Liu on Chinese economy Part I [was: Jim Blaut on Lenin and the National Question ]

Les Schaffer godzilla at
Wed Nov 22 09:25:44 MST 2000

[ Part I of long post from Henry Liu on Chinese economy, in response to
Yoshie's comments on market reform. slightly reformat. Les ]

The questions raised on this thread about China's socialist revolution
are not new.  They are questions that have been debated for 8 decades
since the founding of the CPC and for one and a half century since the
first reform movements during the final phase of the Qing dynasty.

I am currently in the midst of an effort to convince the Chinese
government to adopt a new monetary policy in which full employment is
a mandated prerequisit.

China is now and has been for centuries a socialist nation afflicted
with the cancer of capitalism.  The revolutionary task is to kill the
cancer, not the patient.  Much of the Western Left has been more
anxious to abandon socialist China for its capitalist affliction.

Below is my latest article being circulated in China on the debate on
the lesson of the Cultural Revolution.  My views is that the attacks
on the excesses of theCutltural Revolution, of which there were many,
miss the point, however justified by anecdotal horror stories, like
the NY Times article Yoshie posted.  The deserving target is the
anti-revolutionary resistence that made such excesses necessary.  The
culprit is not the chemal theurapy that makes the patient to loose
his/her hair, it is the cancer that is hard to kill without drastic
measures.  The Western Left is itself afflicted with its attachment to
bourgeois "freedom".  It attacked China on "human rights" abuses while
its spread propganda about the inefficiency of socialist production.
The NYT article was not an arguement for sociailized medicine as it is
a plead for more "voluntary" charity.

Subject: Mao's economics
  From:  "Henry C.K. Liu" <hliu at>

Douglass North, the co-winner of the 1993 Nobel Prize in Economic
Science for his work in economic history, spoke on "The Role of
Institutions in Economic Growth" at the Rotman School of Management at
the University of Toronto on Thursday, October 22, 1998.

Douglass North is the Spencer T. Olin Professor in Arts and Sciences
at Washington University in St.  Louis. I also taught in the School of
Architecture as Washington University in 1972, before North's
arrival. He was awarded the Nobel Prize for having renewed research
into economic history by applying economic theory and quantitative
methods in order to explain economic and institutional change. He
shared the award with Professor Robert W. Fogel of the University of

Professor North is a pioneer in the branch of economic history that
has been called the "new economic history." He has spent more than
fifty years pondering complex variations of a simple question: Why do
some countries become rich, while others remain poor? The effect of
institutions on the development of economies through time is a major
emphasis in his work in both economic history and development.

Born in Cambridge, Massachusetts, Professor North graduated from the
University of California at Berkeley with a triple BA in political
science, philosophy, and economics in 1942, and later, in 1952
received at PhD in economics from there.

He spent 33 years on the economics faculty at the University of
Washington in Seattle before joining Washington University in
St. Louis in 1983 as the Henry R Luce Professor of Law and Liberty in
the Department of Economics. He has held several other prestigious
teaching fellowships as a visiting professor including the Pitt
Professor of American Institutions at Cambridge University and the
Peterkin Professor of Political Economy at Houston's Rice
University. He is currently a Hoover Institute Senior Fellow.

The article on China below (not included because it is in Chinese) was
inspired by North's lecture on economic history.  The unidentified
Chinese author (a Chinese student in economics at Toronto) puts the
Cultural Revolution is a historical perspective and analyzed its role
in the context of the protracted Chinese Revolution.  It is not an
apology for the excesses of the Cultural Revolution as some have
alleged.  The author asserts that the Cultural Revolution provided the
institutional base for China's struggle to remain on a socialist path
in the midst of global neo-liberal dominance.  I am in sympathy with
that view.

The Chinese Revolution entered its mature ideological phase in the
Zunyi Conference of January 15-18, 1935, which marked the emergence of
Mao Zedong as leader.  Zunyi formed the foundation for the

revolution's success in its political phase 15 years later in 1949,
after a protracted armed struggle that spanned 22 years. Most European
socialist armed struggles lasted relatively short time, in Russia, 5
years, and in Yugoslavia, 4 years.

The CPC was founded as an evolutionary party by China's intellectual
youths almost all of whom being from bourgeois backgrounds.  At Zunyi,
the CPC correctly aligned itself with the peasant masses in rural
China.  Relying on the rural masses as its base, the CPC was able to
defeat the KMT despite the latter's superior military and financial
resources and full control of the cities.  This experience also
clearly demonstrated that both national revival and its path through
socialism in China can only be built by promoting the interest of the
masses, not as a by product but as a priority aim.

