I recently participated in a zoom seminar to review a new book entitled Socialist Economic Development in the 21st Century by Alberto Gabriele and Elias Jabbour. Gabriele is a Senior Researcher at Sbilanciamoci, Rome, Italy and Elias Jabbour is an Assistant Professor at the School of Economics, at Rio de Janeiro State University, Brazil.
You can see the comments of the various reviewers (including my own) and the replies of the authors (here). But below is a more considered review of the book. The puff for the book says Gabrieli and Jabbour “offer a novel, balanced, and historically rooted interpretation of the successes and failures of socialist economic construction throughout the last century.”
And as the foreword by Francesco Schettino says, “In this respect, it is interesting to note that about one year ago an internationally renowned economist, Branko Milanovic, published an article in El Pais, arguing that China’s public sector constitutes barely a fifth of the entire national economy, and therefore the PRC is not substantially different from ordinary capitalist countries.”
Milanovic’s claim is fully expressed in his book, Capitalism Alone, in which he paints a picture of a dichotomy between ‘liberal democracy’ (Western capitalism) and ‘political capitalism’ (autocratic China). This dichotomy seems false to me. And it arises because, of course, Milanovic starts with his premise (unproven) that an alternative mode of production and social system, namely socialism, is ruled out forever as there is no working-class around capable or willing to fight for it.
Milanovic’s disciple Isabelle Weber also published an acclaimed book entitled How China escaped shock therapy. This has had a wide and significant impact in academic leftist circles, endorsed as it is by Milanovic. Weber argues that the state has maintained its control over the “commanding heights” of China’s economy as it switched from direct planning to indirect regulation through the state’s participation in the market. Indeed,“China grew into global capitalism without losing control over its domestic economy.”
Weber appears to argue that China became capitalist at least from the point of Deng’s leadership in 1978 and all the debates thereafter were about how far to go i.e whether to go for ‘shock therapy’ or moderate moves towards ‘more capitalism’. But Weber is ambiguous on the economic foundation of the Chinese state. China ‘grew into global capitalism’ but still “maintained its control over the commanding heights”.
Gabrieli and Jabbour are much clearer on the nature of Chinese economy and state. Their analysis of China is subtle, but it is clearly a robust refutation of Milanovic’s thesis that China is a form of capitalism, albeit run by politicians (?) and not capitalists as in the West. The authors do not sit on the fence like Weber. Instead, they (correctly) argue that China is a ‘socialist-oriented’ economy and state, very different from capitalism, democratic or autocratic. “China’s economic success is the result not of capitalism but of its transition to socialism. It is a new social economic formation (SEF) that is beyond capitalism.”
The authors reckon that their term ‘socialist-oriented’ is useful because it is “easily understood in their ordinary significance” where “political forces claiming officially and credibly to be engaged in a process aimed at establishing, strengthening, or improving and further developing a socialist socioeconomic system, and b) can (or could) in fact be considered to be reasonably socialistic, i.e. to have advanced towards socialism along at least some (mainly positive) measurable dimensions in a multi-vectorial space representing key structural economic and social characteristics.” So “whether or not the State exerts (directly and indirectly) a decisively hegemonic role in steering the national economy… is obviously a crucial (although not exclusive) benchmark to gauge to which extent China’s economy can be considered socialistic.” The state must dominate but also those controlling the state must be “credibly engaged” in trying to develop “socialist socioeconomic system.”
The authors admit that this is a “much weaker sense” of what is meant by a socialist economic system which traditionally is “a nation-state (state? – MR) where the principle to each according to her work is universally applied and no forms of private property and of non-labor personal incomes exist -could be regarded as fully socialist. It is clear that such a purely socialist distributional structure does not exist in any place in the contemporary world.”
The authors reject what they consider is an ‘outdated’ formulation of socialism and opt for what they consider are new social economic formations. They reckon that there are already “embryonic forms of socialism – along with capitalism and pre-capitalist modes of production… are now present in some developing countries. Consistently, we refer to them as socialist-oriented SEFs, structured around relatively similar market-socialism models, in spite of the very uneven level of development of their respective productive forces.”
The authors argue that “the USSR and most European socialist states initially achieved high rates of economic growth, but their development trajectory eventually fizzled out. Due to internal contradictions, technological isolation, and unrelenting external pressure, the USSR and its allies did break at first the exclusive domain of capitalist powers on the world economy, but never managed to fully overcome its internal contradictions and eventually collapsed.” In contrast, while you might argue that “market-oriented reforms implied steps backwards with respect to the very socialist nature of China’s socioeconomic system”, actually it “led to an extraordinary development of productive forces and turned the People’s Republic of China (PRC) into a new type of SEF.”
At this point, our authors become a little coy or tentative on where their argument is taking them. “The term ‘market socialism’ might imply on our part an implicit recognition that China’s present-day socioeconomic system is in fact a form of socialism indeed, albeit imperfect. Conservatively, we (as well as, in most cases, CPC leaders themselves) prefer to neither uphold or deny such an engaging ism.”
Nevertheless, they reject the designation of China as state capitalist. “the (often underestimated) sheer weight of direct and indirect public ownership of the means of production and, more broadly, the depth and extension of state control on the commanding heights of the economy do not allow us to see state capitalism as the dominant feature of Chinas present-day socioeconomic system.” Instead, China as developed as a socialist-oriented economy, where the state “can determine in the short-to-medium run the share, the rate of investment, its broad sectoral composition, the level and composition of social expenditure, and the level of effective demand. In the long run, planners in socialist-oriented planned market economies can set the speed and (to some extent) the direction of capital accumulation, innovation, and technical progress, and significantly affect the structure of relative prices by means of market compatible industrial and other policy interventions. Therefore, they …consciously and cautiously steer the unfolding of the law of socioeconomic value in order to achieve ex-post and ecological outcomes superior to those that would have been produced automatically by simply following market price signals.”
So finally, we have it. China and other countries like Vietnam and Laos are not like traditional ‘socialist’ states such as the Soviet Union, Cuba, North Korea or post-war eastern Europe. China has delivered a new social economic formation which could be called ‘market socialism’. And this is the basis of China’s phenomenal economic success, not the planned economy of the Soviet Union where little or no ‘forms of private property exist’. Instead, it is a socialist-oriented state with planning at the macro level, while capitalism and the market rules at the micro level in a fundamentally harmonious way. This new social economic formation is a model of the future for societies that have overthrown capitalism and are on the road to socialism.
