Deng Xiaoping is famous for the saying ‘it doesn’t matter whether a cat is black or white provided it catches mice.’ As I am an unashamed Dengite in economic theory the equivalent of this is that it is perfectly possible to understand China’s socialist economy in terms of either Western or Marxist economic theory – an analysis in terms of both is given on this website at ‘Deng Xiaoping and John Maynard Keynes’.

This reflects the fact that economics studies a material reality and to accurately factually analyse it is the most important issue. For this reason most articles on this website, and others which I write, don’t bother to quote any economist they just study the facts – that is they don’t bother to discuss whether the cat is black or white, they just focus on catching mice.

​But posts on this website have created some discussion among readers of a socialist viewpoint who believe the myth that China’s is a capitalist economy. This is the misunderstanding that constantly leads Western analysts to make fundamental mistakes regarding China’s economic dynamics – a typical example of those errors, regularly updated, are collected together on this website at ‘Wrong Analyses of China – Listed by Author and Date’.

This error arises among those of such a socialist viewpoint because they have a definition of socialism deriving from Stalin rather than Marx – as will be shown below. To clarify the issues for them this article is therefore a brief outline of the key foundations of China’s economic theories and why they are entirely in line with Marx. Those who prefer to use Western categories can analyse China’s socialist economy in those terms – as outlined in ‘Deng Xiaoping and John Maynard Keynes’ – and not bother to read this article. Those who prefer just to have accurate economic analyses, without being overly concerned with what framework they are put forward in, can ignore whether the cat is black or white and just study China’s economy.

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​China’s economic theory

Deng Xiaoping as a Communist naturally explicitly formulated China’s economic policy in Marxist terms – China’s economic reform policies were seen as the integration of Marxism with the specific conditions in China. More precisely Deng stated: ‘We were victorious in the Chinese revolution precisely because we applied the universal principles of Marxism-Leninism to our own realities.’ (Deng, 28 August 1985) Consequently: ‘Our principle is that we should integrate Marxism with Chinese practice and blaze a path of our own. That is what we call building socialism with Chinese characteristics.’ (Deng, 21 August 1985)

Authors, including (Hsu, 1991), have contended that Deng’s economic policies were not in accord with those of Marx. However while China’s economic policies clearly differed from those of the USSR after the introduction of the First Five Year Plan in 1929, which introduced comprehensive planning and essentially total state ownership, it is clear that China’s economic policies were in line with those indicated by Marx. Whether people wish to formulate Chinese economic policy in Western or Marxist terms may be left to them. What is most crucial is not the colour of the cat but whether it catches mice – that is, the practical policy conclusions drawn. This appendix therefore briefly shows that Deng’s concepts in launching China’s economic reform in in 1978 corresponded to Marx’s.

The primary stage of socialism

Regarding China’s economic reform policies Deng noted, as stated in Marxist terms, that China was in the socialist and not the (higher) communist stage of development. Large scale development of the productive forces/output was the prerequisite before China could make the transition to a communist society: ‘A Communist society is one in which there is no exploitation of man by man, there is great material abundance, and the principle of from each according to their ability, to each according to his needs is applied. It is impossible to apply that principle without overwhelming material wealth. In order to realise communism, we have to accomplish the tasks set in the socialist stage. They are legion, but the fundamental one is to develop the productive forces.’ (Deng, 28 August 1985)

More precisely, in a characterisation maintained to the present, China was in the ‘primary stage’ of socialism, which was fundamental in defining policy: ‘‘The Thirteenth National Party Congress will explain what stage China is in: the primary stage of socialism. Socialism itself is the first stage of communism, and here in China we are still in the primary stage of socialism – that is, the underdeveloped stage. In everything we do we must proceed from this reality, and all planning must be consistent with it.’ (Deng, 29 August 1987)

The fundamental characterisations by Deng have been maintained to the present – thus for example in July 2011 President Hu Jintao stressed that ‘China is still in the primary stage of socialism and will remain so for a long time to come’ (Xinhua, 2011), while speaking to the UN premier Wen Jiabao noted ‘Taken as a whole, China is still in the primary stage of socialism’ (Xinhua, 2010). The conclusion flowing from this as noted by Hsu, was that: ‘From this perspective, a serious error in the past was the leftist belief that China could skip the primary stage and practice full socialism immediately.’ (Hsu, 1991, p. 11)

The conclusion of such a contrast between a primary socialist stage of development and the principle of a communist society (which, as noted by Deng above, was regulated by ‘from each according to their ability to each according to each according to his needs’) was that in the present ‘socialist’ period the principle was ‘ to each according to their work’: ‘We must adhere to this socialist principle which calls for distribution according to the quantity and quality of an individual’s work.’ (Deng, 28 March 1978)

In Marxist theory, outlined by Marx in the opening chapter of Capital (Marx, 1867), economic distribution according to work/labour is the fundamental principle of commodity production – and a commodity necessarily implies a market. In this socialist period a market would therefore exist – hence the eventual Chinese terminology of a ‘socialist market economy.’ As presented by Deng Xiaoping and his successors above such Chinese analysis is highly compressed but clearly in line with Marx himself.

