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“Ten crises: The political economy of China’s development,” by Wen Tiejun

Nov 30, 2021

Wen Tiejun (right) and Samir Amin at Southwest University, China, 2012. Photo: Monthly Review.

When the People’s Republic of China (PRC) was proclaimed in October 1949, the country’s economy was in a shambles, devastated by decades of war and ravaged by inflation triggered by global forces beyond local control. The Communist Party of China (CPC) and the new revolutionary government faced tremendous challenges in restoring order to rural and urban areas, securing the country’s territory from foreign influence or invasion, and establishing conditions of stability and security within which the people could pursue their livelihoods. The new leadership was dedicated to the long-term goal of developing China into a modern, industrialized, socialist economy, but had to undertake that endeavor in a context of institutional limitations, complex social conditions, and an uncertain geopolitical environment. The CPC had a membership of around 1,000,000 and faced the prospect of guiding the governance and advancing the economy of a population of more than 450,000,000.

Seventy years later, China was the second largest economy in the world, had eliminated absolute poverty among its people, and was re-emerging as a significant participant in global economic and political affairs. With nearly 1.4 billion people—and more than half of them living in modern cities, with life expectancy more than double that in 1949, and with education and public health provision at high level global standards—China achieved what the Party characterized as a “moderately prosperous society,” the initial stage of “socialism with Chinese characteristics.”

Wen Tiejun’s new book, Ten Crises: The Political Economy of China’s Development (1949-2020) (Palgrave Macmillan, 2021), traces the history of China’s economic development from the founding of the PRC to the beginning of the 2020s. He articulates this narrative through a series of economic turning points, which he characterizes as “crises” in classical political economic terms, or moments in which the budgetary or fiscal system developed major imbalances and stresses which required policy intervention and innovation. Wen is primarily an agricultural economist and serves as the Director of the Center for Rural Revitalization at Peking University. His perspective on China’s developmental history is strongly shaped by this orientation. He sees the long process of socialist development and its requisite industrialization as both a phenomenal success in terms of expanding the productive capacity and the material wealth of the country, and as a generator of deep structural contradictions and challenges. In his final chapter, he suggests these contradictions and challenges can be resolved through a program of “ecological civilization as localization,” or turning away from a single focus on productivism towards a more balanced economy of social provision and environmental stewardship.

Wen distinguishes between crises arising from factors outside of China, or exogenous crises, and those generated by contradictions within China’s domestic economic and political environment, or endogenous crises. Exogenous crises included the hyperinflation that confronted the new PRC government in 1949-50, the Asian financial crisis of 1997, and the global economic meltdown of 2008, while endogenous crises included those associated with significant developmental phases and turning points, such as land reform in the early 1950s, the Great Leap Forward, the Cultural Revolution, and several stages in the evolution of the policies of reform and opening. In each instance, the resolution of the problems of one crisis carried within it the seeds of the next, a dialectical process which Wen sees as continuing to the present. He concludes his analysis with a consideration of the situation of China in 2020, arguing that the country is on the verge of entering a new phase that entails major readjustments to generate a system of “ecological civilization as localization,” resonating with Pan Jiahua’s writings about environmental governance and Xi Jinping’s discussion of the economic and environmental future in volume three of The Governance of China. What follows is a brief recapitulation of the Wen’s narrative of the PRC’s developmental history.

The early years of the People’s Republic (1949-52)

The collapse of the Republic of China as the revolutionary struggle and the Civil War advanced in the late 1940s intensified inflationary pressures that were building since the early 1930s. During the 1930s, China’s currency was linked to the U.S. dollar. China operated on a silver-based currency, so at first it benefited from the booming economy of the 1920s. When the U.S. abandoned the gold standard in 1933, silver appreciated in global markets, which drove down China’s exports. When the U.S. government passed the Silver Purchase Act in 1934, silver prices rose rapidly in international markets, but the Chinese domestic price remained lower, which led to large outflows of silver, in turn spurring deflation within the country. The Guomindang government decided to shift from a silver standard to a fiat currency in 1935.