Now I have profound doubts about this formulation of socialist-oriented economies. My first question or critique of Gabrieli and Jabbour’s approach is based on Marx’s theory of value. In the book, there is an extensive section on value theory. In this section, the authors adopt the value theory of the neo-Ricardian Piero Sraffa in preference to that of Marx. According to them, “the task of rescuing the classical approach (which they equate with Marx’s value theory) was left to the modern classical theory, pioneered by Sraffa and other heterodox economists, among which Garegnani was prominent. As the latter pointed out, Sraffa (besides effectively criticizing the marginal theory) re-discovered the classical approach and solved some crucial analytical difficulties that had escaped Ricardo and Marx.”
Really? In my view, Marxist value theory has been better defended by several Marxist scholars both against neoclassical theory and the neo-Ricardian assumptions of Von Bortkiewicz and Sraffa, among others – for example. Kliman, Moseley, Murray Smith. One of the key fault-lines in Sraffa’s value theory is that it rules out time, while Marx provides a temporal approach. Without incorporating time, any value theory becomes nonsensical.
Here is what the authors say: “taking into account Sraffa’s contribution, production prices can be seen theoretically as those stemming from the resolution of a system of simultaneous equations, jointly defining a photograph of the capitalist system in a given moment of time (and thus elegantly bypassing the necessity of assuming constant returns to scale). As such, they can be interpreted formally as intrinsic logical constraints necessary for the working of the system, rather than real empirically observable economic objects.” So Marx’s value theory becomes just a photo at a given moment of time, a set of equations rather than real or empirically observable. Instead of Marx’s temporal approach, the authors accept the simultaneous errors of his critics.
The authors recognise that “the so-called fundamental Sraffian theorem – if and only if workers are denied all of the goods they produce will the profit rate be positive – does not require per se a labor theory of value (! – MR). The authors in turn reject the approach of many Marxist economists that can show the logical (and empirical) connection between aggregate total values and total prices in production. In accepting Sraffa’s critique, they conclude that “both equalities on aggregates do not require any labor theory of value to be valid, and are compatible with an agnostic and weak interpretation of the LV”.
And what is this weak interpretation? Well, we can drop Marx’s axiom of the equality of aggregates and “uphold a non-fetishist” (and therefore labor-based) interpretation of the LV… via the simultaneous equations approach, without recurring to the principle of conservation of value.” Thus the connection between labour values and prices in the capitalist mode of production is severed and the profitability of capital is no longer determined ultimately by the creation and appropriation of surplus value: “we think that social scientists should not remain unduly fixated on formal models axed on the uniformity of the rate of profit across industries.”
The authors baldly come clean with their view: “Recent developments tend to confirm Sraffa’s fundamental insight: prices of production and the rate of profit are determined simultaneously. Marx’s famous formula for the definition and calculation of the average rate of profits, therefore, is not generally valid.” Clearly the authors have not digested the wealth of work done by Marxist scholars showing the empirical validity of Marx’s value theory and his law of profitability – readers of this blog are well aware of this. (See World in Crisis and The Long Depression).
Instead, the authors accept the critique of neo-Ricardians that Marx failed to show the connection (or lack of it) between values and prices. They state “It is well-known that Marx himself realized that the degree of completion of his system was not fully satisfactory, and for this reason, during his life, he did not publish the material contained in what have been subsequently become the II and III volumes of The Capital. This task was carried out later on by Engels, after many years of painstakingly perusing Marx’s handwritten notes.” Well, it may be well known to the authors that Marx was wrong, but subsequent work by Marxist authors have refuted this view and moreover rebutted the charge that Engels was at fault for publishing Marx’s errors in Volumes 2 and 3 of Capital.
Back to Sraffa. “Sraffa was very keen that, in capitalistic production, labour is on an equal footIng with packhorses (with subsistence wages assimilated to hay). Therefore, there is nothing special that labour transmits to the value of commodities …After all, this is faithful to Marx’s idea that in capitalism labour is a commodity, produced, operated, maintained, scrapped and reproduced as any other input. … Sraffa autonomously completed a solution to which Marx was very close.” But Marx was not very close to this ‘solution’ because he rejected it in favour of a theory of value based on abstract labour and socially necessary labour time. He would not have accepted Sraffa’s ‘production of commodities by commodities’ (and not labour).
The whole point of Marx’s value theory is that labour is not just a commodity like any other; it is special in that only labour creates value. Commodities (like pack horses) do not create new value. New value is only created when packhorses are put to work by human labour. Packhorses in that sense are the same as machines: machines do not create value without human labour controlling them (the story of robots I leave for another day).
That the authors should accept Sraffa’s view is disappointing. But why does all this matter and what has it got to do with China as a socialist country? Well, the authors explain why they want Sraffa’s theory of value and reject Marx’s. It’s because “by itself, the existence of surplus does not prove the existence, or non-existence,of class exploitation, and does not allow to precisely determine the degree of justice and fairness in a given society.” In other words, we can remove the key distinction between Marx’s surplus value under capitalism and replace it with a surplus created by the production of ‘commodities’, not value. As the authors say: “in our view, whatever the interpretation of this issue, the law of value in its weak sense (my emphasis) applies both to capitalism and socialism”. According to the authors, whether there is surplus value created by the exploitation of labour and appropriated by private capitals is no longer the key difference between the capitalist mode of production and socialism. What matters is the surplus (not surplus value) and how it is controlled. The capitalist and socialist modes can therefore be harmonised in the transition to socialism. This interpretation of the law of value under capitalism enables them to claim that there is no contradiction between state planning and the market economy because both modes can work in harmony to boost the surplus. Or as Deng famously put, “It doesn’t matter whether a cat is black or white, as long as it catches mice.”
In my view, this approach flies in the face of not only Marxist economic theory but also runs against reality by denying the fundamental and irreconcilable contradiction between the capitalist mode of production for the profit of capital and a cooperative socially owned planned system of production for social need ie socialism.
This brings us to the nature of transitional economies where the capitalist class has been overthrown and lost state power. Marx spelt out the basis of the nature of these transitional economies. There were two stages on the way to communism. With the working class in power, the first stage was to raise the productivity of labour to the point where social needs were met by direct production and commodity production for a market was phased out. In second higher stage, production is sufficiently high and abundant that each produces according to his or her ability and receives according to his or her need. The point is that in both stages, commodity production ends because it is in contradiction to production for social need.
