CHINA'S SOCIALIST ECONOMY xuE MUgrAo ry CHINA KNOWLEDGE SERIES CHINA'S SOCIALIST ECONOMY xuB MupIAo F,OREIGN LANGUAGES PRESS BEIJING First Edition 1981 CON?ENTS AUTHOB'S PBEFACE i. Chapter f China's Socialist Revolution antl Sociallst Construction 1. Particularities of China's Socialist Revolution 1 2. Guidelines for China's Socialist Construction 7 3. The Stages of Socialist Development 13 Chapter lI Placing the Means of Production Under Socialist Ownership 1. Building Up the Socialist State Economy-the Leading Sector 1B 2. The Socialist Transformation of Capitalist Industry and Commerce 25 3. The Sociatist Transformation of Agriculture Under Individual Ownership 32 4. The Socialist Transformation of the Handicrafts and Small Businesses Under Individual Ownership 39 Chapter III Two Systems of Socialist Ownership 1. Important Differences Between the Two Systems 45 2. Socialist Ownership by the Whole People at the Present Stage 50 3. Socialist Collective Ownership at the Present Stage 56 Published by the Foreign Languages Press, 24 Baiwanzhuang Road, Beijing, China Cha,pter Mhe Distribution System Under Socialism: "To Each According to His Work" Printed by the Foreign Languages Printing llousen 19 West Chegongzhuang Road, Beijing, China 1. Labour in a Socialist Society 67 Distributed by Guoji Shudian (China Publicationi Centre), 2, "To Each According to His Work" - An Objective' P. O. Box 399, Beijing, China Necessity 74 3. Wages in Enterprises Owned by the Whole People 7B Printed in tke People's Republic of Ckina 4. The Reform of the Current Wage System 84 5. Personal Income Under Collective Ownership 91 Chapter X Class Struggle and ContradictlonS Among the People 6. Correct Handling of Differences in Living Standards 9B 1. Class Struggle in a Socialist Society 266 Chapier V Commodity and Money Under Socialism 2. Contt'adictions Among the People 273 3. People's Democracy and the Correct Handling of the Con- 1. Effective Use of the Commodity-Money Relationship 103 tradiction Between the.Leadership and the Masses 2Bl 2. Commodities Under Socialism I 107 3. Commodity Circulation Under Socialism Conclusion Objective Laws of Socialist Economic Development 114 4. Money Under Socialism L25 t. Marxist Theory on the Building of Socialism 289 5, The Development and Disappearance of Commodities and 2. Economic Laws of Socialism 297 Money 1,31 3. Economic Laws and Man's Initiative ,o'' Chapter VI The Law of Value and China's price policy About the Author 315 1. The Law'of Value in a Socialist Economy 135 2. Use of the Law of Value L42 3. Prices and China's Price Policy 146 4. Reforming China's Price Control System L54 Chapter VII Plannlng the Sociatist Economy 1. How to Plan the Economy 168 2. National Construction and the People,s Livelihood 1?0 3. Proportionate and Speedy Development of the National Economy L77 4, Employment of the Country,s Labour Force 185 5. Balancing the National Economy 190 6. Business Accounting Under Socialism 196 Chapter VIII The System of Economic Management ln a Sociallst Country t. Changing the System of Economic Management 203 2. Reforming the Management of State Enterprises 2L0 3. Reforming the Management of the National Economy 218 4. Economic Readjustment and Managerial Reform 229 Chapter IX Socialist Modernlzation of the National Economy 1. China's Road to Modernization 234 2. Modernizing Agriculture 244 3. Modernizing Industry 253 AUTHOR'S PREFACE I thought of writing a book like this more than twenty years ago. In 1955, the Propaganda Department of the Chinese Com- munist Party Central Committee assigned me the job of co- authoring with Yu Guangyuan and Sun Yefang a textbook on political economy. As a kind of spadework, I wrote in col- laboration with Su Xing, Lin Zili and others The Socialist TransJormation of the Nati.orwl Econorny i,n Chirva, a book published on the tenth anniversary of the People's Republic in 1959.* After that I found little time for research on key questionS of socialist economic construction, and what I did outside my regular duties before L966, the first year of the Cultural Revotrution, found expression in about two dozen articles and a dozeh speeches. In 1978 the People's Publishing House offered to publish a collection of articles I wrote during the period from the founding of New China to the eve of the Cultural Revoiution. As requested, I selected over a dozen major articles and com- piled them in a book, published in April l9?9, called Theo- reti.call Questians of tlrc Soci.ali.st Economy. It is by no means a comprehensive work and, judged by today's standards, it is both ideologicaily weak and faulty in some respects. Never- theless, it does touch on important aspects of the socialist economy and, furthermore, reflects the level of my under- standing at the time of writing. This may be r:egarded as my first venture into the subject I An English translation was published by the Foreign Languages Press, Beijing, in 1960. -Trans. During the Culturai Revolution, I spent all available time and solved irnmediately. I offer my views to theoreticians and reading through the Selected Works of Maru and Engels, t}:.;e administrators alike and hope they may be of use in a future Selected Works of Lenin and Marx's Capital along with a treatise on the political economy concerning socialism. further study of the Selected Works of Mao Zedong. In 1968, . China's socialist revolution and construction have entered I tried my hand at a book entitled Questi.ons of the Socinlist a new historical era. The Third Plenary Session of the Party's Economy and rewrote it six times over the next eight years. Eleventh Central Committee set forth the task of shifting the The original plan was to produce a textbook called Potiti,cat focus of the Party's work to socialist modernization and build- Economg Concerning Soci,ali,sm, While -revising the text, ing a powerful socialist state by the end of this century. however, I found the plan increasingly difficult to carry out. Reading about this policy decision, I felt I should corrlplete First of aII, I was not strong enough in a dialectical approach my book as soon as possible. New developments pose impor- to q0estions of the socialist economy. In addition, quite a few tant theoretical and praetical questions. The Party Central "forbidden areas" in theoretical study had been carved out Committee has called on theoreticians to provide guidance during the Cultural Revolution. Consequentiy, the chapters for practical workers. Thus we who work in the theoretical in the textbook showed little improvement over the articles field are asked to contribute to the country's four moderniza- I wrote prior to the Cuitural Revolution. I later realized that tionb* in our own way: by conducting a serious study of China's only after the downfall of the Gang of Four in October 1976 experience in socialist revolution and construction in the past and especially.after the Third Plenary Session of the Party's thirty years and promoting the science of political economy in Eleventh Central Committee in December 19?B could I at- the new circumstances. tempt an effective rewrite. The keynote of the Third Plenary ' I would like to say a few words about my principles for Session w.as a call for people to think for themselves on the studying the socialist economy: principle, "practice is the sole criterion of truth." 1.. Integration of theorg ui,th practice. During the rectifiqa- The revised version showed a departure from my earlier tion campaign in Yenan in 1941, Mao Zedong made an im- plans to write a textbook. Instead of trying to deveiop a com- portant report, "Reform Our Study", in which he said: prehensive theoretical system, I did my best to apply the basic tenets of Marxism-Leninism to a study of the historical ex- Although we are studying Marxism, the way many of our perience of China's socialist revolution and construction as people study it runs directly counter to Marxism. That is well as major economic problems awaiting solution. In the to say, they violate the fundamental principle earnestly en- process of research, I deepened my understanding of the laws joined on us by Marx, Engels, Lenin and Stalin, the unity of motion of the socialist economy. I gave up on the textbook of theory and prdctice.l because I came to realize the difficulties in buitding a com- The unity of theory and practice, that is, seeking tluth from prehensive theoretical system, given the brief history of facts and aiming at one's target, should be our scientific ap- China's socialist construction, the immaturity of her socialist economy and the insufficiency of her practicai experience. On * The modernization of agriculture, industry, national defence and the other hand, having worked in the economic field for more science and technology, than three decades, I wanted to devote my later years to a - Trans. r Mao Zedong, "Reform Our Study", Selected Works, Foreign Lan- study of problems which, in my opinion, had to be examined guages Press, Beijing, L977, Vol. III, p. 20. li llI proaeh. To exarnine the laws of motion of the capitalist We do not regard Marx's theory as something completed economy, Marx collected a wealth of data * historical, current and inviolable; on the contrary, we are convinced that it has and theoretical. Then through a scientific analysis and com- only laid the foundation stone of the science which socialists prehensive study of these data, he brought to light the essence rnust develop in aII directions if they wish to keep pase with of the capitalist relations of production and the laws govern- life.' ing their motion, conciuding that the extinction of capitalism A theoretical study of China's socialist economy must pro- and tlre triumph of socialism are both inevitable. While ceed from present reality. China used to be a semi-colonial, studying Marx's, Capital, we have to grasp not only his theory semi-feudal country. It had the largest population in the on the laws of motion of the capitalist economy but also his world but a very low level of productive forces and,a pre- methodology. Empty, purely. theoretical research divorced dominantly small-peasant economy. This was the basis on .undertaken from reality and a simple repetition of the conclusions in the which socialist revolution and construction were books are to be avoided. after the proletarian seizure of state power. China is already Socialism is a new system. In studying the laws of motion a sociaiist country but one with a backward economy and cu[- of the socialist economy, we must always base our work on ture. We have had our successes and our failures. A look at actual conditions. In a capitalist country, the mission of the the history of the past thirty years shows that it' is by no working class is to destroy the o1d wor1d. In a socialist means easy to build socialism and achieve mqdernization in a country, its task is to build a new wor1d. Under capitalism, country like ours. The path to China's goals can be found only through protrhcted studies on the basis of her actual con- it is irp to the capitalists to organize and manage production. ditions and the principles of Marxism-Leninism and Mao In China tod"ay, socialist modernization and the management Zedong Thought. of the socialist economy are a vital concern of the working 2. Concrete analgsis oJ the contradiettons in a soe.ialist people. It is our job to study the rlew developments and prob- society. Mao Zedong pointed out that contradiction is present lems on the basis of Marxism-Leninism and Mao Zedong in all things and'permeates the course of development of each Thought, discover and apply the laws of the socialist economy, thing frorn beginning to end. Recognition of the internal con- and solve the theoretical and practical questions of socialist tradictions ot'a thing means a grasp of its essence. Contradic- econornic construction. tion is the force that drives society forward. Without con- Marx and Lenin showed us the laws governing the transi- tradiction there can be no social progress in socialist society. tion from capitalism to communism through socialism. Their He said: / scientific predictions remain the guide to our study of ques- tions of the socialist economy. However, the classics they In socialist society the basic contradictions are stiil those authored are insufficient for a study of the socialist economy betweerr the relations of production and the productive because socialism never actually existed in their lifetime. forces and between the superstructure and the economic History proves that the Marxist theory of socialism and com- base. ; socialist relations of production have been munism ean only derrelop through practice. We must never established and are in correspondence with the growth of take. what is said by Marx, Engels and Lenin in their woi'ks l Lenin, "Our Programme", Collected Works,. Foreign Languages as dogma or as a panacea. Lenin said: Publishing House, Moscow, 1960, Vol. 4, pp. 211-12. iv the productive forces, but these relations are still far from ownership by the whole, people is imperfect in a number of perfect, and this imperfection stands in contradiction to the respects and needs improvement and development. In the growth of the productive forces. Apart from correspondence economic sector under socialist collective -,ownership, com- as well as contradiction between the relations of production mune members are still allowed to cultivate private plots and and the growt'h of the productive forces, there is corre- enSage in household side-line occupations. This is another spondence as well as contradiction between the superstruc- indication of the immaturity of the socialist relations of pro- ture and the economic base.l duction. At the present stage of growth of productive forces This was Mao Zedong;s general view on contradictions in a in agriculture, collective ownership and the growth of pro- socialist society.. ductive forces are still in a state of mutual correspondence. Our understanding of Mao Zedong's views was often inac- While the peasants are encouraged to take ari active part in eurate and incomplete, leading to confusion on the question of collective labour, they may devote their spare time to side- contradictions in a socialist society. Correspondence and con- line production as a means of meeting their needs which can- tradietion, it seemed, were mutually exclusivd. Thus corre: not be fulfilled by the present collective economy. Although spondence between the socialist relations of production and the this contradicts collective ownership, the two contradictoty growth r:f productive forces was taken to mean an absence of ,'I dspects are stiil in a state of mutual correspondence. Of contradictions between them an interpretation cohtrary to course, the remnants of individual economy cannot linger on - forever, but will die out as soon as the collective economy Mao Zedong's thesis quoted above and to what he said in his article "On Contradiction", namely, that contradiction is pres- f grows strong enough to take their place. Similarly, although ent in all things and permeates the process of development collective ownership plays a vigorous role in promoting the of each thing from beginning to end. Moreover, this interpre- I growth of agricultural productive forces, it will become an I obstacle to their further development with the full mechani- tation was practically the same as the argument that the # socialist relations of production fully correspond with the pro- tr zation and modernization of farm production, which will create the need for a gradual transition to ownership by the ductive forces. ^ It was an obvious misunderstanding. Con- tradiction exists' likewise between the socialist relations of whole people. iffi production aird the growth of productive forces, except that Back in 1937, Mao Zedong analysed the two states of motion *{ of contradiction in his article "On Contradiction". He said: the different aspeets of the contradiction are stiil in a state of mutual correspondence before any qualitative change occurs. There are two staies of motion in all things, that of rela- Socialism is the lower phase of communism or immature tive rest and that of conspicuous change. Both are caused communism. Viewed against the perspective of communism, tr by the struggle between the two contradictory elements socialism is an imperfect socio-economic formation. And since contained in a thing.l we are in the elementary stage of socialism, our socialism is w The same is true of the motion of the socialist relations of immature or, in the words.of Mao Zedong, "far from perfect". a production and the productive forces 'as opposites to each In the existing socialist relations of production, socialist ild other. When they ape in a state of correspondence and rela- ril il!, iii l Mao Zedong, :'On the Correct Handling of Contradictions Among t M"" Z€dong, "On Contradiction", Selecteil Works, FLP, Beijing, the People", Selecteil Worke, FLP, Beijing, 197?, VoI. V, pp. 393-94. ,,| 19?5, Vol. l, p. 342. ,r), vl il, vii :! 