When Japan invaded China in 1937, the Nationalists embarked on a course of massive printing of money, which triggered inflation. By the autumn of 1949, when the PRC was formally declared and the new government, under the leadership of the Communist Party, began to take steps to manage the economy, inflation was out of control and working people in both urban and rural China faced severe hardships. Two policy initiatives sought to create a stable economy that could begin to improve the lives of the people. Inflation was brought under control by linking the new currency, the renminbi, not to a precious metal nor to another international standard like the dollar, but to a basket of basic goods, so that the farming population (which at that time was still more than 80% of the people) could have a reliable basis for the acquisition of the things they needed in their daily lives and productive activities.

In tandem with the fight against inflation, the process of land reform also advanced. Land reform had been a key component of the CPC’s program since the days of the Jiangxi Soviet in the early 1930s, and had been undertaken in the liberated zones in northern China in the closing days of the Civil War. From 1949 through 1952, land reform was carried out across the agricultural expanse of China, reallocating land from those who had much more than they could farm themselves to the many millions who lacked enough to support themselves and their families. Land was given to adult members of households, so that the mass of the peasantry had the economic resources to pursue their livelihoods free of the exploitation by landlords and loan sharks which had been the plague of the people for centuries.

But land reform, which created a social economy of small proprietors, also complicated some tasks of developing a new, modern, socialist economy, which was the primary objective of the revolution and the new government. Rural villages were largely self-sufficient units and were not well integrated with the urban commercial economy. This meant that, while agricultural productivity increased, the gains were modest and social accumulation was limited. Development of the urban industrial economy required the input of surplus from the agricultural sector, but in the first years of the 1950s this remained at a very low level.

The new government pursued a moderate course in its relationship with private capital in the cities. Campaigns against corruption and profiteering, especially in the context of the war in Korea—which was a serious threat to the PRC until 1953—reduced many economic abuses, but the building of a new industrial system lagged without the influx of investment capital. This challenge began to be addressed in two ways: aid from the Soviet Union and beginning the process of agricultural collectivization from 1954 on. China and the USSR had signed a treaty of friendship and cooperation in 1950, and this was implemented with a program of loans and other financial assistance, along with a flow of advisors and technology for industrial and scientific development projects across the country. Much of this was focused on heavy industry, from steel mills and chemical plants to the building of railways and the construction of electrical generating capacity. As the collectivization of farming advanced in stages, from small cooperative efforts to larger units of collective production and accounting, agricultural production increased significantly, raising the material standard of living for hundreds of millions in both urban and rural China, and yielding a fund of surplus products which could be sold on global markets to generate additional capital for industrial investment. The combination of Soviet aid and domestic accumulation drove economic expansion by well over 3% per year through the 1950s. But the very success of this process also brought with it new contradictions which generated successive crises at the end of 1950s, through the 1960s, and into the 1970s.

Political and economic challenges (1958-76)

Wen sees the period from the late 1950s until the death of Chairman Mao in 1976 as one shaped largely by the exogenous contradictions arising in the course of the Sino-Soviet relationship in the first decade of the PRC, as well as the efforts to resolve those contradictions through political struggle in the following two decades. These found expression in economic policies and practices aimed at pushing forward the development of the industrial economy. These initiatives, which were developed in reaction to the influences exerted by the Soviet Union, in turn generated a series of endogenous crises over the following two decades, emerging as contradictions within China’s political and economic system.

The Soviet model of development emphasized heavy industry and a top-down approach to economic policy making and management, along with the rapid expansion in membership in the Communist Party, which brought in not only people sincerely committed to building a socialist future for the country but also individuals who saw Party membership as a path of personal advancement. This fostered tendencies towards bureaucratization within the CPC and the PRC government. Political forces within the Party centered around Mao Zedong sought to counter this trend by emphasizing a developmental model which sought to engage the industriousness and innovation of the masses as a material factor of production which could accelerate growth in both the agricultural and industrial sectors. One concrete expression of this was the decision in 1957 to decrease central oversight of economic decision making, which gave greater scope to local initiative but also put more control over information into the hands of middle-level cadres.

