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Debate on China :Dynamics and interactions between private and state capitalisms in China

posted 18 May 2012, 08:59 by heiko khoo   [ updated 18 May 2012, 09:33 by Admin uk ]

Debate on China..A critique of Mick Brook's Article by Kostas Lambropoulos 30 April 2012         

Mick Brooks’ document Why China is not a capitalist country - 20120416 ( sides with the official thesis of the Chinese Communist Party - CCP that a principally state-owned mixed market economy managed by one single party is a post-capitalist socio-economic formation constituting, thus, the objective basis for the transition to socialism. It is noted that the Chinese government officials call the present economic system of China “social capitalism”.         


Brooks lets us know that in writing his contribution he has found assistance in the work and research of Heiko Khoo and Jonathan Clyne. His document deals in particular with some of the issues I have raised so far in the discussions about China and socialism. Indicatively, these issues include: the state-capitalist nature of the Chinese economy; the capitalist influence over CCP; the role of the export drive and foreign investment in the growth of the Chinese economy; etc.     


The text is well written and balanced but its writer lacks the necessary stock of knowledge on China and the analytical and political skills needed.      


For example, the writer does not know that the political system of China is not a single-party one as he thinks it is, but is indeed a multi-party one of popular-front type; he understands state-capitalism as the direction of capitalists by the state; he counts the capitalist influence over CCP by the number of capitalists who are members in it; he thinks that the WTO – China Accession Agreement is an insignificant piece of paper (signed just for mutual convenience) and so on and so forth …


Finally, I have also to note that the novice writer on China has not found –at least formally- any kind of interest in the works I have produced on China in order to include them -at least- in his obviously selected bibliography. Certainly, I feel that this “zero basis writing” is not the appropriate way of exchanging ideas constructively and developing them critically.





1. For whom is China a “model”?


The text seems to waver whether or not China is a “model”; and if it is, then for whom exactly.


The text assesses that “China … shows that there are different ‘models’ from that of free market capitalism.” So, China is one of the available alternative models to developed market capitalism.


But in the next line the text states that “China is not a model in the sense of being a form of society we should or could try to emulate.” So, China is not an alternative model to developed capitalism.


The next paragraph contains both the above two conflicting statements: On one hand “Obviously the Chinese way of doing things is not a form of society that we could import wholesale into the countries we live in even if we wanted to.”. On the other hand, “China offers an alternative to neoliberal capitalism …”…


So, what is China? According to the text it is simply a “model to study”.


Concretely, what the text is trying to tell us in this contradictory way is simply that the Chinese model has some characteristics or functionalities that might be of some usefulness to those “who are interested in improving their lot and changing society for the better.”.


So, China is not at all a partial or holistic alternative model for advanced capitalism but simply a source of inspiration to those who are struggling to change it with something which they do not yet know what it is. Of course, this unknown and under construction successor of capitalism is called by them “transitional” something.


However, when the text concludes that “China is a post-capitalist society.” and that  Its economic success shows that capitalism is a fetter upon the productive forces and that Marx therefore was right when he described capitalism as a barrier to humanity’s forward march.”, then we find ourselves in complete disarray. If it so, why then claim that “China is” not a model of post-capitalist society” for developed capitalism?


It is obvious that the text can not finally decide whether China’s “social capitalism” is or is not a model for the anti-capitalists and socialists to follow.


2. Why is China a “model to study”?


To this question the text answers that it is so because “China compared with the capitalist system we live under it is an undoubted economic success.”.


So, the text is comparing an under-developed socio-economic formation with a developed one and it concludes that the “under-developed formation” is “an undoubted economic success” because it grows faster than the developed-one.


The exclusive correlation of the economic performance only with the “nature” of the socio-economic formation –a methodological heritage of the defunct Stalinism that we ought to have already decline- is an act of political propaganda and not an act of social and economic sciences.


Let me remind the reader that Greece had also achieved during the period 1950-1973 extraordinary and of course better growth rates and structural changes than both the developed and under-developed economies. During 1950-60 the GDP was increasing by an annual rate of 5.7%. During 1960-73 the annual rate of GDP growth was 7.2%. Finally, during 1951-71 the contribution of the agriculture to the GDP decreased from 29.1% to 19.2%.


The propelling forces of such socio-economic performances were the state investments and planning as well as the export oriented foreign private investments. The whole configuration has been directed by right-wing autocratic parliamentary governments and –finally- by a formal military dictatorship. No one on the “Left” in Greece has ever thought to support the post-civil war political and military regimes because they achieved extraordinary growth performances and profound changes in the rural social structure of the country. The text is asking us now to do the opposite for a country which has a similar economic configuration with that of Greece during the period referred above. The only typical difference between the two cases is of political order, i.e., that a Communist Party rules in China. However, is this political difference a qualitative one? The text thinks that it is. Its answer will be scrutinised further below.  


So, the text does not count in the success equation it constructs implicitly the profitable assistance that imperialism has given to China by granting market access to her products and by making huge industrial investments in China.


Also, the text does not take into account the simple fact that a dictatorship, of any kind, usually achieves –all the other factors being equal- better economic performances than democracy at least for some period of time because it has not got any kind of formal opposition to its decisions, whether correct or incorrect. The dictatorial regime erases the delays particularly in the infrastructure projects and the foreign investments.


Finally, China is not the sole under-developed socio-economic formation of the world that has grown faster than the developed-ones. India also achieves better growth performance than developed capitalism. So, does Turkey, as do many other less or more under-developed economies.


So, if the text wanted to make a comparative analysis in economic growth and performance it would have had to compare China not to the USA or UK but with Turkey and India. If someone compares Chine, India and Turkey, as I have done[1], then the over-performance of China evaporates in front of the huge investments of imperialism in China without including the privileged (for strategic and geographical reasons) trade relation USA – China.  


There is also an undesirable implication to the outcome of such a growth rates race: If the distance between developed and less developed countries decreases, as it has in the period 1989 – 2008, then world capitalism develops the productive forces in a global scale.


However, the real question to study is not the past growth rates of China -there are a lot of factors explaining them, including the advantage of the huge bureaucratic machinery that China has built and has trained in the Stalinist type quantitative planning- but their present and future sustainability. Can the Chinese socio-economic formation sustain or not the past growth rates in the present and in the future?


The majority of analysts, including my self[2], think not. Even the IMF, where China is a member-state, in its report, “China 2030: Building a Modern, Harmonious, and Creative High-Income Society”, released on February 27th, 2012, “recommends steps to deal with the risks facing China over the next 20 years, including the risk of a hard landing in the short term, as well as challenges posed by an ageing and shrinking workforce, rising inequality, environmental stresses, and external imbalances.”[3].


Those who seemingly support the opposite, as the text implicitly does, have not presented the least evidence for their claim. So, their claim can be considered simply as propaganda fairy-tale.


3. Where is China heading?


The text assesses that “China has some of the features of capitalism, and some features which are incompatible with capitalism. It is an economy in suspended transition. Since it is ruled by a bureaucracy that guards its own interests, it will not make the transition to socialism without a political revolution to overthrow the bureaucracy led by the working class.”.


The text also asserts that “China is not moving in the direction of capitalism, despite a small increase in private ownership of the means of production.”.


There is a dynamic logical contradiction between the above two statements.


Upon its victory, the Chinese revolution eliminated completely every capitalist form and activity in the economy and society. The text shares this view: “The Chinese Revolution actually smashed the bourgeois state more thoroughly than the Russian Revolution.”. This is the initial starting point in the process of degeneration of Stalinism in China.


The first assessment states that now “China has some of the features of capitalism”. Therefore, between then and now, “China has been moved in the direction of Capitalism”. This is a fact totally accepted by the text irrespectively of the degree of significance of this movement.


Therefore, the second assessment has to be reformulated either as (a) “China has stopped moving in the direction of capitalism” or (b) “China will stop moving in the direction of capitalism”.  


The first proposition is a statement of fact which is negated outright by, for example, the abandon of any effort to collectivize and plan agriculture and the continuation of making and accepting foreign investments in the country. Therefore, the “true” proposition is the alternative (b).


