Does the development of China on a capitalist basis deny the theory
of permanent revolution? Does it mean that capitalism on a world scale
has a new lease of life? What was China under Mao? In this first part of
a two part article, which we publish as a contribution to the
discussion, Jeppe Druedahl looks at these and other questions and draws
lessons from the development of the Soviet Union after the revolution
and under the Stalinist bureaucracy.
China is by far the most populous country in the world. More than one
in five people on the planet live within its borders. In the last
decades it has experienced an enormous economic growth. In 1980 China
accounted for only 2.6 percent of total world output. Today it accounts
for 8.7 percent and is with its huge trade surplus becoming an important
factor in the world economy.
understanding of Chinese society necessary for anyone who wants to
understand and change the world we live in. As the centre of gravity of
world history has been moving from West to East, China is becoming more
and more an important political power. At the same time, the study of
the history of China obliges us to dwell on many important questions of
In 2006 the IMT published the document China’s Long March to
Capitalism . It analyses the basic development of
Chinese society from the revolution of 1949 onwards. The document
explains how Maoism in content was the same as Stalinism and that the
“People’s Republic of China” therefore was a deformed workers’ state,
i.e. a nationalised state owned planned economy controlled by a
bureaucratic caste. With its revolution China left the realm of
capitalism, but it never achieved the stage of genuine socialism.
The Chinese revolution as an historical event is only superseded in
importance by the Russian revolution. The planned economy was a huge
step forward for millions and millions of Chinese peasants and workers.
In 1950 average GDP per person was 36 percent higher in India than in
China. By 1980 Chinese GDP per person was 12 percent higher than in
India. Today it is almost 60 percent higher in China than in India (see
the Maddison data on historic GDP at www.ggdc.net/maddison/).
How can one explain this not unimportant detail? Only by the fact
that China had benefitted enormously from its previous period of having a
planned economy. The high level of growth of China today must also be
seen in the light of the important economic steps forward
(industrialisation, increasing level of education, etc.) that even a
deformed Stalinist planned economy without even a hint of workers’
democracy had carried out.
The basic tenet of China’s Long March to Capitalism is its
analysis of how the reforms, beginning at the end of the 1970s, were a
decisive move in the direction of capitalism and that around the new
millennium the dominating mode of production in China had become
However, two questions in particular relating to the characterization
of Chinese society as capitalist had to be looked into more deeply. The
first is the relation between the worldwide great recession and China.
The second, and the focus of this article, is the precise dynamics of a
transitional economy in the hands of a bureaucracy. But first we have to
clear up some basic misunderstandings.
The dynamics of the theory of permanent revolution
The Marxist method has never accepted eternal fixed categories. It
was only the Stalinist caricatured interpretation that turned Marx’s
historical materialism into a rigid schema that saw different modes of
production, primitive communism, slave society, feudalism, capitalism,
socialism, etc., all following on each other mechanically. That truth is
always concrete is the first law of dialectics. What is important for
Marxists is always the process, its dynamics and the direction of its
Prior to the October revolution the Mensheviks argued that a
socialist revolution was not possible in Russia because of its
semi-feudal mode of production which meant that the socialist revolution
was not on the agenda. Trotsky’s answer was that only the proletariat
could solve the tasks of democracy and national emancipation (i.e. the
bourgeois revolution) and that the proletariat would not stop there but
would continue with the tasks of the socialist revolution. History
verified every aspect of his analysis.
Trotsky formalised this in the theory of the permanent revolution. As
the second basic postulate of the theory of permanent revolution he
“With regard to countries with a belated bourgeois development,
especially the colonial and semi-colonial countries, the theory of the
permanent revolution signifies that the complete and genuine solution of
their tasks of achieving democracy and national emancipation
is conceivable only through the dictatorship of the proletariat as the
leader of the subjugated nation, above all of its peasant masses.”