Tensions with the USSR began to increase by 1958, as the Soviet leadership came to view China’s developmental strategy as adventurist. The Soviet government started requiring payment for debts in commodities like grain or vegetables, which put strains on Chinese food supplies. When the Great Leap Forward (GLF) was launched in 1958-59, the Soviets decided to withdraw their aid and advisers, and the relationship deteriorated to one of mutual criticism and growing antagonism. This rupture exacerbated serious problems which were emerging in the domestic food supply, as distorted reporting of harvest yields led to misallocation of resources. In 1959 and 1960, China faced crises both in its fiscal accounts, as Soviet demands for repayment placed great stress on state finances, and even more severe problems with food, as hunger spread in rural areas and large numbers of people faced starvation. Wen does not embrace the exaggerated figures proffered by some critics of the Great Leap, but he does provide a frank assessment of the elevated mortality of this period. The combination of bureaucratic exaggeration and later efforts to cover up and evade responsibility coupled with the devastating effects of the withdrawal of Soviet aid yielded a disaster for the Chinese people and posed serious challenges for the Party and the state..

Wen argues that a key response to the crisis generated by the GLF was the transfer of educated urban youth to the countryside to help with agricultural production in 1959-62. This had the effect of both providing additional labor inputs in rural areas and of easing unemployment pressures in the cities, where the readjustment of agricultural procurement in the wake of the shortages led to a depression in urban productive activity. In addition, the central leadership authorized a reduction in the level of integration reached by the People’s Communes, returning most economic decision making to lower-level production units—which were formed on the basis of the natural village unit—as well as encouraging peasant households to engage in sideline production of vegetables and fruits. These shifts in policy resulted in a revival in agricultural production and the return of harvests and procurements to pre-crisis levels by 1963. But the contradictions between bureaucratization in the Party and state and the goals of rapid economic development remained unresolved.

Wen sees the Cultural Revolution, especially its first three years—between 1966-69—as an effort to address the lingering bureaucratic tendencies within the CPC, which were embedded in a period of geopolitical anxiety about both U.S. imperialism and the deepening antagonism with the Soviet Union. While the political turmoil of the effort to promote mass oversight and criticism of the Party was largely confined to cities and towns and had relatively minimal economic impact, a plan to shift industrial production to cities in the country’s interior—as part of concerns about possible invasion by either Soviet or American forces—led to massive expenditures and caused a serious crisis in the government’s budget. Once again, Wen argues, large numbers of urban youth were sent to the countryside both to contribute to economic and social development there and to ease pressure on urban resources. The rustication of Red Guards and other young people, in much greater numbers than in 1959-62, is generally seen in its political context as part of the winding-down of the radical phase of the Cultural Revolution. Placing it in a broader context of the budgetary crisis on the later 1960s provides a more nuanced understanding of this episode.

The third economic crisis of the period from 1958-76 resulted from the shifting geopolitical orientation of the CPC leadership around Mao Zedong and a new effort to gain access to modern industrial productive technologies in the early 1970s. The split with the Soviets, which deprived China of its only source of modern productive equipment and expertise, reached a point of maximum intensity with armed clashes on the Sino-Soviet border in 1969. This led Mao and others to the conclusion that the primary contradiction facing China in geopolitical terms was no longer with U.S. imperialism, but was with the Soviet Union. Secret negotiations with the Americans led to the visit of President Nixon to China in February 1972. Relations with Japan also improved during this period. As a result of these diplomatic shifts, China was also able to begin acquiring new technological inputs from Japan and the U.S., which enabled it to reinvigorate industrial development. At the same time, however, China began to assume new debt, especially foreign debt, which caused new stresses in the urban economy by 1973-75. This led to a third round of sending urban youth to rural areas, although this time it didn’t develop into a major initiative and was short lived. A period of economic stagnation set in, paralleled by lingering unresolved political contradictions within the Party, the state, and society at large, which would persist until the end of the decade, when dramatic changes in the leadership of the CPC gave rise to the era of reform and opening to the outside.

Structural crises associated with reform (1979-97)

The political transition that followed the death of Mao in September 1976 not only embodied the resolution of the contradictions around the role of the CPC in guiding the course of development in China’s economy, but also, as Wen emphasizes, brought a new and younger cohort of leaders to prominence in the years after 1979. The Communist Party would remain the guiding force in national policy making and would oversee the process of economic planning and development. While not fully embodying the Soviet style of political leadership, the CPC would eschew campaigns of mass mobilization like those of the previous eras. The reaffirmed the central role of the Party, which continues to remain the core of China’s system.