The second proposition is a conditional statement associated either with (i) the coming congress of the CCP or (ii) the coming political revolution, or (iii) both.


Without any analysis of the above alternative conditionalities, which the text does not make, the proposition becomes an expression of faith: The author of the text believes that “China will stop to move in the direction of capitalism”. Of course every one of us is free to believe in anything he or she wants to.   


If we now want to step down from the rosy theory to the harsh reality, we have to acknowledge that the Chinese Authorities -Central, Provincial and Local- face enormous and complex socio-economic problems that they have to resolve: the rotating migrants who return to their villages after the expiration of the term of their industrial / service contract in the cities and ports; the illegal migrants in the industrial towns and provinces; the over-debted Local Authorities; the low productivity and over-staffing of the state-owned companies; the incomplete social security system that does not yet guarantee a medical assistance and a pension to every migrant; the insufficient health and education systems which absorb an important portion of the family income; the financial management of the huge accumulation of foreign currency and credits; the social redistribution of the profits in the state-owned sector; the industrial pollution; the efficient development of the energy resources of the economy; the creation of an internal retail market; etc, etc.


I will not venture to predict here whether these problems will be resolved or not. However, I will note that an eventual failure to resolve all these problems plus the management of the relations and interactions between the private-capitalist, local and foreign, and the state-capitalist sectors in an ordered pattern will result in a break-down of the Central Government and the subsequent economic, social and –finally-political disintegration of China.


In such an eventuality, private capitalism, local and foreign, will prevail almost automatically as a chain reaction of decentralised / spatial ad hoc solutions to a global problem.     


In such a case, the actual great historical objective of world imperialism in respect to China, i.e. to partition both the state and the country in smaller and manageable independent entities, will have been successfully accomplished.





4. The defeat of the political revolution in China


Modern China begun to be formed as we know it today upon the defeat of the political revolution in 1968.


The assault of the political wing of the CCP on the state bureaucracy in 1966-8 passed in history as the “cultural revolution”. It was named “cultural” because it was unarmed. However, this did not mean that there were no causalities. In 1968 the military intervened and successfully restored law and order under the leadership of the ex-guerilla and then military marshal Lin Biao (1907-1971) who was the Minister of Defence since 1959. After the suppression of the political revolution Lin Biao sent over 16,0 million of Red Guards to “work re-education camps” in the country-side.


In 1969 the 9th congress of the party completely reconstructed the CCP under the supervision of the military wing. However, the political wing had been defeated but not eliminated under the political protection of Mao Zedong.


In the 10th congress of the CPC in 1973 the left current of the political wing attacked the military wing and its allied right current of the political wing on terms of “Confucius type right deviation”. Of course “confucius-ism” was a metaphor meaning “bureaucratism”. The military wing retreated under the blows. Deng Xiaoping, the “prime-minister” of the military wing, lost all of his official positions in the party and the state. 


In October 1976 the famous “Gang of Four” was arrested and the (historical) political wing of the CPC vanished for ever. The military wing started to implement gradually and carefully its development strategy (see next paragraph) aiming to bring China into modernity irrespectively of the social / class terms implied by this. In the 11th congress in 1977, Mao Zedong was implicitly designated as the “shadow fifth man” behind the “Gang of Four”.


5. Foreign investments in China


The first oil crisis in 1971-3 threw suddenly the development of China into a complete impasse. The country had to pay the imported energy by its exports if it wanted to survive. In order to create the extra exports needed so as to counter-balance the increase in the price of the imported oil, the country needed the appropriate exports generating investments that only the foreign capital could then provide. China, under the command of the military, was forced to open the gates to foreign investments and in particular to those coming from the USA.


After the admission of China into the United Nations Organization the US Presidential Advisor, Henry Kissinger, visited secretly Beijing in July 1971. In February 1972 US President Nixon visited officially Beijing and the strategic US – China alliance started to take shape.


It is noted[4] that between 1985 and 2008 China received a total foreign investment equal to 74% of its average GDP for the period while Turkey received only 19% and India 18%. Imperialism has invested over 3 times more in China than in Turkey or India.


The text gives a predominant role to the investments of the Chinese Diaspora abroad (Hong Kong, Taiwan, Macau) forgetting to indicate also its business partnership with the multinational capital. In the first period of the Chinese opening to foreign investments, the gates of entry were indeed these three states. In the subsequent period, the multinational companies made their subcontracting to local partners. Finally, the multinational companies established themselves in mainland China under the protection of the CCP officials associated with them.      


The foreign investment multiplier has been high and its significant impact on local growth has contributed to the illusion that China’s development has been historically endogenous.   


In such a context, the insufficient knowledge basis of the text makes it to state wrongly that “First economic growth is powered by Chinese firms, mainly publicly owned. Secondly investment in China is the driving force of economic take-off, not exports to the rest of the world.”.


The percentage variation of the annual growth rates of the real GDP in the period 2007 – 2012 evolves as shown in the graph below:


         Source of data: IMF, World Economic Outlook, September 2011.


Therefore, the “external immunity” of the Chinese economy suggested by the text is not supported by the actual data. The downfall in the world economy since 2008 has significantly influenced the economy adversely in a cyclical double dip pattern. Of course, it is quite normal to be so for the 2nd larger economy and one of the leading exporters and major capital importers in the world. China is a part –a large one but still only a part- of the world economy. China is not a universe apart.


If the text does not recognise the downturn impact of the world economy on the Chinese growth, then it has to admit that its cyclical growth fluctuation is due to an on going internal crisis of an economy which considers being “planned” and, thus, “crisis free”. Such admittance logically implies that there is an underlying failure in the “planning” to provide what it is supposed to do.


So, in both alternative conclusions the Chinese economy is not as “planned” as the text suggests. In reality, both conclusions are simultaneously true.  


6. The industrialization of China


In 1981 Deng Xiaoping succeeded Hua Guofeng in the post of the Chairman of the Central Military Commission of the CPC. This succession meant that the military wing had re-conquered the real power center in China.


The 12th congress in 1982 marked the start of the current economic development pattern of China. The envisaged new socio-economic structure, as an objective and as a way to achieve it, is scripted in the un-constitutional constitution of 1982. Simultaneously, the party was reshaped from top to bottom and became void of all kind of dissidence.  


The 12th congress confirmed the appointment of Deng Xiaoping to the position of the Chairman of the Central Military Commission of the CPC. He held the post until 1989. The military wing prevailed indisputably over the political wing. The defeated wing was ousted massively from the party. The “party” has been transformed accordingly to a technical apparatus of experts with one and only one mission: to implement the economic reforms program of the victors.


The dissolution of the agricultural collectives was accomplished by 1985. In this way China made available an infinite work force was to place in the industries that were to be built by the foreign, i.e. USA, investments. In May 1989 the military established a martial law and in June 1989 their tanks crushed the Tiananmen Square insurrection. Thousands of people were killed and many other thousands were sentenced to prison and forced labour camps in the country-side. The martial law was lifted in January 1990. Since then, the law and order that was imposed by the military continues to reign in China uninterruptedly.  


The historical uniqueness of the Chinese development experience is that China did not privatised the means of production, in the 1980’s no one in the world was really interested in the Chinese means of production, but the use of the available human resources. In the deal with imperialism, China provided the labour force and foreign investors provided the capital.


The acceptance of foreign investments has been complemented with granting some market access in the metropolitan markets to the products produced in China, especially in the labour-intensive industries. In such a context the growth has taken off but not for long.


The negative and almost stable trend of the annual variations of the real GDP growth rates around -4,3%, that has been identified for the 2007-2012 period in the graph above, indicates irrefutably that growth in China is decreasing during the current crisis 2008-2012 period by an average annual rate of -7.5%. This implies that the aggregate growth of China has been sized down by -32.4% during the current crisis period!   


7. Foreign market access to the products made in China


In the period 1995-2000 the Chinese exports begun to fall. Consequently, the economic growth stagnated. So, the Chinese Authorities had to negotiate with imperialism the future of their country in order to gain the needed access in imperialism prosperous metropolitan markets.