'i:' ",i #r' tive rest, we should consolidate such relations of production. .,., Like the natural world, human soeiety develops through a When they are in a state of non-correspondence and conspic- process of growth whereby the new supersedes the old. A uous change, we have to reform the relations of production, new society invariabiy has certain remnants of the old. A introducing first a partial reform, or a partial qualitative dying society always exhibits some seeds of a rising one. Marx change, and then a complete reform, or a complete qualitative { points out that a socialist society emerges from the womb of change. This is how we effect the transition from two systems i ,ti a capitaiist, society, and necessarily bears its birthmarks. of socialist public ownership to a unitary ownership by the China's was not a pure capitalist society but a semi-colonial whole people and then from the lower to the higher phase of and semi-feudal one; its socialist society therefore.shows the communism. Such a transformation requires a long process traces of capitalism as well as those of feudalism and the economy of tfre small commodity producer. The evolution of of many dtages. Any denial of contradiction or over-simpli- fication of its development leads to grave mistakes in both socialist relations of production. coincides with the gradual disappearance of these remnants of the o1d society. On the theory and practice. other hand, seeds of socialism were engendered in China's Since the contradiction between the relations of production Iiberated areas back in the days of her new-democratic rev- and the productive forces and that between the superstructure olution. While the economic sector under collective owner' and the economic base are basic to a socialist society, we ship retains elements of the economy of the individual pro- should give this question serious consideration in a study of ducer, it also contains rudiments of a system of ownership by the political economy concerning socialism. Political economy the whole people. In China's distribution system, vestiges of is the science of relations of production which, nevertheless, differential rent in the o1d society are found under collective cbnnot be studied separately from productive forces and the ownership. In the economic sector under ownership by the superstructure. Instead, it explores the growth of relations of whole people, where the general principle of "to each accord- production in light of the motion of opposites the relations ing to his work" is followed, collective welfare undertakings of production and the productive forces, the-superstructut'e are developed with the growth of productive forces, Collec- and the economic base. tive welfare contains rudiments of distribution on the com- 3. The studg *o! the socialist relnti.ons of productton as a munist principle of o'to each according to his needs". If we process. Every socio-economic formation goes through a pro- do not take into consideration the objective dialectical law of cess of development, which is the very subject matter of polit- the new superseding the old but look for a "pure" socialism ical economy. SocialiFm is not an independent socio-economic free from both vestiges of the old.and rudiments of the new, formation but the lowgr phase of communism and, as such, we are likely to fall victim to a metaphysical point of view. needs more study as a process. Some comrades attempt to Socialism is the necessary stage of transition between capi- disregard capitalism and communism in their study of the his- talism and communism. The period of socialism may last torical stage of socialism, seeing it as something rigid and several hundred years and covers the transition from capital- immutable. This prevents any correct understanding of social- isrn to socialism and from socialism to communism. This ism. As for the statement that socialism is an independent whole period of transition is again divided into smaller stages, social formation, it seems to have nothing in common with including the transition from individual ownership to collec- Marxism. tive ownership, from collective ownership to ownership by viii ix ffi tr' I,I .fi ,ilL the whole people and, finally, from socialist ownership by the 't these relations. Some of the imperfections have to be pre- whole people to communist ownership by the whole people. /l servdd for the time being because they are in keeping with These transitions are effected through continual quantitative the present level of productive forces; others are not quite so changes and a series of partial qualitative changes. Without and, with the growth of productive forces, will be ever more quantitative change there can be no quaiitative change, and out of keeping with the latter and must be changed step by without a series of partial qualitative changes it would be im- fll step. For a fairly long time, all we have to change are those possible to complete the fundamental qualitative change from parts of the socialist relations of production which hamper the capitalism to communism. d growth of productive forces or the four modernizations. The By partial qualitative changes in a general process of de- changes will perfect and consolidate the socialist relations of velopment we do not mean an absence of relative stability production. But there will be no change in the socialist rela- between two qualitative changes. When China's socialist # tions of production as a whole until a graduai transition to system"was first established, Mao Zedong pointed out: # the higher phase of communism is made possible by a spec- . . . the new social system has only just been €stablished ffi tacular rise in both productive forces and people's communist and requires time for its consolidation. It must not be as- consciousness. E,l sumed that the new system can be completely consolidated The "hesolution on Some Questions Concerning the peo- the mornent it is established; that is impossible. It has to ple's Communes" adopted at the Sixth Plenary Session of the be consolidated step by step.l dl) Eighth Central Committee of the Chinese Communist Party He also said: Iil in December 1958 states: Oqr basic task has changed from unfettering the produc- v) 'W" advocates of the Marxist-Leninist theory of unin- tive forces to protecting and gxpanding them in the context """ revolution; we hold that no "Great Wall" exists terrupted I of the new relations of production.2 l{ or can be allowed {o exist between the democratic revolu- The Gang of Four argued that at no time can productive ;rl tioh and the socialist revolution and between socialism and forces grow without a change in the relations of production, ii communism. We are at the same time advocates of the and advocated an unconditional, continual change in the social il Marxist-Leninist theory of the development of revolution relations of production. This was an anti-Marxist view. ti)f .B 'f, by stages; we hold that different stages of development While stressing the need to consolidate the socialist retra- ;'* reflect qualitative changes and that these stages, different tions of production, including collective ownership in agricul- ;{r in quality, should not be confused. ll ture, we do not mean these relations are perfect at the present stage. On the contrary, they are imperfect in many respects. i This is the correct approach for our study of the socialist The lower the level of productive forces, the less perfect are economy. We have to recognize both the transitional and the protracted nature of socialist society. A leap in quality has l Mao Zedong, "Speech at the Chinese Communist Party's National to be preceded by an accumulation of innumerable quantita- Conference on Propaganda Work", Selecteil Works, FLP, -Beijing, 1977, tive changep, and a complete change in quality by a number Vot. V, pp, 422-28. of partial qualitative changes before the realization of com- z Mao Zedo}Q, "On ,tbe Correct Handling of Contradictions Among the People", SelecteCl Worka, fLP, Beijing, L977, Vol. V, p. 397. munism. x- This book can only be regarded as a draft. I invite theoreti- cians, business administrators and other readers to give their comments and criticisms for a further revision of the text. Thanks are due to Su Xing, He Jianzhang, Yu Xueben and Wu Kaitai who participated in the discussion and revision of Chapter I the whole book and to Xu He and Wu Shuqing who took part in the discussion and writing of some chapters of a previous CHINA'S SOCIALIST REVOLUTION draft. AND SOCIALIST CONSTRUCTION In carrying out socialist revolution and construction in a poor, backward and populous country, we have achieved many successes and met with some failures. To realize our goal of four rnodernizations it is important to sum up the his- torical experience in the 30 years since the founding of the People's Republic and examine the objective laws governing the growth of the socialist economy. 1.PARTICULARITIES OF CHINA'S SOCIALIST REVOLUTION Marx and Engels assumed that the proletarian socialist revolution wouid first be successful in the most developed capitalist countries, such as Britain, France, Germany and the United States, perhaps all at once. Had this been the case, the transition from capitalism to socialism would have been much easier. But history takes a tortuous course. Up to now, no proletarian revolution has triumphed in'any of these coun- tries. The proletariat in Russia, a less developed capitalist country, seized state power more than 60 years ago. Unlike the opportunist leadArs of the Second International who ignored the changes in the objective situation and confined themselves to the specific theoretical conclusions of Marx and Engels, Lenin creatively developed Marxism under new his- torical circumstances. He pointed out that in the epoch of imperialism, the uneven political and economic development xlr I of the capitalist countries had made it possible for the prole- capitat. and ehanging tirem into sociaiist state enterprises, the tariat to triumph first in a country representing the weakest proletariat had already established its superiority over the Iink in the capitalist world. Since history offered such an op- national bourgeoisie in the economic field. Now the question portunity to the proletariat, should it seize power first and was: who was to assume leadership over the economy of the then develop the economy and culture of the country, or numerous individual peasants? It was clear that in the should it refrain from doing so until after a full economic and struggle between the proletariat and the bourgeoisie, whoever cultural development? Lenin chose the first course, which gained leadership over the small peasant economy would has been proved correct by the victory of the October Revolu- emerge victorious. tion and the subsequent successes in socialist revolution and The Chinese Communist Party won victory in the new- construction in the Soviet Union. democratic revolution mainly by relying on the peasants Ttre salvoes of the October Revolution brought Marxism- during the 22-year armed struggle in the rural areas. It firm- Leninism to China which, as a semi-colonial, semi'feudal ly united the peasants politically and worked out a whole country, saw the victory of her own proletarian revolution 32 series of measures to direct the small peasant economy. years later. The weakness of China's national bourgeoisie Seeing how scattered and hard to manage was the small made it necessary for the proletariat to exercise leaders[ip, peasant economy, Lenin believed it was more difficult to deal through the Communist Party, in the democratic revolution with the smaIl peasants than with the bourgeoisie. In the against imperialism, feudalism and bureaucrat-capitalism and first half of 1918, he suggested using state capitalism to com- guide it to victory. The Chinese revolution differed from the bat the spontaneous capitalist tendency of the peasants. Russian revolution in that, while the Russidn proletariat During the period of foreign armed intervention and civil seized power through armed uprisings in the cities and then war, he was compelled to put war-time communism into effect extended the revolution to the countryside, the Chinese pro- and tried to do away with the commodity-rnoney relationship. letariat, being smail and weak, had to rely on the peasants When this proved impracticable, he advanced the New Eco- as its.chief ally, establish its revolutionary bases in the rural nomic Policy, an attempt to control the small peasant economy areas, and then encircle and capture the cities from there. This through the market by developing state and co-operative com- was a new trail blazed by Mao Zedong and other Chinese rev- merce. To this end, he called on Communists "to learn how olutionaries for the proletarian revolution in a poor and to do business". backward country. Protracted armed struggle by the Chinese The situation in China was different. During the revolu- peasants under proletarian leadership resulted in the complete tionary wars, we set up supply and marketing co-operatives victory of the democratic revolution and the political pre- throughout the rural base areas which purchased the peasants' dominance of the proletariat in a people's democratic dictator- farm produce and provided them with manufactured goods. ship which was essentiaily a proletarian dictatorship. In this way we rehabilitated agricultural production, gave History posed a new question to us: in our economically much support to the war effort, and rallied the peasants backward country of small peasants, would it be possible to around us while weakening their ties with the bourgeoisie. establish a socialist economy by carrying out an immediate After the victory of the War of Liberation (1945-49), similar socialist transformation of ownership of the means of pfoduc- co-operatives were established in the newly liberated areas to tion? After taking over enterprises owned by bureaucrat- link the socialist state economy with the small peasant econ- 2 omy. From the very outset, we laid a solid foundation for the economy, it iacked a solid foundation. The relations of pro- solution of a problem which Lenin regarded as a hard nut duction can never surpasrr the level of productive forces. Co- to crack. operation on such.a basis precludes the establishment of many Could we start a socialist revolution immediately following big farms. The process of co-operation was basically com- victory in the democratic revolution? The answer wasn't pleted in 1956, followed by the establishment of people's com- clear at the beginning. Half of the country had only just been munes in 1958. But up to now, with the exception of a small liberated, and it would take two or three years to complete number of economically advanced communes and production the agrarian reform, a task of the democratic r6volution, in brigades, the communes are still being operated at a very low this vast region. When we did complete the agrarian reform, level of public ownership and the production team remains the peasants generally showed enthusiasm in expanding their the basic unit of production and distribution. Over the years individual economy whiLe many poor peasants preferred to many areas have seen premature attempts to raise the level take the road of socialism. But we had no experience in of public ownership in the people's communes whereby the organizing the peasants on the basis of a socialist collective production brigade or even the commune was made the basic economy. On the Marxist principle that socialism can only unit of production and distribution, while remnants of the in- be built on the basis of large-scale socialized production, some dividual economy, such as the peasants' private plots and people held that mechanization must come before collectivi- household side'line occupations, were abolished. The result zation in China's agriculture. This view did not seem to apply was a dislocation of productive forces and a marked decline to the conditions in China's rural areas, where the cultivated in agricultural production and the peasants' standard of living. land averaged three mu* per capita and about a dozen rnu per Experience shows that if we ignore the realities of China,s household, which were often divided into several patches. The agricultural production and go against the basic law of small peasant economy showed a low laboun productivity and economic growth, namely, the relations of production must was incapable of accumulating large funds. Without manag- conform to the level of productive forces, we shali be punish- ed for our mistake. ing agriculture on a co-operative basis it was difficult to lay Similarly, the socialist transformation of China,s capitalist out large tracts of farmland or accumulate sufficient funds industry and commerce could only be carried out step by step for mechanization. In his report "On the Co-operative Trans- in view of the country's economic backwardness. In his report formation of Agriculture" published in J.955, Mao Zedong to the Second Plenary Session of the Party's Seventh Central pointed out that, with conditions as they were in China, co- Committee in March 1949, Mao Zedong pointed out that the operation had to precede mechanization in agriculture. After output value of Chinais modern industry only accounted for the ptblication of this report, a movement for agricultural co- some 10 per cent of the total output value of the nation,s operation** swept the country. , economy, while private capitalist industry took second place Since China's agriculilrral co-operation was carried out on in modern industry* and was still a force to be reckoned with. the basis of manual labour and a substantially self-sufficient Because of old China's economic backwardness, it was neces- * One mu equals one-fifteenth of a hectare.-Trans. sary, for a fairly long time after the victory of the revolution, ** Here "co-ope(ation" means the same thing that "collectivization" means in the Soviet Union. *After the industry owned by bureaucrat-capital.-Trans. -Trans. 