The Economic Development of China

Victor D. Lippit

• Publisher: Taylor & Francis
• Year: 2018
• Print ISBN: 9781138313552
• eBook ISBN: 9780429855108
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

This book, first published in 1987, studies the forces promoting underdevelopment in China prior to 1949 and the character of the development that has occurred since then. It presents a unified perspective for grasping the development process as a whole, for relating this to the class structure of China, and for considering development in the context of Chinese efforts to carry out a transition to socialism.

PART I
THE ANALYTICAL FRAMEWORK

1. Class Structure and the Development Process

When Europe was still in the Middle Ages and prevailing opinion held the world to be flat, China passed through a prolonged period of rapid economic expansion and technological development, emerging with a culture of unparalleled sophistication. Yet China’s economic lead was frittered away, and while the Industrial Revolution brought sustained economic development to the West, nothing comparable took place in China. Rather, by the nineteenth century, China had become one of the most underdeveloped countries in the world. It persisted in this state until the middle of the twentieth century, when the Chinese revolution swept new classes into power and a period of sustained economic development was initiated.

Both the failure of Chinese development to be carried through in earlier centuries—despite favorable initial conditions—and the successful initiation of the development process in the middle of the present century require explanation. This is to be found above all in the key role played in the development process by the dominant classes and the use they make of the economic surplus. Almost every society generates a surplus, an output in excess of the customary consumption requirements of its ordinary members. The dominant groups or classes in the society dispose of this surplus in a manner calculated to serve or promote their own interests. Where those interests coincide with the objective requirements of economic development, development proceeds; where those interests conflict with the objective requirements of development, development is blocked. When development proceeds, it is capable of following a number of alternative paths, depending on which classes are predominant. That is to say, if the dominant classes find development to be in their interest, they shape the process in ways that reflect that interest. In short, economic development is a class-specific process.

Although class structure and the attendant pattern of surplus use typically play the most significant role, development prospects are also influenced by such factors as resources, technology, and international conditions, and in some cases they are determined by the actions of foreign powers and the international economic system they have created. The most clear-cut case of this is colonialism, where the dominant classes in a less-developed country are replaced by a foreign power which shapes the colony’s economic activity to reflect the interests of its own dominant classes. Even in the case of colonialism, the most clear-cut case of development being blocked by external forces, questions of class structure and surplus use come to the fore, since the dominant class interests of the mother country replace those of the colony, and since the process of surplus extraction and disposition encompasses the core of colonial economic activity. Where direct colonial rule is not present, imperialism and the capitalist world economic system can nevertheless affect profoundly the prospects for development in less developed countries, and the course of development if it does take place. Where this is the case, however, it is still necessary to examine the domestic class structure and the use of the surplus it determines as well as the impact of the world system. Methodologically, moreover, it is important to examine the two in this order because the impact of the world system can be appropriately clarified only after the character of the domestic system with which it interacts has been established.

The analysis of class structure and surplus use gives this study of the economic development of China its unity. The book is divided into three parts. Part I lays out the analytical framework that underlies the study as a whole. Much of the discussion in this part, therefore, does not deal directly with China, but elaborates the categories of analysis. Those who are less concerned with the theoretical framework can proceed directly to part II, which considers the reasons for China’s development failure prior to the middle of the twentieth century; those whose interests are limited to the postrevolutionary period can proceed directly to part III. Although I have sought to make the three parts complementary and thus give the book its structural integrity, I have sought at the same time to make each of the three parts comprehensible in itself, so as to meet the needs of those whose interests are more specific. The topics in this chapter (part I) include the concepts of class and surplus, economic development, modes of production, social formations, and the transition to socialism. Part II turns to the development of underdevelopment in China, attempting to clarify the reasons for which China, once one of the most advanced societies in the world, became by the nineteenth and early twentieth centuries one of the most underdeveloped. There, developing the argument through an extensive critique of earlier theories, I argue that the class structure and associated patterns of surplus use bear primary responsibility for underdevelopment.

The major part of the book, part III, is devoted to an analysis of economic development in China since the founding of the People’s Republic in 1949. There I argue that the critical change was the replacement of classes with a hostile or ambiguous attitude toward development or the changes needed to bring it about (such as land reform) by classes with a clear interest in development. The classes favored by development in contemporary China are composed of people who work for a living, and for the most part they have shaped the development process to reflect their interest. Much of the discussion in part III is meant to document this by showing that, in general, the characteristic features of China’s post-1949 development can be grasped most readily as an expression of the class interests of those who work for a living.

The relation between the development process and the interests of the dominant class is invariably a complex one, however, embodying various contradictions and affected by a host of related factors, including among others international ones and historically determined initial conditions. The most important contradiction is that posed by a vanguard party and strong state, necessary on the one hand to provide leadership and protect the mass class interests, but at the same time capable of defining and asserting an independent interest that conflicts with theirs.