(Trotsky, 1929, chapter 10)
For some Marxists this has raised the question as to whether China
becoming capitalist does not contradict the theory of permanent
revolution. At first sight this could seem like a valid concern. Let us
for a moment forget that the same question should be raised in relation
to at least the former countries of the Soviet Union becoming capitalist
in the 1990s (not to mention the manner in which capitalism was
introduced in countries such as South Korea and Japan much earlier). Let
us even put to one side the fact that Trotsky (and Lenin also)
repeatedly warned of the possibility of a return of capitalism in
In fact what we have here is a total misunderstanding of the theory
of permanent revolution. We have to remember Trotsky’s method: his
argument as to why the proletariat is the only class capable of solving
the tasks of the bourgeois revolution in the colonial, semi-colonial and
we could add the ex-colonial countries.
Even though Trotsky simultaneously argued that capitalism on a world
scale had reached its stage of decay, where it was more and more
incapable of developing the productive forces, he did not use this as an
argument at all. Marx’s great scientific breakthrough was his
understanding that the development of the productive forces is the
decisive factor in the last instance, but he never
forgot that history is created by human beings. “Men make their own
history, but they do not make it as they please; they do not make it
under self-selected circumstances, but under circumstances existing
already, given and transmitted from the past”, Marx wrote in The
Eighteenth Brumaire of Louis Bonaparte (1852).
Trotsky’s line of argument was rather that the bourgeoisie of the
colonial and semi-colonial countries had arrived late on the stage of
history and that their interests were bound up with both the domestic
landlords (thus opposing any agrarian reform) and the foreign
imperialists (thus opposing any genuine national independence). Or, to
put it more bluntly, that the bourgeois revolution was not in the
interest of the bourgeoisie. Reading Results and Prospects
(1905) and the above quoted The Permanent Revolution (1931)
this is the main point of Trotsky’s argument.
By this Trotsky in no way rejected the possibility that certain external
factors could bring forth the bourgeois revolution and the capitalist
mode of production in full scale. One possibility is that given certain
political and strategic conditions it could be in the interests of the
imperialists to force through a capitalist reformation. This was the
case of US imperialism in relation to, for example, both South Korea and
Japan which the US administration feared would be lost to communism if
the economic foundations were not strengthened.
Another possibility is that the proletariat is incapable of
continuing with the tasks of the socialist revolution and the capitalist
counter-revolution gains power. The backwardness and international
isolation of the Soviet Union and the seizure of power by the Stalinist
bureaucracy, and the similar result with Mao in China, are examples of
how the transition to socialism was blocked and the road for a
capitalist counter-revolution was opened up.
Dialectics in general and historical materialism in particular, is
the science of possibilities turning into probabilities and finally
becoming necessities and concrete reality. At this point of our analysis
we are only at the stage of a theoretical possibility based upon the
general Marxist theory developed on the basis of world history and the
experience of the working class.
In the spirit of the above, some have also argued that the
development of the forces of production in China and the fast growth of
the last decades must mean that the capitalist system is still fully
capable of developing the forces of production on a world scale. This is
completely off the mark. What has happened in China is only to a very
small degree a real qualitative development of the forces of production;
to a much larger degree it is a simple quantitative expansion of the
Chinese forces of production by the importation of techniques already
developed in the advanced capitalist world. And the potential in China
was huge. In 1978 its productivity level measured as GDP per capita was
only a twentieth of the US level; in comparison the productivity level
of Russia in relation to the US in 1917 was about a fourth.
Let us now turn to the beginning of the process of the restoration of
capitalism in China in the end of the 1970s.
The experience of the transitional economy in Russia
To understand the transitional economy of China in the 1970s it is
important to see it as the unity of on the one hand a planned economy as
the economic base and on the other hand a deformed workers’ state with a
Stalinist-type bureaucracy as the political superstructure. The one
cannot be understood properly without the other.
If we begin with the economic base it is useful to begin with the
experience of the young Soviet state. We have to remember that
immediately after the October revolution the Bolsheviks only
nationalised the land, which was distributed to the peasants, the banks
and the rest of the credit system.
Instead of directly nationalising the workshops and the factories,
the young workers’ state told the private capitalists what they should
do – what to produce and how much. It was demanded that all private
capitalists should abide by Soviet democracy and accept the
implementation of workers’ control after October. As Lenin explained,
“control over the production, storage, purchase and sale of all products
and raw materials shall be introduced in all industrial, commercial,
banking, agricultural and other enterprises employing not less than five
workers and office employees (together), or with an annual turnover of
not less than 10,000 rubles.”  This involved among other things complete
access to the books for the workers. If the private capitalists refused
to follow these rules there firms were nationalised.
