Which way for China – part two

The sacking of Bo Xilai, the controversial and maverick party secretary of the Chongqing municipality highlights the strategic split that exists at the top of the Chinese government about what direction to take the country over the next generation.  Mr Bo is the son of a revolutionary hero, one of the so-called ‘princelings’, the children of the elite families that rule one and half billion people.   Considered a “prince among princelings”, Bo Xilai is the son of Bo Yibo, one of the Eight Immortals, the group of senior revolutionary veterans who served as the backbone of Deng Xiaoping’s support in the 1980s.

It’s no coincidence that just days after Bo Xilai came under criticism, prominent Chinese academics were attacking him publicly, saying that his career and the entire Chongqing Model were finished   These attacks were from the ‘pro-capitalist roaders’ faction in the Chinese leadership.  This camp disliked Bo because they saw him as a demagogue supporting populist, statist economic policies.  They hinted at corruption, such as Bo’s son driving a red Ferrari – as if most of the princelings and especially the pro-capitalist wing did not do something similar.

What alarmed the top leaders and led to his downfall was partly Bo’s tactic of “mobilising the masses” in ways that explicitly invoked the Cultural Revolution.  That called up deep-seated fears that populist fervour might be used as a weapon against Bo’s rivals.  But Bo’s Chongqing Model also worried the pro-capitalist faction because they are concerned about the current move towards a larger role for the state sector to protect China from the impact of the slump in the capitalist world. The refrain of “guo jin min tui” (the state advances, the private sector retreats) has been the recent sound across China, not just in Chongqing.  Bo jumped on that bandwagon.

The sacking of Bo is a minor moment in the major debate within the leadership on whether China can continue to grow fast through investment in industry, infrastructure and more exports or it needs to switch to a consumer-led economy that imports more and supplies goods to a ‘rising middle-class’ like advanced capitalist economies supposedly do.  Mainstream economics (and their pro-capitalist supporters in China) reckons that this cannot be done without developing a more ‘market-based’ economy i.e. capitalism, because the ‘complexity’ of a consumer society can only work under capitalism and not under the ‘heavy-handed’ central planning of government and state industries.

Leading up to the National Peoples Congress, the pro-capitalist wing was loudly demanding a change of direction by the government.  This was highlighted by a World Bank report on China’s future (China 2030; http://www.worldbank.org/en/news/2012/02/27/china-2030-executive-summary), published in conjunction with China’s advisory body, the Development Research Center of China’s State Council.  The report argued that there would be an economic crisis in China unless state-run firms were scaled back.  China needed to implement ‘deep reforms’, selling off state-owned enterprises and/or making them operate more like commercial firms. According to the World Bank, China’s growth would decelerate rapidly once people reached a certain income level, a phenomenon that these economists call the “middle-income trap.”   The report said the answer to set up ‘asset-management firms’ to sell off state industries, overhaul local government finances and promote ‘competition and entrepreneurship’.

Two things struck me particularly about this report.  The first of its six strategic measures is the privatisation of the state.  This is put right up front. In contrast, there is no mention of the democratisation of the state, the ending of one-party rule; the ending of the suppression of individual rights and freedoms, allowing trade union rights etc.  What hypocrisy!  The World Bank authors want capitalism, but they don’t care about democracy.  The report is also totally blind.  It wants China to abandon its current economic model and publicly-controlled financial system, which brought it successfully through the world financial crisis, and instead adopt the very model that led the US and Europe into disaster.

But what is also interesting about the report is that it admits that the capitalist mode of production still does not dominate in China – indeed that is the problem according to the World Bank and its domestic supporters.  The report recognises that China’s incredible economic success over the last 30 years was based on an economy where growth was achieved through bureaucratic state planning and government control of investment.  China has raised 620 million people out of internationally defined poverty.  Its rate of economic growth may have been matched by emerging capitalist economies for a while back in the 19th century when they were ‘taking off’.  But no country has ever grown so fast and been so large (with 22% of the world’s population) – only India, with 16% of the world’s people, is close.  As John Ross has pointed out (http://ablog.typepad.com/keytrendsinglobalisation/2012/02/chinas-achievement.html) in 2010, 87 countries had a higher per capita GDP than China, but 83 were lower.  Back in the early 1980s, three-quarters of the world’s people were better off than the average Chinese.  Now only 31% are.  This is an achievement without precedent.

Even if China slows down as the World Bank predicts, it will still add over $21trn to its GDP before the end of the decade and reach the size of the US economy by then.  Even though China’s consumption as a share of GDP is very low by capitalist standards (anywhere between 35-45% of GDP, depending on how you measure it, compared to 65-75% in mature capitalist economies), it will add another $10trn in annual consumption by 2020, equivalent to the size of America’s annual consumption.  These figures come from the World Bank report itself.

This has been achieved without the capitalist mode of production being dominant.  China’s “socialism with Chinese characteristics” is a weird beast.  Of course, it is not ‘socialism’ by any Marxist definition or by any benchmark of democratic workers control.  And 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.

A recent report by the US-China Economic and Security Review Commission (26.10.11) called An analysis of state- owned enterprises and state capitalism in China provides a balanced and objective review (http://www.uscc.gov/pressreleases/2011/11_10_26pr.pdf): “The state owned and controlled portion of the Chinese economy is large.  Based on reasonable assumptions, it appears that the visible state sector – SOEs and entities directly controlled by SOEs, accounted for more than 40% of China’s non-agricultural GDP.  If the contributions of indirectly controlled entities, urban collectives and public TVEs are considered, the share of GDP owned and controlled by the state is approximately 50%.”  The major banks are state-owned and their lending and deposit policies are directed by the government (much to the chagrin of China’s central bank and other pro-capitalist elements).  There is no free flow of foreign capital into and out of China.  Capital controls are imposed and enforced and the currency’s value is manipulated to set economic targets (much to the annoyance of the US Congress).

At the same time,the single party state machine infiltrates all levels of industry and activity in China.  According to a report by Joseph Fang and others (http://www.nber.org/papers/w17687), there are party organisations within every corporation that employs more than three communist party members. Each party organisation elects a party secretary. It is the party secretary who is the lynchpin of the alternative management system of each enterprise. This extends party control beyond the SOEs, partly privatised corporations and village or local government-owned enterprises into the private sector or “new economic organisations” as these are called.  In 1999, only 3% of these had party cells.  Now the figure is nearly 13%.  As the paper puts it: “The Chinese Communist Party (CCP), by controlling the career advancement of all senior personnel in all regulatory agencies, all state-owned enterprises (SOEs), and virtually all major financial institutions state-owned enterprises (SOEs) and senior Party positions in all but the smallest non-SOE enterprises, retains sole possession of Lenin’s Commanding Heights.

The reality is that almost all Chinese companies employing more than 100 people have an internal party cell-based control system.   This is no relic of the Maoist era.  It is the current structure set up specifically to maintain party control of the economy.  As the Fang report says: “The CCP Organization Department manag(es) all senior promotions throughout all major banks, regulators, government ministries and agencies, SOEs, and even many officially designated non-SOE enterprises. The Party promotes people through banks,regulatory agencies, enterprises, governments, and Party organs, handling much of the national economy in one huge human resources management chart. An ambitious young cadre might begin in a government ministry, join middle management in an SOE bank, accept a senior Party position in a listed enterprise, accept promotion into a top regulatory position, accept appointment as a mayor or provincial governor, become CEO of a different SOE bank, and perhaps ultimately rise into upper echelons of the central government or CCP — all by the grace of the CCP OD.”

This does not look like the normal relationship of state owned companies or agencies in mature capitalist economies, where the newly nationalised banks in the UK or the now publicly owned General Motors in the US are owned and controlled at ‘arms length’.  In other words, the taxpayer funds them, while they operate purely on the profit motive.  In contrast, Chinese banks have targets for lending and investment set by the government which they must meet, whatever the impact on profits.

