Trading economics the Chinese way

In my view, the Chinese economy remains at a structural crossroads.  The state and state enterprises continue to dominate the economy in investment, employment and production.  That means that foreign capital, domestic private capital and market forces do not hold sway, even though they have been increasing in weight and power over the last 30 years.

My view is controversial in Marxist circles. The vast majority of Marxist economists and ‘experts’ on Marx’s ‘theory of the state’ reckon that China is capitalist or ‘state capitalist’.  But for me, the class nature of the Chinese state remains open.

All I would add at this point is to remind readers of the data that I published in a past post on the sheer weight of the public sector and public assets in the Chinese economy.

The IMF has published a full data series on the size of public sector investment and its growth going back 50 years for every country in the world.  It shows that China has a stock of public sector assets worth 150% of annual GDP.  Only Japan has anything like that amount at 130%.  Every other major capitalist economy has less than 50% of GDP in public assets.  Every year, China’s public investment to GDP is around 16% compared to 3-4% in the US and the UK.

There is nearly three times as much stock of public productive assets to private capitalist sector assets in China.  In the US and the UK, public assets are less than 50% of private assets.  Even in ‘mixed economy’ India or Japan, the ratio of public to private assets is no more than 75%.  This shows that in China public ownership in the means of production is dominant – unlike any other major economy.

But the IMF data also show that, while public sector assets in China are still nearly twice the size of capitalist sector assets, the gap is closing.  Private (capitalist) sector investment stock is growing faster than state sector assets.

In this post, I want to show that, because the Chinese economy is balanced between the power of the state and the market, this is increasingly reflected in the ideology and economic thinking of Chinese officials and academics.  There are still many academics in Chinese universities that hold to what they think is Marxist economy theory and categories.  But there are many more, particularly officials in government and state enterprises that have been educated in ‘Western’ universities, who have long abandoned a Marxist view and opted for mainstream neoclassical or Keynesian theory.

A recent striking example is Wang Zhenying, director-general of the research and statistics department at the PBoC’s Shanghai head office and vice chairman of the Shanghai Financial Studies Association.  This leading Chinese state banker recently summarised his economic views from his Chinese language textbook on economics (for Chinese students) in the Financial Times of all places.

Wang tells us that “Crises destroy, but crises also create.”  He means that “the outbreak of each crisis gives rise to new economic theories. Marx’s theory of Surplus Value was created amidst frequent economic crises in the late 19th century and Keynes’s revolutionary theory was put forward during the Great Depression in the 1930s. Today, with a worldwide financial tsunami only now receding, people are expecting a new economic theory in response to the failure of the pre-crisis mainstream.”

So for Wang, Marx has had his day in the theoretical limelight (ie 19th century) and for that matter so has Keynes (2oth century).  The recent global financial crisis needs a new theory for the 21st century.  Marx and Keynes apparently have nothing more to offer.

And what is this new exciting theory that Wang is proposing to his students to explain the world economic crisis?  He calls it ‘Trading Economics’.

What’s this?  Wang: “Trading economics” is one new theory emerging against this backdrop. Mainstream economics deduces the macro whole by extrapolating from the behavior of individual “representative agents”. Trading economics replaces this with a systematic and comprehensive analysis approach. It stresses that in an interconnected world, the interaction between trading subjects is the fundamental driving force behind the operation, development, and evolution of economic systems.”

Well, I am still no wiser.  Wang explains that mainstream neoclassical theory is stuck with ‘representative agents’ who have ‘rational expectations’ who maximise utility and profits, while market prices move up and down to achieve equilibrium.  As Wang says, this bears no relation to the reality of modern economies and never did.  In contrast…

“Trading economics chooses a different path. Everyone participating in economic activities is put in a specific organisational structure. As a result, their behaviour becomes affected by culture, morality, property, and system. There is no “economic person” like Robinson Crusoe in trading economics. Trading economics only has organizations with specific internal structures: households and enterprises. This is the first step to bring economic theory back to the reality”.

This all sounds promising.  Wang is going to ‘rethink’ economics and return it to reality.  And what does he come up with – behavioural economics.  “Behavioural economics experiments have demonstrated that choices are characterised by variety — there is no single answer to all situations.”

Now this is not so promising.  Economics is reduced to considering each situation or problem as having a different answer.  That would suggest we cannot find any generalised laws about the world economy and its crises.

According to Wang; “Trading economics differs by recognising that different people have different information, in part because they have different experiences. So while each trading subject seeks maximum profits, the “maximum” differs from one subject to another, even when trading and constraints are the same. Therefore, if the behaviour model in neoclassical economics is the absolute maximum, then it is the relative maximum in trading economics. This is where the difference lies.”