This situation was of course unstable in its very foundations. In the
end you cannot control what you do not own. But the capitalists solved
this problem for the Bolsheviks by refusing to follow the laws of the
workers’ state. And already in 1918 the process of nationalisation was
speeding up rather quickly.
War Communism (1917-1921)
As the Civil War increased in scale and intensity, and in the wake of
the revolution the young Soviet State could not allow that the hostile
capitalists controlled any part of the economy. Trotsky explained this
at the Fourth World Congress of the Comintern in his speech on the The
New Economic Policy of Soviet Russia and the Perspectives of the World
“It is perfectly obvious that from the economic standpoint the
expropriation of the bourgeoisie is justified to the extent that the
workers’ state is able to organize the exploitation of enterprises upon
new beginnings. The wholesale, overall nationalization which we carried
through in 1917-18 was completely out of harmony with the condition I
have just now outlined. The organizational potentialities of the
workers’ state lagged far behind total nationalization. But the whole
point is that under the pressure of civil war we had to carry this
nationalization through. (…) Every factory, every bank, every office,
every little shop, every lawyer’s waiting room became a fortress against
us. They provided bellicose counter-revolution with a material base,
and an organic network of communications.” (Trotsky, 1922)
This was the so-called period of War Communism which involved
confiscation of the grain surplus lowering agricultural supply and equal
wages in industry lowering labour productivity. Trotsky explains: “War
Communism created a bureaucratic surrogate of economic unity. The
machine-building factories in the Urals, in the Donets Basin, Moscow,
Petrograd and elsewhere were consolidated under a single Central
Commissariat, which centralistically allotted them fuel, raw materials,
technical equipment and working forces, maintaining the latter through a
system of equal rations. It is perfectly self-evident that such a
bureaucratic management completely levelled off the peculiarities of
each individual enterprise and cancelled out any possibility of
verifying its productive capacity and its gainfulness, even if the
bookkeeping entries of the Central Commission had been distinguished by a
greater or lesser degree of precision, which in reality has been out of
the question.” (ibid)
The hope and perspective was that War Communism, which designated
production for the sake of the military and communism in consumption
through rationing, could be developed into genuine socialism with the
aid of the West European working class. War Communism was a political
necessity but irrational seen from a purely economic point of view.
The new economic policy (1921-29)
There was a wave of revolutions after the First World War, but only
in Russia did this lead to a successful taking of power by the workers.
Once the revolutions in the advanced capitalist countries had failed, it
was necessary for the workers’ state to retreat. The New Economic
Policy was thus introduced by Lenin and Trotsky in 1921. The main points
of this policy were:
1. In agriculture: The peasants were allowed to sell their
surplus at the market.
2. Industry – Some minor privatizations of small scale
production were carried out and some of the light and medium-sized
industrial factories were leased to individuals and co-operatives.
Differences in wages by, for example, through piece work were allowed.
3. Trade – Private merchants were allowed to operate to some
4. Foreign capitalists were offered concessions.
Or in short: the methods of the market were introduced. The peasants
had to have an incentive to improve and expand their crops. Workers had
to be rewarded for improving productivity. Foreign know-how had to be
attracted. The idea of a complete plan without the use of any markets
had to be abandoned due to the low level of the productive forces.
Trotsky summed this up in the above mentioned speech in 1922:
“Before each enterprise can function planfully as a component cell if
the socialist organism, we shall have to engage in large-scale
transitional activities of operating the economy through the market over
each enterprise and each set of enterprises must to a greater or lesser
degree orient itself independently in the market and test itself
through the market. This is precisely the gist of the New Economic
Social Democrats all over Europe heralded this as the Bolsheviks
having at last come to their senses and that they would now return to
capitalism. This had nothing whatsoever to do with the truth. To use
some bourgeois methods to run the economy is not the same as capitalism.