The trade deal formulated with imperialism was made official with the Accession Agreement of China in the World Trade Organization –WTO in November 2001 after continuous negotiations since 1987. With the gates of the metropolitan markets completely open, the Chinese exports have taken off vertically.


In order to grasp the significance of the China’s entry into the WTO let me note that China’s foreign exchange reserves in 1982 were only $11.3 billion. In 2000 they were $165.6 billion. In June 2010 they were $2.45 trillion!


In consequence, the industrial employment in the imperialist countries took a severe blow by the Chinese imports while the off-shore profitability of the importing –mainly- multinational companies hit an all time high. World-wide accumulation of capital took a global boost. 


However, irrespectively of these facts, the text considers the WTO Accession Agreement just as “a piece of paper”. Further, it considers –with a particularly vigorous revolutionary decisiveness- the mental state of all those who consider this document as an historical deal with imperialism as that of “an advanced legal and constitutional cretinism.”. Finally, the text concludes that “The idea that joining the WTO has caused or signalled a social counter-revolution in the interior of China is ridiculous.”.


Of course, it is ridiculous to write a text on the class character of China without having previously studied in depth its Accession Agreement to the WTO.


If one reads the 103 pages long Accession Agreement with its annexes and its reference Agreements then one realises immediately that all the bla - bla about the “commanding heights of the economy”, “planning”, “planned economy”, etc, are simply nonsense.


I’m not intent to do here the work that any responsible person should already have done by analysing the WTO – China Accession Agreement. Simply, I invite –and not for the first time- every one who considers him/herself responsible to read at least and at last the documentation package of China’s WTO Accession Agreement.


In order to give an idea of what the China’s Accession Agreement really is, I will give few examples below:  


Article 9, Par. 1 establishes the market determination of prices and abolishes the central planning of prices: China shall, subject to paragraph 2 below, allow prices for traded goods and services in every sector to be determined by market forces, and multi-tier pricing practices for such goods and services shall be eliminated.


Article 10, Par. 3 abolishes the central financial planning and management of the enterprises: China shall eliminate all subsidy programmes falling within the scope of Article 3 of the SCM[5] Agreement upon accession.


So, what remains from the central price and financial planning and management of the “commanding heights of the economy”? Absolutely nothing!




Article 5, Par.1 abolishes in principle the foreign trade monopoly: Without prejudice to China's right to regulate trade in a manner consistent with the WTO Agreement, China shall progressively liberalize the availability and scope of the right to trade, so that, within three years after accession, all enterprises in China shall have the right to trade in all goods throughout the customs territory of China, except for those goods listed in Annex 2A which continue to be subject to state trading in accordance with this Protocol.  Such right to trade shall be the right to import and export goods. 


Article 6, Pr. 1 abolishes the central planning and management of the import trade: China shall ensure that import purchasing procedures of state trading enterprises are fully transparent, and in compliance with the WTO Agreement, and shall refrain from taking any measure to influence or direct state trading enterprises as to the quantity, value, or country of origin of goods purchased or sold, except in accordance with the WTO Agreement.


So, what remains from the foreign trade monopoly and planning? Absolutely nothing!


Therefore, I conclude, that the final planned output that the Chinese Authorities have produced is the ordered establishment of capitalism defined in and by their WTO Accession Agreement.


Since the entry of China into the WTO, the State Planning or Managing Authorities no longer have the formal right to do what they want to do with their state-owned companies. The state has been transformed from the owner of the company to the (majority) owner of the capital of the company. The difference between these two successive situations is qualitative.


8. Capitalism is China


China is an immense country and not a homogenous one. China is made up by many smaller “countries”, provinces and regions, costal and inland, industrial and administrative towns and ports which have different socio-economic and development characteristics as well as linguistic and religion particularities and cultural heritages. 


Capitalism is defined by a number of elements: wage, price, capital, convertible money, stock-exchange, circulation of capital, commodities and human resources. All of those elements are today distributed in the territory of the Chinese state in an uneven manner.


In Hong-Kong and Macau, which are integral parts of China and at the same time completely autonomous semi-states[6] (Special Administrative Regions of the PRC), we have fully developed capitalisms with their own convertible money.


It is reminded that in 2011 the Gross National Income per capital was in the USA was US$ 47,140, in Macau US$ 39,500, in Hong-Kong US$32,900. In main-land China the Gross National Income was only US$ 4,260 per capita...


Also, it is reminded, that one of the biggest international banks of the world is the famous HSBC which stands for Hong-Kong and Shanghai Banking Corporation. In addition, it is reminded that the Hong-Kong Stock Exchange (SEHK) is the third largest in Asia (behind Tokyo and Shanghai) and the sixth largest in the world in terms of market capitalization. In the SEHK are listed 1,477 companies whose market capitalization was HK$16.985 trillion as on 30 November 2011. The foreign currency reserve assets of Hong Kong were US$ 223.3 billion in August 2009.


The South East China (from Macau and Hong-Kong to Shanghai) is industrialized and economically fairly developed as well as the four Metropolitan Municipalities of Beijing, Shanghai, Tientsin and Chongqing as well as the various other administrative centers of the country.


However, the common denominator of this uneven structural distribution is private property and labour: in all of the Chinese territory the private contracts of work are permitted, agriculture is private, ownership of at least one home is authorised and ownership of capital stock-shares is unlimited.   


The text adopts an incredibly original and certainly false stand on the capital-shares of the Chinese joint-stock companies inside and outside the two stock-markets of the country (Shanghai and Shenzhen). It claims that these “shares do not actually represent part ownership of the company in China. Rather they are just a way of sharing in the profits.”.


In order to avoid indicating the organic privatization of the state-owned companies which is effectuated by the introduction of their joint-stock capital in the stock-exchanges, the text invents a new type of shares which … are not at all shares. It is a pity to distort reality when it does not fit into one’s pre-established convictions. 


Simply, the text does not want to realise that the state-owned companies entering the stock-exchanges are also entering automatically into a pattern of privatization. 


In logical consequence, the text is obliged to state that “At present a class of idle rentiers, passive owners of the means of production who live off dividends, has not yet come into existence in China.”. This statement is false and contradictory to the above statement of the text that the Chinese “shares do not actually represent part ownership of the company in China. Rather they are just a way of sharing in the profits.”.


In order to clarify the issue, let me remind the reader that the number of the stock-holding accounts in China exceeded in May 2007 the symbolic level of 100 million[7]. This number is larger than the actual CCP membership which was 78.1 million in June 2010. Therefore, the number of stock-holders in modern China is larger than the number of the officially registered communists in the country even without counting the number of the stock-holders in the companies which are not listed in the stock-exchange (like, for example, the famous Huawei). 


According to the People’s Bank of China[8], the ratio of the stock-market capitalization to the GDP has surpassed it in 2007. It reached at 121.10%. This means that a value in means of production, stock and sums of money larger than the annual product of China is available for private appropriation.  


So, there is in China a fully developed but decentralised capitalist structure with Hong-Kong and Macau operating as its nucleuses and interfacing elements between the world capitalist economy and the rest of China[9]. Almost, the same role is played by Taiwan which is formally an independent state but it is considered also by the PRC as an integral part of the country.


In qualitative terms, the vector of capitalism has been established fully in the Chinese territory in an uneven spatial distribution. In quantitative terms capitalism is predominant only in some parts of the Chinese territory. Concretely, besides Hong-Kong and Macau, it is in those provinces where the main bulk of the foreign investments and companies are concentrated, i.e. mainly in South-East China. In the other parts of the country the industry and services sectors are operating predominately under state ownership and management but equally in value terms. Accordingly, these sectors are state-capitalists.


9. State capitalism in China


Where the text hits on a hard rock is state capitalism. The relevant paragraph under the headline “State capitalism?” cannot decide whither or not China’s economy is a state-capitalist one, wholly or partially, or not, wholly or partially.


It is obvious that the larger part of the industrial and service sectors of the aggregate Chinese economy are state-owned or mixed with private capitals. So, basically China has a state economy. However, this aggregation in “one economy” is in the case of China more formal than essential. It is like adding apples and oranges.


