Stalin & Mao
The Soviet Union under Joseph Stalin industrialized itself in just two five year plans under Gosplan (Planning Committee). The Soviet Union became second largest economy only after the US by 1938 and could defeat German military-industrial might in World War II. The victory in the war brought entire East Europe under communism. Soviet planning proved itself to be much more effective in allocating resources in basic infrastructural heavy industries, education and health.
Thus, the Soviet Union emerged as the supreme power in technology and armament industries. After the end of World War II, the Soviet Union under Stalin became one of the two superpowers in the cold war with the US. The success of planned economy under the Soviet Union attracted many backward countries and communist movement flourished throughout the world. Following Leninist, theory movement flourished mainly in backward societies. Communist movements broke the backbone of colonialism.
After the death of Stalin, Kruschev became Soviet Head and began to criticize Stalinist policies. This was the beginning of problems. The growth began to slow down. Though Communist Party replaced Kruschev many questions began to be raised against the Soviet Union policies. Kruschev called for more roles of market and incentives in the Soviet Union economy. This helped Mao Ze Dong to emerge as the number one leader of international communism after Kruschev criticized Stalin.
Mao upheld Stain’s legacies in communist movement while at the same time criticized Stalin for being too much dependent on bureaucracy for economic development. Mao criticized USSR leadership as revisionist and claimed that money motivation can be crushed even at the much lower level of economic development than what the Soviet Union has achieved. For that Mao ushered in Cultural Revolution and Great Leap Forward which failed to give desired results. Mao proved himself the genius in conducting the communist revolution in China and in destroying feudalism and building educational and health foundation. But his direct march to communism by culturally defeating money motivation proved to be disastrous for the Chinese economy.
Where Stalin went Wong
Actually, Stalin’s period saw rapid industrialization because of the communist policy of annihilation of feudal relations, state-led planned investment in non-profit motivated sectors like basic infrastructure industries, education and health. But after reaching this level the Soviet Union should have given more space to private entrepreneurship and profit motivation while keeping key industries under state planning. The Soviet Union created educated and healthy society who could have been most ideal for further qualitative growth through private entrepreneurship guided by state planning. Though Kruschev raised these questions, his anti-Stalin rhetoric destabilized the Soviet Union leadership which prevented them to take these bold policies.
Moreover, capitalist world was following Keynesian state-led demand creation mechanism to counter overaccumulation crisis. Stalin ignored Keynes as somebody who wanted to reform capitalism and save it. Instead, Stalin should have paid more attention to the fact that capitalist class was not liking Keynes prescribed state-led non-profit making demand creating investments. The capitalist class was continuously attacking Keynesian policies since more state role is bringing with it many obstacles to capitalist profit-making like the job security breeding disincentive to work hard, etc. If the communist movement could integrate Keynesian policies successfully, they could have given market better role in the socialist economy.
Stalin failed to notice that global capitalism was already learning from the success of the Soviet Union economy. In the 1950s, US helped Japan, South Korea and Taiwan to go for the abolition of feudal relations and heavy state-led non-profitable investments in education, health and basic industries.
The rise of Financial Capitalism: Deng and Gorbachev
By 1970s West underwent tremendous change and started to use debt to create demand and started negating the role of the state. State’s involvement often said to be inefficient and end up as the disincentive to work hard. Based on petrodollar credit channel, the US assured itself of unlimited credit and with this inflated its asset prices and then made the profit by trading in assets. Thus capitalists could find profit in asset trading and overproduction crisis was temporarily solved. Gradually West mainly the US started exporting its manufacturing base to Third World countries for making more profit by using the later’s cheap labour.
And West and the US itself started to profit by asset trading. Deng Xiaoping, the chairman of communist China since 1978, understood the opportunity of getting Western technology and capital to industrialize China quickly. Deng took the opportunity. Many people across the globe thought that Deng was moving towards capitalism. They failed to get that Deng has reacted to the changed material condition. Capitalism has transformed itself from production capitalism to financial capitalism. Debt to create demand has become more important than production to supply. Consumers became more important than labourers. This simply assures the fact capitalism is transforming itself in reaction to overproduction crisis. And this transformation presented China a historical opportunity clearly noted by Deng in his thesis.
Another dimension of the rise of financial capitalism, Saudi led OPEC cartel was allowed to hike oil price much above production cost by the USA and part of this high rental income was raising consumption of oil-rich countries while another part was funding US profit from asset trading. Thus global capitalism started watching the renewed growth. Between 1920 and 1970 the Soviet Union registered second highest growth rate after Japan. But after 1970 the Soviet Union completely stagnated since its fertility rate fell below replacement rate.
The Soviet Union was growing due to exceptionally high educated and healthy population who could go on inventing new technologies and add to new types of machinery while keeping average productivity per individual stagnant due to lack of incentives and profit motivation. Once population growth fell, growth began falling as well. Thus higher growth in the capitalist world on one hand and slowing down of the Soviet Union, on the other hand, forced the later to move towards market-oriented reforms to improve productivity. Gorbachev led the economic reforms.
Noticing failures of previous the Soviet Union leaders in making economic reforms, Gorbachev went for political reforms first. He destroyed political monopoly of the communist party. Then he started economic reforms. With market forces allowed to play, the Soviet Union being oil-rich caught Dutch Disease due to high global oil prices. That made entire manufacturing base of the Soviet Union completely uncompetitive in the global market. The open economy resulted in deindustrialization of the Soviet Union economy as a result.
