2. China's Economic Transformation

Monthly Review, July-August 2004 | Go to article overview

2. China's Economic Transformation


When the leaders of China's Communist Party announced their program of market socialist reforms in 1978, they argued that it was necessary to overcome the country's growing problems of economic stagnation and waste caused by the Mao era's overly centralized state systems of planning and production. China's rapid growth and industrial transformation during the 1980s encouraged many on the left, both inside and outside of China, to view market socialism as an attractive vehicle for achieving sustained growth, an egalitarian distribution of goods and services, and new forms of democratic participation in economic decision making.

However, despite the hopes of many on the left, it is our argument that China's market reform process has led the country not toward a new form of socialism, but rather an increasingly hierarchical and brutal form of capitalism. In this chapter we seek to answer the question of how and why, in less than two decades, a reform process that was seen as capable of promoting socialist renewal could end up leading to capitalist restoration.

The easy answer to this question is that the process was hijacked by party elites who feared losing their privileges. Faced with popular demands for change, they sought a reform process that would enable them to achieve a more secure form of control over the wealth of the country, and that led them, through trial and error, to embrace capitalism with "Chinese characteristics."

While there can be little doubt that the party elite has indeed profited from the ongoing process of capitalist restoration, we believe that this outcome was driven by more than simple greed. As we argue below, the capitalist restoration in China was also the result of structural contradictions generated by the reform process itself. While every country's experience is shaped by specific historical factors, and thus unique, we believe that this understanding of the Chinese experience offers important lessons for socialists everywhere. More specifically, we believe that the Chinese experience represents a strong argument against the viability of market socialism as a stable and progressive form of workers' empowerment.

Historical Context for Post-Mao Economic Reforms

China under Mao followed a strategy for building socialism that emphasized heavy industry, centralized economic planning, state ownership of the means of production, and party control over politicies and cultural life. The Chinese revolution and resulting state policies succeeded in ending foreign domination of the country and feudal relations in the countryside and achieving full employment, basic social security, and generalized equality for Chinese working people. (1)

However, these broad and significant achievements came at great social cost. The upheavals associated with the Great Leap Forward (1958-61) and the Cultural Revolution (1966-76) involved considerable social instability and loss of life. Urban workers also became increasingly frustrated by the party's resistance to industrial democracy, including its opposition to a greater role for workers in enterprise management. The sole legal union federation, the All-China Federation of Trade Unions, proved no help. Operating under tight party control, its main responsibility was to promote production and labor discipline. (2) Strikes for higher wages and greater worker self-organization and independence took place in 1949-52, 1956-57, and 1966-67. (3) Jackie Sheehan gives some sense of the organizational efforts and political orientation underlying and growing out of these actions:

  By the late spring of 1957, the high point of both the Hundred
  Flowers campaign and the wave of industrial unrest which had built
  up through the previous year, party authorities were ... facing not
  just individual discontent, but organized collective resistance from
  some parts of the workforce. Autonomous unions were formed, often
  termed "redress grievance societies," and while many of these groups
  were confined to a single enterprise, there was also some liaison and
  coordination of action between enterprises and districts . … 

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