China's Market Communism: Challenges, Dilemmas, Solutions 1st Edition Steven Rosefielde
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CHINA’S MARKET COMMUNISM
China’s Market Communism guides readers step by step up the ladder of China’s
reforms and transformational possibilities to a full understanding of Beijing’s com-
munist and post-communist options by investigating the lessons that Xi can learn
from Mao, Adam Smith and inclusive economic theory. The book sharply distin-
guishes what can be immediately accomplished from the road that must be tra-
versed to better futures.
Typeset in Bembo
by diacriTech, Chennai
In memory of my beloved son, David Rosefielde
CONTENTS
List of figures ix
List of tables x
Prefacexi
Acknowledgementsxiii
Introduction 1
PART I
Red Communism 3
1 Politics in command 5
2 Mao Zedong 9
PART II
White Communism 17
3 Deng Xiaoping 19
4 Xi Jinping 28
viii Contents
PART III
The great debate 33
PART IV
Beyond Communism 51
7 Liberal Democracy 53
8 Globalism 56
9 Confucius 58
10 Choosing sides 66
Prospects 68
Notes 69
Bibliography 109
Index115
FIGURES
This year marks the 100th anniversary of the Bolshevik Revolution, the pivotal
event that paved the way for the establishment of communism in China. It provides
a fitting occasion for assessing an aspect of the Soviet communist legacy: China’s
communist experience and prospects. This volume probes China’s communist
dream, chronicles its evolution, investigates the properties of Xi Jinping’s contempo-
rary market communism, and evaluates future possibilities from a rigorous inclusive
economic perspective.The Chinese communist experience has been largely a story
of two rival visions of the true path to Golden Communism – Mao Zedong’s rev-
olutionary Red Communist (Command Communism) approach and Xi Jinping’s
technocratic White Communist (Market Communism) option. This dichotomy is
the heart of our investigation, but it is incomplete because it conceals the larger
perspective. China’s market communist leaders do not have to choose between Red
and White. There is a wide variety of Pink Communist and Liberal Democratic
alternatives. The most attractive are surveyed to gauge China’s best path forward.
ACKNOWLEDGEMENTS
Red Communism
1
POLITICS IN COMMAND
The Communist Party of China (CPC), founded July 1, 1921 by Chen Duxiu
and Li Dazhao, seized control over the Middle Kingdom under the leadership of
Chairman Mao Zedong on October 1, 1949.9 Chen, Li and Mao were Marxists
of diverse persuasions. Their notions of communist utopia and tactics differed,
but all agreed on fundamentals. The task of the Chinese Communist Party was
to eradicate capitalist political and economic rule, install a worker-peasant state,
criminalize private property, the market and entrepreneurship, and establish an
exploitation-free, harmonious, egalitarian order. The dictatorship of the proletariat
(and peasants) was seen as a sine qua non to thwart counter-revolution and foster
rapid industrialization during a “socialist” transition period, but all agreed that in
the fullness of time the Communist Party would turn over the reins of government
to self-regulating co-operators.
Chen’s, Li’s and Mao’s notions of communism’s future were visionary. They
neither understood nor concerned themselves about technical economic feasibility.
However, this was of little moment. All believed that communist rule meant revo-
lutionary “politics in command” during the transition period.10 The CPC’s task was
and is to fortify communist power and advance the communist cause as its leaders
perceive it and necessity dictates without fretting about economic efficiency.11
Chinese leaders have interpreted this mandate in two broad ways.They embraced
the Stalinist notion of command economy under Mao Zedong from 1950–1976
(with an anarcho-communist interlude during the Cultural Revolution),12 and
managed markets thereafter. Today both schools assume that the Communist Party
will someday fully realize Karl Marx’s communist vision elaborated in his Economic
and Philosophical manuscripts of 1844 and The Communist Manifesto,13 and should this
prove impossible, they intend to satisfice by striking the right balance.
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6 Red Communism
GDP growth has been decelerating and the threat of a major financial crisis is
mounting. Mao’s supporters are calling for accommodation, while others are press-
ing the case for democracy.17
What should be done? Should the Chinese Communist Party change course by
paring or further empowering the market? Should it enhance anarcho-communism?
