COM 05/2017

Strengths and Weakness of Ideological Flexibility in Chinese Development

By Jan Kliem, Program Officer, German-Southeast Asian Center of Excellence for Public Policy and Good Governance (CPG)


I. Introduction

China’s rise and its development over the past 70 years or so has been both impressive and fascinating. Hundreds of essays, books and articles have been written about it and yet, there is so much more to explore, analyse and even discover, not least owed to the secretive structure and opaque nature of Chinese politics. Aiming to make a modest contribution to this discourse, this essay seeks to show the difficulty of basic theoretical concepts of International Political Economy (IPE) [1] in framing the People’s Republic of China’s (PRC) development as an example of an “ideological flexibility” that guides post-Mao China. As it will show, the three basic IPE concepts discussed, can only inadequately frame PRC priorities of conduct due to its ideological incoherence. It will further elaborate on this point by looking at one of Marx’s and Mao’s most fundamental categories of class and how even the very ideological fundaments are turned on its head whilst proclaiming they are not. The flexibility that can be beneficial in one set of circumstances, can potentially cause problems in another.

The first part of this paper will briefly introduce the reform process in China. For the sake of simplicity and given the paper’s limited scope, it will simply divide Maoist and post-Maoist periods and briefly depict the reform progress.

Subsequently, the second chapter shall briefly introduce the major IPE theories relevant to this essay. It traces Chinese reforms in terms of ideology and will draw a clear picture of the development from planned to capitalist economics. The emphasis shall be put on the analysis of ideology behind Chinese behaviour. Interestingly, this approach will demonstrate that China’s behaviour can be analysed in terms of the application of a hybrid of established IPE theory and policy. Lessons can be drawn from Chinese flexible interpretation of traditional paradigms.

The final part follows the same argument brought forward above, however from a less “positive” perspective. It will discuss “ideological flexibility” against the background of class as a fundamental category of Marxism and look at how it has been framed fundamentally different in Mao’s era and now.

II. Maoist and post-Maoist reforms in the PRC

When Mao Tse-tung formally declared the foundation of the PRC on October 1st, 1949, he inherited a high inflation rate and a backward economy devastated by internal conflict. The following three decades under Mao’s rule were difficult times for China. Some of Mao’s policies, first and foremost the Great Leap Forward (1958-1961) and the Cultural Revolution (1966-1976) had disastrous consequences and caused the death of millions. However, the post-Mao China tells a different story as the leitmotif of Chinese leadership swung from creating a socialist utopia to creating a strong China that should regain its place among the most powerful nations on earth. It was under the de facto guidance of Deng Xiaoping when China began crucial economic reforms, which had tremendous effects on China’s economy. From 1979 to 2014, China’s average annual growth rate has exceeded 9%[2] and despite a recent relative slowdown, the country has transformed into an economic powerhouse. The Chinese GDP has increased six-fold in the decade following Deng’s reforms and twelve-fold until the year 2000.[3]

In 1953, Mao launched an economic development plan that emphasised heavy-industry. The ‘First Five-Year Plan’ was an almost exact copy of Soviet-style industrialisation. Large, state-owned enterprises (SOE) were created, focusing only on primary (raw-materials) and secondary (manufacturing) economic sectors. Markets were replaced by planned resource allocation, banks were nationalised, and workers were organised into communes.[4] Central planners determined outputs of enterprises and allocation of products and raw-materials.

However, Mao came to realise that the Soviet-style development strategy was fundamentally at odds with the Chinese developmental stage. He regarded emphasis on large industries as ‘contradictory’ to Chinese technological underdevelopment.[5] Indeed, at the outset of reforms in China, employment was 75% agricultural, in the Soviet Union (SU) 75% industrial.[6] Consequently, he regarded agricultural economy as more suitable to Chinese circumstances and concentrated the work-forces around this sector.[7] His ‘Great Leap Forward’ (GLF, 1958-61) was the peak of mass-mobilisation of the work-force, aiming to concentrate labour-collectives in order to rapidly develop agriculture and industry simultaneously.