The state sector operates according to the calculus of value -i.e. prices, wages, capital, interest and profits- the operational principle of capitalism. So, the state economy of China is a capitalist one, i.e. producing surplus-value, i.e. wage-earners’ exploitation in terms of value, i.e. capital.


However the text does not want to recognise what is evident at first glance. It hides itself behind an indeterminant reference to one of the failed past pabloite theoreticians, Ted Grant[10], by stating that “For this reason Ted Grant upheld the position, in a polemic on the nature of the Stalinist economies after the Second World War, that state capitalism as a system where the means of production are owned by the state cannot exist.”.


Of course any such reference to the particular work of Grant is completely irrelevant to our case. Grant supported–correctly- the position that the USSR and the other East-European countries were deformed workers’ states while Tony Cliff supported the position that these countries were state-capitalists formations in the context of being centrally planned economies in use-values / kind. An economy can not be a state-capitalist economy if it operates according to the calculus in use-values / kind. So, the USSR could not be a state-capitalist economy. For an economy to be a state-capitalist one it has to operate according to the calculus of value as contemporary China does. So, China is a state-capitalist economy.  Therefore, the particular reference of the text to Grant is misleading.


In every country of the world the state owns and manages productive resources in kind as well as capital. So, in every country of the world there is nowadays a state-capitalist sector in the economy. In some countries, as in China, Russia, Venezuela, Greece, and others, the state-capitalist sector is the larger sector in the economy. If, however, this owning and managing state is a workers’ state or –alternatively- a proletarian dictatorship then according –at least- to Lenin we have a “proletarian state-capitalism”.


Like Grant who could not accept the collapse of Stalinism in 1989-1993, the text can not accept the obvious fact that the Chinese economy is predominately a state-capitalist one. The text, feeling that the reference to Grant is not at all convincing in relation to the Chinese millionaires’ reality, seeks assistance from Lenin himself. It “interprets” appropriately Lenin by stating –again without a specific quotation- that “Lenin actually used Germany in the First World War as an example of what he called ‘state capitalism’, in other words of state directed capitalism.”. So, according to the text “state-capitalism” exists where and when the state dictates to capitalists what to do.


But, even in such a case, China is a state-capitalist economy through the supposed “central planning of the commanding heights of the economy”! In the case of the Chinese agriculture the text unwittingly admits that the whole configuration is a state-capitalist one: “Agriculture in China, whilst dominated by private family production units at the micro level, is dominated by state purchase and distribution at the macro level. … Thus, contrary to appearances, Chinese agriculture is dominated by the state.”. This means that -contrary to all the contrary assertions of the text- private agriculture operates within a state-capitalist framework!


To redress the damage the text is doing to both theory and history, let us be reminded of what Lenin[11] meant by “state capitalism” not for Germany in the First World War but for post revolutionary Russia in 1922: “The real nature of the New Economic Policy is this—firstly, the proletarian state has given small producers freedom to trade; and, secondly, in respect of the means of production in large-scale industry, the proletarian state is applying a number of the principles of what in capitalist economics is called “state capitalism”.”[12].


Of course the “number of the principles of capitalist economics” to which Lenin is referring to is simply the calculus of value which is fully operating in all the enterprises, private, state and cooperative, in China.


However, the understanding of the text goes to the opposite direction: “From these examples it is clear that Lenin did not conceive that state capitalism could ever become the dominant mode of production in Russia after the Revolution.”.


Before and after the revolution Lenin[13] states in his Left wing childishness and the petty bourgeois mentality in 1918, to which the text is referring by name, that “… state-monopoly capitalism is a complete material preparation for socialism, the threshold of socialism, a rung on the ladder of history between which and the rung called socialism there are no intermediate rungs.”[14].


Lenin[15] had already explained some months before, in September 1917, that “For socialism is merely the next step forward from state-capitalist monopoly. Or, in other words, socialism is merely state-capitalist monopoly which is made to serve the interests of the whole people and has to that extent ceased to be capitalist monopoly.”[16].


It is a shame to distort in such a way both theory and history in order to side oneself with the political illusions and the theoretical confusion of the “Left” current inside the CCP who want –on the one hand- to base themselves historically on the New Economic policy in Soviet Russia but they do not want –on the other hand- to call theoretically its underlying economic mechanism “workers’ state-capitalism” –apparently- because they do not consider –correctly- that the Chinese state is a “workers’ / proletarian state”.


10. A comparison of the state and private capitalism behaviours


Does state-capitalism behave like private capitalism? Of course it does not do so completely. While private capitalism sets almost as its unique operational objective the maximization of the profit, any state owned enterprise sets also –according to the conjuncture and conditions- additional objectives to fulfil like, for example, employment or wages, etc. However, such an addition does not annul the non-loss operational principle. Therefore, private and state capitalism are simple alternative ways to manage the same fundamental operational principle of capitalism, the calculus of value.


In state-capitalism the surplus-value concentrated and accumulated in the hands of the government is distributed in this or the other way in economy and society, for good or bad. However, in this distribution an additional interfacing factor is the reproduction of the state itself as the undisputable manager of the distribution of the surplus-value accumulated. The managers, being also the controllers of themselves, use a part of the capital they manage in order to reinforce their own position and role in such a lucrative management. Then, they begin to use some of the capital they manage for their own benefit (stock-market speculation, selling of inside information, etc). Finally, the most powerful, clever, experienced, audacious or –simply- greedy of them, i.e. practically all of them, divert some of the capital they manage into their own pockets (off-shore companies, etc). Corruption is a systemic characteristic in state-capitalism especially under dictatorial regimes like that in China.


So, the “democratic control of state-capitalism” is simply a political illusion. How can one “democratise” or put “under workers’ control” the every day operation of a financial investment fund active, night and day, in all the stock-markets of the world? It is not a challenge to the right of the dictatorial state over surplus-value but it is a challenge to the common-sense even of inexperienced people.


Further, state-capitalism is not sustainable in the long run. As the economy grows in volume and complexity, especially in the case of China, the government can not follow business development and technology progress either domestically or abroad. An extended state-capitalist sector is bound to collapse because of its inherent corruption generated by the internal and external accumulation of capital in its framework. 


In the industrial and financial investment abroad, state-capitalism behaves exactly like private capitalism, i.e. is seeking the maximum possible return for its investment.


So, even if state-capitalism in China behaves domestically in a socially “correct” and a more “workers’ friendly” manner than elsewhere, in the arena of world economy it behaves like any private investment fund; though, it is true, in a more conservative and in a less risk taking pattern.


11. The planning that does not result to a planned economy


If I have counted correctly, the text contains the noun “plan” 65 times, the noun “planning” 19 times, the adjective “planned” 6 times and the phrase “planned economy” only 2 times.


The meaning of this statistical exercise is obvious: there are a lot of plans and planning in China but this does not achieve to produce a “planned economy”.


Why is it so? It is because agriculture is not included in the planned sector of the economy. The same is also true for the local private companies as well as for the foreign companies. The same is –conditionally- also true for the mass investments of the multinational and other foreign companies as are, for example, the Greek companies operating in China.  Therefore, the “plan is” not so “far-reaching” as the text suggests.


What remains from this “not so far-reaching plan” is the financial management of the state-capitalist sector by the Central, Provincial and Local Authorities. This management is effectuated, indeed, through the corresponding state sector of the banking system which is controlled uniquely by the Central Bank of China - CBC. However, the CBC is formally independent from the government and of course of the CCP. Expression of this fact is the accumulation of huge amounts of foreign currencies and financial assets by the Central Bank of China and its specialised financial institutions. In a word: planning in China does not know what to do with the trade surpluses it plans to achieve!


Of course, the behavioural difference between state and private capitalism mentioned above is valid also in the financial field. In this case that means the credit redistribution of funds to non-competitive industrial enterprises in order to avoid their bankruptcy and the dismissal of their personnel. Their financing comes from the taxation of the private companies, both local and foreign, and the partial sale of their capital in the stock-market.


