed the modernization program espoused by Zhou Enlai in 1975. And a new era of Chinese history began.

Conclusion
The Chinese Revolution of 1949 laid the groundwork for a transformation of the lives of one fifth of humanity. Some advances took place in health and education but many mistakes were made in the first three decades of the revolution, some of which were a repetition of those made in the Soviet Union in the 1920s and 30s. In particular, Mao repeated the mistakes of War Communism in believing that it was possible to skip from the early stages of socialist construction in a poor and backward rural society to socialism in a few quick steps. That revolutionary will could somehow replace the necessary pace of development required by the reality inherited by the Revolution. That pure socialist economic measures could somehow transform a feudal society rather than the hybrid socialist/capitalist programme that was developing under the Soviet Union’s New Economic Policy.

Sadly, the brutality of Mao’s regime and its repeated upheavals cost many lives and caused much suffering. And held back China’s development for its first three decades. But, fortunately, deep lessons were learned from these negative experiences and applied in a spectacular fashion in the period after Mao’s death. As we examine in the section of our Manifesto entitled: ‘China’s New Economic Policy 1977 – today’  

++++++++++++++

Socialism and the Soviet Union

Published: September 2020
Draft Topic for our ‘Transformation, a Manifesto for Democratic Socialism’

The socialist insurrection in October 1917 that created the basis for the Soviet Union was a genuinely popular revolution. Not an unrepresentative coup as critics of the revolution often maintain.

The new Soviet government was a two-party coalition made up of parties that had the support of a large majority of the working population. As such it was a partnership led by the Bolsheviks, the revolutionary wing of the social democrats, representing most Russian workers; with the Left Socialist Revolutionaries, who had majority support among the peasants. Along with their supporters in the intelligentsia and sections of the middle class, the new government expressed the wishes of a decisive mass of the Russian people.
   Russia’s October was also a democratic revolution. The revolutionary forces first had to win an elected majority in the Soviets which were the only democratic organs in the country. Then they had to persuade the military regiments in the capital to freely vote to follow the orders of the Soviet Military Revolutionary Committee rather than the military high command. These two steps formed the democratic basis for the transfer of power to the first workers and peasants government in history. 

The policies of the new government – land to the peasants, withdrawal from the War, food for the workers, a new Constituent Assembly – all had overwhelming support among the Russian population.

Problems for the New Revolution
From the outset, the revolution faced a myriad of problems. First and foremost, Russia was a backward, overwhelmingly agricultural country. Not the advanced industrial nation that Marx had envisaged in which to build a new socialist society. Capitalism had not been overthrown in its ripest rampart but as Lenin put it, had broken at its weakest link.

Moreover, Russia was a country that had faced three years of a devastating war with Germany and Austro-Hungary. A war that had killed 2.5 million Russian soldiers and civilians. And left the economy in a weakened state. 

Last but not least, the October Revolution, despite the best efforts of its participants to spark off a series of socialist revolutions in the more advanced countries, ended up isolated and on its own. The result was that Russia was faced with the very difficult task of building a socialist society in a backward society and encircled by a hostile capitalist world.

Quite apart from these severe objective difficulties that the new Soviet government faced, it soon went on to make major subjective mistakes that made its problems that much worse.

Constituent Assembly Elections
A major miscalculation was the decision of the new government to hold elections for the Constituent Assembly within weeks of the Revolution, instead of delaying them until the following summer. The masses of the population had not yet had a chance to evaluate the outcome of the revolution. Soviets were still being formed across the country and the media remained largely dominated by the capitalists and royalists.The predictable result was a wholly undemocratic outcome in the makeup of the new Assembly: a majority of the Deputies elected represented the exact opposite of what most of the population wanted. For example, a majority of the peasants voted for the Socialist Revolutionaries thinking that they were electing the people who had just given them the land and ended the War. But in fact, they had cast their votes for candidates from the Right of the Party who had recently broken away from the party and directly opposed the peasants’ interests. 

Thus, when the Constituent Assembly gathered in January 1918, instead of consolidating the Revolution and devising a new democratic constitution which protected the people’s rights, it became a focus of counter-revolution. This left the Soviet government with no alternative but to close down the Assembly. This made the new government look completely anti-democratic – holding an election for an assembly and then shutting it down because it didn’t like the outcome! 

This was like manna from heaven for the reactionaries and gave them a great propaganda victory. It formed the basis for all the political parties outside the government, who normally were deeply divided, to form a united front against the revolution and its government. And to launch a united civil war against it. Simultaneously, it helped the capitalist governments abroad to better justify supplying massive military and financial aid for the prosecution of this counter-revolutionary civil war.

War Communism
For three years Soviet Russia was plunged into a horrific civil war in which up to 12 million perished, the large majority of them civilians. This brutalised the Revolution forcing the use of all kinds of ‘special measures’ and undermining the very democracy that had achieved the Revolution in the first place. One of these mistaken measures was the introduction of ‘War Communism’. 

In order to feed and finance the new Red Army that was being brilliantly created from scratch by Trotsky, the Bolsheviks forcibly requisitioned food from the peasants, abolished money and paid workers in kind. The results were disastrous. Industrial production further declined to one-fifth of the prewar level, and real income per capita dropped by 60 percent. The workers had no choice but to accept this. But, the peasants now having control of their own means of production simply refused to cooperate. They stopped ploughing, hid their grain and slaughtered their animals for their own consumption.The inevitable result was agricultural crisis and a famine in which several million starved to death.

Accompanying these measures of war communism was the nationalisation of all business and trade. Inspired by the victories of the Red Army, much of the Bolshevik Party began to believe that through forced collectivisation of agriculture and coerced direction of labour they could somehow jump rapidly from a peasant-based economy to an advanced industrial society. The problem with this was that the masses were simply not willing to accept the sacrifices and compulsion involved. When the Civil War finally came to an end in 1921 the victorious Bolsheviks ironically found themselves very unpopular both among the workers and the peasants. Strikes broke out across the USSR and peasant uprisings occurred in some areas. The best known of these protests being the Krondstadt Rebellion.

New Economic Policy (NEP)
In light of the widespread discontent, Lenin recognised the need to step back. He persuaded a reluctant Communist Party Congress in 1921 to accept a New Economic Policy (NEP). Under the NEP the Bolsheviks replaced arbitrary grain requisitions with a tax in kind. And allowed the peasants free use of the state-owned land as long as it was cultivated. Lenin’s original intention was to limit the reform to barter between farmers and the state in the local areas. But by the autumn normal buying and selling had swept across the country. As a welcome result, the food crisis quickly eased.

The government also reintroduced money and allowed private ownership and capitalistic practices in the retail trade and light industry. While the state retained control of banking, foreign trade, transportation and heavy industry. This was a mixed economy where 100 million peasants on 25 million small holdings were allowed to sell their produce in markets and a multiplicity of small private businesses free to operate. Side by side with this, the government continued to control the ‘commanding heights’ of the economy with state industries employing 85% of the urban workforce. Further, the state leased factories to cooperatives, as well as to foreign capitalists which it was encouraging to bring in their technology and participate in the Soviet economy. 