In a nutshell, mass-concentration of labour led to a devastating famine, for instance, due to disregard of the merits of the division of labour. As the Cultural Revolution was mainly a political, not an economic strategy, it shall not be focused on here beyond referring to its devastating consequences. It is arguable that a positive legacy of the unfortunate events that unfolded throughout the revolution was that a number of senior members of the Chinese Communist Party (CCP) came to realise that economic development requires political stability. Even more to the point, Mao’s dogma of continuous class-struggle began to be seen as an impediment to sustainable economic growth.

The CCP’s analysis of the Maoist era suggested that economic achievements occurred when policies were least ideologically driven, i.e. before the GLF and the Cultural Revolution.[8] Modernists, from Deng to Hu Jintao and Xi Jinping have steadily reformed static Maoist theory and created a self-proclaimed ‘socialist market economy’.[9] But it was Deng who opened a new chapter in post-revolutionary China, following almost three decades of central-planned economy.

First, reforms occurred in the realm of foreign investment and the opening of ‘special-economic-zones’. Deng also reformed the planned distribution system, allowing for material supply and agricultural trade to take place on a relatively free-market.[10] State enterprises were subsequently allowed to buy and sell on this market and industry replaced agriculture as the leading growth sector. Although the creation of private enterprises was legalised, overall, the state remained in control. It appears that Deng was particularly sceptical towards rapid changes due to the experiences of the GLF and preferred gradual transition, against the advice from the West.[11]

Post-1978 economic reforms focused primarily on establishing market mechanisms, privatisation and decentralisation of economic decision-making while maintaining political stability. Decentralisation and privatisation meant the diminution of governmental central-planning of business and ownership in favour of subsidiary governmental units. Whilst there was general consensus on the need for growth in China with ubiquitous poverty problems, the reforms Deng sought to implement were not entirely unchallenged. Almost all senior leaders in the country at the time of the reforms had both fought in the revolution and spent formative years of their career under Mao. They had, at least in some form or another, subscribed to Mao’s vision of establishing a socialist utopia.  Accordingly, they remained reluctant to take the changes too far in the direction of a liberal, open economy. Other, less ideological conservatives opposed reformers on the basis of political stability and power. They feared that rather than a lack in commitment to socialism, a possible transferral of economic to political liberalisation would threaten the CCP rule in the long run.[12]

Deng’s successors had to fine-tune fundamental changes of the 1980s. Despite ongoing pushbacks from inside the party, they remained firmly on the reform track. During the early- and mid-2000s, China actively encouraged private investment and awarded private enterprises status much closer to those of SOEs. Legislation ordered authorities to give private companies equal access to financing as well as to industries previously restricted. In 2005, the draft of a revolutionarily different property law even led to open dissent from Beijing University Professor Gong Xiantian, who, in a public letter, accused the Standing Committee of acting against the principles of socialism and thus, unconstitutionally. Notwithstanding these concerns, the law was passed two years later. Moreover, the CCP allowed private entrepreneurs Central Committee membership. The leadership opened-up decision-making to the private sector and signalled a shift in its communist orientation.[13]

Prior to its World-Trade-Organisation (WTO) accession, China had to make certain commitments which, as Guthrie points out, allowed China to play a vital role in the world economy but fully exposed it to the forces of a free global market.[14] Indeed, it agreed to limit agricultural subsidies to 8.5% of farming output and opened-up service-markets- such as banking and telecommunication- to foreign competition.[15] Moreover, this ‘open-door-policy’ opened China for foreign technology and investment and gave Chinese enterprises a chance to access international markets and resources. Naturally, these enterprises, using international markets for in- and output, are de facto market-oriented and escape tighter governmental control in praxis.[16] Competition, helped to create a market environment that gradually eroded old planning mechanisms. Nonetheless, arguing China is a liberal free-market would be pre-mature. What Peter Nolan has argued in 2005 – that almost all major enterprises in China remain SOE’s and therefore, the government maintains major influence on the economy still rings true today.[17]

Successors of Mao have appeared to be less focused on ideological goals, which has proven conducive to economic development. This is not to imply that they are or acted as capitalists, but it suggests a degree of pragmatism. Another point here is that reforms since Deng are still liberalising the market gradually. Without going into too much detail here, Chinese President Xi Jinping has famously set out his idea evolving around the “Chinese Dream” and the great rejuvenation of his nation by 2049. As evidenced by its controversial geopolitical agenda, as well as the huge Belt and Road Initiative, the dream involves much more than just economic reforms. Nonetheless, the focus on growth and how to achieve it plays a vital part. In 2013, the headline-grabbing third plenum decision one year after Xi took office was certainly part of the economic plan to achieve the great rejuvenation. The reforms laid out were far-reaching and another step on China’s pragmatic journey to more growth. It focused largely on market forces replacing the state for resource allocation and was, by some observers, labelled as more significant than even the reforms that emerged after Deng’s southern tour in 1992.[18]

