The Chinese Economic Miracle – Triumph for Capitalism or the Planned Economy?

[Hyacinth]

The Chinese Economic Miracle – Triumph for Capitalism or the Planned Economy? (http://tanit.co/index.php/2010/11/15/the-chinese-economic-miracle-%e2%80%93-triumph-for-capitalism-or-the-planned-economy-3/)

Fascinating article that gives an overview of how the Chinese economy function, and makes the case that it is a deformed workers state. Whatever one thinks of the latter thesis, the article is still well worth reading for the information that it gives on the nature and structure of the Chinese economy (much of which I was only vaguely aware of before).

[Die Neue Zeit]

I would say it's ni-ni. It's neither markets nor "planned economy" but rather good ole' dirigisme with strategic state ownership. This is most evident in China's sovereign wealth funds.

Had it not been for European and Japanese imperialism, the Chinese state could have gone from its bureaucratized petty commodity production (an "Asiatic" mode of production) to something like this but without the Maoist baggage.

[Hyacinth]

I would say it's ni-ni. It's neither markets nor "planned economy" but rather good ole' dirigisme with strategic state ownership. This is most evident in China's sovereign wealth funds.

Had it not been for European and Japanese imperialism, the Chinese state could have gone from its bureaucratized petty commodity production (an "Asiatic" mode of production) to something like this but without the Maoist baggage.
It certainly isn't a socialist planned economy in, e.g., Cockshott's sense of the term, what I'm wondering is whether China can be considered a deformed workers state or whether it is a capitalist state, or something else altogether. Until reading this article I just took it for granted that it was some form of state capitalism, but if the mere utilization of market mechanisms is insufficient to quality as as capitalist, then the class status of the Chinese state isn't clear to me.

[Die Neue Zeit]

The big issue is that the Chinese economic boom isn't as impressive as the Soviet economic boom. Mao didn't get to achieve the double-digit growth achieved under Stalin and Khrushchev, and even this market-based growth is more precarious for Chinese workers than the latter years of double-digit Soviet economic growth (when the minimum wage, social housing, and various other social measures were introduced).

Heck, if the likes of Beria (the "Soviet Deng") took over or if the Andropov school took over earlier, with key supporting roles played by the likes of Malenkov and Kosygin, the double-digit growth would have continued much longer because of the continued push toward state-owned agriculture (even with more market pricing) as a means of reducing the workforce in agriculture.

Other than that, here are some notables:


In the past 10 years the number of SOEs has declined dramatically from 84 397 to 29 229, but the share of the SOEs in the industrial sector has hovered steadily around 33-34 percent, rising slightly in 2003 and 2004 to 35.5 and 37.0 percent respectively. Considering that industrial production as a whole has increased a lot during period, this actually represents a big expansion of the SOEs.

[...]

If you put it all together the following picture emerges:

1. About one third of GDP is produced by the SOEs. They are highly concentrated and completely dominate investment. They run the decisive sectors of the economy.
2. About one third of the economy is private. However, the state has a considerable influence on this sector. Firstly a large part is agriculture, which is heavily dependent on the state, and is run by peasant households that do not want to break their dependence on the state. Secondly, the state, although a minority shareholder, exercises a disproportionate influence over many private companies. Thirdly, the state through joint-ventures and other means has a high degree of control over foreign multinationals, and dispenses with them as soon as they can build up a domestic alternative. The residual private sector is very small.
3. About one third of GDP is produced by the TVEs. The majority of this is produced by larger TVEs controlled by local governments. The smaller ones are mainly private and are in the poorest and most backward parts of the country.

This is the exact opposite of the productivity problem that we see in Venezuela: keeping the same proportion in the GDP but expanding the number of state enterprises. I think this is the reason why certain international patents cannot be used in China.

Do you think that the recent move in Cuba is meant to harmonize with Venezuela? The media says that Cuba is moving towards state capitalism and Venezuela towards "state socialism," but perhaps the two countries are meeting mid-ground?


Here we have a kind of capitalism which has succeeded in eliminating the fundamental contradiction of a market economy – a capitalism without unemployment

Not true. If the Chinese government had any inkling of Hyman Minsky's zero unemployment public policy, then perhaps this statement might have merit.

[Hyacinth]

Not true. If the Chinese government had any inkling of Hyman Minsky's zero unemployment public policy, then perhaps this statement might have merit.
I think that statement was directed more against the state capitalist view of the Soviet Union. The argument being something to the effect of that it couldn't have been capitalist insofar as it didn't obey the laws of motion of capitalism.


Do you think that the recent move in Cuba is meant to harmonize with Venezuela? The media says that Cuba is moving towards state capitalism and Venezuela towards "state socialism," but perhaps the two countries are meeting mid-ground?
That is a possibility, that they're meeting in the middle somewhere, what I'm interested in where that middle is, or more appropriately what that middle is.

