China's Revolution

[Neo]

China's Revolution - Part 1

In the beginning was Tiananmen

By Henry C K Liu

The People's Republic of China observed the 60th anniversary of its founding on October 1, 2009. Many unthinkingly confuse that date as the 60th anniversary of the Chinese socialist revolution. In fact, the protracted history of the Chinese socialist revolution started 90 years ago in 1919 on May 4, when 5,000 students from Peking University, as it still prefers to be known in English, and 12 other schools held a political demonstration in front of Tiananmen, the focal point of what is today known as Tiananmen Square.

The demonstration sparked what came to be known as the May Fourth Movement of 1919-21, an anti-imperialism movement rising out of patriotic reactions to China's then warlord government's dishonorable foreign relations that led to unjust treatment by Western powers at the Versailles Peace Conference. May Fourth was a political landmark that turned China towards the path of modern socialism through Marxist-Leninism.

Nationalism had fueled the Xinhai Revolution led by the Nationalist Party (Koumintang or KMT) under the leadership of Sun Yat-sen, which succeeded in overthrowing the three-century-old Qing Dynasty (1644-1912) in its final decrepit years by 1911 to establish the Republic of China. However, China after the 1911 Xinhai Revolution was a fragmented nation ruled by regional warlords preoccupied with internal power struggle. The weak central government at the time, known in history as the Beiyang regime (1912-28), was backed by the Beiyang Army commanded by Yuan Shikai, a warlord who had been a leading general in the former Qing army.

The Beiyang regime, preoccupied with consolidating its rule over other unruly independent regional warlords that had sprung up in a power vacuum as Qing rule disintegrated, not only did little to counter persistent and continuing Western imperialism in the new Republican China, it in fact made numerous additional concessions on Chinese sovereignty to imperialistic foreign governments in exchange for foreign financial and military support against rival regional warlords.

Yuan soon developed a delusion of monarchical grandeur, fanned by none other than his American political advisor, Frank J Goodnow, a constitutional expert sent to China by the Carnegie Endowment. Goodnow was later to become president of Johns Hopkins University. A political scientist of note, Goodnow published a book entitled: Principles of Constitutional Government, in which he concluded that Americans had long doubted the fitness of a democratic republic in China where a tradition of autocracy would make a constitutional monarchy a far more suitable institution than a democracy.

Mistaking Goodnow's views as a sign of US support, Yuan made a failed attempt to proclaim himself emperor of China on December 12, 1915. To secure foreign acceptance of his monarchial farce, Yuan accepted Japan's infamous Twenty-One Demands and signed an agreement with Russia to recognize its special interest in Outer Mongolia and with Britain on its special interests in Tibet.

In protest, Sun formed a Southern Government in Guangdong. The monarchial farce ended with the abolition of the three-month-old monarchy on March 22, 1916, after other leading warlords refused to recognize Yuan as emperor. A frustrated Yuan died on June 5, 1916, aged 56, officially from uremia, while some said suicide. Two months later, Goodnow's book received a positive review in the New York Times on August 13, 1916. After Yuan's death, vice president Li Yuanhong became president of the restored republic and Feng Guocheng became vice president. Both were warlords in the Beiyang clique.

As the Beiyang regime fell into chaos, an opening emerged for the restoration of the Qing monarchy, putting Pu Yi, the last emperor, on the restored throne on July 1, 1917. Twelve days later, Duan Qirui, a leading general under Yuan, entered Beijing with his troops and ended the Qing restoration. Re-establishing the republic once again, Duan assumed the premiership of the new government under President Li Yuanhong.

Prodded by the US, the Duan government declared war on Germany on August 14, 1917, without the approval of president Li or the new parliament. Under the pretext of financing China's war effort, Duan negotiated the secret Nishihara Loan of 145 million yen (the yen equaling half a US dollar at the exchange rate of the time). Thus fortified financially, Duan set out to destroy Sun's Southern Government. But Feng Guocheng, who had succeeded Li Yuanhong as president, preferred a peaceful negotiation with Sun. With the leadership of the Beiyang clique divided, Duan's military campaign failed to topple the Southern Government.

At the end of World War I, Japan as a victorious ally of the Triple Entente had taken Shantung, now known as Shandong, in China from defeated imperialist Germany, which had a 99-year lease for a naval base at the port of Qingdao since 1898, left over from unequal treaties with the Qing Dynasty that the 1911 bourgeois democratic revolution overthrew.

At the outset of World War I, China had at first stayed neutral, while Japan joined the Allies and ousted Germany from Qingdao port in Shandong, and subsequently occupied most of the province. After the war, Japan sought to legalize its de factooccupation of Shandong.

In 1917, China entered World War I as an ally of Britain, France and Russia within the Allied Triple Entente, with the understanding that all German spheres of influence in Shandong would be returned to China after an Allies victory.

However, the Versailles Treaty of April 1919 awarded German rights in Shandong to Japan. The peace conference rejected China's request for the abolition of all foreign extra-territorial rights in China, for the annulment of the infamous Twenty-One Demands by Japan and for the return to China her sovereign rights in Shandong.

Secret treaties between Japan and Western imperialist powers to recognize Japan's Twenty-One Demands on China in exchange for Japanese support of Russian, French and British claims on other former German colonies assured great power support for Japan.

The coup de grace was a secret pact signed in September 1918 between Japan and the warlord Beiyang regime, in which the Duan government had accepted the terms of the Twenty-One Demands in exchange for a loan of 20 million yen from Japan as part of the Nishihara loan. China's representative at Versailles argued that the Twenty-One Demands were invalid because the Chinese parliament had never ratified them. Further, the Chinese delegation invoked the international law concept of rebus sic stantibus to nullify Japan's claim on Shandong. The concept states that when the objects of a treaty, or conditions under which it is concluded, no longer exist, the treaty becomes null and void.

In rebuttal, Japan divulged the 1918 secret treaty signed after China entered the war in which the Duan government of the Beiyang regime had "gladly agreed" to Japanese terms. The Western allies were bound by secret treaties to support Japan, leaving US president Woodrow Wilson as China's lone supporter.

The United States at first promoted Wilson's idealistic Fourteen Points, but was forced to abandon most of its anti-imperialist ideals due to firm resistance from Britain and France, the major imperialist powers at the time.

Many Chinese intellectuals felt betrayed by the Versailles Peace Conference as they had naively believed Wilson's ideals of universal justice and were expecting the US to forge a new world order of democracy and international justice after the war.

Two prominent Chinese intellectuals, Chen Duxiu and Li Dazhao, who participated in the May Fourth student demonstrations, soon came to the realization with others that Vladimir Lenin's conceptual linkage between capitalism and imperialism was vividly proved by unfolding events around the world and particularly in China. They came to the conclusion that to rid China of Western imperialism, China must oppose capitalism and adopt a socialist path of self regeneration. In 1921, Chen and Li co-founded of the Communist Party of China (CPC) in Shanghai, the center of Chinese capitalism.

Hobson on imperialism

The structural link between capitalism and imperialism was first observed by John Atkinson Hobson (1858-1940), an English economist, who wrote in 1902 an insightful analysis of the economic basis of imperialism. Hobson provided a humanist critique of neo-classical economics, rejecting exclusively materialistic definitions of value.

With Albert Frederick Mummery (1855-1895), the great British mountaineer who was killed in 1895 by an avalanche while reconnoitering the Rakhiot Face of Nanga Parbat, an 8,000-meter Himalayan peak, Hobson wrote The Physiology of Industry (1889), which argued that an industrial economy requires government intervention to maintain stability, and developed the theory of over-saving that was given an overflowing tribute by John Maynard Keynes three decades later.

The need for governmental intervention to stabilize an expanding national industrial economy became the rationale for political imperialism in advanced capitalist economies. On the other side of the coin, protectionism was a governmental counter-measure on the part of weak trading partners for resisting imperialist expansion of the dominant powers.

Historically, the processes of globalization have always been the result of active state policy and action, as opposed to the mere passive surrender of state sovereignty to market forces. Market forces cannot operate in a political vacuum. Markets are governed by man-made rules. Globalized markets require the acceptance by local political authorities of the established rules of the dominant economy. Currency monopoly and hegemony is the most fundamental trade restraint by one single dominant government. Today, the global market is dominated by dollar hegemony.

Friedrich List on economic nationalism

German economist Friedrich List, in his National System of Political Economy (1841), asserts that political economy as espoused in 19th century England, far from being a valid science universally, was merely British national opinion, suited only to English historical conditions. List's institutional school of economics asserts that the doctrine of free trade was devised to keep England rich and powerful at the expense of its trading partners and it must be fought with protective tariffs and other protective devises of economic nationalism by the weaker countries.

Nineteenth-century American statesman Henry Clay's "American system" was a nationalist system of political economy. Economic nationalism was a necessary policy for the US in the 1850s. US neo-imperialism in the post World War II period disingenuously promotes neo-liberal free-trade against economic nationalism labeled as protectionism to keep the US rich and powerful at the expense of its trading partners.

Before the October Revolution of 1917, many national liberation movements in European colonies and semi-colonies around the world were influenced by List's economic nationalism. The 1911 Xinhai Revolution led by Sun was heavily influenced by Abraham Lincoln's political ideas of government of the people, by the people and for the people, and the economic nationalism of List until after the October Revolution in Russia when Sun realized that the Soviet socialist, anti-imperialist model was the correct mode for national revival of China.

Imperialism and iron law of wages

Hobson's magnum opus, Imperialism (1902), argues that imperialistic expansion is driven not by state hubris, known in US history as "Manifest Destiny", but by an innate quest for new markets and investment opportunities overseas for excess capital formed by over-saving at home for the benefit of the home state.

Over-saving during the industrial age came from David Ricardo's theory of the iron law of wages, according to which wages were kept perpetually at subsistence levels as a result of uneven market power between capital and labor. Today, job outsourcing that returns goods as low-price imports contributes to the iron law of wages in the global economy, including the US domestic economy. (See Organization of Labor Exporting Countries, Asia Times Online, February 2006).

Dollar hegemony

In the 1970s, dollar hegemony emerged as a geopolitically constructed peculiarity through which critical commodities, the most notable being oil, are denominated in fiat US dollars, not backed by gold or other species since US president Richard Nixon took the US dollar off gold in 1971.

The recycling of petro-dollars into other dollar assets is the price the US has extracted from oil-producing countries for US tolerance of the oil-exporting cartel since 1973. After that, everyone accepts dollars because dollars can buy oil, and every economy needs oil.

Dollar hegemony separates the trade value of every currency from structural connection to the productivity of the issuing economy to link it directly to the size of dollar reserves held by the issuing central bank. Dollar hegemony enables the US to own circuitously but essentially the entire global economy by requiring its wealth to be denominated in fiat dollars that the US can print at will with little in the way of monetary penalties.

World trade is now a game in which the US produces fiat dollars of uncertain exchange value and zero intrinsic value, and the rest of the world produces goods and services that fiat dollars can buy at "market prices" quoted in dollars.

Such market prices are no longer based on mark-ups over production costs set by socio-economic conditions in the producing countries. They are kept artificially low to compensate for the effect of overcapacity in the global economy created by a combination of overinvestment and weak demand due to low wages in every economy.

Such low market prices in turn push further down already low wages to further cut cost in an unending race to the bottom. The higher the production volume above market demand, the lower the unit market price of a product must go in order to increase sales volume to keep revenue from falling. Lower market prices require lower production costs which in turn push wages lower. Lower wages in turn further reduce demand. To prevent loss of revenue from falling prices, producers must produce at still higher volume, thus further lowering market prices and wages in a downward spiral.

Export economies are forced to compete for market share in the global market by lowering both domestic wages and the exchange rate of their currencies. Lower exchange rates push up the market price of imported commodities which must be compensated for by even lower wages. The adverse effects of dollar hegemony on wages apply not only to the emerging export economies but also to the importing US economy. Workers all over the world are oppressed victims of dollar hegemony, which turns the labor theory of value up-side-down. (See Dollar Hegemony, Asia Times Online, April 2002.)

Lenin's theory: imperialism as
advanced stage of capitalism

Hobson's 1902 analysis of the phenology (life cycles study) of capitalism was drawn upon by Lenin 14 years later to formulate a theory of imperialism as an advanced stage of capitalism: "Imperialism is capitalism at that stage of development at which the dominance of monopolies and finance capitalism is established; in which the export of capital has acquired pronounced importance; in which the division of the world among the international trusts has begun, in which the division of all territories of the globe among the biggest capitalist powers has been completed." (Vladimir Ilyich Lenin, 1870-1924, Imperialism, the Highest Stage of Capitalism, Chapter 7-1916).

"It is characteristic of capitalism in general that the ownership of capital is separated from the application of capital to production, that money capital is separated from industrial or productive capital, and that the rentier who lives entirely on income obtained from money capital is separated from the entrepreneur and from all who are directly concerned in the management of capital. Imperialism, or the domination of finance capital, is that highest stage of capitalism in which this separation reaches vast proportions. The supremacy of finance capital over all other forms of capital means the predominance of the rentier and of the financial oligarchy; it means that a small number of financially 'powerful' states stand out among all the rest. The extent to which this process is going on may be judged from the statistics on emissions, ie, the issue of all kinds of securities." (Lenin's Imperialism, Chapter III: Finance Capital and the Financial Oligarchy.)

Lenin was also influenced by Rosa Luxemburg, who three years earlier had written her major work: The Accumulation of Capital: A Contribution to an Economic Explanation of Imperialism (Die Akkumulation des Kapitals: Ein Beitrag zur akonomischen Erklarung des Imperialismus, 1913). Luxemburg, together with Karl Liebknecht, founding leaders of the Spartacist League (Spartakusbund), a radical Marxist revolutionary movement that later renamed itself the Communist Party of Germany (Kommunistische Partei Deutschlands, or KPD), was murdered on January 15, 1919, four months before the May Fourth demonstrations in China, by members of the Freikorps, rightwing militarists who were the forerunners of the Nazi Sturmabteilung (SA) led by Ernst Rohm.

The congenital association between capitalism and imperialism requires practically all truly anti-imperialist movements the world over to be also anti-capitalist. To this day, most nationalist capitalists in emerging economies are unwitting neo-compradors for super imperialism. Neo-liberalism, in its attempts to breakdown all national boundaries to facilitate global trade denominated in fiat dollars, is the ideology of super imperialism. (See Super Capitalism, Super Imperialism, Asia Times Online, October 12, 13, 2007.)

