Encyclopedia of Anti-Revisionism On-Line

Revolutionary Communist Party

Revisionist Pipe Dream Goes Up in Smoke

The Destruction of China’s Socialist Economy


First Published: Revolution, Vol. 4, No. 5, May 1979.
Transcription, Editing and Markup: Paul Saba
Copyright: This work is in the Public Domain under the Creative Commons Common Deed. You can freely copy, distribute and display this work; as well as make derivative and commercial works. Please credit the Encyclopedia of Anti-Revisionism On-Line as your source, include the url to this work, and note any of the transcribers, editors & proofreaders above.

Recently, reports have filtered out of China describing how peasants in some places have divided up land and tools. Along with this have come major pronouncements from the government ministries calling for a reassessment of production targets and foreign equipment purchases on account of dislocations and implied financial difficulties. The “four modernizations” has already come on hard times; more to the point, already it has flopped. The party press which only months ago had been singing praises to the “new long march” has since been sounding a new theme in editorials: “First retreat, then advance.” These developments and others–to be examined–bring into sharp relief the political and economic strains tearing at the Chinese economy.

Underlying all of this is not the reputed over-zealousness of central planners eager to get on with modernization or some sort of peasant backlash to years of “deprivation” in the fields. Least of all does this “retreat” mark a return to Mao’s policies. The revisionists, intoxicated by their visions of grandeur, have run straight up against China’s real productive base–which cannot sustain their hopes for superpower greatness. Now they appear to be settling in for a more mundane program of capitalist restoration and one which will more clearly and directly head China back to domination by imperialism. Ever the pragmatists, they think maybe something else will work. The substance of what is happening in China is, on the one hand, the systematic dismantling of the socialist economic base as the economy is restructured according to capitalist principles of putting experts in command, reliance on material incentives and profitability as the key yardstick of investment decisions and, on the other, the unleashing of spontaneous capitalist tendencies as the economy is unhinged from a revolutionary political line. As was pointed out in our Party’s Central Committee Report on the 1976 revisionist coup in China: “It is impossible to carry out such reversals in the superstructure [referring to the reversals in the realm of education and culture] without this being a part of the reversal in the economic base, in the realm of production and the nature of how the economy is run.” (See Revolution and Counterrevolution, Chicago, 1978)

It is extremely important to recognize that given China’s generally backward economic state–something, by the way, which is neither a curse nor an excuse for revisionist “get-rich-quick” schemes–any line other than Mao’s basic orientation towards developing China’s economy on the basis of socialist relations and according to her particular conditions (which involves in large measure her overwhelming peasant and agricultural base) and any line which does not put politics in command will lead back to dependency on imperialism as well as exploitation of the working people. Relying on her own efforts, mobilizing the workers and peasants to master technology and management, dispersing industry throughout the country, and linking economic development with the overcoming of those obstacles–organizational and ideological–which prevent the masses from consciously transforming society and reducing the differences between mental and manual labor, town and country, and worker and peasant on the basis of continuing the revolution–these were not policy options or tinkerings of the Cultural Revolution. They were the only guarantee that China would lift herself out of backwardness while expanding the scope of initiative and participation by the masses. In short, Mao’s line (which was upheld and fought for by the Four) was the only guarantee that China would remain socialist and develop in a socialist direction.

That this orientation has been abandoned is by now universally admitted. There is still some discretion exercised in attacking Mao directly, but his policies have been thoroughly criticized as outdated or hopelessly idealist. But what is now becoming increasingly apparent is that, again, owing to China’s particular conditions, the disintegration of her economy would be very rapid, indeed, once certain forces were set in motion. It also becomes clearer that the so-called “four modernizations,” far from being a practical and down-to-earth approach to China’s economic problems or an ambitious and far-reaching vision of the future (depending on what species of apologetics and sycophancy one chooses) is, in point of fact, a recipe for disaster–no more realistic and no more in the people’s interests than the Shah’s vaunted modernization efforts. And if one wants to speak of idealism (of the most reactionary sort) then the assumptions which are the brick and mortar of these plans are well worth summarizing: somehow the imperialists are going to aid China in developing an independent and comprehensive industrial base; China will at the same time beat them at their own game–playing banking syndicates and suppliers off against each other for loans and technology; and once China lays hold of all this wondrous technology, it will cut these backers loose, break free of any entanglements and with this technology change what Teng Hsiao-ping, in one of his characteristically blunt statements, called the “ugly face” of China. There are no production relations in this fantasyland, no imperialist power politics. Beneath all the trappings of this future world nonsense is the classical comprador contempt and fear of the masses taking society into their own hands and awe and fright at the imperialists.

5th NPC and 1978

A wrecking operation has been underway since the revisionists consolidated political power, and it has been accelerated as they fight among themselves–all while they hypocritically proclaim their unswerving concern for the wellbeing and material welfare of the masses. Some of the key developments in this process can be traced out roughly dating from the 5th National People’s Congress held in early 1978. At that Congress Hua Kuo-feng spelled out in great detail targets for the completion of a 10-year growth program beginning in 1976. In the development plan China pledged to build 120 major industrial complexes, including 30 power stations, 10 iron and steel plants, 10 oil fields, 6 railway lines and 5 harbors–all by 1985. Simultaneously, China would double its annual steel production to 60 million tons and push grain output to 400 million tons a year, from the 1978 level of 295 tons.

