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Theses on the class nature of the People's Republic of China

This resolution was adopted by the 18th Congress of the Democratic Socialist Party of Australia, held in Sydney, January 5-10, 1999.

I. Theoretical framework

1. For orthodox Marxists, as Lenin explained in his 1917 book The State and Revolution, the state is a centralised organisation of force separated from the community as a whole which enforces, through special bodies of armed people and other institutions of coercion, the will of one class, or an alliance of classes, upon the rest of society.

As a rule, the state is the organ of defence of the interests of the economically dominant class, that is, the class that owns the decisive means of production. In exceptional periods when the relationship of forces between the antagonistic classes is nearly balanced, the state power may acquire a degree of independence of both the exploiting and exploited classes. Such, for example, was the regime of Napoleon Bonaparte in the early 19th century, which played off against each other the defeated feudal aristocracy; the capitalist manufacturers, bankers and merchants previously linked to the royal power; the newly liberated peasant-serfs; and the emerging class of wage workers—in order to enable the elements of the petty bourgeoisie that held state offices to transform themselves and their relatives into capitalist entrepreneurs.

2. An epoch of (potential) social revolution begins when the development of society's productive forces comes into conflict with the existing relations of production or—what is but a legal expression of the same thing—with the property relations with which they had been at work up to then. In a class society, the existing property relations are simply the socially recognised and state-sanctioned expression of the relations of production through which the economically dominant class extracts the social surplus product from the direct producers.

A social revolution is actually carried out when the political representatives of the leading class that has emerged on the basis of the advanced productive forces create a new state power that organises this class and its allies to break up the state institutions of the existing economically dominant class. The new state power suppresses the resistance of the economically dominant class to the implementation of measures that enable the new relations of production, corresponding to the advanced productive forces, to become socially recognised and socially dominant, in particular by replacing the old property relations with new ones.

This means, however, that for a certain period of time in a social revolution, the revolutionary state power operates on an economic basis in which the old property relations still exist. Thus, for example, during the first few years of the great French Revolution of 1789-93 the revolutionary state power created by the ideological representatives of the French bourgeoisie ruled over a society in which the feudal landowning nobility retained legal title to its landed estates; similarly, during the first eight months of the rule of the proletarian state power in Russia (November 1917 to June 1918) the capitalists still had legal ownership of most industrial and commercial enterprises.

3. During a social counter-revolution, the counter-revolutionary state power will for a period coexist with the property relations introduced by the social revolution. A social counter-revolution is possible when the victorious social revolution is geographically isolated to areas where the new productive forces (and the classes engendered by them) are still too weak to resist the economic and military pressure of the previous economically dominant class.

Historically, social counter-revolutions have occurred:

  1. through the military defeat of the new ruling class by the armed forces of the old ruling class in a civil war or as a result of foreign conquest by a ruling class based on old property relations; or
  2. as a result, after a social revolution, of the usurpation of state power by a privileged group existing within the new social order but economically linked to the old social order, which uses its command of state power to reinstitute the old property relations.

This, for example, was the process that led to the overthrow of the independent petty-bourgeois republic of Florence by the merchant banking family of the Medicis in the 15th century. In collaboration with other wealthy merchant families, the Medicis usurped the democratic state power that had been created in 1378 by the small merchants and the free artisans (the ciompi) and made themselves the hereditary rulers of a re-established feudal principality (the Grand Duchy of the Medici).

4. The existence of a contradiction between the class nature of the state power and the prevailing property relations is a distinguishing characteristic of a social revolution or of a social counter-revolution. The class nature of the state power during a social revolution or a social counter-revolution is, therefore, not determined by the property relations that are initially dominant, but by the measures that the state power adopts toward the antagonistic classes, that is, by which class forces the state power attempts to organise and which class forces it attempts to suppress.

These measures will, of course, begin to have an impact on the actual relations of production, with more and more despotic inroads being made against the conditions of production that are necessary to the economic domination of the old ruling class and, simultaneously, with the introduction of measures that strengthen conditions for the economic domination of the class or alliance of classes that the state power organises. Thus, for example, the workers and peasants' government established by the Second All-Russia Congress of Workers' and Soldiers' Soviets in Petrograd on November 8, 1917, was a proletarian state power, despite the fact that it coexisted for some time with capitalist property relations. The proletarian class character of the new Soviet state power was evident in the fact that it organised the Russian workers to suppress the resistance of the capitalists to the introduction of measures—such as the formation of committees of workers' control in industry—that began to make despotic inroads into bourgeois property rights.