4 to make full use of the initiative of private capitalism in the diversity and flexibility to production and economic manage- interest of national economic growth. After the founding of ment, contributing significantly to fuII employment and New China, while expropriating bureaucrat-eapital, we didn't meeting the great variety of consumer needs. confiscate national capital. Instead, we made use of its posi- To reveal the essence of capitalist relations of production, tive side which did good to the economy and the people's live- Marx often applies the method of abstraction in his works on lihood, restricted its negative side which did harm to the lat- political economy. Capital deals mainly with the most typical ter, and accomplished its gradual socialist transformation class reiationship in capitalist society, the relationship be- through state eapitalisna. This policy towards capitalist in- tween the bourgeoisie and the proletariat, and says very little dustry and commerce conformed to the level of our produd- about small producers. In his days, while few smali producers tive forces. were left in Britain, vast numbers of them were found in other With the completion of the socialist transformation of agri- countries. Today there are still more than two million private culture; handicfafts and capitalist industry and commerce, farms in the United States, an indication that even in the China becarne a socialist country. But her socialist economy highly developed capitalist countries the situation after the remains immature and imperfect and has a long way to go be- victory of the sociaiist revolution will be much more com- fore it reaches the ,first phase of communism envisaged by Marx in his Critique of the Gotha Programme. Socialist flicated than what is described in the passages on the first phase of communism in tlr,Le Critique of the Gotha Pto- society or the first phase of communism, as Marx defines it, gra,fiLrne. China used to be a country dominated by small is based on ownership of the means of production by the whole producers who conducted partially self-sufficient production society or, as we put it, on a unitary system of ownership by by manual labour. To develop China's socialist economy, we the whole people. The peasantry accounted for some 90 per must take this background into consideration and skillfully cent of China's population at the time of liberation and re- combine principle with flexibility instead of adhering dog- mains more than 80 per cent at present. The country has more matically to the conclusions of Marx, Engels, Lenin and Stalini than 800 million peasants, mostly living in the economic sector copying their models mechanically would lead to an ossifica- under collective ownership. While ownership by the whole tion of China's socialist economy. The measures to be adopted people occupies a leading position in the nation's economy, collective ownership is predominant in the rural areas. Much in different regions should vary with their natural and eco- nomic conditions, and the level of public ownership may be of China's industry is still operated by semi-mechanized 'higher or lower as the circumstances require. A singular rneans or by manual labour. In the service trades, most peo- standard for all regions will hamper the growth of production. ple are doing manual labour, making necessary the preserva- tion and development of enterprises uflder collective owner- ship. After organizing the handicrafts and small businesses 2.GUIDELINES FOR CHINA'S into co-operatives, we took premature steps to place them SOCIALIST CONSTRUCTION under ownershii: by the whoie people. We now see it as a China's First Five-Year Pian for the building of socialism mistake. Even in cities and towns it is necessary to preserve began in 1953. Actually, construction started- immediately and develop some enterprises under collective ownership that after the founding of the Feople's Republic in L949. Industrial are responsible for their profits or losses, because they add and agricultural production grew rapidly during the three 6 years of ecoRomic rehabilitation (19a9-S2). Farm output rose at relatively high prices. In fact, the peasants.contributed by 48.5 per cent, averaging 14.1 per cent a year. Industrial several times more to the state through such unequal exchange output went up by 1a5 per cent, averaging 34.8 per cent a than what they paid in agricultural tax. The rapid growth year. In industry, the average yearly increase in light in- of industry and the urban population created the problem of dustry r.ras 29 per cent and that in heavy industry 48.8 per supplying greater volumes of grain, non-staple foods and cot- cent. Of course, the high rates were peeuliar to a period of ton to the cities and industrial'centres. To cope with the recovery and could not be attained in normal times. As agri- situa'tion, the state had to buy grain and cotton from the culture, Iight industry and heavy industry each grew at a dif- peasants on. a requisition basis and then subjected both to its ferent rate, the proportions they accounted for in the gross monopoly purchase. It also started to buy meat, eggs and industrial and agricultural value of output changed accord- other foods from the peasants by assigned quotas. A11 this ingly. Between 1949 and 1952, the proportion contributed by iimited the supplies available for the peasants' own consump- agriculture dropped from 70 to 58.5 per cent while that of tion, and excessive state purchase of grain in some fe&rs re- light industry rose from 22 to 27.7 per cent and that of heavy duced the peasants' food grain, dampening their enthusiasm industry grew from B to 14.8 per cent. The rapid growth of in production. heavy industry was mainly due to the rehabilitation it.under- To build big socialist industry in an economically backv/ard, went following serious dislocation from war. Although its agricultural country, it is indeed nec€ssary to obtain some annual output surpassed the peak in history after three years funds from the peasants, but they cannot be expected to con- of recovery and expansion, heavy, industry still accounted for tribute too much. The Soviet government, while giving an insignificant proportion in the gross industrial and agri- priority to heavy industry, squeezed the peasants too hard, cultural value of butput. stunting the growth of agricuiture. Soviet heavy industry did Like the Soviet lJnion, China carried out a policy of giving make speedy progress at the outset. But as agriculture and priority to heavy industry during the First Five-Year Plan Iight industry could not keep pace with the rising needs of period (1953-57). With Soviet aid, she launched 156 major the urban people, the development of heavy industry became construction projects, mainly in heavy industry, to lay the increasingly difficult. In his 1956 report; o'On the Ten Major groundwork for socialist industrialization. But giving priority Relationships", Mao Zedong summed up China's own ex- to heavy industry could not but affect the peasants'siandard perience in light of the lessons provided by the Soviet Union. of living and the growth of agriculture. Where were the He pointed out that while emphasis shouid be placed on heavy enormous funds for heavy industry to come from? In those industry, special attention should be paid to the growth of days, the bulk of money could only come from the peasants. agriculture and Iight industry and under no circumstances Heavy industry, which initially accor-lnted for only I per cent should a policy of "draining the pond to get all the fish" be of the gross industrial-agricultural value of output, could not adopted towards the peasants. The speech defined a correct provide much of the money by itself. Light industry did ac- guideline for China's socialist construction. At the time of cumulate more funds, but it earned much of its profit through the founding of New China, peasants accounted for some 90 unequal exchange with the peasants. In other words, it pur- per cent of the population. Their standard of living was very chased raw materials from the peasants at relatively low Iow and many of them were inadequately fed or ciothed. In prices and sold textiles and other manufactured goods to them such a situation we shouid have applied to the peasants a s policy of recruiting fewer labourers for the construction of tion. By 1965, the economy was back on its feet again and, public projects, collecting less government grain, and giving by 1966, it had resumed progress. the rural economy a chance to build up its strength. Heavy Historical experience shows that, since China is still an industry should not have been built on such a large scale agricultural country, her economic plans must be based on while more money should have been saved for agricultural the principle of taking agriculture as the foundation and in- development and the improvement of the peasants' livelihood. dustiy as the leading factor and must be arranged in the order Had things been done this way, it might have been possible oI priority of agriculture, Iight industry and heavy industry. for the overwhelming majority of the peasants to secure If we had conscientiously followed this guideline from the adequate food and clothing in three to five years, which would beginning, agriculture, and consequently iight industry, would have accelerated the growth of agriculture. have developed rapidly, resulting in a higher standand of Requisition purchases and state monopoly, plus the ration- Iiving and a greater financial revenue, which could be used ing of meat, eggs and other non-staple foods almost every- for building up heavy industry as well. This would have where in the country, were signs that agricultural production meant an ever broader road towards progress, one with a con- could no longer meet the needs of industrial development, tinual rise in industrial and agricultural production and ample particularly those arising from the expansion of he4vy in- supplies for the people. Instead, we attempted to develop dustry and the accompanying growth of the urban population. heavy industry at the expense of agriculture and the peasants' These developments served as a warning for us to readjust living standard, and so had to meet the urban people's needs the ratio between agricuiture and light and healry industries by, requisition purchases, state monopoly and rationing, bring- along the guidelines set forth in "On the Ten Major Relation- ing on ever greater difficulties for ourselves. To this day ships". The readjustment was not made, however. In 1956, about 80 per cent of ,China's labour force is still engaged in the rate of agricultural growth began declining; partialty due agricultural production, which includes forestry, animal hus- to the excessive speed of the drive to set up agricultural co-ops. bandry and fishery. But some cultivators of grain crops are The rate of industrial growth also fluctuated and showed a undgifed; some pig breeders seldom have meat. We are stiil general downward trend. Instead of detecting these symptoms importing for the urban population much of the food grain of a disproportion between agriculture, light industry and and part of the cotton, edible oil and sugar. A11 this Doints heavy industry, we took the erroneous vieiw that the bigger to a disproportionate economy which calls for drastic readjust- the base, the lower would be the rate of increase, and called ment. The present economic imbalance is the culmination of this an objective law of economic growth. Worse stiII, begin- a series of occurrences in over two decades, particularly the ning 1958, a "great leap forward" was initiated in heavy in- activities of Lin Biao and the Gang of Four. Except in the dustry, resulting in a sharp drop in agricultural production five years of readjustment (1961-65), the question of im- from 1959 onwards and a slump in heavy industrial produc- balance drew little attention. Accustomed to the status quo, tion that surfaced in 1961. This was a punishment meted out many comrades didn't see requisition purchase,.state monop- to us by the laws of economics. In 1961 the Party Central oly and the rationing of more and more items as symptoms Committee shifted to a policy of "readjustment, consolidation, of a disproportionate economy, but as manifestations of "the filling out and raising standards", lowering the targets of superiority of socialism" and measures indispensable for a heavy industrial production and qurtailing capitai construc- planned economy. Contrary to their belief, the widening 10 1l range of controls affected the working peopie's enthusiasm in management. The existing enterprises, especially the poorly production and particularly the growth of agriculture. And managed ones, will be streamlined to achieve a sharp rise in as agriculture and light industry slowed down the pace of productiorr, technology and managerial efficiency. As produc- their development; shortages of daily necessities grew rather tion improves, so will the people's standard of living, dem- serious, necessitating more controls and a dependence on im- onstrating the superiority of the socialist system. ports. The vicious cycle was a result of not giving priority in the order of agriculture, light industry and heavy industry. We must take into full account the danger of lhis vicious , 3. THE STAGES OF SOCIALIST DEVELOPMENT cycle and make up our minds to readjust the proportions be- tween agriculture, light industry and heavy industry and be- The two phases of communism are defined by Marx jn his tween accumulation ahd consumption. This will enable us to Cri,tique of the Gotha Programme. In the lower phase, where increase the supply of daily necessities and raise the people's the means of production are already owned by society as a living standard. It is the only way to speed up the four whole, there is no longer any exploitation of man by man. modernizations and ensure a sustained high speed of eco- Nevertheless, labour remains the measure of distribution of nomic growth. the means of subsistence under the principle, "from each ac- Planned socialist modernization will be our main task for a cording to his ability, to each according to his work". In other fairly long time to come. Whether we attain this goal by the words, a certain amount of labour is exchanged for products end of the century will decide the destiny of the natioh. In turned out by an equal amount of labour. In the higher phase view of the present economic disproportions, Hua Guofeng of communism, the above principle is replaced by that of "from pointed out in his "Report on the Work of the Government,' each according to his ability, to each according to his needs',. at-the Second Session of the Fifth National People's Congress, In 1956 and 1957, the socialist transformalion of agriculture, which convened in June 1979, that beginning then, the country handicrafts, and capitalist industry and commerce was basical- should devote three years to readjusting, reStructuring, con- Iy accomplished in the country. The process remained in- solidating and improving the economy in order to gradually complete in capitalist industry and commerce because capital- shift it onto the path of sustained, proportionate and high- ists still drew a fixed interest and a considerable number of speed development. This is the first battie for the four joint state-private stores were responsible for their own prof- modernizations. The tasks of readjusting, restructuring, con- solidating and improving the economy are inter-related and its or losses and in fact served as private dealers for state mutqally complementary. Readjustment, which is cr.ucial to commercial departments. From ,1967, fixed interest for capi- the entire economic situation, is aimed at a co-ordinated talists was abolished and the above-mentioned state-private advance of agriculture, light industry and heavy industry. It stores ceased being responsible for their profits or losses. Thus calls for balanced progress in the different branches of agri- the bulk of industry came under ownership by the whole peo- culture ahd of industry. It also means establishing a proper ple, existing side by side with a predominant collective system ratio between the rate of accumulation and the rate of con- of ownership by the working people in agriculture. The means sumption. A11 this is being coupled with measured but firm of production in the collectively owned sector are the common steps to effect an overall reform of the structure of economic property of the working people in one partidular gollective or 12 i another but not that of the whole society. The products of a wond "communism" is also applicable here, providing we collective are distributed within its framework and not on a db not forget that this is not complete communism.l national scale. Socialism characterized by the co-existence of After the victory of the October Revolution, Lenin often called these two systems of public ownership is obviously different the transition from capitalism to communisin a transitiQn from from what Marx defines as the first phase or lower phase of capitalism to socialism. In his view, the two formulations had communism. It can only be regarded as the lower phase of the same meaning. socialisrn or immature, imperfect socialism. At the same time, Marx points out that communism is divided into two phases there should be no doubt about its being socialist because the and that socialism is the lower phase. Current history poses a means of production are publicly owned, either nationally or new question to us: Shouldn't socialism also be divided into collectively, and exploitation is basicatly eliminated. ,"rre.rl phases? Ih a country with an extensive small peasant The term "the transition from capitalism to communism" economy, we must first transform such an economy into a appears in Marx's Cri,ti,que of the Gotlw Programme, Lenin's collective economy and, after a considerably long time, transr State and, Reuolution, and other works. Over the years, the form the latter into an economy under ownership by the whole term has been misinterpreted as meaning the whole process people along with the growth of productive forces. Before all of development'from capitalism to the higher phase of com- means of production come under ownership by the whole munism a view which has been widely accepted by Chinese society, there is a period in which two systems of socialist theorists. - This is clearly not the oniginal meaning of the con- public ownership exist side by side. This is the lower phase cept. The transition from capitalism to communism discussed of socialism, in which China now finds itself. Recognition of by Marx and Lenin refers to the transition from capitalism to this point is highly important because it helps to prevent a socialism or the first phase of communism. In The State d.nd premature application of certain principles applicable only to Reuolution, Lenin clearly divides the process of growth of the first phase of communism defined by Marx. communist society into three stages: first, the transition from Collective ownership in China needs to be developed for a capitalism to communism; second, the first or lower phase of long time before it phases out. This is just iike commodity communist'society; and third, the second or higher phase of production in the country, which will not vanish until after communist society. If the period of transition fro.m capitalism a period of considerabie growth' The initial realization of to communism covers the attainment of the higher phase of agricultural mechanization wilt not be followed by an im' mediate, smooth transition to ownership by the whole people communism, how can there be a lower phase of communism because vast differences in income