On the Shanghai Political Economy Textbook

Rafael Martinez

Introduction

Marxism, as opposed to any other earlier ideology which one way or the other was inspired by the hardships of the exploited masses, is a science. From this point of view, Marxism is not a system of more or less idealist thoughts of how things ought to be and how people should behave, a doctrine of dogmas, but a system of thoughts, organised with a very well-defined scientific method using the principles of dialectical materialism. The Marxist system is a scientific system with which to unveil the objective laws of historical development. Marxism is a scientific tool in the hands of the exploited classes with which the latter take historical development into their hands and transform society on the basis of higher forms of social organisation towards the construction of communism.

Marxism as a science is not a system of frozen ideas, but a system of thoughts that evolves historically. However, while evolving, Marxism remains a unique and self-contained system, as a result of which it has a single correct interpretation, in virtue of its scientific essence. The same way the phenomena of nature and their laws of development are studied by such branches of natural science as chemistry, biology, physics, etc., social phenomena are studied and interpreted by Marxist sciences. For the same reason that there exists only one possible scientific interpretation of the phenomena of nature, that there exists only one science of chemistry, biology, physics and not two or more sciences of chemistry, biology and physics, there exists only one single scientific system that is able to study and interpret social phenomena.

The principles of Marxism-Leninism are not postulates about the laws that govern society and history. They are the result of a titanic effort to generalise the knowledge about social phenomena and they best reflect their essence. Therefore these principles are not eternal truths, the quintessence of human thought, conceived by minds of geniuses. Quite to the contrary, the principles of Marxism-Leninism do not pre-date history; they are a product of history itself and they are derived from the latter, they are a reflection of the objective laws that govern reality. The principles of Marxism-Leninism are not a mystic knowledge of the elders but the minimal expression of a full-fledged science, whose ultimate goal is to understand social processes for the purpose of changing society.

The revision of the principles of Marxism, regardless of its orientation and historical epoch, subverts the scientific basis of Marxism and turns the latter into a dogmatic set of thoughts and citations of holy texts; in other words, it turns the once scientific system of thought into a form of religious doctrine, which overtakes the superstructure of the revisionist system. From being the ideology of the exploited masses, this hollow Marxism turns into a tool of exploitation. Having reached this point, revisionist Marxism, anti-Marxist in essence, can split into different heresies, into different interpretations of what turned into some kind of Holy Scriptures, as those interpretations cease to be scientific and are moulded to fit the needs and idiosyncrasy of the new ruling classes or those who serve the old ruling classes, according to the concrete historical situation.

Revisionism retains the outward form of Marxism but rips off its scientific basis. Revisionism fosters dogmas. For instance, many (if not all) forms of revisionist doctrines uphold the commodity character of all products under socialism. Different revisionist trends (heresies) argue in favour of such a dogma in a different way, and though they agree to disagree in the form, they agree on the need for products under socialism to be commodities. While disagreeing on many issues, Bukharinists and Trotskyites arrived at the same conclusions with regard to the Soviet policies of collectivisation and the progressive curtailing of the sphere of operation of commodity-money relations. While disagreeing on many issues, Khrushchevites and Titoites agreed to condemn the basic principles of Marxist-Leninism of the transition to socialism and communism, which many revisionist and openly bourgeois ideologists have labelled as Stalinist and, hence, evil.

The political economy of socialism has been a highly debated topic for as long as the theory of Marxism has existed. Discussions over this fascinating topic have become a battle ground between Marxism-Leninism and revisionism. It is no coincidence that the process of restoration of capitalism in the Soviet Union and other former People’s Republics in Eastern Europe has been preceded and followed by thorough economic discussions, at the end of which the specifics of revisionism took shape and become a more or less consistent system of thought, a new doctrine, so to say. The system of economic thought developed in the post-Stalin Soviet Union became a more or less consistent revisionist system, which was propagated and became more or less accepted by the revisionist leadership of the former People’s Republics of Eastern Europe.

The revisionist essence of those trends that merged into what came to be known as post-Stalin or modern revisionism, as well as those that were derived from the latter, has been repeatedly exposed by Marxist-Leninists. Not wishing to add anything of substance to this critique, in the present article we would like to concentrate on a fascinating topic in the discussions on the political economy of socialism. In the present work we present a brief critique of what in our opinion is the revisionist essence of the principles of the political economy of socialism promulgated by the famous Shanghai political economy text-book, published in 1975 in China. The Shanghai text-book summarises and publicises the basics of what has been portrayed for many years as a development of the principles of Marxism-Leninism. In the present work we try to substantiate the view that a number of allegedly innovative ideas put forward in the Shanghai text-book are, far from a development of Marxist science, quite to the contrary, a mixture of pre-Marxist thought and openly Bukharinite-Khrushchevite thinking. While adopting a somewhat different form of revision of the principles of Marxist-Leninist political economy, the authors of the Shanghai text-book basically come to similar conclusions as the Khrushchevite-Brezhnevite clique with regard to the basic guidelines for the construction of socialism, the roles of the plan, commodity-money relations, interrelations between industry and agriculture, collectivization, etc. Moreover, the new principles of political economy of socialism advocated by the authors of the Shanghai text-book are postulates which are not the result of a thorough analysis of the concrete economic conditions of revolutionary China. These postulates are rather a reflection of the ‘change of mood’ among economists after the death of Stalin, and do not add anything of substance to revisionist postulates formulated by the revisionists in the Soviet Union. It is important to note that a number of the principles and formulations presented by the Shanghai text-book do display certain formal differences from those adopted in other countries. While pointing the reader to the major similarities we will try to emphasise the specifics of the reasoning used by the authors of the text-book.

It is most fortunate for the economic history of revolutionary China and for our analysis that Chinese economists were indeed aware of and very much familiar with the basic Marxist-Leninist principles for the transition to socialism. After a brief period of brisk economic recovery (1949-1952), the Chinese government launched a very successful First Five-Year Plan (1953-57) whose excellent economic results were praised even by bourgeois economists. This five-year plan followed closely what bourgeois ideologists usually refer to as the Soviet or Stalinist model for the transition to socialism, which had produced very successful and at times even almost spectacular results in the People’s Republics of Easter Europe during the post-war period.