The law of value does operate in China, mainly through foreign trade and capital inflows, as well as through domestic markets for goods, services and funds.  In so far as it does, profitability becomes key to investment and growth.  So what has happened to China’s profitability in the last 30 years?  There have been various attempts to estimate the rate of profit in China.  I did so in my book, The Great Recession, chapter 12.  There are other studies that reach slightly different conclusions than I did (Zhang Yu and Zhao Feng, 2006, www.seruc.com/bgl/paper%202006/Zhao-Zhang.pdf; and Mylene Gaulard, 2010, http://gesd.free.fr/m6gaulard.pdf ).

I found that there were three cycles of profitability.  Between 1978-90, there was an upswing as capitalist production expanded through the Deng reforms and the opening up of foreign trade.  But from 1990 to the end of that decade, there was a decline, as over-investment gathered pace and other economies, particularly in the emerging world went through a series of crises (Mexico 1994, Asia 1997-8, Latin America 1998-01).  The falling rate of profit then was accompanied by slowing in the rate of GDP growth.  Then from about 1999 onwards, there has been a rise in profitability, which also saw a significant rise in the rate of economic growth (as the world too expanded at a credit-fuelled pace).  A more recent study by the Fung Global Institute (http://www.fungglobal institute.org) shows that profit margins in industry rose steadily from 1999 as unit labour costs stayed flat, confirming my work (see below).

We may be reaching a peak in profitability again, heralding slower growth over the next decade, as world capitalism struggles big time.

So the Chinese economy is affected by the law of value.  That’s not really surprising.  You can’t ‘build socialism in one country’ (and if a country is under an autocracy, by definition).  Globalisation and the law of value in world markets feed through to the Chinese economy.  But the impact is ‘distorted’, ‘curbed’ and blocked by bureaucratic ‘interference’ from the state and the party structure to the point that it cannot yet dominate and direct the trajectory of the Chinese economy.

Market forces and the law of value remain pernicious, however.   Inequality of wealth and income under China’s ‘socialism with Chinese characteristics’ has never been so bad.  It was one of the issues that Bo Xilai made much of.   He put it thus: “As Chairman Mao said as he was building the nation, the goal of our building a socialist society is to make sure everyone has a job to do and food to eat, that everybody is wealthy together. If only a few people are rich, then we’ll slide into capitalism. We’ve failed. If a new capitalist class is created then we’ll really have turned onto a wrong road.”  China’s Gini coefficient, an index of income ineqaulity, according to Sun Liping, a professor at Beijing’s Tsinghua University, has risen from 0.30 in 1978 when the Communist Party began to open the economy to market force 0.46.  Indeed, China’s Gini coefficient has risen more than any other Asian economy in the last two decades.  The rise in inequality is partly the result of the urbanisation of the economy as rural peasants move to the cities.  Urban wages in the sweatshops and factories are increasingly leaving peasant incomes behind (not that those urban wages are anything to write home about when workers assembling Apple i-pads are paid under $2 an hour).  But it is also partly the result of the elite controlling the levers of power and making themselves fat, while allowing some Chinese billionaires to flourish.

By the end of this decade, China’s GDP will be higher than that of the US, although average living standards, even in the urban and coastal belts, will be only one-third of that of Americans.  But as living standards rise and China gets older (by 2025, the workforce will stop rising and retirees will rise sharply), the Chinese people will want to obtain the material benefits of a modern economy.  That does not mean just cars, hi-tech gadgets and fashion as mainstream economics emphasises.  It also means decent pensions, proper transport and infrastructure, health services and education – the so-called public goods.

Is mainstream economics right to argue that people’s needs and aspirations can only be met by a capitalist economy?  The evidence of the Great Recession and the ensuing long depression suggest otherwise.  If the capitalist road is adopted and the law of value becomes dominant, it will expose the Chinese people to chronic economic instability (booms and slumps), insecurity of employment and income and greater inequalities.  On the other hand, if the surplus created by the Chinese people remains under the control of an elite backed by an army and police and ruling without dissent, then the needs and aspirations of a more affluent and educated population will not be met.

A socialist or capitalist road?  Well, the elite is united in opposing socialist democracy as any Marxist would understand it.  But they are divided on which way to sustain their power.  The people have yet to play a role.  They have been fighting local battles over the environment, their villages and their jobs and wages.  But they have not yet been battling for more democracy or economic power.  The middle classes are still backing the regime.  In a spring 2010 survey by the Pew Research Center’s Global Attitudes Project, 87% of Chinese said they were satisfied with the way things were going in their country.  In another poll taken last November, creating a “democratic political system with Chinese characteristics” was supported by 50% of those interviewed, but only 15% wanted a ‘Western-style democracy’.   Indeed, nearly 70% were against the “total Westernisation” (whatever that might mean) and 69% opted for the ‘social stability‘.

But the key to continued growth and more equality will be democracy.  China needs to move from ‘socialism (i.e. a planned economy) with Chinese characteristics (i.e. autocracy and corruption)’ to a China with socialist foundations (democratic planning and equality).

29 thoughts on “Which way for China – part two

  1. Gidday Michael, very informative. I don’t agree that the law of value is not dominant. Here we have a regime restoring capital and transforming itself deliberately into a capitalist class. I don’t think the Chinese state distorts the law of value qualitatively differently to the Western imperialist powers. How else can you explain China’s rapid growth which combines cheap labour with new technology to out compete its rivals? The Western powers are envious because they have to pay lip service to democracy and the separation of powers so cannot implement such a streamlined state monopoly regime yet. Crisis and depression will push them towards fascist type centralised states unless we smash the states first. Anyway I think the Chinese workers will be there ahead of us.

  2. Thanks, Mike. You’ve opened a door here that has been very firmly shut for far too long. A door on a China where capitalism has not been restored, and where a restoration would make no economic sense. As you say about the World Bank report: “The report is also totally blind. It wants China to abandon its current economic model and publicly-controlled financial system, which brought it successfully through the world financial crisis, and instead adopt the very model that led the US and Europe into disaster.” Not to mention the Soviet Union – Russia is still recovering from its restoration, and two decades have passed.
    So I’ll stick my foot in the door and ask you for some clarification. You write: “So the Chinese economy is affected by the law of value. That’s not really surprising. You can’t ‘build socialism in one country’ (and if a country is under an autocracy, by definition). Globalisation and the law of value in world markets feed through to the Chinese economy. But the impact is ‘distorted’, ‘curbed’ and blocked by bureaucratic ‘interference’ from the state and the party structure to the point that it cannot yet dominate and direct the trajectory of the Chinese economy.” You also write: “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.”

    Is public ownership of the vast majority of companies and institutions and control of these by a single party enough to make a country non-capitalist?
    If not, what else is required?

    Is the only thing blocking the operations of the law of value in China interference by the state and party? If so, can a mode of production be changed and preserved by political decree?

    As I understand it, the law of value operates most powerfully when the whole of an economy (pre-eminently the world economy, but to some extent a national economy) is commoditized. Land, means of production, labour power. Surplus value is generated by every (productive, market-oriented) interaction between labour and the means of production, and this surplus value is transformed into various kinds of capitalist surplus (rent, profit, interest) over the whole economy and equalized out into chunks proportional to capital invested. So where do the boundaries go between commoditized and non-commoditized production in China?

    And what happens with surplus that isn’t transformed into profit? Assuming normal conditions of production won’t this mean that wealth equal to the average rate of profit (on the whole) remains within the system of production to be reinvested, or distributed as revenue not on the basis of ownership of a certain amount of capital but on quite other grounds? How do you view this “invisible” surplus? Disappearing completely into corrupt political and management pockets? Being ploughed back into production to a degree unmatched in capitalist economies?

    Or, and this could be even more important, serving to pump up a credit system backed by real wealth in a way that is totally incomprehensible to mainstream economics (let’s make that “to all economics except orthodox Marxism”). For decades now bourgeois economists have been gaping in disbelief at the “bad debts” incurred by non-capitalist economies like the Soviet Union and China, and predicting their imminent implosion. It hasn’t happened.