will remain between re- after that? Since socialism is the lower phase of communism, gions, communes and production brigades and teams' Collec- Marx terms the transition from capitalism to socialism a tive ownership will continue to exhibit its vigour and vitality transition to communism. In keeping with Marx's formula- for quite some time. It will be necessary for the rural areas tion, Lenin pointed out in The State anfl, Reuolution: and, to a certain extent, for the cities as weII, to develop col- Iective enterprises responsible for their own profits or losses What is usually called socialism was termed by Marx the "first" or lower phase of communist society. In so far as rLenin, The State ond Reoolution, Foreign Languages Press, Beijing, the means of production become corrlrnon property, the 1965, p. 117. L4' 15 th'at compete with enterprises under ownership by the whole of production are judged by their fitness to the growth o{ people. We should fully recognize the protractedness ,of the productive forces and, at a given time, it may not be suitable socialist period and its divisioir into stages and should not be io place 100 per cent of the ecohomy under public ownership too anxious to cross over from one stage to another. If we try by the whole societY. to do that, the growth of productive forces will suffer, much 3. An abundant supply of products ensuring the people's to the detriment of the consolidation of the socialist system basic material and cultural enjoyments, which will naturally and the transition to communism. result in the abolition of the rationing of daily neceBsities. .A" fuliy mature socialist society is distinguished mainly by While the system of "to each according to his work" remains its relations of production, namely, a unitary ownership by in force, the working people will be free to buy the consumer the whole people instead of the co-existenee of two systems goods they desire with the reward for their labour (money)' of socialist public ownership. The change is preconditioned The people will be provided with sufficient food, clothing, by a tremendous growth of the productive forces along with shelter, transportation, medical care and recreation and with changes in the superstructure and a significant rise in the peo- better collective welfare facilities such as apartment houses, ple's income and in their cultural level. In my view, the fol- canteens, nurseries and kindergartens. Iowing tasks must be fulfilled before a fully mature socialist 4. Universal secondary school education, including middle society takes shape. school and secondary voiational school training; elimination 1, The modernization of agriculture, industry, national qf iliiteracy; and the establishment of a large number of defence and science and technology. Socialism must be built institutions of higher learning plus a network of sparetime on the material basis of highly mechanized and socialized pro- education throughout the country. duction, while the relations of productidn must be suilei to 5. A highly developed system of people's democracy which the same level of productive forces. And only by rapidly devel- gives the people a true right to participate in the management oping our productive forces can we consolidate the socialist of state organs, enterprises and public undertakings.' The main relations of production and ensure their further advance. politidal function of the state wiil gradually change from.sup- 2. Transition of more than 90 per cent of the country,s pression of class enemies to protection of the democratic rights collectively owned economy to a system of ownership by the Lt tfr" people. Naturally, so long as there exists the danger whole people. I say more than 90 per_cent on account of of armed aggression and subversion.by imperialism and social China's extremely uneven and complicated econornic develop- imperialism, state organs will continue to safeguard the peace' ment. Must all agriculture and animal husbandry in the re- independence and sovereignty of the country. mote mountains and outlying regions be pl4ced in the unified, When socialism reaches full maturity, it will advance nationwide system of production'and distribution? Even in towards the second or higher phase of communism. The con- the cities, wouldn't it be advisable to preserve some collec- clusion of the first phase may well be the beginning of the tively owned enterprises in some fields of handicraft produc- transition to the second. It may be necessary to cornplete in tion (such as handicraft arts), which may exist for a long time, the second phase some tasks left from the first one in the same and in the service trades, where manual labour cannot he way as agrarian reform, a task left unfinished during the done .away with aitogether? Questions like these cannot democratic revolution, had to be completed in the period of be answered conclusively today. The advantages of relations the socialist revolution 16 t7 tq realize in. the main, over a fairly long period of time, the country's industriaiization and the socialist transformation of her agriculture, handicrafts and capitalist industry and com- merce. The task involved a very complicated struggle be- Chapter II tween socialism and capitalism. When New China was just founded, her economy was com- PLACING THE MEANS OF' PRODUCTION posed of three main sectors: the so,cialist state sector, the UNDER SOCIALIST OWNERSHIP capitalist sector and the sector under ownership by individual peasants and handicraftsmen. Although the individual sector accounted for nearly 90 per cent of the gross value of industrial I. BUILDING UP THE SOCIALIST and agricultural output, it occupied a pubprdinate position in STATE ECONOMY-_ THE LEADING SECTOR, the economy o-ecause of antiquated methods of production. The socialist state' enteiprises, converted from the Kuomintang's Otd China was a semi-colonial, semi-feudal country. The bureaucrat-capitalist enterprises, enjoyed predominance over founding of New China marked the completion of China's new- the national capitalist ones in fixed assets. But they were democratic revolution and the beginning of her socialist rev- Iargely in a state of paralysis at the time of liberation because olution. The basic task of the new-democratic revolution was their equipment had been taken away or even destroyda Uy to overthrow imperialism, feudalism and bureaucrat-capitalism the Kuomiirtang troops on the eve of their retreat. The na- and establish a people's democratic dictatorship led by the tional capitalist enterprises, which carried on normal opera- proletariat and based on a worker-peasant alliance. As a tion, were actually much stronger. Of the total industrial general ru1e, socialist relations of production cannot come into output value in 1949, the state sector accounted for 34.? per being under capitalism or feudalism. In China, however, cent, the joint state-private sector 2 per cent and the private rudiments of socialism appeared even before the nationwide sector 63.3 per cent. Of the total retail sales in 1950, state victory of the revolutibn becau3e economic sectors under state corurnerce accounted for 14.9 per cent and private commerce and co-operative ownership were established in the revolu- 85.1 per cent. A struggie for leadership between the socialist tionary base areas under Communist leadership. and capitalist sectors began with a fight over market prices. The socialist state economy expanded in the latter days of With the liberation of Shanghai and other ,big cities, the the War of Liberation as the People's Liberation Army captur- "gold yuan" notes'issued by the Kuomint4ng regime became ed more and more major cities. The people's governments mere scraps of paper while the Renminbi (people's currency) established in these cities confiscated bureaucrat-capitalist came into use as the only kind of lega1 tender. But the Peo- enterprises. and placed them under state ownership. ple's War of Liberation was stiil going on and the people's On a national sca1e, the period'of transition to socialism government could hardly balance its budget because it had to lasted from the founding of the People's Republic in 1.94g to supply provisions for nine million troops and civil servants 1956 when the socialist transformation of the ownership of and finance the efforts to restore communication and trans- the means of production was essentially completed. The Com- portation. Speculators who had fattened themselves through munist Party's general line or general task in this period was a dozen years of Kuomintang inflation exploited the situation 18 to profit by hoarding and jackiqg up prices. For this purpose, socialist state economy to establish its control over the market they absorbed idle capital at a monthly interest rate of 40 as well as the capitalist secfor. per cent. Industrial and commercial capitalists joined in the As soon as prices became stable, people were willing to keep stampede, making fabulous profits not from production but their money. The banknotes in circulation fell short ofl de- from inflation. Under the pressure of the rising prices, in- mand. The people's government issued more money to pro- dustrial workers and civil servants exchanged grain and daily mote economic development. First, the state needed money 1o' necessities for paper money the moment they got their pay' pay for the grain, cotton and other farm produce purchased from Peasants simply dispensed with banknotes and traded on a the peasants, who used it to buy means of production for the barter basis. The limited amount of paper money in circula- recovery and growth of agriculture as well as manufactured tion was proof that the entire problem had been caused by the goods for their use, promoting industrial growth in the process. speculators. Unless market prices were stabilized, it was im-. Secondly, the state needed money to pur:chase the goods stock- possible to rehabilitate production, ease the people's life and piied by private industrial and. co nmercial enterprises, enabl- establish the leading position of the socialist state economy. ing them to get over their financial difficulties and restore Early in 1950, the people's governmeht centralized the production at a faster pace. Of the private industrial enter- management of financial and economic affairs, including rev- prises, the largest number were textile mills, and the second enue and expenditure, the allocation of funds and supplies, largest were flour mills. Most of the cotton and wheat they and the h'andling of cash payment. It established rigid con- needed were in the hands of the state. The state provided trol over grain, the main target of the speculators' panic buy- them with raw'materials and placed orders for the finished ing, by collecting public grain (the agricultural tax) from the products, paying them for the processing. This practice was peasants and purchasing their surplus grain. After these welcomed by the capitalists because it gave them three things: preparations, it mounted a surprise counter-attack in the days a source of raw materials, a market, and a reasonable profit. after Spring Festival when the speculators in Shanghai and Conducting production according to state requirements, they elsewhere were more active than ever. State commercial de- were actually guided onto the road of state capitalism. The partments dumped large quantities of grain on the market for state purchased large quantities of farm,produce through its sale at relatively low prices. {or three days the speculators supply and marketing co-operatives and'acquired enormous rushed to buy it until they had used up nearly aII the idle volumes of manufactured goods by placing orders with private capital they could collect.' After a few more days they were enterprises. As a result, the state gained control of the major compelled to sell their grain at a loss in order to pay their paiJ of the wholesale trade. ^A.I1 this resulted in state leader- short-term, high-interest loans. The price of grain'fell, and ship over peasants, handicraftsmen as well as private industry so did tlre prices of other commodities. The speculators re- and commerce a decisive victory of the proletariat over the ceived a crushing blow, while industrial and commercihl capi- - bourgeoisie and of socialism over capitalism in the struggle for talists who had joined in the game also landed themselves in econbmic predominance' dire straits because they could find no market for their hoard- More than ten years of war and inflation before the founding ed grain. Many had no money to buy raw materiqls or pay of New China had jammed the comrnercial interflow between the workers'wages and so asked the people's government for town and country. As soon as commeriial . speculation was help. This victorious battle to stabilize ,prices enabled the ciushed and market prices stabilized in the post-Iiberation 20 and suppiy and marketing co-operativ'es accounted for 63.7 per period, the artificial purchasing power backed by idle capital cent of the turnover in wholesale trade in 1952 as agair6t 23.9 vanished, giving rise to a temporary phenomenon of overpro- per cent in 1950, while their proportion in retail trade rose from duction. For a time, it seemed difficult to market manufac- 14.9 to 42.6 per cent. Although private firms handled the tured goods, farm produce and various kinds of local and' greatest part of retaii trade, a great number of them served specialty products. The people's government therefore or- as distributors or commission agents for state wholesale dealers ganized a drive to promote the exchange of goods between the and, like the private enterprises working on state orders in cities and the countryside. State comniercial ageneies and industry, had been channelled into state capitalism. Agricul- private businessmen were called upon to sell manufactured ture and handicrafts remained an economy of individual, pro- goods in the rural areas and farm produce and local and specialty ducers. By 1952 only 0.1 per cent of all peasant households products in the cities. Many kinds of merchandise once re- had joined agricultural producers' co-operatives and only 3 per garded as unsalable found a ready market, much to the benefit cent of all handicraftsmen had formed handicraft co-opera- of industrial.and agricultural production. tives. But the peasants and handicraftsmen were also to a Owing to the ravages of the war, production had dropped large extent guided by state plans since the supply and market- 25 per cent in agriculture, 30 per cent in light industry and ing co-operatives supplied them with most of the articles of ?0 per cent in heavy industry at the time of the founding of consumption and handled the sales of most of their prod.ucts New China. 'After three years of rehabilitation, grain output and, in the case of the handicrafts, provided most of the raw increased from 103 million tons in 1949 to 166 million tons in materials. All this created favourable conditions for the social- 1952, 11.3 per cent above the peak annual output in history. ist transformation of the ownership of the means of produc- Cotton rose from 450,000 tons to 1.3 million tons, 53.6 per cent tion in agriculture and in the handicraft industry. above the highest pre-liberation level. Steel went up from The victory of the socialist sector over the capitatist sector- 160,000 tons to 1,350,000 tons, 46 pe,r cent above the previous in the economy, was made possible, first and foremost, by record. Coal jumped from 32 million to 66 million tons, 7 per the overthrow of the Kuomintang's reactionary rule after 22 ' cent above the historical peak. The economy grew in the course years of revolutionary wars and the establishment of the peo- of rehabilitation, providing the material conditions for initiat- ple's democratic dictatorship led by the proletariat and based ing'the First Five-Year Plan in 1953. on a worker-peasant alliance. There could be no socialist During the three-year rehabilitation, the balance of forces economy without a government led by the proletariat. between socialism and capitalism changed significantiy in the Second1y, the victory was also a result of the confiscation of economic sphere. In {952, state-owned industry accounted for bureaucrat-capital and the rise' of a powerful socialist state 56 per cent of the nation's gross industrial output value as economy. Even if we were strong politically, we could not against 34.? per cent in 1949; the proportion contributed by have defeated the economic forces of capitalism had our eco- joint state-private enterprises working on state orders went up nomic strength not been equal to the task. Thirdly, we from 9.5 to 26.9 per cent in the same period; while the portion isolated the'bourgeoisie by rallying the peasants and other produced by enterprises operating on their own dropped from small producers around us, not only politically but also in the SS.A to 17.1 per cent. The socialist state sector and the state sense of giving them economic organization and leadership. capitalist sector had become predominant in industry. In com- Finally, we adopted the policy of utilizing, restricting and nleice, business transacted by state commercial departments 23 22 transforming'the national'capitalist economy, i'e.,. a policy of cally proved that in a socialist revolution we must skillfully bringing into play its positive role beneficial to the economy make use of the objective laws governing economic developl and the people's livelihood, restricting its negative role det- ment. If we don't, our chances of success are s1im, and even rimental to the economy and the people's livelihood, and carry- if we did succeed, the cost would be high and industrial and ing out its graduai socialist transformation through various agricultural production would suffer severely as a result., forms of state capitalism. With regard to members of the national bourgeoiiie, we adopted a policy of uniting with, educating and remouiding them, handling their contradictions 2. THE SOCIALIST TRANSFORMATION OT CAPITALIST with the proletariat as contradictions within the ranks of the INDUSTRY AND COMMERCE ' people. This represented Mao Zedong's important advance- ment of the theory of proletarian revolution enunciated by The capitatist economy in old