Indeed, by virtue of the Treaty of Friendship, Alliance and Mutual Assistance signed in January 1950 by Mao and Stalin and valid until 1980, the Soviet Union rendered significant financial and technical assistance to modernise Chinese industry. The Soviet Union provided thousands of engineers to boost China’s industry and therefore her economy as a whole. Large numbers of Soviet engineers, technicians, and scientists assisted in developing and installing new heavy industrial facilities, including many entire plants and pieces of equipment purchased from the Soviet Union. Soviet planners helped their Chinese counterparts formulate the plan, as a result of which the period of 1949-1957 could be regarded as the most successful economic period that China ever had, not only from the point of view of sustained, steady and well-balanced economic growth as a whole, but also from the perspective of the resolution of class contradictions, the liquidation of the capitalist mode of production and feudal domination.

In the present work we concentrate on the most prominent tenets advocated by the authors of the Shanghai text-book, which liquidate the basic principles of Marxism-Leninism with regard to socialist construction that were materialised in the main by the first Five-Year plan: the postulate about agriculture as the foundation of the economy, the violation of the Marxist principle of the leading role of the development of heavy industry, the right-wing stand on the role of commodity-money relations and collectivisation, and the idealist character of the definition of the role of politics in the economy.

Pre-Marxist Character of the Postulate of Agriculture as the Foundation of the Economy

In this and the next sections we will cover two of the most relevant aspects of the economic system advocated by the authors of the Shanghai text-book. Before touching upon what in our opinion is a systematic violation by the authors of the Marxist-Leninist principle of the determining role of the development of heavy industry in both the transitional and socialist economies, it is convenient to evaluate one specific aspect of their economic thinking. In particular we elaborate on the postulate of agriculture as the foundation of the Chinese economy. This postulate as we know it today may be found in the Chinese economic literature by the end of the first Five-Year Plan. Although we do not observe this to be an evident element inherent in the economic thinking of the Chinese communists in general, further investigation may throw additional light on this question. We believe that this postulate is deeply rooted in pre-Marxist economic thinking and, as a result, it may have been inspired one way or another by pre-Marxist Chinese thinkers.

In the next section we will be specific with regard to economic figures characteristic of the first Five-Year Plan and it will illustrate how the relative growth of heavy industry with respect to the others branches suffers a qualitative decline, especially after the economic reforms of the early 1960s. The Marxist-Leninist principle of the prioritisation of heavy industry was followed during the 1950s. Around 1957 the Chinese leadership started to express serious concerns that the path to industrialisation of the country should be carried out differently from the spirit of the first Five-Year Plan. The need for industrialisation of the country was never denied, neither before nor after the completion of the first Five-Year Plan; however, a new thinking started to arise, that other sectors of the economy had allegedly been neglected. It is at this time that the Chinese leadership raises the issue of the need to establish new relationships and balances among various sectors of the economy. By the time of the writing of the Shanghai text-book the new economic thinking had long been consolidated:

‘To realise socialist industrialisation, it is of course necessary to give priority to developing heavy industry. But, giving priority to developing heavy industry does not mean that agriculture and light industry must be ignored’ (ed. George C. Wang, ‘Fundamentals of Political Economy’, M.E. Sharpe, White Plains, New York 10603, 1977, p. 383. This is a translation of ‘Cheng-chih ching-chi hsueh chinch’u chih-shih, 2 vols., compiled by the ‘Fundamentals of Political Economy’ Writing Group, Shanghai (Shanghai People’s Press, 1974) ).

The leading role of industry is not denied here; however the concept of prioritisation suffers a substantial change, as we will see below. The authors of the text-book never deny the progressive character of heavy industry, or the crucial role of science, technology and its application to more advanced and productive means of production. The benefits of the application of technological advances and a robust heavy industry are also acknowledged as a very important element for the mechanisation of the countryside, which the authors are clearly concerned about. With statements of this type the authors try to formally accept, in the form of a statement, the need to develop heavy industry, but at the same time to allow for a very different interpretation of the relationship between various branches of the economy. As will be elaborated in more detail in other sections, this type of statement opens the way to the revision of principles and is used by the authors on different occasions to tackle certain fundamental issues.

For a Marxist who understands the relationship between heavy industry and other sectors of the economy, it makes little sense to say that one should give priority to industry without neglecting agriculture. The Marxist-Leninist scheme for extended social reproduction is very well established both in the theory and practice of socialist construction. Bourgeois and right-wing revisionist economists usually come up with statements of the following sort: The industrialisation in the Soviet Union corresponds to an economic model in which heavy industry is developed at the expense of other sectors of the economy, in particular, in relatively backward countries (like pre-revolutionary Russia and China), at the expense of the vast masses of the peasantry. This stereotype has been repeated over and over again for as long as the revolutionaries have tried to establish a roadmap for industrialisation. A Marxist knows very well that the only possible way for massive collectivisation is via the mechanisation of labour in the countryside. The latter is impossible without the development of a robust domestic heavy industry. Apparently, the authors of the text-book disagree with this view, as a result of which they feel impelled to establish the ‘theoretical’ framework that will enable them to draw a number of earth-shaking conclusions.

In our opinion, the statement above has little to do with Marxist-Leninist political economy and is simply a reflection of the bourgeois and right-wing revisionist thinking that we mentioned above. Let us examine the role of two points raised in the preceding quotation in the political economy put forward by the Shanghai text-book: the meaning of their concept of priority in developing heavy industry and the assertion that agriculture must not be ignored. The authors openly state that agriculture is the foundation of the national economy:

‘In organising the development of the national economy, the socialist country must consciously apply the objective law of agriculture as the foundation of the national economy’ (ibid., p. 368, our emphasis).

This statement goes far beyond the understanding that agriculture, in a country with an overwhelming majority of peasants, has to play a very important role for the very obvious reason that there is a clear economic disproportion at the start of the economic development. We are dealing here with a new understanding of the direction of development in the transitional economy in a relatively backward country like China. When the authors appeal to the principle of agriculture as the foundation of the national economy, they imply that agriculture is to be given priority in the national economy:

‘Since agriculture is the foundation of the national economy, it is necessary to treat the development of agriculture as a priority of the national economy. Only when agriculture is developed as the foundation of the national economy can light industry, heavy industry, and other economic, cultural and educational enterprises be developed’ (p. 370).