Our authors reject the view of Marx, Engels and Lenin on this. For them Marx got it wrong: “In our view (which is of course the product of the benefit of hindsight, of the analysis of over a century of historical experience) this was a mistake, possibly related to Marx’s formation as a young Hegelian idealist and by the tension between Marx the social scientist and Marx the political militant.” Apparently, Marx needed to be less of a romantic militant and more of political scientist and then he would have dropped his idea of socialism without commodity production! Those who take Marx’s view (like both Engels and Lenin) are being rigid: “most efforts aimed at identifying the main features of socialism have been implicitly predicated on a relatively abstract dialectical negation of capitalism, while the analysis of real socialism experiences – with all their errors and (at times) horrors – have of been too brashly dismissed as fatal and treacherous deviations from what should have been the true path.” But surely the ‘errors’ and ‘horrors’ of Stalinist regime in the Soviet Union or in North Korea and eastern Europe should be seen as ‘fatal and treacherous’ deviations from the path to socialism? No?
At this point I would remind readers of what Che Guevara said exactly on this question of commodity production under socialism or what the authors call ‘market socialism’. In 1921 Lenin was forced to introduce the New Economic Policy (NEP), which allowed a capitalist sector in the USSR. Lenin considered this necessary, but a step back from the transition to socialism. Che Guevara argued that Lenin would have reversed the NEP had he lived longer. However, Lenin’s followers “did not see the danger and it remained as the great Trojan horse of socialism”, according to Guevara. As a result, capitalist superstructure became entrenched, influencing the relations of production and creating a ‘hybrid system of socialism with capitalist elements’ that inevitably provoked conflicts and contradictions that were increasingly resolved in favour of the superstructure. In short, capitalism was returning to the Soviet bloc.
And when we look at the experience of the Soviet Union, it was the Bolshevik economist Preobrazhensky who pointed out that Soviet Union was a transitional economy that contained two opposing forces, not working in a harmonious and complementary way as the authors claim for China’s new social economic formation of ‘market socialism’. Preobrazhensky’s emphasis on the contradiction between the law of value and planning for primitive socialist accumulation is not mentioned in the book. For the authors, Che Guevara and Preobrazhensky presumably took an “abstract dialectical negation of capitalism’ and ignored historical experience – although they were there at the time. Surely, it is the historical experience of the Soviet Union that eventually revealed the law of value cannot work in harmony with the public ownership and the planning mechanism and eventually there was reversal back to capitalism.
And then there is workers’ democracy. Marx and Engels made it clear that even before we get to socialism, under the dictatorship of proletariat (where capitalists lose state power to working class), two clear principles of workers democracy must be maintained in order to make the transition to socialism: the right of recall of all workers’ representatives and a strict limitation on their wage levels. Remember this is before even the economy starts to reach the lower stage of communism (or socialism, as Lenin called it).
None of these principles of workers democracy apply in China where the CPC rules without accountability except to itself. Indeed, in China the inequality of income and wealth is very high, if not quite as high as in other peripheral economies like Brazil, Russia or South Africa; or in the US and UK. But these inequalities are not just between rural and urban households, but also between average Chinese households and the fast-multiplying numbers of billionaires. How can an economy supposedly making a transition to socialism (let alone having already achieved some ‘first stage’ socialism) be compatible with billionaires and financial speculation on a grand scale?
One example of the contradictions involved in China is in housing and real estate. Instead of the state building homes for rent for fast-expanding cities, for over 30 years the CPC opted for private developers building homes for sale, funded by huge issuance of debt – a completely capitalist approach to basic housing needs. These chickens have come home to roost with the Evergrande debt disaster and a real estate crisis. The CPC now wants to control the ‘disorderly expansion of capital’ and move to ‘common prosperity’ measures, but it faces considerable opposition among financial circles and pro-capitalist elements.
The authors show how China’s state-led economy and macro-planning has been key to its phenomenal economic and social success, totally missing in capitalist economies, whether advanced or ‘emerging’ – just compare China to India.
As Gabriel and Jabbour show, in China, the state “can set the share of the surplus at the macroeconomic level and capture an important part of the latter not only by means of ordinary fiscal policies but also in virtue of the State’s ownership rights on industrial and financial capital.” P40. And they have also developed a novel view of that planning mechanism: the ‘new projectment economy’, where planning is for specific projects, both at home and abroad. “We chose the quasi-obsolete term projectment (to refer holistically to the utilization of both plans and projects as tools to steer the economy towards a rationally conceived development path).” As a result, China’s success is unparalleled: there have been no regular and recurring slumps as in capitalist economies and over 850m Chinese have been taken out of official poverty in a generation.
But, as far as I can see, Gabriele and Jabbour ignore all the growing contradictions in the Chinese transition story. The ‘trojan horse’ of a large capitalist sector and an unaccountable CPC within the socialist-oriented Chinese economy remain a serious threat to any transition to socialism. Indeed, there is still a significant risk of a reversal back to capitalism as the pressure of imperialist encirclement of the Chinese state proceeds over the next decade and as the pro-capitalist elements in the CPC mount a case for ‘opening-up’ the economy to capitalism.
The authors see no such danger or risk because they have developed a view of China’s ‘market socialism’ as the new harmonious way forward towards socialism. But in so doing they have rejected Marx’s value theory and argue that Marx’s view of the transition to socialism is an ‘abstract dialectical negation of capitalism’. They ignore the serious inequalities in China and the dangerous development of speculative finance capital; and do not consider workers democracy (as defined by Marx, Engels and Lenin) as a necessary base for the transition to socialism.
30 thoughts on “Socialist economic development – a review”
I think you’d find this book by Christian Flamant interesting (but I fully expect that you won’t agree):
“Main Concepts and Principles of Political Economy” – https://hal.archives-ouvertes.fr/hal-02161861/document
He’s rejecting Sraffa (and a surplus approach) – but he also makes a clear categorical distinction between value and price that have different dimensions (even if they are measured in the same money units – much like the width and length of a board are measured in the same units but are in orthogonal dimensions) – for Flamant, Marx did not grasp this fundamental difference in dimension. Labour creates value but distribution is determined in the price sphere. Total value is equal to the wage bill – which, on the price side is spent in its entirety on wage goods, and the surplus is spent on capital. In the (very) simple model diminishing returns on capital only appear when there’s capitalist consumption.