China was divided into two Marx and Lenin. sectors: bureaucrat-capitalism and national capitalism. Bu- The victory of the socialist sector over the capitalist sector reaucrat-capital clung to imperialism and collaborated with the in China's economy was also a result of our correct application landlord class. While exploiting the workers, peasants and of the laws governing the socialist economy, our reliance on other working people, it alio rode roughshod ovei the national the superiority of the socialist economic system apd our proper bourgeoisie. The bureaucrat bourgeoisie and the landloid use of ihe law of value and the capitalist 1aw of surplus value. class were the targets of the new-dernocratic revolution. In After the founding of New China, we immediately put the the period of the democratic revolution we confiscated the land market under our direction and took into -our hands industrial of the iandiords as well as the enterprises owned by bureau- and agricultural products vital to the economy and the peo- crat-capital. The confiscation of bureaucrat-capitat had a dual ple's livelihood. We administered private industry and com- significance. As bureaucrat-capital was compradore capital in merce by the aforementioned state capitalist measures and ex- the service of imperialism, its confiscation was an act of dem- ercised leadership over individual peasants and handicraftsmen ocratie revolution. As bureaucrat-capital was also monopoly through supply and marketing co-operhtives. At the same capital, its confiscation was an act of socialist revolution. time, we provided capitalist industrial and commercial enter- National capitalism in China was oppressed by both im- pryises with reasonable profits by paying, them for processing perialism and bureaucrat-capitalism and thus stood in contra- jobs and purchasing their goods at fair prices. We also guard- diction with them. On the other hand, however, the national ed the interests of the peasants and handicraftsmen by a cor- capitalists ivere.tied to imperialism and bureaucrat-capitalism rect pricing poiicy. The bourgeoisie had controllqd the small in many ways and some of them thought they might be able to producers through the market and exploited them by unequal depend on the latter for survival. This was why the national exchange, whereas we organized them and gave them leader- bourgeoisie wavered in the new-democratic revolutioh, show- ship through the market. Correctly handling the purchas- ing a tendency towards the revolution as weII as a tendency to ing prices of agricultural and handicraft products and the sales compromise with the enemy. Thanks to the Party,s correct . prlces of manufactured goods and eliminating exploitation by united front policy in the War of Resistance Against Japanese middlemen, we enabled the peasants and handicraftsmen to Aggression and in the War of Liberation, most members of thb develop production and lead a better life. It has been practi- nati.onal bourgeoisie either supported the revolution or took 24 a neutral stand. Many of theirrepresentatives joined the anti- in "buying off" the bourgeoisie and tpansforming capitalist Japanese national united front and later the united front against economy through state capitalism. Chiang Kai-shek. After the founding of New China, our Party As the people's government in China did not confiscate the contihued to maintain the united front with the national enterprises owned by national capital, there was no question bourgeoisie on the basis of consolidating the worker-peasant of Ieasing them to the capitalists as proposed by Lenin. In- alliance; Mao Zedong pointed out that we had two alliances: stead, state capitalism in the form of joint state-private enter- the alliance with the peasants and ,the alliance with the na- prises emerged through the intermediary stage of capitalist tional bourgeoisie. Both alliances were very important, but enterprises working with raw materials supplied by the gov- the former was the basic one. In view of China's economic ernment.and selling the manufactured goods to the'latter or backwardness, we had to make use of national capitalism in acting as dealers in state goods. As mentioned earlier, after the interest of the country's economic growth. That was why the stabilization of comr4odity prices, the capitalists willingly we adopted a policy' of utilizing, restricting and gradually ' accepted state orders which.ensured their sources of raw ma- transforming it. Confiscation of bureaucrat-capital and step- terials, the marketing of their products and their reasoriable by-step transformation of the national capitalist economy profit. As far as the state was concerned, placing orders with through the medium of state capitalism this was an imr" private enterprises meant controlling the circulation of their portant policy adopted by the Party under - the leadership of products and cutting off their ties with the market and, to some Mao Zedong. extent, directing theii production. The capitalists could no Marx and Engels pointed out that under given conditions the Ionger reap fantastic profits through speculation and had to proletariat might adopt a policy of "buying off" the bour- produce according to state requirements. The anarchy in pro- geoisie. After the Russian October Revolution, the proletariat duction, typical of capitalism, was partially eliminated. For gained control of the economic lifelines of the country.' Lenin these reasons, placing state orders with private enterprises was proposed to buy off a section of the bourgeoisie through state called an elementary form of state capitalism, a kind of capi- capitalism in order to obtain manufactured goods for the peas- talist' economy controlled and orientated by the state. As ants and train the proletariat in economic management. The usual, the capitalists worked for profit, but they were obliged Russian bourgeoisie, however, did not believe that the prole- to submit to state planning and meet the needs of the govern' tariat could maintain statE power. They tried to sabotage the ment and the people. While placing orders with private enter- ' economy and finally launched an armed rebellion, compelling prises, the state regulated their lines of business by raising or the Soviet government to take drastic measures to confiscate lowering the profit rate according to market demand, giving the property of all capitalists. After foreign armed interven- a sociatist character to their production. . tion and internal armed rebellion were smashed, Lenin once The policy of placing state orders with private enterprises again advanced the policy of state capitalism and announced didn't mean the abolition of class struggle, which remained the government's readiness to lease a number of factqries and acute in those years, In 1950, when capitalist industry and mines to foreign and domestic capitaiists in order to reha- commerce had difficuities, the capitalists were willing to ac- bilitate and develop big industry at a faster pace. But the cept state orders but bargained stubbornly over their process- policy didn't work because it was rejected by the bourgeoisie. ing charges and the prices to be paid for their goods. In 1951, China was the filst country in which the proletariat succeeded a market shortage appeared after the. outbreak of the War to 26 Resist U.S. Aggression and Aid Korea. The capitalists seiz- structibn of some capitalist factories producing urgently need- ed the chance to jack up prices and showed reluctance to ed goods, and these factories became joint state-private firms accept processing or manufacturing jbbs from the state; some in the procesd. Joint state-private operation pushed up pro- even refused to carry'out signed contracts seriously. Ip fact, duction and provided the capitalists with reasonable profit. they ryaged a struggld against the proietarian state by resort- This development prompted many private factories to apply ing to such illegal means as bribery, tax evasion, theft of state for' joint operation, an advanced form of state capitalism, in- property, cheating on government contracts and stealing of stead of merely working on state orders. In fact, joint state- econom.ic information. The Party Central Committee was private enterprises had appeared at the time of the founding of compelled to initiate a campaign against the "three evils" and New China. This was because shares in many private enter- "five evils"l to-ferret out those serving as agents of the bour- prises were owned by Kuomintang officials and even war geoisie within state organs and enterprises and to smash the criminals and were confiscated by the people's government im- attacks launched by the bourgeoisie by the aforementioned mediately after liberation. Small in scale and managed by means.. The victory of the campaign again forced capitalist . capitalists or their age4ts, this first batch of joint-private firms industrial and commercial enterprises into a situation where were hardly distinguishable from private enterprises. The they had to accept the leadership of the socialist state economy joint state-private enterprises established later were bigger and work'cdnscientiously on state orders and were directed by state personnel with the capitalists or ' In 1953, China started her First Five-Year Plan for socialist their agents taking part in management. Such enterprises construction. The socialist economy developed rapidiy and were largely sociaiist in nature. significant changes took place in the balance of forces be- After, capitalilt enterprises switched over to joint state- tween the various economic sectors. In pre-Iio-eration days, private operation, the,state invested in their exfansion Bnd the equipment in bureaucrat-capitalist enterprises had been reconstruction. Production increased rapidly and so did prof- better than that in national capitalist enterprises. After the its, much to the delight of the capitalists. Beginning in 1954i former were taken over by the people's government, their the state instituted joint state-private operation in the larger eguipment was improved through technical renovation, A private factories. The growth o,f state-owned and joint state- number of modern enterprises were completed, adding to the private enterprises placed the remaining medium and small strength of the socialist state economy and bringing its su- private enterprises in a more difficult position and they too periority over the capitalist enterprises into fuller p1ay. With applied for joint operation. But the state could not rebuiid their outdated equipment and poor.management, the capitalist or expand such a large number of small and poorly equipped enterprises could hardly compete with state enterprises. The factories. The only solution was to shift them to joint state- 'government, however, did invest in the expansion and recon- private operation by each'trade and reorganiz,e them on a ' rational basis. Many small factories were merged as one, r The campaign against the "three evils" refers to the struggle which was furnished with new or renovated equipment. In against corruption, waste and bufeaucracy in government offices and state enterprises, with emphasis on the struggle against corruption, early 1956, ,cbpitalists from all different trades in Beijing including bribery. The campaign against the "five evils" refers to the applied for joint state-private operation on a trade-wide basis struggle against the five illegal acts of the capitalists listed in the and those in other cities followed suit, The state approved text. 28 their requests. This marked a decisive victory in the socialist enabled private capitalist enterprises to grow in the course of transformation of China's capitalist industry and commerce. transformation instead of suspending operation or slashing Joint state-private operation by whole trades was a higher production. In the seven years between 1949 when New stage of development of state capitaiism. It required a change China was founded and 1956 when capitalist enterprises switch- in profit distribution. When an individual enterprise switched ed over to joint operation by whole trades, the o"utput value over to joint operation, it was responsible for its own profits of private capitalist industry nearly doubled. Meanwhile, or losses, end the profits were distributed by the shares, which the output value of socialist state industry increased 3.3 times. were jointly owned by the state and by individuals. An en- In 1956, the output value.of socialist state industry accounted terprise making more money. naturally had more profit'to for 67.5 per cent of the gross industrial output va1ue, joint distribute among the shareholders. As soon as joint opera- state-private indgstry contributed 32.5 per cent and practically tions were started on a trade-wide basis and enterprises in a nothing came from private capitalist industry because it was tracie were merged or reorganized, it became irnpossible for almost non-existent. In wholesale trade, state and joint state- each enterprise to distribute its own profits, because a pros- private commerce accounted f.or 97.2 per'cent of the turnover perous firm would hot have been willing to merge with a and private commerce only 2.8 per cent; in retail sales, state poorer one if the old practice of profit distribution were to be commerce accounted for 68.3 per cent, joint state-private and followed. In consultatiqn with the capitalists, the state in- co-operative commerce 27.5 per cent and private commerce troduced the fixed interest system by which profits were dnly 4.2 per cent. In production growth, the state-owned distributed on a unified basis' The stocks and assets of each sector registered the fastest rate, the joint state-plivate sector enterprise were reappraised and, on that basis, the capitalists came second and the private sector third. The speed had tp of all enterprises drew a fixed anrlual interest of 'five per cent do with the quality of equipment, the enthusiasm of the of their shares in disregard of profit. With the introduction workers and the rational use of the means of production. In of this system, the capitalists were no longer interested in how' all these respects the socialist economy enjoyed the grdatest much profit the enterprises made and gave the state a free superiority. hand to go ahead with the merger and reorganization of en- The changeover of private enterprises to joint state-private terprises, and joint enterprises came under state management operation by whole trades in 1956'was a decisive victory in completely. The capitalists or their representatives were as- the socialist transformation of capitalist industry and com- signed suitable posts in the enterprises and became staff mem- merce. This process, which came about under the impact of bers. Such joint state-private'enterprises, except for the fact a high tide irr the movement to set up agficuitural co-opera- that the capitalists were still drawing a fixed interest, were tives, developed a bit too fast. The vast numbers of small not much different from state enterprises and were basically enterprises in industry a,nd especially in commerce had a pos- socialist in nature. In 1967, during the high tide of the CUI- itive role to play in the economy. Excessive amalgamation tural Revolution, payment of fiTed interest to the capitalists resulted in a reduction in the variety of miscellaneous goods was terminated. Thus all joint state-private enterprises were and a shrinkage of the commercial network, causing incon- incorporated in the socialist state economy. veniences to the public. When the transformatlon had just The step-by-step transformation of the private capitalist been completed, many joint state-private stores continued to sector of the economy through various forms of state capitalism be responsible for their own profits or ]osses and distribute 30 31 state goods, earning the differences between wholesale and household forming a productive unit. This scattered, in- retail prices. Beginning in 1958,'and particularly during the dividual form of production is the economic foundation of Cultura1 Revolution (1966-76), the joint state-private stores 'feudal rule and keeps the peasants in perpetual poverty. The were merged with state stores or became their branches, Thus only way to change it is gradual coilectivization. .r commerce was placed under state monopoly, which led to a For generations, .vast numbers of peasants had looked for- further decrease in the variety of goods. Some' stores no ward to the day when they could till their own 1and. Once longer sold their specialties and, in many instances, there was their dream had come true, they thought they were in a posi- a decline in the.quality of service. This shows that within tion to get rich by hard work. But this was not so easy a given period of time, it would be a good idea to maintain because of the country's large population, insufficient arable versatility and flexibility in urban industry and commerce, land, frequeht natural calamities and backward production while i premature changeover to a system of ownershiP by conditions. Most of the peasants.were not well off, and a po- the whole people may not be in the interest of the growth of larization between rich and poor was inevitable. All this production and the people's livelihood. accounted for the dual position of the peasantry: while they were enthusiastic about developing an individual economy, they were also capable of taking the socialist road of mutual 3. THE SOCIALIST TB,ANSFORMATION OF aid and co-operation. Mao Zedong pointed'out.in good iime AGRICULTURE UNDER INDIVIDUAL OWNERSIIIP the need to kindle the sociaiist enthusiasm of the poor peasants After the completion of agrarian reform, the small peasant and the lower stratum of middle peasants and lead the vast economy embraced the overwhelming majority of the popula: peasant masses onto the road of mutual aid and co-operation. tion. The landlord economy had been eliminat€d together Even in the early years of the revolutionary wars, peasants in with the economy of the old-type rich peasants.