At this point, a seeming logical but profoundly anti-Marxist argument is used. We will elaborate on this in more detail below. According to the authors, if agriculture is not developed then industry cannot develop either. It is assumed that the national economy can function only if agriculture is developed as the basis for economic development of the national economy as a whole. According to the authors, the development of industry is determined by the development of agriculture and not the other way around. At this point this scheme is presented as an abstract relationship. It is not clear at first glance exactly what proportions are implied by that relation of subordination. As will become clearer in the quantitative analysis made in the next section, this scheme implies that the level of capital investment in heavy industry is determined by the level of investment in agriculture and light industry and not the other way around.

This is further substantiated by the postulate that agriculture should become heavy industry’s primary market and therefore the level of investment in heavy industry is determined by the needs of agriculture. A more or less advanced agriculture will reflect a more or less advanced heavy industry, as agriculture is the beginning and end of the production process.

‘At present, people have not yet clearly realised that the point that heavy industry must take agriculture as its primary market. With the steady advancement of agricultural technology and its ever-increasing modernisation, fertilisers, water conservancy and power and transportation facilities will be available for agriculture and more fuels and construction materials will be available to private consumption, then people will comprehend that agriculture is the primary market for heavy industry’ (op. cit., p.. 369, a quote from ‘On the Correct Handling of Contradictions Among the People’, Selected Readings from the Works of Mao Tse-Tung, (Type A) Jen-min ch’u-pan-she, 1965, p. 362).

The true meaning of the statement that agriculture should not be neglected is explicitly stated in the form of the postulate of the proportions of labour exchanged between the three main sectors of the economy. The authors draw clear guidelines with regard to the priorities for development in the transitional economy: first agriculture, then light industry, followed by heavy industry.

‘Under the guidance of the General Line for building socialism and the general policy for developing the national economy, China’s national economic plan is arranged in the order of agriculture, light industry, and heavy industry with Chairman Mao suggested. That is to say, in arranging the national economic plan, we must start from agriculture and place agriculture in the primary position. Whether it is allocation of capital funds or the supply of material goods, the needs of agriculture cannot be neglected.’

The authors of the text-book turn upside down the order of priorities established by the founders of Marxism-Leninism. They contradict the very basics of Marxist economics. They ignore Marx and Engels’ theory of reproduction and extended reproduction and their predictions for socialism. They undermine Lenin’s teachings on political economy and his struggle for the industrialisation of Soviet Russia. They put a cross on the titanic effort and practical experience for the industrialisation of a vast agricultural country, the building of the main basis of socialism in the Soviet Union. They liquidate Marxist political economy and replace it with a petty-bourgeois pseudo-science wrapped up in the external appearance of Marxism deprived of its scientific substrate. Using revolutionary phraseology the authors of the Shanghai text-book put forward this and other anti-Marxist theses, which they even dare to portray as a development of Marxist-Leninism! Is this really a development of the Marxist-Leninist science or a plagiarism of pre-Marxist economic thought under the concrete-historical conditions when Marxist-Leninism was under attack by all types of right-wing theories and practice following the XXth CPSU Congress?

So far we have examined the formulation of the postulate regarding agriculture as the foundation of the economy. Such a statement was regarded by the Chinese economists as a novel statement in the science of political economy. More careful analysis of this postulate indicates that the essence of this statement, which is so pivotal to the economic thought advocated by the authors of the Shanghai text-book, is fundamentally pre-Marxist and its essence had been exposed long ago by Lenin, especially in his early works on political economy.

Lenin, following Marx, exposed the mistakes of Sismondi and the Narodniks and also showed the fundamentals of their mistakes with regard to the value of social production within the context of the analysis of the development of capitalism in Russia. Lenin showed that Marx could create his theory of capitalist reproduction by overcoming two main mistakes of classical bourgeois political economy. The first one is related to excluding constant capital from the analysis of the value of social production and thus reducing it to two parts (which correspond to the worker and the capitalist). The second is related to confusing individual consumption and consumption of production, which leads to ignoring the latter in the analysis of reproduction and extended reproduction in general.

Lenin conscientiously and systematically fought against the reactionary economic theory of the Narodniks. In doing so he further developed a crucial methodological statement in the Marxist theory of reproduction, namely, the question of the relationship between individual and productive consumption. The classics of bourgeois political economy, Adam Smith and David Ricardo, in confusing individual and productive consumption reduced all consumption to individual consumption, which prevented them from understanding the process of realisation of the social product. This also prevented them from understanding the process of reproduction of capital. It is only possible to solve these fundamental problems of political economy, regardless of the mode of production, by making a clear distinction between the production of means of production (Department I) and the production of the means of consumption (Department II). These questions are dealt with great detail in Marx’s Capital. Particularly valuable in this respect is the fourth volume of the Capital.

To reduce the social product to two components is a mistake common to pre-Marxist economic thought and has an objective substrate. This ‘omission’ is due to a superficial analysis of the capitalist product at a time when capitalist production was at its early stage of its development, namely the epoch of manufacture, before the advent of large-scale machine industry. The root of this mistake is objective in the sense that it is based on concrete historical-economic conditions, which pre-determine the pre-Marxist economic thinking. Needless to say, the objective conditions in China with regard to the development of large-scale machine industry, which influenced the Chinese economists, were not very different from those that influenced the ideas of the Narodniks in Russia:

‘Old China was a semi-colonial and semi-feudal country. Under the oppression of imperialism, feudalism and bureaucratic capitalism, the level of production was extremely backward. The few modern industries that existed consisted primarily of light industry and textile industry. When the country was liberated in 1949, the annual output of steel was only 158,000 tons. There was nothing to speak of in many important industrial sectors’ (ibid., p. 383).

In this context is much easier to understand the rationale behind the following statement regarding a more quantitative estimate of resource allocation under socialism, which otherwise would sound rather preposterous, to say the least:

‘At the same time, we must also take care that the development of heavy industry and other sectors of the national economy cannot exceed the amount of food grain, raw materials, capital funds, and labour force that can be provided by agriculture’ (ibid, p. 388).

By committing the same methodological mistake as classic bourgeois political economy and its followers in Russia, the authors of the Shanghai text-book not only arrive at the well-known conclusion about agriculture being the basis of the national economy, but they also establish an upper limit on the proportion of the social product that can be involved in heavy industry. Therefore, by construction, the socialist plan establishes an upper limit on investment and resources allocated to heavy industry determined by the development of agriculture, a sector of the economy which displays a lower level of labour productivity. Whether the total social product is large enough in an economically backward country like China at that time, with respect to the total amount of social product involved in heavy industry, is of no substance. We are referring here to a general statement for the construction of the socialist economic base.