The glamorised Mao often presented in China is a myth based on glorification of historical events. Contemporary China is much less Mao’s heritage than Deng’s and his successors’. Modernists can be credited for their pragmatist approach to economic reforms that put China on the road to a relatively free market, giving it wealth and international influence.

III. Marxism, Mercantilism and Liberalism mixing comfortably in the PRC

To open a theoretical exploration, the triad of IPE key concepts needs to be clarified briefly. It is no surprise that in much contemporary Chinese economic theory the core concept of Marxism plays an important role. This theory, in its very roots, assumes a predetermined, linear development of all nations from an uncivilised starting point, via capitalism towards an idealised end-state of communism.[19] It puts special emphasis on class-struggle between the proletariat and the bourgeoisie, which will inevitably lead to the triumph of the former. It recognises economy and the free-market as tools for societal progress but inevitably, this progress leads to a philosophical end, a telos; an idealised world which has overcome the market as the means of resource distribution.

Liberal thinkers put a similar emphasis on the free market. However, they argue that market-forces, via ‘trickle-down’ effects will spread wealth among the people.[20] Naturally, self-interested individuals drive economic growth and create societal wealth by their personal economic initiative. The state must limit economic regulation to enable capitalists to create wealth through largely unrestricted trade.

The last of the three core theories is mercantilism based on realist tradition of thought. Mercantilist theories put a particular emphasis on the state as the major actor. It never surrenders control over the economy in order to maximise benefit, i.e. economic growth. States seek power and dominance domestically as well as internationally in order to achieve the highest possible revenue of economic activity. For example, a mercantilist state consequentially aims to maintain a trade-surplus with other economies in order to accumulate wealth. To facilitate this positive trade-balance, states need to protect economy and trade from impedimental influences.[21] Mercantilism is a broad concept and encompasses numerous interpretations of how it materialises in a state. Today, it is much more refined than when it first appeared and pure ‘mercantilism’, as an all-encompassing economic concept for states is somewhat outdated and needs to be treated in more depth. Therefore, with regards to China, the Asian developmental state seems to be a possible mercantilist subcategory that fits best for it combines a high degree of openness to the international market and a strong state, controlling vital aspects of the economy.

On a theoretical level, and before moving on to the mercantilist and liberalist features of contemporary Chinese economy, it is still possible to make a case for the enduring validity of Marxist ideology in China.

Rihani has argued, Mao’s “brand of communism” reflected his emphasis on the peasantry.[22] Indeed, it seems that Maoism has replaced the Marxist agent of change -the industrial labourer- with the peasantry. Gabriel raises the point that modernists have learnt from Mao’s ‘impatience’ in utilising the peasantry to reach the telos, the communist final-destination.[23] The severe consequences of the aforementioned GLF- e.g. the great famine 1959-61- reflect the disastrous effects of this ‘impatience’. Following the logic of Gabriel’s argument, modernists might have accepted capitalism as a necessary step towards the Marxist telos. In the same vein, one might argue that his successors have been more Marxist than Mao himself, for they accepted the incrementalism of progress. Time is an important factor. A class struggle won by the proletariat requires a strong proletariat, which needs to develop in the first place. It fits the Marxist idea that before communism can be achieved; an economy has to develop substantially. Mao’s GLF was an overly hasty attempt to reach the communist destination without giving the economy sufficient time to grow. Hence, it was an attempt to reach the destination without the journey. The ‘socialist market economy’ could be seen as a landmark along this journey.