Even if people don’t agree with Flamant’s views I think it does help test one’s own arguments – and the clear ‘dimensional’ distinction between value and price puts one’s thinking to the test.
Jabbour’s ideas about China had been on my radar since a pretty decent article he published last year in international critical thought, however I wasn’t aware of this upcoming book so thanks for that.
It is disappointing to see him ditch Marx’s value theory for Sraffa in order to the fudge the differences between capitalist and socialist systems and make it easier to stick China in the latter category, especially since the rest of the book seems so strong.
I quite like the stance of Stephen Resnick and Rick Wolff on this issue myself (though I don’t agree with them on everything): it isn’t who’s in power that makes a system socialist (though it’s not unimportant), it’s the character of production, how surplus value is appropriated, and whether it’s the producers themselves or a class of surplus extracting non-producers who decide what to do with it. Thus in spite of having a formal dictatorship of the proletariat at least in name, the USSR was a state capitalist system since the bulk of production was carried on by wage workers and the surplus value they produced was appropriated and redeployed by a class of state-employed enterprise managers and planners.
Defining a given social formation as state capitalist rather than socialist isn’t necessarily a condemnatory value judgement however, and so Resnick and Wolff ‘do not doubt the sincere Marxist consciousness and anti-capitalist commitment of the revolutionaries who inaugurated the USSR and PRC’. As you say, market capitalist reforms like the NEP in the USSR or reform and opening up in China were often imposed as a result of structural conditions, out of a need either to stabilise the economic situation or to supercharge growth and ensure access to import of the latest technologies.
So for modern China, I think it would be fair to term it a [potentially] socialist-oriented state capitalism. I say ‘potentially’ because as you note the process of selective retreat into capitalism is extremely risky and there is no guarantee that you will be able to maintain the grip on power through the D.O.P needed to ensure that your state capitalism remains socialist oriented and to be able to enact when the time comes, the shift from capitalist to communist economic relations.
I don’t necessarily know if I agree with Che Guevara on this to be honest- I think the miserable state of post civil war Russia meant it needed the medicine of the NEP and state capitalism even at the risk of killing the host (‘socialism’) for a long time. In my view the 60s slowdown was the real time for reforming the USSR’s state capitalism but Kruschev, Brezhnev etc bottled it
Pardon the unwelcome intrusion but this caught my attention and I can’t ignore it.
“Thus in spite of having a formal dictatorship of the proletariat at least in name, the USSR was a state capitalist system since the bulk of production was carried on by wage workers and the surplus value they produced was appropriated and redeployed by a class of state-employed enterprise managers and planners.” Enterprise managers and planners did not have any institutional relationship to “their” enterprises and plan. They held it on suffrage, not by right. “Their” enterprise and plans were not in any normal sense property. There’s a reason why the enterprise managers of great bourgeois enterprises are typically given property rights in the form of stock options, apparently irrational pay, etc. That’s so their is a real community of interest with the bourgeois that doesn’t work on site. And their children do not have any regularized way of inheriting a superior status. They are in other words not even a class. Plus of course, the real issue of party functionaries in the higher strata having so much command over resources matters if you’re going to argue that capitalist market forces are guiding the economy.
This seems to be the equivalent of arguments that the Democratic Party base is the PMC, the “Professional Managerial Class.”
Thanks for this Steven- I fear my clumsy wording has confused R + W’s actual meaning! I went back and checked and they actually also don’t believe planners and enterprise managers were the capitalists in their understanding of the USSR as state capitalist, rather they were just skilled employees. Having read through their work again, my understanding is that it is actually the Council of Ministers who played that role. I’ll just post the quote below for clarity:
“Soon after the 1917 Soviet revolution, a small group of officials in a state agency (Vesenkha) reorganized as the Council of Ministers (COM) and became in fact the receivers and distributors of the surpluses that workers produced in state industrial enterprises. The COM functioned as state capitalists because the economic, political, and cultural processes of the early USSR situated and legitimated them in that class position. Those processes included the passage of specific Soviet laws, their execution by the government, and their adjudication by Soviet courts; the design and dissemination of officially approved ideologies; the activities of the communist party; the planning of the economy by an economic bureaucracy; the design and implementation of school curricula; and so on. Together they placed the COM in the actual social position of first receiver of the surpluses produced in Soviet industrial enterprises. Those enterprises were owned by the Soviet state, the productive workers in them were paid wages for their labor, and the appropriators of the surplus produced by those workers were the state officials appointed to the COM. It was the state capitalist counterpart of a private capitalist board of directors….The COM functioned as the legal personification of collectively owned means of industrial production deployed within state industrial enterprises. Through its subordinated enterprise managers, the COM hired the workers, equipped them with collectively owned means of production (tools, equipment, and raw materials), and received the industrial surpluses. The COM then distributed those surpluses. Of course, the power to influence the size of the surplus and what portions were distributed to which others was shared by various social groups (Party leaders, state bureaucrats, trade unions, and so on). While that shared power was more or less continuously contested among those groups, the class positions of industrial workers (as surplus producers) and the COM (as its receivers) were not.”
“In Soviet state capitalism, the COM employed, in addition to productive workers in its factories, a vast central managerial bureaucracy (Gosplan). Like its managerial counterparts in private capitalist corporations, this central management was responsible for supervision, record-keeping, and so on for the state capitalist enterprises. For example, using a kind of labor theory of value, Gosplan assigned values to inputs (labor power and means of production) and outputs. Gosplan then calculated the total difference between inputs and outputs (at their assigned values) to arrive at the surplus value received by the COM and thus available for it to distribute (to the state, the party, for capital accumulation, etc.). The COM then distributed the surplus (in portions and to recipients that were both subject to the varying powers of the Party, state bureaucracy, trade unions, and so on). The official goal was to reproduce and expand Soviet state capitalism. The COM also employed and depended on a huge decentralized managerial bureaucracy located within state enterprises at local and regional levels. These managers supervised and disciplined the USSR’s ever-expanding industrial work force. They pressured and persuaded workers to raise the productivity and intensity of their labor so as to maximize surpluses delivered to the COM. Because both centralized and decentralized managerial activities were deemed indispensable to the reproduction and expansion of Soviet state enterprises, the COM distributed significant portions of the surpluses to managers as their salaries and managerial budgets.”