The authors of the Shanghai text-book agree with the Narodniks that without the development of agriculture the development of the national economy is not possible, and therefore they conclude that the development of the national economy is determined by the development of agriculture. The growth of capitalism during its early stages of development took place despite a shrinkage of the peasant market because of the expansion of the market of the means of production. Under socialism, the large masses of individual producers do not disappear under the pressure of the development of capitalism in the countryside, nor does the peasant’s market shrink in favour of the development of industry, as happens under capitalism. Much to the contrary, in the transitional economy the expansion of the forces of production in agriculture is mainly driven by heavy industry. To believe that the development of agriculture in a relatively backward country like China can take place on the basis of simple cooperation without the assistance of the state in the form of a solid heavy industry is a hopeless illusion and a reflection of a profound lack of understanding of the basics of Marxist political economy. The economic history of the construction of socialism has shown that failure to understand and implement this in economic practice ultimately leads to the development of capitalism in the countryside. The authors of the Shanghai text-book arrive at quite the opposite conclusions. They arrive at the same conclusions as the Narodniks when they even questioned the feasibility of the development of capitalism in Russia.

Lenin’s classical Marxist analysis of the pre-Marxist character of the Narodniks views of the development of capitalism in Russia is perfectly valid in our analysis of the sources of the anti-Marxist deviation advocated by the authors of the Shanghai text-book in the form of the postulate of agriculture as the basis of the national economy.

‘He regards as the greatest ‘obstacle’ to the development of capitalism in Russia the ‘contraction’ of the home market and the ‘diminution’ of the purchasing power of the peasants.’

‘…Wherein lies the absurdity of this ‘ever new’ (for the Russian Narodniks) theory?

‘Is it that its author fails to understand the significance of the ‘production of means of production as means of production’? Of course not. Mr. Nik. – on knows that law very well and even mentions that it operates in our country, too (pp. 186, 203-204). True, in view of his faculty for castigating himself with contradictions, he sometimes (cf. p. 123) forgets about that law, but it is obvious that the correction of such contradictions would not in the least correct the author’s main (above-quoted) argument’ (V.I. Lenin, On the So-Called Market Question, Collected Works, 4th English Edition, Progress Publishers, Moscow, 1972, p 122-123)

This and other economic theses advocated by the authors of the Shanghai text-book are inconsistent with the proletarian essence of politics guided by Marxism-Leninism. As will be elaborated in other sections, the authors resort to revolutionary (at times ultra-revolutionary) phraseology to cover the pre-Marxist and right-wing revisionist essence of a number of their pivotal theses. From the point of view of a consistent Marxist it makes no sense to call on the masses to follow proletarian policies while the essence of the economic reforms proposed by the authors is fundamentally petty-bourgeois. Their class essence together with the anti-Marxist character of the economic thought of the Narodniks has been exposed long ago. We appeal to those who still consider the economic thesis about agriculture being the foundation of the economy as a proletarian policy to carefully address these issues and pay more attention to the essence of economic phenomena:

‘…the Narodniks did not regard the working class as the foremost class in the revolution. They dreamed of attaining Socialism without the proletariat. They considered that the principal revolutionary force was the peasantry – led by the intelligentsia – and the peasant commune, which they regarded as the embryo and foundation of Socialism.’’ (History of the Communist Party of the Soviet Union (Bolsheviks), 1939, International Publishers, p. 12.)

Violation of the Marxist Principle of the Leading Role of the Development of Heavy Industry

In the previous section we touched upon one of the most important postulates on which the Shanghai political economy text-book relies. As we have seen, the authors unambiguously admit to thinking that agriculture is the basis of the economy and determines the development of other sectors of the economy, in particular heavy industry. Even though the authors of the text-book formally agree with the formulation of the leading role of heavy industry, it is clear that they have a very different conception of the labour exchange between the various sectors of the economy than that advocated by the founders of Marxism-Leninism. To be specific, the authors give priority to agriculture, followed by light industry and then by heavy industry. In this section we will be more quantitative and we will try to show that this conception leads to the violation of the Marxist-Leninist principle in the political economy of the transitional and socialist societies of the determining role of heavy industry in economic development. We emphasise the qualitative change taking place in the development of heavy industry when comparing the main economic control figures of the first Five-Year Plan and the economic reforms that took shape in the early 1960s which, in our opinion, liquidated a number of basic progressive features embodied by the first Five-Year Plan.

The Marxist-Leninist principle of the leading role of the development of heavy industry had been applied in the Soviet Union and in the People’s Democracies of Eastern Europe and it had become a widespread notion when the Chinese Communists came to power. In this sense the first Five-Year Plan had become a concretisation in the conditions of China of what was considered a well-accepted and uncontroversial modus operandi. It is not within the scope of the present work to elaborate on the classical considerations leading the founders of Marxism-Leninism to the conclusion of the need for the leading role of heavy industry in the transitional economy. To conclude otherwise, as the authors of the Shanghai text-book imply, is to deny the very basics of Marxist political economy. Marx reiterated that the level of development of the productive forces is strongly linked to the level of achieved productivity, which depends on the degree of mechanisation of labour. The increasing mechanisation of labour is necessarily driven by a change in the composition in the social product in favour of industry with respect to agriculture and in favour of heavy industry with respect to light industry. This is a necessary result of the Marxist analysis of the realisation of the social product, a necessary result of the Marxist theory of reproduction and extended reproduction. This is applicable to the Capitalist, Socialist and Communist modes of production as well as to the transitional economy. To deny in deeds the leading role of the development of heavy industry over other sectors of the national economy is not only flagrantly anti-Marxist but it also contradicts the purely phenomenological observation about the strong correlation of the growth of industry and the overall growth of the economy in modern modes of production.