During 1978, several conferences were held to promote the necessary organizational changes and to enshrine the bourgeois line that would guide this “new long march,” as it was called: science and education in March and April, trade and finance in June and July. A program for the reorganization of the agricultural machine industry was drafted and two major articles, one by Hu Chiao-mu, head of the Social Sciences Academy on industrial organization, and the other on wage policy appeared later in the year. In October an enlarged Politburo meeting was held in which several important decisions were made with respect to economic affairs. This led to a working conference in mid-November whose decisions were endorsed by a Central Committee meeting held in late December.

The communique issued at the close of that meeting revealed the rehabilitation (even posthumously in some cases) of the remaining high-ranking targets of the Cultural Revolution (with the exception of Liu Shao-chi, though his reactionary wife who was a key figure in fighting for Liu’s line was now back in political life) and made some economic policy pronouncements. The peasants’ rights to decide their own affairs and do their own accounting at the production team level (the basic unit of perhaps 30-40 families in the commune through which production is organized and from which most income is derived and distributed) was upheld, and with this came a reaffirmation of inviolability of private plots, domestic sideline activity and rural trade fairs. It was further announced that grain prices paid to peasants would rise while prices they paid for machinery, fertilizers and pesticides would be cut over the next two years by 10 to 15%. At the same time, prices for grain and farm products to urban residents were to be kept stable. Finally, the meeting stressed the greater authority to be placed in local enterprise management hands–this, of course, eclipsing and replacing the political authority of the now dissolved revolutionary committees. The communique called to a close the campaign against the “gang of four” and declared that modernization and production were now the central task. An editorial published in connection with the communique explained that a shift away from political movements to production at center-stage of the revolution should have been effected as early as 1949. Only a fool couldn’t figure out who it was that stood in the way of this shift!

With this shift in force, we find such claptrap and doggerel as this in a recent issue of Beijing Review #17:

People at various fronts must see that every kind of work we are doing now is in the service of the Four Modernizations and hence is of extreme significance politically. Thus it can be said that politics in the petroleum industry is to get out more oil. For coal miners politics is extracting more coal.

And just under their breath you can hear the missing refrain: for the rulers, politics means extracting more surplus value.

This CC meeting is a convenient reference point–it codified themes that had been emphasized in some important theoretical statements in the previous summer and fall and also hinted at underlying problems and certain adjustments that would be made in the months following. It was at the time of this session that grain output was officially estimated at 295 million tons for the year–considerably below the targeted growth rate. Moreover, the communique warned against “rushing things.” (What is interesting here is that despite their frequent calls for order and stability, the entire economic program of the revisionists has been a headlong rush into chaos.) 1978, it is true, had seen industrial output rise by about 11%. Steel production was put at 31.7 million tons and coal output was said to have exceeded the 1977 level by 50 million tons. The initial summaries of 1978 steel output cited the performance of the industry as proof positive that the 60 million tons goal for 1985 would be achieved. Yet, a February 24th editorial in the People’s Daily called into question the whole idea of taking steel as the key link in industry (this was a policy formulated by Mao based on the relationship between steel and machine manufacture) and announced a reduction of the proportion of investment for iron and steel. The 1985 target has now been scaled down 25%. Clearly agriculture was not developing as rapidly as planned. Heavy industry was absorbing investment funds at agriculture’s expense, and because China had to contract for major grain imports through 1982, cuts into the industrial imports which had been negotiated at a feverish pace throughout 1978 became inevitable. China must pay for grain imports totaling 11 million tons in 1979 alone.

The upshot of these difficulties has been a decision to emphasize the development of those trades and branches of the economy that would most quickly earn profits and foreign exchange and that could compete on world markets, like cotton textiles. The trade deals are being re-thought and renegotiated. But, most important, and in the name of boosting agricultural production, a major adjustment in farm policy has been enacted. Nevertheless, what motivates the very major changes announced is the desperate attempt to continue to divert funds towards the industrial sector, but now by selectively mechanizing agriculture–bolstering some areas while abandoning others. In this way it is hoped that large surpluses and foreign exchange generated through the more intensive exploitation of the countryside can underwrite the modernization program, hence the call for regional specialization and greater reliance on cash and industrial crops. Hua’s campaign promise of basic mechanization of agriculture by 1980 has been quietly shelved. So here we have the early returns from the modernization program–temporary spurts in output which, far from giving momentum to any kind of all-round development, have tended to strain resources and distort growth. Timetables, targets, even promises to the foreigners are routinely thrown to the winds.