Hmm. I am still none the wiser.

What Wang really seems to be arguing for is free trade and international integration. “From the study of the development rules of economic system, it is found that global economic integration is neither the innovation of a single politician, nor a strategy implemented by a certain country to pursue its own interests. Instead, it is the only option following the development rules of social economic system. Today’s world has shifted from an isolated island, through small-world development, to a network without marks. To achieve comprehensive progress and development, the world economy must promote the integration of trading network among countries. We need to listen to the warning of trading economics in a world awash with anti-globalisation thoughts.”

This is shades of the very line presented by President Xi at Davos 2017, where he claimed that China is the leading globaliser. Now the economic theorist of People’s Bank of China is offering ‘trading economics’ to support Xi.

A key feature of Wang’s ‘trading economics’ is that it rejects the idea of looking for causal relationships between economic variables.  He refers to the ‘masterpiece’ work of right-wing monetarist Milton Friedman’s analysis of the cause of the Great Depression of the 1930s.  Friedman argued that the failure of the Federal Reserve Bank to control the money supply properly was the cause.  The banks collapsed because of an unnecessary monetary squeeze.  But others argued that the economy collapsed because a change in ‘expectations’.

Wang concludes that “It is impossible to find a single factor among various events to explain the great contraction”. You see it’s just too complex for ordinary mainstream theory.  So Wang says we must “give up on simple causal relationships”.  Instead, using ‘trading economics’ we can get “a concrete structure through the trading network.” Then, apparently, “various possibilities of economic operation can be predicted, including the fluctuation of economic cycles, the probability of crisis, assessment of policy effects, etc.”

Wang provides no evidence in his FT article for his claim of the power of prediction enabled by trading economics.  And here is the nub of his theory, namely its close “connection between macroeconomics and behavioural economics.  According to Wang, “The behaviour of each trading subject and the ways in which they react to external disturbances can be informed by the research of behavioural economists and psychologists. The economic operation simulated in this way is better targeted and the analysis has more solid experimental foundation.”

There we have it.  Far from carrying out empirical research for cause and effect, all we need is to go back into the laboratory of behaviour and do ‘experimental research’.  Wang claims that this “is a great leap in methods of economic theory research because it represents the unity of economic research and natural science in methodology.”

Actually, behaviourist approach is an economics cul ­de ­sac.  Before the global financial collapse, this micro motivation approach to economics was popular with young economists who had turned away from questions like poverty, inequality or unemployment to study behaviour on television game shows.  Looking at the ‘irrational’ behaviour of people’s brains and thinking was substituted for the aggregate trends and changes in modern economies.

The irony of Wang’s view is that, since the global financial crash, empirical studies have come back into favour in looking for the causes of the Great Recession, because mainstream and behaviourial theory had failed. Despite that, Wang wants us to ditch Marxist macro theory for Keynes’ psychological  ‘animal spirits’ or the micro ‘nudge’ theories of behaviourists like Richard Thaler.

Is the way forward really through behaviourists developing computer models where the idea is to populate virtual markets with artificially intelligent agents who trade and interact and compete with each other much like real people? Sure, every situation is different but anyone who makes a living out of data analysis knows that ‘heterogeneity’ is limited enough so that the well ­understood past can be informative about the future.

In my view, if economists want to understand the causes of financial and economic crises, they need to look away from individual behaviour models and instead look to the aggregate: from the particular to the general. And they need to turn back from deductive a priori reasoning alone towards history, the evidence of the past. History may not be a guide to the future, but speculation without history is even less based in reality. Economists need theories that can be tested by evidence, but the evidence of the aggregate and history not the laboratory.

Yes, Wang recognises that mainstream economic is no good at explaining developments in modern capitalism, but does ‘trading economics’ take us any further? It seems more like an ideologically acceptable theory as an alternative to Marxism in the country of ‘socialism with Chinese characteristics’.