It is necessary to note that in establishing the PRC in 1949, only foreign
observers spoke of the "Victory of Communism" in China.  The CPC viewed its
coming to state power as only marking the victory of the bourgeois-democratic
revolution, albeit guided from the beginning by the CPC.  This first stage in
the revolutionary process was to create the state of "New Democracy" where
different classes were united to support the new government jointly and where
the existing capitalist mode of production was to be allowed to continue as a
matter of expediency.  Only during the second stage was a transformation to
"Proletariat Socialist Revolution" and a transition to a socialist and finally
to a communist social order to be accomplished.

In 1949, the CPC and its leaders were attached to the Marxst-Lenninist
view of the industrialization of China as a precondition for achieving
the final stage of the revolution.  Yet the new government was faced
with several immediate tasks: 1) To establish full administrative
control of the whole nation by smashing the residual resistance from
China's social traditions - mainly Confucian rituals of personal and
family loyalty and local autonomy that gave rise to Warlordism.  2) To
reform the traditional system of agricultural ownership and
production, to implement modern methods of production and scientific
utilization of agricultural land to feed China's vast population, then
at 500 million.  3) To mobilize China large labor force as an social
asset through education and organization to move the nation through a
rapid industrialization process.  4) To built a national
infrastructure for efficient economic construction and food
stabilization.  5) To lay the organizational foundation to satisfy the
demands of mass consumption, investment, industrialization and
defense.  The key for accomplishing these tasks was centralized
planning to marshall the nation towards a unified purpose and to avoid
the disunifying individual self-interest so fundamental to a market
economy. And the secret of success lies it transforming the political
and cultural consciousness of the Chinese people toward a common good
(Datung).  This was what Mao Zedong meant when he declared on October
1, 1949: "The Chinese people have arisen."

The Provisional Government of 1949 was a coalition government.
Between 1951 and 1957, the CPC formally shared power with
non-Communist United Front Parties.  This was at variance with
Marxist-Leninist concepts which maintain that economic conditions,
i.e. the means of production and the system of ownership, are the
basis of the social superstructure and a political party is by
definition a class instrument.  After the Zhengfeng Movement of 1942,
the CPC had considered itself as the political arm of the proletariat
of which, in the Chinese social context, is predominately the rural
peasant masses rather than urban factory workers.  The new
governmental order of " New Democracy" in 1949 represented the united
dictatorship of several revolutionary classes, including the petty
bourgeoisie as well as the national bourgeoisie.

The Constitution of 1954 put to a close the national
bourgeois-democratic revolution and began the socialist transformation
of the country, characterized by agricultural collectivization, the
co-operativisation of trade and commerce and the nationalization of
industrial means of production.  Non-Communist political parties were
allowed to continue, under the guidance of the CPC, to carry out the
re-education of their members as contribution members of socialist

The leadership of the CPC, in carrying out the party's task of
changing China towards a socialist order, adopted the method of mass
movements (qunzhong yundong) to create the new socialist man for a new
socialist society. This notion of the masses (qunzhong) is uniquely
Chinese, yet not exclusive to Chinese communism. Most branches of
Chinese philosophy, from Confucianism to Daoism and Legalism place
importance on the will of the masses.  The prime instrument of the
method of mass movements is the organization of party cardres (ganbu),
an elitist corps of selfless revolutionaries to lead the nation.

The Land Reform Movement of 1950-53 was an unqualified success.  The
CPC pursued three objectives: 1) Land redistribution from landlords
and rich peasants to the majority poor peasants.  Land reform was
still part of the national bourgeois revolution, maintaining the
regime of private ownership but with more equality.  2) Destroy the
traditional power structure of reactionary resistance.  3) Consolidate
the support of the peasant masses for the revolution.  It was a
struggle (douzheng) against feudalism rather than against
capitalism. While the Land Reform law of June 30, 1950 prohibited the
use of force or violence, the hatred for landlords built-up over
hundreds of generations was hard to contain. Yet the excesses did not
obscure the correctness the land reform.

With the success of the Land Reform mass movement, the CPC proceeded
with the next phase of revolution: the transformation of the national
bourgeois democratic revolution to the proletarian socialist
revolution.  From June to September 1953, in two National Work
Conferences on economic and organization questions, a new General Line
of Socialist Transformation was adopted and announced on October 1

The new General Line called for the step by step curb of private
enterprise in agriculture as well as in industry and commerce, and
replaced it by collective and state ownership. During the summer of
1953, it became clear that land reform alone could neither guarantee
adequate food supply to the population in cities nor provide
sufficient capital for industrial construction.  Private farmers
preferred to sell their produce to private speculators rather than
state purchase agents.  Tax evasion continued to be widespread in farm
villages.  The need for collectivization was obvious and the entire
CPC leadership approved the new General Line.  The General Line was a
success in setting the preconditions for a socialist order, despite
recurring resistance and periodic setbacks.  New China became the
admired model for progressive forces all over the world.