At first, Lenin conceded that the NEP was a “retreat” and a “turning back toward capitalism”. But he and Nicolai Bukharin, who was to become the chief theoretician of NEP, soon began to see it as an obligatory policy for a socialist government in a largely agricultural country. As the best way of combining socialist and capitalist economic forms in the transition to a fully socialist society. 

In addition, they came to understand that such a society could only move forward by forming a long-term alliance between the workers and the peasants. As Lenin put it: “in our Soviet Republic the social order is based on the collaboration of two classes: the workers and the peasants.” A “split” between these classes, Lenin concluded, “would be fatal.” 

This was a major change for the Bolsheviks who had seen the peasants only as a temporary ally. Helping to make the revolution in order to gain the land. But as a potential enemy as they sought to grow their farms and develop a capitalist agriculture. In order to avoid this danger Lenin and Bukharin developed a cooperative strategy to bring the farmers together, and link them to the socialist state. These cooperatives would combine the peasants together for the purchase of seeds, animals and equipment; for marketing of their produce; and for negotiating credit from the state banks. 

Lenin’s new approach was also based on a voluntary approach to economic management in place of the coercion involved in the previous period of War Communism. Unfortunately, he did not combine this more democratic approach with an appreciation of the danger that was threatening the internal life of his own party, and through its one-party rule that of the whole of Soviet society.

The Decline of Democracy in the Party & the State
The problem of democracy emerged less than a year after the governing role of soviets were enshrined in the 1918 constitution. The other socialist parties made attempts to violently overthrow the soviet government and so were banned from standing in elections within the soviets. This had the effect of introducing one-party rule in the USSR. And unintentionally of emasculating the soviets. After all, if everything was now decided by the Party what role did the soviets have? This naturally focused the question of democracy solely on the Bolsheviks. And very quickly democracy started to fall short in the Party and bureaucracy to replace it. 

This was soon reflected in the emergence of opposition factions inside the Bolshevik party which protested against this process. First off were the Democratic Centralists which formed in 1919 to organise against the increasing centralism and decreasing democracy in the running of the Party. Then the Workers Opposition in early 1921 emerged to campaign on similar issues. The main leaders of the Communist Party responded to these complaints and other divisions in the Party by banning the organisation of factions at the 1921 Congress. This was initially thought of as a temporary measure to hold the country and the revolution together at a moment of severe danger. But Lenin in response to a question from one of the Congress delegates declared it to be a permanent ban. This turned out to be a serious mistake – the ban on factions became a crucial noose around the neck of internal democracy in the Party. 

In the same period, Lenin unwittingly proposed that Stalin become General Secretary and also be put in charge of other key administrative posts. 

Finally, the 1921 Congress saw the emergence of slates in the election of the Central Committee. Previously elected on the basis of individual performance, the new slate system potentially allowed the existing leadership to decisively influence who was elected to future Central Committees.

Taking full advantage of all three of these developments, Stalin began a ruthless and stealthy bid to take over the Party. Within a year, he had already placed his supporters as officials across the Party. 

Lenin, the undisputed leader of the party and the government, quickly began to sense Stalin’s growing power behind the scenes. And to identify the coarse and brutal aspects in his character that made him a danger to the future of the Party. He sought to form alliances against Stalin. But, fortunately for Stalin, Lenin suffered a series of strokes that progressively reduced his abilities until his death at the beginning of 1924. 

Trotsky, still leader of the Red Army and the second most important leader of the Party, also began to be alarmed by the bureaucratisation of the Party. And unlike in earlier years, from 1923 onwards he started to openly campaign against it. But he, like most of the Party underestimated Stalin who they saw as a second rate organiser. A key turning point came soon after Lenin’s death. On the eve of the following Congress Trotsky and the other leaders agreed in the name of maintaining party unity to suppress Lenin’s Last Testament calling for Stalin’s removal as General Secretary. This was effectively their last chance to stop Stalin but they were not to know it until five years later.

Divisions over the Economy
After Lenin’s death, major factional struggles developed within the Party. 

A central issue was the future of the Soviet economy. In Lenin’s absence, Bukharin became the leading defender of the NEP which had achieved great success in its initial period. Both peasants and workers were eating better. Rations had been replaced with real wages which now rose to higher than prewar levels. Working hours had decreased from ten hours a day to eight. Access to welfare benefits, free medical care and education were starting to become available. 

But there were many problems too. Emigration from the countryside to the towns was creating widespread urban unemployment and a lack of housing. The operation of private enterprise was leading to growing inequality, profiteering and corruption. Some ‘Red partisans’ had even become Soviet millionaires. In the cities there was widespread prostitution, gambling and drug trafficking. 

Some workers started to label the NEP as the “New Exploitation of the Proletariat”. All of this led to resentment among many Communist Party members who saw this as a betrayal of the Revolution. Fears began to grow of a potential capitalist threat from the richer peasants and Nepmen, as the industrialists, middlemen and speculators came to be known. 

Trotsky’s Left Opposition came to politically represent these fears. Their chief economic theorist, Preobrazhensky, developed his “primitive socialist accumulation” theory, which argued for the rapid expansion of state industrial capital by squeezing the peasantry through taxation and higher prices for their industrial products. Thus, they proposed that the Soviet Union should launch an industrialisation “offensive” as part of a five year plan.    

No-one in the Communist Party leadership disputed the need to industrialise but disagreed over at what speed it should be carried out, and how it should be paid for. Bukharin, in particular, disagreed with the Left Opposition arguing that industrialisation could not be carried out at the expense of the peasantry who would simply refuse to cooperate as they had in the war communism period. That given the dominance of agriculture in the Soviet Union, the proletariat “is compelled, in building socialism, to carry the peasantry with it.” 

Bukharin further argued that the threat of a restoration of capitalism was unreal given the small number of wealthy farmers, a fact that was later proved to be correct. He called for balanced growth and a slower tempo than the Left. That in a largely agricultural country industrial growth should spring first from the countryside generated by the demands of the farmers for implements and household products. That the processing of agricultural products and demand for more complex producer goods such as tractors would naturally lead to the development of light industry and then to heavy industry.

But events seemed to support the super-industrialisers, as the Left Opposition became known. Shortfalls in grain collection caused by artificially low state prices caused severe shortages in the cities in what became known as the ‘scissors’ crisis. In response, Bukharin moved towards some of the Left Opposition’s positions. He came to see that a Five Year Planning system was required and more investment in heavy industry. Plus, he started to accept the Left’s argument for the development of voluntary collective farms. But, unlike the Left Opposition he was confident that the resources for all this could be found without squeezing the peasants. 

Stalin removes all opposition
During this debate over the future of the soviet economy, Stalin was busy building up his forces and taking steps to destroy all opposition within the Party. From a position in the centre of the Party, Stalin first allied with the Right against the Left Opposition. Utilising the ban on factions and the majority he had built up in the Central Committee, he accused Trotsky and his supporters of breaking party discipline and organised his removal first from the leadership of the Party and then from the Soviet Union itself. With Trotsky out of the way, he turned on Zinoviev and Kamenev who were removed from their leading positions and forced to recant. Then he turned on Bukharin and his supporters. This left him in undisputed control of the party.

As Bukharin’s biographer concluded: “Part of the tragedy of the old Bolsheviks lay here: for seven years they fought among themselves over principles, while an intriguer gradually acquired the power to destroy them all.