At this point it is important to make two remarks. Firstly, we do not touch upon the basic features of the Chinese economic development during the years of the Great Leap Forward. These economic reforms were relatively short-lived compared to other stages of the economic history of China. Not wishing to discuss the essence of the economic phenomena that were produced by the Great Leap Forward, we prefer to establish a comparison between the spirit of the first Five-Year Plan and the economic reforms of early 1960s. First, this is meant to simplify the analysis and to establish a clear demarcation between two well-defined periods of the economic history of China. Secondly, it is not necessarily correct to view the first Five-Year Plan as a uniform stage. As a matter of fact, a more detailed analysis of the control figures of the first Five-Year Plan show changes towards 1956-1957 that reflect certain changes in the economic discussions of that time. The pillars of the new economic doctrine, as summarised in the Shanghai text-book, were laid down during the period of 1956-1957 in the aftermath of the CPSU XXth Congress, were consolidated in the years after and were in our opinion consistently applied during the early 1960s. When we establish a comparison between the first Five-Year Plan and the economic reforms of the 1960s we are using a convenient simplification.

Regardless of the academic considerations concerning the determination of various stages in the economic history of China, it is evident to us that the spirit of the first Five-Year Plan and the economic reforms of the early 1960s are fundamentally different. The scope of the first Five-Year Plan was very well-defined and it included building the material foundation for socialism via the industrialisation of the country:

‘The magnificent First-Five Year Plan for the Development of the National Economy was launched in 1953. One of its fundamental tasks was to lay a preliminary foundation for the socialist industrialisation of the country’ (‘Ten Great Years’, State Statistical Bureau, Foreign Language Press, Peking 1960, p. 80).

In principle, right-wing revisionist political economy does not preclude declarations in favour of industrialisation as a leading criterion of success of the socialist transformation. The above statement does not necessarily make the first Five-Year Plan any better than the successive plans if it was not for the fact that the guidelines of the former were specific and clear:

‘The central task in China’s transitional period is to carry out socialist industrialisation and the basic policy for socialist construction is to give priority to the development of heavy industry’ (ibid., p. 46, our emphasis).

The Marxist-Leninist principle of the determining role of the development of heavy industry was hard-coded into the spirit of the first Five-Year Plan. As quantitative analysis shows, Chinese economists and planners did implement this basic principle in economic practice. Moreover, the leading role of heavy industry was at the very heart of the first Five-Year Plan. In retrospect, many imperialist and petty-bourgeois critiques of the first Five-Year Plan associate it with the policies of Stalinism that were allegedly imposed on China and other progressive countries from the outside. The ideologists of imperialism and their followers always confused the respect by the progressive world that the Soviet Union and its leadership enjoyed with political imposition, especially in the post-war period. We do not deny the tremendous respect that the progressive world had for the economic model that turned a backward and agricultural country into a mighty and industrialised superpower, which was victorious in the toughest of all wars. However, it is evident to us that the basic principles of such an economic model were not considered at that time to be intrinsic to Russian concrete historic-economic conditions, but rather were a concretisation of the economic principles of Marxism-Leninism. It was acknowledged throughout the progressive world that the Soviet Union’s celebrated success was due to the correct concretisation of the economic principles of Marxism-Leninism, the leading role of heavy industry being particularly important. As matter of fact, the highest rates of sustained economic growth were achieved when the principle of the leading role of heavy industry was applied consistently. The ideologists of right-wing revisionism, imperialism and petty-bourgeois economists argue otherwise while denying flagrant historical facts:

‘One section of leaders of the Communist Party advocated a programme of rapid industrialisation. Their approach was to concentrate resources on big and modern factories and advanced technology. They wanted to build up the urban areas. Development, in their eyes, would then trickle down to the countryside. These leaders said that you needed a big centralised planning apparatus in order to run the economy and that you needed to train vast armies of experts and specialists to staff the new economy and administrative organs. They argued that the way to motivate people and the staff of enterprises was to rely on wide wage differentials and financial incentives.

‘This programme reflected the influence of the Soviet Union, which was very strong in China in the 1950s. But Mao saw problems with this model – both as it was practiced in the Soviet Union and as it was being applied in China in the 1950s. This path of development elevated technique and expertise over the conscious initiative and activism of the masses. He rejected the model of subordinating agriculture to serve urban-based industrialisation. And if China was going to be able to withstand imperialist attack and invasion, it had to decentralise industry and not concentrate development in the vulnerable cities and coastal areas’ (Raymond Lotta, ‘Mao's Advance – Breaking with the Soviet Model’, Revolution #032, January 29, 2006, http://rwor.org/a/032/socialism-communism-much-better-capitalism-pt8.htm).

We do not want to discuss here the political line of this or that political leader who at a given time did or did not stand behind the policies of rapid industrialisation. That is beside the point and is basically irrelevant to the present discussion. It is evident to us that the standard critique of what the petty-bourgeois ideologists refer to as the Soviet model reflects, on the one hand, their lack of understanding of the basic principles of Marxist-Leninist political economy and their disregard for studying economic and historic facts on the other. In addition, the apologists for the ideas summarised in the Shanghai text-book basically plagiarise many of the arguments put forward by imperialist ideologists, U.S. scholars being the most prolific of them. Lotta, as a typical supporter of the ideas of the Shanghai book, reproduces distinct features of the bourgeois critique of the so-called Soviet model that allegedly the development of industry occurs in detriment to the countryside. Lotta’s objection does not add much to Bukharin-Trotsky’s ‘rebuttal’ of the party line for the industrialisation and collectivisation of the countryside in Soviet Russia. Nor does Lotta differ much from the typical bourgeois critic of centralised planning as one of the basic pillars of the economic model he seems to object to. It is a well-known fact that the economic reforms that followed the completion of the first Five-Year Plan involved massive decentralisation of economic management and decision-making, with central planning reduced to a body coordinating a large mass of independent producers, that exchanged labour according to the principle of the exchange of equivalent values (law of value) and the so-called principle of self-reliance. Despite what the supporters of the ideas of the Shanghai text-book may believe, these principles are also common to the Yugoslavian Titoite ‘contribution’ to modern theories of ‘market socialism’. This is the economic model that Lotta and the authors of the text-book define as Marxist-Leninist. The so-called Soviet model did not rely on wide wage differentials and material incentives as much as Lotta and many like him claim. Moral incentives did play a crucial role in Soviet production. Nevertheless, wage differentials and material incentives, even though they should not become the main incentive for the masses to participate in production, are consistent with the socialist principle of distribution and should exist in socialism. It is utopian to argue otherwise. Not surprisingly, Lotta appeals to the phenomenon of consciousness when characterising the so-called Soviet model when he states that this ‘path of development elevated technique and expertise over the conscious initiative and activism of the masses. As will be discussed in the last section, this is an expression of metaphysics and idealism in the treatment of politics and the phenomena of consciousness in questions of political economy. With this digression we want to illustrate the idiosyncrasy of those who have argued and still argue against the determining role of the development of heavy industry with respect to other sectors of the economy.

