Long before the Chinese revolution, indeed, even long before the Bolshevik revolution, the Marxian economist Rudolf Hilferding I think did a good job in explaining in a bit more detail what a socialist economy in practice would actually look like.
Because you cannot dispense of the market sector entirely since much of it is still dominated by small enterprise and self-employment, you cannot plan the economy completely from the ground up, at least not in the current era. Rather, you would plan the economy indirectly by nationalizing all the biggest enterprises. Since the smaller enterprises are all reliant on these larger enterprises, then the entire economy could be planned indirectly without having to nationalize all the small businesses.
The socializing function of finance capital facilitates enormously the task of overcoming capitalism. Once finance capital has brought the most importance branches of production under its control, it is enough for society, through its conscious executive organ - the state conquered by the working class - to seize finance capital in order to gain immediate control of these branches of production. Since all other branches of production depend upon these, control of large-scale industry already provides the most effective form of social control even without any further socialization.
A society which has control over coal mining, the iron and steel industry, the machine tool, electricity, and chemical industries, and runs the transport system, is able, by virtue of its control of these most important spheres of production, to determine the distribution of raw materials to other industries and the transport of their products. Even today, taking possession of six large Berlin banks would mean taking possession of the most important spheres of large-scale industry, and would greatly facilitate the initial phases of socialist policy during the transition period, when capitalist accounting might still prove useful.
There is no need at all to extend the process of expropriation to the great bulk of peasant farms and small businesses, because as a result of the seizure of large-scale industry, upon which they have long been dependent, they would be indirectly socialized just as industry is directly socialized. It is therefore possible to allow the process of expropriation to mature slowly, precisely in those spheres of decentralized production where it would be a long drawn out and politically dangerous process. In other words, since finance capital has already achieved expropriation to the extent required by socialism, it is possible to dispense with a sudden act of expropriation by the state, and to substitute a gradual process of socialization through the economic benefits which society will confer.
— Finance Capital
This is basically how China ended up structuring their model in practice, despite this being written decades before the Chinese revolution. The public sector’s focus is on very large enterprises that the most companies rely on, things like heavy industry and infrastructure. If the Chinese state controls oil companies, well, most companies rely on oil, your local bouncy ball producer needs oil to make the rubber for the bouncy balls. But nationalizing a small business making bouncy balls wouldn’t achieve much in terms of economic control because no other enterprise relies on bouncy balls as an input.
This is why it is misleading when you see some left anti-communists simply quote GDP ratios of the public vs the private sector to “prove” China is not socialist. It doesn’t matter as much the proportion of the GDP, but the input-output relationship between enterprises. Not all enterprises are as essential to the economy in the sense of their outputs being the inputs for many other enterprises. The Chinese state controls enterprises which almost every enterprise relies on directly or indirectly: they control land, banking, a significant portion of heavy industry, etc. This allows for the planning of the economy indirectly.
It may be possible one day to have complete economic planning, but implementing it by fiat is not Marxist, and the CPC is a Marxist party. In order for that day to come to pass, Marx’s prediction that all sectors of the market economy will centralize on their own has to come to pass, which could take hundreds, of years, maybe more.
That’s why the CPC introduced a distinction between what they call “developed socialism,” which is the notion of a version of socialism so developed that all enterprises can be nationalized, and “the primary stage of socialism,” which is the notion of a version of socialism that is not so developed and so it still relies heavily on markets. Note that his is not the same distinction as what Marx made between the first and higher phase of communism, but these are two stages within the first phase of communism.
The modern CPC is heavily critical of abandonment of classical Marxist theory in order to rush towards developed socialism by fiat for moralistic reasons even when it made no economic sense. You can justify it as something temporary that the Soviets needed to do to prepare for war against Germany, but after the war there would inevitably become a time of reckoning when they had to revert back to a model more inline with Marxian theory of development.
Sadly, corrupt officials in the USSR took advantage of this process to destroy it internally. The process of economic transition is necessarily a precarious one and so it requires the strengthening of the socialist state prior to the transition to survive it. However, Gorbachev instead weakened the socialist state prior to attempting an economic transition, which ultimately led to a restoration of capitalism, while in China, Deng had doubled-down on strengthening the socialist state and communist party leadership prior to the transition.