Even Trotsky missed what was really happening and for a time saw Bukharin as the main threat. During the early part of the struggle between Stalin and Bukharin in 1928 he predicted that Bukharin and Rykov would shortly “hunt down Stalin as a Trotskyist, just as Stalin had hunted down Zinoviev.” Then when Bukharin began to put out feelers to the opposition, Trotsky responded “With Stalin against Bukharin? Yes. With Bukharin against Stalin? Never!” 

Bukharin, of course, being on the inside understood the balances of forces far better. As he communicated to Trotsky, he had discovered that “the disagreements between us and Stalin are many times more serious than all of the disagreements we had with you.”

Stalin Turns to the Left
The continuing crises of grain deliveries became the occasion for Stalin to take a dramatic turn to the left. In doing so he adopted much of the Left Opposition’s economic programme but in an extreme and brutal form. He pushed through the new line ending the NEP and launching a war against the peasantry. He adopted the Five Year Plan and included highly ambitious targets for the industrialisation of the country. 

Sections of the Left Opposition including Preobrazhensky welcomed Stalin’s new policy and actually moved over into his camp. In a secret visit to Kamenev, Bukharin hastened to warn others in the opposition against joining forces with Stalin: “He is an unprincipled intriguer, who subordinates everything to his thirst for power… He will kill us all. He is another Genghis Khan and will strangle us.

Stalin also included a new policy: a programme of compulsory agricultural collectivization that would force the peasants from their 25 million farms into 250,000 collective farms owned by the state. It was effectively a return to war communism but on an even larger more permanent scale. 

The peasantry responded in the only way they knew, slaughtering their own livestock to prevent them being requisitioned by the collective farms. By 1934, half of the country’s 33 million horses, 70 million cattle, 26 million pigs, and two-thirds of its 146 million sheep and goats had disappeared. Twenty-five years later, livestock herds had still not recovered.

In the process of collectivisation Stalin identified the richer peasants, the so-called Kulaks, as a major threat to be eliminated. The only problem was the number of kulaks had been grossly overestimated and the threat they were supposed to represent virtually non-existent. It became a ludicrous task of ‘find the kulak’. But, in their absence officials expelled millions of the country’s most industrious peasants from the land, ultimately leading to the terminal decline of the Soviet agricultural sector.”

As for the collective farms, for many years they turned out to be a pathetic failure run by unqualified managers. Few even had tractors to replace the horses the peasantry had destroyed. 

The inevitable outcome was widespread famine with between 4.6 million and 8.5 million people dying of starvation or disease between 1930 and 1933.

Industrialisation and the Five Year Plans
There can be no question that the Five Year Plans and the drive for the industrialisation of the Soviet Union brought impressive results which compared very favourably to the Western capitalists economies which were going through the years of the Great Depression. Industrial output in the First Five year Plan increased 118%. The Second Five Year Plan begun in 1933 yielded impressive albeit slower growth. Then a Third Plan was cut short by the invasion of Germany in the Second World War.

But this rapid economic expansion came at great cost. And not just for the peasants. In the cities, housing space fell dramatically and consumption of meat declined by two thirds. Workers lost all rights. Real wages dropped by up to half. Rationing and queues became commonplace with consumer goods and services non-existent. 

Worse still, many of the big construction projects for power stations, dams etc. were carried out by slave labour from a massively expanded system of labour camps, many of whom were worked to death. Millions of camp inmates, condemned for decades as ‘enemies of the state’ were used to fell the forests and mine raw materials in the freezing and remote areas of Northern Russia. 

Stalin’s Great Purge
Stalin became increasingly unpopular and constantly feared revolts against his brutal methods from within his own Party. To prevent this he began to eliminate his rivals and organise the arrest of communist activists from the end of 1934. This reached a peak in the years from 1936-8 when millions were arrested, tortured and shot. Show trials were organised of the ex-leaders of the Party in which they were forced to confess to ridiculous crimes in order to save their families. By the time that an agent of Stalin assassinated Trotsky in Mexico in 1940, only Stalin was left alive from the Bolshevik leadership who had made the Revolution.

Even the Red Army leaders, the most experienced and able military leaders in Europe, were caught up in the purge and executed. This greatly helped Hitler’s war against the Soviet Union in 1941. 

Second World War
The growing industrial strength of the Soviet Union was clearly demonstrated in the Second World War. Despite serious mistakes by Stalin – first in the Stalin-Hitler Pact which greatly helped the Germans in their drive to conquer Europe; and then in his unwillingness to listen to the warnings of the coming German invasion – the Soviet system was able to hold and then drive back the mighty nazi war machine. 

The power of the planned economy meant that soviet industry was able to be relocated beyond the reach of enemy air attack, and rapidly built up to match and then overcome the German armaments. In time, the Red Army was able to drive the German invaders all the way back to Berlin. And in the process to occupy the eastern half of Europe. Once there, they imposed a system of state ownership and planning along with the stalinist system of repression and control. 

After the Second World War
Despite the devastation of the War and its 25 million Soviet victims, the post-war period in the Soviet Union was one of successful reconstruction. Indeed, in the 50 years up to 1963, Soviet industrial output multiplied more than 52 times over. In contrast, over the same period, industrial output in the US grew just six times, while in Britain it barely doubled. In 1917, Russia had been at the same economic level as India. By the 1960s, it had risen to become the world’s second industrial and military superpower after the United States.

This was reflected in a massive increase in general living standards with full employment and many public utilities and services provided free.

But increasingly, economic growth began to slow. Central planning worked reasonably well when the main task was to produce a relatively small number of key products in large quantities. However, as the economy became more complex planning from above became less effective. The absence of any democratic control by the population resulted in the priorities of the planners being towards heavy industry and the military rather than light industry and consumer goods. Plus the lack of any input from the workforce or consumers meant that there were frequent shortages and queues, and that the quality of consumer products was lacking.

Most soviet workers were alienated, cared little about the quality of what they produced or about improving production, often worked as little as possible, and used the time and energy they had left over to function in the informal sector. 

Another major problem in the bureaucratically planned system was a lack of innovation. At one time the Soviet Union had the most scientists of any country on earth. This reflected its emphasis on higher education in science and engineering. As a result great basic science was done which was utilised in heavy industry, military technology and space. But these scientific developments were rarely applied to light industry and consumer products. And this was reflected in the failure of the Soviet Bloc to produce attractive products for the world consumer market.

Contrast this to the experience of Japan. In the 1970s Japan was spending 2.5% of its GDP on research and development compared to the Soviet Union’s 4 per cent. Yet it grew much faster because this funding was spread across a wider variety of economic sectors. Crucially, the Soviet Union did not have organisations through which to commercialize the technologies developed by the state. Moreover, Japan had strong user–producer linkages which produced popular hi-tech products. Japan also encouraged innovation with incentives provided to management and the workforce of companies, rather than mainly focusing as the USSR did on bureaucratically-run scientific academies.

Stagnation and Collapse
The decade of the 1980s saw the Soviet economy stagnate which created an increasing political crisis that soon led to the collapse of the whole system. 

The reasons for this collapse were manifold. The rise in military spending in response to the provocations of the US meant that the USSR ended up spending 40% of its annual budget on defence. This included the disastrous war in Afghanistan. The agricultural sector was never sorted out, and the Soviet Union ended up having to import larger and larger amounts of grain. All the while, rampant bribery and corruption had spread throughout society. The ruling caste of officials was rapidly losing confidence in their own system and beginning to look to the West as a superior alternative. 