The period immediately following Mao’s death was one of intense maneuvering within the Party, which limited the leadership’s ability to address economic issues arising from the expenditures undertaken earlier to acquire new productive technologies from abroad. The reversal of the program of rustication for urban youth resulted in the return of millions of men and women—now in their mid to late twenties—to the cities, where they added to the urban labor force in need of employment. As Deng Xiaoping emerged as the leading figure in Party and state affairs after November 1978, and along with the emergent younger leadership sought to legitimize the new political order, the policies of reform and opening to the outside were formulated and implemented. This included a reorientation in industrial policy towards the production of consumer goods, and a corollary enhancement of social service provision. These factors combined to generate a budgetary crisis by the beginning of the 1980s, the first of three Wen delineates for the first two decades of the reform era.

This crisis was addressed with two policy initiatives, one centered in the countryside and the other taking shape in east coast provinces. In the agricultural sector, the household responsibility system, which devolved most economic decision making to the level of the individual household (although some functions continued to be managed within the framework of what Wen terms the natural village) was developed. Households started entering into contractual relationships with township or county governments for the delivery of set, modest quotas of specified commodities. Production beyond the contractual obligations could be sold on markets which developed rapidly across rural China. This resulted in a significant increase in agricultural production, which in turn enhanced the revenues of village and township administrations. These, in turn, began to invest new income streams into small scale industrial enterprises, known as Township and Village Enterprises (TVEs), which quickly developed as an important new source of low-cost goods for rural consumers and as providers of employment for surplus labor.

China sought new inputs of Foreign Direct Investment (FDI) by establishing Special Economic Zones (SEZs) in several locations, first of all in the coastal areas of Shenzhen and Zhuhai. Foreign enterprises were offered tax concessions, land use rights, and the chance to build industrial facilities with easy access to state-of-the-art production technologies and industrial management practices to learn from and emulate these in order to develop China’s modern economy, with the long-term objective of achieving a “moderately prosperous society” and eventually to build a truly socialist system for the equitable distribution of social wealth. The SEZs soon became successful attractors of major FDI, and grew rapidly into centers of industrial employment and production. Additional SEZ were set up in other coastal locations in the following years.

The reforms in the agricultural sector and the development of TVEs and SEZs resolved the budgetary crisis at the end of the 1970s and the early 1980s, but once again created new contradictions which built during the latter decade. These contradictions, which would help produce an economic crisis at the end of the decade, spurred social unrest during the same period. The very success of the growth of investment in both rural and coastal areas created overcapacity in production and drove a new cycle of inflation. The transition to market forces generated social stresses, especially in the cities, as the reform of state-owned enterprises reduced employment in some areas. These tensions were manipulated by certain elements, including foreign interests, and this contributed to the serious anti-government turmoil of April-June 1989. The violence which marked the ending of the occupation of central Beijing, and which saw the death of perhaps 600-800 people, including around 200 military personnel killed in street fighting, caused a sharp negative reaction among Western political elites, and China was subjected to criticism and sanctions which had a strong impact economically, driving foreign trade and investment down in the following year or two. This further deepened the economic crisis facing the country.

Serious debates took place within the Party and the PRC government about how to proceed with reform. Some who had advocated from more large-scale marketization were now weakened by the negative effects which had emerged in the ‘80s. Deng Xiaoping argued for maintaining the reform program, but with modifications which would address the issues plaguing the economy. In 1992 Deng undertook what was called his nanxun, a Classical Chinese term for an imperial tour of inspection, in the course of which he visited the Shenzhen SEZ and made several very strong statements aiming to reinvigorate the reforms. This succeeded in jump-starting a new phase of economic expansion fueled by Foreign Direct Investment, by new policy changes in the rural sector, and by refocusing industrial production towards the global export market.

