[Marxism] Getting Rich is Glorious

Louis Proyect lnp3 at panix.com
Fri Jun 18 07:29:38 MDT 2004

Monthly Review, February 2000
The Necessity of Gangster Capitalism:
Primitive Accumulation in Russia and China
by Nancy Holmstrom and Richard Smith


"Getting Rich is Glorious"

China's transition to capitalism has followed a sharply different 
course, but with a similar end result. On the one hand, China's 
post-Communist ruling class is striving to fully expropriate the 
proletariat, to break their "iron rice bowls" (their guaranteed jobs, 
state-subsidized housing, free medical care) and to subject them to 
market discipline, breaking through socialist "sloth" and raising labor 
productivity (even, according to New York-based Human Rights in China, 
to the point of reproducing the workhouses of Dickens' England). On the 
other hand, they're striving to privatize the profits of, and eventually 
the ownership of, the country's state-owned means of production. Many 
cadres are also "borrowing" state funds and "plunging into the sea of 
the market." This struggle has been led by China's highest-level cadres, 
starting with Deng Xiaoping and his children. Since the onset of reform 
in the early 1980s, these post-Communist robber barons have plunged into 
a veritable orgy of corruption, embezzlement, bribery, kickbacks, graft, 
smuggling, currency manipulation, influence peddling, and theft of state 
funds to amass personal fortunes and privatize state monies, 
enterprises, and properties. It was, of course, this "official 
corruption" that was the main grievance of protestors in the Tiananmen 
uprising in 1989. This resentment is, if anything, felt more deeply today.

China's transition to capitalism has differed from the Russian case in 
two main ways: first, the Chinese, starting in 1978, broke up their 
communes and effectively privatized much of the agricultural sector 
(whereas in Russia, agricultural production is still carried out mainly 
by large-scale, state-owned, state-managed farms). Though still 
maintaining formal legal ownership of all agricultural land, the 
government instituted long-term leases that gave peasants some incentive 
to improve. Though still enforcing production quotas for major crops 
like grain, oil crops, and cotton, the government allowed peasant 
farmers freedom to organize production and to sell sideline produce on 
the free market. These reforms transformed China's agricultural sector, 
generating regular and sustained increases in farm output that served to 
underpin the entire reform process.

Secondly, whereas the Russians rapidly (and criminally) privatized large 
sections of state industry right at the start of the reform process, the 
Chinese have, so far, maintained state ownership, management, and 
planning of the bulk of the industrial economy. Side-by-side with this 
state sector, however, the Chinese simultaneously promoted the 
development of a new private and semi-private economy, heavily 
foreign-funded and export-oriented. This economy is composed mainly of 
new rural township industries and "Special Economic Zones" established 
in the 1980s in Guangdong and other coastal provinces. In contrast to 
state industries, which still produce mainly for the plan, these new 
industries produce for market, and they have few to none of the 
restrictions or social obligations imposed on state industries. So the 
Chinese created, in essence, an economy within the economy. They were 
able to do this mainly because they were able to tap into the vast 
wealth of Hong Kong and other overseas Chinese to fund private and 
semi-private development. The Chinese leadership also invited western, 
especially U.S., investment, which began flowing heavily into the 
special economic zones in the mid-to-late 1980s. So, again in contrast 
to the Russian case, foreign investment has largely funded the 
breathtaking growth of China's non-state sector industries in the 
eighties and nineties. In this way, in the first phase, at least, the 
transition to capitalism has not been as traumatic as the shock therapy 
model Sachs' HIID and the International Monetary Fund (IMF) imposed on 
Russia. Yet by preserving state ownership of most of the industrial 
economy, the process of primitive accumulation in China has only been 

Under Mao's "classless communism" prior to 1978, China had no 
capitalists and no private property. Virtually all industry was 
government owned, as was all land. Workers were tied to their production 
units, but as part and parcel of their lack of freedom, they had a 
presumptive right to their jobs, and their children could likewise 
expect to be assigned work, and enjoyed rights to their housing, medical 
care, childcare, free schools, and numerous subsidies. This was the 
workers' so-called "iron rice bowl." Everyone wore the same blue suit 
and was more or less equally poor—but could feel economically secure. 
The Communist cadres enjoyed the fruits of the system but they owned 
nothing personally. When, in 1978, Deng abandoned Mao's "socialism in 
poverty" and called on China's masses to "get rich!" he was careful to 
bar Communist officials from going into business—it being unseemly at 
the time for actual card-carrying Communists to become practicing 

For years after launching the market reforms in 1978, the government 
sought to confine the developing market economy to farm sidelines, 
small-scale private manufacturing, and petty trading. These reforms were 
quite successful as far as they went. But rural, small-scale industry 
and farmers' markets were not going to generate the capital to renovate 
China's economy, and were not going to employ China's growing population.