The reforming government of Gorbachev that took office in 1985 tried to open up the system with a policy of ‘glasnost’ (openness) which enhanced freedom of speech and the press. And to implement perestroika (restructuring) of economic decision-making. This included steps towards some elements of the old NEP. But Gorbachev was paralyzed by indecision and constantly reversed decisions.

From 1989 the states in Eastern Europe that formed the Soviet Bloc began to break away.  Finally, in 1991 following a failed coup the Soviet Union itself began to rapidly unravel. Various national parts of the Union declared independence leaving behind a smaller Russian Federation.

Then began a rapid economic transformation of Russia into a capitalist state. Once the planning network which had coordinated the economy was removed, what occurred was not the spontaneous self-organisation of the economy promised by the neo-liberal advisers, but a domino process of collapse. One industry after another closed down. An industrial system that had been designed to work as an integrated whole, was split up by national barriers and simply ceased to operate.

Accompanying the dismantling of central planning, came the wholesale privatisation of state industries. This was carried out on such a scale and so rapidly that there was no class of citizens wealthy enough to buy up state companies by legal means. Thus, the best pickings of the economy passed into the hands of ex-soviet officials and gangsters. 

Instead of delivering the promised land, this process impoverished the country. From having been the world’s second superpower, Russia was reduced to the status of a minor bankrupt economy with a huge decline in industrial production and in living standards. Even life expectancy fell, with the population actually declining by nearly six million. 

Conclusions
With the benefit of hindsight, especially that of the spectacular performance of the Chinese economy after Mao’s death, we can now see that Lenin and Bukharin’s New Economic Policy approach was the most likely to succeed if it had been allowed to proceed from the end of the 1920s. In a largely agricultural society, socialists needed to focus first on agriculture in order to solve the food problem for the farmers and the urban population. From this first step, rising productivity in the countryside and the resulting surplus could have been used to develop light and then heavy industry in an organic and balanced way.

Integral to such a policy would have been the need for the workers and peasants to work together in a cooperative alliance. Tragically, Stalin chose the opposite path of coercion; a “revolution from above” as he put it at the time. And this created a top-down repressive system that was unable to provide the dynamism and efficiency needed for continuous rapid development of Soviet society. Thus, the collapse of the Soviet Union was never an inevitable process but one that had been prepared many decades earlier. And never repaired in time. Fortunately, China was able to learn from this experience and take a different road. As we clearly lay out in our Topic: ‘China’s New Economic Policy 1977 – today’

HONG KONG – the real story behind the protests

The growing influence of the United States in the pro-independence movement in Hong Kong

By Pat Byrne (Brazil) and Khalid Bhatti (Pakistan)   
Published by The Socialist Network 
7th September 2020

Things in Hong Kong are not as they seem. In an Alice in Wonderland scenario right wing political leaders like Donald Trump and Boris Johnson, who invariably defend their states against violent attack, now applaud demonstrators in Hong Kong as they confront local police with weapons and firebombs.
Where normally such reactionary capitalist leaders would be condemning damage to shops and businesses, in Hong Kong they have been cheering protestors as they do so on a daily basis.
Likewise, they are loudly condemning the introduction of security laws into Hong Kong which are far less draconian than those that operate in their own countries.

What can explain such glaring contradictions?
How has Hong Kong become such a cause celebre for the far right, fake news brigade?
And why have so many liberals and left-wing commentators on Hong Kong ended up joining common cause with the most reactionary forces on the planet?

What is really going on in Hong Kong? 

Hong Kong has been continuously in the news for the last couple of years. On our television screens we have seen massive pro-democracy marches involving millions of citizens protesting against perceived threats to their democratic rights. And demanding the extension of the vote to cover all governing positions in the Hong Kong Special Administrative Region.
Side by side with the peaceful demonstrations have been increasingly violent protests and clashes with the local police.
Now, in order to break the stand off, China has recently introduced a Security Law for Hong Kong which applies the regulations used by most countries against treason and sedition, subversion and sabotage. And begun arresting some of the leaders of the protest movement.
In response to this, the United States, UK and other countries have started to impose sanctions on China.

Britain taking over Hong Kong in its infamous ‘Opium Wars’

British Hypocrisy
As the former colonial power in Hong Kong, Britain is playing a particularly hypocritical role in the current dispute over the Territory.
For example, Britain is demanding the extension of elections in Hong Kong. Yet, it ran the area for 150 years without any elections! In fact, Britain governed Hong Kong as a colony not a democracy.
In the first place, Britain only gained control of Hong Kong and its surrounding territory through naked conquest in the two Opium Wars between 1841-1860. These wars were so-called because of the resistance of the Chinese to the sale by the British of opium from India as unwanted payment for chinese silk, porcelain and tea. Understandably, the Chinese emperor opposed the idea of his population becoming a mass of drug addicts. But the British used their naval technological might to defeat chinese opposition and impose their will. And then demanded the key deep water port of Hong Kong and its surrounding territory as colonial possessions.
During its colonial rule, far from standing up for Hong Kong’s local population as Britain is pretending to do now, the British introduced anti-chinese racial zoning with the best areas in the extremely limited land area reserved solely for europeans (and their servants). Signs were erected in public places such as parks excluding ‘chinese and dogs’.
Under British rule, chinese people in Hong Kong faced many other discriminatory regulations including higher taxes. Plus, a requirement to carry lights and written passes at night which for many poor chinese meant that a curfew operated for them every night.

Democracy Thwarted
At the end of the Second World War there was a worldwide move towards decolonisation. But Britain decided to keep Hong Kong under its control for military and strategic reasons.
In compensation, a promise of more democracy was made in the Young Plan. But, because of the success of the Chinese Communist revolution on the mainland in 1949, and the threat the British felt it posed to their dominance in the region, even these modest proposals for democratic reform were withdrawn in 1952. Thus, leaving the local people of the Territory without any voice at all.
Following the Chinese revolution, many people fled to Hong Kong from the mainland. Some because they had been on the losing right-wing nationalist side. Some because they feared to lose their wealth in the major changes that followed the revolution.
Another wave of refugees came during the late 1950s escaping the poverty and famine of the disastrous Great Leap Forward. And again during the massive disruption of the Cultural Revolution. Unsurprisingly, many of these refugees from the chinese mainland were fanatically anti-communist and have long influenced the political makeup of Hong Kong (HK), rather like the older Cuban exile community in Florida. Only in the last few decades have more ‘normal’ mainlanders come for work or settlement in HK.

Hong Kong’s Handover To China
In 1997 the official lease for Hong Kong between the UK and China came to an end. The British wanted to extend the lease but China demanded the return of its territory. Britain had no practical choice but to comply.
However, there was a major contradiction posed by the Handover. Hong Kong was run on private capitalist lines dominated by a few wealthy families, while the rest of China operated as a bureaucratic planned economy. But it so happened that the Chinese needed a gateway to the world capitalist market for its now booming economy. And so it came forward with the idea of a 50 year ‘One Country, Two Systems’ transitional system which would allow capitalism to continue for a long period in HK, along with various democratic rights of free speech, assembly and private media. Many observers have since assumed that the ‘two systems’ referred to here are only the different political setups in mainland China and HK. But it actually referred to the two different economic and political systems.
In the run up to the Handover, Governor Chris Patten, acting on behalf of Britain’s Thatcher government, cynically introduced a number of democratic changes in order to tie up Beijing in the Accession process and protect capitalism in HK after the handover. This was part of a wider preparation for the transfer which included large scale privatisation of public utilities and the sale of public land to the rich families that dominated Hong Kong.
Thus the 1997 Hong Kong Handover to China Agreement left many things unresolved including the lack of a National Security Law which has only now been introduced.