Once the initial wave of international criticism of China for the events of 1989 receded, the imperatives of global capitalism drove a new phase of interest in investing in the PRC. FDI began to flow into China in greater volume than ever before. Much of this new investment was directed to the production of goods for export, from electronic gear to clothing and footwear. Factories sprang up in cities along the coast, and employment skyrocketed. Millions of younger workers moved from rural villages to the expanding urban centers. Many young women went to work in factories, while many men sought employment in construction, as both commercial and housing development boomed.

Changes in the rural economy both contributed to the surge in urban industrial development and were the result of that growth. Between 1992-94 the government phased out the use of coupons as a means of rationing the supply of key commodities, which meant that the rural economy was finally fully monetized. This had several effects. It severed a strong link between individuals and their place of household registration, since they were no longer dependent on the township or village government for the provision of such coupons. This allowed young people in particular to decide to move to the cities in search of employment. This expansion of the mobile labor population dovetailed with the rapid growth of demand for labor in urban factories and on building sites. It also created a new pool of finance in the hands of individual citizens which could serve as a source of investment funds.

The growth of the SEZs and the focus on production for export eclipsed the TVE sector, as the smaller scale and lower quality standards characteristic of rural light industry could not compete with the newer, state-of-the-art technologies of the big factories. This further contributed to the “push” of labor from the rural to the urban sector. The export strategy was a great success, and in 1994 China began to run a surplus in its international trade, as it has done in every year since. The trade surplus also led to the accumulation of foreign currency reserves, which would become a major resource pool for managing economic challenges in the coming decades.

The developmentalist policies of the revived reform program improved the material conditions of life for many people, and overall growth in Gross Domestic Product (GDP) reached unprecedented rates by the late 1990s. But the very success of these measures generated new economic contradictions, now largely of a speculative financial nature. The emphasis on production for export had the unintended effect of depressing domestic demand, which resulted in high savings rates. This created new pools of funds seeking investment opportunities, which fueled speculation in real estate, in the new equity markets which were being set up, and in new forms of financial activity. Systems of regulatory oversight in these areas were not yet adequately developed, so that markets were often volatile. At the same time the government was further pursuing the marketization of social services such as medical care and education. Core services continued to be provided by the state, but private clinics and hospitals and private educational programs sprang up in cities across the country.

The primacy of urban development, both in the production for export industries and in the rapid pace of urban construction, along with the attendant flow of young working people to the cities, left rural county and township governments strapped for resources. Central government funds were no longer proved as budgetary allocations, but were redefined as loans, which would require repayment. This drove local officials to seek other ways of financing their administrative operations. The sale of land to property developers became a favored way to raise revenues, but also often led to conflicts with local communities, sometimes resulting in incidents of popular unrest.

By the late 1990s China’s economy was growing quickly, but was also plagued by structural contradictions stemming from the reform policies. At this point new challenges emerged from outside the country, as a result of China’s deepening engagement with the global capitalist system.

Exogenous crises of 1997 and 2008

Wen Tiejun sees the economic crises which arose in China from the early 1950s through the late 1990s as largely the result of contradictions which developed within the domestic economy, often as the dialectical outcome of the resolution of the preceding fiscal or budgetary difficulties. As China became more deeply engaged with the global economy in the later 1990s and into the twenty-first century new challenges confronted the Party and the PRC state which came not from the internal dynamics of the country, but as the result of major breakdowns in global financial markets and in the Western, especially American, capitalist core.

The first of these externally driven crises was the 1997 Asian financial meltdown, which resulted from the actions of speculators in the money markets seeking profits from the exploitation of weaknesses in the currencies of some countries. The Thai baht was the first of several Southeast Asian currencies to come under attack in July as the royal government had to sever the link to the U.S. dollar which had been the basis of monetary stability. The currency was allowed to float, and its value plummeted as speculators reaped profits. The collapse of the Thai Currency had a ripple effect through other East and Southeast Asian economies, especially those of Indonesia and South Korea. The Hong Kong dollar, long pegged to the U.S. dollar, also came under pressure just as Hong Kong was returning to Chinese sovereignty after the end of British colonial rule.

China was already grappling with contradictions arising from the effects of the reform policies, as outlined above, and given its increasing interconnection with global markets it was now more vulnerable to downturns in both the monetary system and in aggregate consumer demand. The expansion of production for export, in tandem with further decentralization of economic decision making, had given rise to overcapacity in many industries, and the decline in demand as Asian countries struggled with their monetary difficulties had a negative impact on employment and overall output in China.