The only little thing i would take issue with is that i think you’re being overly critical of what you call the “Stalin model”. Different circumstances call for different approaches, and i would argue that at that time, the USSR simply had to undertake rapid collectivization and industrialization in order to catch up. They could not afford to maintain the NEP any further as the development would have been too slow.
China’s model works great for building up productive forces provided you are in a period of peace and foreign countries are willing to come and invest capital. But the USSR was far more isolated globally in the 1920s and 30s than China was in the 80s and 90s. And war was on the horizon. If the USSR had adopted in the 1930s a model like that which Deng Xiaoping implemented, they would have lost the war against the Nazis. I think you recognize this as well:
You can justify it as something temporary that the Soviets needed to do to prepare for war against Germany
And in the years immediately after the war they needed to rebuild a lot of what had been destroyed, they were in no position with much of the country still heavily affected by the war to go directly into such an ambitious transition as “Reform and Opening Up”. And then the Cold War started which meant that once again the USSR was under an existential threat and could not afford to shift to a more consumer economy, at least not until they developed the atom bomb.
But by the time that the situation had stabilized and they could have safely undertaken a Deng-style shift, Stalin was already dead, the principled Marxist-Leninists were sidelined, Khrushchevite revisionism had taken hold, and there was no political will anymore to take risks by radically reforming a system that had until then worked very well for the purpose of turning an underdeveloped, backward, agrarian society into an industrial superpower.
And from a theoretical perspective, it’s not entirely correct to say that what Stalin did wasn’t well grounded in Marx and Lenin. Lenin himself warns in “A Tax In Kind” against the corrosive influence of small business:
“But in many ways, the small-proprietary and private-capitalist element undermines this legal position, drags in profiteering and hinders the execution of Soviet decrees. […] because the continuation of the anarchy of small ownership is the greatest, the most serious danger, and it will certainly be our ruin (unless we overcome it)”
It is not contrary to Marxism to be wary of the petty-bourgeois mentality that private enterprise, even small enterprise, inevitably re-creates. The tension between private enterprise and the socialist state will always be present until one or the other is abolished. Of course if implemented carefully the strategy of a socialist state using market mechanisms to develop productive forces can be very beneficial, as we have seen from China’s stunning rise.
But the key to China’s success has been keeping private enterprise subordinated to the proletarian state and never allowing it to spiral out of control. This is a constant struggle that requires permanent vigilance. A less disciplined government than the CPC may well risk losing control, which could be fatal to the socialist project. In my view it is understandable why a socialist government would not want to take this risk unless it is very confident in itself and its ability to stick to what Deng called the “Four Cardinal Principles”:
Keep to the socialist road.
Uphold the dictatorship of the proletariat.
Uphold the leadership of the Communist Party.
Uphold Marxism-Leninism (and in China’s case Mao Zedong Thought).
Thanks for this write up, it actually clarified a lot of things for me, even related to Marxism directly.
I read books slowly to educate myself on this subject but I always struggle to incorporate it in a bigger understanding as I don’t have a structured study course helping me link up knowledge of these books between them
Long before the Chinese revolution, indeed, even long before the Bolshevik revolution, the Marxian economist Rudolf Hilferding I think did a good job in explaining in a bit more detail what a socialist economy in practice would actually look like.
Because you cannot dispense of the market sector entirely since much of it is still dominated by small enterprise and self-employment, you cannot plan the economy completely from the ground up, at least not in the current era. Rather, you would plan the economy indirectly by nationalizing all the biggest enterprises. Since the smaller enterprises are all reliant on these larger enterprises, then the entire economy could be planned indirectly without having to nationalize all the small businesses.
This is basically how China ended up structuring their model in practice, despite this being written decades before the Chinese revolution. The public sector’s focus is on very large enterprises that the most companies rely on, things like heavy industry and infrastructure. If the Chinese state controls oil companies, well, most companies rely on oil, your local bouncy ball producer needs oil to make the rubber for the bouncy balls. But nationalizing a small business making bouncy balls wouldn’t achieve much in terms of economic control because no other enterprise relies on bouncy balls as an input.
This is why it is misleading when you see some left anti-communists simply quote GDP ratios of the public vs the private sector to “prove” China is not socialist. It doesn’t matter as much the proportion of the GDP, but the input-output relationship between enterprises. Not all enterprises are as essential to the economy in the sense of their outputs being the inputs for many other enterprises. The Chinese state controls enterprises which almost every enterprise relies on directly or indirectly: they control land, banking, a significant portion of heavy industry, etc. This allows for the planning of the economy indirectly.