Hong Kong Since the Handover
Despite repeated forecasts of communist domination and oppression by the mainland since the handover in 1997, Beijing has allowed Hong Kong to remain a capitalist enclave with low taxation, freedom of speech, assembly and press. Indeed, the Cato Institute, a Washington-based, neoliberal think tank set up by the far-right Koch brothers, recently declared it to be third freest place in the world. Ironically, with the United States being in 17th place!
A common image fostered by the right-wing media in Hong Kong is that HK was better off economically under the British. In relative terms this was partly true. But, only because of its role as an exclusive gateway between the world and booming China. Once China allowed direct investment and trade from the rest of the world into mainland China, especially after it joined the World Trade Organisation in 2001, it was no longer necessary for outside companies to go through Hong Kong and vice versa. As a result, HK lost a major part of its attraction to international business and its importance to China’s economy – since the Handover HK has rapidly declined from a position accounting for 20% of China’s GDP to only 3% today. As a result, Hong Kong has fallen behind many mainland Chinese cities including its neighbouring technological powerhouse in Shenzhen.
But this was only a relative decline not an absolute one. Hong Kong still offers many advantages for companies wanting to do business in China. More importantly, in real terms the incredible rise of China’s economy has also raised HK’s standards. Thus, Hong Kong’s GDP has nearly trebled from $165 billions dollars since China took possession in 1997 to $455 billion dollars today, with a corresponding trebling of per capita wealth ($25,000 to $61,000). On the other hand, with the private ownership and massive inequality of capitalist Hong Kong this big increase in wealth has not gone to the ordinary people of HK but overwhelmingly to the capitalist elite.

Comparisons to the Berlin Wall
Comparisons have been regularly made between Hong Kong’s situation and the Berlin Wall erected in Soviet East Germany to prevent its citizens from defecting to the capitalist west. The obvious difference being that HK citizens are free to go back and forth. And unlike East Germany which was considerably poorer than West Germany, mainland China is increasingly on a par with Hong Kong and in some cases is surpassing HK in terms of jobs, living standards, housing and other opportunities.
Thus, there is no need for a Berlin Wall to prevent people from going from the mainland to Hong Kong. Indeed, the flow of people for work is often from HK to China rather than the other way round. To further emphasise the difference between the situation in HK and Berlin, far from trying to impede travel between HK and the mainland, Beijing has spent massive amounts of money to build the world’s longest series of bridges and tunnels to connect Hong Kong and Macau with the mainland. This has dramatically cut down the time it takes to travel between HK and the mainland.
Far from making it extremely difficult for its citizens to travel abroad, for fear of them defecting as the Soviet Bloc did in the 20th century, chinese students, business people and tourists travel freely. Indeed, last year 150 million Chinese tourists travelled on foreign holidays and rather than defecting returned to their homes in China. So much for the prison house image of China portrayed in the western media!

The Pro Democracy Movement
Last year’s protests in Hong Kong were not the first. There had been earlier demonstrations in 2014 with the Umbrella Revolution and the Occupy Central Movement.
The latest upsurge came last year in response to the introduction of a local regulation proposing extradition to China. This arose because of a murder of a Hong Kong woman in Taiwan and the fleeing of her alleged HK murderer back to the territory. There being no extradition treaty between Taiwan and Hong Kong because of Taiwan’s undetermined national status (either as part of China or an independent country), Beijing’s solution was to introduce a rule that allowed people to be extradited from Hong Kong to the Chinese mainland. This frightened many HK residents who feared it would open the way for the extradition of dissidents for punishment on the mainland. Such fears had been stoked by the earlier disappearance of two Hong Kong booksellers who later turned up on the mainland charged with selling books critical of the Chinese leadership.
To voice these fears in HK, a huge movement was launched against the proposed extradition rule helped by the support of the right-wing media. This movement initially represented the majority of people in Hong Kong and included voices from both left and right.
In response to the massive protests of millions of HK people the Chief Executive of the local Legislative Council suspended the proposed extradition rule. The protests continued. Then the rule was withdrawn. But still the protests continued with its demands widening to include: the withdrawal of the extradition bill; retraction of the “riot” characterisation; release of students and the injured; and Lam’s resignation as Chief Executive. A fifth demand went much further in demanding universal suffrage for the whole Legislative Council and the Chief Executive.

Last year’s pro-democracy movement began with massive peaceful crowds

Genuine Protests Morph into a Reactionary Movement
From a broad and peaceful protest the pro-democracy movement rapidly changed into something else. Increasingly, it was taken over by right-wing, pro-American forces and its aims shifted from protecting the democratic rights of Hong Kong people towards denunciation of the chinese political system and for complete secession from China.
A key part of this transformation was the role of the right wing media led by Apple Daily and Next Digital both owned by Jimmy Lai, a well named publisher who copied Rupert Murdoch’s combination of gutter journalism and sex to build up his media brand. Lai, who is a fanatical neoliberal, has played a leading role in directing and funding right wing elements in the protest movement.

Pro-democracy protestors breaking into the Legislative Council

Violent Actions
The pro-democracy movement in Hong Kong soon split into two factions. On one side is a mass movement that demonstrates peacefully in huge numbers. On the other, an extremely violent masked and helmeted action force dressed in black and carrying weapons that call themselves among other things ‘the Braves’.
These ‘Braves’ have become increasingly more aggressive beating up anyone who dares to argue with or oppose them, attacking shops, buildings and important targets such as the local Legislative Council building.

Invading the Legislative Council and raising British colonial flags

In the latter case, hundreds of protesters broke through the glass walls and metal doors and entered the building, ransacked and vandalised the interior with anti-government and anti-People’s Republic of China slogans. They defaced the local Hong Kong flag and city emblems, waved British and colonial flags and sprayed slogans such as “Destroy the Chinese Communist Party,” and “Hong Kong is not China”.
The protestors also blockaded HK’s airport, Hong Kong’s most important lifeline. And have been setting parts of the HK train system on fire. The core of these Braves are easily manipulated 14-15 year olds, even youngsters as young as 11 or 12.
Imagine the reaction of the authorities in America or Europe is such things were to happen there? They would crack down on the perpetrators like a ton of bricks. While there have been incidents of overreaction from the Hong Kong police, in comparison with police actions elsewhere they have been remarkably restrained. In the clashes with protestors one can see them regularly backing away from the demonstrators. As a result, there have been no deaths during the long conflict. Compare that to the way that the police in other countries deal with less violent protests such as the aggressiveness of the police in America with their armored vehicles and military style uniforms and readiness to use rubber bullets, tear gas and batons. Or the number of deaths and serious injuries inflicted by the police against the yellow vest protestors in France. Or the absolute brutality in the way that the pro-Madrid police treated the independence demonstrations in Barcelona. Or the 29 deaths and thousands of injuries used last year against demonstrators in Chile.
Meanwhile, the violent wing of the pro-democracy protest in Hong Kong, while preaching non-violence has been practicing its opposite on a daily basis. Accordingly, they appear with weapons and molotov cocktails, and have beaten women on the streets, burnt people, stabbed a policeman in the neck, and thrown acid on another.
All of their violent acts are edited out of the videos broadcast or used by the foreign media who consciously ignore the comparison with much greater police violence in other parts of the world. But clear evidence has surfaced in hundreds of eyewitness videos posted by shocked, ordinary citizens on Twitter.