But at this point the PRC government was able to build on the success of the reform program in developing the economy to cope with the effects of the financial crisis in several ways. The large reserves of foreign exchange which the state had accumulated allowed the central government to back up the Hong Kong dollar by injecting funds into the banking system of the new Special Administrative Region (SAR), which stabilized the currency and insulated Hong Kong, and China more broadly, from the more serious impact of financial speculators. The PRC’s national currency, the renminbi, was not yet traded internationally and so was protected from market fluctuations. The financial resources of the central government were also sufficient to allow it to take over some of the debt obligations of local governments, which eased the pressure on them in the wake of the temporary decline of export demand. This also gave the central government to opportunity to re-centralize some economic decision-making functions, which enhanced oversight and planning capacity.

A further series of policy measures were deployed over the following years to begin to encourage greater domestic consumption, thus reducing reliance on exports to drive development. These included major investments in rural infrastructure and a significant expansion of social services, specifically the expansion of health insurance and health care provision for rural residents. In 2006 the land tax, which had been the foundation of government finance throughout the imperial and Republican periods and had been maintained under the PRC, was abolished, which greatly enhanced rural household incomes and proved funds which could be used for all kinds of consumption activities, from basic products for personal use to new home construction to tourism and other forms of entertainment.

These measures combined to help China weather the 1997 crisis relatively unscathed, and by the time of the outbreak of the 2008 global financial crisis they helped provide the basis for handling this much greater economic challenge. The development of opaque and unmanageable financial derivatives, such as collateralized debt obligations, based on poorly understood risk assessments in real estate markets, had driven a massive wave of false growth in the American and other Western economies for the first seven years of the 21st century. Profits on paper were translated into bonuses and other material benefits flowing to a small subset of capitalist plunderers. This house of cards collapsed in the summer of 2008 and by that Fall the effects had spread around the world, wiping out the savings and pensions of workers and casting large numbers of working families out of their mortgaged homes. As consumer demand evaporated millions of people lost their jobs as well, further depressing economic activity.

In China the impact of the crisis was dramatic. More than 20,000,000 workers were laid off in factories normally producing a wide range of goods for export to Western markets. Yet the long-term effects of the global downturn were relatively minimal, and China recovered more quickly than any other major economy, resuming steady growth by 2009. The steps which had been taken in the wake of 1997, and the commitment of the CPC and the PRC government to prioritizing the needs of the people, reduced the economic pain for laid-off workers, the vast majority of whom could return to the rural villages from which they had come, where they remained eligible, because of the household registration system, for at least basic social services, including housing, education for their children, and health care. Further government investment in rural infrastructure projects absorbed some labor, and as further policies were put in place to re-orient production to domestic consumer products employment began to revive and those workers who had been laid off could either return to their previous jobs or seek new work opportunities elsewhere.

China’s political economic system, which retained both a core of publicly owned enterprises and a socialist legal infrastructure, had achieved, through the twists and turns of successive crises, their resolution in new policy initiatives, and the dialectical unfolding of what the CPC calls “socialism with Chinese characteristics”, the ability to manage these shocks from the global capitalist system, even while having to constantly adapt and update its theory and practice. The leading role of the Party was critical to this success, and in the final period analyzed by Wen, the CPC would once again embark on a new phase of building socialism, which would yield new contradictions as well as new opportunities.

From globalization to ecological civilization as localization (2013-20 and beyond)

By the second decade of the twenty-first century China was entering a new relationship with the Western, American led capitalist system. During the first three decades of the reform period China had largely subordinated itself to the interests of the global bourgeoisie, in order to gain access to state-of-the-art productive technologies, and to accumulate capital through the production of export goods. The overall goal was to use the mechanisms of the marketplace to develop the productive economy, with the CPC playing a guiding role and with the ultimate objective of reaching a level of social wealth which would allow for the beginnings of new forms of social distribution, an initial step on the path to true socialism. But as Wen has demonstrated, while this yielded rapid growth in GDP, it also brought with it attendant contradictions within the economy, and in the interaction of the economy with social and environmental conditions, generating serious inequalities of income and producing pollution of the air, water, and soil among other ecological stresses. Each economic crisis in the history of the PRC had been addressed in ways which resolved the immediate issues, but which also fostered the conditions which led to the next outbreak. In the wake of the 2008 global meltdown China was able to handle the challenges which it faced more effectively than other countries, largely because of the measures which had been put in place over the course of reform and building on the foundation of infrastructure developed in the initial period of the PRC from 1949-79. This success, along with changing attitudes on the part of the United States and other capitalist countries towards China, contributed to a new perspective among leaders of the Party and government, more confident in the country’s strengths and capacities, and less willing to accommodate the demands and expectations of the Americans and Europeans.