There seems to be very little understanding on the left what sorts of mechanisms will be used for economic planning immediately after the revolution, or even when full-blown socialism is established. Disagreement and unclarity over that I think largely responsible for the fragmentation of the left over the question of what to classify the former-Soviet Union, present-day China, Cuba, Vietnam, etc. as. (Not that I have an answer, mind you.)

[Die Neue Zeit]

I think that statement was directed more against the state capitalist view of the Soviet Union. The argument being something to the effect of that it couldn't have been capitalist insofar as it didn't obey the laws of motion of capitalism.

Although I've said this in other threads, my main beef with most "state capitalist" views is their blatant attempt to link their view with some sort of Soviet "imperialism." In only two instances did the Soviet regime act imperialistically in its economic dealings: industrial relocation from Eastern Europe and the Aswan Dam Project.

The planned economy did obey the laws of motion of mass commodity production, hardly the lower phase of the communist mode of production.


That is a possibility, that they're meeting in the middle somewhere, what I'm interested in where that middle is, or more appropriately what that middle is.

Me too.


There seems to be very little understanding on the left what sorts of mechanisms will be used for economic planning immediately after the revolution, or even when full-blown socialism is established. Disagreement and unclarity over that I think largely responsible for the fragmentation of the left over the question of what to classify the former-Soviet Union, present-day China, Cuba, Vietnam, etc. as. (Not that I have an answer, mind you.)

Haha, even Paul Cockshott and I have a few disagreements here and there re. transitional framework. ;)

He's leaning more cooperativist. I'm leaning for cooperatives crushing other partnerships, the proprietors, and the corporations - but also for state ownership in commanding sectors (i.e., no things like credit unions) as opposed to the vague "commanding heights."

There's a role for the Meidner Plan, for tax-to-nationalize schemes, for outright expropriations, for labour litigations, and for an all-out occupational general strike.

[NKVD]

What miracle? You meant the rapid growth in bourgeoise profits due to imperialist capitalism?

[Rowan Duffy]

Haha, even Paul Cockshott and I have a few disagreements here and there re. transitional framework.

He's leaning more cooperativist. I'm leaning for cooperatives crushing other partnerships, the proprietors, and the corporations - but also for state ownership in commanding sectors (i.e., no things like credit unions) as opposed to the vague "commanding heights."

There's a role for the Meidner Plan, for tax-to-nationalize schemes, for outright expropriations, for labour litigations, and for an all-out occupational general strike.

I find this intriguing. In private conversations with some other socialists I've been talking to and in my private ruminations an idea similar to this has come up.

Djilas mentioned that the French revolution and the Russian revolutions were quite different in character since the economical model was already in existence and attempting to overthrow the political order which supported the former agrarian economic order - yet the Russian revolution was a revolution that had to suddenly use it's new found political power to effect a new economic order just after coming to power.

Such rapid changes in economic model must be immediately successful or they can contribute to counter-reaction. The most natural view regards a failing economic system will be reactionary approaches to regain the old social order, or something similar.

Clearly things were complicated in the Russian revolution and economic difficulties were certainly not the only problem that was faced. However, I do think it was a contributing problem.

While I do believe that a planning system is possible, it seems to me that some advocates underestimate how difficult it would be to actually implement it and convert people to its use. By way of example, the US Navy has implemented a planning system for logistics and one of the most persistent headaches that they face is in its misuse or the failure to use it entirely (and to use the phone or paper methods for acquisition). Since this is in the context of a military, I can only imagine that the problem would be more pronounced outside, without careful training and simplification of interface to make real needs tractably solvable without recourse to ulterior methods - or worse - outright rejection.

Because of this it would be advantageous to be able to experiment. However, experimentation in terms of large scale economies is not possible short of revolution. And those only come very seldom.

Perhaps then we can take a smaller approach. Supposing that we formed a cooperative, and that cooperative was based on a rational planning model. You'd want to choose a sector of the economy in which you were liable to have high profit margins. Often co-ops start in low-skilled areas with low fixed-capital which means that the pressure on profits will be on wages. You'd require a rather high level of self-exploitation to be part of the driving ideology of the co-op. This would allow for the acquisition of funds to invest in either spin-offs or new co-op areas that seemed likely to work - especially along the natural supply-chain if possible. The relationships would be created in such a way that profits were shared globally in order to create a pool for investment in future projects, essentially creating a democratically controlled bank for investment. As products were used between these various bodies, the allocation of the inter-firm resources would be calculated via a planning model which takes no profit internally.