Of course there was a real danger that private capital could grow in
strength and from being a tool of the Bolsheviks could become the main
force in the economy. Trotsky explained how this was to be avoided:
“Our most important weapon in the economic struggle occurring on the
basis of the market is – state power. (…) Another weapon of the
proletariat is that the country’s most important productive forces are
in its hands: the entire railway system, the entire mining industry, the
crushing bulk of enterprise servicing industry are under the direct
economic management of the working class. (…) The workers’ state
likewise owns the land (…) The workers’ power holds the state frontier:
foreign commodities and foreign capital generally can gain access to our
country only within limits which are deemed desirable and legitimate by
the workers’ state.”
Trotsky explained that about a million workers were employed in the
state-run factories and that only 80,000 were employed in the privately
run factories with about half of these in co-operatives. The NEP was a
retreat, but it was not a move towards capitalism.
The superiority of a planned economy
Why do Marxists argue that a planned economy is superior to
capitalism today but that that would not have been the case 500 years
ago? How does the production process now differ from then? The most
important difference is that the production process in the early days of
capitalism was mostly private, and now it is social.
Private production in the extreme is production for the sake of only
you and your family. In feudal society production was mainly private.
The peasants produced mainly for themselves. Only a small part of the
crops was sold on the market and it was out of the surplus product that
rent was paid to the landlord. Capitalism is in its core commodity
production, i.e. production for the sake of the market. Hereby
production is social in the sense that the consumption of the products
is social. Each factory is related to each other by competition in the
market which leads to the closure of the most inefficient factories
which are underpriced by the more efficient ones. This is the
progressive aspect of capitalism which has led to an enormous
development of the productive forces.
However, the social character of production increases as capitalism
develops. Infrastructure (transport and communication) becomes necessary
to reach markets far away and to get raw materials from afar. The
social division of labour is increased and intermediate markets for
capital goods and subcomponents arise. The companies are linked in a
long chain from the raw material to the final commodity. Simultaneously
large scale production becomes absolutely necessary to be able to stand
competition – this creates monopolies.
The production of even the most common everyday goods becomes an
intertwined complex process involving all parts of society – production
becomes truly social. And we have not even discussed the role of
research done at the universities or in the research departments of the
big corporations which creates new types of goods and completely new
branches of production.
In the early days of capitalism the market was effective because it
fostered the most effective production process. But when production
becomes social the effectiveness of one firm depends completely on other
firms, and their individual contributions to the overall level of
productivity cannot easily be separated and with the rise of monopolies
the markets lose all their former power and effectiveness. Billions and
billions of dollars and enormous amounts of human brain capacity are
wasted in parallel research in competing firms due to business secrets
and “intellectual property rights”.
The need for a conscious plan therefore arises. Private
appropriation, where everything has to be sold at a market for a private
profit, comes into contradiction with the social process of production.
The important point here is that the overwhelming part of production
in Russia prior to the revolution was actually not social but private in
character. Therefore total nationalisation was not economically
The programme of the Left Opposition
Here, however, we are still only at the level of the ABCs. As the NEP
started to work, agricultural production was increased and industry was
massively improved. But as a result of this the kulaks (rich peasants)
and NEP-men (private traders) grew in power. How the right and the left
reacted to this problem was clearly seen in the so-called “scissor
crisis”. The problem was that the kulaks were demanding higher and
higher prices for their grain. But this would divert funds away from
investing in and improving industry. Bukharin, as the theoretical leader
of the right wing, wanted to accommodate the kulaks and instead develop
industry at a “tortoise tempo”. “Get rich!” was his slogan to the
peasants. Even the idea of denationalisation of the land gained some
support within the bureaucracy.
Trotsky and the Left Opposition had a completely different
perspective. They understood that improvements for the peasants,
especially the poorer layers, were necessary, but they explained that
the most effective way of achieving this would be to have a more
developed industry able to provide the peasants with, for example,
tractors. This would then create the basis for collectives in the
countryside and even more effective agricultural production freeing
labour for a needed enlargement of industry.
But the only basis upon which this could have been achieved was a
plan of industry which Stalin at first denied drawing up. What was
needed was a plan for what was called “primitive socialist
accumulation”. Primitive socialist accumulation can be based on two
1) The surplus product of the state sector can be reinvested.
2) A part of the product from the private sector can be retained and
used to expand the state sector.
