China: Socialism in the XNUMXst Century

Wilhelmina Barns-Graham (1912-2004)
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By MICHAEL ROBERTS*

Considerations on the book by Alberto Gabriele and Elias Jabbour

I recently participated in a remote seminar to comment on the book Socialist Economic Development in the 21st Century (Routledge, 2022) [China: Socialism in the XNUMXst Century , Boitempo, 2021], by Alberto Gabriele and Elias Jabbour. The introduction to the book says that Gabrieli and Jabbour "offer a fresh, balanced, and historically rooted interpretation of the successes and failures of socialist economic construction over the past century."

According to the foreword by Francesco Schettino, “in this regard, it is interesting to note that, in early 2020, Branko Milanovic, an internationally renowned economist, published an article in the journal The country in which he argued that China's public sector constitutes only one-fifth of the entire national economy and that, therefore, the country is not substantially different from ordinary capitalist countries.

Branko Milanovic's statement is fully expressed in his book, Capitalism Alone [Capitalism without rivals: the future of the system that dominates the world, However, 2020], in which he paints a picture of a dichotomy between “liberal democracy” (Western capitalism) and “political capitalism” (autocratic China). This dichotomy seems false to me. It arises because, of course, Branko Milanovic starts from the (unproven) premise that an alternative mode of production and social system, socialism, has been ruled out for good, as there is no working class able or willing to fight for it.

Branko Milanovic's disciple, Isabelle Weber, has also published an acclaimed book entitled How China escaped shock therapy (Routledge, 2021) [How China escaped shock therapy] Its release, endorsed by Milanovic, had a wide and significant impact in left-wing academic circles. Isabelle Weber argues that the state maintained control over the “commanding heights” of the Chinese economy as it abandoned direct planning in favor of indirect regulation through state participation in the market. Indeed, “China entered global capitalism without losing control over its domestic economy”.

Isabelle Weber seems to argue that China has become capitalist at least since Deng's leadership in 1978, and all the debates since then have been about how far to go, i.e. about opting for "shock therapy". or by moderate movements towards “more capitalism”. Isabelle Weber, however, is ambiguous when dealing with the economic foundation of the Chinese state. Indeed, China entered global capitalism, but still “maintained its control over commanding heights.

Gabrieli and Jabbour are much clearer about the nature and economics of the Chinese state. His analysis of China is subtle but clearly a robust refutation of Branko Milanovic's thesis that China is a form of capitalism, albeit one run by politicians (?) rather than by capitalists as in the West. Authors don't sit on the fence like Isabelle Weber. Instead, they argue (correctly) that China is an economy and a state that has a “socialist orientation” very different from capitalism, be it democratic or autocratic. “China's economic success is a result not of capitalism but of its transition to socialism. It is an economic-social formation that is beyond capitalism”.

The authors consider that the terms “socialist orientation” and “socialist orientation” are useful because “they are easily understandable in their common sense” according to which “political forces that claim to be officially and credibly involved in a process that aims (or aimed) establish, strengthen or improve and develop a socialist socio-economic system; can (or could) in fact be considered reasonably 'socialistic', that is, they have advanced towards socialism in some measurable dimension that represents its main structural economic and social characteristics”. Thus, whether or not the state exercises (directly and indirectly) a decisively hegemonic role in the direction of the national economy (…) is obviously a crucial (although not exclusive) reference for assessing the extent to which China's economy can be considered socialist. The state must dominate, but also those who control the state must be “credibly engaged” in trying to develop a 'socialist socio-economic system'”.

The authors admit that this is a “much weaker sense” of what is meant by a socialist economic system, which, traditionally, is “a national State (State?) in which the principle of 'to each according to his work' is applied universally and there is no form of private property and non-work personal income could be considered fully socialist. It is clear that such a fully socialist distributive structure does not exist anywhere in the contemporary world”.

The authors reject what they consider to be an “outdated” formulation of socialism and opt for what they consider to be new socioeconomic formations. They note that there are already “embryonic forms of socialism – along with capitalism and pre-capitalist modes of production – are considered socialist economic formations, structures around relatively similar dynamics of market socialism, despite the very uneven level of development of their respective productive forces.

The authors argue that “the Soviet Union and most of the socialist countries of Eastern Europe initially achieved high rates of economic growth, but the trajectory of development declined. Due to internal factors, technological isolation and relentless external pressure, the Soviet Union and its allies were never able to completely overcome their internal contradictions and ended up collapsing, despite having managed to break the exclusive dominance of the capitalist powers in the world economy”. In contrast, while it could be argued that “the market-oriented reforms led to setbacks with regard to the socialist nature of the social system of the People's Republic of China”, in reality they “resulted in an extraordinary development of its productive forces and transformed , as we will demonstrate, in a new class of socio-economic formation”.