It may be possible one day to have complete economic planning, but implementing it by fiat is not Marxist, and the CPC is a Marxist party. In order for that day to come to pass, Marx’s prediction that all sectors of the market economy will centralize on their own has to come to pass, which could take hundreds, of years, maybe more.
That’s why the CPC introduced a distinction between what they call “developed socialism,” which is the notion of a version of socialism so developed that all enterprises can be nationalized, and “the primary stage of socialism,” which is the notion of a version of socialism that is not so developed and so it still relies heavily on markets. Note that his is not the same distinction as what Marx made between the first and higher phase of communism, but these are two stages within the first phase of communism.
The modern CPC is heavily critical of abandonment of classical Marxist theory in order to rush towards developed socialism by fiat for moralistic reasons even when it made no economic sense. You can justify it as something temporary that the Soviets needed to do to prepare for war against Germany, but after the war there would inevitably become a time of reckoning when they had to revert back to a model more inline with Marxian theory of development.
Sadly, corrupt officials in the USSR took advantage of this process to destroy it internally. The process of economic transition is necessarily a precarious one and so it requires the strengthening of the socialist state prior to the transition to survive it. However, Gorbachev instead weakened the socialist state prior to attempting an economic transition, which ultimately led to a restoration of capitalism, while in China, Deng had doubled-down on strengthening the socialist state and communist party leadership prior to the transition.
2/2
This is an excellent write-up, comrade!
The only little thing i would take issue with is that i think you’re being overly critical of what you call the “Stalin model”. Different circumstances call for different approaches, and i would argue that at that time, the USSR simply had to undertake rapid collectivization and industrialization in order to catch up. They could not afford to maintain the NEP any further as the development would have been too slow.
China’s model works great for building up productive forces provided you are in a period of peace and foreign countries are willing to come and invest capital. But the USSR was far more isolated globally in the 1920s and 30s than China was in the 80s and 90s. And war was on the horizon. If the USSR had adopted in the 1930s a model like that which Deng Xiaoping implemented, they would have lost the war against the Nazis. I think you recognize this as well:
And in the years immediately after the war they needed to rebuild a lot of what had been destroyed, they were in no position with much of the country still heavily affected by the war to go directly into such an ambitious transition as “Reform and Opening Up”. And then the Cold War started which meant that once again the USSR was under an existential threat and could not afford to shift to a more consumer economy, at least not until they developed the atom bomb.
But by the time that the situation had stabilized and they could have safely undertaken a Deng-style shift, Stalin was already dead, the principled Marxist-Leninists were sidelined, Khrushchevite revisionism had taken hold, and there was no political will anymore to take risks by radically reforming a system that had until then worked very well for the purpose of turning an underdeveloped, backward, agrarian society into an industrial superpower.
And from a theoretical perspective, it’s not entirely correct to say that what Stalin did wasn’t well grounded in Marx and Lenin. Lenin himself warns in “A Tax In Kind” against the corrosive influence of small business:
It is not contrary to Marxism to be wary of the petty-bourgeois mentality that private enterprise, even small enterprise, inevitably re-creates. The tension between private enterprise and the socialist state will always be present until one or the other is abolished. Of course if implemented carefully the strategy of a socialist state using market mechanisms to develop productive forces can be very beneficial, as we have seen from China’s stunning rise.
But the key to China’s success has been keeping private enterprise subordinated to the proletarian state and never allowing it to spiral out of control. This is a constant struggle that requires permanent vigilance. A less disciplined government than the CPC may well risk losing control, which could be fatal to the socialist project. In my view it is understandable why a socialist government would not want to take this risk unless it is very confident in itself and its ability to stick to what Deng called the “Four Cardinal Principles”:
Keep to the socialist road.
Uphold the dictatorship of the proletariat.
Uphold the leadership of the Communist Party.
Uphold Marxism-Leninism (and in China’s case Mao Zedong Thought).
Thanks for this write up, it actually clarified a lot of things for me, even related to Marxism directly.
I read books slowly to educate myself on this subject but I always struggle to incorporate it in a bigger understanding as I don’t have a structured study course helping me link up knowledge of these books between them