* After ac- the liberated areas formed many labour mutual aid teams and quiring land, the poor peasants fared much better, and the a fer4, agricultural prgducers' co-operatives, which accumulat- farm hands became small individual producers. In spite of ed valuable experience for Carrying out the socialist transfor- these improvements, however, the peasantry remained poor. mation of agriculture after agrarian reform. In Soviet Russia, Each household tilled only ten-odd mu of land with some experiments' in agricultural co-operation were initiated under small farm implements, and few of the households had draught Lenin after the Russian October Revolution. But it was not animals. Labour productivity was low and accumulation until the late 1920s and early 1930s that the Communist Party meagre. The peasants were sometimes incapable of conduct- developed a suitable form of organization for the collective ing simple reproduction, let alone extended reproduction' economy. In China, we avoided some of the detours taken Mao Zedong pointed out: in the Soviet Union by making it clear from the outset that agricultural collectivization must be caruied out step by step, Among the peasant masses a system of individual economy that it must proceed from mutual aid teams in agricultural has prevailed for thousands of Srears, with each family or production to elerirentary agricultural producers' co-operatives * As distinguished from modern capitalist farmers, the rich peasants in pre-liberation China generally engaged. in feudal or semi-feudal l Mao Zedong, "Get Organized", Selected, Works, Foreign Languages exploitation. - Trons, Press, Beijing, 1977, Vol. III, p. 156. a2 advanced co-ops were the working people's collective economic of a semi-socialist nature and then to advanced agricultural producers' co-operatives of a socialist nature. organizations of a sociallst character. The socialist transformation of China's agriculture was com- Labour power and farm tools were distributed unevenly pleted at a high speed. After the completion of agrarian re- among the peasants, and draught animals often had to be form, the Party Central Committee decided to "strike while shared by several households. These problems were solved to the iron is hot" by following it up with a mutual aid and co- some extent after the formation of mutual aid teams, for operation (collectivization) movement in agriculture. The an- human labour could now be exchanged for th6 use of draught nouncement of the general line for the transition period in animals, and labour productivity was rdised in genergl' But 1953* speeded up the process. The Party,Central Committee land was still owned and cultivated by each household, .and had planned to complete agricultural co-operation in 15 years, the scattered patches of land presented an obstacle to efficient but things came to a head in 1955. While only two per cent farming. To put the soil to better use, it was necessary to iink of the peasant households were in co-ops in 1954, the figure up the patches belonging to different households' This was rose to 14.2 per cent in 1955 and shot up to 96 per cent, with done through the formation of elementary co-operatives, in BB per cent in advanced co-ops, by the end of 1956. Most of the which the peasants, while retaining private ownership of their co-ops formed at the end of 1956, however, had not yet had land, pooled it together for common use and management' time to organize collective production and distribution. Agri- Oraugnt animals and big farm implements also rtimained under cultural co-operation in China was actually completed in 1957. privaie ownership but were used jointly by the co-op members' Whether it was possible to realize agricultural co-operation Thus the income was distributed according to work as weII as or collectivization before the mechanization of farming was investments in the form of land, draught animals and farm a subject of heated debate in those days. Some comrades implements. The income from land ownership was known argued that China's agriculture must first be mechanized be- *, 1'dirid"rrds on land". A11 this meant that some members fore it could be collectivized. But in a country like China with ,appropriated the fruits of labour of others on account of their her.large population and inadequate arable land, it would be possession of meians of production. But as the elementary co- ver! difficult to achieve mechanization on the basis of a smaIl operatives developed their collective economy, they accumu- peasant economy which could accumulate little by operating on lated more and more public property and increased the pro- a per household average of ten-odd mnt of Land. Ours is a poption of the income which the peasants earned by work' socialist country with a large socialist industry, and our agri- this made.it both necessary and possible to abolish the div- culture cannot possibly take a capitalist road. Proceeding idends on land and other means of production and change over from China's actual conditions, Mao Zedong pointed out that to the advanced form of agricultural producers' co-operatives in China, co-operation must precede mechanization.- But after by iransferring iand, draught animals and farm implements the realization of agricultural co-operation, we should have to public ownership with compensation to the owners' In the pressed ahead by placing the collective economy under effi- advanced co-ops, the products of trabour were all distributed iient management, developing agricultural production and according to work after deductions were made for the depre- raising labour productivity in agriculture as the only way to ciation costs of the means of production, state taxes and a small amount of reserve fund and public welfare fund. The Cf. pp. 18-19 in this book. -Ttans. * 35 34 consolidate the socialist collective economy, for co-Operative commodity production. In spite of this, the resolution still farming based on manual labour could hardly be consolidated regarded the transition from collective ownership to owner- and might slide back to individual ownership' In fact, a return ship by the whole people as a fairly simple matter. At the to individual farming did take place in some areas, such as the Zhengzhou Conference held in February 1959, Mao Zedong practice of "fixing {arm output quotas for each household" criticized this tendeniy, known as the "communist wind", and division of iand among commune members for them.to pointing out that the people's commune should practise a "go it alone." This had to do with the fact that our collective three-leve1 ownership with the production brigade as the ufor,.o*y was, as it still is, based'chiefly on rrianual labour' basic unit for production and distribution (also called the basic Cautious steps were taken to carry out agricultural co- accounting unit). This prbvision was again found to be in- operation at a steady pace in the first few years and agricul- commensurate with the level of productive forces and in the tural production rose from year to year on account of this 1961 "Working Regulations of the Rural People's Corrlmunes policy. But the drive took on too much speed in 1956, causing (Draft)", otherwise known as the "60 Articles", the production d""r""." in the growth rate of agricultural production and team was generally made the' basic unit for production and "in the number of livestock. In 1958 dgricultural co-operatives distribution whereas the production brigade remained the were suddenl5i changed to people's communes' In some re- basic unit only if its output was exceptionally high and, its gions, the commune was hastily empowered to conduct unified Ieadership unusually strong. After the publication of the "60 In some counties, the [roduction and distribution in its loca1ity. Articles" in 1962, the relations of production in rural areas communes were even combined to carry out unified distribu- were stabilized and agricultural production speedily rehabili- tion on a county-wide basis, a step which changed collective tated and expahded. Practice shows that objective economic ownership to state ownership in actual effect' A "communist laws are not to be violated, or else people will suffer. Prob- wind" was stirred up, whereby equalitarianism prevailed and transferred without re- lems arose in 1958 mainly because we expected to do too human and materi"l were "uror""us which they belonged' AiI this much through a change in the relations of production, includ- gard to the actual collectives to of the peasants and,cadres ing ownership, overlooking the law that the ri:lations of pro- iaturally dampened the enthusiasm duction must conform to the growth of productive forces. at the grassroots. coupled with other reasons, it resulted in Production resumed its growth as soon as we corrected our a slump in agricultural production for three successive years (1959-61). The Party central Committee began to correct this mistakes by readjusting the relations of production to the i'L"ft" tendency from the winter of 1958 and the spring of level of productive forces. 1959, but it was no easy task. In December 1958, the Sixth For a long time we were not sufficiently aware of the diffi- Plenary Session of the Eighth central committee of the Party culties involved in the socialist transformation of an agricul- adopted a ,,Resolution on Some Questions concerning ture based chiefly on manual labour and the protracted nature 'the People's Communes", which defined the differences of the task. We were often too anxious to cross from one betweerr socialism and communism, between collective stage to another and so caused losses to agricultural produc- ownership and ownership by the whole people, and tion. Socialism has to be based on large-scale socialized pro- called for adherence to the principle of distribution duction. While our realization of agricultural co-operation according to work and observation of the laws of before mechanization was a rare achievement, we should have. 36 fully recognized that this was an immature, imperfect kind of 4, THE SOCIALIST TRANSFORMATION OF THE .o"ifli.* *t i"t could not but retain vestiges of the old society. HANDICRAFTS AND SMALL BUSINESSES we should have made careful use of .such imperfect socialism UNDER INDIVIDUAL OWNER,SHIP to develop agricultural productive forces and lay a solid ma- terial basis for a gradual improvement of the system' However' ?he socialist transformation of China's individual handicrafts many of our comrades did not see that the low leve1 of produc- also took the form of co-operation. At the time the People's tive iorces was the main obstacle to the consolidation of collec- Republic was founded, handicraft workships and househoid tive ownership in agriculture. Instead, they took the lop- handicrafts accounted for about 20 per cent of the country's sided view that the trouble lay in the peasants' spontaneous gross industrial output value, while handicraft products ac- tendency towards capitalism and often resorted to "cutting off counted for 60 to 70 per cent of the manufactured goods con- the tails of capitalism" as a means of consolidating the collec- sumed by the peasants. Back in the period of the new-dem- tive economy. Contrary to their wishes, agricultural produc- ocratic revolution, various kinds of handicraft co-operatives, tion declined and so did the peasants, standard of living, while mainly supply and marketing co-operativ€s and co-operative itwaqbecomingevenharder,toconsolidatethecollective groups, were formed in the base areas of the revolution to economy. meet the needs of the army and the civilian population and It is universally accepted that the relations of production break the enemy blockade. After the liberation of the whole must conform to the level of productive forces. But people country, handicraft co-operatives of a mass character developed differ on the question: what is meant by the non-conformity with speed. of the relations of production with productive forces? For a Unlike the situation in agriculture, most of the individual long time, many of our comrades believed that this non-con- handicraft shops were engaged in commodity production. tori.ity lay in ihe relations of production falling short of the Raw materials and a market were most essential for their requirLments of the growth of productive forces' They did production. Thus it was necessary to organize them first ,oi ,"" that a change in thg relations of production much too in a supply and marketing network directed by the state sector fast for the growth of productive forces would impede or even of the economy to help them obtain raw materials, market undermine.thelatter.Thustheyheldthattheonlykindof their products and free themselves from dependence on the commercial capitalists, in the course of which the handicrafts- mistakes that could occur in the socialist period were Right men would be won over to a collectivist outlook. On this and not "Left" ones, and even criticized "Left" mistakes as basis they could be further organized^for joint production ,,Right deviationist line". This gave rise to manifestions of a and their shops changed over to collective ownership. ,,Left" deviation waq better and the wide-spread iilea that a The socialist transformation of China's handicrafts went so more preferable than a Right one' Consequently, during through three stages: (1) handicraft supply and marketing co- the Cultuial Revolution, the nation's- economy was pushed to operatives; (2) handicraft producers' co-operatives; and (3) the brink of coliapse. We must act on the principle that co-operative factories "practice is the sole criterion of truth" and review our ex- only way to Under the direction of the state sector of the economy, p-erience by calling a spdde a spade. This is the the handiiraft supply and marketing co-operatives suppiied avoid similar mistakes, raw materials to and purchased products from its members, . 38 Between 1958 and 1960, many handicraft co-operatives in each consisting of a household or a workshop.l These co-ops China were upgraded to co-operative factories replacing hand also ensured their earnings by reasonable pricing. While labour with machine operation. The. co-operative factories acting as a supplier of their raw materials and purchaser of paid the workers regular wages and handed over their profits their products, some co-ops pay them a processing charge' ' to a higher level (a united. county co-operative or a united The supply and marketing co-ops detached handicraftsmen city co-operative) for disposal. The workers received wages f.rom commercial capital and attached them'to the socialist according to a unified pay scale worked out by the higher state sector of the economy. In this sense they were semi- authorities, and the principle of equal pay for equal work socialist in nature. was basically carried out in a1l co-operative factories. These since the co-ops freed their menabers from exploitation factories were regarded as an intermediate system between by eommercial capital and guaranteed stable prices for their collective ownership and ownership by the whole people. In goods, the latter were assured of a steady rise in production principtre a co-operative factory should assume sole respon- and a fair income. But as they continued to operate in sibility for its profits or losses and determine the pay for their own households or workshops, they could hardly effect its members according to its productive. and managerial per- a division of llbour or co-ordinate their work, let alone adopt formance. But it has been stipulated rigidly that workers modern technology. The work tools were owned by the handi- craftsmen. Though quite simple, they varied in quality of a co-operative factory should draw fixed wages and that their pay and welfare subsidies should be a little lower than and so made differences in their income. Thus it was im- those in a state-owned factory. Such rules are harmful to possible to carry out the socialist principle of rewarding equal labour with equal products. To raise labour productiv- the growth of co-operative factories and should be changed itt, it was essential to change these handicraft supply and at once. Chiha's co-operative factories were placed unrler the Handi- marketing co-operatives to handicraft producers' co-opera- craft Administrative Bureau in a city or county, which has tives, which owned both the means of production and the now been renamed the Second Light Industry Bureau. 'While products and rewarded their members according to their work state-owned factories delivered, aII their profits to the state, and the collective income' Adopting the principle of equal co-operative factories handed in about 50 per c6nt to the pay for equal work, a co-operative became a collective enter- state and the remainder to the Second Light Industry Bureau prise of a socialist nature. In 1955, an upsurge in agricultural co-operation was follow- for technical improvement in these factories and the es- tablishment of new co-operative factories. That was why ed by one in handicraft co-operation. By the end of 1956, over the years such "big collective" industry in many areas more than 90 per cent of the handicraftsmen were organized has grown faster than state industry. This experience de- in producers' co-operatives against only 13;6 per cent in 1954' serves careful study. The socialist trahsformati,on of handicrafts was basically com- The handicrafts will exist for a long time as an aid to large pleted. socialist industry. As living standards rise, people will de- 1A workshop differed frorn a household in that the handicraftsman mand better food and .clothing, and the need for manual in a workshop employed one or two apprentices or workers whereas labour will increase, not decrease. Manual labour wiII exist the labour force in a household consisted of members of the same for a long time in the repair and service trades. The drive family. 