This shift in the global orientation of the Chinese leadership was reflected in the choice of Xi Jinping as CPC General Secretary and President of the PRC in 2012. Under Xi’s guidance China has become more assertive in international affairs, both in response to an increasingly hostile and aggressive posture taken by the Americans, and in proactive programs like the Belt and Road Initiative (BRI) and various other forms of aid and assistance to less developed countries, as well as in seeking to create new institutional structures for international cooperation not subordinated to the domination of the U.S.

This changing relationship with the global capitalist system has been paralleled within China by developments in the political and economic spheres which also reflect the recognition of what has been accomplished over the previous decades and a confidence in the country’s readiness to undertake dramatic initiatives to move towards a more equitable distribution of social wealth, to reign in and carry out greater oversight of the activities of private capital, and to significantly strengthen China’s efforts to address environmental concerns, most particularly global warming and climate change, through expanding investment in alternative energy development and aggressive mitigation programs.

Wen traces the course of these developments through the years from 2013-2020, noting as ever the persistent problems of systemic debt and the role the central government played in recirculating financial assets accumulated from foreign trade to meet needs arising within the domestic sphere. He also notes that the place of the rural sector within the economy was declining as more people came to live in cities than in the countryside for the first time in Chinese history. Conditions in the country were improving in many ways during these years. The government and the CPC carried on a strenuous anti-corruption campaign seeking to reduce the abuses of power and the draining of social wealth into private hands through the illegal actions of officials at all levels of administration. Efforts to reduce reliance on coal and oil as energy sources were advancing as China became a world leader in the development and deployment of wind, solar, and hydroelectric power. Ongoing long-term programs of poverty reduction were nearing fulfilment as the last pockets of absolute poverty in remote corners of the country were being reached. But as the new year of 2020 arrived a crisis of massive dimensions, unlike the series of turning points charted by Wen across the previous seven decades, struck the People’s Republic with the emergence of the Covid-19 virus.

Wen takes note of the effectiveness of China’s response to the health crisis, which was also an economic crisis, and lauds the mobilization of governmental resources and the participation of masses of ordinary people in bringing the viral outbreak under control and preventing the kinds of catastrophic loss of life which have so sadly been characteristic of the “advanced” Western world, most particularly the United States, where the for-profit health care system and the polarized political culture of decaying bourgeois democracy produced a death rate more than 600 times that of China.

As a political economic history, though, Wen’s study takes the crisis of 2020-21, and the dynamics of China’s ongoing course of development, as a point of departure for reflection on how that process can and should play out in the coming era. He argues that there are continuing structural contradictions within the economy, especially with regard to debt within the domestic sector and the relationship to the global capitalist system externally, but also that China is now in a position to pursue a reconfigured developmental gestalt, moving away from the developmentalist globalization of the period since 1979 and towards what he calls “ecological civilization as localization”.

Wen’s vision is of a China which would be increasingly self-reliant, delinking from the American dominated global capitalism and developing its own key technologies and productive capacities, while at the same time continuing to engage with other emerging economies which share a desire to be free of Western neo-imperial control. Within the PRC there would be an even deeper dedication to addressing environmental concerns, especially alternative energy, but also through rebalancing urban and rural development, with an emphasis on rural revitalization. The leadership of the CPC and the PRC government, the oversight and supervision of private capital, is critical to this vision. This is not a prediction of a Chinese version of the “end of history”, with the country reaching a fully realized socialism in the immediate future, but rather Wen’s projection and prescription for what China could and should achieve in its next steps along the path to the future.