Preobrazhensky, the economist of the Left Opposition until he
capitulated to Stalin, explained this in the following way:
“The more backward economically, petty-bourgeois, peasant, a
particular country is which has gone over to the socialist organization
of production, and the smaller the inheritance received by the socialist
accumulation fund of the proletariat of this country when the social
revolution takes place, by so much the more, in proportion, will
socialist accumulation be obliged to rely on alienating part of the
surplus product of pre-socialist forms of economy and the smaller will
be the relative weight of accumulation on its own production basis, that
is, the less will it be nourished by the surplus product of the workers
in socialist industry.” (Preobrazhensky, p. 124)
The point of the NEP was exactly to strength the private sector and
then tax it (or distort prices in favour of the state sector) and in
this way turn primitive capitalist accumulation into primitive socialist
accumulation. Stalin and the right wing ridiculed this idea, claiming
that it was impossible and accused the Left Opposition of being
Total nationalisation and collectivisation (1929)
However, once Stalin had defeated the Left Opposition in 1927-8 his
main concern became the right wing and especially their economic base in
the form of the NEP-men and the kulaks. In 1929 Stalin turned against
Bukharin and carried out the programme of the Left Opposition in a
completely distorted fashion. The farms were all nationalised down to
every unhatched chicken. All markets were closed and replaced by a
bureaucratic centralised plan. Foreign trade was almost erased due to
the idea of self-sufficiency. In many ways this was a return to War
Communism but on a qualitatively higher level. Both Stalin’s left and
right policies were out of touch with the needs of the workers’ state.
Trotsky was the first to acknowledge the great economic achievements
of the Soviet Union under the Five Year plans under Stalin. In his
article The Soviet Economy Danger (1932) Trotsky explains:
“Socialism, as a system, for the first time demonstrated its title to
historic victory, not on the pages of Capital, but by the
praxis of hydroelectric plants and blast furnaces. Marx, it goes without
saying, would have preferred this method of demonstration.
“However, light-minded assertions to the effect that the USSR has
already entered into socialism are criminal. The achievements are great.
But there still remains a very long and arduous road to actual victory
over economic anarchy, to the surmounting of disproportions, to the
guarantee of the harmonious character of economic life.” (Trotsky, 1932)
In the NEP-period Stalin and the right wing had only focused on the
need for private incentives and the need of markets. Now it was the
other way around, with an exaggerated focus on the plan. Trotsky
explained that three elements are necessary for a transitional economy
to function properly:
- The state plan
- The market
- Soviet democracy
“If a universal mind existed, of the kind that projected itself into
the scientific fancy of Laplace – a mind that could register
simultaneously all the processes of nature and society, that could
measure the dynamics of their motion, that could forecast the results of
their inter-reactions – such a mind, of course, could a priori draw up a
faultless and exhaustive economic plan, beginning with the number of
acres of wheat down to the last button for a vest. The bureaucracy often
imagines that just such a mind is at its disposal; that is why it so
easily frees itself from the control of the market and of Soviet
democracy. (…) The innumerable living participants in the economy, state
and private, collective and individual, must serve notice of their
needs and of their relative strength not only through the statistical
determinations of plan commissions but by the direct pressure of supply
and demand. The plan is checked and, to a considerable degree, realized
through the market. The regulation of the market itself must depend upon
the tendencies that are brought out through its mechanism. The
blueprints produced by the departments must demonstrate their economic
efficacy through commercial calculation.” (Trotsky, 1932)
The point is that the plan shall grow in size as the forces of
production are developed and assume a socialised character. This process
was called primitive socialist accumulation relating it to Marx’s
concept of primitive capitalist accumulation. The idea of the NEP was
precisely that the period of primitive capitalist accumulation had not
finished and that it was therefore necessary to let primitive capitalist
accumulation exist side by side with primitive socialist accumulation.
Concretely, the main point of the NEP was to increase agricultural
production freeing labour for the industrial sector and simultaneously
increasing labour productivity in industry by huge levels of investment
based on taxing the peasants.
The Stalinist bureaucracy instead shifted to a complete command
system focusing only on the plan and fixing all prices centrally. This
was very ineffective as is confirmed by all the stories about factories
producing only shoes for the right foot to meet targets, peasants
feeding pigs bread instead of grain because it was cheaper or natural
gas not being exploited in Central Asia because approvals from 27
different ministries were necessary.