5. The proletarian class character of the Russian Soviet republic was consolidated during the second half of 1918 when the Soviet political representatives of the Russian working class (the Bolsheviks) used the state power they had seized in late 1917 to expropriate the capitalists and to organise industry on the basis of state property, centralised planning and a state monopoly of foreign trade. However, in the aftermath of the Russian Civil War and with the introduction of the New Economic Policy (with its extensive economic concessions to the petty bourgeoisie) the balance of antagonistic class forces within Soviet Russia, and between Soviet Russia and world capitalism, was such that the Soviet state power, in its capacity as mediator between these class forces, became increasingly independent of the Russian working class.

In this context, a section of the Bolsheviks commanding the state power adapted to the petty-bourgeois mentality and methods of administration of the former bourgeois officials and specialists who made up the bulk of the administrative personnel of the state organs. This adaptation was facilitated by the corrupting influence on Bolsheviks working as functionaries in the state administration of the high salaries and privileged access to scarce consumer goods that the Soviet regime was forced to grant to the former bourgeois administrative specialists in order to secure their services. Joseph Stalin, the general secretary of the Communist Party of the Soviet Union, emerged as the chief political representative of this bureaucratic tendency within the ruling Communist Party.

6. The weakening of the Russian working class during the Civil War and at the beginning of the New Economic Policy, the strengthening of the petty bourgeoisie during the NEP, and the admission in January 1924 of large numbers of politically backward workers and their ideological representatives (ex-Mensheviks) into the ranks of the CPSU enabled the Stalinist faction to marginalise the revolutionary political representatives of the proletariat within the state administration. The consolidation of political power in the hands of the Stalinist faction within the CPSU prepared the way for the rise of Stalin's Bonapartist political regime at the end of the 1920s.

Stalin's Bonapartist political regime was based upon the merging of former Bolshevik revolutionists with the former bourgeois administrative specialists into a crystallised petty-bourgeois stratum of materially privileged administrators. This bureaucratic caste utilised the state power it monopolised to ruthlessly suppress resistance by the Russian workers to an enormous extension of bourgeois norms of distribution of consumption goods in the bureaucracy's own favour.

7. Analysing the nature of this state regime in his 1936 book The Revolution Betrayed, the exiled Bolshevik leader Leon Trotsky pointed out: "The Soviet bureaucracy has expropriated the proletariat politically in order by methods of its own to defend the social conquests [of the proletarian revolution]. But the very fact of its appropriation of political power in a country where the principal means of production are in the hands of the state, creates a new and hitherto unknown relation between the bureaucracy and the riches of the nation. The means of production belong to the state. But the state, so to speak, `belongs' to the bureaucracy. If these as yet wholly new relations should solidify, become the norm and be legalised, whether with or without resistance of the workers, they would, in the long run, lead to a complete liquidation of the social conquests of the proletarian revolution. But to speak of that now is at least premature. The proletariat has not yet said its last word. The bureaucracy has not yet created social supports for its dominion in the form of special types of property. It is compelled to defend state property as the source of its power and its income. In this aspect of its activity it still remains a weapon of proletarian dictatorship."

That is, while the Stalinist bureaucracy in the USSR was "completely saturated" with "bourgeois reaction", as long as the ruling bureaucratic stratum in control of the Soviet state power did not seek to extend bourgeois norms of distribution from the sphere of consumption to that of production, the USSR remained a "workers' state", though one in which there had been a bureaucratic degeneration of its governing personnel.

However, Trotsky also warned that the bureaucratic ruling caste would not indefinitely confine the bourgeois reaction it expressed to the sphere of political power and norms of distribution of consumption: "It must inevitably seek supports for itself in property relations. One may argue that the big bureaucrat cares little what are the prevailing forms of property, provided only they guarantee him the necessary income. This argument ignores not only the instability of the bureaucrat's own rights, but also the question of his descendants. The new cult of the family has not fallen out of the clouds. Privileges have only half their worth, if they cannot be transmitted to one's children. But the right of testament [inheritance] is inseparable from the right of [private] property. It is not enough to be the director of a trust; it is necessary to be a stockholder. The victory of the bureaucracy in this decisive sphere would mean its conversion into a new possessing class."