37 Responses to “Trading economics the Chinese way”

  1. Gabriel Zadunaisky Says:

    If the weight of the public sector in the economy determines the class nature of the state -either capitalist or post-capitalist, transitional towards socialism- then the Italian state under Mussolini, where the public sector had much more relative weight in the economy than today in China, should have been considered “socialist”. Naturally nobody would say such a thing. What determines the class nature of a state is if the economy is based fundamentally on capitalist profit or not. In China’s case the profits of capitalist enterprises determine the course of events today. Though the existence of a large public sector gives the Chinese stalinist burocracy more room for manuevre, for example, than what Putin has in Russia. But it does not alter the fact that starting in 1978, the reforms implemented by Deng and his successors led to the restoration of capitalism
    Gabriel Zad

    • Arthur Says:

      I agree with the general direction, but not exactly. People did and still do claim that fascist states and parties are “Socialist”. First, the fascists often make this claim – eg German National Socialist Workers Party (better known as “Nazi”), Communist Party of the Soviet Union, Union of Soviet Socialist Republics, Communist Party of China. Second the right wing enthusiastically endorses their claims. Third the pseudo left apologetically helps provide ammunition for the right. What determines class nature is which class holds power. Transition from feudal to bourgeois rule was preceded by growing importance of capitalist profit and was not always followed by change in name of State (eg Restoration in UK did not restore feudalism and Glorious Revolution did not abolish monarchy). Seems bizarre to describe Chinese bureaucracy as “Stalinist” but we agree on the main point – class nature of State in both Russia and China was not determined by weight of the “public sector”.

      • prianikoff Says:

        The assertion that Fascist Italy “nationalised” its industries is a right wing canard that’s unfortunately echoed by some ultra-leftists.

        It was debunked long ago by Daniel Guerin (1).

        In fact, when Mussolini took power he did exactly the opposite.
        Shortly after the March on Rome, he stated:
        “ We must take from the state those functions for which it is incompetent…”

        He was true to his word.
        The Fascist government handed over the national insurance scheme to private companies in 1923 and gave up running the telephone system in 1925.
        Taxes on capital, securities and inherited wealth were either drastically cut or abolished.

        After the Wall St crash, government intervention increased as the fascists bailed out failing banks and industries.

        But these weren’t nationalised, they were refloated with government money and encouraged to join compulsory associations. The boards of directors hardly changed.

        The fascists formed an Industrial Reconstruction organisation called IRI, which supervised the bail outs.
        But Mussolini made in quite clear in a speech he gave in 1934 that his aim was not “state-socialism” (or state capitalism)
        In many respects Mussolini’s policies were inspired by Keynes, rather than Marx.

        The aim of Fascism was to bail out the Italian ruling class, which lacked the Imperial resources of Britain and France.
        The unions were violently suppressed and attempts to invade and colonise Albania, Libya, Somalia and Ethiopia soon followed.

        (1) “Fascism & Big Business”
        by Daniel Guerin
        Chapter IX “In power-Economic Policy”

      • Arthur Says:

        I haven’t read Guerin or studied fascist Italy so cannot comment on evidence.

        But my understanding of “corporatism” and “bail-outs” as advocated by fascists, social-fascists and keynesianism is that they have a lot in common as well as significant differences.

        The conversions between “bankrupt capitalist enterprises”, “bailed out enterprises under temporary administration by state officials”, “nationalized”, “socialist” and “privatized” state enterprises and related mergers and acquisitions on a global scale suggest both a commonality enabling conversion as well as differences prompting it.

        The “nomenklatura” in Eastern Europe and China provided basis for the subsequent oligarchs and Princelings. Incorporating representatives of unions in corporate boards had both differences and similarities functions in “self managed” Yugoslavia, corporate fascist Italy and modern Germany. It did helped unify the management of workers and paralyse workers resistance (including more carrots, longer chains and better cages as well as more precisely wielded sticks).

        Conversion of private bourgeois property into State (and global) bourgeois property in various forms including compulsory “corporatist” associations (which can also be called “cooperatives”) sometimes becomes a necessity for preserving bourgeois rule.

        It also provides preconditions for the revolutionary overthrow of that rule, but the sharp distinction between communists advocating workers rule and socialists advocating State property remains crucial.

    • Edgar Says:

      “the Italian state under Mussolini, where the public sector had much more relative weight in the economy than today in China”

      Can we have the evidence for this please

  2. Virgens VK Says:

    “This is shades of the very line presented by President Xi at Davos 2017, where he claimed that China is the leading globaliser. Now the economic theorist of People’s Bank of China is offering ‘trading economics’ to support Xi.”

    But the same Xi said that:

    “If we deviate from or abandon Marxism, our Party would lose its soul and direction […] On the fundamental issue of upholding the guiding role of Marxism, we must maintain unswerving resolve, never wavering at any time or under any circumstances.”


    It is a myth that China is not a democracy. There’s only one party with real chances of governing (the Communist Party), but inside the party itself, there’s constant struggle for its control between various factions — some of them patently liberal. In other words, there is an organized and strong right-wing in China, the CCP being the synthesis of this correlation of forces.