In the end, the planned economy in the Soviet Union is said to have
produced 200,000 different types of commodities. It was clear that a
centralised bureaucratic commission had no possibility of planning this.
The bureaucratic central management of every detail is problematic even
in a simple newly industrialised economy, but it is totally crazy
within a highly specialised economy as the Soviet Union developed into
in the decades after World War Two. In the 1970s the growth of the
Soviet economy slowed down and eventually came to a halt in the 1980s.
This was the economic basis for the collapse of Soviet Union.
As we demonstrate below, this shows how a bureaucracy which is a
relative fetter on the development of a less developed planned economy,
becomes an absolute fetter in a more complex one. According to Alex
Nove in his Economics of feasible socialism there were about 12
million different commodities in Russia at the beginning of the 1980s ‑
simply too many to manage for a bureaucracy.
Post-Mao headaches in China
Precisely the same kinds of problems were present in Maoist China in
the 1970s. The Great Leap Forward (1958-60) and the Cultural Revolution
(1966-69) had been complete failures. There were, however, some
differences between the Chinese and Soviet system. China was not as
centralised as the Soviet Union. In 1970 it was as a consequence of the
Cultural Revolution that only 7.1 percent of industrial output in China
came from centrally owned enterprises, which was down from the 42.2
percent in 1965 (Sweetman and Zhang, 2009, p. 15). This figure had
probably risen in the 1970s but it was still low compared to the Soviet
Union. On the other side the focus on self-sufficiency was driven to the
extreme in China.
However, what Mao left behind when he died in 1976 was basically a
Stalinist deformed workers’ state characterised, apart from the
fundamental deformity of the lack of workers’ democracy, by deformities
such as over-nationalisation, over-planning and the already mentioned
self-sufficiency (autarchy). The serious character of the problems
facing the Chinese bureaucracy was further underlined by the slowdown in
the growth of the Soviet Union – their “future picture” we could say.
Therefore a number of “reforms” were implemented when Deng Xiaoping
became leader in 1978.
The basic points of these reforms were:
1) The self-sufficiency policy was aborted.
2) Foreign investors were invited on strict conditions.
3) The peasants were given the possibility of leasing the land
individually for 30 years.
4) Markets started playing a bigger role in determining prices.
5) It became possible to set up collective and private Town and
Village Enterprises (TVEs).
In short this can be seen as a Chinese NEP; Deng even described it as
“market socialism”, and this was in general correct even from an
abstract Marxist point of view. But two key aspects have to be taken
into consideration. Firstly, the bureaucracy did not dare to use the
most effective medicine against the problems of the Chinese economy, the
introduction of genuine workers’ democracy. In analysing the Chinese
transitional economy (and the transitional economy of all deformed
workers’ states) it is important to remember that these are in a
“blocked transition”. Socialism is not possible with a bureaucracy
running the economy; socialism is characterised by the state “withering
away”. Secondly, in the same manner we must not confuse the dynamic laws
of a “true” transitional economy in a healthy workers’ state with that
of a transitional economy controlled by a Stalinist bureaucracy.
In The Revolution Betrayed (1936) Trotsky clearly explains
the relation between the political and economic demands in a deformed
“Let us assume first that the Soviet bureaucracy is overthrown by a
revolutionary party having all the attributes of the old Bolshevism,
enriched moreover by the world experience of the recent period. Such a
party would begin with the restoration of democracy in the trade unions
and the Soviets. It would be able to, and would have to, restore freedom
of Soviet parties. Together with the masses, and at their head, it
would carry out a ruthless purgation of the state apparatus. It would
abolish ranks and decorations, all kinds of privileges, and would limit
inequality in the payment of labor to the life necessities of the
economy and the state apparatus. It would give the youth free
opportunity to think independently, learn, criticize and grow. It would
introduce profound changes in the distribution of the national income in
correspondence with the interests and will of the worker and peasant
masses. But so far as concerns property relations, the new power would
not have to resort to revolutionary measures. It would retain and
further develop the experiment of planned economy. After the
political revolution – that is, the deposing of the bureaucracy – the
proletariat would have to introduce in the economy a series of very
important reforms, but not another social revolution.” (Trotsky,
1936, my emphasis)