8. Trotsky believed that without a victorious civil war against the Soviet workers, the ruling bureaucratic caste could not overturn the property relations created by the proletarian social revolution of 1917-18 and convert itself into a new bourgeoisie. This prognosis was undoubtedly correct at a time, only ten years after the October Revolution, when the generation that had actively participated in the social revolution still constituted the majority of the active forces of the Soviet proletariat. However, it was undermined by the political decimation of that generation in the mass terror of the late 1930s, and its replacement over the subsequent decades by generations of workers whose identification with the social conquests of the revolution was severely eroded by the bureaucracy's abuse of state property in the interests of its own social parasitism.

9. In the context of a deepening crisis in the system of bureaucratic management of the nationalised economy and an increase in the economic and military pressure of world capitalism during the 1980s as a result of the shift in the relationship of international class forces to the advantage of imperialism, the central leadership of the ruling Soviet bureaucracy headed by Mikhail Gorbachev opted for a reform process that combined the introduction of market mechanisms into the economy, bureaucratic attempts to encourage greater worker involvement in enterprise management and the ending of repression of dissident political views.

The weakening of the central planning system and the shift to market allocation of productive resources, however, opened the way to a competitive struggle within the bureaucracy to transform state property in the means of production into private means of accumulation of capital.

This competitive struggle encountered little resistance from the politically atomised working class. In fact, most workers allied themselves with local or enterprise administrations against the central state authorities in the ensuing struggle over control and possession of productive resources and the social surplus product.

10. By 1991 the ruling bureaucracy in the USSR had divided into two main political blocs. Those connected with the central administration sought to retain the all-union institutions of bureaucratic rule (the Communist Party, the central command of the armed forces, the central government ministries etc.) in order to use them to carry out a more gradual, centrally managed transition to capitalism in which they would be able to transform themselves, their family members and close associates into the owners of big, all-union capitalist corporations. Those connected with republican, provincial and enterprise administrations sought to free themselves from the tutelage of the central administrative institutions in order to carry out a rapid process of privatisation of state assets. Boris Yeltsin, the popularly elected president of the Russian republic, became the chief political spokesperson for this trend within the bureaucracy.

11. In August 1991 the conflict between these two wings of the ruling bureaucracy came to a head when the leaders of the all-union apparatus of the Communist Party and the USSR government attempted a coup d'etat to oust Gorbachev and to re-establish the authoritarian control of the central state administration.

In the ensuing political confrontation between the two camps within the bureaucracy, the Yeltsin camp was able to win the passive support of the working class by posing as the defender of the political liberties gained under the Gorbachev reform process. With the commanders of military and police units in and around Moscow backing it, the Yeltsin camp was able to secure the neutrality of the central command of the armed forces in the confrontation, arrest the leaders of the "Communist coup", publicly humiliate Gorbachev, dissolve the Soviet Union and begin to use the republican state machines to implement their program of rapid private expropriation of state property.

12. The political victory of the Yeltsin-led advocates of rapid denationalisation was a dramatic indication that decisive sections of the ruling bureaucracy had abandoned any defence of the property relations established by the October Revolution and were consciously committed to the restoration of capitalism, and that therefore, the state power in Russia (and in the other ex-Soviet republics) was under the command of pro-capitalist forces. However, the ruling bureaucracy at both the level of the individual republics of the USSR and at the all-union level had endorsed the replacement of the nationalised, planned economy with a capitalist economy a year earlier when the USSR Supreme Soviet approved the Russian Supreme Soviet's "500-Day plan" for the creation of a "market economy".

II. Origin and evolution of the People's Republic of China

13. The People's Republic of China came into existence in October 1949 as a result of the victory of the peasant-based People's Liberation Army over the semi-colonial bourgeois/landlord Republic of China (ROC) regime headed by the Chinese Nationalist Party (Guomindang) during the 1946-49 civil war. The Stalinised Communist Party of China (CPC), which organised and led the PLA, had based itself among the Chinese peasantry after the defeat of the 1925-27 national-democratic revolution. By the end of the second world war, the CPC had become the political apparatus of a petty-bourgeois stratum of bureaucratic military commanders ruling over a rural population of 95 million people. Its political ideology was a mixture of revolutionary nationalism, peasant egalitarianism and Stalinist petty-bourgeois anti-capitalism.