    One last thought in relation to all this… If underdeveloped and constantly embattled non-capitalist economies like the Soviet Union and China can easily outperform their underdeveloped and embattled peers (Indonesia, Brazil, India, for instance) over decades (not to mention the example of Cuba in relation to its peers in Central America and the Caribbean), and beyond this challenge the developed and “embattling” imperialist countries (the US, Europe, Japan) enough to keep them on their toes, mind their behaviour and strive to compete… well, if this is the case, what kind of impact would a non-capitalist state have if it arose in a relatively advanced and strategically robust country? Like Britain or Sweden?

  3. As usual a very informative and interesting article though I would say that in some cases vague. For instance “The law of value does operate in China..”. If it walks like a duck and quacks like a duck, you can be reasonably sure it is a duck. China is not the first country where the government exerts control over major economic activities. For example Saudi Arabia and Iran, etc. They’re all capitalist to the bone.

    “Property bubble” and “huge debts” in every capitalist society including that of China is a sign of an impending crisis because capital is not being accumulated rather it’s entered into speculative activities.

    Lending money to the US and the EU in order to sell its goods is not a sustainable model. China will not be able to transfer majority of the surplus to the US and the EU in the form of loans as well as wealth for a handful at home indefinitely. Yes on paper China has $3T but isn’t most of that held hostage by the US and other countries? I mean what would happen if China decides to redeem its money from the US?War?

    Chinese laborers deprived of the surplus they create can use some of it and that’s why we see such growing discontent among Chinese workers that’s starting to get out of control and has made the rulers really worried. The level of oppression has become intolerable for the workers. People like Bo Xilai can sense the danger it poses. It’s at a crossroad.Rulers realize that the old way is no longer practical. I’m expecting changes and upheavals.

    1. Cameron
      The trouble is that I am not sure it does walk or quack like a duck. China was born in 1947-9 more as an ugly duckling. Only it did not turn into a beautiful swan but something else, but not a duck. It’s a weird beast, as I say.

      As far as I am aware, neither Saudi Arabia nor Iran have huge state sectors outside the energy sector. One country is ruled by one ever-extending family that relies on foreign companies in joint ventures, the other by medieval mullahs in league with a capitalist sector. Sure they exert their influence but not on all the major investment and employment decisions of companies.

      The evidence of the Great Recession is also pertinent. The worldwide collapse of capitalist production affected all but a few countries. According to the IMF database, of the top 20 economies of the world, only six did not suffer a real contraction in output in the worst year of the slump (2008). China outperformed even those by some way. By the way, Iran did not do too badly (+3.5%).

      Real GDP growth (national currency basis)
      China 9.2
      India 6.8
      Indo 4.6
      Aus 1.4
      Arg 0.8
      Kor 0.3
      S Ara 0.1
      Bra -0.6
      S Afr -1.7
      Fra -2.6
      Can -2.8
      US -3.5
      Tur -4.8
      UK -4.9
      Ger -5.1
      Ita -5.2
      Mex -6.2
      Jap -6.3
      Russ -7.8
      By 2010, China’s real GDP was up 32% compared with 2007. Not even India can compete with that. And remember China has 22% of world’s population, not the handful that Saudi Arabia or Australia has. That suggests a weird beast different from a duck.

  4. I believe that market economy is confused with capitalist economy. In Chinese there is Capitalism. The workers sell their labour-power in exchange for a wage and the production and surplus value correspond to the proprietor of production means. The rate of surplus (exploitation) is faster than occident. The differences respect to market capitalism is that the proprietor is the state. The proposal of world Bank is in fact to mutate from a state capitalism to market Capitalism.

  5. Interesting. I read the World Bank Executive Summary concerning China. If the economy of China is not mixed, with areas operating outside the law system of bourgeois commodity production and its modern financial institutions, then the suggestion in the Summary make no sense and are fiction.

    If half of China’s economy is planned and half of the workforce is employed in these institutions, the economy is a mixture of capitalism and socialism in my estimate. Whether the planning is bureaucratic is irrelevant. A plan administered through a bureau system, where individuals essentially steal wealth does not give rise to the law system unique to bourgeois commodity production. Has China during the past 40 years suffered at any point from a cyclical crisis of overproduction? I am aware that thousands of factories servicing the export sector of the economy was closed tossing millions into the street. I am assuming that most of the workforce and economy was not impacted by the 2008 financial crisis.

    As I understand things Marx directly states that the law of value will still operate under socialism, but not communism. This is stated in Critique of the Gotha Program.

    On another note:

    New means of production or qualitatively different means of production, rather than class struggle, causes transition from one mode of production to next. This does not imply one does not fight. Nor does it imply a worship of technology. The contest of human will, classes and politics take place in a context. The tractor brings to an end the sharecropping system, changed land tenure and the social organization of labor in Southern agriculture. The struggle of the various agricultural laborers cannot cause transition or a qualitative change in the social organization of labor.

    In a real way the tractor destroyed the class of sharecroppers as a social force. Sure, more was involved than the tractor, like chemical and pesticides. “More” is always involved. The struggle between the sharecropper and his landlord – “his capitalist,” did not and could not bring the sharecropping system to an end. This same dynamic operates with a greater force when examining the mode of production and the primary classes defining the mode of production.

    People fight when they cannot win and then things change in such a way – qualitatively – as to create the conditions for the next society advance. The struggle between the primary classes of a mode of production drives the mode of production through all its quantitative stages of development. That is to say the struggle between bourgeois and proletariat has thus far driven the bourgeois mode of commodity production through its quantitative stages of development or caused the reform of the system.

    Everyone in America understands on one level of another the story of John Henry. John Henry is a story about the steam hammer displacing labor a man representing his group of workers or as it is called the existing social organization of labor. John Henry beat the steam hammer, but he laid down his hammer and died. The steam hammer was revolutionary and created the context for a qualitative change in the social organization of labor. The proposition that the law system internal to capital (i.e., the law of value production based on bourgeois property relations) brings the system to an end is a common error within Marxism. This error was revealed with the emergence of qualitatively new means of production created by the electronic revolution.

    The Marxism of the past century was in error. The Bolsheviks seized power and quickly discovered they were “industrial revolutionaries” on the side of the proletariat. All the doctrinaire learning went out the window. The only socialism possible on the basis of the industrial revolution is industrial socialism. Who was the most revolutionary, Lenin or Henry Ford? I answer Lenin only because I am a communist, fully aware that in 1920 Henry Ford’s methods of production – lifted from the Singer sewing machine company – were revolutionary. Ford was a capitalist revolutionary and fascist with backwards ideology.

  6. Waistline, please give us the relevant quotes from the GP.
    You write: “As I understand things Marx directly states that the law of value will still operate under socialism, but not communism. This is stated in Critique of the Gotha Program.” But “operating under” and “dominating” are not the same thing. And Marx never thought they were.
    Under slave-ownership the law of value operated wherever commodity production and exchange were present. Notable in manufacture for the market, commerce, and money-lending. But it didn’t determine the whole economic process. It was even more strongly present under feudalism, most especially in the capitalist enclaves of the city states (ex-Roman municipalities) like Florence, Venice or Augsburg. (Henri Pirenne is good on this.)
    Under capitalism the law of value determines the whole process (and we can sharpen this to say that if you deny the viability of value as the fundamental theoretical concept underlying the economic analysis of capitalism, you’re floating free in space untethered from reality, and might as well be a marginalist instead of a shame-faced pseudo-Marxist).
    As the development of the forces of production make the class struggle more and more a desperate rear-guard action by the bourgeoisie, as they fight like cornered rats to keep the proletariat from power and the forces of production from developing unfettered by the constraints of bourgeois production relations, then the law of value becomes sidelined to an extent varying with the degree of oligopoly, the impermeability of political economic barriers between countries, and most particularly with the presence of countries based on a non-capitalist (proto-socialist) mode of production.
    Mike is one of the few professional economists in a position to help us determine the progress of this tug-of-war between production and circulation on the basis of the law of value, and production and circulation beyond it, on the basis of cooperative planning in the perspective of a whole economy run and operated by freely associated producers. To determine the proportion of the world economy driven by the one or the other system of organizing the social production of humanity.
    Understanding the character and trajectory of China today is as important for the emancipation of the working class worldwide and thus humanity as understanding the Soviet Union was after 1917.
    Which is why this discussion we are having right here and now is so crucial.