[Neo]

Chinese exposure to Marxism

Chinese intellectuals first became aware of Marxism around 1905, 57 years after the 1848 publication of the Communist Manifesto and 38 years after the first publication of Das Kapital: Kritik der politischen Okonomie in 1867, when a small Chinese newspaper named Min-Bao (People's Journal) published a biography of Marx, 22 years after Marx's death in 1883.

Three years later, in 1908, an anarchist journal by the name of Tien-yi Bao (Journal of Natural Justice) founded a year earlier, published a Chinese translation from the Japanese translation of Friedrich Engels' 1888 English edition of Introduction to the Communist Manifesto, and the first chapter of the Manifesto itself. But only in 1916, three years before the May Fourth Demonstrations, did Lenin make the insightful connection between imperialism and capitalism.

Although incipient recognition of Marx and Engels as the founders of scientific socialism had been acknowledged, the influence of Marxism on Chinese intellectuals remained sporadic until the 1919 May Fourth Movement when the success of the Bolshevik October Revolution dramatized the revolutionary possibility of a socialist ideology seizing the power of the state. At Versailles, Western democracy lost all credibility in China as a progressive force against imperialism.

Lenin's views about imperialism being the highest stage of capitalism enabled socialism to present itself as a promising revolutionary theory to the Chinese intelligentsia for combating both Chinese feudalism and Western imperialism. On a state level, the new communist government of the Soviet Union twice, in 1918 and 1919, unilaterally renounced all special rights and privileges of Tsarist imperialism in China, notwithstanding a fragmented China nominally headed by a central government too weak to reverse the encroachment of Western imperialism.

Lenin's insight of the linkage of capitalism and imperialism gave Chinese intellectuals an understanding of capitalism as the pugnacious root cause of foreign imperialistic domination of China. More importantly, Lenin's insight inadvertently gave Chinese revolutionaries a central place in the universal struggle towards a new world order. By 1918, Peking University had become a vibrant center of socialist revolutionary thoughts.

Li Dazhao, head librarian at the Peking University library at the time of the 1919 May Fourth demonstrations, had learned from the October Revolution of 1917 that anti-imperialism as a political movement required the existence of a communist party in China. But while Li was a nationalist and socialist revolutionary who saw the peasantry as the fountainhead of socialist revolution in China, he was temporarily distracted by Kropotkin's communist anarchism as promoted in China by Li Shi-zeng, which denied the importance of the role of the state in guiding socialist revolution before the stage of the "withering away of the state".

The May Fourth Movement marked a turn by anti-imperialist Chinese intellectuals towards revolutionary Marxism. The success of the Bolshevik Revolution in Russia was a major factor in forming the views of Li Dazhao on the revolutionary role of the state. Li initiated the Peking Socialist Youth Corps in 1920 and in July 1921 co-founded the Communist Party of China (CPC) with Chen Duxiu, who had been exposed to socialist ideas in Japan, as a political institution with the secular program to seize power of the state to carry out socialist revolution in China. A revolutionary state is the rationale for a one-party government, provided that the ruling party represents the interest of the people. Li was a mentor to Mao Zedong, who openly acknowledged having been influenced by Li's ideas.

However, at the direction of the Third International (Comintern) in Moscow, Li and Chen and other Chinese Communist Party members joined the Nationalist Party (KMT) as individuals. Li was even elected to the KMT Central Executive Committee in 1924. When the Chinese civil war started after the death of KMT leader Sun Yat-sen on March 12, 1925, and the subsequent assassination five months later, on August 20, of Liao Zhongkai, leftist KMT leader and heir to Sun, Li was captured together with 19 other communists during a right-wing KMT raid on the Soviet embassy in Beijing. All were executed on the orders of the warlord Zhang Zuolin on April 28, 1927.

The debate on socialist internationalism

The first edition of Stalin's Problems of Leninism, which appeared in April 1924, seven years after the October Revolution of 1917, asks: "Is it possible to attain the final victory of socialism in one country, without the combined efforts of the proletarians of several advanced countries?" The answer was: "No, it is not. The efforts of one country are enough for the overthrow of the bourgeoisie. This is what the history of our revolution tells us. For the final victory of socialism, for the organization of socialist production, the efforts of one country, especially a peasant country like ours, are not enough. For this we must have the efforts of the proletariat of several advanced countries."

The strategic key words on socialist internationalism are "final victory", which cannot be achieved with just "socialism in one country", and the phrase "the proletariat of several advanced countries". But "final" implies not immediate but in the future, even the distant future. And international communism was focused not on the whole world, but on "the proletariat of several advance countries" where evolutionary conditions were considered as ripe. It was not focused on the peasantry still living under agricultural feudal societies outside of Europe or the oppressed people of imperialist colonies and semi-colonies.

To both Lenin and Stalin, the path to liberation in the colonies of the Western empire was to strengthen the only socialist country in the world and to weaken capitalism at the core to end its final stage of imperialism. In theory, the liberated workers of the West would in turn liberate the oppressed peasants in the colonies and semi-colonies.

Unfortunately, events failed to support theory. There was no worker uprising in the advanced economies. In fact, unionism in the advanced economies turned anti-communist. Liberation cannot be delivered by others. Each oppressed group must struggle for self liberation through internal political consciousness.

Both Lenin and Stalin failed to recognize the inherently powerful but latent revolutionary potential of the peasants of the pre-industrial colonies and semi-colonies of the Western empires, which had to wait until the emergence of Mao Zedong in China to force the world to acknowledge this truth in history. Mao, in placing his faith in the revolutionary potential of the Chinese peasantry, redefined the term "proletariat" to mean those deprived of property, a property-less class, away from the European idea of the proletariat as the class of urban industrial workers.

The October Revolution of 1917 was launched on the slogan "All Power to the Soviets", through which the minority Bolsheviks won political leadership in the soviets, which were workers councils that constituted the power behind the new socialist state. Bourgeois liberal democracy was not an objective of the October Revolution, but rather a target for elimination in order to establish the dictatorship of the proletariat in the context of socialist revolution through class struggle.

This was because in feudal Russia in 1917, the proletariat as a dominant class was an abstraction yet to be created as a reality by industrialization. The proletariat in its infancy, small in number, could not possibly command a majority under universal suffrage in a feudal agricultural society. Therefore dictatorship of a minority proletariat is the only revolutionary path towards socialism.

In pre-industrial societies, liberal representative democracy is by definition reactionary in the absence of a dominant working class. Lenin considered the revolution in Russia as a fortuitous beginning of an emerging socialist world order that required and justified a dictatorship of the proletariat to sustain revolutionary progress.

Leninists work for the acceleration of socio-economic dialectics by the violent overthrow of capitalism, which itself had been the violent slayer of feudalism. Evolutionary Marxists, such as social democrats, believe in scientific dialectic materialism which predicts the inevitability of the replacement of capitalism by socialism as a natural outcome of capitalism's internal contradiction.

But the evolutionary process requires the emergence of capitalism as a natural outcome of feudalism's internal contradiction. Marx saw the process of evolution toward socialism as taking place in the most advanced segment of the world, in capitalistic societies of industrialized Western Europe, where the ruling bourgeoisie had replaced the aristocracy as a result of the French Revolution. The Russian Revolution showed that geopolitical conditions had opened up opportunities for revolutions in pre-industrialized nations and it was in these pre-industrial societies that radical revolution was needed to bring about socialism by short-circuiting the long evolutionary process from feudalism to capitalism to socialism.

In Germany, the most industrialized country in the second half of the 19th century, social democrat icons such as Karl Kautsky and Eduard Bernstein, titans of Marxist exegesis, favored gradual, non-violent and parliamentary processes to effectuate inevitable dialectic evolution towards socialism because of the existence in Germany of a large working class. These Marxists subscribed to the doctrine of evolutionary Marxism which renders revolution unnecessary as socialism would arrive naturally from capitalism as an evolutionary process of dialectic materialism.

At the other end of the spectrum were radical revolutionaries such as Luxemburg and Liebknecht, leaders of the Spartacists, founded in the summer of 1915 when they withdrew from the German Social-Democrat Party (SDP) because of SDP support for Germany's participation in World War I. The Spartacists staged an abortive coup to overthrow the young social democratic government in Germany. For communists, revolution is necessary in order to short circuit the long stage of capitalism during which the evolutionary process can be halted by unionism and the introduction of a mixed economy. This is particularly true for pre-industrial feudal societies.

The call by radical Leninists for worldwide coalition of the browbeaten proletariat majority in the industrial societies in the West, who were still deprived of political power beyond the dialectical process, and the agitating proletariat minority in the agricultural societies in whose name radical Leninists had gained state power in Russia, was most threatening to the rulers of the capitalist order in the advanced imperialist countries.

Reaction to this threat gave rise to insidious anti-communism in the imperialist West to prevent the arrival of socialism in the strongholds of industrial capitalism ahead of its evolutionary schedule. In the advanced economies, state-sponsored capitalist propaganda was conditioning workers into an active anti-communist force through industrial unionism and the addictive appeal of individualistic bourgeois freedom to neutralize collective working class solidarity.

Still, all Marxists share the belief that the structural antagonism between a capitalist bourgeoisie class and a proletariat class in advanced economies was a necessary precondition for creating socialism. It required the resolution of the contradiction between the efficient productivity of capitalism and the economic dysfunctionality of the maldistribution of wealth inherent in capitalism. The good of capitalism is its efficiency in creating wealth; the bad is that the way wealth is created in capitalism requires wealth to go to the wrong places, to those who need it least, namely the rich rather than the poor who need it most. Also, awareness was increasing that capital in the modern financial system comes from the pension funds of workers.

Wealth is good

Wealth is good; it is the maldistribution of it that is bad. The internal contradiction of capitalism is that it creates wealth by widening the gap between rich and poor. Wealth disparity is a polluting socio-economic by-product of capitalism. While capital cannot create wealth without labor, the proletariat in advanced economies, oppressed by a pro-capital legal-political regime, never managed to gain control of ownership of the means of production financed by their own wealth.

Thus workers remained silent, docile victims of exploitation by capitalists using workers' own money. Apologists for capitalism then create the myth of capital being needed to create employment, ignoring the fact that it is the saved income from employed workers that creates capital.

The global financial crisis that began in 2007 is a living demonstration of the self-destruction potential of finance capitalism when not supported by full employment and high wages, which then force needed consumption to be financed by debt. The current financial crisis of unsustainable debt has ignited populist socio-political changes in all countries.

These populist changes will transform the existing socio-economic world order, even though it is too early to predict what the new world order will be like. Suffice to observe that changes in government toward progressive populism are now taking place in every nation.

Next: Lessons of other revolutions

Henry C K Liu is chairman of a New York-based private investment group. His website is at Henry C.K. Liu Home.

[Neo]

China's Revolution - Part 2

Revolutionary lessons

By Henry C K Liu

The French Revolution (1789-1799) was not a revolt of the peasants against the landed aristocracy. It was a violent process by which the bourgeoisie used the disenchanted peasantry to gain control of the power levers of the state from the aristocracy.

The rise of the bourgeoisie as the middlemen to carry out trade in an expanding market economy forced the aristocracy to transform from its traditional role as a benign, even benevolent, feudal ruling class to an increasingly exploitative class to make up for the lost wealth, siphoned off by the trading bourgeoisie. The accumulation of wealth by the bourgeoisie came from the backs of the peasant class through the escalating oppression by the aristocracy.

Had the French monarchy during the revolution sided with the bourgeoisie against the aristocracy as its British counterpart had done, France could well be a capitalist constitutional monarchy today. Louis XVI failed to understand that the political raison d'etre for monarchism rests in its mandate of exercising state power to maintain socio-economic equity in the nation by protecting the peasants from the aristocracy.

As the French bourgeoisie gained control of state power after the French Revolution, much of Europe adopted economic and political systems in which the bourgeoisie lorded over the proletariat with a new exploitative regime to replace the previous relatively benign, symbiotic arrangement between the landed aristocracy and the tenant peasantry under agricultural feudalism. As a result, the need for a universal class struggle emerged between workers and capitalists in industrialized Europe.

But much of the world outside of Western Europe was still operating on agricultural feudalism, which became a ripe target for Western imperialism born of the rise of European capitalism. The landlord class of these feudal agricultural countries, in order to resist the encroachment of Western imperialism as an advance stage of industrial capitalism, was forced to shift from the traditional symbiotic relationship with their landless peasants that had produced prosperity, as it had been in China the Tang dynasty in the 8th century, to a new relationship of ruthless exploitation to make up for the lost wealth being siphoned off by Western imperialism, and to form alliance with an emerging national bourgeoisie to oppress a small growing working class in newly established national industries.

In China, as in many other Asian societies, including Japan, the disappearance of a harmonious symbiotic socio-economic structure caused Confucian feudalism to collapse from its cracked foundation, heralding two centuries of cultural decline that pushed a once glorious civilization into temporary relative backwardness in comparison to the advanced Western world. In Japan, nationalists sought solution in fascist militarism in the first half of the 20th century. In China, liberation came in 1949 the form of socialist revolution after a protracted six-decade long struggle.

Today, the leadership in the ruling Communist Party of China seeks to construct a harmonious society out of a socialist market economy. It is a highly problematic endeavor because market economies, socialist or not, are inherently not harmonious, because markets operate with confrontational competition, not harmonious cooperation.

Lenin's misplaced expectation

Lenin, up to his death in 1924, believed that the Russian Revolution was only a local phase of a Europe-wide revolution, albeit he did not connect the revolution with the underdeveloped non-European feudal societies which formed the majority of the world’s population, except indirectly through the resultant demise of Western imperialism after the eventual collapse of capitalism in the core countries.

After the October Revolution, Lenin had expected follow-up proletariat uprisings in Germany, Poland and the minor industrial states in the Danube valley, from the ashes of the failed democratic revolutions of 1848 that inspired Karl Marx to write the Communist Manifesto, which was issued as a propaganda pamphlet by the Communist League, renamed from the "League of the Just" after Marx and Friedrich Engels joined it.

The internationalist communist movement was a European event until the founding of the Communist Party of China (CPC) in 1921, even though three years earlier Chinese nationalism had been seminally influenced by Marxist ideology in the May Fourth Student Movement of 1919, two years after of October Revolution of 1917.