4L 40 to put the handicrafts on a co-operative basis proceeded a bit It seems necessary to restore, particularly in.the food, repair and service trades, a large number of financially independent too fast in 1956. In a number of places, different kinds of co-operative stores and groups which operate during hours handicrafts were organized in a single co-operative' This convenient to customers. Specialty foods should again be affected the variety of products and the quality of famous made available and further improved. A socialist country brands. The Party central Committee gave timely instruc- should enrich and diversify the people's life instead of rnaking tions and corrected this defect. In 1958, many handicraft ' it crude and monotonous. co-operatives were merged as co-operative factories' While The socialist transformation of commerce created another this played a politive role in mechanizing production and- in- serious problem, i.e., with the disappearance of private busi- output, it also caused a further decrease in variety "rurtitg nessmen engaged in the long-distance transport of commod- and made it difficult for handicraftsmen to produce directly for'the varying neeids of consumers and do repair jobs as ities, the channels were cut off for the flow of many kinds they had done before. Instead of over-concentration, it seems of farm produce and side-line products as well as local and necessary to preserve a certain number of scattered handi- specialty products from the countryside to the cities. The craft co-tp"""iirr"" for manual production and permit a small supply and marketing co-operatives alone could not handle number of irairridral handicraftsmen and small traders to thousands of kinds of sundry goods. Many kinds of local prod- peddle their wares. This will not ohly provide better service uets, includingi mountain products, rotted in the valleys or to consumers but create more jobs. fields because there was nobody to carry them away. The Until 1956, the sodialist transformation of China's small income of the peasants dropped, and so did supplies to the stores and vendors was carried out mainly by making them cities. The output of local and specialty products in moun- retailers of goods distributed by state commercial.whole- enter- tainous and pastoral areas fell by 70 to B0 per: cent as eom- prises and letting them earn the differences between pared with the early years after liberation, and they became sale and retail prices. During the upsurge of socialist trans- unavailable in the cities for a long time. Handicrafts made formation in 1956, the co-operation movement was extended of local materials in these areas were no longer produced 'to small stores and vendors. In fact, many small stores were because of sales difficulties. This experience shbws that, to incorporated into state stores. other small stores and ven- develop rural side-line production and increase the peasants' dorswereorganizedinco-operativestoresorco-operative income and to ensure supplies to the cities, it is necessary to groups, while a considerable number of small stores and ven- expand the interflow between town and country by permitting Iors continued to operate on their own. In the interest of supply and marketing co-operatives' and enterprises run by consumers, the small stores should not be over-concentrated ' communes and their subdivisions to sell their farm produce, butkeptdispersed.Thisisparticularlytrueofthefoodand side-line products, local and specialty products and handi- service trades, the over-concentration of which would cause crafts in the cities. It would also be advisable to organize, much difficulty to consumers. Beginning in 1958, many co- under the direction of local governments or people's com- operative stores and groups were incorporated into state stores munes, a number of transport and marketing co-operatives while small stores and vendors responsible for their own prof- ' responsible for their own profits or losses for bringing goods its or losses were almost nowhere to be found. Thus people to distant areas. In this way, the interflow between town 'had to stand in long lines to get a meal or some groceries' 42 and country will not stop with socialist transformation but see a steady growth" "since the completion of'the "three major transformations", i.e., those in agiiculture, handicrafts and capitalist industry markets have continued to exist in rural "o**"r"",1r"u areas and city suburbs. Here the peasants exchange their "rrd products and supply limited quantities of farm produce to rwo sYSTEMS ;lTfl,iilsr owNEnsHrp the urban people in addition io the bulk provided by state commerciaf departments. Since the peasants have private 1. IMPORTANT DIFFERENCES BETWEEN THE plots and are engaged in household side-lines and many pro- TWO SYSTEMS iuction teams also have a surplus to seII after'fulfilling state quotas, such free markets are needed by both the peasants By 1956, the means of production in the country were and the urban people. At these mar\ets, prices fluctuate gen'erally placed under socialist ownership, which nevertheless with supply and demand and in turn regulate the latter' So took two different forms, i.e., onwership by the whole people long as agricuitural production develops smoothly and- the in the state economy and collective ownership in the co-opera- purchasin$ power of the whole society and the commodities tives. In 1958, the agricultural producers' co-operatives devel- supplied Jre roughly equal, free m-arket prices will not show oped into rural people's communes. In L967, with the abolition great ,ra"i"rr"", frorn state prices. During 1959-61, a de- of the fixed interest paid to private industrialists and business- Itine in agricultural production and an oi'er-supply of cur- men, joint state-private enterprises became state enterprises ,"rrlt"d in sharp rises in free market prices' which or, in other words, they came under ownership by the whole ""rr.y: state purch"r" of agricultural products. But this was people. Recent years have seen the establishment of industries "ii#"a basically by disprgportions in the economy and had run by communes or producticin brigades in rural areas, which ""rr"d Iittle to do with the free markets. Prices cannot be stabilized are under collective ownership, and the api:earance of riew by the abolition of free markets, which will only mak^e life collective enterprises in cities and towns. These have been more difficult for the urban and rural, people' From 1962 to important developments in the two systems of socialist owner- 1g66, as industrial and agricultural production recovered and ship since 1.956. deveioped in the course of economic readjustment, prices re- Ownership by the whole people and collective ownership are turned to normal at the free markets' both socialist in nature. The differehce lies in the degree of maturity. The former is a higher form of socialist public owriership under which the means of production belong to all the wonking people as represented by the state under the dic- tatorship of the proletariat. Such means of production are essentially the public property of society as a whole. Collec- tive ownership is a lower form of socialist public ownership, under which the means of production are not yet the public property of society as a whole but belong to the working people M 45 Collective o'wnership is an imrrtature form of socialist in one economic collective or another. In the eeonomic sector public ownership. The economic sector under collective under collective ownership, production is carried on with the ownership differs from the one under ownership by the whole leadership and support of the socialist state economy, and the people in that each economic collective is an independent main economic opera'lions are geared to the needs of the gov- owner. Each owns some means of production and the products ernment and the people through state planning'and other eco- of labour belong to its members. After deductions are made nomic measures. ThL exchange of products between state and for whatever is consumed in production and for the fund of collective economy and among the economic collectives must accumulation to be turned over to the state, the products are in basically conform to the,principle of equal exchange' Thus handled by the collective, which sets aside an accumulation its internaL and external ielations, the collective econorny is a out the exploitation of man by fund for its own use and distributes the consumption fund socialist economy which rules within i,tself. The members of a collective have an equal right man.. of ownership of its means of production, but different collec- Ownership by the whole people is a more developed fotm tives are unequal in their possession of means of production. of socialist pufiic ownership. Here production is carried out Differentes in the quantity and quality of the means of pro- by plan *rrd i. aimed at fuliilling the rising material and- cul- duction in the possession of the collectives, plus the differences turil requirements of society as a whotre' At present' how- in local qatural and economic conditions, give rise to wide urr.", o*-rrurship by the whole people in China co-exists with ' differences in labour produetivity, output and the ineome from collective o*t u"thip. The products of labour in the former a given amount of labour. Since the collectives are responsible sectof, after deductions are made for whatever is' for their own profits and losses, the pay varies from one to consumed in production, are finally divided into two major ""orrorrri" another, and equal pay for equal work, which is basically prac- categories: the accuinulation fund and the consumption fund' tised among state enterprises, is inapplicable among the coilec- to The"accumulation fund is.handled by the state according tives. Differences in the funds accumulated by the collectives unified state plans and policies. The consumption fund' espec- determine the differences in their capacity for extended re- ially the part earmarked for individual consumption' is mainly production. The economic sector under collective ownership disiributed among the staff and workers of state enterprises. bears quite a few birthmarks of the o1d society. We may say Members of the economic collectives, mostly the peasants' -"*org that it is an immature form of socialist public c,wnership, or ;i;;; themselves the income of their cotlectives and public ownership at a low level. receive nothing from the individual consumption fund in the people' This results in Ttre two systems of public ownership of the means of pro- ;;;;" under oivnership by the whole the two duction account for the existence of two types of working under differences in the pay - for people working people in socialist society: the working class and the peasantry. systems of ownership. tn this sense, the system of ownership As industry is predominated by ownership by the whole people Uy tttu whole people we have today is still incomplete' It can- it a unitary sys- and agriculture by colleetive ownership, the working class and ntt develop into a complete one until becomes the peasantry are often negarded as typical of the working ending the co-existence of ' tem covering the whoie economy' people in these two sectors the two systems, so that the country's consumption fund is people and no The existenc€ of the two systems of socialist public owner- distributed in a unified way among all working ship in socialist society within a given period is, in the final differencesarisefromdifferentsystemsofownership. 46 analysis, determined by the level of development of productive ences in the incomes of peasants of different coilectives, which forces. In China, industrial production is basically mechanized should likewise be eliminated by raising the lower incomes and a number of industriai departments and factories are and not by ievelling off the higher ones. Peasants account for highly mechanized and are on the way to automation. How- more than B0 per cent of China's population. It is obviously ever, agricultural production is still conducted mainly by impossible to raise the living standard of the peasants all at manual labour and the use of draught animals, and mechaniza- once, especially of those in low-yield communes and brigades, tion has begun in only a few rural areas, Because of these to the level of the workers without a protracted effort to different levels of productive forces, industrial production achieve a tremendous growth in industrial and agricultural generally shows a relatively strong social character, as mani- production. fest in the cornplex division of labour and co-operation among The major differences between the two systems of socialist various departm,ents and enterprises. This gives rise to an public ownership, ownership by the whole people and collec- objective need for society and the state to own the industrial tive ownership, naturally give rise to contradictions between means of production directly and exercise centralized, unified them. These include the contradictions between the state and leadership over industrial production. In other words, it the collectives and those between the working class and the calls for a system of socialist ownership by the whole people. peasantry. For example, there are obvious contradictions be- On the other hand, agricultural production shows a relatively tween state and collective economy over such issues as taxation, weak social character, as a considerable portion of the products the quantities of agricultural produce purchased by the state of a unit is consumed by itself and by its members. In such and the purchasing prices. If the agriculturai tax levied by circumstances; collective ownership tacilitates production and the dtate on the collectives is too heavy, it will reduce the management and brings into play the socialist enthusiasm of funds accumulated by the collectives and may even' affect the members of such a unit. It is a form of ownership that the income of the peasants in these collectives. Excessive answers the need to develop productive forces in agriculture. purchase and underpricing are also harmful to the interests of Owing to the differences between industry and agriculture the cbllectives and the income of the peasants. The state must with respect to the levels of productive forces and labour pro- work out correct policies with regard to taxation, the purchase du0tivity, the differences between the workers and peasants of agricultural produce and the pricing of industrial and agri- in living standards cannot be eliminated within a short time. cultural goods, taking into consideration the interests of both Differences in the conditions of material production and in the state and the collectives, so as to effect a rapid development labour productivity among collective economic units, coupled of industrial and agricultural production and of the economy with the distribution of products within each collectivg result as a whole. Since the founding of New China, the agricultural in considerable differences in living standards am,ong the peas- tax has remained low, but there were years in which too much ants of different collectives. To effect distribution among the grain was purchased from the peasants, causing dissatisfaction workers and peasants on a single basis of equal pay for equal among them. Today the "scissors" difference between indus- work, the right thing to do is to bring up the income of the trial and agricultural prices is still much in favour of industry, peasants gradually tO the level of the workers' 'u'l'ages, rather and effective measures are being taken to change the situation' than to resort to egalitarianism by lowering the workers' wages. The contradictions between state and collective economy are Nor is egalitarianism the proper way to eiiminate the differ- those within the ranks of the people that are based on an iden- 48 tity of fundamental interests. If correct policies are adopted, relationship between the state, the enterprise and the workers. in such a way as these contradictions can certainly be handled The means of production and products of the enterprises in to benefit the consolidation and development of the socialist this sector are the public property of the state representing economic system. the interests of the whole people and should, in principle, be managed, by the state in a unified way. But the complexity of such an economy makes it impossible for the state to handle 2. SOCIALIST OWNERSHIP BY THE WHOLE all of them directly. It can only leave the job to the several, PEOPLE AT THE PRESENT STAGE hundred thousand enterprises in the country. Thus each en- terprise is a basic unit which handles such means of production At present, ownership by the whole people in China is not and products. In principle, the workers of a state enterprise, yet a unitary system of public ownership by the whole society including office and industrial workers, jointly appropriate its as envisaged by Marx in his Criti'que of th,e Gotha Programme, means of production and products. But in the absence of but one that co-exists with socialist collective ownership. The democratic management and measures which link its business figure of workers and staff rnembers on state payroll comes performance directly with the financial interests of all its mem- to only 70 odd million while those drawing pay for their work bers, the workers and staff, who only receive their shares in from the collectives number 300 million. As stated earlier, a the products on the principle of "to each according to his work", portion of the products turned out by enterprises under owner- can hardly see the identity of interests between them and the ship by the whole people, mainly the accumulation fund, is enterprise, let alone that between them and the state. In these distributed nationwide in a unified way, whereas another por- complicated circumstances, what kind of relationship should be tion, mainly the consumption fund, is distributed among the established between the state, the enterprise and the workers? workers and staff of the state enterprises and government in- This is a question to be taken seriously in an analysis of the stitutions. The peasants in the collectives are not among the economic sector under ownership by the whole people. recipients in such distribution; they get only the products of ,A cbpitalist enterprise is the private property of a capitalist their collectives. Thus these peasants enjoy only a partial or a group of capitalists, who entrust its management to a and not a full right to the means of production in the enter- manager or governing body they elect, e.g., a board of directors, prises under ownership by the whole people. Because of its an.executive board, etc. The manager or governing body