What is going on? Basically two things: first, a further adoption of capitalist practices and methods, essentially in the form of building up what is already built up and going in for what yields the greatest immediate returns–in a word, reorganization according to and concentrating on what is most profitable; second, and directly related, the breakdown of the planning mechanism. The time frame within which the “four modernizations” were to be achieved does not reflect the real capabilities and needs of the Chinese economy and such modernization is assuredly not based on the creative energies of the masses. As a result, major dislocations have already occurred. Planning is reduced to patchwork attempts to make good on some of the long-term targets and foreign agreements–but only by further squeezing some sectors while other targets are ditched altogether.

In many ways there is much similarity to the Cuban experience where the 10-million ton sugar target for 1970 was not only unrealistic in its own right but based on the same comprador philosophy of exporting to industrialize. It led to serious disruptions of the economy, particularly for cement and consumer goods production (and, of course, perpetuated the very colonial relationships the leadership claimed to be fighting, though now the neo-colonial relationship was with the Soviet Union as imperialist overlord).

Such difficulties make necessary frantic planning to utilize and manage resources under conditions in which they cannot be rationally allocated given the unrealistic targets, e.g. large steel mills to be constructed when there are no assured supplies of raw materials and inadequate transportation, as is the case in China. And it also becomes necessary to placate sectors of the population unleashed by the promises and methods of such a program while the majority is enjoined to work hard and perhaps be the lucky ones to get ahead. The illusion of broad and systematic planning to the year 1985, to the year 2000, is shown up for what it is–anarchy. The long-term planning which is supposed to take account of capital construction needs, indicate a general orientation and raise people’s sights, proves totally unrealistic. The flexibility associated with short-term planning in realizing such goals now becomes a dike-plugging affair.

To understand the situation developing it is necessary to go back to the program outlined at the 5th National People’s Congress. By most estimates it involves expenditure of perhaps $600 billion over the 10-year period. Of this, $230 billion is thought to be the cost of imported equipment which is the keystone of the entire project. There is no question that steel output, for instance, could be increased through the import of huge steel plants, such as the one planned for Baoshan by Nippon Steel, which was very much at the center of the steel expansion program. But the financing and absorption of this technology has already posed problems so serious that this contract was frozen since China had to pay (and lacked) cash for it.

China’s foreign exchange reserves are estimated to be anywhere between $1–2.5 billion–essentially a drop in the bucket. How will China pay for such plant and equipment? Tourism is one possible source of earnings, and would-be travelers will be happy to learn that the Bank of China is issuing travelers’ checks and accepting credit cards. (For the more homesick tourist, coke and pornography are now being made available.) More significantly, it can finance these projects through export earnings which for some years to come will center around oil, light manufactures and cotton textiles.

But the development of the oil industry, itself, is based on a massive infusion of foreign exploration and extraction equipment, management and finance. In return for this assistance China has been willing to repay with a portion of the output from these and other sectors. These co-production deals, as they are called, are the most widely employed and preferred at the present time. The development of an export-oriented oil industry, however, cannot be looked at in isolation from the rest of the economy. It requires the upgrading and expansion of port facilities to accommodate large tankers and the construction of pipeline, if inland sources are to be tapped. In other words, it requires major shifts in overall investment policy, not to mention a careful clamp on domestic consumption (which has increased 2-fold in the last 10 years and much of which goes towards fertilizer production) if this oil is to be freed up.

Baoshan is also interesting in this connection. If actually built, it will be the first Chinese steelworks to be constructed on China’s coast–far from China’s own ore deposits. Much of the increase in China’s steel output in the ’60s and ’70s was due to the output of small and medium sized mills scattered throughout the country and able to process local materials. Not only will the new complex have to import Australian ore, but to do this a new berth will have to be built. And who was to have undertaken the necessary dredging of the river? A Dutch consortium! It becomes a kind of vicious cycle of tightening dependency and increasing distortion of the economy. What’s more, the world market must be prepared to take up this oil. At present this would appear to be quite the order of the day – but so did it in 1973 just before the worldwide recession of 1974-75. As for the here and now, the world market is glutted with textiles and clothing, which figure prominently in China’s future export plans and which already make up 25% of China’s export earnings. Moreover, the very markets the Chinese hope to penetrate with these goods (North America, Japan and Western Europe) have seen a major escalation in protectionism in the last few years. Meanwhile, the prices of the high-technology items the Chinese hope to bring home have been rising steeply.

Japan has no need for repayment in steel for its Baoshan complex, so other financial arrangements must be made. Various credit schemes have been worked out ranging from suppliers’ credits to syndicated bank loans to what amounts to foreign “aid” from Japan’s Export-Import Bank and its Overseas Economic Cooperation Fund. But here other problems present themselves–high interest rates, long-term loans denominated in yen which will be more costly to repay if the yen continues to climb in value relative to the dollar (the Chinese have been burned in such a way in contracts signed 4 or 5 years ago for plant and equipment), and the prospect of a rather large debt burden, even assuming that China meets some of these targets. Yet these targets are more and more at cross purposes with each other. There is to be a major expansion of oil and other raw material exports when agricultural mechanization is oil-based. There is to be a major drive to increase agricultural exports when increases in grain and non-staple food consumption in the cities is promised. There is to be price stability when this program has a built-in inclination towards inflation. Reports have been circulating of higher consumer prices in some cities and this undoubtedly will spread given the “all things to all people” hype behind the modernization program–wage increases, bonuses, promises of increased purchase prices of agricultural goods alongside the limited growth of consumer industries and the spread of rural free markets.