To analyze this and other contradictions, and to provide the basis for a comprehensive assessment of China’s economic development in the modern period, this chapter sets out the basic features of socialist economic development; that is, development that reflects the interest of workers, peasants, and indeed all those doing socially useful work. This provides a benchmark against which it is possible to assess the actual economic record and clarify the contradictions that have emerged in the course of Chinese development. As the discussion in part III makes clear, Chinese development has on the whole reflected the interests of those who work, but there have been notable deviations which if left uncorrected would have threatened the entire socialist project.

The Concept of Class

Throughout the book, the conception of class plays a central role, for I assert that in the last analysis it is dominant class interests that blocked development prior to 1949, and (a new set of) dominant class interests that promoted and shaped the development process after 1949. By class I refer in the first instance to the economic relations into which people enter as a consequence of their participation in the production process, including its characteristic ownership patterns. Common usage is sometimes a satisfactory indicator of class status, sometimes not. Thus, for example, the identification of capitalists as the private owners of the means of production and of workers or the proletariat as those who must sell their labor power in order to live is fairly straightforward. The term “middle class,” on the other hand, has no clear reference to economic roles and thus is avoided here.

Sometimes, however, popular terminology is convenient to use even though it fails to isolate the critical elements that distinguish classes. Thus the terms poor, middle, and rich peasant, for example, appear to be based on income, and at one level of analysis they indeed are. At the same time, however, poor peasants can be identified as those whose farm income is inadequate to meet their subsistence, and who must supplement their income to a considerable extent by selling their labor power, full or part time, or engaging in handicraft production. Since the term “poor peasant” incorporates this economic role, it is useful for class analysis. Similarly, middle peasants are those with sufficient land to occupy them fully or nearly so, while rich peasants have more land than they can farm themselves and thus hire one or more full-time laborers to assist them. Landlords, by contrast, do not engage in labor, but derive the greater portion of their income by renting out their land to others. In each of these cases, a production relation underlies the common usage of the term.

Thus the concept of class must first of all be based on economic relations entered into as a consequence of the production process and the system of ownership that surrounds it. To be useful analytically in identifying distinct groups in the population and grasping their behavior, however, it must go beyond these relations. For example, dominant classes are characterized by the development of mechanisms to transfer class status from one generation to the next. Thus inheritance is an important mechanism in perpetuating capitalist class status. In some societies elite educational institutions fulfill the same function. Unless such mechanisms for intergenerational transmission of class status exist, the concept of class loses much of its descriptive and analytical power.

In analyzing post-1949 China, it is important to grasp the role of the cadre-bureaucrats—those with access to the power and resources of the state—in this context. Nominally they serve as representatives of the working classes—composed of workers, peasants, and all those doing socially useful work—but in practice they naturally tend to develop distinct interests of their own. As will be seen later, this creates one of the principal contradictions in the transition to socialism, but from the standpoint of class analysis the critical questions are whether the cadres develop mechanisms for intergenerational maintenance of class status, whether they will free themselves entirely from the authority of those whom they nominally represent, and whether they divert a significant share of the surplus they control to serve their own purposes. As I will argue later, these conditions for class formation have not yet been met in contemporary China. Thus the bureaucracy can be identified as a potential class-in-the-making, but one which has not yet emerged as a distinct class. Indeed, when and if it does so, the transition to socialism in China will be cut short.

In general, to clarify the potential of the bureaucracy as a class, we need only keep in mind the central role any bureaucracy, whether in China or in another less-developed country, can assume in the process of economic reproduction. Even though it is not directly involved in economic production, a substantial share of the economic surplus passes through its hands in the form of taxes, profits of state enterprises, state fees, and bribery. The members of the bureaucracy are often in a position to divert these revenues to their own purposes. Their situation can be likened to that of merchant capitalists who also find a substantial share of the surplus flowing through their hands. Like merchant capitalists, the bureaucrats bear a definite relation to the production process without direct involvement in it. Just as merchant capitalists can appropriate much of the surplus by virtue of their position in the circulation process, in their case by differential pricing, so the bureaucracy can appropriate the surplus it controls, using such means as high salaries or expense accounts, establishing new enterprises or other state activities, accepting bribes, and so forth. Even if the bureaucracy directs the surplus into what it perceives, from its class perspective, as proper public projects, however, its distinctive relation to the production-circulation process remains, and so too, therefore, does its class status.

One final clarification of the concept of class I will be using here is in order. I have spoken of class as being defined in the first instance by the characteristic relation to the production process. Class membership also involves the acquisition of a set of values, way of perceiving the world, and various cultural accoutrements, although considerable diversity exists and can be tolerated about the norm. More significant, when society is divided quite clearly into those who produce the surplus and those who appropriate it, the appropriators may engage in a variety of activities without changing their class status.

In imperial China, it was not unusual for far-sighted families to prepare some sons to enter trade and others to enter the bureaucracy by passing the requisite examinations. Despite their different activities, it would be quite improper to ascribe different class status to the brothers involved. In similar fashion, members of the bureaucracy who enriched themselves in office and used the funds thus acquired to purchase land or establish pawnshops did not thereby change their class status. In imperial China—and the argument here will be developed much more fully in chapter 4—the social structure brought about a thoroughgoing interpenetration of the various elite class roles, and mobility among them. Thus, although a specific relation to the production process determines class status in the first instance, the multiplicity of roles that the appropriators can assume and the ease of movement among these roles may make it most meaningful to group the appropriators of the surplus in a single class. As we will see, this approach is certainly warranted for late imperial China.