14. Upon seizing state power in mainland China in 1949, the CPC-PLA mobilised the peasant masses to carry through the anti-imperialist, anti-landlord national democratic revolution. While seeking to hold back the revolutionary mobilisation of the urban proletariat against the Chinese bourgeoisie, the CPC regime expropriated the enterprises that had been controlled by the big capitalist families that headed the Guomindang (all of whom fled mainland China with the defeated ROC armies to Taiwan), and introduced measures to gain support from the urban workers (for example, organisation of trade unions, a sliding scale of wages).

15. In the context of the threat of attack from the imperialist powers during the Korean War and of growing attempts by the Chinese urban bourgeoisie to reassert its political power by corrupting local officials of the new regime, the CPC launched a series of bureaucratically controlled mass mobilisations of the urban workers. These aimed to break the resistance of the Chinese capitalists to increasing state control over their economic activities, to levy huge fines upon them for failure to pay taxes and, in 1952-53, to nationalise industrial, financial and commercial activity. By 1953, the bulk of industrial output was in state hands, and large-scale production was placed under a bureaucratically centralised system of national economic planning.

16. The First Five-Year plan, drawn up in 1953 in consultation with Soviet advisers, virtually ignored agriculture and consumer goods, allocating 70 per cent of all investment funds to heavy industry on the Soviet Stalinist model. Despite this gross disproportion in the allocation of investment funds, as a result of the statisation of all industry and centralised planning, major economic and social advances were achieved. Between 1953 and 1957, industrial output grew by at least 20 per cent per year; famine, prostitution and opium addiction were eliminated; women won equal rights under the law; workers' wages rose for the first time in a decade; and dramatic advances were made in public health and in the eradication of unemployment and illiteracy.

17. At the same time, the CPC bureaucracy enormously extended the privileges in consumption it had institutionalised on a modest scale during its years as the ruling stratum in the rural areas under its control in the 1930s and '40s. In 1956, the central government adopted a system of ranks for state employees that included thirty grades, with the top grade receiving no less than twenty-eight times the pay of the bottom grade. In addition to significantly higher salaries than ordinary workers, the top state and party officials were provided with expense accounts that gave them special housing, cars, drivers, staff (including private servants), meals, travel and access to imported luxury consumer goods. The ruling clique at the top of the bureaucratic party-state machine, headed by party Chairman Mao Zedong, began to enjoy a lifestyle resembling that of the old imperial court—living in luxurious mansions, with a vast entourage of private servants and guards, personally tailored clothes, extravagantly prepared meals etc.

18. As with its Soviet counterpart under Stalin, the Chinese Stalinist bureaucracy exercised political power over the workers and peasants through a totalitarian system of arbitrary administrative command, rigid ideological control and a vast network of police repression of dissent operating behind a ceremonial facade of representative institutions. The contradictions between this system of Bonapartist rule and the needs of a planned economy, which requires a democracy of the producers, led to a sharp conflict within the top circles of the ruling Chinese bureaucracy in the late 1950s over the question of how to raise agricultural output.

In 1955, the privileged sectors of the peasantry sought to force up the prices of wheat and rice by withholding sales of grain to the cities. In July 1955, the National People's Congress (the PRC's ceremonial parliament) approved the already half-completed First Five-Year plan and projected that by the end of 1957 one-third of all peasant households would be organised into "agricultural producers' cooperatives of elementary form". Twenty-four hours after the NPC adjourned, Mao overrode its decisions and ordered the immediate wholesale organisation of all peasant households into producers' cooperatives.

By 1957 this decision had been implemented, but it failed to increase sales of agricultural produce to the state and generated large-scale discontent within the peasantry. At the same time, the CPC bureaucracy's attempts to enforce rigid ideological control brought it into conflict with intellectuals and skilled workers.