New US Destabilisation Strategy – Combining Peaceful Protest with Violent Assault
Normally, non-violent mass movements distance themselves from the destructive actions of minority violent factions. But in the case of Hong Kong, both sides have a pact to positively support each other irrespective of the actions taken. Thus, the non-violent side refuses to criticise or distance itself from the violent side, and vice versa.
In contrast to the Ghandian non-violent tactics of civil disobedience, this is part of a new CIA/Defence Department strategy that combines mass protests with violent attacks including firebombing on police, institutions and civilians. This strategy has clearly become a key part of the CIA’s manual of operations designed to destabilise governments and effect regime change.
This new strategy uses the highly detailed, non-violent tactics of the late Gene Sharp which sought to overthrow dictatorships. And then co-opted them into something entirely different. In particular, former American Defense Intelligence Agency analyst, Col. Robert Helvey, helped to develop “a blueprint that weaponized protest as a form of hybrid warfare, aiming it at states that resisted Washington’s domination.”
The CIA took this further and integrated the strategy with violence including the use of unemployed youth as thugs.

The Example of Venezuela
This approach has been used in a number of pro democracy uprisings around the world. But nowhere has its method of operation been more clearly demonstrated than in Venezuela. As far back as 2005, with Chavez at the peak of his popularity, five right wing Venezuelan student activists identified by the US as promising candidates were sent to Serbia to begin training in civil disobedience insurrectionary tactics. One of these was none other than Juan Guaidó, later to become America’s self-declared alternative “leader” of Venezuela.
These student activists began their work in 2007 leading protests in defence of the right-wing media. Then in 2010, a plan for widespread street violence in Venezuela was developed at a meeting in Mexico. After Maduro was elected President in 2013 in succession to Chavez, the plan was put into operation. Barricades were erected across the country, turning opposition-controlled quarters into violent fortresses known as guarimbas. These tactics of violent disruption proceeded over the course of several years and resulted in massive damage to Venezuela’s economic and social life, along with the deaths of hundreds of civilians through the widespread use of fire to burn property and individuals.
The aim of the street barricades was to destabilise the country and was part of preparations for a hoped-for coup by the venezuelan military to overthrow the Maduro government. However, the venezuelan army has been so radicalised by the struggles of the last two decades and the continuing influence of Chavez’s popular ideological legacy, it has been unwilling to be used in these US-hatched plans for overturning the democratic institutions of the country.
In the absence of a coup, the never ending barricades and street violence began to alienate even the majority of the anti-Maduro middle class.

Clear Parallels between Venezuela and Hong Kong
The widespread use of street violence by the pro-democracy movement in Hong Kong has paralleled the experience of Venezuela. While such tactics might work in a short sharp protest uprising, the longer they continue the more they serve to alienate the wider public. It was to avoid such reactions that the Ghandian protest movements were so insistent on rejecting violence and disassociating themselves from it.
The same process has happened in Hong Kong. From having a large majority behind them in the early days, many citizens have become disgusted and frightened by the tactics of the violent minority. And grown weary by the constant disruption and economic dislocation that have resulted from it. No wonder that 3 million HK citizens, nearly half of the adult population, have now signed a petition supporting the new Security Law introduced by Beijing. This is a devastating setback to the image of a protest movement that was supposed to represent the vast majority of HK’s population.

Ordinary worker disagreeing with attack on train station is set on fire by ‘the braves’

The Role of US Agencies in the Protest Movement
There is growing evidence that the pro-democracy movement in Hong Kong has been operating with the close assistance of US government agencies. Despite this, there is a reluctance by some commentators to openly admit that the HK protest movement is being directed or influenced by an American intelligence operation for fear of being accused of supporting conspiracy theories. However, what would be very strange would be if the Central Intelligence Agency and its front groups were not organising a major operation in Hong Kong. Especially, given the history of the CIA which since the 1953 coup in Iran onwards has been shown to be involved in trying to overthrow almost every government deemed to be acting against American interests.
China is now declared America’s ‘enemy number one’ and Venezuela its ‘enemy number two’. Are we seriously expected to believe that it has only been operating a regime change policy in Venezuela and not in Hong Kong?
So, the question is not: is there a CIA conspiracy in Hong Kong? But, why wouldn’t there be?
In fact, the CIA and its complementary agencies in the US, the State Department, USAID, National Endowment for Democracy, etc. are all fully supporting the pro-democracy movement in Hong Kong politically, financially and tactically. As such, they are supporting the opposition parties and put millions of dollars into last year’s elections to the District Councils.
Naturally, the US agencies have supported the frequent trips of pro democracy leaders to America and Europe. For example, to the so-called ‘Summer of Discontent’ hearings that were held last year in the US Congress with Joshua Wong, Denise Jo and Nathan Law talking to US lawmakers about how to “contain China”.
It also appears that the US have helped train some of the student leaders of the Hong Kong pro-democracy movement who emerged in the 2014 protests. Just like they did in Venezuela. For example, leading HK pro democracy leader Joshua Wong was filmed several years ago attending seminars on how to organise civil disobedience actions at the Oslo Freedom Forum, another US financed right-wing front group.
Meanwhile, a whole number of US intelligence agents have been identified accompanying and advising the leading figures in the pro-democracy movement.
Meanwhile, right wing US Senators fly over and openly walk around the pro-democracy demonstrations. And in the demonstrations we now see the regular sight of American flags and posters saying things like: ‘President Trump, please liberate us‘.
If the pro-democracy movement were a genuine movement for independence why are they flying British and US flags and not their own independence flags? And why are they singing the US Anthem and not their own local songs?

What is America and the UK’s Strategy?
Hong Kong is clearly being used in the geopolitical conflict between the US and its allies on one side, and China and its allies on the other. The US and the UK know that China will never allow Hong Kong to break away and are cynically using the pro-democracy protestors to help them in their new cold war against China.
Part of this strategy was to use Hong Kong’s Legislative Council elections due this month to further destabilise and undermine China’s authority in the Territory. Just as they did in Venezuela, US agencies have used their financial and political power to force the bickering and divided right-wing and liberal parties in Hong Kong to work together. Thus, we have seen the highly unusual agreement of the various opposition parties and factions in HK to conduct a joint primary in which they all agreed in advance to respect the results and present a united front in the September elections for half the seats of the Legislative Council. This was likely to lead to a sweeping victory for the pro-democracy movement and the potential emergence of a leading figure that the US, UK etc. could then declare as the true leader and voice of Hong Kong. As they did with Juan Guaidó in Venezuela. Recognising this person as the ‘real leader’ of the territory, parading him or her around the world in a big propaganda effort to build support for sanctions against China.
No doubt, China has recognised the possibility of such an outcome. Accordingly, the elections have been postponed until the summer of 2021, and actions are being taken in Hong Kong to break up the united front arising from the primary by disqualifying many candidates and arresting some on charges of collusion with external powers.