The point is that China can’t pay for all of what it intends to purchase (these compradors are like children in a candy shop) and can’t do what it says it can do as far as the fulfillment of these goals is concerned. The havoc it is already wreaking with the economy–the strains on resources and lop-siding of growth–is only a small glimpse into the future. The growth rate of industry over the past 10 years has been much greater than that of agriculture (though agricultural output picked up during the Cultural Revolution), and any program that has as its starting point the establishment of advanced industrial complexes, the technology of which cannot be widely introduced throughout the country, is only going to increase the technological gap between industry and agriculture as well as widen differences between peasants and workers, since wage payments are to be more directly linked with output.

The All-Round Destruction of Agriculture

But it might be reasonably argued that the Chinese leadership’s decision to re-evaluate some of the targets and to retrench a bit represent a new-found realism that will result in a more balanced growth between industry and agriculture. Actually, the latest calls to step up agricultural development (the editorials on this are excerpted in Beijing Review No. 11, 1979) will lead both to the exploitation of the peasantry and to more uneven development within the countryside in terms of the spread and level of technique and living standards. A hint of what was to come was contained in a People’s Daily editorial published on January 28th–again, in the wake of the 3rd Plenum. Here it is concluded that “compared with the pre-liberation period, the peasants’ living standards were much better during the time the agricultural cooperatives were set up... but in the following years farm output rose only slowly.” The message is unambiguous. It was beginning in 1957-58 when the People’s Communes were set up that mistakes were made! The ruling revisionists hanker for the balmier days not of the early ’60s, but the 1950s–which is why Peng Teh-huai, a vocal opponent of the Great Leap Forward, has been posthumously restored to honor.

Mao’s view was that mechanization was key to transforming agriculture, although he also stressed that collectivization had to proceed mechanization. The manner in which the mechanization of agriculture would be brought about required that industry serve agriculture (50% of all rolled steel had been allocated to farm equipment manufacture), that local industry at the county, commune and brigade level acquire the capability to produce and repair farm machinery as well as generate the funds to assist collective units in purchasing equipment, that technicians be trained from among the peasants, that agricultural science and education serve the needs of the peasants and be based on their experiences in production, and, most essentially, that all this be carried out within the framework of the continuous revolutionizing of the superstructure and production relations.

Hua Kuo-feng in his 1975 Tachai speech called for the mechanization of agriculture by 1980. The content of this mechanization has been continually redefined and finally the goal itself has been abandoned. But the political line guiding all of this has remained thoroughly consistent–that is, revisionist. The RCP’s CC Report on China made an analysis of Hua’s speech. It was pointed out that it does not deal anywhere with the central question of reducing differences between production teams. These are economic differences based on fertility, location of land and previous accumulation. When the revolutionaries were in control several different kinds of measures would be taken to reduce these differences. First, political leadership would be given to these poor or more backward teams so that they could unfold mass movements to overcome various obstacles. Second, the commune’s machinery would be used to enlarge arable land area and improve the soil. Third, some of the labor from these poorer teams would be employed in commune-run enterprises during slack season to boost incomes. And finally, the bulk of the reserves accumulated by these enterprises would be used to mechanize and further develop agriculture while a substantial portion would go toward expanding social services. Hand in hand with these measures were efforts by the revolutionaries to encourage those brigades or communes with more favorable conditions (better land, access to water, etc.) to make sacrifices to aid those less favorably suited. (The revolutionary opera Song of the Dragon River is a powerful portrayal of a struggle to implement this line.)

That Hua’s much-touted mechanization program was just a pretext for widening such differences has now been completely borne out. In the fall of 1978 Vice Premier Li Hsien-nien announced an increase in the proportion of medium and large tractors to be earmarked for state mechanized farms. But it was a January 27th editorial that sealed the fate of the nationwide mechanization campaign. It explained that the state would “concentrate on building modern production bases in crop farming, forestry, animal husbandry and fisheries.” Funds and material would be concentrated there. A subsequent editorial indicated “that these production bases can be built by expanding some state farms or by reclaiming virgin land. In some cases they can be run by the combined efforts of several people’s communes.” These bases receive the latest and most advanced equipment and the people there will be allowed to improve their living standards and, according to this revisionist wisdom, “become examples to the rest of the country.” Other areas are to achieve mechanization, it is declared, by taking into account local conditions and practicing “self-reliance,” a policy which has now come to mean sink or swim. The other key component of the new policy is a move away from grain self-sufficiency–different regions are to specialize in different activities with a greater emphasis on cash and industrial crops. Cash crops are not produced according to a compulsory delivery obligation to the state. They include such items as fruit, vegetables, beets, medicinal herbs and tea. One example that is widely referred to concerns an area which in 1958 (the Great Leap Forward year when the communes were formed) turned grassland over to grain cultivation. Now it has reverted to grassland, to the jubilation of the revisionist planners.