Be this theoretical Marxist argument as it may, Chinese leaders have seemingly ceased to make this point. Instead, the ‘socialist-market’ is promoted as being a favourable status quo much rather than a vital step on an ideologically led path. The CCP is aware of the damage rigid interpretations of philosophical assumptions can incur, and a new, more critical orthodoxy emerged within the modernist leadership after Mao’s passing.[24]

Leaving this theoretical level, and turning to the reality in contemporary China, there is no doubt that neo-mercantilist practices dominate, mixing comfortably with Chinese socialism. First and foremost, China’s central government has been the primary driving force of economic growth. With its mostly unchallenged authority and with the unique timeframe within which it is allowed to operate, i.e. the economic five-year plans and planned leadership transitions at a specified time, embedded in greater, long term ‘visions’, which largely determine the economic path.[25] Therefore, most force in the Chinese economy remains with a mercantilist, authoritarian government, rather than the market or the outcome of a continuing class-struggle. Whether or not China can be labelled an Asian developmental state, as alluded to earlier, is debatable and depends on the applied definition.

According to Johnson’s concept of a developmentalist state, economic growth is state-driven and the state elites primarily aim at rapid economic development. The centralised state delegates power to a bureaucracy which develops plans to achieve economic growth.[26] Even though this seems to fit well with contemporary China, other definitions stress different aspects and can lead to other conclusions. Breslin focuses on other parts of Johnson’s definition. He stresses that the main feature of the developmentalist state is a “stable rule by a political-bureaucratic elite not acceding to political demands that would undermine economic growth.”[27] In his view however, the Chinese Communist Party rule is only theoretically a means to an end. It is not a necessary step during the journey to communism, not a “vehicle for representing the wishes of the proletariat and establishing a communist society.”[28] This means that policy making is highly, if not entirely, driven by political demands, i.e. the CCP’s desire to stay in power. Economic achievements become means rather than the ultimate goal, which it should be, according to Breslin’s reading of Johnson, in a developmentalist state. In addition to this, another argument of Breslin can be found in the redistribution of economic decision-making power since Deng. In relative terms, local level authorities have been granted financial autonomy at the expense of centralised power accumulation. Therefore, local level initiatives –as successful as they may be- undermine the idea of a centrally planned, coherent economic strategy which lies at the heart of a developmentalist state.

China, just as other nations, aims to maximise its wealth and power. What has been referred to above as mercantilist in nature, does not happen in a vacuum of course and hence, has limits in its efficacy. The CCP cannot unrestrainedly assert its will in international trade, despite its relative power. The trade-rules WTO members ought to comply with, for instance, incur significant constraints on Chinese polices. The reality of interdependence weakens the idea of the paramount state. This is especially true for a country that builds its growth on exports.

China acts first and foremost as a rational actor, constantly optimising its national interest with the state as the clear and paramount leader, discouraging individuals from pursuing egoistic goals, potentially not in the interest of the society as a whole,  and this is what classifies mercantilist behaviour on a very broad, moralistic level.[29] Whatever this national interest may be, however, is not clearly defined. It may well be the fulfilment of the Marxist journey, but it may also be the mere accumulation of wealth. It is no coincidence that the infamous term of socialism with Chinese characteristics is as ambiguous and vague as is gets and even the highest CCP party members may well struggle to concisely explain the term.

In the context of Chinese authoritarianism, rather surprisingly the government includes traditional liberal reasoning into its economic ideology. A governmental statement on how to distribute wealth reads, ‘[…] encouraging certain lead groups and areas to become rich first, enabling them to help others towards prosperity too, […]’[30]. This ‘trickle-down’ reasoning of an entrepreneurial few benefitting the many appears to be fundamentally at odds with the idea of socialism. Even if socialism is interpreted as a step towards a communist end-state, the initial inequality ‘trickle-down’ effects incur, does not fit well into Marxism.

Unlike the former SU, China has managed to handle not only a relatively smooth market transition, but managed to create an economic growth that exceeds Western nations by far.[31] As an example, figure 1 shows the annual GDP growth rates of the US and China. It illustrates that since the beginning of China’s economic reforms in 1978, the GDP growth rate has consistently exceeded the US’s. As shown, China undergoes similar ups and downs as the US. However, China manages to maintain a steady surplus. Moreover, when the US economy stagnates or even shrinks, as it did in 1982, China managed tremendous growth rates. In 1982 it was around 9%. In 2008, this ability has been proven again even during the global financial downturn. Unlike western economies China achieved to maintain growth rates in excess of 9% despite the global financial turmoil.