Revolution and counter-revolution in Germany

The Communist League was created in London in June 1847 out of a merger of the League of the Just and of the 15-man Communist Correspondence Committee of Bruxelles, headed by Marx. Engels convinced the league to change its motto to Marx's call for "Working Men of All Countries, Unite!". It had branches in Paris, London, Geneva, Berlin and several other major European cities. In 1848, the Communist League issued a set of "Demands of the Communist Party of Germany", renamed from the Spartacist Party, urging a unified German Republic, democratic suffrage, universal free education, arming of the people, a progressive income tax, limitations on inheritance, state ownership of banks and public utilities, transportation, mining and collectivization and modernization of agriculture. But the program was too radical for the liberal Frankfort Assembly.

Marx was asked in the summer of 1851 by Charles Anderson Dana, managing editor of the New York Tribune, the most influential paper in the US at the time - it had been founded in 1842 by Horace Greeley, later a founder of the Republican Party in 1854 - to write a series of articles on the German Revolution of 1848. These articles, written by Engels and edited by Marx, who had not yet attained fluency in English, appeared under Marx's name with the title "Revolution and Counter-revolution in Germany".

In these articles, Marx described how in April 1848, the revolutionary torrent in Europe was suppressed by those classes of society that had profited by the early victory and that then immediately formed counterrevolutionary alliances with the vanquished reactionaries.

"In France, the petty trading class and the Republican faction of the bourgeoisie had combined with the Monarchist bourgeoisie against the proletarians; in Germany and Italy, the victorious bourgeoisie had eagerly courted the support of the feudal nobility, the official bureaucracy, and the army, against the mass of the people and the petty traders," Marx wrote. Yet "every inch of ground lost by the Revolutionary parties in the different countries only tended to close their ranks more and more for the decisive action", which could be fought in France only.

Marx continued that as Germany remained not unified, France, by its national independence, civilization, and centralization, was the only country to impart the impulse of a mighty convulsion to the surrounding countries. Accordingly, when, on the June 23, 1848, "the bloody struggle began in Paris between the mass of the working people on the one hand, and all the other classes of the Parisian population, supported by the army, on the other; when the fighting went on for several days with an exasperation unequalled in the history of modern civil warfare, but without any apparent advantage for either side - then it became evident to everyone that this was the great decisive battle which would, if the insurrection were victorious, deluge the whole continent with renewed revolutions, or, if it was suppressed, bring about an at least momentary restoration of counter-revolutionary rule."

Republican France was the fountainhead of early modern socialism. While not all republicans were socialists, most socialists were republicans against monarchism. The economic system of monarchism had degenerated into chaotic aimlessness with systemic injustice brought about by the advent of the aggressive bourgeoisie. All felt moral indignation against a system where wealth was concentrated in the hands of an idle minority who enjoyed hereditary privileges sustained by unrestricted socio-economic and political power.

Yet this wealth was being siphoned off to the pockets of the bourgeoisie, who plied their luxury goods and services on the idle aristocrats. Entrepreneurs and merchants began to gain power to give or deny work to workers and to set wages and working hours in their private enterprises to maximize private profit derived from aristocratic conspicuous consumption.

French socialists rejected the social value of private enterprise in a market economy. They worked to organize society along principles of harmony, coordination, cooperation and free association, believing that beyond the civil and legal equality promoted by the French Revolution, a further step toward socio-economic equality had yet to be taken. They were dissatisfied with the human rights declared by the French Enlightenment for glaringly lacking in economic rights. French citizens won the right to vote, but not the right to employment with living wages.

As reactionary policies entrenched themselves all over Europe in the years following the post-Napoleonic peace, socialism spread rapidly among the working classes after 1830. In France, it blended with revolutionary republicanism. There was a revival of revisionist interest in Robespierre, who was rehabilitated as a new hero of the masses. Socialist Louis Blanc, published his Organization of Work in 1839.

Marx reported that "the proletarians of Paris were defeated, decimated and crushed with such an effect that even now [1851] they have not yet recovered from the blow. And immediately, all over Europe, the new and old conservatives and counter-revolutionists raised their heads with an effrontery that showed how well they understood the importance of the event. The Press was everywhere attacked, the rights of meeting and association were interfered with, every little event in every small provincial town was taken profit of to disarm the people to declare a state of siege, to drill the troops in the new maneuvers and artifices that [Louis-Eugene] Cavaignac, prime minister of France (June 28-December 28, 1848) had taught them. Besides, for the first time since February, the invincibility of a popular insurrection in a large town had been proved to be a delusion; the honor of the armies had been restored; the troops hitherto always defeated in street battles of importance regained confidence in their efficiency even in this kind of struggle."

Later, under Napoleon III, whom historians saw as the prototype of the modern dictator and who was labeled the bourgeois emperor by royalists, Baron Haussmann's baroque city planning was also dominated by the political purpose of clearing the rebel-infested urban quartiers in the old city; of effectively and easily deploying troops on the new, broad boulevards against much-feared popular uprisings; and of preventing the easy erection of revolutionary barricades on narrow streets that had once frustrated government authority in the "Bloody June Days" of the proletariat uprisings of 1848.

Marx linked this defeat of the ouvriers of Paris to definite plans of the old feudal bureaucratic party in Germany to get rid even of their momentary allies, the middle classes, and to restore Germany to the state she was in before the revolutionary events of March (Marzrevolution). The army, loyal to its institutional mandate, again was the decisive power in the state. The vanquished nobles and bureaucrats exploited the solidarity of an army fresh from victories against Napoleonic France and jealous of the great success the French soldiers (whom the German army had defeated in war) had just attained in domestic civil conflict what it had failed to achieve in foreign war and by brushing aside the presumptions of the bourgeois parliamentarians. Could the glorious German army do less?

Marx reported that "by the beginning of autumn [1848] the relative position of the different parties had become exasperated and critical enough to make a decisive battle inevitable. The first engagements in this domestic war between the democratic and revolutionary masses and the army took place at Frankfort. Though a mere secondary engagement, it was the first advantage of any note the troops acquired over the insurrection, and had a great moral effect. The fancy government established by the Frankfort National Assembly had been allowed by Prussia, for very obvious reasons, to conclude an armistice with Denmark, which not only surrendered to Danish vengeance the Germans of Schleswig, but which also entirely disclaimed the more or less revolutionary principles which were generally supposed in the Danish war.

This armistice was, by a majority of two or three, rejected in the Frankfort Assembly. A sham ministerial crisis followed this vote, but three days later the assembly reconsidered its vote and was actually induced to cancel it and acknowledge the armistice. This disgraceful proceeding roused the indignation of the people. Barricades were erected, but already sufficient troops had been drawn to Frankfort, and after six hours' fighting, the insurrection was suppressed. Similar, but less important, movements connected with this event took place in other parts of Germany (Baden, Cologne), but were equally defeated.

Marx observed that "this preliminary engagement gave to the Counterrevolutionary Party the one great advantage, that now the only government which had entirely - at least in semblance - originated with popular election, the Imperial Government of Frankfort, as well as the National Assembly, was ruined in the eyes of the people. This Government and this Assembly had been obliged to appeal to the bayonets of the troops against the manifestation of the popular will. They were compromised, and what little regard they might have been hitherto enabled to claim, this repudiation of their origin, the dependency upon the anti-popular governments and their troops, made both the Lieutenant of the Empire, his ministers and his deputies, henceforth to be complete nullities. We shall soon see how first Austria, then Prussia, and later on the smaller states too, treated with contempt every order, every request, every deputation they received from this body of impotent dreamers."

Marx reported that "we now come to the great counter-stroke in Germany of the French battle of June, to that event which was as decisive for Germany as the proletarian struggle of Paris had been for France; we mean the revolution and subsequent storming of Vienna, October 1848. But the importance of this battle is such, and the explanation of the different circumstances that more immediately contributed to its issue will take up such a portion of The Tribune's columns, as to necessitate its being treated in a separate letter."

Liberals, with middle-class backing, called for the many German states to send representatives to the Frankfort Assembly for the purpose of uniting Germany. The assembly decided to offer the crown of emperor to Frederick William IV of Prussia. This was to be a limited constitutional monarchy. To their horror, he turned it down saying that he would not "pick up a crown from the gutter". The Prussian king thus undermined the liberal movement and caused it to fail. Like Italy and Hungary, German unification failed. That was Marx analysis of the 1848 revolutions in Europe.

On September 30, 1862, Otto von Bismarck made his famous speech to the Budget Committee of the Prussian Chamber of Deputies: "The great questions of the time will not be resolved by speeches and majority decisions - that was the great mistake of 1848 and 1849 - but by iron and blood."

Still, notwithstanding the political failure of liberalism, 1848 liberal proposals such as social insurance, public education, and expanded suffrage were incorporated into Bismarck's social programs after German unification.

In Britain, socialist ideas gave new energy to further parliamentary reform. The working-class anti-capitalist Chartists, deriving its name from the People's Charter of 1838, circulated a petition signed by half of the adult males in the population in Britain calling for electoral reform to allow working class representation in parliament. It was rejected by the House of Common by a vote of 287 to 49, fearing that political democracy would threaten property rights. Liberal democracy was not considered a safe institution until a property-owning middle class became the majority class in Europe. In America, representative democracy has always been the political instrument of the propertied class.

Lenin's dashed hope for European revolution

Lenin declared himself as not being a "socialist chauvinist". He and the Bolsheviks sent all possible aid to the radical leftist fringes in Germany, Sweden and Italy to combat reactionary obstacles. The Soviet Party even considered sending troops to help Hungarian Bolshevik Bela Kun.

The Second International had failed to rally socialist parties in European states to oppose participation in World War I. The Third International (Comintern) after the war accepted the Bolshevik Revolution as the true fruition of Marxism and declared itself as a weapon for world revolution - but the revolution never came. Reaction in the advanced countries to the international Bolshevik "menace" gave rise instead to fascism in post-war Europe.

Lenin's neglect of non-European agricultural societies

The Russian Bolsheviks did not consider non-European agricultural societies ripe targets for revolution. Lenin's anti-imperialism was administered by the Comintern as a longevity drug for European imperialism, not directed at national or personal liberation for the non-European peasant victims of European imperialism. The revolutionary target was clearly and decisively European capitalism, not non-European agricultural feudalism. The segment of the population deemed ripe for liberation was the industrial factory worker, not the farm peasants.

The Communist Party of China (CPC) under Li Lisan, who had joined the communist party as a student in France before returning to China, followed this biased line of organizing urban workers for armed uprisings in cities. This line was met with repeated failures that almost destroyed the CPC until Mao Zedong turned the party into a revolutionary political instrument of the Chinese peasants.

The October Revolution

The October Revolution was an unexpected metamorphic anomaly in the metabolism of revolution because geopolitical circumstances of World War I caused it to take place in Russia, a pre-industrial country on the fringe of Europe, the majority population of which was rural peasants rather than urban factory workers, and the main socio-economic conflict was between the feudal landlord class and the landless peasant class rather than between the capitalist class and the worker class.

It was then a revolutionary task after the revolution to create a proletariat class in Russia and the other Socialist Republics within the USSR as quickly as possible through rapid industrialization, not merely to catch up with the more industrialized West but to hasten revolutionary dialectics of transition from feudalism to capitalism to socialism. Socialism was recast from an ideological social movement to a venue for post-Word War I nationalism. After World War II, socialism was transformed by Cold War superpower geopolitics as the nemesis of capitalistic liberal democracy.

Thus the early modernization strategies of the Soviet revolutionary government were fundamentally different from the imperialist Westernization strategies of Tsar Peter the Great of Russia. It is wrong to see Soviet industrialization as inter-imperialist rivalry, the way the Western anti-communist left does. Social engineering had to be speeded up through revolution to accelerate historical dialectics. This new post-revolution proletariat class, not having existed before the revolution, had not had the experience of being oppressed by capitalists. In fact, there was a shortage of capitalists against whom to mount a triumphant class struggle that was supposed to be the victorious outcome of the revolution.

Yet it was problematic for the new proletariat class to be a new antithesis against a nonexistence thesis of capitalism. The revolution provided the solution by creating a class of state bureaucrats, known as party cadres, which liberal democratic opponents immediately named the "New Class". The task of the party cadres was to build a transitional capitalist system designed to give way voluntarily to socialism. This was essentially the same problem faced by Deng Xiaoping's open-and-reform policy, which aimed to direct China towards a transitional market economy without abandoning the socialist path of the Chinese revolution.

Notwithstanding that the ideological role of the party cadre is to guide the revolution toward socialism, this New Class acted essentially as management against labor in the new industries to facilitate a controlled class struggle toward socialism. The newly created socialist proletariat, in the absence of a capitalist class, mistook the bureaucratic management class as the target of class struggle and played into the hands of reactionaries.

This eventually culminated in the Solidarity Movement that began in Poland, a broad anti-communist social movement that united the Catholic Church with the anti-communist left. After the dissolution of the Soviet Union, the Solidarity Movement transformed itself into the color revolutions of the former Soviet Republics.

Leon Trotsky, in his book The Revolution Betrayed, refers to the rise of Stalin and the accompanying post-revolutionary bureaucracy as the "Soviet Thermidor". Trotsky and the adventurist left ascribed to the process of "bureaucratic counterrevolution" the French Revolution term "Thermidorian Reaction", which followed Robespierre's fall on the 9th of Thermidor in the French Revolutionary calendar (July 27, 1794). This ended the Reign of Terror and the Paris Commune of 1792, and led to the purging of radical Jacobin clubs, later becoming pejorative labels for left-wing revolutionary politics and extremist centralist views.

Social and political life became freer, more extravagant, and more personally corrupt. During the Thermidorian Reaction, a splurge of mannered fashion and a conspicuous consumption of bourgeois wealth came forth while the poor suffered from harsh economic conditions amid a world of plenty. Trotsky's reference to Thermidor was meant to show that the "counterrevolution" was not a restoration, a return to the ancient regime, but a counterrevolution against the path toward socialism. In reality, the Thermidorian Reaction was an official reversion to a regime of structural socio-economic inequality.

Trotsky attacked revolutionary aspirations that shifted from the bottom to the top with the consolidation of a new order of rule by the proletariat class for the purpose of sustaining the revolution, not withstanding that the revolution has always been from directed the top (Bolsheviks) and that the idea that it should have been from the bottom (the proletariat) was fantasy because the bottom did not exist in Russia. And where the bottom existed in Europe, there was no revolution.

The Chinese socialist revolution also succeeded in seizing state power without a significant class struggle between industrial workers and capitalists. After three decades of open and reform policy introduced by Deng from 1978, a sizable industrial worker class has come into being, many members of which are migrant workers from rural region to urban centers. There is no evidence that this new worker class has been properly represented let alone is gaining control of the party or the government.