Similarly, China had huge educated and healthy cheap labour that attracted huge investments from Western capitalists. Since the Soviet Union had already lost the demographic edge its labour was educated but expensive. Hence, it failed to attract enough Western capital. Everyone in the Soviet Union was blaming the communist government for economic woes while lack of monopoly in decision-making power gave communist party little chance to change the track. As a result, the Soviet Union collapsed by 1991. That was a great ideological defeat for communist movement.
Soviet Collapse and Demographic Crisis
The Soviet Union collapsed because it was ideal for Leninist monopoly capitalist age not for post-Leninist financial capitalist age. The Soviet Union was lost due to twin effects: temporary solution of overaccumulation crisis by global capitalism and fall of fertility rate of the Soviet Union below replacement rate. The Soviet Union had little to offer to global capitalists, unlike China which had cheap productive labour. In fact, the Soviet Union could have claimed higher growth rates with lower productivity as the socialist success of giving working class more leisure time, unlike capitalist world.
This claim can be made only if fertility rate is kept constant at some level. The Soviet Union failed to take any policies that would keep fertility rate constant. In fact, Lenin could never solve the dilemma between women working as part of working class and motherhood. Lenin failed to see that women once joined working class cannot perform motherhood with equal determination as before. Women participation in outdoor jobs definitely helped USSR to grow in the short run. But it reduced birth rate and resulted in demographic crisis resulting in lower growth rate in the long run.
Belt Road Age: Xi Jinping
China began to industrialize itself using capital and technology from the US and West and Japan while the US continues to take debt from China and other countries and generate demand for Chinese made products. The process started in the 1980s but after the 2007-08 global financial crisis, this process came under severe doubts. China’s economy has grown to more than US’s in purchasing power parity. China’s economy becoming too big to rely on debt created demand for the US economy.
The US also found itself indebted to a lot of countries and as its asset trading business in crisis, people started to question the deindustrialization process that went side by side with the growth of asset trading in the US. China in 2013 was the largest trading nation. China’s potential GDP is at least three times that of US and by Nobelist Robert Fogel predicting that, by 2040, Chinese GDP would be twice of America’s and Europe’s combined GDP. So Wall Street players know China is their future financial centre as well.
In 2013, under Xi Jinping’s leadership, China came up with the different idea to counter overproduction crisis. China came up with Belt Road Initiative which is about investing in infrastructure like ports, railways, roads across the globe and help different poor regions to develop and share the prosperity of China. China can endure long gestation period and long-term losses while the Western system cannot. This is because in Chinese economy surplus value appropriation of wage labour goes on. But while in West how to use surplus value is decided by private capitalist and banker class, in China the same is decided by the working class leadership.
Thus working class may enforce investment with long gestation period which is highly avoided by private capitalist and banker class. Thus while the Western system is more prone to go for short-term profit-making asset trading, China can go for real investment with long gestation period. This simply proves Chinese system can deal with overproduction crisis without external indebtedness and remaining self-sufficient and keeping industrial base more or less intact. This also shows China will keep resource allocation power more in the hands of State than in hands of private capitalists.
The recent crackdown on top executives of Alabang, Wanda, etc. clearly showed that Chinese leadership will go for long-term non-profitable productive investments and not for short-term profitable non-productive investments in asset trading or entertainment. This is the new dimension of the struggle between communism and capitalism in the new Belt Road age. Thus most of Belt Road project to be developed by state-owned banks and infrastructural corporations.
China has also launched gold-yuan-oil scheme for all oil selling countries, and it has got 12% of global oil futures market in just first 50 days. Thus soon BRI will start to get financed by yuan itself. Hence, China is already production centre of the world and soon emerging as the global financial centre as well. The strongest economy in the world under the working-class dictatorship is definitely the most important event of history. Chinese communist leadership has already turned Chinese capitalist class as the mere appendage of socialism. Once China becomes the financial centre as well, it will turn global capitalist class as the tool to serve goals set by communist leadership.
This is our brief analysis of the march of Communism from Communist Manifesto by philosopher Marx to Belt Road Age under Xi Jinping leading the world’s largest economy. The rise and fall of the Soviet Union and rise of China clearly show Marxism when applied correctly give spectacular results while if fail to change with changed material conditions can lead to disaster. The world communist movement now possesses world’s largest economy and can have world’s best technology in next 10-15 years.
China is already celebrating Marx’s 200th birthday with renewed vigour. The Soviet Union proved how to abolish feudalism in backward economies and industrialize rapidly by investing non-profitably through state planning in education, health and basic infrastructure industries. Chinese reforms have proved that market works best under the working-class dictatorship where surplus value appropriation of wage labour goes on but the use of surplus is determined by working class leadership, not capitalist leaders. This is the best way to solve overaccumulation crisis at the aggregate level and money motivation at the individual level. So China is already a role model for the developing world.
The capitalist world is currently witnessing two crises: debt crisis (which is transformed version of overaccumulation crisis in the age of financial capitalism) and demographic crisis. China has already started stated state-led demand creating investments under BRI to counter debt crisis emanating from financial capitalism. But China has to find a way to solve the demographic crisis as well. China still has 400 million rural populations who will help China to grow in next 20-30 years. China has to raise fertility rate above replacement rate in this time period. China is now demand constrained economy and so additional population will add extra demand in its economy which will help it to grow. That will make China a model for the industrialized nations too since the entire industrial world is suffering from the demographic crisis.
The 21st-century communist movement must not only intend to develop third world countries on lines of Chinese market socialism but must also intend to solve demographic crisis among industrialized nations. If world communist movement is able to move with these two objectives, developing the world and the developed world both will become ripe for communist movement in the Belt Road age.
DISCLAIMER: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy and position of Regional Rapport.