Chinese leaders have demonstrated decisive leadership and visionary policies. The rigid embrace of Marxist-Leninist ideology has proven fatal to the SU and Chinese leaders have learnt from this experience. Their approach to modernisation and development has engaged considerable flexibility, creativity and firm leadership.[1] Riskin argues that a ‘hybrid ideological atmosphere’ followed Mao’s death.[2] Chinese leaders were not ready to completely break with the past, but were convinced that the Marxist-Maoist doctrine needed to be amended.

Walder has suggested that China could be viewed as an ‘alternative model of gradual reform’. The slow paced but steady introduction of private ownership and orientation towards the market is an alternative to ‘shock-therapies’ in Eastern Europe.[3] This incremental policy change has altered actors’ behaviour throughout the system and allowed the economy to mature. McMillan and Naughton argue that if sufficient expertise can be found in the government, delaying privatisation in order to gradually introduce a market and to equip enterprises with the means to endure on it can be extraordinarily conducive to sustainable economic growth.[4] Along the same lines, Nolan claims that the Chinese way may well be more conducive to sustainability than a rapid shift from one extreme to the other, which is often suggested by for instance the IMF.[5]

IV. Theory and practice of class struggle

The flexible interpretation of basic theory and its appropriation to circumstances in order to benefit the country’s development, has long been a feature of Chinese development. While this sometimes pertains to theoretical nuances and political communications embed these changes in a way that the process itself somehow seems natural and intuitive to the Chinese people, other changes seem more drastic and while they make for good examples showcasing the “ideological flexibility” referred to in this essay, they can indeed be so fundamental that they hold potential for overstretching the flexibility and cause backlash in the future. The treatment of one of the most fundamental categories of Marxism, class, is one of those issues and the PRC today finds itself a long way away from Mao’s “Never forget class struggle!”[6].

To many, this may seem to be stating the obvious. To even the most casual observer, it has become evident that the new middle class has become the class en vogue in China and that many in China aspire to become a part of it or have done so already. To be part of the proletariat, be that industrial or agricultural, is no longer attractive to Chinese, let alone central to a communist cause. Capitalist sentiments have long taken root in Chinese society and people strive to become rich. This has been acknowledged and was taken up by the CCP at the time of the Chinese opening under Deng. Interestingly however, due to the CCP’s official ideology and its allegiance to Marxism, at least to the letter, not the spirit, they have difficulties renouncing the class concept altogether. They are forced to walk a tightrope between allegiance to a concept in theory which they totally disregard in practice.

The overall ideology, or rather ideologies, that the CCP has been pursuing since 1949 are therefore not the only issues that warrant for a certain degree of flexibility to reconcile the sometimes not so subtle differences. While this essay has argued that the CCP remains ideologically flexible to sustain significant economic growth, this second layer of flexibility is potentially more destabilising. The flexibility here can much easier be understood as plain inconsistency. Furthermore, the situation is likely to deteriorate if the numbers of the left-behind grow and the disparity between those classes who once were labelled the backbone of China and those, who now predominantly reside in China’s richer coastal areas, keeps growing. To an extent, and as long as lives are improving, Mao’s class struggle can easily be forgotten even if Marxist theory in general, if without the crucial part of class struggle, is still commonly recited by the CCP. It is easily imaginable for instance that unprecedented possibility of consumption does its part to keep people from biting off the hand that feeds them. Once this development recedes however, and consumption ceases to satisfy those who Marxism would have struggling, the continuous referencing and not letting go of core Marxist ideas could come to haunt the CCP in future.

The CCP is undoubtedly aware of its dilemma but has at the same time manoeuvred itself into a corner. Symbolism in general and the Chinese flag in particular serve as an example of this. Historically, the five stars on the Chinese flag represent the “Masters of the Country”, which are, besides the CCP – represented by the biggest star- the most important classes, i.e. the proletariat, peasantry and the petit and national bourgeoisie. Alongside the planned watering-down of the class struggle discourse, the CCP has been keen to alter the meaning of the symbols. “Little wonder then, that the 1982 Constitution, all the subsequent amendments, as well as the national flag act of 1990 and the State Emblem Act of 1991, are invariably evasive as to what the five stars stand for, vaguely referring to them as ‘symbols of the People’s Republic of China’ (…) This shows clearly that the Party is trying to ‘forget’ their class and racial overtones (…)”[7]. Jiang Zemin’s “Three Represents”, as the same observer suggests, goes even further in trying to amend this ideological inconsistency by altering the identity of the CCP from a proletarian class organisation to a party that represents the entire nation.[8] As alluded to above, it is no easy task for the CCP to modify or alter the meaning of the symbols, as there are “entrenched perceptions in China that associate modifications of state symbols with the collapse of dynasties.”[9]