Taken together, this is a frontal assault on Mao’s agricultural policies. On this last point it was Mao’s line to “take grain as the key link and ensure an all-round development.” The logic of this was to reduce dependency on the state for grain supplies and to lessen the burden on the transportation system, making it possible for all regions to feed themselves. And it was a policy which helped safeguard the country’s independence–first by minimizing needs for grain imports, and second by building up grain surpluses in order to sustain a war effort. This was not a call to eliminate other crops, but to establish priorities based on political criteria–including the development of the economy overall along socialist lines. Wherever possible, for instance, a cotton-growing area was encouraged to increase grain output. Land for grain, cotton or other crops was allocated in a unified way–usually at the prefectural level (consisting of several counties)–and production norms for different crops set. Attempts were made to bring more land into cultivation, to introduce new cropping techniques and make greater use of chemical and organic fertilizers so that grain and industrial crops could be expanded simultaneously; but again, this was undertaken with an eye towards the overall needs of the country and by struggling against the ideology of self-gain, since many of these industrial crops brought higher incomes to peasants.

The new turn with respect to crop specialization and selective mechanization also stipulates that tractor and machine stations be set up by the state to serve surrounding communes and brigades. In the past, communes purchased such equipment with internally generated funds, operating it on their own account, with the state assisting the more backward areas and giving overall guidance to mechanization, which was based on mass initiative. This latter policy is obviously being reversed in the name of efficiency and specialization, which is why Hua Kuo-feng, returning from his infamous tour of I ran last summer, stopped off in the less developed Sinkiang province to announce that state subsidies there would be phased out. In keeping with this orientation, the government announced in April a shift in investments and subsidies to Kwangtung, which lies opposite Hong Kong, where non-staple foods and light industrial goods production will be expanded for exports. What is being dished up here is nothing but an updated version of Liu Shao-chi’s program, complete with its “left” cover of big state farms and state monopoly on farm tools.

This “state ownership” masked an exploitative relationship that had grown up between tractor stations and communes, which were charged exorbitant fees for the use of this equipment in the early ’60s. Many of these stations refused to plow for communes and brigades in difficulties, since they had to show a profit. Moreover, the new policies, like Liu’s, restrict local farm machinery industry which was a basic element of Mao’s line on how mechanization would be achieved. Yu Chiu-li in January of 1978 had criticized the independent development of this industry and ordered that it be brought under tighter rein. In the period since then, some plants have been phased out while others are being placed under provincial and regional authority.

This whole policy, then, in its centralized deployment of agricultural technology and its rigorous allocation of funds to where returns will be highest, will lead to regional imbalances and polarization. Mechanization, rather than being achieved by relying on the masses, will be a function of state investment policy. Rather than being linked with overall needs of defense policy and guaranteeing food supplies, such mechanization will serve to “drain the pond to catch the fish”–that is, to levy a higher tribute from the peasantry to finance a bankrupt modernization program. And the seeming ambitiousness of Hua’s mechanization speeches dissolves, as with most everything else, into neglect and exploitation of the countryside. As the peasants come to register their complaints in the cities, the ever-so-concerned Hua and Teng, with the understanding and benevolence that is uniquely theirs, prepare them for an even more royal screwing.

The results of this are already in evidence. The fragmentation and breakup of the communes outside the key areas of investment is beginning. This was given impetus by a series of directives last year and reiterated this year, emphasizing the peasants’ right to grow what they think fit; to distribute their own products, including the further encouragement and stimulation of rural trade fairs where privately grown produce or hand-made goods can be marketed freely; and the right to ignore arbitrary orders from above. These “democratic rights” are just a cover for the setting loose of the countryside from any unified planning and from any kind of political leadership that challenges the ideology of petty proprietorship. In fact, the peasant families held up as models today are those that reap extra-profits. “What’s wrong with becoming rich?” feature stories and editorials ask.

A new system of quotas–with bonuses for those who exceed them–was experimented with last year, and it involved administrative subdivisions of production teams. Apparently, a Central Committee Draft is circulating which calls for tracts of land to be farmed by smaller work groups who will be assigned quotas and responsibility on this basis. The consequences have been reported in provincial radio broadcasts monitored abroad. In some areas of the country there has been a dangerous reduction in rice planting and a return to family-oriented cash farming. Fertilizer supplies have been seized by some groups, and forest areas have been cut. Tools have been divvied up and some transportation equipment used for mainly non-agricultural purposes, as growing numbers of people are drifting out of agriculture into commerce. One account told how the production responsibility groups mentioned earlier have spontaneously taken the form of stronger men banding together, hoping to capitalize on the work-point system, which is now almost exclusively calculated on a piecework basis.