  7. Louis P writes: “So is there any big difference between what China is doing and what Korea was doing under the Chaebol system in South Korea? If so, I can’t detect it.”
    None whatever, Louis 😉 except what we’ve been discussing throughout parts one and two of this thread.

  8. What we have to deal with here is a communist society, not as it has developed on its own foundations, but, on the contrary, just as it emerges from capitalist society; which is thus in every respect, economically, morally, and intellectually, still stamped with the birthmarks of the old society from whose womb it emerges. Accordingly, the individual producer receives back from society — after the deductions have been made — exactly what he gives to it. What he has given to it is his individual quantum of labor. For example, the social working day consists of the sum of the individual hours of work; the individual labor time of the individual producer is the part of the social working day contributed by him, his share in it. He receives a certificate from society that he has furnished such-and-such an amount of labor (after deducting his labor for the common funds); and with this certificate, he draws from the social stock of means of consumption as much as the same amount of labor cost. The same amount of labor which he has given to society in one form, he receives back in another.

    Here, obviously, the same principle prevails as that which regulates the exchange of commodities, as far as this is exchange of equal values. Content and form are changed, because under the altered circumstances no one can give anything except his labor, and because, on the other hand, nothing can pass to the ownership of individuals, except individual means of consumption. But as far as the distribution of the latter among the individual producers is concerned, the same principle prevails as in the exchange of commodity equivalents: a given amount of labor in one form is exchanged for an equal amount of labor in another form.

    Hence, equal right here is still in principle — bourgeois right, although principle and practice are no longer at loggerheads, while the exchange of equivalents in commodity exchange exists only on the average and not in the individual case.

    In spite of this advance, this equal right is still constantly stigmatized by a bourgeois limitation. The right of the producers is proportional to the labor they supply; the equality consists in the fact that measurement is made with an equal standard, labor. http://www.marxists.org/archive/marx/works/1875/gotha/ch01.htm

    Choppa Morph, if you are not a police agent then stop your insults and personal attack. I suggest not using the weapon of personal insult on this blog. Since you started this cop, you really do not want to engage men in a contest of personal insults . . . .Cop Morph.

    Lets stop now.

  9. “Under capitalism the law of value determines the whole process (and we can sharpen this to say that if you deny the viability of value as the fundamental theoretical concept underlying the economic analysis of capitalism, you’re floating free in space untethered from reality, and might as well be a marginalist instead of a shame-faced pseudo-Marxist).

    “As the development of the forces of production make the class struggle more and more a desperate rear-guard action by the bourgeoisie, as they fight like cornered rats to keep the proletariat from power and the forces of production from developing unfettered by the constraints of bourgeois production relations, then the law of value becomes sidelined to an extent varying with the degree of oligopoly, the impermeability of political economic barriers between countries, and most particularly with the presence of countries based on a non-capitalist (proto-socialist) mode of production.”

    Dear Sir, allow me to present a fundamental different view about America. Let agree right now that you are correct and I am wrong. Allow me to describe exactly the depth of my wrongness.

    The bourgeoisie in American did not face a proletariat in a contest over power during the past 70 years in America. In fact our imperial bourgeoisie has never had to face the American proletariat in a context over political power. Never. How did the development of the productive forces make the class struggle more and more a desperate rear guard action (whatever that means) for the bourgeoisie in America between 1932 and 1971? Pardon my being “”untethered from reality, and . . . a marginalist instead of a shame-faced pseudo-Marxist.”

    A non-capitalist mode of production means socialism in the context of transition from agriculture to industry or after the industrial revolution is underway. We have a different understanding of the meaning of “mode of production.” What in god’s name is a non-capitalist mode of production after the industrial revolution has fundamentally shatter the primacy of private property as landed property? If the transition Marx writes about is from bourgeois property to economic communism and socialism is a word that means transition from capitalism, what in god’s name is “proto-socialist mode of production?” Well in history “proto-socialist mode of production” meant NEP, which is capitalism.

    Sir, socialism is not a mode of production. Those folks who contend that socialism is a mode of production define mode of production as a property relation. Marx define mode of production as first and foremost a stage of development of means of production and then a corresponding form of property relations. All I do is define mode of production as first and foremost a stage of development of the material power of production, as this material power enters into antagonism with the more than less old static production relations.

    Marx writes about communism as a new mode of production and describes its general feature and law system. Communism – economic communism – is a new mode of production, whose means of production are characterized as post-industrial, or in laypersons terms an advance on the electro-mechanical process, which is the meaning of industrial. That is to say, “industrial” is what Marx write about in Capital Vol. 1 as a flywheel, transfer bar and electro-mechanical levers. Socialism is a period of transition from one mode of production to another but is not itself a distinct mode of production.

    The bourgeois mode of commodity production becomes a system on the basis of the industrial revolution. That is to say, the bourgeois mode of commodity production cannot become a system, or rather an economic system, based on handicraft or early manufacture because of the division of labor these stages of development of productive forces express. The bourgeoisie and proletariat, or rather modern proletariat, are terms defining property relations but they come into existence solely based on a certain stage of development of the material power of production.


    The “class struggle” as an answer to a concrete economic issues leaves the audience wanting.

    The American bourgeoisie has not been a cornered rat or behaving as a corner rate between 1945 and 1971. American is a big country with different regions developing at different rates. I live in the Rust belt. Detroit. My daughter who is 35 works in auto. I retired from Chrysler in 2001 and been a member of local 51 UAW for 41 years. My brother retired in 2009 with 41 years seniority of which 30 years was as a union rep and International Representative of the UAW. My dad, an electrician, passed with 38 years seniority at Ford Rouge local 600. My Dad brother, Leroy passed this February and had worked at Ford Rouge then migrated to Ghana to teach at the university. Leroy was a Pan Africanists and Marxist, whose outlook was shaped by the SWP in Detroit. It was natural that I would end up going to Debs Hall on Alexandrian and Woodward. My grandfather came to Detroit around 1919 and got hired at Ford Rouge. I have a little experience and knowledge about the so-called “class struggle.” The decisive battles in auto forming and shaping the industrial trade union movement were at Ford and Local 600 in particular.

    Simply because one believes in a concept of “class struggle” as the end all and last word defining the logic and movement of the proletariat does not make it so. For the record the history of all existing society is not the history of class struggle. Simply because you believe this does not make it so. There is a reason Engels added a footnote to this passage. Further society moves in class antagonism. Simply because you see things different is no reason to be insulting.

    The American bourgeoisie has not been cornered or faced a proletariat in a contest over power during my lifetime or that of my father and his dad. Why not state the facts without outlandish statements?

    The last great strike in auto was at my local union, local 51 in the mid-1990s. Before our strike that last great strike at Chrysler was in the 1950s. What class struggle are you speaking of? A strike against an employer is not the meaning of class struggle or rather society moving in class antagonism. I define class struggle as Lenin did. Do you want the exact quote Mr. Morph? Pardon, if I do not call a strike or development of the means of production, the “class struggle.” The bourgeoisie develops means of production under a specific law that arises as competition between capitals based on private ownership of the means of production, which in turn gives rise to the law of the tendency of the rate of profit to fall. To call these laws the class struggle is an approach that has never been helpful for me. I call this law dealing with competition anarchy of production.

    We can disagree without being disagreeable and hurling insults. The law of value cannot be vanquished by political fiat but it can be restricted, in my opinion. I simply do not know if China steel producing capacity operates based on the law of value, or rather bourgeois property relations with its private ownership of these means of production. I do not know. I stated I did not know to what degree bourgeois property relations governed the totality of production in China. I do not know.

    I do believe that the concept of state capitalism is bogus. If the state owns all the fundamental building blocks of the infrastructure of society, as this society is organized on the basis of the industrial revolution, and the law of value is restricted, and the aforementioned means of production are not governed and subjected to the law of anarchy of production, that is industrial socialism and calling it state capitalism means we (not you personally) disagree over the meaning of the state.