From ‘State Capitalism versus Communism: What Happened in the USSR and the PRC?’
It has puzzled me that no commentator to my knowledge has ever referenced some aspect of the work of Istvan Meszaros, who in my opinion is the most thoroughly “marxist” of his 20/21st century interpreters. His distiction between what is capital and what is capitalism is not only helpful theoretically in mediating the confusing melange of conflicting versions of marxism, but has been severely tested in practice by the embattled Bolivarian Venezuela, where the state creates semi-independent, worker directed communes as actual productive entities serving as class conscious directional guides to the future, while all the while being in dialectical opposition/support of the State Capitalist state, which itself extracts surplus value from wage labor in industries ii controls within the larger private sector economy.
Lenin tried to accomplish something analogous to this in setting the industrial soviets in critical opposition to the Bolshevik state (which he considered state capitalist).
Could China save itself by employing state capital in creating self-directing communal nodules producing use value?
“As you say, market capitalist reforms like the NEP in the USSR or reform and opening up in China were often imposed as a result of structural conditions, out of a need either to stabilise the economic situation or to supercharge growth and ensure access to import of the latest technologies.”
Does capitalism have the ability to develop technologies and create economic stability more than socialism? I thought the victorian pseudoscience of Marxism says the exact opposite. So… isn’t socialism superior to “obsolete” and “ineffective” capitalism?
State-owned enterprises as well as governments of the cities, provinces, central ministries are run for profit. Just read the business news from China for awhile. Government regulation, tax, and fiscal tools are not different in kind from what Japan, France, and even the U.S. use.
Michael, in inverse proportion to your many economic strengths lies your political weaknesses and China is one of them. To understand socialism you need to understand capitalism first and here you are right, these authors who favour Sraffa are clueless. Sraffa was an anti-working class, fraudulent theorist, who should never be allowed to crawl out from under the rock of material balances planning which he tried to adapt and apply to capitalism, but which in the hands of the Stalinist bureaucracy brought down the collective economy in the USSR condemning the international working class to live for another two generations under the yoke of capitalism.
As for socialism let me start with the falling rate of profit, your favourite topic. The falling rate of profit which is an avatar for the rising productivity of labour and therefore the cheapening of production is not simply about crisis, in the end it can no longer motivate society by its fall. It becomes obstructive demanding a re-organisation of the relations of production. Let me be blunt. It requires an end to a society based on returns, based on margins. It requires an end to the Chinese economy as it is structured because this economy, despite its “socialist” trappings is based on margins.
It has to be. How are investments measured in China, by their return? This applies as much to state enterprises as it is to private companies. If it were not, then the Chinese state would be throwing its capital away. It would end up just like the USSR where the center was bankrupted by incessant subsidies to loss making enterprises. The success of China was due, not to putting politics in command but profit. Sure the state plays a directing role in the economy, but you and others make too much of this. Please explain how it was that China was caught with its pants down when chips were embargoed by Trump. Explain why it is that China recently is imitating the role played by the Pentagon in the 1980s which rejuvenated the US economy called the ‘military civilian fusion’ and which can be found here http://theplanningmotive.com/2021/11/11/defcon-3-yellow-alert-analyzing-the-pentagons-2021-report-to-congress-on-chinas-military-capabilities/ This discussion on socialism in China is reminiscent of the discussion by the bourgeoisie over the issue of universal suffrage where they felt its granting would mean the capitalist economy would not longer be capitalist because the market would not have the final say.
Yes, the CCP has successfully developed the capitalist economy in China. But there was nothing socialist about it. Yes they invested in upstream industries to nurture the more fragile downstream industries where private capital flourished. Yes they encouraged export based industries, in many cases acting as gang masters for foreign capital. Yes, they harvested and centralized the proceeds of these exports to industrialize the economy by first purchasing foreign (mainly German) means of production and when their leverage grew entering into joint ventures. And above all they proletarianized China, creating the largest disposed national working class in history barred from developing its own organisations apart from the CCP. For the love of me, I cannot see anything socialist about this.
Elias Jabbour decline a lot when he migrated to Economics (he’s originally a geographer). His first book — China Today — is a much superior opus (and yes, he mentions Preobrazhensky in that book, highlighting him as seminal to understanding Market Socialism with Chinese Characteristcs). Gabriele is not even a Marxist, if memory doesn’t fail me.
It is ironic how meritocracy alone does not determine what gets translated and what gets the spotlight in the Anglo-Saxon publishing world, even when it comes to the extremely small circle of Marxianism. It is “China Today” (China Hoje, in Portuguese), not “Socialist Economic Development in the 21st Century” that should have been translated into English and be the focus of debate in the First World.
The greatest merit on defining China as “Market Socialism” and not “State Capitalism” or “Capitalism” is documental evidence itself: the Chinese literally define their own system as Market Socialism. The burden of proof falls on the academicians who want to prove otherwise, not on the ones who state it is Market Socialist. I myself (who’s not from Economics) agree with the official definition of the Chinese government.
The argument that China must not be socialist because inequality is as high as Brazil, India etc. is not valid because it ignores the factor of the development of the productive forces (which are immensely higher in China than in the “emerging economies”). That means Market Socialism can simply be another form of Primitive Accumulation of Socialism – in the inverted form of what happened in the USSR.
I think the best definition of the Soviet system was the one made by philosopher István Mészáros, who said that, in the USSR, extraction of surplus labor was political (i.e. direct, by the order of the State) instead of the economical extraction of surplus labor in capitalism (i.e. indirect, through the motions of the world market). The USSR was socialist, but it didn’t have the corresponding stage of the development of the productive forces to consolidate it, hence the necessity to accumulate through politics instead of economics (which wasn’t possible anymore, because it had already decided to be politically and socially socialist).
China, in my opinion, is the USSR but with an economic engine of extraction of surplus labor. Learning from the Soviet stagnation and collapse, the CPC realized direct exploitation of labor was unsustainable, and thus internalized the capitalist way of extraction of surplus labor, which at least gives the illusion of meritocracy and is much more dynamic and explosive than the direct/political method of extraction of surplus labor. But the leviathanic portion of China is fully socialist, first and foremost because the Communist Party has full command of the State (i.e. the CPC is the Leviathan of China, not the capitalist class).