Some of these trends, particularly as they have adversely affected spring planting, have been condemned at various levels, but this doesn’t alter the fact that once the floodgates are opened, once a proletarian line is replaced by a bourgeois one, these things are bound to occur. Where all this is heading is perhaps indicated in an article appearing in a Hong Kong newspaper with close connections to the revisionist leadership: “The organizational form of the communes does not assist the accelerated modernization of agriculture and has already become an obstacle. If this obstacle is not removed how can the rural economy be developed without hindrance.” The all-too familiar pattern of agriculture in the underdeveloped countries is beginning to reappear in China–the subordination of food production to mechanical harvesting of industrial and cash crops, a growing proportion of which is linked with export needs, the ruining of some sections of the peasantry and a drift into the cities.

Trustification of Industry and the Expanded Role of the Banks

A major reorganization of industry was heralded in an important series of articles appearing in the fall of 1978. It called for four major reforms: the formation of specialized companies, enforcing the contract system between various economic units, binding economic legislation and increased responsibility for the banks. As with most every other reform, this one is barely distinguishable from the provisions of a trust system experimented with in the early ’60s, which was criticized and repudiated during the Cultural Revolution. The policy of provinces setting up independent and complete industrial systems on their own is now to be scrapped. It was Mao in a widely quoted directive (which encouraged the spread of rural industry suppressed by the revisionists) who said that “various localities should endeavor to build up independent industrial systems. Where conditions permit, coordination zones, and then provinces, should establish relatively independent but varied industrial systems.” In the short run the significance of this approach lay in its ability to quicken development and overcome bureaucracy. But from a strategic standpoint it limited China’s vulnerability to a major attack, which could knock out vital installations or nerve centers. China would be able to sustain a war effort on the basis of its industry’s dispersion and its linkage with agriculture. But beyond this Mao had an entirely different vision of economic development. The attempt was being made to avoid the over-concentration of industry and population in the cities and to avoid the kind of technological and industrial organization that would lead to an oppressive and stifling specialization and division of labor. In an article written by the revolutionaries on this subject it also pointed out, “If we build an industrial or mining enterprise on a foreign model we shall have to build or expand a city; we shall have to build a welfare district and use walls to keep the peasants away. This is bound to lead to separation from the masses and to expansion of the differences between industry and agriculture and between town and countryside.”

The new reform also challenges the practice forged through the Great Leap Forward and the Cultural Revolution of enterprises being run on an “integrated and self-contained basis,”–that is, making spare parts and even machinery for use in production, opening workshops that could utilize waste material, and so forth.

In 1958 Mao had made an inspection tour of the Wuhan Steel Works and directed that, besides producing a greater variety of iron and steel products, it should also produce some machines and building materials and in addition engage on a modest scale in agriculture, trading, education and military training. Similarly, the Four promoted as a model a plant in Shanghai where 52% of the workforce was proficient on two or more machine tools.

Taking shape in China is a trust system in which factories producing similar products are incorporated into specialized companies under the command of responsible ministries. This is linked at the enterprise level with a system of material rewards and penalties for management, staff and workers who overfulfill or fail to fulfill production quotas. Contracts will be signed directly between enterprises, with provisions made for fines when such obligations are not met. This system of trusts is a form of vertical integration through which calculations for raw materials, semi-finished goods and auxilliary raw materials will be made for related enterprises nationwide. By means of these trusts maximum profits can be achieved by withholding material from lagging enterprises, which can be compared directly with others on the basis of pure economic criteria. This authority and its bureaucratic overlay was broken up during the Cultural Revolution. In its place revolutionary committees were established at the provincial level and more initiative given to localities to work out plans bringing into play the dynamic relations between different enterprises producing different kinds of products but which, through socialist cooperation, could combine efforts and make creative use of local resources.

Economic accounting of production costs, materials consumption, yields and so on was practiced by individual enterprises, but this was always subordinate to mutual assistance and cooperation with other enterprises and always done with an eye to overall political priorities. These were policies which in the long run would boost and diversify production capabilities. A crucial commitment to deepening and expanding ties with agriculture and rural industry was part and parcel of this. (Shanghai was a pacesetter in dispatching skilled workers to rural areas and training rural workers in its plants.)

The return to the trust system means, as has been explicitly stated by China’s leaders, that advanced enterprises–judged by such yardsticks as labor productivity and return on invested capital–will be given priority in the supply of power, fuel, and raw materials. This dovetails with a fresh emphasis on banking: “All Chinese banks will exercise supervision over commercial and industrial enterprises by means of credits, according to their financial statutes.” This is a practice which especially impressed Chinese revisionist leaders during their recent tour of Yugoslavia, where operations with good profit records get easy credit terms from the government banks. Those with poorer records must pay higher rates, if they can get credit at all. Funds for capital construction projects in China will now be funded by bank loans instead of state appropriations.

It’s useful to examine the method by which the revisionists rationalize all of this. They assert that under the old system of state appropriations enterprises paid no attention to cost and quality and that now, with a system of loans, waste and complacency will be overcome. Actually, waste and complacency was not the main problem during the Cultural Revolution, and to the extent that it did exist, it was because a revisionist line was still dominant in those enterprises. But by throwing this up as a smokescreen it now becomes defensible to unleash competition between enterprises for loans. In the same way, the charge of excessive administrative interference is made so that revolutionary committees can be dissolved and so that the banks can be placed at center stage to monitor the performance of the economy. In fact politics must “intervene” in the economy in the sense of guiding it. This commanding role of politics was summarized in the slogan “Grasp revolution, promote production.”