    Look Mr. Morph, the world is big enough to accommodate different mode of communism and different slants of Marxism. I am not of a Trotskyists orientation. I believe most of his writings are nonsensical. But then again, much of Soviet Marxism is simply obsolete. I believe that socialism existed in the Soviet Union and using the word bureaucratic is irrelevant. It is not as if a non-bureaucratic political system and economy is possible based on industrial implements.

  10. Sir, Mr. Morph

    I am comfortable with lenin. Here is the source of my error and wrongness. Of course you are correct. I do not consider the wage struggle the meaning of class struggle. which is why some Marxist started using the word antagonism and class antagonism to express the external collision between old and new classes. I’m going to stay with Lenin on this issue.

    “But what is this class struggle? When the workers of a single factory or of a single branch of industry engage in struggle against their employer or employers, is this class struggle? No, this is only a weak embryo of it. The struggle of the workers becomes a class struggle only when all the foremost representatives of the entire working class of the whole country are conscious of them as a single working class and launch a struggle that is directed, not against individual employers, but against the entire class of capitalists and against the government that supports that class. Only when the individual worker realizes that he is a member of the entire working class, only when he recognizes the fact that his petty day-to-day struggle against individual employers and individual government officials is a struggle against the entire bourgeoisie and the entire government, does his struggle become a class struggle. ‘Every class struggle is a political struggle’ – these famous words of Marx are not to be understood to mean that any struggle of workers against employers must always be a political struggle. They must be understood to mean that the struggle of the workers against, the capitalists inevitably becomes a political struggle insofar as it becomes a class struggle.” http://www.marxists.org/archive/lenin/works/1899/articles/arg3oit.htm

  11. Waistline, thanks for the quote from the Gotha Programme.
    What I’d like to point out here is that the remarks here are against utopian anarchist dreams of “from each according to his ability, to each according to his needs” the day after the setting up of a proto-socialist society. There are two axioms underlying everything Marx wrote. One is “Nothing comes of nothing” (no profit out of thin air for insubstantial things like “abstinence” or “responsibility”) and the other is “Like exchanges for like” (in capitalist society based on the law of value, in aggregate, all commodities produced are exchanged against commodities of equal value).
    Which means, in relation to the quote from the Gotha Programme, that the “deductions for the common funds” are equal to the surplus value of the whole of social production measured using the bourgeois yardstick of socially necessary labour time. This surplus value is gigantic, equivalent to the total profit appropriated by capitalists (and their governments) and “reinvested” (often in luxury buildings, the pyramids of our day), consumed as revenue (and how), or destroyed in war. So although associated workers “only” receive the equivalent for their labour power seen as a commodity, in part their labour power brings them much more wealth under the associated mode of production, and in part they receive vast wealth from the common funds in the form of education, health care, culture, public amenities etc etc.
    In the initial stages of the non-capitalist mode of production, this pattern of production and distribution will be hugely distorted (birthmarked, gory, deformed) by the relative lack of development of the forces of production and by the immense superiority in terms of wealth and power of the remaining imperialist countries dominating the world economy. We saw this in the Soviet Union, and we are seeing it in China.
    But since the capitalist mode of production is fighting an historically losing war against the socialist mode of production, our proto-socialist system is far stronger than decaying imperialism, DESPITE ALL APPEARANCES TO THE CONTRARY. These appearances are peddled by all bourgeois ideologists (including economists) as the truth. Our task as revolutionary Marxists is to expose this surface lie and prick it like a bloated wobbly bubble of sewer gas. The stench will be awful, but the view will be clear.

    Thanks for calling me a cop 😉 Next time back up your problems with my style with quotes and not just impressions.

    And when the hell did you ever see a cop argue about Marx’s economic theory at this level in these terms??? And if you do find one, recruit the bastard!

    1. In other words Marx is not talking about exchange value, i..e., value, in the material quoted. Simply because Marx states he is speaking of exchange value we are not to consider this. OK.

      The bourgeois mode of production, as a system, arises and becomes a mode of producing on the basis of the industrial revolution. The rub is that economic communism and capitalism can no more exist on the same foundation, than feudalism and capitalism.

      The bourgeois mode of commodity production is fighting a losing battle against qualitatively new means of production. What we are experiencing is not a crisis of overproduction. Our entire society is being torn from its foundation. What Marx called the “advance of industry.” We are experiencing social revolution exactly as Marx described it in his Preface To a Contribution . . .Critique.

      The question was under what condition is the law of value rendered inoperable. Political fiat cannot change an economic law. Something has to begin the destruction of the law of value as a condition for its withering. If the law of value arises on the basis of private property relations, as fundamentality, then property is the key to its dissolution. If the law of value arises on the basis of the division of labor, as fundamentality, then something in the division of labor is the key to its dissolution. Everyone knows that real life contains no abstract categories.

      If the whole world went socialist in the past century the law of value would still operate due to the state of development of the productive forces, i.e., the division of labor, especially in the agricultural sector of world economy. The story of the Soviets is pretty clear on this issue. The small agricultural producer cannot alienate their products, except on the basis of exchange, because it is their product.

      We simply have different points of view.


  12. Waistline, just to clarify.
    I wrote: “Under capitalism the law of value determines the whole process (and we can sharpen this to say that if you deny the viability of value as the fundamental theoretical concept underlying the economic analysis of capitalism, you’re floating free in space untethered from reality, and might as well be a marginalist instead of a shame-faced pseudo-Marxist).”
    The “you” here is general, and not you, Waistline. It refers to any and everyone who denies the fundamental role of value in Marx’s analysis of capital. Who denies that it is axiomatic, and refuses to see what it means to appropriate a smidgeon or two of Marx’s work as empirically handy while dismissing his theoretical work as a whole as metaphysics based on a delusional concept of value. It means that your own economics becomes a Frankenstein’s monster –scraps of meat taken from here and there and stitched together — but one lacking a skeleton – the value theory. It’s Lady Gaga’s steak dress without Lady Gaga.
    Maybe I don’t express myself as politely as I might. But I don’t lash out at individuals unless I think they deserve it (and for good reason). And so far I have no reason to lash out at you (despite the cop comment) — I appreciate your contributions here. And it’s not in our tradition to sit around sipping tea and making small talk. A little pointed invective is as much part of our game as a solid tackle is part of ice hockey.

  13. I think the issue of a definition of capitalism is important to clarify if something fits this.
    I repeat the basic points I made in the comments on first part of Michael’s China articles.

    Key questions
    1. Who owns the commanding heights of the economy?
    2. Does the market control or planning?
    3. Is political economy hostile to capitalism or supportive.

    1. China’s commanding heights are in public ownership. Overwhelmingly! (This has been generally misunderstood for 10 years or more, but it is now widely accepted by scholars and economists that they were wrong)

    2. Planning completely dominates economic activity, meeting plan targets, (not making profits) is what rewards and the promotion or demotion of managers and officials is based on. And when there is talk of SOE profits guiding their activity this is nonsense, these ‘profits’ are manufactured by plan, by amending the law of value to serve SOEs. By cheap bank loans (really grants), controlled factor prices, guaranteed procurement etc. etc.

    3. A yes and a no, but more of an ingrained no. If capitalist want to make money buying and selling houses, this is fine for a while, then bang, no more permission. If capitalists want to pay ridiculously low wages, fine for a while, then Bang, 2008, a new labour law wipes out the ‘freedom to pay as little as possible’, and tens of thousands of private companies close down.
    In freewheeling Wenzhou many capitalists have now run for their lives or even killed themselves. A wealthy capitalist currently faces the death penalty for ‘raising money’ outside of the state! Not normally a crime under capitalism! Where is the capitalist legal system to protect her from a bullet in the head? Capitalists have no security for property, recently mines, airline, postal services have been renationalised. Chinese capitalists are on the retreat not on the march.

    I think the increasing strength and militancy of the working class both ‘in and for itself’, is the key to understand the relation of forces that has generated this specific system. China’s system is not something we should study with the mindset, that condemns it by spontaneous impulse.

