Silk Route and Marxist Historical Materialism

Recently at People Liberation Army’s rally, Chinese President Xi Jinping has asked China to go to Marxist roots. Many foreigners used to think that Mao’s China was Marxist and since Deng Xiaoping China is capitalist. But this is not how Communist Party of China sees things. For CPC, Mao and Deng both view China under the present objective conditions. Since objective conditions change dramatically in the 1970s, Deng took a path that is distinct from Mao.

But Deng never negated Marxism. We will explain here how CPC’s vision changed in different historical periods and why Xi Jinping facing new objective conditions distinct from Deng is taking the distinct path. Mao, Deng, and Xi actually represent reactions of the Chinese leadership to different material conditions.

Marxist historical materialism states that forces of production rise as human knowledge about nature rise. As a result, production relation needs to be changed too. Production relation implies ownership pattern of productive means like land, tools, machines and class relation in the production process. As productive forces develop, the production relations develop as well. In this way, humanity is moving from Primitive Communism to Slavery to Feudal System to Capitalism and finally to Communism.

Mao Era

During the first decade of 20th-century colonial industrial capitalism was facing a deep crisis. Automation resulting in fewer job opportunities, heavy centralization of the production process to exploit economies of scale resulting to big cartels and companies eating up smaller companies, newer industrialized countries are rising and challenging older industrialized countries. Thus, there was working class movement, small ownership in crisis and industrialized countries at war with each other over control of raw materials, cheap labor and colonies. Therefore, World War I broke out and Lenin seized the opportunity of the then social and political disarray and created the Soviet Union.

Lenin pointed out the bad effects of profit motivated production process and hence following Marx-Engels idea called for state ownership of means of production (i.e. land and machinery and factories) and resource allocation by Planning Authority rather than the market. Under Stalin, Soviet Union succeeded in doing them. Plan based resource allocation under state ownership helped the Soviet Union to succeed in heavy industries and creating an independent weapon producing industries. The Soviet Union also succeeded in education and health. The victory of Soviet Union over Nazi Germany made the Soviet Union a role model for the then world.

As colonial era ended after World War II, newly independent colonies and semi-colonies were following Soviet’s rapid industrialization model under planned resource allocation under state ownership. Since all newly independent countries found it a hope of self-sufficient industrialized society. India, Africa, Latin America, even East Asia, and West had different levels of considerable influence of this planning model of Soviet Union. China and many East European countries had the communist revolution just like the Soviet Union. CPC just following the trend of the then world went for planned resource allocation under state ownership. In fact, this was believed to be the only way to become industrially self-sufficient. Even West was following Keynesian economics where the state was asked to create demand since market forces were considered not enough to create sufficient demand to meet supply.

Hence, it can be said that industrial capitalist system was under over production crisis and state was believed to the way to generate demand. In none industrialized countries, the state was given the extra job of allocating resources to heavy industries and infrastructure which have long gestation period would not be taken care off under market.

Deng Era

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 petrol dollar credit channel, USA assured itself of unlimited credit and with this inflated its asset prices and then made a profit by trading in assets. Thus capitalists could find profit in asset trading and over production crisis was temporarily solved. Gradually West mainly the USA started exporting its manufacturing base to Third World countries for making more profit by using the latter’s cheap labor. And West and the USA itself started to profit by asset trading. Deng 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 laborers. This simply assures the fact capitalism is transforming itself in reaction to over production crisis. And this transformation presented China a historical opportunity clearly noted by Deng in his thesis.

And West and the USA itself started to profit by asset trading. Deng 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 laborers. This simply assures the fact capitalism is transforming itself in reaction to over production crisis. And this transformation presented China a historical opportunity clearly noted by Deng in his thesis.

China began to industrialize itself using capital and technology from USA and West and Japan while the USA 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 USA’s in purchasing power parity. China’s economy becoming too big to rely on debt created demand of US economy. The USA 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 USA. So new crisis is back in Western capitalism.

Xi Era

Xi Jinping came to lead China in this critical situation. He and his comrades understood that old system of globalization cannot go on. Since the USA will no longer be able to generate enough demand for Chinese products the course of over production is on Chinese economy now. How to react then?

One way is following USA and West, China can start dolling out debt to inflate asset prices and profit from asset trading and export its manufacturing base to some other less developed Third World countries like India, Bangladesh or Africa. An important problem in following this step for China is that China does not have any petrol dollar type credit channels and it’s impossible for China to make one. This is simply because petrol dollar reflects three centuries of Anglo Saxon global domination. China has no such global domination history neither it is interested in. So China can never have an unlimited inflow of real debt, unlike the USA. Another shortcoming of this step is that China will then face similar problems of deindustrialization and indebtedness the USA is facing today.

Hence under Xi’s leadership, China came up with the different idea to counter over production 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. Though China has a huge trade surplus and is still growing funding infrastructure worldwide will not be the problem. But long gestation period, non-profitability for long period of time often considered being a great problem for Belt Road Initiative. But will this be a real problem for China?

Remember Xi’s Speech: Marxist Root

China can go for Belt Road while Japan or Germany with huge trade surplus cannot. This is because China can endure long gestation period and long-term losses while the Western system cannot. This is because in Chinese economy mode of surplus value appropriation like the Western system is essentially capitalist in nature. That means capitalize appropriate surplus value created by wage labor by having ownership of machines and other means of production. But while in West how to use surplus value is decided by private capitalist and banker class, in China the same is decided by bureaucrat class. Thus bureaucrat 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 over production 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 hands of State than in hands of private capitalists. The Recent crackdown on top executives of Aubang, Wanda, etc. clearly shows this. Most of Belt Road project to be developed by state owned banks and infrastructural corporations.

Conclusion

We can thus conclude that China never actually moved away from Marxist approach but changed course as time and material conditions changed. Under Xi, as state companies will do more infrastructural investments often incurring losses for the sometimes Marxist root of Chinese leadership must be remembered.

DISCLAIMER: The views and opinions expressed in this article are solely those of the author and do not necessarily reflect the official policy and position of Regional Rapport.