is Iimitations, therefore, the system of ownership by the whole accountable to the capitalist or the group of capitalists (the people at the present stage is not a fully developed one. joint-stock company) owning the enterprise, and is delegated It will not'be a fuliy developed one until it becomes a unitary power by the latter to take care of their interests. He is not system embracing the whole economy or, in other words, a accountable to the state or to the workers and employees. public ownership by the whole society. It may also be said that An enterprise under socialist ownership by the whole people the present ownership by the whole people in China is still a is entirely different. As the means of production and the prod- state ownership, and that is why we usually refer to the eco- ucts of the enterprise are the public property of the whole nomic sector under this kind of ownership as the state economy. people, the leader or the leading body of the enterprise is nat- An important question is the tripartite relationship in the urally accountable to the state, which represents the interests economic sector under ownership by the whole people the of the whole people, and must take care of state property, carry - 60 51 out the production plans formulated by the state and conduct iittl" har been achieved because no specifiemeasures have been the distribution and exchange of products according t6 state taken or the measures adopted are mere formalities. assignments. At the same time, the leader or leading body is, Such a system of economic management deprives the work- to a certain extent, accountable to the workers of the enter- ers and the enterprises of their right to handle their own af- prise and must take care of their interests and see to a steady fairs. All the economic operations of an enterprise are dictated improvement in their livelihood along with the growth in pro- by state plans. It has to depend on state allocations for invest- duction. The socialist state carries out the principle of "to ment, even for technical innovation funds, and must turn over each according to his work" among the workers, who are con- all profits to the state. It has no direct contact with the cerned with their personal interests as well as the interests of market because all its products are purchased and marketed the state. These two kinds of interests should in principle be by state commercial departments, and the transfer of workers identical, because increases in production and state revenue and staff members from one enterpris,e to another,is up to the will eventually result in bigger incomes for the workers. How- labour departments of the government. In other words, an ever, such an identity of interests does not manifest itseif in enterprise has no control over human, material and financiai such a direct manner as in a collective enterprise, which is resources or over the procurement of materials, production and responsible for its own profits and losses, but in a roundabout marketing, and is hardly able to play its proper role as a basic way, and is not readily seen by the workers. If the leaders of the unit of economic management. This makes it difficult for state and enterprises do not concern themselves r,rrith the live- an enterprise to take the initiative in iniproving technology lihood of the workers and fail to improve it steadily as produc- and management, raising labour productivity and thus in- tion grows, the workers will not concern themselves with the creasing its contributions to the state and the people. It can interests of the enterprises and the state, but treat them with hardly e,ncourage the workers, from the angle of their financial the mentality of wage labourers. In such a situation, the su- interests, to increase production by.achieving the maximum periority of socialism cannot be brought into play. economic results with the minimum expenditure of labour and The managerial system in China's economy, borrowed material tresources, or raise. their own standard of living from the Soviet Union in the 1950s, lays undue emphasis on by increasing the income of the enterprise. If such a centralized leadership by the state. The leader or the leading system of management is allowed to develop along its own body of an enterprise is accountable for its performance only Iines, it will be impossible to bring into play the superiority to the state but not to the workers of the enterprise. He is of socialism and, what is worse, economic development will be not elected by the workers but appointed by a higher state inferior to that under capitalism. organ. The workers contribute labour and draw pay in ac- With the enterprises deprived of their right to autonomy cordance with state plans without a full right to the manage- and the workers of their democratic rights, bureaucracy thrives ment of the enterprise or any extra benefit from its production in leading organs and among leading cadres of the state and increases. Such a relationship between the workers and their the enterprises, resulting in the arbitrary direction of affairs enterprise cannot fully embody the superiority of the socialist in disregard of objective economic laws and, consequently, system. Although the Central Committee of the Chinese Com- inestimabie losses to the state and the people. In such cir- munist Party has repeatedly called for broadening the workers' cumstances, the leading cadres of an enterprise and its workers democratie rights and for their participation in management, and staff have no alternative but to follow the orders and 52 directives from the higher authorities. This dampens their ownership, and question the superiority of thi: socialist system initiative and creativeness, preventing them from giving play as if it were inferior to capitalism. This is completely wrong. to their wisdom and bringing up ideas of improving business The economic sector under ownership by the whole peopie rep- operations. Yet the superiority of the socialist system lies pre- resents the common interests of the people throughout the cisely in that the people throughout the country, as'their own country, conforms to the needs arising from the development masters, are able to give wide scope to their wisdom and that of modern industry which is of a strong social character, and the leading state organs, enterprises and working people can is the leading force in the nation's economy. It cannot be achieve their common aims through concerted efforts. T'here- substituted by the sector under collective ownership in any of fore, we must change this irrational system of economic these respects. Of course, collective ownership has its own management in a fundamental sense so that the leading state advantages, which are obvious in partially self-sufficient organs, the enterprises and the working people may jointly agricultural production which depends mainly on manual develop the superiority of the socialist system to a fuII extent labour and naturai conditions. It is also preferable in some by discharging their clearly defined duties. types of handicrafts, commerce and service trades, where For a long time, we regdrded the economic sector under it cannot be substituted by enterprises under ownership by the ownership by the whole people as a clock driven by a single whole people. The socialist system guarantees the overall spring mechanism, failing to see it as an organic body com- arrangement and rational use of the human, material and posed of many parts and cells. In this organic bocly, while the financial resources across the country. Given good manage- nerve centre functions as the command headquarters, every ment, it is capable of combining the interests of the state, the part, every cell, should have its own vitality and should be enterprise and the worker so as to bring the enthusiasm and able to operate by itself. Whenever it is impaired, it should creativeness of all three into fuIl play. We failed to achieve be capable of readjustment either by itself or jointly with this in the past because, lacking a sufficient understanding of other organs, or cells without having to go through the nerve the objective economic laws of socialism, we adopted a centre. If none of the ceI1s could function independently, the mechanical, dogmatic approach to the socialist economy and whole body would cease to exist. TI:e economic sector under handled it in a way which prevented a full manifestation of ownership by the whole people will become a lifeless robot if its superiority. In the eight years after the founding of New we exercise too rigid a control over the economic operations China, we enabled the new-born socialist economy to triumph of the enterprises instead of letting them readjust themselves over the capitalist economy in the country by an overwhelming by virtue of their own vitality. The economic fabric of society strength, compelleh the capitalists to accept the socialist trans- is far more complicated than the human body, and its sound formation of the system of ownership, and achieved a much development is impossible without the proper functioning of higher rate of industrial and agricultural growth than in capi- the enterprises, which are the basic components, and of the talist countries. Didn't all this prove the superiority of the workers, who are the cells. socialist system? Owing to the mistakes in our planning and While some comrades are aware of the drawbacks of the then the sabotage caused by Lin Biao and the Gang of Four existing system of management of the sector under ownership during the Cultural Revolution, several ups and downs ap- by the whole people, they doubt the superiority of such an peared in China's eeonomy in the two subsequent decades, re- economy as if it were inferior to ttre sector under collective sulting in slow progress; The trouble didn't lie in the socialist 54 55 system, but in the mistakes in our work.So long as we grasp Collective ownership is necessary in China's agriculture be- and act according to the objective economic laws of socialism, cause of the extremely low level of productive forces, the vary- protect the enterprises' right to autonomy and the workersf ing farming conditions and the wide gaps in labour productivi- democratic rights, correctly handle the relationship between ty between different areas? communes, and production brigades the state, the enterprise and the worker and thus enhance the and teams. The state can neither raise the pay in low-yield- initiative of all three, the superiority of the socialist system ing teams to that in high-yielding ones nor reduce the latter. If will become fully manifest. it were to "take from those who have more and give to those who have less" as a means to even up the incomes, the high- yielding teams would be unwilling to strive for still higher 3. SOCIALIST COLLECTIVE OWNERSHIP yields while the low-yielding ones would not try to catch up. AT THE PNESENT STAGE This would seriously hamper the growth of agricultural pro- duction. Socialist collective ownership is a form of transition from An important reason for a far lower labour productivity individual ownership to ownership by the whole people. In in agriculture than ip industry is that the former has to de- China, this transition is effected in two steps: a change from pend on natural conditions, and mechanization of agricultural individual ownership to collective ownership; and a change production is more difficult than industrialization. The equip- from collective ownership to ownership by the whole people. ment for farm mechanization has to come from industry. La- The two stages are interconnected but different in nature. bour productivity in agriculture cannot rise significantly unless The first step means a change from private ownership to public industry produces more, better and cheaper farm machinery. ownership, involving a change in the relations of production Industrialization started in capitalist countries as early as the which must keep pace with the growth of productive forces. Iatter part of the l8th century, made rapid progress in the The second step means developing a lower form of socialist early 20th century and reached the level of modernization soon public ownership to a higher one, which requires, first of all, afterwards. On the other hand, mechanization of agricultural a tremendous growth of productive forces. China's peasants, production did not take place until the beginning of the 20th who account for B0 per cent of her population, still live under century. Its standards were gradually improved after the a system of collective ownership which is predominant in 1940s and became relatively high only after the Second World agriculture, the foundation of the economy. The rural collec- War. With a huge population, a small per capita amount of tives, i.e., the people's communes, generally follow a three- farmland, a low pay for work and highly-priced farm machin- level system of ownership of the means of production ery, China faces far greater difficulties in mechanizing her ownership by the commune, by the production brigade and by - agriculture than the U.S.A. and the West European countries the production team, with the last as the basic form. A pro- did. Although initial progress has been achieved in farm duction team, as a basic accounting unit, is usually composed mechanization in some areas in China, it has not led to a signif- of an average of 30-40 households and carries on production icant increase in agricultural labour productivity or in farm mainly by manual labour and the use of draught animals. Thus output. In particular, production costs of agricultura[ produce collective ownership in China today is only a lower form of have gone up in many areas because of a greater input, creat- socialist public ownership. ing a situation in which a higher output is not accompanied by 50 a higher income. Thus it is hecessary to improve management ativeiy scattered. Since collective economic units are r€spon- ' and achieve better economic results in the course of farm sible for their own profits and losses and, in principle, the mechanization, so as to ensure a quick rise in agricultural state may issue plans on their production only as guidelines labour productivity and in output and income. and not as binding instructions, they have a right to arrange Agriculture lags far behind industry in the division of labour their production according to local conditions and with some and co-operation. In fact, China's agriculture. remains in a reference to state targets after they selI major agricultural state of .partial self-sufficiency, with roughly three-fourths of products to the state by assigned quotas. The state it obliged the grain, the main product, consumed by the peasants them- to respect the collectives' right of ownership and their right to selves. ?he peasants also produce much of their means of pro- manage their own affairs. On the condition of completing. its duction, sueh as seed grain, fodder and organic manure, and sales to the state, a collective may decide for itself what to breed some of the draught animals. The greater the extent produce and how to produce. Owing to the varying climatic of self-sufficiency, the smaller the scope for a unified manage- and other naturaL conditions, the communes and production ment of production and distribution. This is also one of the brigades and teams must develop such lines of production as reasons why the size of a collective economic unit cannot be are most beneficial to the state and to themselves. For a long very big at the present stage. But there wiII be a gradual time, some of our comrades were not clear about the distinc- change in the situation when the collectives are brought closer tions between collective ownership and ownership by the together through farm mechanization and the growth of in- whole people and applied to the economie sector under col- dustries run by communes and production brigades and teams. lective ownersliip methods appropriate only to the sector under At present, the economic sector under coliective ownership ownership by the whole people. Showing no respect for the exists as an objective need independent of man's will, and any collective economic units' right of ownership and their right premature attempt to abolish it goes against the objective laws to manage their own affairs, these comrades issued to them of economic development. Compared with individual owner- binding instructions such as on the growing of crops, and forced ship, collective ownership represents a leap forward and it has them to obey confused orders. Ali this caused tremendous loss- actually promoted the growth of agricultural productive forces. es to agricultural production. Of course, the government or- Without the movements to establish agricultural producers' gans at various levels should not give the people's communes co-operatives and rural people's communes, it would have been a totally free rein, but should guide and co-ordinate produc- impossible to level so much farmland, undertake large-scale tion in various collectives in iight of state plans and local con- capital construction in dgriculture, including water conser- ditions, taking into consideration both the needs of the state vancy projects, and achieve initial farm mechanization in some and the interests of the collectives. The same thing applies to areas. Collectivization of agriculture has removed the scatter- the relationship between the people's communes and their ed nature of agricultural production to some extent, which in production brigades and teams. But the turn has facilitated state planning and arrangement of agricul- subdivisions - the must not adopt higher authorities an authoritarian style of tural production and state purchase of agricultural produce, con- work. Instead, they should consult with the collectives on the solidating the economic basis of socialism in China. However, co-ordination of their production plans and leave all the details . compared with the economic sector under ownership by the of production and distribution to the latter. whoie people; agriculture under collective ownership is still rei- Since the eollectives are responsibtre for their own profits 58
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