At this point, our authors become a little shy or hesitant about where their argument is leading them “The term market socialism may imply, on our part, an implicit recognition that China's current socioeconomic system is one of It is indeed a form of socialism, albeit an imperfect one. Conservatively, we (as well as in most cases the Chinese Communist Party leaders themselves) prefer not to defend or deny such an allegation.”

Despite this, they reject China's designation as state capitalism. “The (often underestimated) absolute weight, direct or indirect, of public ownership of the means of production and, more broadly, the depth and extent of state control of the 'commanding heights' of economics does not allow us to see state capitalism as the dominant feature of China's current socio-economic system. Instead, China developed as a socialist-oriented economy, in which the state, “as a result, can, in principle, determine in the short and medium term, the share of the investment rate, its broad sectoral composition, the level and the composition of social expenditure and the level of effective demand. In the long run, socialist-oriented planners can set the speed and (to some extent) the direction of capital accumulation, innovation and technical progress, and significantly affect the structure of relative prices through industrial interventions and other compatible policies. with the market, consciously guiding the unfolding of the law of value, in order to achieve socioeconomic and ecological results ex post higher than would be produced if they automatically followed market prices.”

So, finally, we got there. China and other countries such as Vietnam and Laos are different from traditional “socialist” states such as the Soviet Union, Cuba, North Korea or post-war Eastern Europe. China presented a new socioeconomic formation that could be called market socialism. This is the basis of their phenomenal economic success, not the planned economy of the Soviet Union, in which forms of private property are few or non-existent. Rather, it is a socialist-oriented state with planning at the macro level, while capitalism and the market rule at the micro level in a fundamentally harmonious way. This new socio-economic formation is a blueprint for the future of societies that have overthrown capitalism and are on the way to socialism.

Now, I have deep doubts about this formulation of socialist-oriented economies. My first question or critique of Gabrieli and Jabbour's approach is based on Karl Marx's theory of value. In the book, there is an extensive section on value theory. In this section, the authors adopt the neo-Ricardian Piero Sraffa's theory of value rather than Marx's. According to them, “the task of rescuing the classical approach (which they equate with Marx's theory of value) was handed over to modern classical theory, pioneered by Sraffa and other heterodox economists, among whom Garegnani was prominent. As the latter pointed out, Piero Sraffa (in addition to effectively criticizing marginal theory) rediscovered the classical approach and resolved some crucial analytical difficulties that escaped Ricardo and Marx”.

Does this proceed? In my opinion, the Marxist theory of value has been best defended by a number of Marxist scholars against both the neoclassical theorist and the neo-Ricardian assumptions of Von Bortkiewcz and Piero Sraffa, among others – such as, for example, Kliman, Moseley, Murray Smith. One of the main flaws in Sraffa's theory of value is that it excludes time, whereas Marx provides a temporal approach. Without incorporating time, any theory of value becomes absurd.

Here is what the authors say: “If we take Pierro Sraffa's contribution into account, we can theoretically see production prices as arising from the resolution of a system of simultaneous equations that jointly define a snapshot of the capitalist system at a given time (and thus , elegantly ignore the need to assume constant returns to scale). As such, they can be formally interpreted as intrinsic logical constraints necessary for the functioning of the system, and not as real empirically observable economic objects”. Thus, Marx's theory of value becomes just a snapshot of a particular moment in time, a set of equations rather than something real or empirically observable. Instead of Marx's temporal approach, the authors accept the concurrent errors of their critics.

The authors acknowledge that: “the so-called Sraffian fundamental theorem – the rate of profit will be positive if and only if workers are completely alienated from the product of their labor – does not per se require a labor theory of value” (!). The authors, in turn, reject the approach of many Marxist economists, which demonstrates the logical (and empirical) connection between aggregate total values ​​and total output prices. In accepting Piero Sraffa's critique, they conclude that: "both equalities in aggregates do not require the labor theory of value to be valid, and are compatible with an agnostic and weak interpretation of the laws of value".

And what is this weak interpretation? Well, we can abandon Marx's axiom of the equality of aggregates and "advocate a non-fetishistic (and therefore labor-based) interpretation of the laws of value...through simultaneous equations, without recourse to the principle of conservation of value." In this way, the connection between labor values ​​and prices in the capitalist mode of production is severed and the profitability of capital ceases to be ultimately determined by the creation and appropriation of surplus value: “we think that social scientists do not must remain unduly fixed in formal models based on the uniformity of the rate of profit in all industries”.

The authors clearly reveal their vision: “Recent developments tend to confirm Piero Sraffa's fundamental idea: production prices and profit rate are determined simultaneously. Karl Marx's famous formula for defining and calculating the average rate of profit is therefore not generally valid. Clearly, the authors have not assimilated the wealth of work done by Marxist scholars showing the empirical validity of Marx's theory of value and his law of profitability – my readers are well aware of this.