In terms of economic development the first decade, 1949-1959, can be broken up into three distinct stages: first, the period of recuperation from 1949-1952, then the first Five-Year Plan from 1952-1957 and the Great Leap Forward from 1957-1959. The period of 1950-52, after the seizure of power by the revolutionary government, was marked by considerable economic growth due to efforts to restore dormant sections of the productive forces, especially in industry and other crucial sectors of the national economy. According to various sources, the economic GNP (Gross National Product) grew during that period by an average of 25%. This was due to the mobilisation of political cadre and working population at a time when whole industries had been unproductive following a period of political instability, which came to an abrupt end after 1949.

‘During the period 1949-1952 the gross output value of industry increased by 145% and the gross output value of agriculture increased by 48.5 per cent. By 1952 most of the major products of industry and agriculture had either been restored to their previous levels or had actually surpassed pre-liberation records’ (‘Ten Great Years’, State Statistical Bureau, Foreign Language Press, Peking 1960, p. 3).

After a brief but rather spectacular process of recuperation the Chinese planners, with the assistance of their Soviet counterparts, formulated what has been commonly known as the first Five-Year Plan. This period is without a shred of doubt the most successful economic period of the economic history of revolutionary China. To argue otherwise is to ignore and misinterpret overwhelming historical facts:

‘During the period of 1952-1957 the gross output value of industry increased by 128 per cent, an average annual increase of 18 per cent, and the gross output value of agriculture increased by 25 per cent, an annual increase of 4.5 per cent’ (ibid., p. 3).

The sound success of the first Five-Year Plan resonated around the world. It was praised in the Soviet press as well as in the press of the People’s Democracies. Even bourgeois economists admitted to the exhilarating success of the first Five-Year Plan which, as mentioned above, had its primary focus on laying the foundations of the industrialisation of backward China:

‘China’s First Five-Year Plan (1952-1957) was a relatively rationally thought-out technical plan for economic development, and quite impressive economic progress emerged during that period (B.M. Richman, ‘Industrial Society in Communist China’, Random House, New York, 1969. p. 47).

The historical success of the policies of the first Five-Year Plan, which confirm the correctness of Marxist economic science, touches upon a more fundamental question, namely, the superiority of the socialist mode of production with respect to capitalism. The superiority of the socialist mode of production was demonstrated on the basis of prioritising the development of heavy industry:

‘All this proves that the two different systems, socialism and capitalism, create two entirely different rates of development of the national economy and socialism is incomparably the better system’ (‘Ten Great Years’, State Statistical Bureau, Foreign Language Press, Peking 1960, p. 6).

This prominent feature is usually ignored by the ideologists of right-wing revisionism and of imperialism. The latter do so for obvious reasons. The former were faced with the harsh reality that their anti-Marxist theories with regard to the question of heavy industry and other crucial points of the political economy of socialism in practice liquidated the excellent economic growth shown by the Soviet Union and the People’s Democracies during the 1930-50s, which overshadowed that of the most developed capitalist countries. The superiority of the socialist form of organisation of production was liquidated with the liquidation of the Marxist-Leninist principle of the leading role of the development of heavy industry in the transitional economy and socialism. This is another historic-economic fact that the supporters of the Shanghai text-book seem to ignore. Instead they choose to concentrate on arguing about the role of consciousness in economics while failing to grasp the objective laws of economic development, the true task of political economy. While the right-wing revisionist economic thought in China, summarised by the Shanghai text-book, emphasised phenomena of consciousness by putting forward the concept of ‘revolution in command’, revisionist economists in the Soviet Union and other countries concentrated on a more ‘conscientious’ critique of the so-called Stalinist model of industrialisation, while avoiding obvious idealist mistakes. Nevertheless, all of them, regardless of their line of thought and argument, converged in demonising the ‘old model’ as being excessively supportive of heavy industry and creating economic imbalances.

The analysis of the control figures of the Five-Year Plan and the actual economic performance is a fascinating topic that in our opinion has been neglected by those who claim to uphold the revolutionary traditions of the Chinese revolutionaries. The concrete figures of economic growth in different sectors of the national economy were indeed impressive. While overall the economic growth was outstanding, the most impressive growth was in heavy industry:

‘Comparing production figures of 1958 and 1949, the following increases were recorded: steel (not including steel produced by indigenous methods) increased by 4960 per cent; pig iron (not including iron produced by indigenous methods) increased by 3680 per cent; electric power, 540 per cent; coal, 730 per cent; crude oil, 1770 per cent; metal-cutting machine tools, 3060 per cent; cement, 1310 per cent; cotton cloth, 200 per cent; paper, 610 per cent; edible vegetable oil, 180 per cent; sugar, 350 per cent; grain, 130 per cent; and cotton, 370 per cent.’ (‘Ten Great Years’, State Statistical Bureau, Foreign Language Press, Peking 1960, p. 6.)

Table I

Combined Gross Output Value of Industry and Agriculture

(percentage distributions)

Year Gross output value of Industry Gross output value of Agriculture 1949 30.1 69.9 1950 33.3 66.7 1951 38.6 61.4 1952 41.5 58.5 1953 47.2 52.8 1954 50.2 49.8 1955 49.7 50.3 1956 54.7 45.3 1957 56.5 43.5

Table I displays the year-by-year change in the relative weight of the gross output of industry and agriculture between 1949-1957, which cover the period of recuperation and the first Five-Year Plan (‘Ten Great Years’, State Statistical Bureau, Foreign Language Press, Peking 1960, p. 17). The relative weight of industry (both consumer goods and means of production) was about 33% in 1950 and the relative weight of agriculture was about 67%. By the end of the first Five-Year Plan the preponderance of agriculture was reversed to the extent that the gross output value of industry significantly surpassed that of agriculture. It is important to note that a significant fraction of what was classified as industrial production also included artisan production and small-scale workshops. The relative weight of their contribution to the gross output value in industry decreased significantly by the end of the first Five- Plan Year. For reasons of brevity the year-by-year absolute values of the gross output value of each of the two main sectors of the national economy is not shown. The decline in the relative contribution of agriculture does not by any means imply a decrease in the actual agricultural output; it just means that the rate of growth of industry was significantly larger than in agriculture. It is important to note that the rate of growth of agriculture during that period of time significantly surpassed those of pre-revolutionary China and also surpassed the rate of population growth at the time.