However, large and very large scale export, energy, technology and defence companies have no need of such a kind of bank financing. They can issue their own debt and increase their own capital in the domestic and international financial and capital markets. So, they are outside the grip of the financial control of the state. In reality these giant companies in association with the military are dictating the policies to the state; the CCP is subsequently invited to implement them.


Therefore, the supposed “socialist” financial planning is even more restricted in the state-capitalist sector than it appears to be at first glance and finally is resulting in the stock-market privatization of the state-owned companies. This is the organic perspective of the state-capitalist sector of the Chinese economy.


Further, it has to be noted that China is a member of the International Monetary Fund – IMF since 1945. This means that the Central Bank of China is obliged to act in a “financially correct” way defined by its IMF formal engagements. One of them is the pursuit of the long term objective to make the mainland national currency, the Renminbi, fully convertible.    


In the Executive Summary of the IMF report “China 2030: Building a Modern, Harmonious, and Creative High-Income Society”, released on February 27th, 2012, is noted that “Integrating the Chinese financial sector with the global financial system, which will involve opening the capital account (among other things), will need to be undertaken steadily and with considerable care, but it will be a key step toward internationalizing the Renminbi as a global reserve currency.”.


Certainly, making the Renminbi a fully convertible currency –as it is inevitable- means the full capitalization of the Chinese economy.


The second field of central, provincial and local planning is the planning and financing of the public projects and infrastructure works. This kind of planning is common in every country, less, under or fully developed, of the world.


The third field of planning, and this is indeed unique to China, is the management of the labour inflows from the country-side into industrial and administrative towns and ports. This management is effectuated by the CCP in co-ordination with the receiving Provincial, Local Authorities and companies.


The text states that “… the CCP is in charge of the planning mechanism of the Chinese economy.”.


This is so, mainly in relation to the 3rd form of planning, i.e. the management of the migrant flow from the country-side to industrial sites. This function of the CCP explicates also why the peasantry is –as can be seen further below- the most important social class in the CCP membership.  The peasants, in order to be preferred for migrant selection, are entering the CCP en mass and therefore they constitute the larger single segment of its rank and file.


In relation to the 2nd form of planning, i.e. the public projects and infrastructure works, the Local Authorities have a significant role to play. It is well known that the conflict of priorities and interests between Local Authorities and the CCP undermines the integrity of the planning process.


Finally, the degrees of liberty in the 1st form of planning, i.e., the financial planning, is very limited as shown above. Therefore, the CCP can not “use the banks to ensure they serve the Plan.” in the extent that the text suggests.


Therefore, the comprehensive global “state planning” and the overall “state planned economy” in China are in reality official propaganda myths designated to make “state ownership” to look like something else that it can not be, i.e. a vehicle to socialism.   


Let me add a final comment concerning the efficiency and the cost of planning. If one does not measure the final outcomes of the planning (roads, ports, factories, etc) against their cost of realization plus the cost of the planning process itself, then one can not evaluate the final social benefit of the planning. The huge debt of the state-companies is a strong indication both of inefficient operation and ineffective planning.  





12. The political system


The text states that “The Chinese Communist Party (CCP) is the ruling party in China today, and the only legal party.”. This statement is false.


China is not constitutionally a single party dictatorship as was the USSR or as Cuba is today. It is a dictatorship of a Popular Front under the leadership of the CCP exercised through the National Congress of the People’s Representatives. The successive constitutions of PRC have institutionalized the historical Popular Front parties and organizations as well as their Conference under the permanent chairmanship of the representative of the CPC. In other words, the Popular Front is so far a political hostage of the CPC.


In the Preamble of the so-called constitution of the PRC it is defined that “In building socialism it is imperative to rely on the workers, peasants and intellectuals and unite with all the forces that can be united. In the long years of revolution and construction, there has been formed under the leadership of the Communist Party of China a broad patriotic united front that is composed of democratic parties and people's organizations and embraces all socialist working people, all patriots who support socialism and all patriots who stand for reunification of the motherland. This united front will continue to be consolidated and developed.”


Therefore, the CPC is the “leader” of a Popular Front which is composed by the initial historical forming eight organizations considered officially as “democratic parties”. These parties[17] are the following: China Zhi Gong Dang (1925), Chinese Peasants and Workers' Democratic Party (1930), China Democratic League (1941), Jiusan Society (1944), China Association for the Promotion of Democracy (1945), China Democratic National Construction Association (1945), Taiwan Democratic Self-government League (1947) and China Revolutionary Committee of the Kuomintang (1948).


However, besides the official parties there are in China a lot of semi-legal and illegal political formations of various sensibilities.


The following organizations of unknown influence are included in the organizations which are not recognized officially as political parties: Party for Freedom and Democracy in China, China/Chinese Green Party, Human Rights Party and United People's Party of China.  


The following organizations of unknown influence are included in the organizations which are officially illegal: Chinese Democracy and Justice Party (1998), Wang Bingzhang; China Democracy Party (1998), evolved from the Chinese Democracy Wall Movement (1978) and the 1989 Democracy Movement (1989); China New Democracy Party (2007), Guo Quan and Union of Chinese Nationalists (2006) related to the Pan-Blue coalition on Taiwan.


The conclusion is that any political concept that admits the existence only of one party in China, i.e. of the CCP, is misleading on the actual political situation in China.


13. Is China a workers’ state?


The text finds “powerful evidence that China is not a capitalist country.”. If China is neither a capitalist nor a state-capitalist state -as the text claims- then it has to be a “workers’ state”.


So, is China a workers’ state?


If Trotsky was considering the USSR as a workers’ state this was due to the fact that the USSR was a single class proletarian society. In the USSR there was only one social class: the wage-earners. Besides this class there were two social groups: the slaves in the forced labour camps and the outstanding outlaws (murderers, thieves, prostitutes, black market traders, speculators and marketeers, , , etc).


Is China today a single-class proletarian society? Of course it is not. Contemporary China has been constructed by and through the ex-nihio creation of a petit and big bourgeoisie in the country-side, towns and ports in business partnership and association with imperialism. The text acknowledges that “Nobody denies that a class of private capitalists exists in China today.”. However, the text forgets to inform us that this private capitalist class is the majority of the population in the form of the peasantry. Contemporary China, despite its extraordinary growth performance in the past, still continues to be a rural country. Concretely, the rural population in China numbers the 54.7% of the total. In the USA it numbers the 16.0% of the total population.


Therefore, China is not a workers’ state in the broad, social, sense of the term. It is certainly a workers’ and peasants’ state where the peasantry stands for the main bulk of the petty-bourgeoisie. 


However, China can be a workers’ state in the narrow, class, sense of the term, i.e. as a political proletarian dictatorship over a multi-class and basically peasant society (taking into account that the internal migrants are only temporarily in the ranks of the working class).


So, is China a proletarian dictatorship?


14. Is there a proletarian dictatorship in China?


It is obvious that there is a dictatorship in China. The text acknowledges this fact: “China is a dictatorship, a one party state.”.


Is this dictatorship a proletarian one? For a dictatorship to be a proletarian one it has to be exercised at least by a proletarian political party at the expense of the other classes, i.e. limiting the private accumulation of capital both in towns and villages.


In China we observe that neither the CCP is a proletarian party nor the state policies implemented are directed against the private accumulation of capital.


According to the data provided by the text only the 10.8% of the 73.3 millions strong CCP was workers in June 2007. In June 2010 the number of workers fell to 8.9% of the 78.1 millions strong CCP[18]. Thus the CCP is a proletarian party without proletarians! Much worse, it seems that the proletarians are deserting the CCP!


In contrast, the peasantry (farmers, herdsmen and fishermen) is the relative majority in the CCP with 31.5% in June 2007 and 30.8% in June 2010. It is reminded, simply, that the peasantry is the main bulk of the petty-bourgeois class in China.


It is reminded also that[19] in 2006 81.6% of the Chineses population was living in their own home while the corresponding ownership rate was 68% in the USA and 42% in Germany. Consequently, the number of the property owning proletariat is larger in backward China than in fully developed USA and Germany. So, the Chinese proletariat has a relatively strong petit-bourgeois aspect.  