A sharp conflict arose within the top echelons of the CPC bureaucracy over how to deal with this economic and political crisis. A grouping headed by Liu Shaoqi and his protege Deng Xiaoping favoured making concessions to the workers, peasants and intellectuals along the lines of the post-Stalin regime in the Soviet Union headed by Nikita Khrushchev. The dominant grouping, headed by Mao, favoured further centralisation of bureaucratic authority, tightening of the regime's ideological control over the masses, freezing of workers' wages, forced statisation of peasant farming and decentralisation of industrial production to rural areas.

19. In 1958, the CPC bureaucracy, in the habit of commanding, and which by its very nature was incapable of involving the masses in economic planning, proceeded to act on the illusion of its own omnipetence by decreeing the implementation of Mao's administrative solution to the economic and political problems which the bureaucracy's methods of rule had created. Through the "Great Leap Forward" of 1958-59, Mao and his supporters within the bureaucracy first tested the ideas they would later implement on a more extensive scale during the "Cultural Revolution" of 1966-76. These included the compulsory involvement of the entire population in self-criticism circles where they were required to profess their faith in the CPC leadership and in the "Thoughts of Mao Zedong"; open hostility towards books, including scientific literature, that might lead to a questioning of blind faith in "Mao Zedong Thought"; antipathy toward intellectuals, schools and scientific knowledge; distrust of all things urban and foreign; a romantic idealisation of peasant life, stressing its conformity, hard physical work and obedience to established authority; and the transfer of large numbers of lower level party and state functionaries, technical workers and intellectuals to the countryside.

These policies were accompanied by the forced organisation of the peasantry into bureaucratically run collective farms (the rural "people's communes"), and extensive efforts to build from scratch and without state aid a nearly self-sufficient network of industrial production under the jurisdiction of the "people's communes".

Mao's attempt to adapt the methods of Stalin's system of bureaucratic control over the workers, peasants and intellectuals to Chinese conditions proved to be a political and economic disaster. The peasants responded to the new regimentation and lengthening of their work hours with a passive production strike. In the cities, the workers simply refused to participate in the self-criticism circles, and these were soon abandoned. By 1960, the grain harvest fell to 50 per cent of its 1957 level, and in 1959 industrial production was thrown back to its levels of the early 1950s.

In December 1958, Mao was forced to resign as China's president, to be replaced by Liu Shaoqi, and his "Great Leap Forward" was condemned at the Lushan plenum of the CPC Central Committee in July-August 1959 as "petty-bourgeois fanaticism".

20. Between 1962 and 1966, Mao and his supporters within the bureaucracy laid the basis for the ousting of the Liu-Deng grouping from power and the revival of the methods of political control over the masses first tested in the "Great Leap Forward", through the 1962-64 "Socialist Education Movement" (which promoted the cult of "Mao Zedong Thought" and appeals to hyperactive and obedient labour by workers and peasants) and the reorganisation of the People's Liberation Army as a factional tool of the Mao grouping under the command of Lin Biao.

With the backing of the PLA central command, in 1966 the Mao group launched a massive purge of its opponents within the party and state bureaucracy, denouncing anyone who questioned "Mao Zedong Thought" as an agent and supporter of capitalist restoration. Proclaimed as the "Great Proletarian Cultural Revolution", this purge was also accompanied by the revival of the thought-control methods first used in the "Great Leap Forward". It also replaced all mass organisations such as the trade unions, the national women's organisation, the Communist Youth League and the formal representative institutions (the city and provincial People's Councils) by "revolutionary committees" composed of pro-Mao PLA officers and party and state functionaries who sided with the Mao grouping. These "revolutionary committees" did not even maintain a pretence of acting according to the PRC's constitution and laws.

The purge, which quickly assumed the characteristics of a civil war within the bureaucracy (since in many areas local army commanders aligned themselves with the majority of party and local government bureaucrats who were targets of the purge), caused enormous dislocation in economic production and provision of government services, most particularly in public education. Between 1970 and the time of Mao's death in 1976, that is, during the period when the purge had been completed and the thought-control methods of the "Cultural Revolution" had become institutionalised, China's industrial output stagnated. The officially announced figure for steel production in 1976, for example, was barely above its 1960 level. The official figure for annual per capita grain production in 1976 (319 kg) was barely above the official figure for the 1958 harvest (312 kg).