What I disagree most with Western Marxists, including the Marxian, is the problem of (proletarian) democracy. The thing is: we cannot, with a straight face, tell Western Liberal Democracy is closer to socialism than Single Party Totalitarianism anymore. History of the 21st Century tells us WLD has endless mechanisms to always guarantee capitalist absolute hold of leviathanic powers, much more formidable and sophisticated than SPT. At least SPT can collapse from within, through a relatively peaceful bonapartist coup (e.g. the collapse of the USSR in 1991; the euthanasia of the Communist Party of Mongolia soon after).
There are progressive aspects of the Single Party Totalitarian system that cannot be observed in any form of Bourgeois Liberal Democracies. First and foremost, the Single Party elite (Nomenklatura) is non-hereditary: no Soviet general secretary has ever managed to put his family in a position of perpetual power, directly or indirectly; the anti-inheritance system of socialism makes building a dynasty virtually impossible. Hence we don’t see any Stalins, Krushchevs, Brezhnevs or Gorbachevs ruling capitalist Russia or Ukraine nowadays. Secondly, the very nature of the party apparatus requires for any potential leader – no matter how power-hungry, greedy he/she is – to at least have to convince the many instances of the Single Party to move up the ranks through political thesis and discourse, which requires theory and a good level of intellect: hence Stalin, considered in the 1920s to be “dumb”, is, by modern standards (specially if we compare to your everyday Western political leaders), a political genius (I doubt any of them could write something even close to the “National Question”). Thirdly, the very nature of the Single Party of the Communist type requires it to expand its reach to the village level, i.e. to become a mass party; that is true even if this party retains its traditional Leninist vanguard orientation, because the vanguard is only a communist vanguard as long as it is “connected” to the people — hence most of the Soviet and Chinese leaders coming from very humble roots, mostly peasant, instead of the classical formation of a class of politicians in the bourgeois liberal democracies. Therefore, it is not scientifically obvious at all that communist totalitarianism is more distant from socialism than representative liberal democracy.
I think the best definition of the Soviet system was the one made by philosopher István Mészáros, who said that, in the USSR, extraction of surplus labor was political (i.e. direct, by the order of the State) instead of the economical extraction of surplus labor in capitalism (i.e. indirect, through the motions of the world market).
Which means by this, the former USSR is in the same category as feudal orders, prisons, and slavery– direct compulsion. That’s not an advance on capitalism. So much for that type of “socialism.”
That’s a weberian vulgarism. The USSR was a socialist nation, because of the development of the productive forces. Besides, just because the method of extraction of surplus labor is direct, it doesn’t mean life is necessarily bad; it would be moralism to claim otherwise, the same as stating that having a stable job is slavery in comparison with having numerous “gigs”.
Never in one million of years could any feudal society send a man to space or develop state-of-the-art aircraft and electrical grid, and so on. Never in one million of years could any Bronze Age slavery society develop universal healthcare and education system. It was the Soviets who brought electricity to the peasants, not the czar; it was the Hammer and Sickle who marched to Berlin and stuck its flag on the Reichstag, not the imperial Tricolor.
If the system didn’t matter for the development of the productive forces, then there wouldn’t be any reason for any of us to be discussing changes of modes of production at all.
Well, for once, finally you’re half-right. Vulgar? Always. Weber? Never. But as a vulgar eurocentric marxist, I have a request. Please reconcile the below contradictory statements:
“I think the best definition of the Soviet system was the one made by philosopher István Mészáros, who said that, in the USSR, extraction of surplus labor was political (i.e. direct, by the order of the State) instead of the economical extraction of surplus labor in capitalism (i.e. indirect, through the motions of the world market). The USSR was socialist, but it didn’t have the corresponding stage of the development of the productive forces to consolidate it, hence the necessity to accumulate through politics instead of economics (which wasn’t possible anymore, because it had already decided to be politically and socially socialist).”
” The USSR was a socialist nation, because of the development of the productive forces.”
Or is that your notion of dialectic? If it is, then vulgar really is your area of expertise.
P.S. It’s not “productive forces” that define the mode of production; the productive forces exist in and as a certain relation to the organization of social labor– that relation is what defines the mode of production. That’s Marx, not Weber.
The relation between labor and means of production is universal, a-historical. It will forever haunt the human species.
You took a universal relation in order to relate the USSR to some ancient and feudal society, which is absurd from the point of view of the science of History. Only Weber did such comparison (he compared the USSR with Ancient Egypt on the same premises you used).
Therefore, you’re the one confusing the categories.
Confusing nothing; your adoption of Mészáros characterization of surplus appropriation places the former Soviet Union in a category that Marx identifies with feudalism and slavery. The characterization may be correct, but if it is, it goes a long way to explaining a) the more brutal aspects of the Stalinists b) the mounting inefficiency and eroding productivity of the order c) the collapse of the fSU, regardless of the number of missiles, space capsules, multiple rocket launchers produced.
Nazi Germany produced rockets too, utilizing “direct” compelled slave labor: V2s
You named the shoe, you said it fits, don’t whimper when you trip over the laces.
Excelent analysis Michael. I am a leftist (Western) German and I was always wondering why the allegedly marxist political economists in the former GDR never really questionned the term socialist market economy and why they were so eager to take advantage of the law of value in building the socialist economy. Did none of them ever fully understand what Marx wrote about VALUE? Sure, the first chapters in Capital 1 are not trivial literature, but can one fully ignore, that value is a social relation intrinsic to capitalist production of commodities with all sorts of fatal implications. You mention very briefly the fetishism, which descibes the blindness and anonymity of producers and how they relate to each other via commodities in a capitalist market economy. Are there chinese marxists who question the chinese way to socialism along these lines? I have my doubts, but I know too little about such discussions among chinese intellectuals, should there be any.