  3. failedevolution (@failedevolution) Says:

    China ready to dominate the CryptoCurrency markets of the future using supercomputer power superiority

  4. Eleutério F S Prado Says:

    If you want to know if China is capitalist or socialist, you should look at the social relations of production that prevail there – not whether the state is big or small. State enterprises that exist in many capitalist countries are capitalist – not socialist. They are based on the relationship between capital and wage labor.

    • Arthur Says:


    • Edgar Says:

      “State enterprises that exist in many capitalist countries are capitalist – not socialist.”

      Too dogmatic and too simplistic. For example the National Health Service in the UK was fundamentally different to the US private healthcare system. If socialism, at least in some stunted form, cannot exist within capitalism then how can there be any dialectical transformation of capitalism?

      • Arthur Says:

        1. The UK NHS is, like the US private healthcare system, an employer of employees. Ask any of their employees.

        2. All sorts of positive developments have and will occur within capitalism and are a necessary aspect of the inevitability of capitalism transitioning to communism. Better examples would be universal suffrage, the eight hour day and the factory acts (all implemented by Tory governments). Likewise capitalism developed within feudalism. Adding the word “dialectical” does not magically avoid the necessity for a change in ruling class in achieving “transformation”.

      • Edgar Says:

        But to call something a capitalist organisation is more than just saying it employs people. This is just way too simplistic and ignores all the other dimensions at play.

        A cooperative may employ people, they certainly pay wages because they have to pay the legal tender of whichever country they happen to reside in.

        But this doesn’t prove they are capitalist.

        Why the 8 hour day and the factory acts are a better example of socialistic forms existing within capitalism is genuinely beyond me. In fact the 8 hour day was more a necessity for capitalism than any kind of moral compulsion. The 15 hour day was literally killing the goose that lay the golden egg! Whereas the NHS was and is bitterly opposed by the Tories since its inception.

        Universal suffrage is a little problematic also given Marx believed only in England could it bring abut socialism!

        Your point about the need to get rid of the ruling class is totally and utterly irrelevant to the point I was making, and your attempt to pad out your argument with it doesn’t wash.

      • Arthur Says:

        It is not unusual for for employers to pay wages “because they have to pay the legal tender of whichever country they happen to reside in”. Further discussion does not strike me as potentially illuminating so I will desist.

      • Nadim Mahjoub Says:

        “All sorts of positive developments have and will occur within capitalism and are a necessary aspect of the inevitability of capitalism transitioning to communism.”
        Arthur, are you religious?

      • Arthur Says:

        I am guessing that the words “necessary” and “inevitability” are what prompt the question.

        Another positive development that has and will occur within capitalism is the decline of religious faith.

        For example there really was a “Labour movement” in Britain that actually “believed” with “faith” that nationalization by Labour government was reforming capitalism into socialism.

        The decline of this faith was positive. There are more Tory fanatics who actually feel threatended by this nonsense than people who sincerely believe it.

        There are also many negative developments within capitalism that are also a necessary aspect of the inevitability of capitalism transitioning to communism. The suppression of religious movements by secular elites in the Arab world to preserve minority rule is both negative and a necessary step towards the inevitable doom of those elites and of the religious illusions held by the masses.

        The rise of faith in green nature worship in the developed world is a negative trend towards religious faith that has gone together with a collapse of left politics. But that collapse was as necessary and inevitable as the collapse of the second international with the first world war. There cannot be a revolutionary movement without the corpse of the pseudoleft having been buried with full state honors by the greens. The zombies are still twitching, but Trump and the far right have taken over most of their main slogans – for isolationism against solidarity with the democratic revolution against fascist regimes in developing countries, against globalization.

        Belief in the eternal permanance of things goes better with religious belief. As does looking for saviours from on high rather than revolution from below.

        My view is that the trend towards state capitalism including such things as the UK National Health Service are positive, necessary and an aspect of the inevitability of capitalism transitioning to communism.

        Engels put it very clearly in 1880:

        “The modern state, no matter what its form, is essentially a capitalist machine — the state of the capitalists, the ideal personification of the total national capital. The more it proceeds to the taking over of productive forces, the more does it actually become the national capitalist, the more citizens does it exploit. The workers remain wage-workers — proletarians. The capitalist relation is not done away with. It is, rather, brought to a head. But, brought to a head, it topples over. State-ownership of the productive forces is not the solution of the conflict, but concealed within it are the technical conditions that form the elements of that solution.