The success of the period of 1949-1957 was based purely on the
effective organization of the CPC.  The collective decision of the
leadership was conveyed to the masses through a corps of dedicated and
self-sacrificing cadres who mobilized the masses to great effect.

The 8th Party Congress of 1956 initiated an extensive campaign of
ideological relaxation.  The Propaganda Department of the CC launched
the Hundred Flowers campaign.  By 1957, China was faced with a
crossroad decision between two paths: 1) a phase of consolidation to
enhance the living standard of the people or 2) to push forward the
momentum to complete the revolution.

Path 2) was to be accomplished with mass movements so successfully
employed in the 1949-56 period to following an "independent path" from
Soviet models. Mao Zedong proposed a greater equilibrium between
development of different economic sectors and regions in a speech on
April 25, 1956: "The National Program for the Development of
Agriculture 1956-67", on the principle of self-reliance and the
simultaneous development of agriculture and industry through both
modernization and traditional techniques.  China would overcome its
lack of financial capital by utilizing its vast reservoir of labor.
It was a classic application of Marx's labor theory of value.  Mao
concluded that to achieve this aim, both social consciousness and
economic reality must be changed simultaneously.  Development was not
only for material gain but also for building better citizens.

Resistance to this self-reliance path from the non-Communist United
Front parties and "rightist deviationists" emerged under cover of the
Hundred Flowers movement.  In response, Deng Xiaoping made a speech in
the CPC in the Third Plenum of the 8th CC on October 1957: On the
Rectification Campaign" declaring that the Party must deal rightist
oppositions a decisive blow.  Liu Shaoqi read the CC's work report
outlining the program of collectivization, mass mobilization and
intensified formation of political consciousness.  The policy of the
"Three Red Banners" carried the day.

In order to change Chinese feudal society towards Communist social
order, which is understood by Communists as a necessary goal of human
development, Mao developed specific methods out of Leninist concepts,
which were deemed applicable to special characteristics to Chinese
conditions, giving Chinese Communism its strengths and its problems.
These methods, above all the system of organized mass movements,
stress the change of social consciousness, i.e. the creation of new
citizens for a new society, as the basis for changing reality,
i.e. the mode of production.  The concept of the mass politics,
relevant in Chinese political thought from ancient time, plays a role
as important as that of the elite cadre corps within the Party.

The mass movement as an instrument of political communication from
above to below is peculiar to Chinese Communist organization.  This
phenomenon is of utmost importance in understanding the nature and
dynamics of the governmental structure of the Communists Party of
China (CPC).  The theoretical foundation of mass movement as a means
of mediation between the will of the leaders and the people
presupposes that nothing is impossible for the masses, quantitatively
understood as a collective subject, if their power is concentrated by
a Party of correct thought and action.  This concept comes out of
Mao's faith in the great strength the masses are capable of developing
in the interest of their own well-being.  So the "will of the masses"
has to be articulated by the masses and within the masses.  This 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!  This means: take the scattered
and unorganized ideas of the masses and, through study, turn them into
focused and systematic 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
leadership level, announced to Party cadres at central and regional
work conferences, subject to cadre criticism and modified, 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 rallies at which these letters are read and debated.  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, and then the mass movement
spreads to the whole nation.  Until the Cultural Revolution, the
history of Chinese politics was 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); Nationalization 1955 (from private
ownership of industrial means of production into state ownership).
The method against intransigent opposition was thought reform through
"brain washing" (without the derogatory connotation), which is a
principle of preferring to change the consciousness of political
opponents instead of physically liquidating them.

The Hundred Flower Movement, 1957 was launched on February by Mao
Zedong with his famous 4-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 a
dictatorship, i.e. physical force, but by open discussion with
criticism and counter criticism.

Up until 1957, the mass movement policies of Mao achieved spectacular
success.  Land reform was completed, the struggle for women's
emancipation was progressing well, and collectivization and
nationalization was leading the nation into 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.

By 1958, agriculture production almost doubled from 1949, 108 million
tons to 185 million tons, coal production quadrupled to 123 million
tons, steel production grew from 0.1 million tons to 5.3 million tons.
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 bourgeois liberty.  That afternoon, Mao said at a
Conference of Communists Youth League cadres that "all words and deeds
which deviate from socialism are basically wrong".

At the opening session of the Peoples Congress on June 26, Zhou Enlai
initiated the "counter criticism" against the anti-socialist critics.
Mao's call for open criticism was serious and genuine, but the
discussion he had conceived of as a safety valve against bureaucratism
reached a degree of anti-revolution intensity he had not anticipated.
Mao over-estimated the stability of the new socialist political
climate and under-estimated the the residual strength of bourgeois
liberalism.  Against this background, the CPC also stood at the
crossroad of choosing the Soviet model of development or an
independent, self-reliance path.

[to be continued]

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