Conclusions

What are the lessons, the overall patterns and understandings, which can be drawn from Wen Tiejun’s deeply detailed and thoughtful presentation of the history of China’s political economy from Liberation to the era of Xi Jinping? In a few brief, tightly argued paragraphs in the closing pages of the book he presents an overview of what he calls “the institutional experience of China’s late-developing introvert industrialization.” In this narrative the main lines of development began with the stabilization of the country and economy in the early 1950s backed by the equalization of land tenure and the influx of investment and technology from the Soviet Union. This allowed China, by the mid-1950s, to undertake what Wen defines as primitive accumulation through the extraction of surplus value from increased agricultural productivity driven by the economies of scale attained through collectivization, in tandem with the mobilization of large-scale rural labor forces on major infrastructure projects to some extent replacing regular capital inputs. This process, while launching the industrial development of China’s economy, also incurred great costs which, Wen notes, were not always borne equitably across society. In the course of this first decade Wen discerns the emergence of “government corporatism”, essentially the core of state-owned enterprises which became the basis of the socialist system. He sees this structure as having been essential to China’s ability to maintain its intact economic system over the ensuing shifts and reorientations in policy.

Wen further defines two critical aspects of China’s successes in economic development. The first is cultural in nature, drawing on collectivist and collaborative elements within traditional society to overcome what in other developing economies were often debilitating cost externalities by absorbing them into existing community structures. In other words, the progressive collectivization of agriculture in the 1950s facilitated accumulation as part of a wider social consciousness, not as an arbitrary extraction by an alien governmental power. He elaborates this concept further as a kind of “non-monetized” investment strategy in the villages, arguing that it was the capacity of rural society and the rural economy to pursue collective development goals through the mobilization of labor resources which underpinned the development of the urban socialist industrial system. 

Based on the growth of agricultural productivity across the first thirty years of the PRC and the investment in industrial development which this had fueled, despite the withdrawal of Soviet assistance after 1959, the reform policies instituted beginning in 1979 followed what Wen characterizes as a course of pro-capital development, allowing private capital to greatly expand within the domestic economy as well as welcoming FDI to grow the productive forces of the country. After some twenty-five years of this approach Wen sees a major shift to “pro-people” policies beginning 2003, and carrying on with steadily increasing effect following the successful management of the 2008 global financial crisis’ effects on China and into the period of Xi Jinping’s leadership. 

Given the levels of industrial production and the accumulation of social wealth which have been achieved through the seven decades since Liberation, Wen sees China as poised to embark on his vision of an ecological civilization. He sees this as requiring a sharp break with the developmentalist model of “high investment-high debt-high GDP” which has been the basis of policy heretofore, in favor of an economic system more firmly grounded in a sustainable relationship between human society and the natural world.

Wen Tiejun’s history of the People’s Republic of China’s political economy is a remarkable document of struggle and achievement, while frankly recognizing the challenges and contradiction which arose along the path of development. It is a counterpoint to bourgeois histories which seek to portray the course of post-1949 China’s history primarily in terms of political factionalism and the grasping for power of the Communist Party and its leaders. Wen’s focus is on the fiscal and budgetary constraints which shaped the crises he details and the policies he analyzes. He traces the intricate dialectical course which this history followed, showing how the resolution of one set of contradictions in turn generated those which ensued; a masterful exercise in historical materialist analysis. His background and experience in rural reconstruction work leads him to give greater prominence to the rural sector than many accounts of China’s economy which focus almost exclusively on urban industry. Wen’s perspective brings greater nuance to his account, and provides the ultimate basis of his vision of the ecological civilization of the future.

Theorists of socialist development, from Marx and Engels to Lenin to Mao Zedong, have been quite clear that building socialism is neither a quick nor easy process, that it will be a lengthy and sometimes convoluted itinerary. Wen’s narrative of China’s course since 1949 reveals both continuities and ruptures, from the ongoing quest for foreign investment and technology, the fraught process of primary accumulation, to the extraction of surplus value from labor. These were accompanied by shifts in emphasis from mobilizational movements to expert-led management. He is clear that much has been achieved, but just as clear that the future will contain its own contradictions and challenges.

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