Reluctant to give up control of state industry, China's Communists 
tried, in the 1980s, to reform state-owned urban industries by 
introducing some market reforms, such as pay hikes, bonus incentives, 
and two-tier pricing structures to encourage some out-of-plan 
production. But since they also continued to enforce mandatory 
production targets and state ownership of industry, the reforms had 
little effect. State industry stagnated, the national debt mounted as 
the government took on foreign loans, and, meanwhile, China's surging 
population growth was putting enormous pressures on the government to 
generate new jobs and raise incomes. By the mid-1980s, therefore, Deng 
gave the Communist cadres the go-ahead to get into business in a big 
way. The cadres were freed to set up joint ventures with foreign 
capitalists and even private enterprises in order to generate jobs, 
foreign investment and tax revenue. Yet China's cadres, like Russia's, 
lacked the personal capital to set up private businesses, and they did 
not own the state enterprises they ran. So without a "legal" way to 
embourgeoisment, China's red bourgeoisie began to build their fortunes 
through corruption. In the beginning, they enriched themselves by 
trading on their position, but they soon graduated to siphoning off 
state funds to set up private businesses. Rural cadres also levied 
numerous ad hoc levies on peasants.

In the ongoing collapse of China's social order into a pell-mell 
capitalist free-for-all, it is no longer clear who owns what. As in 
Russia, the transition to a market economy in the absence of a bourgeois 
legal framework is fast producing a descent into corruption, 
criminality, gangster capitalism, and violence in a society-wide 
struggle over property. In the cities, managers are struggling to break 
workers' job rights, and tens of thousands of industrial workers have 
been forced out of their state jobs and into the free market. Cadre 
capitalists strive to privatize "their" enterprises by means of stock 
frauds, back-door deals, bilking government treasuries, and outright 
theft. Factory bosses squeeze their workers, and government officials 
squeeze the capitalists. Government agencies, such as the army and 
schools, have gone into business. In the countryside, millions of 
Chinese peasants are being driven off their lands by economic necessity. 
The state refuses to pay them enough for their crops for the farmers to 
make a living wage, their land is ruined by overfarming or by drought 
(as precious water supplies are diverted to government and joint-venture 
industrial projects), or they're ejected by local officials, who 
confiscate their lands for joint venture industrial projects, road 
building, or urban sprawl.

In March 1998, the govenment announced its intention to begin 
privatizing its ailing state-sector industry by selling off thousands of 
small, state-owned industries. But in just a few months, the program 
collapsed in corruption, as Prime Minister Zhu Rongji conceded in his 
speech to the National People's Congress in March 1999. Zhu was 
responding in part to the increasing public outrage at growing 
corruption. The threat of rising unemployment that privatization 
inevitably entails (and which China can ill afford) has forced China's 
reformers to retrench. For the moment, large-scale privatization is on hold.

The end result of this process of primitive accumulation cannot be 
foreseen. But what is absolutely certain is that far from the fantasy of 
a smooth, gradual transition to capitalism envisioned by western 
academic economists, capitalism will be born through intense class 
struggle in all its manifestations. And instead of a vast consumer 
cornucopia for all, we can expect to see vast poverty and unrest as 
millions more lose their lands and jobs. There is already a "floating 
population" of more than a hundred million mostly landless and homeless 
migrants in China. But as evidenced by reports like those in the Asia 
Monitor Center's Asian Labor Update, masses of people in China are not 
reacting passively to their forced transformation. Since the beginning 
of the decade, discontent over inflation, non-payment of back wages, 
layoffs, hazardous working conditions, and bureaucratic corruption has 
fed thousands of strikes, slowdowns, and protests against both state 
industries and foreign-owned firms. Peasant farmers have also protested 
over taxes, corruption, and expropriation of their lands. And despite 
ferocious state repression of labor activists, workers have repeatedly 
tried to form independent trade unions. China's increasingly restless 
and combative labor force has yet to find its voice, but when it does, 
this could throw a large wrench into the World Bank-comprador bureaucrat 
plans for a transition to capitalism. The government's reaction to the 
Falun Gong cult shows how desperately they fear independent organization.

full: http://www.monthlyreview.org/200holm.htm


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