​Marx’s analysis

It is clear Marx envisaged that the transition from capitalism to communism would be a prolonged one, noting in The Communist Manifesto: ‘The proletariat will use its political supremacy to wrest, by degree, all capital from the bourgeoisie, to centralise all instruments of production in the hands of the State, i.e., of the proletariat organised as the ruling class; and to increase the total productive forces as rapidly as possible.’ (Marx & Engels, 1848, p. 504)

The ‘by degree’ may noted – Marx therefore clearly envisaged a period during which state owned property and private property would exist. China’s system, after Deng, of simultaneous existence of sectors of state and private ownership is therefore clearly mo
re in line with Marx’s conceptualisation than Stalin’s introduction ‘all at once’ of essentially 100 per cent state ownership in 1929.

Regarding Deng’s formulations on communist society being regulated by ‘to each according to their need’ versus the primary stage of socialism regulated by ‘each according to their work’ Marx noted in the Critique of the Gotha Programme of the post-capitalist transition to a communist society: ‘What we are dealing with here is a communist society, not as it has developed on its own foundations, but on the contrary, just as it emerges from capitalist society, which is thus in every respect, economically, morally, and intellectually, still stamped with the birth-marks of the old society from whose womb it emerges.’ (Marx, 1875, p. 85)

In such a transition Marx outlined payment in society, and distribution of products and services, necessarily had to be ‘according to work’ even within the state owned sector of the economy:‘ Accordingly, the individual producer receives back from society – after the deductions have been made – exactly what he gives to it. What he has given to it is his individual quantum of labour. For example, the social working day consists of the sum of the individual hours of work; the individual labour time of the individual producer is the part of the social working day contributed by him, his share in it. He receives a certificate from society that he has furnished such-and-such an amount of labour (after deducting his labour for the common funds); and with this certificate, he draws from the social stock of means of consumption as much as the same amount of labour cost. The same amount of labour which he has given to society in one form, he receives back in another.

‘Here obviously the same principle prevails as that which regulates the exchange of commodities, as far as this is exchange of equal values…. as far as the distribution of the latter among the individual producers is concerned, the same principle prevails as in the exchange of commodity equivalents: a given amount of labour in one form is exchanged for an equal amount of labour in another form.

‘Hence, equal right here is still in principle – bourgeois right… The right of the producers is proportional to the labour they supply; the equality consists in the fact that measurement is made with an equal standard, labour.’ (Marx, 1875, p. 86)

In such a society inequality would necessarily still exist: ‘one… is superior to another physically or mentally and so supplies more labour in the same time, or can labour for a longer time; and labour, to serve as a measure, must be defined by its duration or intensity, otherwise it ceases to be a standard of measurement. This equal right is an unequal right for unequal labour… it tacitly recognises the unequal individual endowment and thus the productive capacities of the workers as natural privileges. It is, therefore, a right of inequality in its content like every right. Right by its very nature can consist only as the application of an equal standard; but unequal individuals (and they would not be different individuals if they were not unequal) are measurable by an equal standard only insofar as they are made subject to an equal criterion, are taken from a certain side only, for instance, in the present case, are regarded only as workers and nothing more is seen in them, everything else being ignored. Besides, one worker is married, another not; one has more children than another, etc. etc.. Thus, given an equal amount of work done, and hence an equal share in the social consumption fund, one will in fact receive more than another, one will be richer than another, and so on. To avoid all these defects, right would have to be unequal rather than equal.’ (Marx, 1875, pp. 86-87)

Marx considered only after a prolonged transition would payment according to work be replaced with the ultimately desired goal, distribution of products according to members of society’s needs.

‘Right can never be higher than the economic structure of society and its cultural development which this determines.