        This solution can only consist in the practical recognition of the social nature of the modern forces of production, and therefore in the harmonizing with the socialized character of the means of production. And this can only come about by society openly and directly taking possession of the productive forces which have outgrown all control, except that of society as a whole. The social character of the means of production and of the products today reacts against the producers, periodically disrupts all production and exchange, acts only like a law of Nature working blindly, forcibly, destructively. But,with the taking over by society of the productive forces, the social character of the means of production and of the products will be utilized by the producers with a perfect understanding of its nature, and instead of being a source of disturbance and periodical collapse, will become the most powerful lever of production itself.

        Active social forces work exactly like natural forces: blindly, forcibly, destructively, so long as we do not understand, and reckon with, them. But, when once we understand them, when once we grasp their action, their direction, their effects, it depends only upon ourselves to subject them more and more to our own will, and, by means of them, to reach our own ends. And this holds quite especially of the mighty productive forces of today. As long as we obstinately refuse to understand the nature and the character of these social means of action — and this understanding goes against the grain of the capitalist mode of production, and its defenders — so long these forces are at work in spite of us, in opposition to us, so long they master us, as we have shown above in detail.

        But when once their nature is understood, they can, in the hand working together, be transformed from master demons into willing servants. The difference is as that between the destructive force of electricity in the lightning in the storm, and electricity under command in the telegraph and the voltaic arc; the difference between a conflagration, and fire working in the service of man. With this recognition, at last, of the real nature of the productive forces of today, the social anarchy of production gives place to a social regulation of production upon a definite plan, according to the needs of the community and of each individual. Then the capitalist mode of appropriation, in which the product enslaves first the producer, and then the appropriator, is replaced by the mode of appropriation of the products that is based upon the nature of the modern means of production; upon the one hand, direct social appropriation, as means to the maintenance and extension of production — on the other, direct individual appropriation, as means of subsistence and of enjoyment.

        Whilst the capitalist mode of production more and more completely transforms the great majority of the population into proletarians, it creates the power which, under penalty of its own destruction, is forced to accomplish this revolution. Whilst it forces on more and more of the transformation of the vast means of production, already socialized, into State property, it shows itself the way to accomplishing this revolution. The proletariat seizes political power and turns the means of production into State property.”

        That is not a religious conception. It is a scientific one. I would only add that with globalization of the vast means of production the seizure of political power must also be global, although of course proceeding by stages

        Turning it upside down so that ones aim is “Socialism” which means “State property” rather than the seizure or political power by the workers far more easily becomes a religion of worshipping the State.

      • Edgar Says:


        you posted a comment that had really little to do with what I actually said, so don’t take that condescending attitude with me!

        An example of differences in US and UK health is that in the US the health is its own sector, which has its own stock index and affects the overall stock prices. This doesn’t happen in the UK, at least not to the extent of the US.

        In the US health advertising is more ubiquitous because health is part of capitalist money making, whereas in the UK it is less so, though as NHS privatisations gathers apace I can’t help but notice increased advertising around human health.

        US private companies are hovering over the socialised healthcare of the UK because they know the opportunities it will present when privatised. With health they can use their best weapon to make a killing, that weapon is fear.

        Health with a capitalist character looks very very different to one with a socialised character, even when both exist within an overall capitalist system.

        I am not saying anything outlandish here, seriously.

      • Arthur Says:

        There are many differences between the US and UK health systems. There are even bigger differences between an 8 hour day and a 16 hour day, between universal suffrage and a property franchise and between factories with and without legal restrictions and inspectors enforcing them.

        It is not “outlandish” but rather conventional (though now increasingly “dated” to decades ago) for people to believe such differences are themselves a transition from capitalism rather than positive developments within capitalism which point towards the obsolescence of capitalism and necessity of working class becoming the ruling class.

        What the UK and US health systems have in common is precisely what you originally focused on as “too dogmatic and simplistic” in the succinct explanation by Eleutério F S Prado at start of this sub-thread. The social relations of production are the same – state enterprises are capitalist employers of wage labor employees.

        I don’t have much to add to the long quote from Engels in comment directly above:

        Discussion has moved on to later posts.

  5. John Wunderlich (@PrivacyCDN) Says:

    While I take the point about the economic weight of the state and the state-owned enterprise, I spent a number of months in Shenzhen in 2016 both on location working for a large enterprise and evenings and weekends ‘on the streets’. My ‘anecdata’ is that the person on the street in Shenzhen was fully oriented to a market economy. This makes the case for cultural hegemony in market-oriented thinking. Which is the tail and which is the dog is still not clear, especially with President’s XI’s popular nationalism and with a foreign trade agenda building around the Belt and Road initiative?

