Socialist economy progressed gradually from Stalin to Xi Jinping, Stalin’s rapid industrialization model was criticized by Mao and Deng learnt from Mao’s theory and practices, but Xi is building a new stage of the socialist economy where capital becomes dependent on non-profit-making investment flow.
Stalin in his book, “Economic Problems of Socialism in USSR” claimed that planning is base of socialist economy and law of value (or money motivation in commoners’ words) worked partly in the socialist planned economy. Mao
Stalin achieved the rapid building of heavy industries, education and health. This created a productive labour and infrastructure base very quickly. But after that, the Soviet economy began to struggle in consumer goods or light industry production. Post Stalin era saw the return to money-motivated incentives in a big way. These problems challenged Stalin’s understanding of the socialist economy in a big way.
Mao’s Critique of Stalinism
Mao criticized Stalin’s position in his book “Critique of Economic Problems of Socialism in USSR” and said planning is the superstructure, the base of a socialist planned economy is commodity production and the law of value works fully under panned socialist economy. Mao further said that socialist economy produces by looking at use-value while capitalist economy produces by looking at exchange value. Another way of saying the same is in the socialist economy, the investment must be social need-oriented while in a capitalist economy, the investment must be profit-oriented.
So Mao’s primary proposition was planning does not change the mode of production i.e. commodity production and the law of value remains intact. It only replaces profit from the prior objective of investment. Thus investment money under socialism is no longer M-C-(M+dM) and this change has been done from the superstructure of the planning commission. So while individuals are still working for money, the superstructure of the planning commission is preventing capital to be activated by investing in giving priority to social needs and not profit. Stalin was wrong to think this change in the nature of investment money has been done from the base.
Thus while Stalin thought that private property is in the moribund stage, Mao stressed that private property remains and takes birth in reaction to every action taken under the socialist planned economy. Now, Mao wanted to counter this by culturally attacking commodity production, money motivation, private property. His Cultural Revolution failed to produce desired results. Instead, the attack on money motivation seriously reduced the growth of productive forces.
Mao on Light Industries
Mao pointed out another important drawback of Stalin’s planned economy. It gives too much stress on heavy industries while cares little about light industries. Mao pointed out that the use-value of heavy industries and infrastructure can be determined by planners and economists and bureaucrats. But use value of light industries is determined by people only. So people must be involved in what to produce, how to produce and for whom to produce. The decision must be made democratically in economic planning. It should not be left upon bureaucrats. People’s involvement in planning also did not give the desired results. Professionals were often not listened to and that often led to disaster because people did not understand production.
Deng and Cultural Reveloution
Deng emerged when China was enduring the bad effects of the Cultural Revolution. He did not reject Mao completely. Not only Deng accepted Mao’s contribution in fighting imperialism, eradicating feudalism and building strong education-health-physical infrastructure-military industries, but also accepted Mao’s critique of Stalin. Deng accepted that base of a socialist planned economy is still a commodity production where the law of value acts fully and private property emerges every day.
Deng also accepted that light industry or consumer good industry use-value cannot be determined by planners. People have to decide that. People have failed to produce consumer goods through democratic planning as they could not understand production. Only professionals can produce them. But people can decide use-value by revealing their preference in the market. The market is needed in light industries and consumer goods and services.
But Deng also cherished socialist economy’s power to invest for use-value production. He understood that socialism can have the advantage of it only if it fully utilizes the base of commodity production. So Deng allowed private property to operate, allow competitive market and take advantage of the global market and global technology both of which are superior to Chinese counterparts. So Deng fully activated a base of commodity production while continue to pursue investment priority for use-value (social needs) over exchange-value (profit).
Thus Deng refused to go for rampant privatization and electoral politics unlike Gorbachev of USSR. Deng continued to keep state ownership in key sectors and infrastructural industries and services, while allowed private ownership in the consumer goods sector. The private desire for exchange value (money motivation) is allowed to identify the area with a competitive advantage while state-led use-value (infrastructure) creation goes on to create new areas of competitive advantage without taking into consideration of exchange value (profit).
President Xi and Value Creation
President Xi recommended demand creating infrastructure investment which not only create areas of new competitive advantage but create demand for existing industries and services. Thus a new advantage of a socialist economy is proved. Socialism not only invests in use value creation better than capitalism but also can create demand in the process and thus make profit-motivated investment dependent on-demand creation through planned use-value. So exchange value creation becomes permanently dependent on use value creation which gives no exchange value return. So Xi has is leading the most advanced stage of socialism attained by mankind yet.
Hence we conclude that Deng’s policy recommendations were created taking into account the advantages and disadvantages of Stalin’s policies, analysing critiques of Stalin by Mao and identifying the areas of failure of Mao’s policies. Xi’s policies are based on the success of Deng. This is the reason Deng policy is proving to be the best development policy ever created in mankind. Deng policies will be a great source of inspiration for developing productive forces of the Third World and reducing the gap in productive forces and wages between Third World and First World. Similarly, Xi’s policies are inspiring First World people to go for use-value prioritized investment over exchange value (profit) prioritized investment.
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.