    Concrete concepts of how a socialist China can and should develop are needed, rather than the standard reflex tone of left wing sniping that we are often accustomed to. Here we have a non-capitalist economy that really works, we should ask how can it be improved. How can the workers execise their democratic rights? Which, in Chinese law, includes the right to elect and recall the management.
    How can one condemn China’s bold green energy policy? Surely credit should be given where credit is due?

  14. Getting back to China. Marxists who deny that the law of value prevails in China are proposing a hybrid economy where the LOV is subordinated to the plan. This is possible briefly in a healthy workers state. Not so in a bureaucratically degenerate workers’ state. There can be no efficient allocation of labour time when the plan is managed by a bureaucracy. Stagnation follows. Hence the bureaucracy’s interest is to convert itself in a capitalist class by opening up to the LOV operating on the global market. Once the state officially allows the LOV to enable global prices to apply to China capitalism is restored. Since that state is already centrally organised and can manage to combine cheap labour with advanced technology the rate of exploitation and accumulation is extraordinarily high. Only on that basis can we explain China’s remarkable growth rate and expansion into the global economy. China is not only capitalist, it is super-capitalist, and hence imperialist.

  15. Waistline – It’s not a question of you and me “simply having different points of view”, it’s a question of you and Marx having different theoretical understandings of the relationship between means of production and modes of production.

    Raved (and I’m sorry I got swept past your first comment, so to say) – In China (as was the case in the Soviet Union) we have proto-socialism – a situation in which the mode of production is fundamentally non-capitalist, but in which (to use Preobrazhensky’s term) primitive socialist accumulation is taking place in the teeth of political and economic aggression from an imperialism that still dominates the world economy. The process is further distorted by political and economic aggression WITHIN the new state where the interests of imperialism are promoted by its counter-revolutionary agents in the bureaucratic regime – as Trotsky spells out in The Revolution Betrayed. However, as long as the bureaucracy (and its twin the military) as a whole is predominantly dependent for its power and privileges on the non-capitalist state, it will defend this state. It is tearing itself to pieces this way and will either be dissolved by a resurgent revolutionary socialist workers movement or capitulate to imperialism and consummate the political counter-revolution with full restoration, that is a socio-poltical counter-revolution, as happened in the USSR/Russia. Trotsky makes this alternative very clear in the Transitional Programme of the Fourth International.
    You write that this view holds that China is “a hybrid economy”. That is correct as long as we remain clear that this involves a single dominant socio-economic system incorporating elements of another system within it. That is, not so much a mongrel, as a root system and stem with an alien organism grafted onto it. You also write that in this view “the LOV is subordinated to the plan”. This, however, is nonsense if you equate a non-capitalist society with a smoothly functioning plan. If a non-capitalist society is equal to your idea of “the plan” as the “efficient allocation of labour time”, then imperialist corporations are non-capitalist because they allocate labour time with extreme efficiency (within certain bounds), and we have never ever seen a non-capitalist society of any description because we have never seen such efficient allocation of labour time in any existing society.
    This is perverting both Marx and the evidence of our own eyes.
    First our own eyes – we see China allocating labour time more efficiently than comparable capitalist countries (eg India) and even than imperialist countries, while avoiding (as Mike R and Hydeparkspeakes note) the catastrophic crises of overproduction these other societies have suffered. Not very efficiently compared to a perfectly efficient allocation, but MORE efficiently. As a whole.
    And secondly Marx, because as I showed by the quotes from Capital III ch 27, he already saw the non-capitalist character of the operations of joint-stock companies before 1867. That is, a hybrid economy dominated by one mode of production (capitalism) but with a new and superior mode of economy grafted on to it (or growing within it), that is the economy of associated producers. So he had no problem whatever envisaging this kind of setup. If imperialism is a duck with a swan grafted on to it (or a dragon pregnant with a unicorn ;-), then non-capitalist societies, proto-socialist systems, are swans with ducks grafted on to them (or unicorns still fighting their way free from the stinking placenta and rotting remnants of the dragon they have emerged from).
    This is the economic side of things. The political is very important too. Despite all appearances and a judgement that a political counter-revolution had been carried out in the USSR, Trotsky in the Revolution Betrayed insisted that it is still a workers state, ie non-capitalist. While others were claiming it was fascist or state capitalist. (Or if they were Stalinist stooges, fully-fledged socialism.) We have since seen a genuine socio-economic counter-revolution in Russia, and the convulsions involved. There is no principled difference between Trotsky’s insistence that the Soviet Union was still a workers state and our insistence today that China is still a workers state. Neither you nor anyone else has yet demonstrated that a socio-economic revolution has taken place in China. Capitalist techniques including certain legal entitlements to profit, sure, but nothing turning the country inside out as happened and is still happening in Russia.
    Until you can prove beyond reasonable doubt that this has happened then either you hold that China was never a non-socialist society, or you are wrong about its recent history.
    So convince me.

  16. China reporter comments were extremely interesting, without the ideological bombast.

    The law of value basically states like amounts of socially necessary labor exchange, one of the other. Under the bourgeois mode of commodity production, the value relation allocates labor and resources in production based on profitability. That is to say what is profitable to the individual producers or the indivual owners of means of production and purchasers of wage labor. Thus, planning is not administering in the meaning of political economy. Whether the plan is administered in a bureaucratic way is irrelevant to the question, “does the unrestricted law of value hold sway in the economy of China and if so to what degree.”

    Planning means determining deployment of resources and labor towards definite ends. This determination is made without regard to what is purely profitable to the individual owners of the means of production. Since a political law cannot abolish an economic law, the question for me is the “unrestricted law of value” versus “restricted law of value.” That the individual must work as condition for consumption means they are still subject to the enslaving subordination tot eh division of labor or what the same, the value relation is. Socialist planning means deployment of the social power of capital, outside the law system that establishes anarchy of production and a hand full of associated laws of bourgeois production. How this planning is administered and the degree to which the creative energy of the masses is expressed in proletarian democracy is irrelevant to the economic law of value. While important to me, the content of political liberties as the cornerstone of the political phenomena of the citizen – democracy – liberty cannot override, determine or define an economic law based on labor input.

    Value is a social connection amongst people, expressed in the buying and selling of commodities. This social connection is the value relation or the law of value. Value exists in society where people are organized with a division of labor for the production and distribution of goods and services. The value relation serves to allocate labor power and other scarce resources for both production and distribution under conditions where there is insufficient labor power to satisfy the needs of all. Value in this sense does not exist when humans live in isolation, or when a person produces only for his or own personal use. The value relation express, or rather is the fundamental law of commodity production. This law arises on the basis of the increase in labor ability, enhanced and increased in the division of labor in society, making it possible for human labor to produce different things simultaneously and for the individual to produce more than they consume.

    Enough for now


  17. As previously stated, I have followed the writings of Henry C.K. Liu, Chairman of an investment firm for the past decade. Also regularly consult the writings of Michael Hudson.

    “For example, an important element of innovation in Mao’s revolutionary strategy is the capturing of the full economic advantages of abundant labor in the Chinese economy for nation-wide socialist construction on a scale never attempted in modern history. Mao aimed to eliminate surplus labor in the Chinese socialist economy by banishing unemployment. Unfortunately, this strategy has been distorted since 1979 to turn into a policy of bringing into existence a new laboring class of exploited, poorly paid migrant workers from rural regions to overcrowded urban centers that are dependent on foreign capital to finance the overblown export sector, leaving rural regions underdeveloped for lack of domestic capital despite, or because of, a national trade surplus denominated in fiat dollars that cannot be used domestically in China. Inequality of income and wealth has deterred China from its effort to increase the rate of domestic capital formation without undue restriction on the rate of rise in mass consumption. China today is faced with a serious unemployment and underemployment problem. The most serious underemployment comes in the form of low wages on all levels.”

  18. Seeing as South Korea is one of the most technologically advanced countries in the world, with a top 5 education system, it seems the state capitalist model can go much further than middle income stagnation. The World Bank basically doesn’t know what it’s talking about.