21. The form of rule implemented by the Mao regime during the "Cultural Revolution" combined elements of the old emperor system (with its demand for blind obedience to the arbitrary will, and public expressions of faith in the infallible wisdom, of the emperor) and the Stalinist system of domination of a statised economy by a materially privileged bureaucratic caste, with a system of fanatical petty-bourgeois egalitarianism for the masses. In The Economic and Philosophical Manuscripts of 1844, Marx had described the latter as the perspective of "vulgar communism", which seeks the "annulment of private property" through "the abstract negation of the entire world of culture and civilisation" and "the regression to the unnatural simplicity of the poor and crude man who has but few needs and who has not only failed to go beyond private property, but has not yet even reached it".

The policies and system of rule implemented during the "Cultural Revolution" not only had a devastating impact on China's economy, and the living standards and intellectual life of its people, but also shattered the confidence of its intellectuals, workers, peasants and large numbers of lower level state and party functionaries in the possibility that social progress could be achieved through "building socialism".

22. In the wake of the death of Mao Zedong in 1976, the policies of the "Cultural Revolution" were abandoned by the CPC regime, which quickly came under the leadership of the previously disgraced grouping headed by Deng Xiaoping. To win a measure of public support and to encourage a revival of economic growth after the devastation of the "Cultural Revolution", the new ruling clique implemented a series of NEP-type concessions to the peasantry, granted the first rise in workers' wages in twenty years and began to relax the regime's rigid control over intellectual life.

In December 1978, the Central Committee of the Communist Party of China approved the dismantling of the "commune" (collectivised farming) system and its replacement with family-based farming units that were free to sell their above-quota agricultural and handicraft products on an unofficial "free" market. This led to a rapid and massive increase in petty commodity production in China's rural economy and the beginning of a process of primitive capital accumulation by provincial and local government bureaucrats.

Beginning in 1982, the managers of state-owned industrial enterprises were increasingly freed from the direct control of the central government ministries and oriented towards maximising enterprise profits through market competition rather than fulfilling centrally set plan targets.

Already by 1980, the ideologists of the CPC regime were extolling the supposed virtues of "market competition" as a means of regulating social production. An editorial in the June 6, 1980, People's Daily (the central organ of the CPC Central Committee), for example, had declared: "Competition forces leaders of an enterprise to strive to make the enterprise grow, to improve management, to raise the quality of products, to reduce costs and to put cheap but good quality products on the market. This forms a sharp contrast with the past situation in which `products were turned out as usual whether or not they found a market', `wages were paid as usual whether or not the enterprise made a profit or incurred a loss' and people `shared food from the same big pot' under socialism… Such competition is sure to put the enterprises which are under bad management and running big deficits in an unfavourable position. Some might have to change leadership, some might have to close down."

23. During the period 1978-84, the official policy of the Chinese state authorities was to create a "planned economy supplemented by market regulation". However, as in the USSR under perestroika, in the absence of democratic control by the working class of both the state authorities and the management of state enterprises, the extension of market mechanisms facilitated a process of primitive accumulation of money capital by provincial and local governnment officials and by enterprise managers. Their desire to win greater freedom to transform this money capital into productive capital and the accumulating contradictions between the mechanisms of bureaucratically centralised planning and the growing commodification of social production led to pressures on the central state authorities for greater and more radical "market reforms": devolution of investment decision-making to enterprise managers and state-enterprise profit-sharing, gradual freeing of prices, relinquishing of central government controls over the allocation of resources by provincial and local government authorities and enterprise managers, and the introduction of laws allowing state enterprises to be declared bankrupt and to lay off their employees.

The introduction of these measures was given ideological sanction after 1984 with the argument that China had to move toward a "planned commodity economy" in which the "law of value" was allowed to determine the day-to-day operation of economic enterprises.

24. Real market competition could not be introduced between state enterprises unless the central government was willing to allow enterprise managers the authority to eliminate the social benefits that flowed to the working class from the nationalised, planned economy created through the proletarian revolution of 1952-53, that is, guaranteed employment to all workers and provision of public education, housing, health care etc. from the social surplus product generated by these enterprises. (In 1996-97 the World Bank estimated that Chinese state enterprises' social service payments equalled their "losses", meaning that they would record profits if their workers were not provided with these basic services.)