Historically, the policy of opening to the outside was first instituted by Mao Zedong, who invited US president Richard Nixon, president of the United States, to visit China in 1972. Deng's policy of 1978 was merely a continuation of Mao's initiative, without which Deng would not have been able to implement his policy in 1978. Chinese autarky was never voluntary but was imposed by US anti-communist policy of containment by total embargo.

There is undeniable evidence that since 2002 the Communist Party of China (CPC) has de-emphasized class struggle as a revolutionary process along with the admission of capitalists into Communist Party membership. This is perhaps due to the fact that both the working class and capitalist class are really new groups in the Chinese economy, coming into existence only after 1978.

Still, the proletariat in Chinese political nomenclature is the property-less class, historically mainly rural farming peasants. Many Chinese farmers today are no longer property-less. In fact, the new proletariat class today appears to be made up of mostly migrant workers, numbering between 150 million and 200 million, approaching the size of the US population. The issue of migrant worker rights has become a festering timebomb in China's economic policy.

Since 1978, revolution momentum has been preempted by economic reform while socialist construction has been pre-empted by socialist market economy. For all practical purposes, the CPC has transformed itself from a revolutionary party to a ruling party only perfunctorily obligated to socialist principles, while Chinese economic growth is achieved at the expense of economic equality. The CPC has not yet transformed itself by crossing the line to become a counterrevolutionary party because it has managed to resist political reform toward bourgeois liberal democracy as some reformers have been pushing in the name of economic necessity.

Yet, after 30 years of reform, the Chinese economy is visibly infested with glaring inequality in income and wealth, and the means of production have been increasingly privatized and controlled by a minority financial elite. The CPC now officially represents all the peoples, including capitalists, rather than the dictatorship of the proletariat. All this is officially accepted in the name of modernization and following global trends. These global trends have been abruptly halted since 2007.

The revolutionary momentum of the CPC has been put on hold since 1978 as socialist market economy was promoted by the party leadership as a deliberate policy, presumably to allow evolutionary dialectics towards socialism to work themselves out in due time. There is a rising danger that even the normal pace of dialectic evolution from capitalism toward socialism has been deliberately slowed down by party policy. Deng's famous dictum of letting some people get rich first along the path to national prosperity was gradually been changed by quietly dropping the word "first". China is now a country in which some people can get super rich before others - permanently. Forbes Magazine annually publishes a list of China's richest.

Ironically, the socialist revolution that had been started by the 1911 May Fourth student movement was torpedoed by a misguided counterrevolutionary student demonstration of 1989, both having taken place at Tiananmen. Since 1987, Deng's open-and-reform policy has taken a turn from a New Economic Policy-type of modernization to a policy contaminated with dubious neo-liberal dimensions to appease geopolitical pressure from the US, whose markets are deemed indispensable for an overgrown Chinese export sector financed mostly by foreign capital.

Yet with the outbreak of the global financial crisis of 2007, ample evidence now exists to show that the economic achievements in China came not from unregulated markets opened to neo-imperialism, but from the fact that CCP has wisely and fortunately retained essential control of the socialist market economy, by limiting the opening up of the economy to foreign capital and by slowing the privatization of stat-owned enterprises, as Russia had done while following US shock treatment advice.

Most importantly, China has managed to insulate its financial sector from the turmoil of global markets since 2007 because it resisted both internal and external pressure to fully open and deregulate its own financial sector and to make its currency fully convertible.

Next:The Soviet experience

Henry C K Liu is chairman of a New York-based private investment group. His website is at Henry C.K. Liu Home.

[Neo]

China's Revolution - Part 3

Lessons of the Soviet experience

By Henry C K Liu

Interclass oppression in pre-revolution Russia was mostly of a feudal nature. A peasant uprising without a proletariat core was merely a revolt against the established feudal order, not revolution for socialism. This peculiar incongruity between revolutionary theory and Russian actuality in the 1920s gave impetus to the internationalists to advocate carrying the revolution to where revolutionary conditions actually existed - in the advanced industrialized countries with a large working class.

Communist internationalism did not focus on underdeveloped nations of the world until after World War II when the Communist Party of China under the leadership of Mao Zedong gained control of state power in China.

The operational concessions made in the USSR to the kulaks (relatively affluent peasants and independent farmers) and the petty bourgeoisie by the New Economic Plan (NEP) between 1921 and 1927 restored needed symbiotic trade between urban centers and the rural periphery as it existed under feudalism's gradual transformation toward capitalism. This concession advanced the revolution from feudalism toward capitalism but it fell well short of the ideology of socialist revolution against capitalism.

In the eyes of the radical revolutionaries who set their aim at accelerated, if not instant, socialism, the New Economic Policy proposed by Lenin, while a step forward in the struggle against feudalism, was not only a disappointing pause in revolutionary momentum; it could spell the end of revolution in the name of natural socio-economic evolution.

In the Soviet Union, Stalin's centrally planned command economy had followed Lenin's NEP of 1921-27. NEP was in essence a mixed market economy; the main part of the market was in state possession (banks, industries, foreign trade, and so forth), while the peripheral part was owned by collective or private entrepreneurs. NEP, while temporarily successful in arresting economic chaos, did not give the Soviet economy sufficient growth in the capital-goods sectors (that is, coal, steel and electricity, transportation, heavy industry), nor did it provide adequate food for the urban population even as the middle peasantry managed to feed itself through a new market system.

To overcome such structural obstacles and to combat general economic backwardness inherited from centuries of feudal czarist rule, Stalin introduced a command economy with central planning toward policy objectives and achievement targets as a strategy of national survival.

Starting from 1928, the Soviet economy was put under a system of central planning whereby all modes of production were socialized and foreign trade de-emphasized in favor of a largely autarkic system of domestic demand and supply. The success of the autarkic approach in the USSR induced the Nazi Third Reich to adopt it in 1933 for Germany.

The irony was that both Soviet and Nazi central planning adopted much of its effective techniques from successful US experience. The only difference was that in the US it was a system of planning focused solely on unit end-results while externalizing social costs to society at large. Soviet and Third Reich central planning of this period received glowing praise from US planners of the New Deal. The key distinction between the USSR, German and US approaches was that the Soviets rejected and bypassed the corporate structure and replaced shareholders with state ownership, the Third Reich imposed state control over the corporate sector, and the US instituted state support for the corporate sector. Stalin singularly brought about the principle of "revolution from above".

The main features of top-down revolution were: strengthening of political dictatorship in the name of the proletariat (a revolutionary version of enhancing management authority in the US in the name of shareholders); collectivizing kulak peasants (equivalent to large scale agri-business development in the US); emergency measure authority (equivalent to government bailouts and re-regulation in the US); introduction of a five-year plan structure (adopted from US corporate strategic planning); rapid expansion of urban labor force (equivalent to urbanization in the US that reorganized its geoeconomy into Standard Metropolitan Statistical Areas - SMSA); and state intervention and control over (i) agriculture (equivalent to farm subsidy programs in the US), (ii) heavy industry (equivalent to defense contracts in the US), and (iii) over finance (equivalent to central banking in the US).

Between 1934 and 1936, the Soviet economy achieved a spectacular economic growth rate that continued despite political purges of Trotskyites between 1936 and 1938. Economic growth was unfortunately interrupted by war in 1941. The German economy also grew spectacularly between 1933 and 1937. Under the Nazis, German decision to invade the USSR was not independent of fascist apprehension of continued Soviet socialist economic success. The US economy, with the New Deal hampered by the US Supreme Court, remained in depression until the US joined World War II after the Japanese attack on Pearl Harbor.

In reaction to the NEP, which ended in 1927, Trotsky had advanced the concept of "permanent revolution", an incessant drive for proletariat dictatorship on all fronts in all parts of the world, even in countries where the proletariat did not exist, such as China and all of what later became known as the Third World. "Permanent revolution" was a misnomer. What Trotsky advocated was in fact pre-mature revolution in countries where revolutionary conditions were lacking. Internationalism mistakenly treats the whole world as an evenly developed integrated entity, while in reality it is a loose collection of fragmented special conditions in countries in various different stages of development. Universality is only a theoretical mirage, even today after decades of globalization.

The Comintern, or Communist International, an international communist organization, was founded in Moscow in March 1919. The Fifth Congress of the Comintern was held in June 1924, five months after Lenin's death on January 21, 1924, and at a time when the capitalist system was booming worldwide, albeit in reality heading for the 1929 crash and an ensuing Great Depression that would plunge the world into World War II. By the time of the Fifth Congress, the revolutionary forces were on an ideological and operational defensive and the congress rejected Trotsky's internationalist priority of world revolution as naive adventurism.

The situation was similar to the neo-liberal market fundamentalist globalization of the two decades the spanned the 20th and 21st centuries when a global speculative boom anchored on debt after the Cold War was interpreted by conservatives as evidence of "the end of history" in a world of perpetual capitalism that would preempt a dialectical march toward world socialism. Free-market finance capitalism operating under bourgeois representative democracy controlled by the propertied class was declared as the final stage of human socio-economic-political evolution.

However, facts overrode fantasy, and in July 2007, free-market finance capitalism collapsed globally. To forestall the evolutionary emergence of socialism, the US since 2007 has been leading the world's capitalist economies in resorting to anti-socialist state capitalism, known in history as fascist capitalism because it uses the resources of the state not to help the people but to help capitalist institutions that the state deems too big to fail without threatening the survival of the capitalist system.

In China since 1978, in order to achieve rapid economic growth, revolutionary energy has been temporarily dissipated and national direction sidetracked in the face of the country's eager participation in world trade driven by global prosperity based on debt financed by currency hegemony of the part of the dollar. The price China had to pay for unsustainable economic growth through exports came as a socio-economic regime of low wages, environmental abuse and a deterioration of societal values. It did not take long for the permanent costs to out-weigh the temporary benefits in China's move toward market economy, socialist or not, based on low-wage exports primarily financed by foreign capital under dollar hegemony.

Yet the CPC leadership, even after being faced with undeniable adverse data of its policy of opening to the outside and reform, has been unable to reverse the harmful trends with effective policy readjustments because the Chinese economy has become addictive to export for fiat dollars. China for the past three decades has been shipping to the West real wealth created by low wages and high pollution, not to mention social disintegration, in exchange for paper dollars that cannot be spent inside China but have to be invested in dollar debt instruments to finance the US trade and fiscal deficits.

Foreign capital has been the new opium of a new Western neo-liberal opium war in the 21st century. Fortunately, China's addiction to export has been forced to go through cold turkey detoxification since July 2007 with the abrupt collapse of global financial markets. Hopefully, this financial crisis will save China from the danger of voluntarily falling back into the semi-colonialism from which it took 120 years of protracted socialist revolution to extract itself.

In 1978, at the initial formation of the open-and-reform policy, Chinese policymakers were acutely aware of the danger of allowing foreign capital into the country. Thus the policy compromise on the revolutionary path in order to kick start the economy was at first limited to a term of less than a decade, as reflected by the fact that the new 1979 Joint Venture Law governing foreign capital has a sunset clause limiting all foreign joint venture agreements to a maximum life of nine years, after which joint venture assets had to revert to full Chinese ownership.

Unfortunately, the 1989 June Fourth Incident at Tiananmen Square, in which initial students protests against the adverse effects of market-oriented economic reform and the resultant corruption were distorted by counterrevolutionary elements, encouraged by the US media allowed in to cover the state visit of Soviet president Mikhail Gorbachev, to look like a popular movement in demand of bourgeois democracy.

This distortion led eventually to, among other regressive political developments, the removal of the nine-year sunset limitation clause. In contrast to the May Fourth Movement of 1919, which turned China toward a socialist path by rejecting Western imperialist machination, the June Fourth Incident of 1989 turned China away from its socialist path by appeasing US neo-liberal geopolitical pressure.

By the mid-2000s, the CPC leadership was forced to accept that the long-term ideological penalty and economic costs of its open-and-reform" policy were beginning to outweigh the short-term economic benefits, leaving the party with serious internal ideological division and the nation with an economy infested with compradorism and excessively dependent on export, with unsustainable long-term environmental degradation, structural destabilizing wealth and income disparity and uneven regional development.

Yet, despite clear evidence of leadership awareness of the serious problem, the open-and-reform policy had difficulty in regaining its original revolutionary socialist purpose because the economy had become too addicted to petty bourgeois seduction all through the early 2000s, until the necessity of review was imposed on it by the global collapse of free market financial capitalism in mid-2007.

Marx's law of social motion declares that society progresses from feudalism to capitalism at the point when feudalism ceases to support the forces of production. In turn, capitalism will give way to socialism once capitalism's productive potential has been fully exhausted, rendering its continued existence obsolete. This will happen when the need for further capital formation is neutralized structurally by the involuntary excess saving imposed on workers through low wages, which then reduces demand needed to justify more capital. The so-called savings were in reality excess profits on the part of foreign capital.

Yet this dialectic process of self-terminating capitalism can be and has been prolonged by imperialism in the 19th century and neo-imperialism in the 21st century. Under neo-imperialism, currency hegemony in a global financial architecture is the device to force low-wage workers in labor-intensive exporting economies to finance the consumption of the higher-wage workers in financially advanced importing economies in a process of the poor lending to the rich.

The dictatorship of the proletariat is the revolutionary device to accelerate the dialectics and to combat the antirevolutionary effectiveness of imperialism and neo-imperialism. Today, in both exporting and importing economies, the revolutionary struggle is to raise wage levels to deny further incentives for multinational corporations to profit from inter-economy wage arbitrage.

But in the 20th century, Russia went straight from feudalism to socialism in 1917, as did China in 1949, and Vietnam in 1975. Unlike Russia, both China and Vietnam were saddled by the curse of Western imperialism. These revolutionary states ended up shadow-boxing non-existent capitalism in their effort to achieve accelerated socialism.

For China and Vietnam, as with all other developing economies, the obvious enemy was imperialism, which Lenin, drawing on Hobson, declared to be the final stage of capitalism. For countries that are or have been victims of imperialism, capital is essentially a foreign enemy if their economies are open without restriction to outside investment. Under such circumstances, domestic capital is often merely comprador capital controlled by foreign capital. The struggle against imperialism cannot be won without economic nationalism.

In the second edition of Problems of Leninism, published in August 1924, seven months after Lenin's death, the very foundation of international communism was reordered to reflect the objective reality that, for the then foreseeable future, the USSR was going to remain the sole communist state in a world dominated by long-lasting if not permanent capitalist wonders. Russian communists erred in their underestimation of Chinese communism led by Mao Zedong. As it turns out, history granted China the role of the sole remaining major communist state after the dissolution of the USSR in 1991.