‘In a higher phase of communist society… after the productive forces have also increased with the all-around development of the individual, and all the springs of common wealth flow more abundantly – only then can the narrow horizon of bourgeois right be crossed in its entirety and society inscribe on its banners: From each according to his abilities, to each according to his needs!’ (Marx, 1875, p. 87)

It is therefore clear that post-Deng policies in China were more in line with Marx’s prescriptions than post-1929 Stalin policies in the USSR. Given the essentially 100 per cent state ownership of industry in China in 1978 ‘Zhuada Fangxiao’ (keep the large, let go the small) – maintaining the large enterprises within the state sector and releasing the small ones to the non-state sector – together with the creation of a new private sector created an economic structure clearly more in line with that envisaged by Marx than the essentially 100 per cent state ownership in the USSR after 1929.

Deng’s insistence on the formula that in the transitional period reward would be ‘according to work’ and not ‘according to need’ was clearly in line with Marx’s analyses. It is notable that in the USSR itself a number of economists opposed Stalin’s post-1929 policies on the same or related grounds – including Buhkarin (Bukharin,1925) , Kondratiev (Kondratiev n.d.), and Preobrazhensky (Preobrazhensky, 1921-27). Their works were, however, almost unknown as these issues were ‘resolved’ by Stalin killing those economists who disagreed with him and banning their works, although several accounts have been published outside the USSR – see for example (Jasny, 1972) (Lewin, 1975). China’s economic debates therefore preceded primarily with reference to China’s conditions and Marx, and not any preceding debates in the USSR.

It is therefore clear that China’s post-reform economic policy is in line with Marx’s analysis of socialism and that, as stated in Chinese analysis, post-1929 Soviet policy departed from Marx’s analysis – the argument that the converse is true, by Hsu and others, is invalid.

​China’s economic theory certainly differs from Stalin’s – because it goes back to Marx.

​References

Bukharin, N. (1925). ‘Critique de la plate-forme économique de l’opposition’. In L. Trotsky, E. Préobrajensky, N. Boukharine, Lapidus, & Osttrovitianov, Le Débat Soviétique Sur La Loi de La Valeur (1972 ed., pp. 201-240). Paris: Maspero.

Deng, X. (2 June 1978). ‘Speech at the all-army conference on political work’. In X. Deng, Selected Works of Deng Xiaoping 1975-1982 (2001 ed., pp. 127-140). Honolulu: University Press of the Pacific.

Deng, X. (21 August 1985). ‘Two kinds of comments about China’s reform’. In X. Deng, Selected Works of Deng Xiaoping 1982-1992 (1994 ed., pp. 138-9). Foreign Languages Press.

Deng, X. (28 August 1985). ‘Reform is the only way for China to develop its productive forces’. In X. Deng, Selected Works of Deng Xiaoping 1982-1992 (pp. 140-143). Beijing: Foreign Languages Press.

Hsu, R. C. (1991). Economic Theories in China 1979-1988. Cambridge and New York: Cambridge University Press.

Deng, X. (29 August 1987). ‘In everything we do we must proceed from the realities of the primary stage of socialism’. In X. Deng, Selected Works of Deng Xiaoping 1982-1992 (pp. 247-8). Beijing: Foreign Languages Press.

Jasny, N. (1972). Soviet Economists of the Twenties. Cambridge: Cambridge University Press.

Kondratiev, N. D. (n.d.). The Works of Nikolai D Kondratiev (1998 ed.). (N. Makasheva, W. J. Samuels, V. Barnett, Eds., & S. S. Williams, Trans.) Pickering and Chatto.

Lewin,
M. (1975). Political Undercurrents in Soviet Economic Debates. London: Pluto Press.

Marx, K. (1867). Capital Vol.1 (1988 ed.). (B. Fowkes, Trans.) Harmondsworth: Penguin.

Marx, K. (1875). ‘Marginal notes on the programme of the German Workers Party’. In K. Marx, Karl Marx Frederich Engels Collected Works (1989 ed., Vol. 24, pp. 81-99). London: Lawrence and Wishart.

Marx, K., & Engels, F. (1848). ‘Manifesto of the Communist Party’. In K. Marx, & F. Engels, Collected Works (1976 ed., Vol. 7, pp. 476-519). London, UK: Lawrence and Wishart.

Preobrazhensky, E. (1921-27). The Crisis of Soviet Industrialization (1980 ed.). (D. A. Filzer, Ed.) London: MacMillan.

Xinhua. (2010, September 24). ‘Premier Wen expounds ‘real China’ at UN debate’. Retrieved February 2, 2012, from China Daily: http://www.chinadaily.com.cn/china/2010WenUN/2010-09/24/content_11340091.htm

Xinhua. (2011, July 1). ‘China still largest developing country: Hu’. Retrieved February 2, 2012, from China Daily: http://www2.chinadaily.com.cn/china/cpc2011/2011-07/01/content_12817816.htm