Fear of the massive social unrest that might be provoked by any major attack on this state enterprise-based system of social services, however, led the central bureaucracy to hold off taking this course. Instead, in the face of an upsurge of worker unrest in 1988-89, which culminated in the student-led protest against official corruption in Beijing's Tiananmen Square in mid-1989, the Deng regime sought to rewin a measure of support from the urban masses by shifting the emphasis of state production from heavy industry to consumer-goods production and large-scale imports of consumer durables. This was to be paid for through a massive increase in exports of low-technology consumer goods from joint ventures with foreign companies. These ventures were set up in selected coastal provinces utilising the huge reserves of unskilled, particularly young female, labour that were being driven out of agriculture as a result of the market-driven rise in farm productivity.

These joint ventures, and their listing on the Hong Kong stock market, also provided a means for large numbers of party and state bureaucrats, both in the central state institutions and at the provincial level, to cement personal economic alliances with foreign capitalists, particularly those in Hong Kong, and to convert the money they had accumulated through embezzlement of state funds and assets into actual bourgeois property.

25. Since the Fourteenth Congress of the Communist Party of China in 1992, the officially declared aim of the state authorities has been the creation of a "socialist market economy", to be achieved through the dismantling of the post-capitalist state-owned and nationally planned economy that came into being as a result of the expropriation of bourgeois property in industry, banking and commerce in the early 1950s. This perspective was reaffirmed and deepened at the Fifteenth CPC Congress, held in September 1997. In his unanimously approved report to the congress, Chinese President Jiang Zemin declared that the CPC's aim is the rapid privatising of the ownership of most medium-sized and all small state-owned enterprises through "joint stock partnership or sell-off", while converting some 512 major state-owned enterprises into "highly competitive, large enterprise groups with transregional, intertrade, cross-ownership and transnational operations".

From the point of view of Marxism, the concept of a "socialist market economy" is a theoretical absurdity. A socialist economy is an economy in which the production and supply of goods is consciously regulated by society to directly meet the needs of its members through the socially planned allocation of productive resources. The precondition for this is that means of production are collectively owned by the dominant social body (the public power representing all members of society).

By contrast, a market economy exists in a society in which material production is regulated in a socially unplanned manner through the mechanism of generalised exchange according to the law of value (which adapts the production and supply of goods to social demand indirectly—that is, independently of society's conscious choices—through successful and unsuccessful exchanges between autonomous producers). Such an economy is a result of the fragmentation of social labour among separate (private) owners of society's productive resources—whether this is recognised in law or not.

Such fragmentation of social labour, of course, also characterised socioeconomic formations in which petty commodity production prevailed, that is, in which the direct producers (peasants, artisans) owned their own means of production. But a market economy is one in which commodity production is generalised, that is, in which the majority of direct producers no longer own their means of production and are therefore compelled to sell the only productive resource they have (their labour power) to a private owner of means of production. A market economy is a capitalist economy.

26. In the period since the Fourteenth CPC Congress in 1992 approved the goal of creating a "socialist market economy", the share of state-owned enterprises in gross industrial output has fallen from 53 per cent to 34 per cent. Most industrial, agricultural and commercial activity is no longer directed by the central state authorities, and the central planning system has been converted into a series of compromises between the state banks and the state-owned industrial enterprises. More and more state economic assets have been transferred into the hands of joint stock companies owned by government officials. Even the army has set up its own businesses, operating more than 400 factories producing refrigerators, TV sets and passenger aircraft for the domestic and overseas market.

The top officials in the central government have set their children up in private and quasi-private businesses in mainland China and in Hong Kong; vast numbers of lower ranking government officials in the coastal provinces and those with family business connections in Hong Kong have gone into private and quasi-private business ventures with Hong Kong, Taiwanese and Western capitalist investors. The increasing business ties that were established after 1989 between the ruling Chinese bureaucracy and the big capitalists in Hong Kong provided the economic basis for the latter's enthusiastic support for the integration of Hong Kong's fully capitalist political and economic system into the state structures of the People's Republic of China in 1997.