The Soviet Revolution needed to be protected first and foremost from effective, coordinated hostile reaction to revolution in the advanced countries giddy with temporary prosperity fueled by imperialism. These advanced industrial states, natural cradles of inevitable evolution from capitalism toward socialism, turned out to be powerful and unrelenting counterrevolution headquarters all through the 20th century.

The role of the Comintern was accordingly reduced to opposing foreign counterrevolutionary intervention against the new USSR to keep the lone socialist lamp burning in the world, rather than either engaging with unacceptably high-cost but futile sacrifice in struggles that could not possibly be won in the prosperous capitalist countries or fostering prematurely untimely socialist revolution in pre-industrialized colonies that had no proletariat class.

The socialist revolution in Russia, instead of building on the high prosperity of the advanced stage of capitalism, was saddled with all the decrepit problems of feudal decay. The path to socialism, instead of being another step towards the final stage of human development, was mired in object poverty left over from the collapse of feudalism without the necessary wealth-creating institutions offered by capitalism.

Socialist revolution against feudalism cast a poverty shadow everywhere outside the advance capitalist economies, exacerbated by organized anti-socialist hostility from the moneyed class. In the Third World, imperialism gained new life and respectability by assuming an anticommunist mask in defense of capitalism.

Under such circumstances, the Comintern needed instead to act as an instrument of Soviet state foreign policy in a world order full of hostile anti-communism states that were materially more prosperous. This meant that the non-ruling communist parties in all countries had to seek cooperative arrangements with whatever influential sections of society they could, in the interests of promoting "state-to-state friendship with the Soviet Union", temporarily sublimating the revolutionary advancement of the class interests of workers.

This change in the Comintern line was demonstrated in two events in the mid-1920s - the British General Strike in 1926 and the defeat of the upsurge of workers in Shanghai in 1926-7. The betrayal of the General Strike in Britain fractured the British communists and gave birth to the anti-communist, anti-Soviet British left. At the CPSU Party Congress in Moscow in 1927, the Central Committee under Stalin defeated Trotsky's "left deviationism" by a plurality of 854,000 to 4,000 votes. In exile, Trotsky, instead of abandoning his fanciful dream of world revolution, stigmatized Soviet policy in this period as "Stalinist".

[Neo]

Luther a Marxist-Stalinist

Protestantism, as espoused by Martin Luther (1483-1546), was revolutionary because its doctrines held not merely that abuses in the church must be reformed but that the Roman Catholic Church itself, even if perfect by its own ideals, was wrong in principle. Protestants aimed not to restore the medieval church from Renaissance abuses, but to overthrow it and replace it with a church founded on principles drawn from a contemporary reading of the Bible. Such principles should not be decreed by the church but by the individual believer's conscience.

Marx's attitude toward capitalism is similar to Luther's attitude toward the Roman Catholic Church, with the exception that, opposite to the church's faith-based dogma, Marx proposed a scientific analysis of the internal contradiction of capitalism.

The anti-central authority attitude of Luther was political music to the German princes under the Holy Roman Emperor in the 16th century and they responded enthusiastically to his invitation to institute state control of religion. Protestantism became entwined with social and political revolution in 16th century Europe as Buddhism did in 7th century China.

Charles V, as Holy Roman Emperor, was obligated to uphold his role as Defender the Faith because only within a Catholic world could the Holy Roman Empire assume any secular authority. The princely states within the Holy Roman Empire saw the emperor's effort to suppress Luther as a threat to their own rising desire for political freedom and independence.

The imperial Free States and the Dynastic States of northern Germany insisted on ius reformandi, the right to determine their own religion. They became Lutheran and secularized (that is to say, confiscated) church properties to enrich their secular sovereign princes.

Thus Luther, in placing theological protest under the protection of secular power politics, exploited the political aspirations of budding German principalities in the 16th century. In return, he conveniently provided the German princes with a theological basis for political secession from the theocratic Holy Roman Empire.

Luther exploited the political aspirations of the restless German princes to be independent of the Holy Roman Emperor to bolster his theological revolt from the Roman Catholic Church. Yet he came to denounce peasant rebellions when the peasants rose up against their Protestant German princes. He did so even though such uprisings claimed inspiration from the same theological ideas of the Reformation that had motivated the revolt against the Holy Roman Emperor by the same German princes for independence. Such radical ideas had been advocated by Luther himself.

However, even Luther's professed personal sympathy for peasant demands for improved treatment from their oppressive princes did not persuade him to endorse peasant uprisings. Luther might have been a revolutionary; he was not an anarchist.

In fact, Luther could be considered a Stalinist. Or more accurately, Joseph Vissarionovich Stalin (1879-1953) would fit the definition of a Lutheran diehard, at least in revolutionary strategy if not in ideological essence. Like Luther, Stalin suppressed populist radicalism to preserve institutional revolution, and glorified the state as the sole legitimate expeditor of revolutionary ideology.

Early Protestantism, like Marxist-Leninist-Stalinism later, became more oppressive and intolerant than the system it replaced. Ironically, puritanical Protestant ethics celebrating the virtues of thrift, industry, sobriety and responsibility were identified by many sociologists as the driving force centuries later behind the success of modern capitalism and industrialized economy, particularly, ethics as espoused by Calvinism, which in its extreme advocated subordination of the state to the church.

In that sense, the post-Cold War Islamic theocratic states are Calvinist in principle. Calvinism diverges from Luther's view of the state to which the church is subordinate, ironically credited as the spirit behind the emergence of capitalism that has given rise to the modern Western industrial state. (See THE ABDUCTION OF MODERNITY - Part V: The Enlightenment and modernity, Asia Times Online, August 12, 2003).

Parallels in political and ideological developments, and in the relationship between ideology and state, are discernable in the history of the Chinese socialist revolution. The success of China's economic revival of the three decades since 1979 has been built on the Marxist-Leninist approach of Mao Zedong in the three decades before 1979 after socialist forces seized state power in China in 1949.

China today is more Lutheran than Calvinist in nature in that revolutionary ideology is subservient to the state, whose role is to revive the Chinese nation through socialism to its natural central position in the world. In this respect, socialism is a means to an end and socialism will remain operative in China as long as it fulfills the role of a catalyst for national revival. Throughout China's four-millennia-long history, ancient socialism has produced prosperity and peace.

Chinese communism

In China, modern communism began as a political movement after the intellectual ferment of the patriotic May Fourth Student Movement of 1919. Revolution in modern China rode on the dual rails of anti-imperialism and national revival. The revolution, through its multiple metamorphoses, was a means to the end of national revival, not an end in itself. Socialist revolution serves the purpose of national revival because throughout China's long history, periods of socialist grand harmony (da'tong) produced periods of prosperity and cultural flowering, not bourgeois democracy, not capitalism and not a market economy. Until modern times, markets were permitted to operate two days a month in China.

Early Chinese nationalists identified the subjective anti-science aspects of Confucianism as being responsible for having weakened Chinese civilization for imperialist conquest from the West. They were drawn to the objective materialism of scientific Marxism as the correct and effective path for national revival.

The May Fourth Movement was the first mass protest in modern Chinese history. It did not, however, achieve its specific political objective because it was not a top-down directed movement. As a mass movement without leadership by a proactive political party, it failed to achieve concrete political results while it continued as an influential intellectual movement.

Even though Chinese diplomats representing the Beiyang regime to the 1919 Versailles Peace Conference refused to sign the treaty, the Allied Powers was quite prepared to sacrifice China's national interest in order to lure Japan into the new League of Nations. Appeasement of Japan after World War I was also facilitated by secret British-French anti-Soviet collusion. The realpolitik irony was that Japan would be the first to withdraw from the league in 1933 after the Manchurian Incident of 1931, which Japan used as a pretext to set up a puppet Manchuguo government in Manchuria, headed by the dethroned Qing emperor Pu Yi.

The May Fourth Movement, however, is significant in Chinese political history because it spawned a new wave of intellectual revolutionary thinking in the New Culture Movement. Several of the leaders of the movement who had earlier entertained pro-Western democratic fantasies were bitterly disappointed by the betrayal of China at the Versailles Peace Conference. Many of these embittered intellectuals turned to Marxism and the lessons of the Bolshevik revolution of 1917, while others turned toward fascism after it gained control of state power in Italy in 1921 and Germany in 1933. The rise of fascism in Europe complicated the relationship between national socialism and international communism in Asia.

The New Culture Movement began to gestate the seeds of the founding of the Communist Party of China. The founders of the CPC, Li Da-zhao and Chen Du-xiu, were prominent leaders in the New Cultural Movement. Iconoclastic and brilliant, Li opposed the conservative ideas of Hu Shih, another prominent leader of the New Culture Movement. Hu Shih, a student of American scholar/philosopher John Dewey, advocated the latter's pragmatism espousing an evolutionary approach to social improvement as the solution for China.

Chen Du-xiu, known in Chinese history as the leader of the New Culture Movement, believed that Chinese society can be changed only through a revolution modeled after the Bolshevik Revolution. In 1921, Chen and Li Da-zhao co-founded the Communist Party of China with advice from Gregory Voitinsky, a Soviet representative of the Comintern. On July 20, 1921, the CPC held its first congress, attended by 12 Chinese members, with two Comintern representatives as observers. Neither Chen nor Li were present but were represented by deputies. Chen and Li formed two separate location foci, with Li in Beijing and Chen in Shanghai. There were also ideological and operational differences. Chen followed the general European Marxist focus on urban workers and Li believed that for China, no revolution could succeed without it being centered on the peasantry.

Chen dismissed bourgeois democracy and representative government as self-serving institutions of the capitalist class and that such institutions have no relevance to the interests of the working class. He believed that feudalism could be transformed directly into socialism without having to pass first through a long transitional capitalist republican era. He advocated throughout his entire life the ideals of the May Fourth Movement: against Confucianism, to promote thought liberation and scientific thinking, to reject superstition, to construct industrialization, to promote human rights, and against bureaucratic politics.

By 1922, however, the Comintern, which commanded strong influence on operational activities of the CPC, began to press the Chinese communists to cooperate with the Kuomintang in order to facilitate the rise of the new Chinese republic. Under the influence of Lenin, and after his death in 1924, Stalin, the Comintern adopted the view that China was not ready for communism for it needed first to undergo a period of modernization, industrialization and republicanism. The standing order, then, was for the CPC to ally itself with the KMT left, even after the rabid anti-communist KMT right wing took control of the party.

This position based on Soviet geopolitical interest left residual resentment in the collective minds of Chinese communists on the wisdom of international communism and reinforced the doctrinal validity of "socialism in one country". The concept of nationalism, a modern Western development, began to loom larger within the Chinese socialist revolution.

Stalin's geopolitical policy toward China was to win over the bourgeois-nationalist movement, as represented by the KMT even after the death of Sun Yat-sen in March 1925 and the assassination of the KMT leftist leader Liao Zhongkai six months later in August 1925. Stalin wanted China under the Nationalists as "friends of the Soviet Union" against its drift toward Nazi Germany. Liao had engineered the admission of communists into the KMT as individual members. Consequently, the Comintern instructed the small new Communist Party of China, founded only in 1921, to seek an alliance as a weak junior ally with the well-established nationalist KMT, which had founded the Republic of China in 1911 and had been governing China in a single-party regime.

Thus, the policy of the CPC was for a "democratic dictatorship of the proletariat and peasantry" in which the KMT was to be an ally of the proletariat through its left wing. But after the death of Sun and the assassination of Liao, the right wing of the KMT purged the left wing. Throughout 1926, KMT rightwing forces brutally suppressed worker strikes in Canton (Guangzhou) and attacked the peasant movement in rural areas.

Despite these counterrevolutionary developments, the Comintern Resolution of November 1926 continued to urge CPC members to join the KMT as individuals, stating: "The apparatus of the National Revolutionary Government [that is, the Kuomintang] offers a very real road to solidarity with the peasants ... and even certain strata of the big bourgeoisie may still march for a certain time with the Revolution."

In 1927, the Shanghai trade unions staged an uprising and took control of the city, with the active support of Comintern representatives directed by Trotsky. Chiang Kai-shek marched on Shanghai with KMT forces, and Stalin ordered the workers of Shanghai to welcome Chiang's forces and not to resist.

Gregory Zinoviev, Karl Radek, both of whom had traveled with Lenin in a sealed train through Germany to return to Russia to participate in the October Revolution, and others in support of Trotsky in the Comintern, demanded that the Shanghai workers be warned that Chiang Kai-shek would not tolerate worker power in Shanghai. But the Trotskyists were outvoted by the Stalinists by a wide margin in the CPSU central committee. As a result of Stalin's new Comintern policy, the workers of Shanghai were crushed and their leaders slaughtered - with arms that had been supplied to the KMT by the USSR during the period of nationalist-communist cooperation.

The Comintern under Trotsky had also encouraged an adventurist uprising in Guangzhou that was also brutally crushed at enormous human cost to revolutionary forces. Following this defeat, the CPC increasingly moved its focus to the countryside and abandoned its precarious base in the urban working class.

Under Stalin, Comintern policy of collaboration with the bourgeois capitalist ruling party during this period ran completely counter to the Bolsheviks' own experience in making the Russian Revolution. The lessons of the Russian Revolution were forgotten so quickly because Stalin was driven not by the needs of the workers in China or Britain to learn from the Russian Revolution and to make their own revolution based on local conditions, but by the narrowly conceived geopolitical needs of the young USSR.

Next: The situation in China

Henry C K Liu is chairman of a New York-based private investment group. His website is at Henry C.K. Liu Home.

[Neo]

China's Revolution - Part 4

Mao's legacy lives on

By Henry CK Liu

In the political chaos of the early years of the bourgeois Republic of China, provincial warlord military governors and regional military groups emerged based on residual Qing Dynasty connections and personal loyalties. To establish central control by the government of the new republic, the regime of warlords who had seized control of much of northern China since the collapse of the Qing Dynasty had to be defeated.

Kuomintang (KMT) leader Sun Yat-sen, assisted by his able comrade Liao Zhong-kai (1877-1925), realized that the Western imperialist powers, in order to continue their plundering of China, would maintain a divided China by supporting the warlords engaged in internecine power struggles. Thus in 1921, Sun turned to the new Soviet Union and communism, the only anti-imperialist force. The Western democracies were proving themselves to be happy heirs to overseas empires whose imperial governments they had overthrown at home.