Instead, the authors accept the neo-Ricardians' criticism that Marx failed to demonstrate the connection (or lack thereof) between values ​​and prices. They claim that “it is well known that Marx himself realized that the degree of completeness of his system was not entirely satisfactory, and for this reason, during his lifetime, he did not publish the material contained in what later became volumes II and III. of Capital. This task was later undertaken by Engels, after many years of meticulously examining Marx's handwritten notes. Well, the authors may consider that Marx was wrong, but subsequent work by Marxist authors has refuted this view and, moreover, has denied the charge that Engels was guilty of publishing Marx's errors in Volume II and II of The capital.

Back to Piero Sraffa. “Sraffa believed that in capitalist production, labor is on an equal footing with 'packhorses' (on subsistence wages assimilated to hay). Therefore, there is nothing special about the fact that work is transmitted to the value of commodities… After all, this is in line with Marx's idea that, under capitalism, work is a commodity produced, operated, maintained, discarded and reproduced like any other input… Sraffa autonomously concluded a solution to which Marx was very close”. But Marx was not very close to this “solution” because he rejected it in favor of a theory of value based on abstract labor and socially necessary labor time. He would not have accepted Piero Sraffa's notion of “production of commodities for commodities” (not work).

The main aspect of Marx's theory of value is that labor is not just a commodity like any other; it is special because only work creates value. Goods (such as "packhorses”) do not create new value. This is only created when the "packhorses” are put to work by human labor. You "packhorses”, in that sense, they are like machines: they do not create value without human work controlling them (the story of robots I will save for another day).

It is disappointing that the authors accept Piero Sraffa's view. But why does all this matter and what does it have to do with China as a socialist country? Well, the authors explain why they opt for Sraffa's theory of value and reject Marx's. It is because “by itself, the existence of surplus does not prove the existence or non-existence of class exploitation and does not allow to accurately determine the degree of justice and equity in a given society”. In other words, we can remove Marx's key distinction between surplus value under capitalism and replace it with a surplus created by the production of "commodities", not value. As the authors say: "in our opinion, regardless of how one interprets this question, the law of value, in its weak sense, applies to both capitalism and socialism".

According to the authors, the existence of surplus value created by the exploitation of labor and appropriated by private capital is no longer the fundamental difference between the capitalist mode of production and socialism. What matters is surplus (not surplus value) and how it is controlled. Capitalist and socialist ways can therefore be harmonized in the transition to socialism. This interpretation of the law of value under capitalism allows them to claim that there is no contradiction between state planning and the market economy, because both modes can work in harmony to boost surplus. Or, as Deng said, "It doesn't matter if a cat is black or white, as long as it catches mice."

In my opinion, this approach goes against not only Marxist economic theory, but also against reality, denying the irreconcilable contradiction between the capitalist mode of production for the profit of capital and a cooperative social system designed of production for social need, i.e. socialism.

This brings us to the nature of transitional economies, in which the capitalist class has been overthrown and lost state power. Marx spelled out the basic nature of these transitional economies. There were two stages on the road to communism. With the working class in power, the first step would be to raise the productivity of labor to the point where social needs were met by direct production and the production of commodities for the market was eliminated. In the second stage, production would be high enough and plentiful so that everyone could produce according to his ability and receive according to his need. The point is that, in both phases, commodity production would end because it would be in contradiction with production out of social necessity.

Our authors reject Marx, Engels and Lenin's views on this. For them, Marx got it wrong: “in our opinion (product of the benefit of hindsight, after more than a century of historical experience), this was a mistake, possibly due to Marx’s background as a Young Hegelian idealist and the tension between Marx the scientist social and the political militant Marx”. Apparently, Marx needed to be less of a romantic activist and more of a political scientist, and then he would have abandoned his idea of ​​socialism without commodity production!

Those who adopt Marx's view (such as Engels and Lenin) are being stark: "Most efforts aimed at identifying the main features of socialism have been implicitly based on a relatively abstract dialectical denial of capitalism, while analyzes of actual experiences of socialism – with all its errors and (sometimes) horrors – have been shamelessly dismissed as sliced ​​and treacherous deviations from what should have been the true way”. But surely the “mistakes” and “horrors” of the Stalinist regime in the Soviet Union or North Korea and Eastern Europe must be seen as “fatal and treacherous” deviations from the road to socialism? No?