  6. ucanbpolitical Says:

    I think we need to treat state capital to private capital ratios with caution. The cross holdings of the state enterprises (reminiscent of Japan up to 1990), which the National Economic Bureau of China treats as productive investment, artificially boosts the amount of state investment. When we use value added ratios, instead, it is quite clear that the private sector dominates. Of greater interest is the question of the Chinese state’s response to economic crisis. In a capitalist economy, generally, individual capitals seek to preserve their capital by withdrawing it from problem areas. The opposite occurs in China. The state runs towards the problem with additional capital. The question is posed, how much longer can they keep doing that? The purging of capital, or creative destruction is integral to the resolution of the crisis of profitability. That the Chinese state prevents this, is not a sign of strength, but of its weakness. Nevertheless it poses interesting theoretical challenges to Marxists, namely can the overproduction of capital be resolved by the state rather than the market as in the case of China.

    • mandm Says:

      I don’t think that the notion of state capitalism represents a non- marxist perspective. True, such a state by definition is capitalist because it would be based on wage labor creating surplus value for reinvestment .But it could be a first step toward socialist development, depending on what kind of state is directing the process. Today, even nationalizing the financial system would require a revolution.

      Both the Russian and Chinese revolutions occurred in preponderantly peasant economies. The Bolsheviks were isolated, immediately attacked, lost millions in a “contra type” civil war, and remained harassed until the Nazi’s were allowed to invade the Soviet Union. Despite the best of intentions, the bolshevik state necessarily lost its democratic character, its state led by a party representing the minority of the working population (proletariat) in its exploitation of the peasantry.

      China’s situation was different. The mere existence of the Soviet Union and an insurgent colonial world, complimented by the bankruptcy of all the major capitalist states (except for the US) after the war, gave the Maoists breathing space to democratize the countryside while building the infrastructure to begin industrialization. The super-exploitation of the peasantry under the leadership of the “capitalist roaders” after the overtures of the West (Nixon/Kissinger) offering to industrialize the country, leading to Tiananmin Square.

      I agree with Michael Roberts assessment of the current situation. I don’t know if he agrees with me that state capitalism–especially in the West–can be in accord with a marxist perspective. I think that even Meszaros believed that. What, after all, is the dictatorship of the proletariate?

      • mandm Says:

        correction: place “began” between “capitalist roaders” and “after” in the next to last paragraph. Also read: “it was” after “that” in the last paragraph, and strike the “e” of “proletariate”.

      • Arthur Says:

        “Today, even nationalizing the financial system would require a revolution.”

        Why? If the financial system had actually gone down in the GFC they would have had to nationalize it then. They came rather close.

        Keynes advocated nationalization of investment as necessary to preserve capitalism after the last Great Depression.

        How could nationalization be avoided if the institutions that are “too big to fail” do go down? The Central Banks are already the “dealers of last resort” and would end up with most financial assets on their own balance sheets.

        A revolution would certainly be “required” for other reasons but there is still no sign of revolutionaries that have the foggiest clue about how one might run finance after a revolution.

        Possibly apocryphal: When Fidel Castro asked if anyone was an economist who could be appointed to run the Cuban Central Bank, Che Guevara put his hand up. Fidel: “I didn’t know you were an economist”. Che: “I thought you said communist”.

        Do we know any revolutionaries who could run a central bank?

  7. Julian Wells Says:

    Wang Zhenying’s musings seem to be so much blether; but in principle agent-based modelling with heterogenous (types of) agents has much to offer, especially if combined with explicit consideration of networks. Even so-called zero-intelligence models can provide food for thought — see Ian Wright’s “Social Architecture of Capitalism”: see

    • Arthur Says:

      Thanks for the ref. Only skimmed it. Hope to study it and related literature carefully. Statistical Mechanics is an improvement from 17th Century mechanics but it looked like a long way to go before actually modelling laws emerging from production relations rather than imposing them. When doing that it will look more like Systems Biology models and less like Statistical Mechanics. Continuum mechanics (especially rheology) would be an important intermediate step beyond Statistical Mechanics.

      • Julian Wells Says:

        Agreed: the importance of the statistical mechanics analogy (econophysics) is precisely that it opens the way to models in which law-like behaviour of the system is an emergent property — in other words, to the complexity perspective.

        I claim that Marx’s approach to political economy was fundamentally probabilistic in character, and that he is hence a precursor of modern complexity science; the argument is sketched in my article “Of fat cats and fat tails” (paywall, I’m afraid).

        You may also find Cockshott et al. (2009) “Classical Econophysics” of interest.

      • Arthur Says:

        Thanks! Will study it closely. Paywalls not a problem with “Library Genesis” (google):

        Have seen Cockshott.