In 1923, a joint statement by Sun and a Soviet representative in Shanghai pledged Soviet support and assistance for China's national unification. The Comintern sent Soviet advisers such as Mikhail Borodin to China to aid in the reorganization and consolidation of the KMT along the lines of the Communist Party of the Soviet Union. Communist Party of China (CPC) members were encouraged to join the KMT as individuals, forming the First United Front between the two parties. The CPC was still small at the time, having a membership of only 300 in 1922 and only 1,500 by 1925. The KMT in 1922 already had 150,000 members and was well financed by US-based protestant churches, as both Sun and Chiang Kai-shek converted to Christianity out of geopolitical expediency.

Soviet advisers also helped the KMT set up a political institute to train propagandists in mass mobilization techniques, and in 1923, Chiang, one of Sun's lieutenants from pre-revolution Tongmeng Hui days while in exile in Japan, was sent for several months' military and political study in Moscow. After Chiang's return in late 1923, he participated in the establishment of the Whampoa Military Academy (Huangpu Junxiao) as its commandant, with Liao Zhong-kai as political commissar for the KMT and Zhou En-lai of the CPC as the deputy commissar. The military academy was founded with a Soviet gift of 2.7 million yuan supplemented with a monthly stipend of 100,000 yuan. Soviet weapons were supplied including 23,000 rifles, machine guns and artillery.

In 1923, when Sun Yat-sen started to reorganize the KMT and installed a provisional government in Guangzhou, Soviet advisers A A Yoffe and M M Borodin proposed that the KMT and the CPC form a united front (guo gong hezuo) against the Beiyang warlord regime. Dual membership in both parties was common for communists at this time. Sun had lost faith in the will of the Western imperialist powers to cooperate with China's anti-imperialism aims and leaned more and more toward the Soviet Union for support.

In 1924, Sun held the first national congress (Guomindang diyici quanguo daibiao dahui), during which he stressed the Three People's Principle (sanmin zhuyi - nationalism, democracy, people's livelihood, or minzu zhuyi, minquan zhuyi, minsheng zhuyi) as a doctrine against imperialism. Within the KMT-CPC united front, Sun adopted three major policies (sanda zhengce): alliance with the Soviet Union (lian su), alliance with the communism (lian gong), and supporting peasants and workers (fuzhu nonggong).

Five months after Sun's death from cancer on March 12, 1925, Liao Zhong-kai, leader of the left wing of the KMT, was assassinated on August 20 of the same year at age 48 at the behest of the right-wing leaders of KMT. Chiang, as commander-in-chief of the National Revolutionary Army, with communist help, set out on the long-delayed Northern Expedition against the northern warlords to unite China under KMT control. By 1926, the KMT had divided into left-wing and right-wing factions. Neither wing had any use for Western democracy, which openly presented itself as an agent of Western imperialism. The left turned toward communism, while the right turned toward fascism.

Later, the KMT did put up a facade of democracy after the US got involved in Chinese domestic politics during World War II. If the United States in this century is really serious about spreading democracy around the world, its leadership needs to realize that the world will not accept Western democracy unless and until it rids itself of its pugnacious role as an agent for Western neo-imperialism.

By 1926, communist influence within the KMT was growing fast. In March 1926, Chiang abruptly imposed restrictions on CPC member participation in the top leadership, and emerged as the pre-eminent KMT leader on an anti-communist platform. By early 1927, the KMT-CPC rivalry led to an open split in the revolutionary ranks. The CPC and the left wing of the KMT moved the seat of the Nationalist government from Guangzhou to Wuhan.

After Chiang Kai-shek seized control of the KMT and achieved initial successes in the Northern Expedition with communist help, all communists were expelled from the KMT. On April 12, 1927, a workers' movement in Shanghai was brutally suppressed by Chiang (si-yi-er zhengbian). He and Wang Jingwei later were to form a traitorous puppet government in Nanjing under Japanese tutelage.

Chiang then launched an anti-communist purification program within the KMT (qingdang qugong) and drove out all communists as well as leftist KMT members such as Song Qingling, the widow of Sun Yat-sen, and He Xiangning, the widow of Liao Zhong-kai, ending the first alliance between the KMT and the CPC. After the end of World War II, the two great ladies formed the Revolutionary Committee of the KMT and joined in the founding of the People's Republic as vice chairmen of the PRC.

Chiang Kai-shek, riding on the bipartisan success of the Northern
Expedition, turned his elite forces to destroy the Shanghai CPC apparatus. Chiang, with the aid of Western imperialists and the Shanghai underworld criminals, arguing that communist activities were socially and economically disruptive, turned on communists and unionists in Shanghai, arresting and summarily executing hundreds without trial on April 12, 1927 for activities that were legal prior to the date of arrest. The purge obliterated the urban base of the CPC that laid the ground for the rise of Mao Zedong with his strategy of a rural peasant revolution.

Chiang, expelled from the KMT for his reactionary moves, formed a rival reactionary government in Nanjing. Three political capitals now emerged in China: the foreign imperialist-recognized Beiyang warlord regime in Beijing; the communist and left-wing Kuomintang coalition government at Wuhan; and the right-wing reactionary military regime at Nanjing, which would remain the Nationalist capital for the next decade, until Japanese occupation in 1937.

The CPC adopted a strategy of armed insurrections in urban centers in preparation for an anticipated rising tide of revolution. Unsuccessful attempts were made by communists to take cities such as Nancang, Changsha, Shantou and Guangzhou. All failed.

A successful armed rural uprising, known in history as the Autumn Harvest Uprising, was staged by peasants in Hunan province, led by Mao Zedong. But in mid-1927, the CPC was at the low ebb of its history. Their left-wing KMT allies in Wuhan were toppled by a militarist regime led by Wang Jingwei.

The KMT resumed the campaign against the warlords and captured Beijing in June 1928, after which most of eastern China came under Chiang's control, and the Nanjing government received prompt international recognition as the sole legitimate government of China. The Nationalist government announced that in conformity with Sun Yat-sen's formula for the three stages of revolution - military unification, political tutelage, and constitutional democracy - China had reached the end of the first phase and would embark on the second, which would be under KMT political tutelage. After Adolf Hitler came to power in Germany in 1933, the KMT turned to the Nazis as a model both in political organization and in military modernization.

During the Japanese invasion and occupation of the northeast (Manchuria), Chiang still saw the CPC as the greatest threat, and refused to ally with the CPC to fight against the Japanese invasion. On December 12, 1936, two young Kuomintang generals, Yang Hucheng and Zhang Xueliang, son of the warlord Zhang Zuolin, who earlier had been assassinated by the Japanese for opposing Japan's plan to set up a puppet government in Manchuria headed by Pu Yi, kidnapped Chiang Kai-shek while he was visiting Xian and forced him to enter into a truce with the CPC to form a united front against Japan. The event became known as the Xian Incident.

Both political parties agreed to suspend inter-party fighting and form a second united front to focus their efforts against the Japanese. However, the alliance existed in name only. The level of actual cooperation and coordination between the CPC and KMT during World War II was minimal. While CPC forces were fighting the Japanese, Chiang was reserving his best troops for dealing with the CPC after the war.

US general Joseph Stillwell, commander of US forces in the Burma Theater, was openly critical of the KMT leader and advocated US assistance to the People's Liberation Army (PLA), which was prosecuting a guerrilla war against Japanese in earnest with inadequate supplies and equipment. The situation came to a head in late 1940 and early 1941 when KMT forces attacked the PLA.

In December 1940, Chiang Kai-shek demanded that the CPC New Fourth Army evacuate Anhui and Jiangsu provinces, promising safe conduct. When the New Fourth Army commanders complied in order to preserve inter-party coalition, their forces were ambushed by Nationalist troops and suffered great losses in January 1941. This treachery, known as the New Fourth Army Incident, weakened the CPC position in central China and in effect ended any substantive cooperation between the KMT and CPC.

The use of two atomic bombs in short order by the US caused Japan to surrender much more quickly than anyone in China had imagined. As insurance in the event that the bomb might not work, US president Harry Truman had pressured the Soviet Union to open an eastern front against Japan. Under the terms of unconditional Japanese surrender dictated by the United States, Japanese troops were ordered to surrender to KMT troops and not to the PLA, which actually had done most of the fighting.

Days before the sudden end of the war in East Asia, the Soviet Union was persuaded by president Truman to enter the war against Japan. After the dropping of two atomic bombs on Hiroshima and Nagasaki, Soviet forces flooded into the northeastern provinces to seize Japanese positions and to accept the surrender of the 700,000 Japanese troops stationed in the region.

Later in the year, Chiang came to the awkward realization that he lacked the needed military resources to prevent a CPC takeover of the northeast after the scheduled Soviet departure. He therefore made a deal with the Soviets to delay their withdrawal until he had moved enough of his best-trained men and modern arms into the region. The Soviets spent the extra time systematically dismantling the entire Manchurian industrial plant built by Japan with Chinese slave labor and shipping it back to their war-ravaged motherland.

The civil war in China ultimately ended with CPC victory and the People's Republic of China was established on October 1, 1949, under the leadership of CPC headed by Mao Zedong, after which socialist construction of the war-torn, imperialism-ravaged nation began.

Socialist construction in the People's Republic

Mao understood that Confucianism (ru jia) had permeated Chinese society perniciously and hindered its advancement in modern times, so he tried to combat it by launching mass movements, culminating in the Great Proletarian Cultural Revolution in 1966.

But even after a decade of enormous social upheaval, tragic personal sufferings, fundamental economic dislocation and unparalleled diplomatic isolation, Confucianism stood its ground in Chinese societal mentality. The Cultural Revolution failed to achieve its spiritual goal even with serious damage to the nation's physical and socio-economic infrastructure and to the prestige of the Communist Party of China (CPC), not to mention the decline of popular support and near total bankruptcy of revolutionary zeal among even loyal party cadres.

Confucianism will have to wait for many future cultural revolutions to restrain its negative influence on the Chinese civilization and to revive its positive elements. A culture that took two millennia to develop cannot be changed in just one century.

Realistically, nostalgia aside, the feudal system under imperial monarchy cannot be restored in modern China. Once a political institution is overthrown, all the king's men cannot put it back together again. Nor would that be desirable. Yet the modern political system in China, despite its revolutionary clothing and radical rhetoric, is still fundamentally feudal, both in the manner in which power is distributed and in its administrative structure. This is why cultural revolutions are necessary and will be necessary to move Chinese civilization forward.

However, violent revolutions cannot be regular events without destroying the very purpose that justifies them. China needs a continuous non-violent cultural revolution to ensure that its revolutionary path toward national revival through socialism is not reversed. It does not need destructive factional political violence in the name of ideological vaccination that ends up disrupting the national purpose.

In Chinese politics, loyalty is traditionally preferred over competence. The ideal is to have both in a minister. Failing that, loyalty without competence is preferred as being less dangerous than competence without loyalty - the stuff of which successful insurrection and revolts are made. Therein lays the seed of systemic corruption in Chinese politics.

For socialist China, loyalty is to the socialist cause, not personal relations. It is imperative that leaders remain loyal to socialist ideals. Yet loyalty to socialist ideals alone is not enough. It must be augmented by competence. Confucianism, by placing blind faith in a causal connection between virtue and power, has remained the main cultural obstacle to modern China's attempt to evolve from a society governed by men into a society governed by socialist legalism, which should not be confused with the Western bourgeois concept of rule of law. The danger of Confucianism lies not in its aim to endow the virtuous with power, but in its tendency to label the powerful as virtuous.

In order to change Chinese feudal society toward a communist social order, which is understood by all communists as a necessary goal of human development, Mao Zedong developed out of abstract Leninist concepts specific operational methods that took on special characteristics necessary for Chinese civilization and historical-cultural conditions, its strengths and shortcomings.

These methods, above all the system of organized mass movements to achieve the advancement of the mass interest, stress the change of social consciousness, that is, the creation of new men for a new cooperative society, as the basis for changing reality - the replacement of private ownership as the mode of production by collective ownership. The concept of mass politics, relevant in Chinese political thought from ancient time, is implemented by an elite cadre corps within the party which is the political instrument of the people.

[Neo]

Mao's mass line

Mass movement as an instrument of political communication from above to below is unique to Chinese communist organization. This phenomenon is of utmost importance in understanding the nature and dynamics of the governance structure of the CPC as the ruling party. The theoretical foundation of mass movement as a means of mediation between the leadership and the will of the people pre-supposes that nothing is impossible for the masses, quantitatively understood as a collective subject, if their power is concentrated by a political party of correct thought and responsive actions.

This concept comes out of Mao's romantic yet well-placed faith in the great strength the masses who are capable of developing in the interest of their own well-being. So the "will of the masses" has to be articulated with the help of the party but by the masses and within the masses, which the CPC calls the "mass line".

Mao's mass-line theory requires that the leadership elite be close to the people, that it is continuously informed about the people's will, and that it transforms this will into concrete actions by the masses. "From the masses back to the masses" is more than just a slogan. This means: take the scattered and unorganized ideas of the masses and, through study, turn them into focused and systemic programs, then go back to the masses and propagate and explain these ideals until the masses embrace them as their own.

Thus mass movements are initiated at the highest level - the politburo; are announced to party cadres at central and regional work conferences; are subject to cadre criticism and modification; after which starts the first phase of mass movement. Mass organizations are held to provoke the "people's will", through readers' letters to newspapers and at rallies at which these letters are read and debated. In modern times, expressions on the Internet have augmented the role of the print media. The results are then officially discussed by the staff of leading organs of the state and the party, after which the systematized "people's will" is clarified into acts of law or resolutions. Then the mass movement spreads to the whole nation.

The history of Chinese socialist politics is a history of mass movements. Mass movements successfully implemented land reform (1950-53); marriage reform (1950-52); collectivization (1953) - the "General Line of Socialist Transformation" (from national bourgeois democratic revolution to proletarian socialist revolution); and nationalization (1955 - from private ownership of industrial means of production into state ownership). The method used against opposition was thought reform through "brainwashing" (without the derogatory connotation since given in the anti-communist West), which is a principle of preferring the changing of the political consciousness of political opponents instead of physically liquidating them.

All this was despite the enormous cost imposed on the national economy by the Korean War. The opening ceremony of the Beijing Summer Olympics in 2008, which television audiences saw around the world, was a manifestation of Chinese socialist mass movement. It had the legacy of Mao Zedong written all over it.

Before 1949, the Chinese peasant had been deprived of basic health services for over a century. One of the party's first steps in medical reform called for mass campaigns against endemic infectious diseases. Tens of thousands of health workers were trained with basic hygienic skills and sent out into the countryside to examine and treat peasants and organize sanitation campaigns with mass movement techniques.