Thus, the conclusion of the text concerning the CCP that “In membership terms this is not a Party of capitalists.” has to be reconsidered fundamentally. 


Therefore, the CCP is a multi-class party and the state policies implemented by it are in favour of the private accumulation of capital, both national and international. Further, the Chinese government itself is a big capital owner of some US$ 2.45 trillion, a significant industrial investor abroad and the biggest single lender of the USA government.


So what is the CCP? It is a populist formation, so common in under-developed socio-economic formations operating according to the calculus of value.


In such political formations the influence of capitalists it is not exercised by their membership number, in capitalism capitalists are always a tiny minority in society, but by their ability to offer employment and wages to the rest of their “comrades” in the party. Further, they have the money power to corrupt not only the leadership but also the rank and file. The purchase of votes is a long established tradition in all countries of the world, even in Chavez’s Venezuela. Therefore, the numerical argument of the text is invalid. A single owner of a big factory exercises more influence in the local CCP affairs than thousands of devoted communists. We do know that from our relevant experience with PASOK in Greece.


Besides -at least according to Lenin[20]- the small peasantry inevitably vacillates between the proletariat and the bourgeoisie even under a proletarian dictatorship. So, the influence of capitalism is transmitted into and it is reproduced inside the CCP also by the peasant component of its rank and file which is also the largest.


Specifically, the liberation of the internal movement of persons from any restriction and administrative controls, i.e. practically the abolition of the so-called “internal passport”, as well as the freedom of establishment anywhere in the country is the “natural” demand of the rural population. However, such a demand is a de facto operational challenge to the actual dominance of the CCP. Therefore, objectively, it is a demand bearing a latent pro-capitalist content and dynamic. Without its grip on the internal movements of the population, the CCP can hardly continue to have its compact character and dominant position it has for the time being.


Much worse, the populist CCP is commanded by the military cast. Concretely, the CCP is the political executive tool of the Chinese Army Forces in the framework of the ruling nine parties’ popular front through which the military cast exercises its dictatorship in China.


15. Is China capitalist?


The conclusion of the text that: “Taken together, the extent of public ownership and the existence of a far-reaching plan provide powerful evidence that China is not a capitalist country.” is logically ambiguous.


If there is socially a significant capitalist class –as there actually is - China is also, at least partially, a capitalist country. It has been indicated how this functions spatially in the framework of a private agriculture which provides –according to the text- 12% of the GDP and 40% of all jobs.


However, the existing capitalist class is not, so far, the ruling class of the Chinese state. The state in China is self-ruled under the leadership of its military component with the CCP acting as its transmission mechanism and interfacing sub-system with society. As the main but not unique transmission mechanism and interfacing sub-system, the CCP is also, at least partially, a component of the system ruling the state. Besides CCP, the existing popular front with its eight “sleeping” political parties provides to the military caste an alternative ruling transmission mechanism and interfacing sub-system which is not only outside the framework of the CCP but it can also be turned –if such a social or political need arises- against the CCP itself. 


The Boards of Directors of the big domestic business and the multinationals investing in and trading with China act –for the time being- as lobbyists, consultants and advisors in the process of decision taking, i.e. of “planning” according to the terminology of the text..


Therefore, China is not a capitalist state but never the less this non-capitalist state operates on the calculus of value, i.e. capital. Thus, structurally, the state operates capitalistically in most of the cases, i.e. as if it was basically a capitalist state.


Therefore, both the economy and the state are, at least for the time being, basically state-capitalist.


16. Is China a post-capitalist society?



1.    there is not a workers’ state in the broad sense of the term in China but a multi- class society,

2.    there is not a proletarian dictatorship in the narrow sense of the term in China but a military dictatorship exercised through a multi-party political system and a multi-class populist Communist Party,

3.    There is no collective sector nor any kind of state planning in agriculture which has been de-collectivised and reversed to a private one,

4.    the majority of the population is peasantry and this peasantry constitute the main bulk of the existing petit capitalist class,

5.    there is not any kind of  foreign trade monopoly and planning,

6.    there is not any kind of enterprise and price central planning,

7.    the planning of the public projects and infrastructure works is not an exclusive state task but is done jointly with the Local Authorities as in any country of the world,

8.    the financial planning is predominantly a partial regulation of joint financial viability of the financing banks and the debt ridden enterprises and Local Authorities,

9.    there is an enormous accumulation of capital in the hands of the government generating surplus-value by its industrial and financial investment inland and abroad,

nevertheless the text concludes arbitrarily that “China is a post-capitalist society. Its economic success shows that capitalism is a fetter upon the productive forces and that Marx therefore was right when he described capitalism as a barrier to humanity’s forward march.”.


If China is considered to be a “post-capitalist society”, this means that it is irreversible to “capitalism”. If it is so, then the supposed on going current “transition” can lead only to “socialism”. In consequence, China is a “pre-socialist society” irrespectively of the simple fact that it is a backward country in which the vast majority of the population is composed by the rural and urban petty-bourgeoisie. In terms of the class composition of its population, China is basically an “under-developed” capitalist society dependent on the imperialist structure and dynamics of the world economy.


For a socio-economic formation to be a “post-capitalist” one it first has to have established that it is not reversible to capitalism. This means that it is more developed, economically, socially and politically, than metropolitan capitalism.


On the economic level while the GDP of China in 2011 was 49% of that of the USA, its per capita GDP was only the 15.8% of that of the USA. On the social level, China is a predominantly a petite bourgeois rural society. On the political level, China is a politically disguised military dictatorship.   


In summary, rural and urban petite bourgeois and dictatorial China is less developed than semi-industrialised and autocratic Russia in all the above criteria. Russia, and by the same token, Russia is less developed than, e.g., industrialised and democratic Belgium in all the above criteria.


Therefore, both the state-capitalist China and Russia are heading -through a class conflicting political pattern- towards either private capitalism or socialism.  


16. Misleading by an outdated concept of socialism


Methodologically, all the argumentation of the text concerning the Chinese “post-capitalism in socialist transition” is based on a concept of socialism defined as “state ownership” plus “planning” plus “a proletarian party as the instrument of planning”.


This three component socialist structure is familiar to all of us and accepted by many of us. So, instinctively, the conclusions of the text look plausible, especially in the actual context of the crisis even in the meaning of socialism.


However, in China, behind such a familiar façade is hidden an unfamiliar reality almost to all of us.


It has been indicated that China is predominately a petty-bourgeois rural society in which the initially established planned collective agriculture has been reversed into private and unplanned. So, the relation between agriculture and the state sector is of state-capitalist character while its relation with the private sector is simply capitalist.  


It has been demonstrated that that the “state ownership” in China is the “majority state ownership of the joint-stock capital of the enterprises inside and outside the stock-exchanges”. So, the Chinese state-ownership is a state-capitalist one.


It has been demonstrated that the “planned economy” is simply the combined financial viability state regulation, on the one hand, of the debt ridden small and medium local state enterprises and municipalities and, on the other, of the financing state banks. So, the financial planning is a partial and specific one in order to avoid the joint bankruptcy of all the agents involved and not a global one covering the whole of the economy. So, the Chinese planning is not an instrument to form the future but an emergency tool to avoid impeding catastrophe.


It has been demonstrated that the CCP is not a proletarian party but a populist puppet in the hands of the Chinese military. So, the “party” is not an instrument of the liberation of the working class but a subjugated chain.


Finally, the sole essential argument that the text provides in favour of the “irreversibility” thesis of the Chinese “post-capitalism” is the simple fact that there is a military dictatorship in China having some societal engraving and much more control over society in the form and by the means of the CCP.


However, any “irreversibility” based on the military bayonets has inherently a limited numbers of days or months or years of life before it. This is one of the great lessons that the instantaneous collapse of the USSR has taught us. 





17. The unnecessary return to the Social-democracy of the past


Workers’ state-capitalism in Soviet Russia during 1918-1927 and the associated New Economic Policy during 1921 – 1927, which generated a small scale private capitalist sector in the economy, were typical social-democratic policies.