Table I shows the qualitative and quantitative change in the evolution of the two main components of the national economy, but it does not shed light on the change in the internal composition of industry. The relative weight of the production of means of production in 1949 corresponded to 26.6 per cent, where the relative weight of the output value of consumer goods reached 73.4 per cent. Before the launching of the first Five-Year Plan, in 1952 the relative weight of heavy industry had increased to 35.6 per cent. By the end of the first Five-Year plan, in 1957, the relative weight of the output value of means of production reached 57.3 per cent of industry. These figures show the qualitative change in the composition of industry towards heavy industry. This indicates an important change in the composition of the Chinese economy, which is consistent with those attained by the People’s Democracies in Eastern Europe during the post-war period.

Table II

Rapid Growth of Industrial Output and Priority Development of the Means of Production

(index numbers; preceding year = 100)



Year Gross output value of industry Output value of means of production Output value of consumer goods 1950 136.4 151.6 130.8 1951 137.9 150.3 132.6 1952 130.3 143.8 123.8 1953 130.2 136.5 126.7 1954 116.3 119.8 114.2 1955 105.6 114.5 99.97 1956 128.2 140.0 119.8 1957 111.4 118.4 105.6

Table II displays the yearly change in the rate of growth of the gross output value of industry (‘en Great Years’ State Statistical Bureau, Foreign Language Press, Peking 1960, p. 89). Table II also shows the change in the gross output value of the production of means of production and the production of consumer goods. The year-to-year growth rate of industry overall was really impressive, as indicated in the second column of Table II. This growth is made possible by a more impressive growth of the gross output value of the means of production. The third and fourth columns show that the rate of growth of the means of production is always greater than the corresponding index for consumer goods. This does not by any means imply that the material needs of the population were neglected, as bourgeois propaganda claimed for years and years. In fact, significant rates of growth of heavy industry are accompanied by large rates of growth of light industry with rates significantly greater than the rate of growth of the population. The dynamics of the change in the composition of the national income is strongly related to the growth of the economy in general and the growth of productivity throughout all sectors of the economy in particular. The average growth of the GNP over the period of 1957-1965 dropped by more than a factor of 2.5 compared to the corresponding figures achieved in the period of 1953-1957, during which the growth of the relative weight of industry had become prominent. The necessity for the prioritisation of the development of the means of production is very well shown by the Marxist analysis of extended reproduction of social production. This is part of the ABC of Marxism. Any socialist economy has to follow these guidelines in order to overcome economic backwardness and achieve genuine independence.

The industrialisation of China was taken extremely seriously during the first Five-Year Plan, which was the main reason for its sound success. This involved expanding heavy industry, not only by means of developing existing industrial branches but also by means of diversifying industry, creating new industrial branches on the basis of modern technology:

‘China, a backward agricultural country, had to be gradually turned into a great socialist country with a highly developed modern industry, modern agriculture and modern science and culture. In the execution of this great task it was necessary, apart from making full use of the existing productive equipment and development of its potential, to carry out new large-scale capital construction, set up new industrial branches, specially those of heavy industry, provide the various departments of the national economy with new equipment and technique and build strong socialist material and technological foundations’ (‘Ten Great Years’, State Statistical Bureau, Foreign Language Press, Peking 1960, p. 45).

The implementation of the Marxist-Leninist principle of prioritisation of the development of heavy industry was reflected in the structure of capital investment in the different branches of the national economy. The distribution of capital investment in favour of heavy industry was made possible due to the role of centralised socialist planning. This is a direct expression of the prerogative of the socialist state to organise forces of production according to the objective laws of socialism and to satisfy the main law of socialist production. This is quite opposite to the conception advocated by the authors of the Shanghai text-book who, like their counterparts in the post-Stalin Soviet Union, regarded the principle of equivalent exchange of value (i.e. the law of value; see the section on the ‘Role of Commodity-Money Relations) as the leading criterion which regulates the exchange of labour in the national economy. Their ‘marketist’ conception in conjunction with their pre-Marxist view that the resources intended for heavy industry and other sectors ‘cannot exceed the amount of food grain, raw materials, capital funds, and labour force that can be provided by agriculture’ leaves no room for a healthy development of industry. In contrast, the policies of prioritisation of heavy industry in terms of capital investment were taken very seriously by centralised planning during the first Five-Year Plan:

‘Of the more than 86,000 million yuan the state invested in capital construction from 1952 to 1958, 51.1 per cent was for industrial construction, of which 43.8 per cent was for heavy industry. The balance was divided as follows: 8.6 per cent for agriculture, forestry and water conservancy, 15.3 per cent for communications, transport, port and tele-communications, 9 per cent for cultural, educational and public health work and public utilities, and 16 per cent for other construction’ (ibid., p. 46).

The qualitative trends mentioned above were acknowledged even by bourgeois economists. According to bourgeois sources the relative weight of industry (manufacturing, mining, transportation and construction) accounted for about 27% of the net domestic product (based on 1952 yuan prices) in 1957, up from 16.6% in 1952. During that same period of time the relative weight of agriculture fell from 48% to 39%, while displaying sustained and stable growths of the GNP and agricultural production (T.C Liu and K.C. Yeh, ‘The Economy of the Chinese Mainland’, Princeton, Princeton University Press, 1965, p. 88). This was corroborated by countless bourgeois sources. It is well-accepted by bourgeois experts and scholars in general. Needless to say, Marxists do not need corroboration from bourgeois and imperialist ideologists in order to gain confidence in the correctness of the main laws of Marxist-Leninist political economy in general and the leading role of heavy industry in particular. As matter of fact bourgeois economists reduce themselves to quantitative analysis accompanied by random political statements as to what in their opinion could have motivated this or that economic policy. Their approach is purely phenomenological, as they do not understand the essence of Marxist political economy. However, even such a superficial approach to the analysis of economic phenomena cannot escape the most glaring economic benefits that the Marxist-Leninist policies of industrialisation can bring in such a brief period of time as a five-year plan.