Health teams examined 2.8 million peasants in 1958, the first year of the schistosomiasis program. One team claimed to have examined 1,200 patients in a single day. Some 67 million latrines were reportedly built or repaired, and over the next few years, hundreds of thousands of peasants were set to work day and night, drying out swamps and building drainage ditches to get rid of the habitat of snails that help to spread the disease. Party workers claimed schistosomiasis cure rates of 85 to 95% in some areas, and that the disease had been wiped out in more than half of previously endemic areas along the Yangtze River.

Mao's mass movement success until 1957

The Hundred Flower Movement of 1957 was launched on February 27 by Mao with his famous four-hour speech, "On the Correct Handling of Contradictions among the People", before 1,800 leading cadres. In it, Mao distinguished "contradiction between the enemy and ourselves" from "contradiction among the people", which should not be resolved by dictatorship, that is by force, but by open discussion with criticism and counter criticism. Up until 1957, the mass-movement policies of Mao achieved spectacular success in both social and economic construction.

Land reform was completed, the struggle for women's emancipation was progressing well, and collectivization and nationalization were leading the nation towards socialism. Health services were a model of socialist construction in both cities and the countryside. The party's revolutionary leadership was accepted enthusiastically by society generally and the peasants specifically. By 1958, agricultural production almost doubled from 1949 (108 million tonnes to 185 million tonnes), coal production quadrupled to 123 million tonnes, and steel production grew from 100,000 tonnes to 5.3 million tonnes.

The only problem came from bourgeois intellectual rebellion. On May 25, 1957, Mao expressed his anxiety at a session of the Standing Committee of the Politburo, and gave his approval to those who warned against too much reactionary bourgeois liberty. That afternoon, Mao told cadres at a Conference of Communist Youth League that "all words and deeds which deviate from socialism are basically wrong". At the opening session of the People's Congress on June 26, Zhou Enlai initiated the "counter criticism" against the critics. Mao's call for open criticism was serious and genuine, but the discussion he had conceived as a safety valve reached a degree of intensity he had not anticipated. Mao overestimated the stability of the political climate and underestimated the residual influence of Confucianism.

Crossroads: Soviet model or independent path
Against this background, the CPC stood at the crossroads of choosing the Soviet model of development or an independent path. Economy development was based on three elements:
# Build up heavy industry at the expense of agriculture.
# Establish an extensive system of individual incentives by means of which productive forces could be developed from a conviction that the superiority of socialist modes of production would be vindicated by a visible rise in living standards.
# The acceleration of the socialist transformation of society in order to create the precondition required by the CPC for establishing a socialist order.

Two paths were opened to the CPC leadership in 1958: (i) consolidation or (ii) pushing forward toward permanent revolution

Mao was forced by geopolitical conditions (the abrupt withdrawal of Soviet aid in 1960 and the US Cold War embargo from 1951 to 1973) to overcome the lack of capital and technology through mobilization of China's vast labor reservoir. The strategy was to connect political campaigns to production campaigns. Under pressure from orthodox Leninists within the party apparatus, with the surprise failure of the "Hundred Flower Movement", Mao concluded it was impossible to create a socialist consciousness through a gradual improvement of material living conditions; that consciousness and reality had to be changed concurrently and in conjunction through gigantic new efforts at mobilization. There was no real alternative open if new socialist China was to survive.

This led to the Anti-Rightist Campaign of 1957-58, followed by "Three Red Banners" in the spring of 1958, initiating simultaneous development of industry and agriculture through the use of both modern and traditional methods of production under the "General Line of Building Socialism". It was to be implemented through a labor-intensive development policy by a "Great Leap Forward" and by establishing a comprehensive collectivization by establishing "People's Communes". (See The Great Leap Forward not all bad, Asia Times Online, April 1, 2004).

While Mao headed the CPC, leadership was based on mass support; and it is still. The chairmanship of the CPC is analogous to the position of Pope in the Roman Catholic Church, powerful in moral authority but highly circumscribed in operational power. The Great Leap Forward was the product of mass movement, not of a single person. Mao's leadership extended to the organization of the party and its policy-formulation procedures, not the dictation of particular programs.

Western accusations of Mao as being a dictator merely reflects an ignorance of the true workings of the Communist Party of China. The failures of the Great Leap Forward and the People's Communes were caused more by implementation flaws than by conceptual error. Bad luck with weather and a relentless US embargo had also much to do with it. These programs resulted in much suffering, but the claim that 30 million people were murdered by Mao with evil intent was mere hostile Western propaganda.

Without Mao's leadership, the Communist Party of China would not have survived the extermination campaign by the Nationalists under Chiang Kai-shek. It was Mao who recognized the invincible potential of the Chinese peasant as the fountainhead of revolution. It is proper that the fourth-generation leaders of the PRC are again focusing on priority promotion of the welfare of the peasants.

In Europe, the failure of the democratic revolutions of 1848 led eventually to World War I, which destroyed all the competing monarchal regimes that had collaborated successfully to suppress the democratic revolutions six decades earlier. The full impact of Mao's revolutionary spirit is yet to be released on Chinese society. A century from now, Mao's high-minded principles of mass politics will outshine all his anti-communist and neo-liberal critics.

The People's Republic of China, established in 1949 under the leadership of the Communist Party of China headed by Mao Zedong, is today a rapidly developing nation of over 1.3 billion people with the world's highest economic growth rate. The Chinese economy is on track to be the largest in the world. Yet until China moves expeditiously toward policies that put equality as a goal, China's road toward achieving the highest per capita income for its economy will be agonizingly long.

The dissolution of the USSR in 1991 led to a precipitous socio-economic decline for Russia since 1990 as it went through shock treatment to rush headlong into market capitalism as advised by US neo-liberal economists. In contrast, China's economic reform since 1978 has produced spectacular growth, albeit along with a host of unsustainable socio-economic penalties and problems. In comparison with the poor results in Russia, the question inevitably arises on why reform towards a socialist market economy by the world's largest remaining socialist state has produced comparatively positive results. What are the "Chinese characteristics" that Deng Xiaoping had identified that led to the impressive economic growth of the past three decades since 1979?

The answer leads directly to the revolutionary policies launched by Mao Zedong during the three decades between 1949 and 1979 that had provided a potent spiritual platform, without which Deng's reform policies would not and could not have succeeded.

Without the strong and broad basis for China's revolutionary socio-economic development laid in the three decades before 1979, as part of Mao's strategy of building essential institutional prerequisites based on a revolutionary collective awareness of the power of an organized masses and carried out through mass movement programs such as comprehensive land reforms followed by the formation of agricultural co-operatives and later peoples communes, the reform policies after 1979 could have not been implemented successfully.

Despite all the neo-liberal hyperbole about efficient asset allocation through the market mechanism and all the capitalist ideological anathema against egalitarianism, the solid and rational contribution by "Mao Zedong Thought" on China's national collective consciousness of self-confidence and reliance remains the light source of the historic revival of the four-millennia-old Chinese civilization.

It was Mao who taught a discouraged China, despite having been reduced to abject poverty materially, hopeless bankruptcy spiritually and a total deprivation of confidence, not to be intimidated by temporary foreign imperialist dominance and to struggle for national revival through self-reliance by placing faith in the invincible power of the masses.

Yet despite Mao's indispensable contribution to the Chinese collective consciousness of the dormant prowess of the masses and to the methodology of achieving economic and social development through mass movements that had enabled the economic miracle of new China, his contributions continues to be insufficiently appreciated by many Chinese revisionist social scientists, particularly free-market economists, who once again are falling into the heinous propaganda spell of Western cultural imperialism in the name of neo-liberal market fundamentalism.

For example, an important element of innovation in Mao's revolutionary strategy is the capturing of the full economic advantages of abundant labor in the Chinese economy for nation-wide socialist construction on a scale never attempted in modern history. Mao aimed to eliminate surplus labor in the Chinese socialist economy by banishing unemployment. Unfortunately, this strategy has been distorted since 1979 to turn into a policy of bringing into existence a new laboring class of exploited, poorly paid migrant workers from rural regions to overcrowded urban centers that are dependant on foreign capital to finance the overblown export sector, leaving rural regions underdeveloped for lack of domestic capital despite, or because of, a national trade surplus denominated in fiat dollars that cannot be used domestically in China.

Inequality of income and wealth has deterred China from its effort to increase the rate of domestic capital formation without undue restriction on the rate of rise in mass consumption. China today is faced with a serious unemployment and underemployment problem. The most serious underemployment comes in the form of low wages on all levels.

Next: Economic surplus and capital formation

Henry C K Liu is chairman of a New York-based private investment group. His website is at Henry C.K. Liu Home.

[Neo]

China's Revolution - Part 5

Surplus and capital formation

By Henry CK Liu

For an underdeveloped feudal economy transitioning towards a modern industrial growth path, one that is not isolated by hostile forces such as foreign embargos, the problem is not that economic surplus being too small, but that the way the economic surplus is produced and appropriated is not conducive to capital formation.

In feudal economies, the main forms of economic surplus are land rent, usury interest rates and middleman profit. Only a small part of the surplus is capitalist profit in feudal economies because land assets have not found ways to become monetized capital, which remained trapped in land that was not commercially traded.

Participants in the feudal economy, its agrarian sector in particular, were predominantly landlords, moneylenders and commodity traders, while capitalists played no major role. The participants in a feudal economy produced their surpluses from narrow direct financial margins by rack-renting tenant farmers, squeezing debtors through usurious interest rates, hoarding to manipulate prices, and so forth, but the surplus was not invested to increase productivity or output.

This type of surplus were merely income transfers from the property-less class to the class that monopolized property in the form of land or money, and who had little incentive to improving productivity. Landlords in feudal societies were generally conservatives who felt threatened by changes, even changes towards productivity. They consumed their surplus through non-agricultural construction such as luxurious goods and grand estates. Traders by definition were not interested in increasing production, only in high profit margins. Usurers were interested only in transferring to themselves, from distressed debtors, ownership of collateralized assets that required no further capital investment.

At the time of the founding of the People's Republic in 1949, China's feudal economy was producing surpluses that were mostly socio-economically unproductive. The developmental problem then was how to transform these structural socio-economic unproductive forms of surplus into new productive forms, leading to a rise in capital formation and hence in national income.
Under capitalism, the approach to transformation was a conservative, socially elitist and narrowly based one of reforming but preserving the system of landed private property. Land reform took the path of paying financial compensation to landlords, and redistributing the land thus acquired through the market by selling to those who had money to buy. This method structurally limited land redistribution to a minority with money, or with access to money, and excluded the majority of the peasants who worked on the land and who needed land most. Thus, capitalism of the landed elite was promoted at the expense of a broad-based peasant socialization of capital.

By contrast, the revolutionary socialist path was a socio-economically broad-based one of abolishing private ownership and the associated system of rent and interest on debt. This was achieved by seizing the landed property of rentiers without compensation, namely confiscating it in the name of the people, followed by a free and egalitarian redistribution to peasants who actually worked on the land, and writing off all outstanding confiscatory mortgages. Given their improved economic status, the peasants then would evolve capitalist efficiency production "from below".

In Japan, the conservative path was exemplified by the Meiji land reform during 1869 to 1873, which abolished the feudal right to rent-cum-tax of the nobility (daimyo and the samurai) only by paying them compensation, namely, the capitalized value of their rents as cash and bonds; and then taxed the farmers heavily to finance the compensation.

After World War II, US occupation regime in Japan under General Douglas MacArthur, whom historian William Manchester labeled an American Caesar, instituted land reform in 1945, under which all land with resident lords in excess of one cho (2.45 acres) was acquired and redistributed to the tenants on it at a nominal payment, while absentee landlords were not allowed to keep even one cho, but had to surrender all their land for redistribution.

The insistence of the US occupation regime in Japan in the post-war period on land reform, up to that time the most comprehensive ever in Asia, arose from US perception that the twin pillars of Japanese militarism had rested on the zaibatsu, monopolistic conglomerate, and the prevalence of petty tenancy as opposed to owner-occupied land.

In contrast, the revolutionary path was exemplified by the confiscation and free distribution of land in the Soviet Union after 1917, and by the land reform in China after 1949. In this revolutionary approach, the egalitarian and free distribution of land to peasant households was thought of as the successful completion of an essentially capitalist task of doing away with feudal property, and as a transitional phase to the eventual establishment of production cooperatives and collectives, in which individual ownership of the material means of production would be replaced by cooperative and collective ownership in enlarged units.

Prior to land reform in China in 1952, the total of landlord net income in rural areas by way of land rent, usury interest and profit amounted to 16.9% of the value added in agriculture. Adding a 2.1% tax paid by land owners, a total of 19% of value added in agriculture (9.39 billion yuan at 1952 prices) was taken from the farming peasants. Of this total, some 4.5 billion yuan was retained by farming peasants after land reform and 4.9 billion went to the government in new taxes.

Thus the peasants benefited, and at the same time the new socialist state had access to resources released by land reform to support socialist construction which included road building, hydroelectricity development, free education and health care. This transfer of surplus from the agrarian sector to the state budget, expressed as a percentage of total gross and net domestic investment in the economy in 1952, amounted to 34.7% and 44.8%. Land reform thus contributed significantly to needed development finance.

Yet further capital formation for socialist development needed to come from development planning since the increased income of peasants after land reform, while in theory could provide more saving for investment, was too low and given the residual abysmally low standard of living of the peasants before land reform, all the additional income from land reform was immediately consumed, for on a per family basis it worked out only to about 55 yuan in 1952.

Thus egalitarian land reform, while eliminating a parasitic landlord and taxation system, did not in itself generate a rapid rise in productive investment needed for output growth. In effect, poverty was being equitably shared by egalitarian land reform unsupported by wealth creation government measures.

Yet egalitarianism by itself is never the cause of poverty or prosperity. It is just that egalitarianism can enhance prosperity more effectively when effective wealth creation policies are functioning.

A case in point in history is that of the founding Civil Emperor of the Sui dynasty (518-618), who, after his coronation, took 5,000 buffalos from government lots and distributed them free to impoverished farmers, helping to restore farm production. He also opened state land reserves to the landless, forbade the military to draft men under the age of 21, reduced the annual tax burden by as much as 80%, shared with the people revenues from state monopolies on wine and salt, exempted the elderly, those over 50, from taxes and reduced the state's take from farm harvests by one third. A central bureaucracy was established and staffed with literati selected on merit through public examinations. As a result, within a few years of his socialist reign, the economy recovered totally from three centuries of war and destruction and grew with unprecedented prosperity. By the final year of his 15-year reign, the state grain reserve was so large that it was sufficient to feed the nation for the next 60 years, albeit the population was only 50 million in size.