  19. Choppa, quoting you: “This, however, is nonsense if you equate a non-capitalist society with a smoothly functioning plan. If a non-capitalist society is equal to your idea of “the plan” as the “efficient allocation of labour time”, then imperialist corporations are non-capitalist because they allocate labour time with extreme efficiency (within certain bounds), and we have never ever seen a non-capitalist society of any description because we have never seen such efficient allocation of labour time in any existing society.”

    I am the one making a distinction between a healthy workers state and a degenerate workers state. Why not stick to the scientific concepts? I specifically say that only a healthy workers state can plan efficiently (which means to eliminate scarcity) and create the conditions for socialism. And only a healthy workers state can subordinate the LOV yet only briefly because the LOV unless replaced by a comprehensive plan will subvert the plan.

    On the other hand a degenerate workers state’s plans create stagnation because they don’t allocate efficiently on the basis of social need. This was the experience in the USSR and China and explains why the LOV was reintroduced to stimulate the economy. In both countries there has been a long period in which the LOV was able to undermine the plan, but the decisive qualitative change came in 1992 when in both countries the state openly promoted the LOV to revalue the production of uses values as exchange values.

    Bourgeois plans do not produce efficiently because capitalism causes crisis and stagnation, i.e. the subordination of use value to exchange value. If bourgeois firms could produce efficiently then we would have long junked Marx and all be living in a paradise on earth. But given the collapse of the bureaucratic plan the CCP was forced to restore capitalism, and of course they cannot escape capitalist crisis and stagnation.

    You method is empiricist pastiche. You invent a global transitional mode of production to escape the charge that socialism cannot be built in one country. You credit the Chinese bureaucracy not only with making a transition to socialism possible in China but also with leading a global transition. Where is the working class in all this?

    All of this invention is to deny the material reality predicted by Trotsky, and that is that the degenerate workers state, unless rescued by a political revolution, would restore capitalism via state capitalism. So in the case of China we see precisely this. The restoration of capitalism has allowed huge growth because, unlike the established imperialist powers which face a crisis of overproduction, China has cheap resources including labour power, and because the restoration was carefully steered from above by the CCP, the imperialists were required to transfer technology. The result is that China’s rapid growth is due to this exceptional combination of factors and does not require the introduction of far-fetched inventions to explain.

    Chinese capitalism has already accumulated much surplus capital some of which is being put into internal development, but much is now exported as FDI to take advantage of cheap raw materials and labour power. The capitalist laws are already in motion and China too will come up against the basic contradiction of capital – use-value vs exchange value.

    Marxists need to get real and instead of living in fantasy land in which some form of market socialism is being delivered by the Chinese bureaucracy, recognise that the Chinese working class is today the revolutionary class because it is being driven by the concentrated contradiction of capitalism in the most dynamic imperialist power, and capable of overthrowing the Chinese ruling class and leading the global socialist revolution.

    1. The revolutionary class in China and the world remains the proletariat. I do not believe for a moment American Marxists have lived in fantasy worlds, but have grappled with difficult question even when they were wrong. Why not speak in clear terms without the thick ideological sound bites and jargon?

      Scarcity is not created by bureaucracy, bad planning or inefficient administration of things. Bad planning and bureaucracy creates shortages. A shortage is not scarcity.

      Scarcity in political economy – in my neck of the woods – is a concept of human development i.e., history. Shortage is not. It is the passing of generations measured against the accumulation of productive forces that gives scarcity a meaning. Scarcity as a category of political economy is a state of development of productive forces not sufficient to emancipate the individual from their enslaving subordination to the division of labor. Shortage means exactly what is implied in the word “short.”

      Scarcity in the Soviet Union was an issue of the development of the productive forces, in a country of small peasant holdings, first and foremost. A country of small peasant holdings implies several things, but more fundamentally defines the stage of development of the means of production as handicraft and late stage manufacture at best. Then, the issue of international division of labor played a secondary role, although industrial society is characterized as a society of scarcity, in its international dimensions. Administration or bureaucracy cannot create scarcity in human society, only shortages which exacerbate scarcity.

      Scarcity is a stage of development of means of production, rather than a numerical concept of quantity, “how many widgets,” theft of property and resources or devoid of the historically specific quality of productive forces. As long as the individual is compelled to labor as the condition for distribution of the social product, the law of value operates to some degree and scarcity has not been eliminated from history. Thus, for a section of the Marxist movement – the majority of the past century – the question of value was understood as operations of the unrestricted law of value, rather than the existence of the law of value. One never has to agree with a majority opinion but if one is serious lets aim at serious talk rather than who has the one true God.

      Scarcity, as is the case with abundance, are concepts deriving meaning riveted to development of the means of production i.e., division of labor and/or economy and science, rather than the political form of the state or the bureau system. I personally deploy both concepts riveted to what Marx wrote about the division of labor, abundance and freeing the individual. I seek agreement with no one, ever. But I do try and reference everything in Marx, which is relevant to what he wrote. My point is that the rule and domination of the bureau system, which Lenin called the “red bureaucracy” does not create scarcity. A proletarian state cannot create scarcity, which in turn means government cannot create scarcity only shortages. Thus, corruption, rule and domination of the bureau system, theft and privilege have next to nothing to do with enacting a plan that restricts the law of value. Corruption and rule of the bureau system has profound significance for the population and the ideological steadfastness of the vanguard of the proletariat and the willingness of the people to fight and defend socialism, but corruption cannot create scarcity. Only shortages.

      Communist economy arises as the result of the destruction of the value relation as governing production and distribution. Humanity leaves the long epoch of scarcity with the development of means of production powerful enough to “emancipate the individual from the enslaving subordination to the division of labor.” (Marx)

      Economic communism as a mode of production destroys scarcity because as a mode of production it comes into existence with qualitatively new productive forces; the electronic revolution and the robotic economy. The unfolding revolution in the productive forces, including the biogenetics revolution, offer revolutionaries an opportunity to measures Marx observation based on emergence of a new technology regime. In the past century, society could have not advanced to economic communism on the basis of the industrial revolution or rather the electro-mechanical production process, even under a theoretical model of world socialism; a model that was impossible for several reasons. That is to say it was impossible to solve the issue of scarcity anywhere on earth of the past century based on the “international revolution.” This is not to imply the proletariat does not fight.

      Modern “bourgeois scarcity” has been the “control of scarcity” through allocation of resources based on value or what is profitable to capitalist economy. Scarcity is rooted in the division of labor and controlled based on property relations.

      Bourgeois property relation, along with its corresponding ideology of scarcity, is not a law of nature and does not reflect the visible truth about the real world. This ideology proclaims that “there will never be enough of the blessings and good things necessary for prosperity, such as land, resources, even food and water, let alone oil, to go around for all to enjoy freely.” (Part IV: Scarcity Economics and Overcapacity http://henryckliu.com/page8.html)

      Various radical ideologies of the past century that view scarcity as the result of bureaucracy, or specifically rule and administration based on the bureau system and its domination, more often than not describe shortage based on administration rather than a state of development of productive forces powerful enough to break the age old subordination of the individual to the division of labor. In the case of the various Trotskyists ideological adherents their purpose was to prove that the Soviet Union was not socialist in everything fundamental to its industrial economy, because the society did not conform to their view and definition of socialism. Thus, the meaning of value and scarcity become issues.

      In my opinion the Chinese working class is not the key to the fate of the revolution in China. The proletariat of China is key.


  20. Replying to Raved :

    There are a couple of observations in your comment :

    1) You are ignoring the political dynamics of a restoration. When you state that the bureaucratic plan collapsed and the ‘bureaucracy was forced to restore capitalism’ you don’t explain the political dynamics of this transition. The political authority of the old bureaucracy should have been eliminated completely. In the Soviet Union one of the immediate outcomes was the destruction and eventual banning of the Communist party there. The new bureaucrats did not require the old communist party as a vehicle for restoration and simply created a new bourgeois party. The same party which continues to rule Russia today under Putin’s leadership. This has happened more or less along the lines on which Trotsky predicted. What did not happen was an upsurge by the working class of russia to prevent restoration. The general strike which did take place happened only after all the political conditions for restoration were in place and by which time the process became quite irreversible. What was clear from the Russian example was that the political changes preceded the economic changes. Thus, we see the dynamics of a counter-revolution taking place in Russia which reverses the transition from the superior mode of production *( Socialism ) to the inferior mode of production *( Capitalism ). This of course came with necessary political consequences in the super-structure. Has such a thing taken place in China ? Not by a long shot ! the CCP which has ruled China since 1949 still rules China, the old Chinese constitution is still in force, the military machinery, the bureaucracy, the state machinery is almost as it is. The economic changes should therefore be interpreted as only superficial which hasn’t resulted in any political changes. This prognosis would be corroborated by the above article.