Accordingly, the dilemma is not solved. Thus far, the overall improvement of most people’s lives in China has helped to keep the lid also on ideologically motivated unrest related to the gap between theory and praxis in the CCP’s dictated ideology. It is perceivable though, that the gap between the poorer population, the peasants and migrant workers for example, and the new middle class that lives in big, modern cities like Shanghai, Beijing or Guangzhou grows past a critical threshold. Once the lives of the ones at the bottom of society improves less rapidly and becomes more difficult yet, it is conceivable that the CCP has left itself vulnerable and open to additional criticism due to its formal allegiance to Marxist values which it did not or could not amend or drop entirely. Should the government have to face an uprising, it may not be the ideologically motivated who would lead as arguably, other issue from environment to health, to social inequality or basic human rights are all pressing issues that could easily galvanise large amounts of people in contemporary China.[10] Nonetheless, if the nominal “Masters” of the country are left so far behind and are at the same time regularly reminded of their crucial role in Chinese society, the likelihood increases that they attempt to claim back the position that is ideologically theirs. After all, Marxist analysis of today’s superstructure in China would not look favourably on those who hold productive property (the bourgeoisie) and would name and clearly label those, who are exploited (the proletariat).[11]

V. Conclusion

This essay has shown how transformation, or rather flexible interpretation of theory, has transformed China from an isolated neo-Stalinist economy with a focus on domestic manufacturing into a high-technology, export and capital oriented state with neo-mercantilist, liberal and Marxist features.

The described Chinese path appears to be too complex and multi-facetted for at least the very classical triad of IPE theories to classify sufficiently. All three core theories seem to categorise into more and less important factors (for example the Marxist emphasis on class-struggle, the liberal view on market forces, and the mercantilist ideas on the state’s centre stage and economic agenda), follow those categories rigidly and then aim to predict an outcome.

Classical Marxism has been reformed by post-Mao modernists however, and interpreted in a more liberal, flexible manner. Capitalism is not only useful for development and a mere stage towards pure communism, it is in some form desirable. The Chinese interpretation of Marxist theory leads observers to believe that the status quo might be more than a step on an incremental path towards a telos.

Rational economic facts lay at the heart of the transition process. Normative Marxism, mercantilist effectiveness and liberal ‘trickle-down’ assumptions have morphed and joined forces in post-Mao China.

As it stands, power and responsibility, including a planning mechanism, largely remain in the hands of the existing bureaucracy for an extended period. Liberalists would not find a place for this type of government regulation. Nonetheless, rapid privatisation in the former SU has proven less successful than the Chinese model. Political changes preceded economic transition and alternative owners needed to be found quickly due to the government’s abdication. It is no surprise that the ‘shock-therapies’ have incurred oligarchic structures. China chose gradual liberalisation because of the potential dislocation and destabilisation of moving rapidly. The incremental move from the extreme towards the ‘grey’ middle-ground is arguably more stable than rapid movements from one extreme to the other. Development does not necessarily follow a predictable pattern and Chinese leaders have realised that Marxist’s, mercantilist’s and liberalist’s exclusiveness is at odds with the logic of interaction of multiple factors.

This multi-factorial reality needs to be handled with pragmatism and flexibility. Here it becomes evident why it appears to be difficult to capture contemporary China with one certain theory. As shown by the example of the Asian developmentalist state, different views that stress different aspects of either China’s behaviour or the theoretical concept can justify varied conclusions.

Whether pure economic growth, the longevity of the party, or communism is the destination, Chinese political pragmatism follows a rational-choice pattern and what qualifies rationalism is maximising utility, not defining it.

The third part of the essay pointed out however that ideological flexibility can also be perceived as inconsistency and turn into a potentially destabilising factor as shown on the example of the Marxist category of class. It has been argued that class plays a theoretical, but no practical role in contemporary China, which harbours potential for future conflict.