In recent centuries, both as a result of population growth and shrinkage of territory from persistent Western imperialist encroachments, China has become an agricultural economy deficient in cultivatable land for the size of its population. Thus China, like England in earlier centuries, must either adopt an industrial policy to support agricultural imports, or an emigration policy, or a population policy.

In the socialist perspective, land reform in itself is a bourgeois measure taking socioeconomic evolution no further than the French Revolution had over two centuries ago. Land reform constituted a necessary condition for further institutional change towards a cooperative society.

The urgent need to amalgamate peasant efforts for the purpose of socialist investment is underscored by the accelerating level of environmental degradation and deforestation in China before 1949 and after 1979. Countering the massive problems of large-scale deforestation, soil erosion and land degradation could not be realistically done on an individual basis or through the market mechanism. It requires the socialization of hundreds of millions of individual households on a network of local projects, not driven by individual profit incentives but by a unified sense of national purpose.

In 1949, abysmally low standards of public sanitation and health care and the prevalence of epidemic diseases from snail-infested canals and mosquito-infested water called for a massive collective investment effort towards cleaning up the environment and initiating a health care system to provide service to those who needed it regardless of their purchasing power. Since 1979, public social infrastructure in education, health and pension has been allowed by policy to regress towards pre-1949 levels.

Latent economic surplus trapped by unemployment and underemployment

Marx observed that the internal contradiction of capitalism is not the competition it fosters or its indifference to inequality. Rather, it is the structural problem of surplus labor which, under the labor theory of value, translates into surplus value. To Marx, capitalism is a self-terminating system because it structurally deprives the worker of a significant portion of the value of his work. Capitalism is built on the concept that value is a function of marginal utility which justifies the exploitation of many by a few.

For Marxists, it follows that latent surplus value can be mobilized for the purpose of capital formation by the reduction of unemployment and underemployment of labor. In China, this is particularly true for rural labor. Neoclassical economics, based on the concept of scarcity, invented the concept of surplus labor, deriving from the concept of surplus people as those who are economically unnecessary. Market fundamentalism creates in market economies the phenomenon of labor with zero marginal utility. This views flies in the face of reality that nations with large populations are economic powerhouses if full employment is ensured by policy. (See Scarcity economics and overcapacity Asia Times Online, July 28, 2005. )

The fallacy comes from treating labor as a commodity to be traded in the market, a residual mentality of the slave society. Economics exists for the benefit of people. People exist as a matter of nature, not for making any economic system more efficient. The very idea of surplus people in an economy is obscene.

Market operations cannot deal effectively with the employment problem as long as employment is restricted to boosting narrow economic efficiency through a market mechanism. Full employment must be a goal in all economic systems, not structural unemployment, as in the concept of non-accelerating inflation rate of unemployment (NAIRU), defined as the rate of unemployment at which i) there is neither upward pressure on inflation (from producers taking advantage of the market power given them by bottlenecks, and from workers using the market power provided by a tight labor market to try to realize wage growth aspirations higher than the rate of productivity growth); nor ii) downward pressure on inflation (from customers taking advantage of the market power given them by excess capacity, and from firms using the market power provided by high unemployment to try to decrease the rate of wage growth).

Market capitalism thus falls short because it must use unemployment as a device to restrain inflation. Excess capital formation derived from unemployment and underemployment leads structurally to overcapacity due to demand rising at a slower rate than productivity from overinvestment.

Capital formation can also be achieved with a system of voluntary deferred wages, wherein every worker agrees to work longer hours without corresponding increases in pay in order to accumulate capital with which to increase productivity, so that less labor can command higher wages in the future.

However, such a system will only work if the capital so accumulated is collectively owned and the benefits of additional productivity are equitably shared among workers who made the temporary sacrifice. Thus mobilizing voluntary economic surplus towards capital formation can only take place in a socialist system. Under a capitalist system of private ownership of the means of production, only oppression of workers can produce capital formation.

In China in the 1950s, cooperatives with 300 households and people's communes with 3,500 households played a key role in voluntary mobilization of economic surplus toward productive capital formation to increase productivity.

During the crucial period of the transition to advanced cooperatives, an awareness of the potential of cooperatives to mobilize surplus labor was recorded in Mao's writings.

[Neo]

In 1954, Mao wrote: "Under present conditions of production, there is already a surplus of roughly one-third of labor power. What required three people in the past can be done by two after cooperative transformation, an indication of the superiority of socialism. Where can an outlet be found for this surplus labor power of one-third or more? For the most part, still in the countryside. ... The masses have unlimited creative power. They can organize themselves to take on all spheres and branches of work where they can give full play to their energy, tackle production more intensively and extensively, and initiate more and more undertaking for their own well being." (Mao Zedong, Selected Works, Beijing, Foreign Languages Press, 1978, p269.)

Local adaptations and variations were to take place within a broad national policy of promoting undertakings in the following sectors: physical capital formation via land reclamation, hill terracing, reforestation and irrigation; infrastructure (roads, bridges and buildings); hydroelectric energy; rural businesses and industries; and human capital formation (public sanitation, health clinics and schools).

The possibilities were certainly nearly limitless at this time, given the existing abysmally low levels of material, educational and health development in the countryside. On land reclamation and reforestation, Mao Zedong stressed the need for "state organized land reclamation by settlers, the plan being to bring 400 to 500 m. mu [3 million hectares] of wasteland under cultivation in the course of three five-year plans".

He went on to say: "I think the barren mountains in the north in particular should be afforested, and they undoubtedly can be. Do you comrades from the north have courage enough for this? Many places in the south need reforestation too. It will be fine if in a number of years we can see various places in the south and north clothed with greenery."

Mao Zedong confidently expected, even within the advanced cooperatives and before full collectivization, that the annual labor days employed per worker would rise substantially and that female participation rates would also rise as more rural undertakings were established, existing labor surplus thereby mobilized and increasing supply elicited:

"Before the cooperative transformation of agriculture, surplus labor-power was a problem in many parts of the country. Since then, many cooperatives have felt the pinch of a labor shortage and need to mobilize the masses of the women, who did not work in the fields before, to take their place on the labor front ... For many places, the labor shortage becomes evident as production grows in scale, the number of undertakings increases, the efforts to remake nature become more extensive and intensive, and the work is done more thoroughly."

Further, he goes on to say: "Things in this country also show us that an outlet can be found in the villages for rural labor power. As management improves and the scope of production expands, every able-bodied man and woman can put in more work-days in the year. Instead of over 100 workdays for a man and a few score for a woman as described in this article, the former can put in well over 200 workdays and the latter well over 100 or more."

The timing of the shift to the large-scale communes was not a happy one; it coincided with a run of very poor harvests, complicated by floods in some parts of the country and attacks of pests in others. There was a very substantial downward deviation of output from the trend during 1959 to 1963, and this has complicated the evaluation of the shift ever since.

There is a severe problem of causal identification here: it is arguable that even without the institutional change to communes, output would have fallen anyway, for agricultural output is subject to cyclical patterns of movement. Many Western scholars who are disposed to criticize the idea of large-scale collective production have, however, tended incorrectly to place the main burden of the output decline on the shift to the communes. What is probably true is first, that the decline which would have taken place anyway, was exacerbated by the initial severe management problems entailed in the shift.

The geopolitics of the Sino-Soviet split was a key factor. In 1960, the Soviet Government unilaterally broke up 600 aid contracts with China, and notified the Chinese government that it would withdrew all its 1,390 experts and stop sending the agreed upon 900 new experts. The Soviet experts left with all their blueprints, plans and materials. The Soviet government also stopped delivering urgently needed equipment and parts to China. As result, the construction and operation of over 250 large industrial enterprises had to be suspended. This put a halt to heavy industrial development and greatly exacerbated China's economic difficulties in the following decade.

Since 1979, average income in rural areas has lagged far behind the average in cities, giving China one of the highest income disparity measures in the world. Many farmers still work on tiny, state-allocated plots of land for a small fraction of the year, investing little in agriculture. While they are entitled to 30-year land-use contracts, the state retains ownership of rural land, and local authorities sometimes seize or reallocate farm land to suit their non-agricultural development priorities.

Rural land disputes are perhaps the biggest source of social unrest in China. Protests and riots in rural areas number in the thousands each year, according to national police estimates. They are often incited by allegations of corruption and illegal land seizures.

Many farmers leave the land to seek work in cities, but they are still classified as farmers under the country's population control policies and tend to work in low-wage factory or construction jobs on a seasonal basis.

Advocates for land reform say the proposed changes would create more asset wealth for farmers and strengthen land security, which would in turn encourage peasants to invest in farming and increase productivity.

A law enacted in 2002 allows limited land-use trades between individual farmers but does not permit unrestricted trade between farmers and companies, straight sales of land-use rights, or the option to use the land as collateral to obtain a loan.

The major state news organizations reported in October 2008 that rural land reform was at the top of the agenda for a meeting at the time of communist party leaders. China Daily, the country's official English-language newspaper, reported, "The meeting is expected to make it easier for farmers to lease or transfer the management rights of their land, measures that have become necessary as many farmers move to cities as migrant workers."

As the New York Times reported in October 2008, "Private ownership of land is not allowed under the constitution, and rural land is still effectively controlled by township- and village-level leaders. Officials characterize the proposed policy changes as allowing the farmers to lease or trade their 30-year land-use contracts to individuals or companies.

"The issue remains a delicate one. Many party traditionalists strongly favor collective land ownership. They have argued that China's economy is still not robust enough to absorb hundreds of millions of rural laborers full time. They also defend the system of allocating small plots of land to all rural families as guaranteeing farmers at least a subsistence income.

"But repeated efforts to enliven the rural economy without freeing up land have failed, and proponents of moving toward partial privatization appear to have the upper hand. One point under discussion is whether land contracts should be extended to 70 years from 30 years, scholars say, a move that would give farmers more security and presumably increase the value of their land-use rights."

In the Soviet Union, the percentage of planned output achieved by important industries at the end of successive five-year plans, in "value-added" terms, was impressive. The first five-year plan (1928-32) achieved 75% of its target, the second (1932-37), 76%. The plan ending in 1950 achieved 94% and 1955 achieved 99%. Yet the area of trouble in Soviet planning was in agriculture, not so much in the state farms but in the collective farms made of small farmers. The knotty problem of reward and incentive in collective enterprise has yet to be solved by human ingenuity. The same was also true in China. When China abandoned collective farming, the agricultural problem also eased, but it was not solved, even today. In the US, free-market principles never touched agriculture, which has remained a fortress of government subsidy.

On June 27, 1981, the sixth plenary session of the 11th Central Committee Congress of Communist Party of China adopted unanimously an official resolution on certain question related to the Founding of the Nation: Concerning economic development during the Mao Zedong era:
"The accomplishment we have achieved over the past 32 years is still significant. To neglect or denied our accomplishment, and to neglect or deny the successful experience we gained from these achievements, would be a serious mistake.

"From 1953 to 1956, the nation's gross value of industrial output on average increased progressively every year by 19.6%. The total agricultural output value on average increased progressively every year by 4.8%. The economic development was relatively rapid, the economic effect relatively good and the proportional balance between the major sectors of the economy relative well coordinated. The market was prosperous with price stability. The livelihood of the people improved remarkably.

"In April, 1956, Comrade Mao Zedong summarized in his speech 'Discusses Ten Big Relations' our country's initial socialist construction experience, and proposed the task of exploring a path towards socialist construction that would suit our national conditions.

"After the completion of basic socialist transformation, our party leads all of the nation's various nationalities to start to change over to the comprehensive large-scale socialist construction. Until the eve of the decade-long Great Cultural Revolution, despite having encountered serious setbacks, we still achieved the very great accomplishments.

"A very major part of the material and technical foundation we now depend on to carry on the program of modernization had been built during that period. The backbone strength behind the effort for national economic cultural construction and their work experience had also been mostly cultivated and accumulated in this period. This had been the Party's main task in this period."

On top of rising income, farmers during the Cultural Revolution decade enjoyed free education and free rudimentary health care, which they never enjoyed before or after. In 1965, with the launch of the Cultural Revolution, Mao expanded the idea of health for the masses beyond infectious disease. Mao proclaimed: "In health and medical work, put the stress on rural areas." With that, China's cadre of "barefoot doctors" was born. These health care programs were called "rural cooperative medical systems" and strove to include community participation with the rural provision of health services. It became a model health care program much admired and copied by the world's developing countries.

A peasant medical force

Hundred of thousand of peasants, young men and women mostly in their 20s with some general education, were selected for an intensive three- to six-month course in medical training. They were instructed in anatomy, bacteriology, diagnosing disease, acupuncture, prescribing traditional and Western medicines, birth control and maternal and infant care. They came to be known as barefoot doctors because some of them were not even equipped with shoes.

The barefoot doctors continued their farming work in the commune fields, working alongside their comrades. Their proximity also made them readily available to help those in need. They provided basic health care: first aid, immunizations against diseases such as diphtheria, whooping cough and measles. They provided health education. They taught hygiene as basic as washing hands before eating and after using latrines. Illnesses beyond their training, the barefoot doctors referred on to physicians at commune health centers.

Ten years after the Cultural Revolution, there were an estimated 1 million barefoot doctors in China. In the 1970s, the World Health Organization and leaders in some developing countries - even the Soviet Union - began to consider China's program as an alternate model to Western-style health care. They were looking for inexpensive ways to deliver health care to rural populations; China had seemed to set up a successful model.

But the barefoot doctors program largely fell apart after 1979. The central government provided less financial support for the program, and the country's emerging free-market system began forcing farmers to pay for their health care. The World Health Organization recently ranked China as fourth-worst out of 190 countries for equality of health care. To correct the regression, the government recently adopted an universal medical insurance program.

Yet 40 years after the program began, the program still holds allure and lessons for health officials around the world looking for a solution for inadequate rural health care. There is also recognition outside of China that the country did go much further than other countries of comparable wealth in reducing infectious diseases, such as polio, smallpox and schistosomiasis during this period,

On a visit in 1972, American doctor Victor Sidel praised the program for supplying health care where previously there had been none; he also singled out the barefoot doctors themselves for their role as patient advocates.

Next: The Great Proletariat Cultural Revolution

Henry C K Liu is chairman of a New York-based private investment group. His website is at Henry C.K. Liu Home.