More US Hypocrisy
In public, the most reactionary Republican US Congress representatives and senators have been praising the protestors in Hong Kong to the skies calling them “heroes”. At the same time they are describing the millions in the US protesting against police violence against black people as “thugs”.
Likewise, throughout last year the US threatened China with major consequences if it introduced a curfew to deal with the riots in Hong Kong (which it didn’t). Then the US went on to to rapidly introduce curfews in many American cities in response to the Black Lives Matters protests.
Then, there were threats made against China if it brought its People Liberation Army units onto the streets of Hong Kong, but despite the length, ferocity and destructiveness of the violent actions last year the chinese army never once appeared on the streets. Contrast this to America to see how quickly the army was brought onto its streets to confront the anti-racist protests.
But do the international media highlight such double standards? Of course not. They are up to their necks in a one-sided propaganda war against China.

Racism Against Mainland Chinese
Another objectionable side to Hong Kong’s Pro-Democracy movement is its growing racism against the mainland Chinese population. Throughout this whole period there have been an increasing number of racist attacks on mainland Chinese with insulting signs appearing in some pro-democracy restaurants and businesses refusing trade with mainland chinese. This has been translated into actual assaults on mainlanders.
We see this racism even reflected among the elected political representatives of the pro-democracy movement such as its district councillors.
The negative results of this have been entirely predictable. At the beginning of the campaign there was significant support in mainland China for the protest movement. But this anti-mainland Chinese racism has killed that support. This combined with the violence and unreasonableness of the protests have united chinese people on the mainland behind the new Security Law and its application to the pro-democracy movement.
Normally the leadership of a genuinely local movement in Hong Kong would have recognised that they needed to win the mainland chinese people’s support for their demands. But they actually did the opposite. Undoubtedly, this was because they were encouraged by the US and British to believe that they could achieve the dream of independence. To this end, the leaders of the protest were feted around Washington where they addressed Congress and the White House, and later in London and the European Union. The many promises of money and support they received abroad obviously went to their head.
Now that China has begun to take even minimal action against the pro-American pro-democracy leadership in recent weeks, the bubble has quickly burst. A number of key protest leaders like Nathan Law have fled to the West while the others have resigned their positions and folded up their organisations, despite previously boasting that they would rather die than give up the cause.

Pressing Local issues
There are a number of social and economic problems in Hong Kong that need serious attention. Top of these is a growing housing crisis. Major progress is being made on this in China but not in Hong Kong. Accommodation is actually getting smaller and smaller in newer apartments with the animals in HK’s zoo have bigger living space! At the heart of the problem is the ownership of so much land by a few wealthy families who are only interested in the building of luxury apartments and office buildings. This is a legacy of the British who ruled Hong Kong in favour of these property tycoons. In the period before they left they sold a lot of land off to just four companies, plus many other public utilities and assets. So, these ruling families virtually own HK.
Other problems facing HK’s citizens include rising unemployment, especially among younger people, and an increasing cost of living rising beyond the reach of ordinary people living in the Territory.
Elected representatives of the pro-democracy movement have been criticised for not addressing these issues but they say that the priority has to be to deal first with the relationship between China and Hong Kong. In this way, they show that their real allegiance is to their rich backers and not the ordinary citizens of HK.
Even where major progress has been made such as in transport, the pro-democracy movement is so against steps to improve links with the mainland that they have been trying to persuade people not to use the new high speed train.

The Left in Hong Kong
There is a significant left-wing movement in Hong Kong. But much of it has become overshadowed by the increasingly right-wing pro-democracy movement. Many on the left in Hong Kong go along with this because they think that China is just another form of capitalism whether state capitalist or dictatorial capitalist. So they see it as a struggle between two capitalist factions the outcome of which need not concern them.
We don’t have space here to deal with this superficial and illogical position, but if China was just another version of capitalism why would the international champions of capitalism be trying so hard to overturn it? And be framing this as an anti-communist struggle into the bargain? The reality is that the US, the UK, the EU etc. are against China because it is an alternative economic system that threatens their future rule. A planned economy in which the state, the publicly-owned banks and state-owned enterprises dominate the economy and effectively dictate the direction of its private companies. Where public investment is at the heart of development. A form of economy that they see as directly counterposed to their own capitalist economies which are unplanned and dominated by the private sector.
It is no accident that all the talk is of a Second Cold War. The First Cold War was between the capitalist countries on one side and the planned economies of the Soviet Bloc and China on the other. This is now being replaced by a new cold war against the state-managed economy of China. The difference this time around is that the Chinese planned economy is proving itself more and more effective than its capitalist rivals. This explains the growing intensity of the media propaganda war against China and the attempts to isolate and sanction it.

Which Way Forward for Hong Kong
In our view, the first thing for the Left in Hong Kong is to disassociate itself from the pointless calls for independence from China – after waiting more than a century for it to be returned, there is no way that China is going to allow Hong Kong to be separated from the rest of the country. Indeed, the idea that HK would do better by breaking away is lunacy. For one thing, by separating it would very quickly lose its unique advantages in relation to the chinese mainland and have to compete as just another financial centre / tax haven. And this would just see its already high inequality intensify even further for ordinary HK citizens.
As it happens, a plurality of residents in HK (37%) see their future more with mainland China than in closer relations with the United States (30%), according to a recent poll by London-based Redfield & Wilton Strategies.
Instead of seeking to break away from China, the logical road for Hong Kong is to positively accept itself as part of it. To co-operate more closely with the mainland and gain from its growing employment opportunities, rising living standards, housing facilities and so on. And to build upon HK’s autonomy and major freedoms as a model for the rest of China to follow.
On the economic front, the mainland has proposed the development of an integrated Guangdong-Hong Kong-Macao Greater Bay Area (GBA) as a triangle area for development which would include Hong Kong, Macau and the whole Guangdong province (which includes the technology hub of Shenzen). This region, covering 80 million population would be the most open and vibrant economic area in the whole of China.
To facilitate such integration, Beijing has offered special facilities to those HK residents who wish to work in Guangdong such as continued tax exemption, free local schooling, health etc. However, the pro-democracy movement has spurned such offers in favour of a programme for independence. In contrast, fellow ex-colony Macau has responded more positively, and its growth and development is reflecting this.

A Capitalist Future for Hong Kong?
Under the Handover Agreement capitalism in Hong Kong is only guaranteed until 2046. That is just one generation away. Now is the time to begin to take steps to move on from HK’s incredibly unequal model of property ownership and financial capitalism. Far from the common image of a Hong Kong of skyscrapers and prosperity, out of 7.5 million people in HK there are 1.37 million living below the poverty line.
The Left in Hong Kong needs to be able to reach ordinary HK citizens and give them the chance to voice their demands for increased public housing and renovation, better wages, affordable transport, more secure jobs, an end to the super exploitation of immigrant labour, and so on. And work together with them in genuine methods of co-productive design and partnership through which to develop a democratic socialist plan to overcome these problems. A new model of democratic public ownership and public investment that can shape the Territory’s economy in the interest of the mass of its citizens.