Let’s just hope, that what Che Guevara said about the NEP in the USSR and Lenin’s will to limit this period rather than expand it will apply to China in one way or another: The CPCs pledge to mitigate social inequalities, to reduce the number of billionaires and their economic power, to invest in climate change projetcs etc. may point in this direction. But there is still a long way to go
The important thing is whether there are guarantees that in China the pressures for self-interest of party members will not cause less and less attention to be given to the broad interests of the majority. The lack of democracy and of any popular control on who enters the party – in full agreement with the bolshevik tradition, ‘the party knows best’, a fundamental mistake – induce pessimism. It seems likely that the fusion of interests of party members and rich capitalists, which has already started with the admission of successful ‘entrepreneurs’ to high positions in the party, will continue, there being no way the workers can stop it except by a generalized insurrection. The gradually increasing inequalities and privileges of party members will slowly increase popular discontent and the answer will be more repression, so slowly China will become more and more an authoritarian state, and sooner or later there will be phenomena similar to Stalinism, the party leader becoming a true dictator (there already are clear indications of attempts in this direction), great purges, more and more desire of imperialist expansion, etc.. All this does not deny that firm state controls on a market economy can produce vast improvements relative to a laissez-faire market economy. But without full democracy it is not socialism.
You can say, as a matter of your personal opinion, that Chinese socialism will likely collapse, but you cannot say that that must be the case. We don’t have a comprehensive theory on this (as opposite to capitalism itself, which we know for sure will collapse, via Marx and Henryk Grossman demonstration).
And you’re simply wrong when you state that there’s any “lack of democracy and of any popular control on who enters the party”. Almost anyone can and could enter the CPC and the VKP(B); if it depended on both parties’ abstract will, everyone would be a member.
Question: Could the Chinese blend of socialism and capitalism maintain high growth if China were the hub of the world economy and faced relatively lower demand for exports from nations with economies in which capitalism dominated? … For anyone interested: “Mixing Capitalism and Socialism: Policies To Moderate Systemic Wealth Concentration in the United States” https://www.inequalityink.org/resources/capitalism%20socialism%202019%20edits%20June%20-%20latest.pdf
My take is this: when “high growth” stops in China, it will start – if it is indeed socialist – to invest in even greater infrastructure projects and even more R&D, in the direction of lowering socially necessary labor time the most possible.
If, on the contrary, it starts “creative destruction”, i.e. to disinvest in order to extract more surplus value, then it will be demonstrated it is capitalist.
So far, evidence points towards the PRC being socialist. When GDP growth fell suddenly from 10% to 6% circa 2014, the CPC doubled down on the development of the productive forces, under to political slogan of “quality growth” (in opposition to “quantitative growth”), publicly stating to the Chinese people 6% would be the “new normal” from now on. It was all over the Chinese news, websites and newspapers — the Chinese people knows the era of double-digit growth is never coming back, they’re not being fooled in this sense. China is building more railroads, investing heavily in green energy and even more heavily in R&D, specially the most urgent area which is semiconductors (see the Taiwan question). They’re also showing a very socialist pattern of territorial development which was also present in the USSR from the very beginning: the integration and convergence of the periphery to the center. The 2,700 km railroad going through the Taklamakan Desert was just finished; Tibet is richer, more developed and more integrated with the rest of China than ever; no resources are being spared to revive the decadent Northeast, just to keep on three examples.
Can we call things by their right names? Chinas expansion was initiated with the opening of the economy to market prices, initially with agriculture, then in relation to assets, property including property in the means of production and in the cost of labor power. Those are capitalist mechanisms. Now if you want to claim that’s been a rip-roaring success, then I would ask you to consider that that success has included destruction of the “iron rice bowl,” the expansion of a disposable, disenfranchised, migrant “casual, precarious working class, unequal education and health care access, dispossession of not property owners but property users by local and regional governments working hand in hand with “developers” AND the minor item of $1 trillion in direct foreign investment.
Growth rate? That’s how we’re measuring? GDP? Well, FWIW, China’s growth of industrial production during the “Mao” years1949-1976 average more than 10 percent per year, so it’s not like these “market” mechanism dramatically altered that terrain. Made a lot of people rich by SUBSIDIZINIG capitalist mechanisms from the previous social accumulation through price movements. Call it “success” call it “Chinese characteristics” call it the biggest goddam maquiladora the world has ever known; call it socialism even. Doesn’t change what it is– even with Xi’s latest programs- which is quickening the impulse to capitalist restoration.
This blog talks a lot about the dead weight of debt and the obstacle that “fictitious capital” presents, but somehow can’t see the same dead weights in China’s accumulated internal debt and the hideous scams of the completely overbuilt real estate sector.
China represents a competitor to capitalism? Sure thing, like adidas is a competitor to puma.
In humanities, we deal with the concept of hegemony in order to determine and classify social systems. It’s different from STEM, where something must be 100% of something in order to be that something.
So yes, albeit there is capital in China, it is not the dominant form of social reproduction. Hence we tend to follow the documental evidence and simply classify it as “Market Socialism with Chinese Characteristics”. There is no scientific consensus on China’s alleged full-capitalist status; the assertion that evidence is clear the PRC is 100% capitalist is simply a lie, it’s academic dishonesty — there’s no other way to put it.
Swell, but the careful reader will note that nowhere did I quantify how much capitalism there is in China. Most estimates suggest that approximately 76% of the GDP is the result of “private business” — this includes the rural sector and domestic/foreign partnerships– with SOE’s accounting for the remaining 24%. The issue isn’t quantification– it’s movement, direction, moments, in the creation and struggle of classes, hence I stated the growth is a result of “quickening the impulse to capitalist restoration.”
I know you couldn’t have had me in mind with your reference to academic dishonesty. I am not now, nor have I ever been an academic.
As for this: “If, on the contrary, it starts “creative destruction”, i.e. to disinvest in order to extract more surplus value, then it will be demonstrated it is capitalist.” you might want to revise your hegemonic determination of socialist because of this: “no resources are being spared to revive the decadent Northeast, just to keep on three examples.” The industrial NE of China, its “rust belt” has experienced that sort of disinvestment– it’s been going on for years.