        Am broadly aware of Agent Based Computational Economics (Tesfatsion et al) and complexity science as well as ABM generally (got Machover and Farjoun when first published).

        Unfortunately I am only just getting back into study and have a LOT of catching up to do.

        From quick scan of your article I broadly agree, but also sort of take it for granted ie don’t see how anyone could actually read Capital and NOT notice it is about emergence. (Hence don’t regard most “marxian economics” as having anything to do with Marx).

        Am doubtful about trying to model finance without first having a plausible toy model of prices fluctuating with business cycle. Believe semiquantiative “pure model” of Marx’s theory of “The Capitalist Cycle” by Maksakovsky could be illustrated as emerging from production relations with ABM. Links for free download or paperback order are at:

        Sort of thing I have in mind is mentioned in this comment here:

        Would be very interested in references/suggestions on how to work on above.

        Continuum Mechanics (especially rheology) has concepts like viscosity, plasticity, elasticity that seem to me much closer to emergent laws in economics than the more “thermodynamic” laws that emerge with just Statistical Mechanics. Rheology is about “flow” and so is economics.

        My blog above won’t be ready for quite a while but if you want to chat, please leave me a message there so I can email you.

      • Arthur Says:

        Comment with multiple links still stuck:
        “Your comment is awaiting moderation.
        February 3, 2018 at 1:22 pm”

  8. Charles A Says:

    The public sector is increasingly less public, more and more operated for profit in general. Large chunks of it have long been run for the gain of privileged families. Anyone who reads “business news” regularly, just for the facts, can see it. Statistics on the weight of the public sector in the economy mean little.

    Nor is the public sector coordinated as a whole for socialist development. The plan was abolished about two decades ago.

  9. Virgens VK Says:

    We can debate until the end of times about s: if China is socialist or not.

    Problem is: we don’t know what socialism really is, because it is not born completely yet. Marx defined socialism as merely the transition period between capitalism and communism. How can we know, from a purely economic point of view, if socialism hasn’t begun yet?

    My opinion is very straightforward, because I’m a historian: China is socialist because it considers — officially and socially — socialists, they consider what they are doing socialism; its main geopolitical enemies consider it socialist. To consider socialism just what happened in the USSR is not constructive in my opinion.

    Now, what will happen tomorrow, we don’t know. A capitalist restoration may happen in China (indeed, that’s what the West is fighting for since 1951). The socialist faction may prevail, China becoming the beginning of the spread of socialism in the world. We don’t know. The only thing I know is that, today, there’s a real dispute between socialism and capitalism in China: that nobody, a hundred years from now, dare to say that what happened from now on was a fait accompli.

    • jlowrie Says:

      On November 15, 2017, police stormed into a student reading group at the Guangdong University of Technology and seized six young participants. Two of them, Zhang Yunfan and Ye Jianke, were held at the Panyu Detention Center for a month as suspects for the crime of “gathering crowds to disrupt social order,” along with two other young people involved with the reading group who were later seized at their residences: Sun Tingting and Zheng Yongming. After prominent intellectuals circulated a petition for Zhang’s release, all four detainees have been released on bail but are still awaiting trial. Four other young leftists connected to the reading group are on a wanted list and still in hiding.

      It is a strange ‘socialist’ society that arrests young people for forming a Marxist study group. There are plenty of anti-marxist study groups in China, but the members do not seem to get arrested, unless they are conspiring with foreign powers!

  10. Arthur Says:

    1. “Yet, when it was written, we could not have called it a socialist manifesto…. in 1847, socialism was a middle-class movement, communism a working-class movement. Socialism was, on the Continent at least, “respectable”; communism was the very opposite. And as our notion, from the very beginning, was that “the emancipation of the workers must be the act of the working class itself,” there could be no doubt as to which of the two names we must take. Moreover, we have, ever since, been far from repudiating it.”

    Preface to the Communist Manifesto, 1888 English edition

    We have known what socialism is and what socialists are since before 1847. Socialism is a respectable bourgeois movement opposed to the emancipation of the working class by the workers themselves. Chinese communists are enemies of the Chinese capitalist state. Friends of the Chinese capitalist state are enemies of the working class.

    2. Naturally “socialists” support wage labor for the “public” sector of what Engels called the “national capitalist”. The world is headed towards state capitalism. It isn’t just in China that socialists support state capitalism.

    3. There is currently no “Marxist economics”. When there is it will follow Marx’s path from the particular to the general (starting with the commodity as the cell) and then ascending deductively to the concrete. Agent based modelling will be an important aspect of that. It has little to do with “behavioural” economics and in fact brings emphasizes the “emergence” of economic laws such as the law of value largely independent of the detailed behaviours of individual agents.