With an enormous amount of luck, a lot of hard work and a coherent enough ideology it might be possible to make this work. It seems to me that in areas in which innovative work needs to be done, this would be a more conducive environment towards creation, as supported by studies which show the weakness of remuneration in obtaining results in these areas, but the strength of common social values.

I'm curious if others have relevant writings to point me towards, or comments on this.

[Mr_Red_X]

It's a victory dor something I doubt anyone wants. It appears more to be some bastardized combination of soviet-style socialism and Neo-liberalism (which David Harvey points towards being the case).

I think a planned economy is good in a sense, but we must realize does the planning. It can't be a central government as seen in the USSR and elsewhere, and it sure as hell can't be a board of directors who "earned their way to the top".

[bagor22]

A good discussion, I am very interested in this discussion ...
permits listening ...:)

[Hoplite]

I think (and my opinion is based solely off of amateur and non-academic study so take it for what you will) that China represents an economy based off practicality.

I think many in the Chinese government realized that a pure Communist system, for whatever reason, was simply not achievable or would not give them the results they wanted. So they opted to cannibalize parts of the Capitalist system and try to "paint them red" and use them to boost their own economy. Say what you will about Capitalism, it IS good at accelerating an economy.

I'm a little surprised there hasn't been some rumbling from the more hardline Communists inside the Chinese government. Or perhaps there have and I've simply missed it.

[Geiseric]

We can see that capitalism is great at boosting economies with great examples like russia and eastern europe. Oh their economies are doing GREAT. /sarcasm

[Hoplite]

We can see that capitalism is great at boosting economies with great examples like russia and eastern europe. Oh their economies are doing GREAT. /sarcasm
Not compared with the US or Canada, but Russia improved overall until the crash (when the WORLD economy tanked) and it's slowly picking up.

http://www.tradingeconomics.com/Economics/GDP-Growth.aspx?Symbol=RUB

[ar734]

I would say it's ni-ni. It's neither markets nor "planned economy" but rather good ole' dirigisme with strategic state ownership. This is most evident in China's sovereign wealth funds.

Had it not been for European and Japanese imperialism, the Chinese state could have gone from its bureaucratized petty commodity production (an "Asiatic" mode of production) to something like this but without the Maoist baggage.

You say....neither planned economy but rather...strategic state ownership.
Are you saying the Chinese do not engage in economic planning? It seems that is exactly what they are doing, at least with the large scale, state-owned companies.

[Die Neue Zeit]

Yes, but they plan on the basis of market prices and not an arbitrary price-setting system.

[Rafiq]

Guys, let's face it, it's "Boom" had nothing to do with Capitalism, State Capitalism, or Socialism. China was almost economically isolated from the whole world. They have a hell of a lot of people. Once they started to get involved with the "World Economy" they had a huge fucking work force, to make all the great western products we enjoy.

Say that the World Economy was Socialist, China would be in mass starvation and poverty if it was in the state of Isolated Capitalism.

It all depends on what is the "Big System" in thew world.

This is why "Socialism" in one country does not work...

The best thing to do as a worker in a Capitalist nation is start the formation of worker's councils and legeslatures, whilist fighting for the interests of the working class as a whole, and once conditions are set, begin the revolution.

[Sinister Cultural Marxist]

What about "State Mercantilism"? It's clearly a Statist economy, with some socialism at the top but very little socialism for the lower classes, with the overall state capitalist objective of accumulating Capital and technology in China.

One difference between them and the USSR which is interesting is in China's interest in using capitalism to gain financial ownership over the US economy via debt. This gives China a leverage over the USA that the USSR never had. In a way, the USSR had better rights for its workers, but in a geopolitical context the Mao-Deng strategy of trade seems to have worked better than the 50s-80s Soviet policy of military buildup.

that said, they have an atrocious human rights record, as the government has needed to keep a tight lid on social discontent caused in part by the rampant inequalities now prevalent in China.

[Rowan Duffy]

Not compared with the US or Canada, but Russia improved overall until the crash (when the WORLD economy tanked) and it's slowly picking up.

They managed to sustain GDP growth at a moderate level by 2000 but that's after a 10 year period of negative GDP growth, by any measure a pretty long depression.

In addition the human costs were tremendous, including a rapidly falling life expectancy and a huge suicide rate. You can't look strictly at GDP to determine if economies are improving. You need to evaluate the impact on peoples livelihoods.

[Hoplite]

They managed to sustain GDP growth at a moderate level by 2000 but that's after a 10 year period of negative GDP growth, by any measure a pretty long depression.

In addition the human costs were tremendous, including a rapidly falling life expectancy and a huge suicide rate. You can't look strictly at GDP to determine if economies are improving. You need to evaluate the impact on peoples livelihoods.
I agree completely, however we were talking strictly about economic health. And by that measure, Russia has improved.