Should it abandon or strengthen its dictatorship of the workers and peasants? People
hold strong and opposing opinions on these matters based on their ethical, ideo-
logical, political, social, cultural and religious attitudes that allow them to disregard
fundamentals.This puts the cart before the horse, caricaturing the Red Communist–
White Communist split as a struggle between have nots and haves. The deeper issue
is whether Marx’s communism is attainable either as an ideal or acceptable approx-
imation, and if so, whether communism is positively, normatively and ethically best.
Nobel Prizes have been awarded for mathematically proving the “existence” of
a competitive market general equilibrium (Pareto optimality) covering production,
distribution and transfers.18 The proof shows how suppliers can optimally satisfy
consumer’s demands. A similar proof has been devised for the perfectly planned
analogue of perfect competition given planners’ preferences.19 The correspondence
is called the duality theorem, and provides substance to Chinese claims that plan-
ning theoretically is as good as competition. Moreover, mixed models combining
markets and plans are easily constructed. This provides comfort for supporters of
both Mao’s command planning and Xi’s market communism, but only suppos-
ing that planners know exactly what each and every individual wants (including
transfers). This is the rub. Advocates of command planning, Cultural Revolution
and market communism cannot construct a complete existence theorem that
shows how the Communist Party and Red Guards know what individuals want
(including transfers).20 No Marxist has done so, and until such existence proofs are
devised any debate between Maoists and Xi’s supporters is shadow boxing. Neither
approach can provide fully efficient production, distribution and transfers or fulfill
arcane promises about full abundance (all goods are free), the abolition of exploita-
tion of man by man, harmony and the full actualization of each individual’s human
potential. These goals are social romanticism.21 There is no path to the promised
land, even if Communist Party members were competent, well-intended and wise.
Marx’s and Stalin’s meta-historical materialist dialectics don’t save the day.22
This means that the comparative merit of Maoism and Xi-ism depends on
the performance characteristics (positive economics) of Red Communism and
White Communism in a bounded rational universe,23 social justice and other nor-
mative considerations (ethics). Communist ideals, except insofar as they bear on
social justice and ethics, are irrelevant and should not cloud normative judgments.
What counts are the comparative levels of well-being that Mao’s and Xi’s systems
provide, judged by wise and compassionate observers.
2
MAO ZEDONG
Mao Zedong’s Red Army defeated the Kuomintang, conquered the mainland and
established a one-party regime. Mao, the “Great Helmsman,” was a military vet-
eran and hardened partisan.24 He became Chairman of the Communist Party in
1935, and was conversant with communist ideological politics. Stalin was his polit-
ical mentor.25 This background shaped Mao’s perception of the main direction for
constructing communist power in China. It impelled him to ruthlessly suppress the
forces of counter-revolution26 and follow the path pioneered by Stalin for building
command communism, with some accommodation for local circumstances and
many casualties.27 Despite successes,28 Mao understood that full Marxist utopian
communism could not be gestated overnight. Tactical concessions were essential,
but he believed that if the Party stayed the course, China would eventually reach
the promised land.
The Great Helmsman’s preference for Stalin’s command model also was the
path of least resistance. Soviet and Chinese communists shared the same ideo-
logical goals. The USSR despite great adversities rapidly industrialized after 1928,
decisively defeated Hitler’s armies and developed atomic and thermonuclear weap-
ons. Perhaps other communist models including anarcho-communism (Cultural
Revolutionary “redness”) might have been better,29 but there was little reason in
1950 to resist Stalin’s bandwagon.30
Command economy
Mao from the outset chose to adopt Stalin’s command economic framework with its
complex “top-down” planning and “bottom-up” self-regulating mechanisms. The
framework rested on three principles: the criminalization of private property (state
freehold ownership of the means of production), the criminalization of markets
10 Red Communism
Supra-Ministerial organizations
Council of Economic Minister
Tax and Budget Authorities
State Incentives
State Inspectorate Dept 1 Dept 2 Design Bureau Dept 3 Dept 4 State Statistical Agency
State Self-Misregulating
Standards Khozraschyot
Firm 1 Firm 2
State Firm 3 Firm 4
Investment
Bank Contract
GULAG Retail