At this point I would like to remind readers exactly what Che Guevara said on this issue of commodity production under socialism or what the authors call market socialism. In 1921, Lenin was forced to introduce the New Economic Policy (NEP), which allowed the creation of a capitalist sector in the USSR. Lenin considered this necessary, but it was a step backwards for the socialist transition. Che Guevara argued that Lenin would have reversed the NEP if he had lived longer. However, Lenin's followers "did not see the danger and this remained the greatest Trojan horse of socialism," according to Guevara. As a result, the capitalist superstructure became entrenched, influencing the relations of production and creating a hybrid system of socialism with capitalist elements that inevitably provoked conflicts and contradictions that were increasingly decided in favor of the superstructure. In short, capitalism was returning to the Soviet bloc.

When we look at the experience of the Soviet Union, it was the Bolshevik economist Preobrazhensky who pointed out that the Soviet Union was a transitional economy that contained two opposing forces, not functioning in a harmonious and complementary way, as the authors claim in the new social economic formation of China of market socialism. Preobrazhensky's emphasis on the contradiction between the law of value and planning for primitive socialist accumulation is not mentioned in the book. For the authors, Che Guevara and Preobrazhensky presumably took an “abstract dialectical denial of capitalism” and ignored historical experience – even though they were there at the time. Of course, it is the historical experience of the Soviet Union that eventually revealed that the law of value cannot work in harmony with public ownership and the planning mechanism, and eventually there was a reversal to capitalism.

Then there is workers' democracy. Marx and Engels made it clear that even before we arrive at socialism, under the dictatorship of the proletariat (in which capitalists lose state power to the working class), two clear principles of workers' democracy must be upheld in order to make the transition to the socialism: the right to call together all workers' representatives and a strict limitation of their salary levels. Remember, this is even before the economy starts to reach the lower stage of communism (or socialism, as Lenin called it).

None of these principles of workers' democracy apply in China, where the Chinese Communist Party governs without being held accountable except to itself. In fact, in China income and wealth inequality is very high, if not as high as in other peripheral economies such as Brazil, Russia and South Africa; or in the US and the UK. But these inequalities are not just between average Chinese families and growing numbers of billionaires. How can an economy that supposedly makes a transition to socialism (much less one that has already reached a first stage of “socialism”) be compatible with billionaires and large-scale financial speculation?

An example of the contradictions involved in China is in the housing and real estate market. Instead of the state building houses for rent for rapidly expanding cities, for more than 30 years the Chinese Communist Party has opted to build, via private companies, houses for sale, financed by a huge debt issue – a thoroughly capitalist approach. for basic housing needs. The spell turned against the sorcerer with the Evergrande debt disaster and a housing crisis. The Chinese Communist Party now wants to rein in the disorderly expansion of capital and move towards common prosperity measures, but it faces considerable opposition among financial circles and by pro-capitalist elements.

The authors show how China's state-led economics and macro-planning has been key to its phenomenal economic and social success, wholly lacking in capitalist economies, whether advanced or emerging – just buy China with India.

As Gabriele and Jabbour show, in China the state “can define the share of the surplus at the macroeconomic level and capture an important part of the latter, not only through common fiscal policies, but also through the state's property rights over industrial capital and financial". And they also developed a new vision of this planning mechanism: the “new design economy”, in which planning is done for specific projects, both domestically and abroad. “We chose the almost obsolete term of 'projection' (to refer holistically to the use of plans and projects as tools to guide the economy towards a rationally conceived development path)”. As a result, China's success is unparalleled: there have been no regular, recurring slumps like in capitalist economies, and more than 850 million Chinese have been lifted out of extreme poverty in one generation.

But it seems to me that Gabriele and Jabbour ignored all the growing contradictions in the Chinese transition story. The Trojan horse of a large capitalist sector and an unaccountable Chinese Communist Party within the socialist-oriented Chinese economy remain a serious threat to any transition to socialism. Indeed, there is still a significant risk of reversal to capitalism as the imperialist encirclement pressure on the Chinese state advances in the next decade and as pro-capitalist elements of the Chinese Communist Party argue in favor of an opening of the economy to capitalism.

The authors did not see such a danger or risk because they developed a vision of Chinese “market socialism” as a harmonious path towards socialism. However, in doing so, they rejected Marx's theory of value and argued that Marx's view of the transition to socialism is an "abstract dialectical denial of capitalism". They ignored the serious inequalities in China and the dangerous development of speculative finance capital; and they did not regard workers' democracy (as defined by Marx, Engels and Lenin) as a necessary basis for the transition to socialism.

*Michael Roberts is an economist. Author, among other books, of The Great Recession: A Marxist View.

Translation: Matthew Feitosa.

 

Reference


Alberto Gabriele & Elias Jabbour. Socialist Economic Development in the 21st Century. A Century after the Bolshevik Revolution. Abingdon, Routledge, 2022, 374 pages.

Alberto Gabriele & Elias Jabbour. China: Socialism in the XNUMXst Century. São Paulo, Boitempo, 2021, 474 pages.

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