Lenin[21] explained to his comrades in the Bolshevik party that gold was the operational basis of their workers’ state-capitalism as well as of its interaction with the private capitalist sector. So, the Soviet Government issued the gold backed Chervonets paper-money and gold currency as the money item in the domestic towns - villages and international exchanges, saving and accumulation.


The convertible Chervonets fared well in its exchange, saving and accumulation role until the international agricultural crisis of 1926-7. The crisis interrupted the normal exchange flows between towns and villages as well as between Russia and abroad. The interruption of trade flows provoked the massive withdrawal of the golden Chervonets from the circulation and multiplied overnight the conversion of the Chervonets paper-money into gold. However, the available gold reserves of the banking system were insufficient to cover the increased conversion demand of the paper-money into gold. In consequence, the Chervonets paper-money collapsed, i.e. it became inconvertible in gold. The Russian economy collapsed along the monetary collapse. The only way out of the economic ruin was the return back to an exchange system in kind between cities and villages, i.e. between workers and peasants. This could not be done other than by a return to a less violent version of the war communism economics in kind.


The majority of the Bolshevik party eliminates in 1927-8 the minority opponents to such a return (Joint Opposition of Trotsky and others) and implements the 1st 5yrs plan in kind in 1928-1932. The plan eliminates every capitalist element in production and trade. Stalinism is established. Stalinism collapses in 1989-1993 and Russia reverts to a three sector private, collective and state capitalist economy. However, the small-scale private agriculture is not re-established but the collective structures continue to operate. The second difference is that the political system is reshaped into a multi-party presidential democracy. The Russians elect a right-wing authoritative government of nationalist consonance. 


China has transited along a similar line. Ready-made Stalinism is established by the militarised CCP in 1949 but in a nine parties’ popular-front political form under the command of the CCP. Central planning in kind collapses in 1962 (“the great leap forward”). The collectivist system is partially abandoned in agriculture by 1965 and the private food trade between towns and villages begins to prosper. This return to small scale capitalism generates the political revolution in 1966-8 (“cultural revolution”). The military crushes the revolution and subsequently starts since 1971 to negotiate trade, investment and assistance with the USA and eliminates gradually the opposition inside the CCP by 1976 (“Gang of Four”). Since 1982 (12th congress of the CCP, new constitution), the Chinese Government gradually re-established the private capitalist sector by accomplishing the privatization of the agriculture by 1985, opening the frontiers of the country to the foreign investment and by reforming the operational mechanisms of the state sector from that of calculus in kind to that of the calculus in value. Thus a two sector private and state capitalist economy is created gradually in China. The entry of the country in WTO in 2001 validates the transformations and limits the intervention of the government (“planning of prices and quantities”, “subsidies”, etc) in the business sector, both private and state. The next macroeconomic objective, related to the IMF membership of the country, is the achievement of the full convertibility[22], [23] of the main-land currency that implies the complete capitalization of China.


The differences between the Russian and Chinese developmental experiences are –so far- the following four: China can not afford a collective agriculture while Russia can not finance a private one. China –being in the 60’s an almost totally closed and unskilled economy- could absorb locally the consequences of the collapse of the centrally planned economy while Russia –being in the 90’s a relatively open and relatively skilled economy- could not. China has privatised its labour force while Russia its scientific personnel and specialised means of production. China can not afford a competitive multi-party political system while Russia can. In all the other essential aspects, the two socio-economic formations are similar.  


It is obvious that these differences are due to the different levels of global development of the two counties. In summary, China is less developed than Russia and Russia is less developed than the countries of the metropolitan capitalism.


The third relevant case is, of course, that of the developed mixed economies.


The mixed state-capitalist, private capitalist and co-operative economy was the child of the post-war I European Social-democracy that grew and matured in the post-war II era mainly in Western Europe. The famous welfare or social state has been the organ for the surplus-value re-distribution between the classes through the multi-party political system controlling the state, its expenses and incomes. In the social-democratic view, socialism is nothing more than the public sector and public works guarantying skilled and unskilled employment; education and medical care free of charge; and unemployment benefits; all of which are financed by the heavy taxation of private capitalism and employment.


The developed version of that which the Chinese Authorities name officially “social capitalism” has revealed a structural defect in the social-democratic system. The system in order to be sustainable it has to be self-financed, i.e. it needs continuously increased tax income from the private sector. The private sector can provide the additional tax income demanded only by expanding abroad, investing in other countries and trading in the world markets, i.e. importing surplus-value. But from the moment that the private sector operates outside the jurisdiction of the National Taxing Authority it has no motive to repatriate its profits in order to be heavily taxed. It prefers to accumulate them in more hospitable places, e.g. in Hong-Kong, in Macau, in Cayman Islands or in Switzerland, and to invest them through opaque business vehicles, i.e. off-shore companies, everywhere in the world.     


The higher round of the globalization of capital that followed the collapse of the USSR, the consequent obligatory opening of the less developed countries (including China) to the foreign investments and the development of the new digital technologies in communication and computing have opened a black hole in the financial sustainability of the national state and thus to the viability of the Social-democratic social system.


On the level of the international economy every company, private, collective or state, is too small to behave differently than a private one, i.e. to seek, in principle, the maximum of return. So, whatever a national state can gain from the activities of its own state-companies in other countries will be lost by the activities of the state companies of the other countries inside its territory. So, the play is a zero sum game. If there is not the reciprocity principle, then the national state-capitalist case turns to that that of National-socialism. 


Therefore, the social-democratic welfare system is not sustainable in the long term either in terms of private capitalism or in terms of state capitalism. However, the actual problem with it, and also for all of us, is that the “theoretical” long term has already become the past in Europe today. Most of the European countries have already traversed the frontier of sustainability of their welfare socio-economic systems.


Of course, this long term perspective is also valid for the Chinese “social capitalist” version, whether a copy or an adjustment of them. Whatever actual difference it has with the European precedents, it is not due to its supposed “planned” physiognomy or other, real or invented, structural characteristic of it but mainly to its lower level of global developmental content. The rudimentary Chinese social security system makes fully the case of the economic inequality between China’s and the European precedents. 


Another qualitative difference in the Chinese configuration is the total absence of the democratic political component of the typical social-democratic welfare system. This essential difference will certainly curtail the life span of the Chinese “social capitalism” but in which direction? 


Is dictatorship extending or curtailing the life span of the model? Will democracy extend or curtail the life expectancy of the model?


In this respect, let me add two things: First, the wrong answer to the above dilemmas implies almost the semi-automatic collapse of the Chinese configuration. Second, the correct answer is not valid once and for all time but it has to be updated continuously.   


18. Globalization as world-wide capitalization


Completely outside of the current historical context as described above, the text puts an existentialist dilemma to its readers, who –admittedly- are socialists: “If the world can develop a new momentum of growth then capitalism remains a progressive system because it is developing the productive forces. That should pose a serious question to socialists – are we wasting our time?”.


It is noted again that if the distance between more developed and less developed countries decreases, as it actually happens, then world capitalism develops the productive forces on a global scale because all the world growth is effectuated in terms of the calculus of value except in North Korea and Cuba.


Therefore, the text completely misses the essence of the current crisis of the historical euro-atlantic imperialism: world capitalism is developing the productive forces world-wide, China included, at the cost of the western proletariat which is called to finance -through the cuts in its employment, wages, social services and living standards- the global expansion of capitalism, also in China. Globalization is the process of world capitalization. In this process, the states are downgraded to the second rank and the multinational financial, industrial and trade companies are upgraded to the first rank of significance.


So, the Chinese bureaucracy is the best ally and business partner of the world imperialism inside China. Outside China, the bureaucracy is an integral part of world imperialism.