    4. What is the point of refuting Wang Zhenying? Why not spend the time learning something you don’t already know, like Maksakovsky’s explanation of “The Capitalist Cycle”?

    • jlowrie Says:

      ‘There is currently no “Marxist economics……. What is the point of refuting Wang Zhenying? Why not spend the time learning something you don’t already know, like Maksakovsky’s explanation of “The Capitalist Cycle”?’

      Well, nobody can accuse Arthur of modesty, but his point about socialism is well-made. Also I would suggest we ditch Marx’s own concept of the lower stage of communism, under whose rubric bourgeois socialist ideas have been smuggled in.

      • Arthur Says:

        Well it is certainly true that bourgeois socialists have taken advantage of confusion about concepts of a “socialist mode of production”. But they also often call themselves “communists”.

        Seems inevitable that there HAS to be a long historical epoch of transition from capitalism to communism. Whether or not one calls it “socialism” there is no way to avoid capitalist roaders taking the capitalist road during that epoch and waving red flags while doing so.

        Given that wage labor and hence capital can only be abolished by the completion of that transition, they must continue to exist at the beginning and engage in struggle throughout.

        Marx was clear that “bourgeois right” was inherent in the lower stage of communism with distribution according to work (ie wage labor). Based on historical experience from the defeat in the Soviet Union, Mao put it more starkly – there is still a bourgeoisie and it is right inside the communist party. Q. Where exactly? A. The top leadership, the capitalist roaders are still taking the capitalist road.

        Events did not prove either Marx or Mao wrong.

  11. YK Says:

    Marxists often get tangled up in insoluble debates due to a certain laxity in the way certain theoretical terms are used. “Socialism” is often used interchangeably with “communism” and no one seems to know what either actually entails. If we stick for a bit with the Marxist-Leninist framework then socialism is what Marx identified as the lower phase of communism, that is, production taken over by workers via the state and run according to a plan, with private capital mostly eliminated. “Communism” on the other hand was used to denote the higher phase of communism, where all commodity production has been eliminated, classes do not exist and neither does the state. It was the ultimate goal, hence the party governing the Soviet Socialist state was the Communist Party.

    Of course, the Bolsheviks did not believe they had created a socialist society until after the completion of the First Five Year Plan in 1932. Nevertheless, their state was already called the Union of Soviet Socialist Republics even before then and no one in their right minds would have called the 1920s NEP USSR a normal capitalist society.

    There are I think a number of useful comparisons that can be made between NEP Russia and modern day China. Both are/were heavily mixed economies with a strong state sector operating according to political priorities. Both are/were governed by revolutionary parties that claim to be guided by Marxist ideas. Both are/were confronting a hostile western world and attempted to make maximum gains within the context of their international environment.

    There are of course several important differences. There are, as far as I know, very few limitations placed upon the areas of economic activity that the private sector can enter in China. By contrast, in the NEP USSR, heavy industry and foreign trade where entirely out of bounds. Second, the 1920s Bolsheviks were a revolutionary party who only a decade earlier had been underground. Their leadership was very clear about the fact that the NEP was a temporary retreat from their ultimate goal, which did consist in the elimination of commodity production. The Chinese leadership has been implementing ‘reforms’ for decades and there is no indication that they see this as somehow antithetical to socialism, coming up instead with the notion of a socialist market economy. What is more, in Mao’s words, the bourgeoisie sits on the central committee.

    I think the point is that regardless of whether China is a capitalist state, or a decades long NEP regressing to normal capitalism, if Marxist political economy is correct, then at some point the capitalist sector in China will be faced with a major crisis. Inevitably, this will lead to a showdown within the party between those advocating full restoration and those that will want the state to take over failing private enterprises. Investigating where and when this crisis might break it out is I think a much more interesting endeavor than sparring over definitions. As the Chinese saying goes, Seek Truth From Facts.

  12. kiers Says:

    It is true that each recession/depression in gdp, is the end of an economic paradigm. We are about there i think. A new paradigm is already in the works. We the sheeple have to wait and see. They don’t share that with us till its’ done being legislated and signed.

    As for Wang Zhenying, he’s been channeling Greenspan-speak: grandiose obfuscation of well-known, small interests, i guess.

  13. Andrew Ford Says:

    My view of the character of the Chinese state:

  14. Arthur Says:

    Wow! Maoists noticed that there was an anti-communist military coup d’etat in China in October 1976 with half the Standing Committee of the Politburo arrested. Trots still “debating” FOUR DECADES later!

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