The Surplus and Development

The dominant class or classes are, by definition, those who control the disposition of the surplus. Some uses of the surplus, especially investment, promote economic growth, or an expansion of economic output over time. Economic development refers to the process whereby accumulation, consisting of both saving and investment, and technological change become institutionalized. That is, institutional mechanisms become established that regularly channel a portion of the surplus into accumulation. In capitalism, the corporation fulfills this function. Pursuing profits and propelled by competition, it regularly sets apart a portion of the cash flow generated by profits and depreciation for reinvestment. Because involvement in this process does not depend on the particular individuals involved, it can be said to be institutionally determined. In like fashion, in the socialist or statist societies (the distinction between the two is clarified below) where the accumulation process is directed by the state, a proportion of state revenues is regularly set aside for reinvestment, again irrespective of the particular individuals who may be involved.

Economic development requires certain favorable conditions, but, of equal importance, it takes place only when the dominant classes perceive it to be in their interest to routinize the process of capital accumulation and technological change. They need not, of course, be conscious that this is in fact what they are doing, just as individual capitalists pursuing profit may have no idea or even interest in the fact that they are contributing to the development process. In imperial China, the gentry class which controlled the state was so much the beneficiary of the existing order that it tried at all costs to defend it rather than promote the reforms that would have contributed to the development process. As the discussion in part 2 shows, a substantial surplus existed in prerevolutionary China, amounting to at least 30 percent of national income. The critical determinant of the development of underdevelopment, then, was not a shortage of capital, but the disposition of the surplus by the dominant class in ways that failed to advance the development process.

When the People’s Republic was established in 1949, China’s per capita income was approximately U.S.$60 (in 1957 prices; Perkins 1975, 134). At that level, it was impossible to meet the needs and aspirations of the working mass of the population, which had assumed dominant class status as a result of the revolution. It was only natural, then, that in implementing reforms and institutional changes that reflected its class interest, it would attempt to institutionalize the accumulation process, routinely channeling a significant share of the surplus into capital formation. This process is documented in part III, but by far the greatest concern there is analysis of the relation between the class interest that spawned development in China and the characteristic features of the development process that emerged. Economic development is possible under a variety of regimes distinguished by their predominant classes, and we can expect the nature of the development process to differ sharply among systems with differing class structures. Most of part III is devoted to analyzing the specific nature of Chinese development as a case study in socialist economic development, clarifying on the one hand how the dominance of people who work for a living shapes the development process in a manner quite divergent from the characteristic features of capitalist development, and on the other how the bureaucratic structures that revolutionary societies tend to spawn can modify the process in ways inimical to mass class interests.

Economic development, then, is a class-specific process both in the sense that whether it occurs depends above all on the interest of the dominant class, and in the sense that if it occurs, it does so in a way that reflects that interest. The analysis of the Chinese case, however, is complicated by the fact that the establishment of socialism is a historical process that does not end with the establishment of public ownership of the means of production but begins with it. Ultimately, the meaning of socialism as a socioeconomic system lies in the dominance of the working classes at every level of society, from the workplace to the state. Public ownership of the means of production is a necessary condition for this dominance but by no means assures it. Rather, the revolutionary expropriation of private capital ushers in a more or less prolonged period of transition to socialism, a period which continues as long as the prospects for the growing authority of the working classes remain viable. It is also possible, however, for the transition period to be cut short by the emergence and entrenchment of a bureaucratic class with a distinct interest of its own. This issue will be explored more fully in chapter 9, but here I would like to lay the groundwork for that discussion by elaborating the concepts of modes of production and social formations, and then discussing the various models of development based on these concepts.

Modes of Production and Social Formations

A mode of production refers to the distinctive relations, including ownership relations, into which people enter in production activity, and to a corresponding development of the forces of production, including such factors as capital, technology, and human skills. The relations of production, which define class status in the first instance, are the most important element specifying the mode of production. Most presocial-ist modes of production tend to be exploitative in that of the two primary classes, one tends to live off the surplus above its subsistence requirements produced by the other. Thus slave owners live off the surplus created by slaves, feudal lords live off the surplus created by serfs, and capitalists live off the surplus created by workers. Precapitalist modes of production are not always exploitative, however, and may not even have a dual class relation of this type. Petty commodity producers like independent farmers or artisans who produce goods (commodities) for sale on the market, for example, appropriate their own surplus. It is noteworthy, however, that the independent petty commodity mode of production has proven unstable historically, invariably giving way to the capitalist mode of production.

A social formation refers to the mix and interaction of modes of production in a given society, as well as to the institutions and activities that govern their interaction. It refers in short to the entire economic structure, with the vari...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Original Title Page
• Original Copyright Page
• Dedication
• Table of Contents
• Preface
• Part I: The Analytical Framework
• Part II: The Development of Underdevelopment in China
• Part III: Economic Development in the Socialist ERA
• References
• Index