I recall that in 1950’s Britain ‘the commanding heights’ of the economy were state owned, not to mention a veritable plethora of other state institutions such as the Passport Office, the Royal Mint etc. etc.; while education and health were free at the point of use ( are such still commodities in China?). Moreover urban transport and much housing was owned by local councils. The Prime Ministers were such Conservatives as Harold Macmillan, a capitalist grandee, and Douglas Hume, the descendant of a feudal dynasty. So if today China is socialist, I guess Britain was even more so then? Anyway, we are missing the main point in examining the role of the state. Recall that Marx observes that the expansion of joint stock companies represents the ”abolition of capital as private property within the capitalist mode of production itself” ( capital Vol 3 p 567). As Marxists we must get away from juridical fetishism. Marx distinguishes two types of capitalist: ”The capitalist exists in a dual form-…. juridically and economically… it (capital) is lent, instead of being sold…What is sold is its use-value, whose function in this case is to produce exchange -value, to yield profit, in other words to produce more value than it itself contains”(TSV Part 3 458). So when the Chinese State advances capital to Chinese Companies, the State is the juridical capitalist and the company is the economic capitalist. To claim that the fact the State issues such capital renders it non-capitalist is to confuse private capital with social capital, and to identify capitalism only with the presence of private capitalists. The modern capitalist company may juridically belong to its shareholders, but economically the Board of Directors are the real capitalists who exercise command over others’ labour power and make the investment decisions. I think that the biggest shareholder in Shell owns about 0.5% of its shares. So if the Chinese State advances capital to a Chinese company it is engaging in capitalism, unless one can demonstrate that the activities of such companies ( or indeed the State itself) are not predicated on production for profit.. The executives of Shell do not own the Company: while they may stock options, as with Chinese State companies, their wealth also comes from salaries and bonuses. Thus when Shell enters into joint ventures with Chinese Companies, which may also have Star financing, would one claim that the Shell executives are capitalists (i.e. in Marx’s formulation the bearers of the capitalist relationship), while the Chinese executives are mere salaried managers? Were it so, it were difficult to comprehend how so many have become millionaires ( second I think only to the US)! Certainly not in the seat of their brow!
”So yes, albeit there is capital in China, it is not the dominant form of social reproduction.” I think it is, much more so than in India. What I feel is different is the dominant role of the Party. I feel as yet the capitalists as a class do not dominate the State in China. Clearly there are mighty contradictions, but I think Xi and his supporters fear that China could go the way of the old Soviet Union, if the forces of capitalism are unchecked. Recall that this caused the greatest peacetime economic horror in history, with 12 million excess deaths between 1988 and 2002. Still, I fear that things will only be resolved in favour of the capitalist road!
@ jlowrie #1
You raise a very important question that confuses many Western leftists to this day, which is the role of social-democracy in the greater scheme of things.
The second most important characteristic of socialism is the disappearance of the State, as Marx made clear. But we’re talking about the State in the philosophic sense, that is, the Leviathan.
So, socialism presupposes the beginning of the end of the Leviathan, which is an “institution” that exists since the dawn of History (the birth of patriarchalism, private property). Capitalism, as a historically specific, patriarchal system, must be governed by the Leviathan to exist, no matter its form or shape. In other words, the Leviathan can exist without capitalism, but capitalism cannot exist without the Leviathan, albeit a capitalist version of the Leviathan.
The Leviathan is necessary in capitalism because the free market doesn’t exist in nature. Capitalism needs a neutral arbiter to enforce the basic rules of private property and the free market. That’s the limit of “small government” as preached by the Austrians and the neoliberals, among other numerous sects that proliferated in 20th Century capitalism.
So we have Clement Attlee in 1950, after he defeated Winston Churchill. His government was what many call the holotype of post-war social-democracy. What did he do? He took the Leviathan, with its original function of serving as the neutral arbiter of the free market, and used its powers to, in addition to it, also give form to many policies which we nowadays call the “welfare state”.
So, the picture we have here is clear: social-democracy doesn’t make the Leviathan to fade away one bit; on the contrary, it only strengthens it, because now it has two functions instead of one – serving as the neutral arbiter of the free market and to maintain the welfare state. You can say social-democracy subverts the original Leviathan (from the point of view of the “minimum government” ideologues), but it certainly doesn’t contribute to the transition of socialism (in fact it makes the opposite, as the capitalist Leviathan only gets stronger).
Throughout this discussion a SMALL detail was missing (!), The Chinese working class. Whether China is a “market socialism” or “state capitalism” is a detail for working classes and any revolutionary movement. The Soviets took power in Russia not because they had perfectly defined what would follow the revolution, to tell the truth Lenin celebrated the day when it lasted longer than the Paris Commune.
The important thing that the largest mass of industrial workers is in China worksman for export than for the domestic market.
Gentlemen, the story is not over!
As long as there are exploited and explorers, no matter who explorers are the masses will not conform, and everything if there is recession in the capitalist West, or greatly diminishes the performance of the Chinese proletariat, or the state only takes care of internal claims, or Still, China catches fire.
By net total trade, China is barely an exporter nation (as Michael Roberts has shown at least three times in this blog). Therefore, it is not true the Chinese working class is merely an export machine.
Even if it was, what does it prove? The German working class is merely an export machine, while the working class of the USA is merely a consumer machine. Both are working classes from two equally capitalist nation-states. It proves nothing.
Regardless, China has been transitioning to be an even more consumer nation since 2012, when Xi Jinping took office. This movement continues as we speak.
Yes, socialism will not have classes, but nothing is born out of nothing and already in perfect form, like Athena being born out of the head of Zeus. In the real world, there must be a transition.
A few on the left see only the alternative: bourgeois democracy or an authoritarian regime. This is the sham alternative that world politics is offering us today.
In bourgeois democracy, voters make decisions about individuals who, once elected, are committed to no one but the “common good,” and 90 percent of the time this is identical to the interests of capital.
In a workers’ democracy, voters make decisions about issues and upcoming tasks. In a workers’ democracy, the electorate does not award posts, but orders.
The lie of bourgeois democracy is to blur this fundamental distinction and pretend that voters actually have the right to decide matters.
An authoritarian regime can do without this lie. Anyone who praises an authoritarian regime as a better alternative dreams of the “enlightened rulers” of the 18th century and has no knowledge of Marx’s “civil war in France” and the experiences of the Paris Commune.
Wal Buchenberg, Hannover
I think we’re missing the value (at least for me) of this blog and, therefor, what is motivating the course of history. Capitalism, having reached its structurally determined limits decades ago, still holds onto its global hegemony, but by war and destruction, violently creating the very conditions–even at the imperial centers–that demand a socialist solution. But Western socialists botched their opportunity prior to the great world wars. It’s all academic for us now. But at least most of the commentators on this blog know which side they are on.
Putin and his metamorphoses are reflections of this process, and so too Xi: socialism or extinction (including their own). Successful revolutions will be dictatorships of the working classes and will provide plenty of opportunities for entrepreneurial capitalism, but controlled and modified by the state. It will have the best of Chinese and German characteristics, not their worst.