27. The turn by the ruling bureaucracy in China toward sanctioning the transformation of the petty-bourgeois stratum that constitutes the commanding personnel in the organs of state power into owners of bourgeois property, like the somewhat earlier turn in the same direction by the ruling bureaucracies in the Soviet Union and eastern Europe, marks the final triumph of bourgeois reaction within the state structures of these societies and the end of any activity on their part to defend the nationalised, planned economy as a source of their power and income. The state power these bureaucracies command has ceased to be "a weapon of proletarian dictatorship". It has become an instrument for the suppression of the resistance of the working class to the reintroduction and defence of capitalist property relations. These regimes are no longer highly deformed expressions of proletarian state power. They are now capitalist states.

III. Fundamental tasks facing the proletariat in eastern Europe, the ex-USSR and China

28. The capitalist states that now rule in China, Russia and the former socialist states of eastern Europe do not represent imperialist bourgeoisies. They represent bourgeoisies whose financial and technological resources place them in a subordinate position within the world capitalist system to the monopolist finance capitalists of North America, western Europe and Japan.

These capitalist states are being integrated into the world imperialist system as semi-colonial countries, victims of imperialist exploitation. It is therefore the duty of the international working class to support the working people of these countries in any struggle against imperialist domination. Insofar as the ruling classes of these countries seek to defend their national sovereignty against the dictates and encroachments of the imperialist powers, class-conscious workers should seek to support their resistance against the imperialist powers while maintaining political independence from these countries' bourgeois governments.

29. The strategic political task facing class-conscious workers in these countries is no longer that of carrying out an anti-bureaucratic political revolution, that is, the revolutionary organisation and mobilisation of the working class and the small farmers to break the political power of the bureaucracy and to carry through a democratic reform of organs of state power based on the nationalised, planned economy. The strategic political task now facing the class-conscious workers in these countries is the revolutionary organisation, education and mobilisation of the working people to break up the state institutions in these countries (governmental apparatus, police and standing army, etc.) and to replace them with new organs of state power created by the working people themselves.

This new revolutionary state power will not only have to introduce profound changes in the distribution of the national income in correspondence with the interests and will of the working masses, but also carry out revolutionary changes in the sphere of property relations—expropriation of the private fortunes accumulated by the families of the bureaucrat-bourgeoisie, reinstitution of the state monopoly of foreign trade and of a (democratically) centralised system of economic planning and the centralisation of all large-scale means of production in the hands of the state, that is, of the proletariat organised as the ruling class.

The working class can be won to this perspective only through the voluntary organisation of its most politically conscious and militant elements into a mass revolutionary Marxist party. Such a party is necessary not only to provide leadership in solving all the strategic and tactical problems involved in the struggle of the working class to take state power and abolish capitalism, but also in finding the correct road to creating a classless, socialist society.

30. The experience of Stalinist rule in the Soviet Union and China demonstrates that the smashing of bourgeois state power and the centralisation of large-scale means of production in the hands of a new state power that is based on the political organisation of the working people, is a necessary but by no means sufficient condition for the building of socialism. It opens the road to the planned allocation of social resources to meeting the working people's material and intellectual needs. But without the active involvement of the working majority in the administration of the state, that is, actual and not simply formal democracy, and its conscious commitment to building socialism, in a society in which the decisive aspects of economic life have been statised, the danger of a restoration of capitalism through the bureaucratisation of the state functionaries will be enormously magnified.

The possibility of maintaining the active involvement of the working majority in the administration of a socialist state (a workers' state that organises a statised, planned economy) depends not only upon the maintenance and deepening of democratic forms of state administration—election and recallability of all officials, restricting the remuneration of officials to no more than remuneration of the average skilled worker, representative institutions that combine legislative with executive functions and organisation of the population into a people's militia. It also depends upon the rapid development of the productive forces so as to rapidly be able to make the allocation of necessary consumer goods and services according to people's rational needs rather than their contribution to social labour, and thus to rapidly increase the free time they have for involvement in the administration of social life.

As long as the capitalist class continues to own and control the decisive productive forces within the world economy, the possibilities of doing this in any isolated socialist state or group of socialist states will be severely limited. Humanity's advance towards socialism therefore depends decisively upon victorious socialist revolutions in the developed capitalist countries and the voluntary and consciously organised cooperation of the workers of the world.

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