How the New System “Works”

To draw some of these threads together, one example will suffice. There is a pressing need to generate foreign exchange, as was mentioned earlier, to pay for the massive imports upon which modernization is predicated. Textiles which can be manufactured quickly and which are competitive in world markets are to made in specially designated export zones–announced by Hua at the 5th NPC. These factories will be grouped into an export corporation. They can market their entire product overseas and even contract independently with foreign concerns, working out the specific terms of quality and quantity. At the same time Hong Kong businessmen will be allowed to construct factories to manufacture clothing–enjoying the right of choosing location and establishing production norms. Land given over to grain cultivation will now be turned over to cotton-raising in the mad rush to develop this sector and maximize export earnings. Workers in these textile plants will find themselves subjected not only to oppressive rules and regulations, but increasingly to the dictates of foreign capital while peasants’ security will grow more uncertain as crops are reallocated and land redivided.

How the New System Doesn’t Work

Tragedy or farce? It’s hard to say which it is, but the “four modernizations” is a flop Buck Rogers type pictures of spaceships and electrons adorning the pages of the Beijing Review. There’s a little of everything for everyone in this cornucopia–peasants promised better terms of trade, workers higher wages, intellectuals their old prerogatives and privileges–and all based on conflicting investment priorities and targets that cannot be met. But there is an internal logic that propels things in a cerain direction. As it is not possible to politically mobilize the masses, so suppression and bribery must be resorted to.

As it is not possible to dictate to the imperialists, so it becomes necessary to accept their dictates as foreign capital interpenetrates with the Chinese economy. In some of the trade talks with the Japanese, word leaked out that the Chinese might be willing to grant offshore concessions to some of the drilling companies. The Ministry of Foreign Trade has announced that joint-equity ventures, such as one being negotiated in which GM will be entitled to 49% ownership of truck plants it builds in China, are perfectly acceptable. China is actively considering joining the World Bank with all the interference and monitoring this entails. And what is the import of a recent article in the Guangming Daily which said “Some foreign friends after visiting our factories have said that if they managed them, they could double productivity without increasing manpower or equipment.” Yes, the foreign capitalists have rich experience in this regard and will be given many opportunities to put it to use and perhaps even refine their methods.

Planning for Dependency and Stagnation

The superiority of the socialist system does not turn on the formal attributes of central planning, but on the conscious initiative and collective force of the millions. On this basis plans can be drawn up and modified while knowledge of the production process and relative proportions and balances required can be deepened through mass movements. When the proletariat was in power planning was an important link in unifying and coordinating different aspects of the economy, even as local initiative was released. Guided by a revolutionary line, such planning held in check the centrifugal tendencies, the forces tending toward fragmentation and disintegration, which would be very strong in a backward peasant country. In fact, it was the view and practice of the revolutionary forces that by putting ideological work at the center of the planning mechanism local enterprises and areas could work out flexible arrangements while their activities could be gradually incorporated into the planning process.

Now, under the rule of the revisionists, what is happening is maybe best expressed in the lines of a poem, “things fall apart, the center cannot hold, mere anarchy is loosed upon the world.” There is intensifying contention within the ruling clique, though not over basic orientation; just how fast to wreck and destroy and whowill get the lion’s share of the spoils. No doubt there are those who would use Mao’s order of priorities of agriculture, light industry and heavy industry to justify a capitalist program a la Singapore or Yugoslavia, emphasizing rapid turnover and quick profits that can be earned from certain agriculture and light industrial enterprises. Other elements, it appears, would hew to a Japanese or a Soviet model anchored in heavy industry or advanced technology. The scaling down of investment targets and the renegotiation of some heavy industrial contracts would suggest that the former position is the ascendant one. Flowing from this have been attempts to induce foreign capital to take advantage of cheap land and labor–particularly in the processing industries. There is adjustment and reevaluation–but it’s partial, spontaneous and based on the same assumptions–how to maximize export earnings, etc. There are growing conflicts of interest between various sectors and enterprises which can only be addressed by resort to pricing and profit indicators.

The conflict within the revisionist ruling clique over what model of “development” to follow, and the current push for agriculture and light industry, sheds additional light on the big hoopla made about–and the distortion of–Mao’s essay “The 10 Major Relationships” after the coup. In this article Mao makes the argument that agriculture and light industry allow a more rapid accumulation of funds, thereby helping to create the basis for a further development of heavy industry and an overall growth in the economy. By divorcing this argument from the context within which Mao makes it (namely, the development of all around socialist economy through self-reliance) a section of the revisionists hope to twist Mao’s words for “support” in arguing that the most rapid means of capitalist accumulation is in light industry and certain branches of agriculture.