    2) Slapping labels. You slap around the labels of LOV, FDI and exportation of Capital without realizing their dynamics in general. All this while asserting that the Law of Value has in fact firmly entrenched itself in China and that the export of Capital is an example of this entrenchment. What according to you would constitute exportation of Capital ? the Soviet Union also sent aid, loans, and investments in various countries around the world. Would you consider this to be evidence that the Soviet Union was Capitalist ? As a corollary to this of course you would have to presume that the consequence of the revolution not only subserves the law of value within the country it takes place, but outright wipes it off. Yet, you say that socialist transformation would be impossible within the confines of one country ? Let’s say a single country has underwent a Socialist revolution which dramatically changes all the political equations of that country and it begins undertaking economic transition. Do you think that such a transition would take place under pure confines from the world imperialist framework where the law of value is still supreme ? The author in the above article has shown how the 5 year plans of the party are still the driving force of the economy determining allocation of resources and controlling surplus creation in China. The situation is more akin to the NEP in the USSR than post restoration Russia where Capitalism lived under suffrance and political power was in the hands of the Bolsheviks. The Bolsheviks under Lenin of course were committed to revolutionary transformation of Russian society and the world revolution, the Chinese bureaucracy is not interested in any of those.

    3) A dangerous proposition. Hidden beneath your words of course is the very dangerous objectivist assertion that the gradual progress of objective factors would steer society towards revolutionary *( or counter-revolutionary ) transformation by some tweaks in the economic sub-structure. Effectively, your putting forward a theory of revolutionary reformism ! This is a very destructive kind of anarchism which leaves all concrete talk of revolution in the air and puts forward only the objective realities in their outward appearance as primary. In China’s case that would mean the apparent supremacy of private companies and foreign companies in the Chinese economy and the exportation of Capital. It is exactly this kind of objectivism which almost destroyed the left after the 2nd world war. Mandel and Lambert come to mind..

  21. I don’t fly with the “Arrighi” perspective on China – with the stereotypical and conventional counter-position of “state” and “private” sector, it is but a left mirror image of bourgeois ideology :

    1) CMOP is dominant in China, not because of its absolute quantitative size, but because it is the sector that has determined, and continues to determine, the trajectory of Chinese development;

    2) Almost all the public factions are “capitalist roader”, Bo is simply a capitalist (“state” or otherwise) practicing the old tried and true demagoguery first poineered by the capitalist Democratic Party in the U.S.;

    3) The LOV is not determinant in every instance in any capitalist country, no matter how “advanced”. The structure of consumption, in particular, while conditioned by the LOV and the subsequent circuit of capitalist production, is not directly determined by it. This is what lies at the heart of the economic problems of the U.S. (obviously seen in capitalist terms), and is why Apple prefers to exploit workers who won’t be expecting singe family homes, 2 giant tonka trucks for their 2 hr commute, 40″ flat screen TVs, etc., because they are bunked up in a giant Labor Camp with a 10 minute commute.

    4) The CCP apparatus is the primary site of the RENTIER sector of the “new” Chinese bourgeoisie, particularly when it comes to access to the land (vide the present “property bubble”, of which there is little comment on here). But in general, when it comes to access to the “people’s common property” (the “state sector”), the apparatus has its palm grease hand out at every juncture, as any Chinese can tell you as they complain of “corruption”

    5) It is true that the Chinese capitalist system represents a new and innovative economic and social structure that has been conducive to capitalist accumulation in historically unprecedented ways. But as I mentioned before, so was the U.S. from the 1870’s to the 1950’s, in ways that Marxists STILL don’t fully understand, even as they (me included) seek to come to grips with the next capitalist locomotive barreling down the tracks. Is China then anything *qualitatively* new in this regard? I say no.

    So for that we have to do better than this!

  22. I also don’t fly with the “traditional” Trotskyist perspective either, and I come from the Trotskyist current.

    For the historic character of the social formation as a whole, it is quite secondary whether or not the leading edge of the restorationist counterrevolution is political or economic in nature, though that does have its concrete consequences, as the Putin faction, regretting the breakup of the USSR and casting its eyes enviously at China (while thanking its lucky stars that Russia can still be “operated” as a giant mineral extracting rentier state), will tell you. And btw, last I heard the successor party of the old Soviet CP, the CPRF, is not only legal but a vital prop for the Putin regime.

    The CCP has been practicing restoration “from below”, first developing a mature bourgeoisie, then applying the political icing on the cake when the time comes, or at least that is the “plan”. In this they are following the example of…get ready…the United States, which after all was originally supposed to be a Utopia of small agrarian producers a la Jefferson – a pre-capitalist social formation and state superstructure that the emergent bourgeoisie were able to keep intact (including the 2 parties) while enacting an immense economic transformation that made world history.

    The superstructural contradictions of the CCP are obvious more severe than that of parties resting upon a large layer of petite-bourgeois farmer settlers due to the historic origins of the CCP, but that only means this party is less likely to survive the complete counterrevolution.

    In general, all the former worker’s states were considered *transitional* social formations in Trotskyism (correct), meaning they all contained bourgeois and socialist elements without either being determinant of the social formation as a whole. Second, Trotsky located the center for bourgeois counterrevolution in the party-state apparatus itself (correct), and indeed even in capitalist social formations (US, France, Britain) the *rentier* bourgeoisie clusters around the State and Party apparatus for reasons I hope are obvious – they aren’t representative of productive capital. But they are *capitalists* partaking in the distribution of the total surplus value.

  23. Broadly I agree with Matthew.
    The key to all this is that it happens in the epoch of imperialism where state monopoly capitalism is the concrete form of capitalism. China’s great capitalist leap is due to its CP being led by the capitalist roaders and of course its virgin rebirth of state monopoly capital. So Matthew is correct about the state managed cool long march of the LOV through the social relations. But from above not below.
    re Hind’s blueprint of the backwards film. The dogmatic Trot view of films running forwards or backwards is just denialism. The Chinese film was like a long boring soap lasting 40 years. So we all went to sleep except the Chinese workers an peasants who resisted all the way.
    Yeltsin stood on a tank and banned the CP. So what? Hollywood wanted to break the box office. Don’t credit Trotsky for the script. Russia is also imperialist. Capital exports don’t exist before restoration because it aint capital. After restoration and LOV it is capital.

  24. Beat me to it, raved – after reading the entire exchange i was going to say the same.

    “I am the one making a distinction between a healthy workers state and a degenerate workers state. Why not stick to the scientific concepts?”

    Answer: No! 🙂 But this conversation is very revealing of two different attempts to (re) write the still recent history of capitalist restoration. Interesting indeed – let the battle be joined!

    As i recall Trotsky predicted that the bureaucracy embedded in the party-state apparatus was counterrevolutionary in the (now past) present, and would be the agent of restoration in the (now present) future. In the former USSR they did it in a formalistic idiotic way where that broke themselves up and then had to partially reconstitute themselves within the state apparatus. In China they did it more intelligently, converting themselves en bloc int a parallel layer of bourgeois and petit bourgeois rentiers.

    The huge landed property bubble is the latest symptom of the onset of an overaccumulation crisis – there is a reason capitalist crises always seem to break out on the land! China famously build an entire city the size of San Diego with nobody in it.

    Question: Now is that “capitalist” or “socialist” waste? If you are a right wing libertarian, you know the answer.

  25. A small issue: it is not correct that the “vast majority of employment” is with the state or the public sector. Not that this amends the basic theses here, but it is important as regards the everyday experiences of the working masses. State and public sector employment is probably about 112 million.

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