19. The “Left” current inside the CCP


In the framework of its overall agreement with the CCP’s line, the text sides particularly with the “Left” current inside the CCP which stands, behind the banner of the fight against bureaucratic corruption, abuse and speculation, against the privatizations of the state-owned enterprises; against the granting of further inner economic space to the activities of the multinational companies; for the rank and file participation in the decision making processes (“democratization”); for the re-activation of the representative collective bodies (“control of and participation in the management”) in the institutions (party, communes and municipalities, enterprises, etc). Accordingly, the “Left” current is a hybrid mixture of a retiring Stalinism (not committed to political democracy) and a perspective Social-democracy (committed to the state’s predominance) on a basis of populism, i.e. of politically unelaborated class differences appearing for this reason functionally as coincidence of economic interests that structurally are opposites. The sources of inspiration of the “Left” are located in the Ideology and International Affairs Departments of CCP, in the Universities and in some Research Institutes in social, economic and political sciences. In a word, the motivators of the “Left” are theoreticians outside the hard core operational decision making mechanism of governance.


The text concludes vaguely that “What is needed in China is a political revolution.”. At first sight this revolution seems to be magnificent. But the objectives of this political revolution are very limited in scope: they do not envisage the establishment of the delegative council political system, neither the establishment of the class independence of the trade unions nor the establishment of the economic self-management of society but simply “The central demands will be for democratisation of the state and for workers’ control and management of industry.”. This is not the programme of a revolution, of any kind. This is a programme of endless reforms aiming to lessen the gap between the governing and the governed without changing the existing mutual hierarchical positioning of either.


To give a voice to the “Left” current inside the CCP is of course something important, first of all for the Chinese themselves. But to reproduce uncritically their analytical fallacies and political illusions is quite another.


The European Social-Democracy has failed to establish the “democratisation of the state and for workers’ control and management of industry” in the post-war II era even in relatively backward countries such as Portugal and Greece. Pablo had put forward exactly the same demands when the USSR was collapsing but without any impact. With the same slogans Chavez has led the working class movement in Venezuela into an impasse. With the same objectives, PASOK has completely destructed the working class movement in Greece and subsequently is implementing a full scale privatisation of the economy. Now, the “Left” tries to tell us exactly the same old story but in Chinese.


20. Socialism as an immediate class objective


Today, it is the time for socialism on a world wide scale and not the time for an illusionary –at least for the metropolitan socio-economic formations- version of state-capitalism modified in a somewhat more worker friendly fashion. It has been indicated that state-capitalism does not generate the taxes needed for the conservation of the welfare state in Europe and elsewhere.


The text asserts that “It is clear (from Critique of the Gotha Programme, 1875) that Marx conceived of society going through a long phase of evolution after the overthrow of capitalism before we arrive at socialism.”. These words and meaning are not, of course, of Marx but of Pablo, Grant and Woods.


Let us take a look at the authentic passage of Marx: “Between capitalist and communist society there lies the period of the revolutionary transformation of the one into the other. Corresponding to this is also a political transition period in which the state can be nothing but the revolutionary dictatorship of the proletariat.”[24]. There is no time duration indicated in the passage. So, the “long phase of evolution” is simply an invention of the text. Therefore, the text is again distorting theory and twisting common sense.


Lenin[25] approximates subjectively in May 1918, immediately after the victory of the October revolution, the time duration involved in the transition: “It has not occurred to them that state capitalism would be a step forward as compared with the present state of affairs in our Soviet Republic. If in approximately six months’ time state capitalism became established in our Republic, this would be a great success and a sure guarantee that within a year socialism will have gained a permanent firm hold and will have become invincible[26] in our country.”.


So, what in reality Lenin thinks about transition is  that in the case of an industrially and financially developed economy and country, e.g. Germany, socialism would be essentially an affair of only of eighteen months even in the 1920’s!


Today, socialism is possible and feasible in the metropolitan socio-economic formations immediately, tomorrow morning, in weeks and months, and not after centuries of supposed bloody class battles. Only the under-developed and the less-developed socio-economic formations need additional time in order to eliminate their existing development gap. Not the developed ones.


So, to be clear, the “theory of transition” that 4th International formulated in the post-war II, concerns exclusively the less-developed and the under-developed economies and societies.


However, even in the worse cases of under-development the best way to cover their global developmental gap is not to extend even further their transition time span, i.e. to add centuries to their social under-development, but to establish socialism in the developed socio-economic formations as quickly as possible.


What is socialism in the developed socio-economic formations the day after? This is the question to elaborate collectively in relation to the next day in Europe, North America, Japan and Australia and not to try to invent another new “transition” inside a “transition” which is another phase of a never ending transition from under-development to a more developed level and structure which the text and many others confusingly name as “transitional to socialism”.


21. From state-capitalism to socialism


The text assesses correctly that China is not socialist: “Nobody can seriously suggest that China is as yet even on the lower rungs of this stage of transition to socialism as Marx defined it.”.


How can socialism be established in China?


In order to become a post-state capitalist society, China has first to distribute equally at least the profits of the state-owned companies to all of its citizens and then to also distribute to them also their ownership in the form of capital joint-stock shares. 


In order to become socialist, i.e. irreversible to capitalism, China has to establish the delegative political system which incorporates the right to recall all the elected delegates and determines that each elected delegate represents in all the Institutions (Parliament, Central Bank, Board of Directors, Committee, Factory Committee, etc) the number of votes casted in his / her favor every single moment.


This is the post-stalinist and post-social-democratic socialism, based on the intertwinement of the economic and political civil rights in a socialized -and for this reason- inherently planned economy.  





Kostopoulos [20080403] L., Soviet bureaucracy: a new state based class or the working class commanding layer in the industrialization process and the associated social restructuring of an under-developed country? Critical evaluation of Elif Çağlı’s views on the class character of USSR.


Kostopoulos [20100124] L., The coming crisis in China and its global impact.


Lambropoulos [20100924] K., The ethno-linguistic and religion situation of China: a note.


Lambropoulos [20101010] K., The Stalinist dictatorship – part 3; The particular case of China.


Lambropoulos [20101105] K., The developmental performance of China: an appraisal, 1960 – 2007.



[1] Lambropoulos 20101105.

[2] Kostopoulos 20100124.

[4] Lambropoulos 20101105.

[5] "SCM Agreement": Agreement on Subsidies and Countervailing Measures.

[6] See, e.g., International Monetary Fund [February 2006] People’s Republic of China—Hong Kong Special Administrative Region: Selected Issues, IMF Country Report No. 06/51.

[8] PBC [2008] China: Financial stability report 2008, China Financial Publishing House.

[9] See: Associated Press, Hong Kong stock market plans yuan futures, widening role as offshore hub for China’s currency, Washington Post 20120420,

[10] Grant [1949] T., Against the Theory of State Capitalism, Reply to Comrade Cliff,

[11] Lenin [19221027-1105] V. I., Interview with Arthur Ransome, Manchester Guardian Correspondent, October 27 - November 5, 1922: Collected Works, 2nd English Edition, Volume 33, pages 400-409, Progress Publishers, Moscow, 1965.

[12] Italics in the original text.

[13] Lenin [1918V05] V.I., “Left-wing” childishness and the petty-bourgeois mentality, Collected Works, vol.27, p.323-354.

[14] Italics in the original text.

[15] Lenin [19170914] V. I., The impending catastrophe and how to combat it, Collected Works, 4th English Edition, Vol. 25, pp. 323-69, Progress Publishers, Moscow 1974.

[16] Italics in the original text.

[17] with the date of their constitution in parentheses.

[18] People's Daily June 28, 2010, translated by CT.

[20] Lenin [191811] V.I., “The proletarian revolution and the renegade Kautsky, Collected Works, vol.28, p.226-325: 296.

[21] Lenin [1921XI] V.I., The importance of gold now and after the complete victory of socialism, Progress Publishers, Collected Works, v.33:109-116.

[22] Hang Luo R. & Jiang C. [2005] Currency Convertibility, Cost of Capital Control and Capital Account Liberalization in China, Journal of Chinese Political Science, vol. 10, no. 1, April 2005.

[23] Arce [20090507] A., China takes steps towards full convertibility of the Yuan,

[24] Italics in the original text.

[25] Lenin [1918V05] V.I., “Left-wing” childishness and the petty-bourgeois mentality, Collected Works, vol.27, p.323-354.

[26] Lenin’s term “invincible” means today “irreversible”.