The Issue of Democracy
Hong Kong already has key elements of democracy in the form of free speech and assembly. The proposal to extend the right of citizens to vote for the whole of the Legislative Council and to have a directly elected Chief Executive appears on face value to be an eminently reasonable demand that would further provide the citizens of HK with a real say in the future of their city. However, this is a mirage. Behind this demand lie the rich tycoons of HK who intend to combine this extension of the franchise with their existing ownership of media channels and political parties to extend their power and wealth.
As we can see from competitive capitalist democratic systems elsewhere, gaining the vote does not mean gaining real power. The rich are able to manipulate the narrow and limited democracies of the West to deliver what they want and shut out the demands of the mass of the population. That is why all the western governments are being able to systematically reduce living standards and public services in face of popular discontent.
HK citizens should not be listening to the false promises of Trump or Boris Johnson who constantly lie to their own populations as they push them further into inequality and poverty. Nor to link its fortunes to the declining and decaying West.
The Left in Hong Kong needs to urgently separate themselves from and expose the violent forces in the pro-democracy movement. And to support the demand for all foreign funding and manipulation to be ended and punished – all those parties and individuals in HK who have accepted it should be publicly disgraced and barred from public life.
If HK citizens really want a say in the future of their territory they will need a very different kind of democracy beginning with the democratisation of the newspapers, television and social media. To this end, they need to create grassroots organisations with independent public funding to ensure that they have independent voices free from elite support and manipulation. The ordinary people of Hong Kong need a real democracy that delivers full participation in the decisions that affect their lives.
Hong Kong does not need to move towards the fake capitalist model of democracy. We have seen the results of this in the Soviet Union and Eastern European where the peoples’ hopes of a post-stalinist society were betrayed and power ended up in the hands of a few rich oligarchs. A better HK cannot be based on a society owned by a rich elite but by a truly democratic and publicly-owned system. Such a real democracy could provide a very attractive model for the rest of China instead of alienating them as it now does.

Hong Kong’s future cannot be to fruitlessly go it alone. Or to rely on the hypocritical support of the reactionary rulers of America, Europe and Australasia who seek to use HK’s citizens as pawns in their rivalry with China.
The people of Hong Kong should reject the racist and short-sighted anti-mainland voices. Instead, they need to grow closer to the fast expanding Chinese economic system and benefit from its success. And to use HK’s existing autonomy and freedoms to develop new forms of democratic public power that can appeal throughout China.

This article is the first of a series on the nature of Chinese society and the challenges facing it. It will include original insights and positive proposals for how China can better answer its critics and overcome its current problems. If you would like to receive future articles on this subject or give us feedback please send a message to us at our facebook page: https://www.facebook.com/thesocialistnetwork

China’s Leadership Rejects Capitalist Model

Published: 27 October 2017. 
Author: Michael Roberts.

Intro by: TSN Editor.

The 19th National Congress of the Communist Party of China has just finished. These Congresses are only held every five years and must approve the next Five Year Plan and the leadership of the Party for the coming period. At this Congress President Xi Jinping consolidated his power and won support for his policy platform for China which confirms its pro state ownership model. This will have profound consequences for the global economy and political developments.

Below we publish an important assessment of the significance of the Communist Party Congress and China’s economic and political direction, from renowned marxist economist, Michael Roberts.

Xi takes full control of China’s future

Xi Jinping has been consecrated as China’s most powerful leader since Mao Zedong after a new body of political thought carrying his name was added to the Communist party’s constitution.  The symbolic move came on the final day of a week-long political summit in Beijing – the 19th party congress – at which Xi has pledged to lead the world’s second largest economy into a “new era” of international power and influence.

Read more

Venezuela on a Knife-Edge

Middle class protest while the poor vote for the Constituent Assembly

Published: 3 August 2017
Author: Heiko Khoo

Here we reproduce an excellent article published on the Chinese news site, www.China.org.cn

Despite the ferocious and violent campaign orchestrated by the US backed Venezuelan opposition, the election of a Constituent Assembly was carried through successfully on Sunday 30th July. Delegates were elected from a wide range of organizations representing those sections of the population who have an interest in protecting the social gains of the revolution, by establishing mechanisms to reorganize economic and political power in the interests of the masses.

Venezuela’s popular revolution began in 1998 with the election of Hugo Chavez as the country’s president. Four years after his election in 2002, the opposition, backed by the United States, orchestrated a coup d’état, kidnapped the president, and installed a puppet regime. However, the depth of popular support for the revolutionary movement ensured that this coup d’état was swiftly brought to an end by a mass popular uprising.

Chavez had an extraordinary capacity to express the hopes, dreams and aspirations of the Venezuelan masses. He attempted to use the rules of capitalist democracy to shift the balance of power in favour of the poor and the exploited. Venezuela’s vast oil reserves gave Chavez leeway to secure progress in welfare, education, housing, women’s rights, healthcare and indigenous rights, and to enact hundreds of other progressive social and economic reforms. The living standards of the upper strata of society rose at the same time as the poorest sections of society were elevated out of economic penury.

Read more

Why are China and India Growing So Fast? State Investment

Published: 15 July 2017
Author: John Ross
(Senior Fellow Chongyang Institute for Financial Studies, Renmin University of China, Beijing)

We reprint below an important new article by a leading Marxist economist based in China. 

 

The world’s two most rapidly growing major economies are China and India. Both China and India show a common pattern of development which differs sharply from the slowly growing Western economies. China and India’s fast expanding economies have rapidly growing state investment even while their private investment is either growing very slowly or declining. In contrast the slowly growing Western economies rely on private investment with no rapid growth of state investment. It will be shown below why rapid expansion of state investment is correlated with fast economic growth, while reliance on private investment leads to slow economic growth.

Read more

America Continues To Radicalise

Video from last weekend’s People’s Summit in Chicago where Bernie Sanders sums up the current stage of the struggle.    Published: 14 June 2017

The rise of the Bernie Sanders movement on one side, and the election of Trump as US President on the other, were both a reflection of the growing discontent of American working people, and a spur to a wave of radicalisation taking place across the United States. A significant indication of this are the recent opinion polls that show that Sanders is now by far the most popular politician in the country with 63% support.

This wave is lifting the socialist movement, most notably in the incredible growth of membership in Democratic Socialists of America, a group that The Socialist Network has been in contact with in recent years. Next week we will carry an interview with some left-wing members of the DSA.

 

Social Democracy in Europe is Now Swinging Decisively to the Left

Capitalism-and-Social-DemocracyPublished: 5 June 2017
Author: Pat Byrne
(British Labour Party activist)

As Britain prepares for a new General Election in which a left-led Labour Party looks set to do much better than predicted, there are clear signs that the long swing to the right within social democracy in Europe is now running in the reverse direction.

In recent years, there has been much comment on the Left that social democracy was finished and that a new mass left movement was in the process of taking its place. The rise of Syriza in Greece and Podemos in Spain were trumpeted as evidence for this widespread trend. While welcoming the rise of Syriza and Podemos, our Socialist Network also pointed to the potential of the left within social democracy to regain the ascendancy within the movement as an organic reflection of the rising discontent of working people hard-hit by the world economic crisis.

Read more