The bottom line and rationalization for the reversals in China is always the Soviet threat. But China already went through this experience with, ironically, the Soviets themselves. In the early ’50s when 50% of China’s machine tools were imported from the Soviet bloc, management manuals translated and management methods copied. And long-term loans entered into, the effect of all this was to distort China’s development and threaten her independence, as Mao summed up. It’s no mystery where all this leads and the policies of these revisionists make easy work for the Soviets. The destruction of the rural economy, the spread of private plots and free markets–these things increase China’s susceptibility to attack, making it more difficult to mobilize people and resources and maintain unity, particularly in the sensitive border regions. Since everything is read in purely economic and technical terms, and since these revisionists can only carry out “modernization” under the sponsorship of one or another “great power” the need grows to come to terms with the Soviets, who enjoy massive military superiority, conventionally defined, and who pose the most direct and immediate threat.

China’s semi-feudal and semi-colonial past weighed very heavily on her even during the socialist stage of the revolution. There were the ideological influences in the form of national inferiority, small-producer thinking, Confucian obeisance and the concrete fact that the democratic revolution was not that distant nor that separate from the socialist revolution. There were elements of the other within each stage of the revolution. That peasants have actually formed into traditional clans and family groups as some of the production teams have been broken up is an indication of where things will go as the restorationist process continues. But this entire process will also give rise to resistance, something far more difficult for the revisionists to factor into their planning models than the dislocations and breakdowns that have already made a mockery of “modernization.”

Resistance Will Grow

The prospect of speed-up and coercion set against the backdrop of a more direct foreign presence in the Chinese economy, the growth of anarchy and dislocation as the socialist economy is destroyed, and the attendant misery all this brings with it all raise the question of what kind of internal support the new regime can count on. Clearly, one of the reasons the Hua-Teng clique could consolidate power was its ability to play upon people’s immediate material concerns. Could it be any accident that one of the most widely advertised of the economic reforms was the promulgation of a wage increase in late 1977? These are time-honored tactics. It should be recalled that Liu Shao-chi had attempted to suffocate the mass movement in Shanghai during the early stages of the Cultural Revolution with bonuses and pay hikes; for that matter, the Shah of Iran, in one of his last acts of desperation, tried unsuccessfully to placate the striking oil workers–who had been raising political demands–with an offer of a 100% wage increase. Communists are, of course, concerned with the material welfare of the masses and no system of exploitation can fundamentally satisfy the needs of the masses, but the highest aspirations of the working class are not a “chicken in every pot.” Further, as borne out by the examples cited, economic concessions are, as Lenin often emphasized, the cheapest or easiest kind for the bourgeoisie to make.

The Chinese revisionists have consistently made demagogic appeals to the masses of the order “you can’t eat politics,” “since when does improving your lot mean you’re going revisionist,” “if we don’t soon attain the living standards of the Japanese, then what good is socialism,” etc. A not inconsiderable section of the population could be taken in by extravagant promises made by the new rulers. Certainly, a substantial portion of the intelligentsia, middle-ranking party and government officials, and administrative and managerial personnel, who were being groomed as a social base and who would be the most likely beneficiaries of the new policies, did, to a large extent, unite behind these revisionists in the conditions of the last great struggles in 1973-76. This only confirms what Mao had repeatedly said about the existence of classes under socialism. But the existence of classes is also reflected in the ideological influence of the bourgeoisie within the working class.

With the arrest of the Four and the temporary defeat of the initiatives of the advanced and revolutionary section of the working class, it became difficult to sustain organized resistance to the revisionist take-over. Many of the intermediate sections of the workers and peasants were lured by the promises and crumbs thrown them, or at least disposed to a wait-and-see attitude toward the regime. Needless to say, if the revisionists could “deliver the goods,” if they could build China into a modern and prosperous country and allow the workers to share in the prosperity then there would be little basis for any widespread or durable opposition to the regime. But capitalism does not, and cannot, lead to a balanced and steady development of the economy and still less to any real improvement in the lives, material or otherwise, of the masses on any long-term basis. In China, as everywhere, capitalism brings economic dislocation, crises and the attendant misery for the masses.

The current revisionist rulers used the excuse that the “gang of four” (and Mao!) had “wrecked” the economy as an excuse for restoring capitalism, an argument that was shamelessly parroted by apologists for revisionism throughout the world. Now, however, the hollowness of this change stands out clearly as the very measures the revisionists take, far from leading China’s economy forward, simply leave it in disarray. The question remains the same as it has been all along–not whether to “pay attention” to the economy, but whether to take the capitalist or socialist road.

Precisely because the new revisionist policies are not in the interests of the broad masses and will lead in a direction opposite to that professed by the new rulers, they will provoke resistance. This resistance is not highly developed yet–some confusion obviously persists, repression is fierce, the effects and implications of the new measures are just beginning to be felt, and many challenges confront the revolutionary forces in their task of reconstituting leadership and organization. Nevertheless, the significance of the cracks and fissures in the revisionists’ economic plans (which are widening daily) and the increasing hardships that will be faced by the masses as the economy stumbles and careens into deeper difficulties is that the political hold of the new rulers will be harder to maintain, particularly over the intermediate workers and peasants, and this will create better conditions for the revolutionary left and the line of Mao Tsetung to again triumph and overthrow the revisionist usurpers.