The liquidation of the economic principles upon which the first Five-Year Plan was conceived and executed is a complex matter and it was not a straightforward process. It is not within the scope of the present article to evaluate the different stages that the economic reforms that followed the first Five-Year Plan should be divided into. As mentioned above, the first Five-Year Plan was not homogeneously executed and was ‘corrected’ towards the end in the light of the economic discussions within the Chinese leadership. It is equally complex to evaluate the rationale of the economic reforms of the Great Leap Forward. Therefore, to simplify the analysis of the Shanghai text-book we have concentrated on its central features and their similarities with the right-wing revisionist economic discipline created by their counterparts in the post-Stalin Soviet Union, rather than focusing on the intricacies of the evolution of the thinking of Chinese economists.

The economic policies of the Great Leap Forward were not necessarily aimed at liquidating the leading role of heavy industry, or at least in its most external expression. What is clear to us and hopefully is uncontroversial at this point is that the policies of the Great Leap Forward were accompanied by an adamant effort to decentralise the management of the economy in favour of local and regional authorities and in detriment to central planning, so crucial for a conscious and sustained policy of support for heavy industry. The economic policies of the Great Leap Forward were short-lived and were followed by a number of countermeasures, which lead, among many other things, to the liquidation of the determining role of heavy industry and the consolidation and development of the principles of ‘marketism’.

The dynamics of the flow of labour among sectors of the national economy suffered a qualitative change after 1960 in order to accommodate the economic postulates which were summarised later in the Shanghai text-book. Indeed, the rapid qualitative change in the composition of the national economy was brought to a halt after 1959-1960. According to official Chinese statistics, the ratio of the relative weight of industry to that of agriculture increased from a factor of 0.89 in 1953 to 1.3 in 1957, displaying a qualitative change in the structure of the economy (see Table I). The first Five-Year Plan was followed by the policies of the Great Leap Forward, during which large masses of peasants were mobilised to participate in industry. Between 1957 and 1960 the ratio of the relative weight of industry to that of agriculture increased to a factor of 3.6, as a result of an abrupt increase of industrial output and a decrease of 20% of the output value of agricultural production. The policies of the Great Leap Forward came to an equally abrupt end in 1961. By 1962 the relative weight of industry to that of agriculture had dropped to a factor of 1.6. As a result of the new policies, which finally liquidated the application of the Marxist-Leninist principle of the preponderance of the development of heavy industry over other sectors of the economy, between 1962 and 1965 the ratio of the output value of industry to agriculture increased very slowly, from 1.6 to 1.68 (from ‘Brief History of the Socialist Economy of China’, Beijing 1984).

The essence of the economic reforms that followed the Great Leap Forward is clear to us as far as the development of industry is concerned. With the excuse of ‘re-adjusting’ the economic disproportions created by the abrupt redirection of resources to industry, the economic reforms of the early 1960s concentrated on reversing these tendencies. The development of industry was slowed and the ratio of the weight of heavy industry to that of light industry was improved’ in order to reflect a more ‘harmonious’ system of relationships between economic sectors:

‘…The proportional relation between industry and agriculture and between light industry and heavy industry improved. In 1962 the gross output value of agricultural production reached 43.000 million yuan, an increase of 6.2% with respect to the previous year, and that of industrial production 85.000 yuan, a decrease of 16.6% with respect to the preceding year; the ratio of the value of industrial to agricultural production was 4:1 in 1960 and 2.1 in 1962. In the industrial production, the value of production of light industry was 39.500 million yuan, a decrease of 8.4% with respect to 1961, and that of heavy industry 45.5000 million yuan, a drop of 22.6%; and its relative weight went from 42.5:57.5 in 1961 to 47.2:52.8 in 1962’ (‘Brief History of the Socialist Economy of China’, Beijing 1984, p. 300).

Following the ‘re-adjustment’ of the policies of the Great Leap Forward, the economic reforms of the early 1960s liquidated altogether the socialist principle of preponderance of heavy industry. Instead, a new system of proportions and absolute and relative growths emerged, more characteristic of what one observes in the capitalist mode of production. Table III shows the change of the ratio (or relative weight) of the gross output value of light and heavy industries to the total gross output value of industry for the period of 1949-1975 (‘Brief History of the Socialist Economy of China’, Beijing 1984, from Table 1, p. 481). The fourth column shows the change of the ratio of the relative weight of heavy to light industry (or the ratio of the gross output value of heavy to light industry). This statistics are indeed revealing: the growth of the ratio of the relative weights of heavy industry to that of light industry between 1952 and 1957 (from 0.55 to 0.82, or an increase of a factor of 1.5) is similar to the period between 1957 and 1975 (form 0.82 to 1.27 or an increase of a factor of 1.55). In other words, in the 5 year period between 1952 and 1957, a similar relative growth of heavy industry was achieved as in the following 18 years! It is interesting to observe that the ratio of the relative weights of heavy industry t that of light industry remained flat during the years following the Mao’s death. It is relevant to note that this feature is specific to this period in question. The liquidation of the socialist principle of preponderance of heavy industry does not necessarily lead in the economic practice to freezing or even decreasing of the ratio discussed above. As a matter of fact, in developed capitalist countries this ratio increases as a function of time, although at rates lower than those typical to socialism (such as those observed in the Soviet Union, the People’s Democracies and the Chinese First Five-Year Plan)

Table III

Relative Weight of Light and Heavy Industries



Year Light Industry (%) Heavy Industry (%) Ratio 1949 73.6 26.4 0.36 1952 64.5 35.5 0.55 1953 62.7 37.3 0.59 1957 55.0 45.0 0.82 1962 47.2 52.8 1.12 1965 51.6 48.4 0.94 1970 46.2 53.8 1.17 1975 44.0 56.0 1.27 1980 47.2 52.8 1.12 1984 47.4 52.6 1.11

Role of Commodity-Money Relations

In the present section we evaluate the role of commodity-money relations in the system advocated by the authors of the Shanghai text-book. It is convenient to note that the postulates put forward by the authors with regards to commodity-money relations differ little in essence from those advocated by revisionist economists in the post-Stalin period. We observe a number of formal differences with respect to the party line defined by their counterparts in the Soviet Union, but these, regardless of what many would claim, do not alter the true ‘marketist’ essence of their postulates. This is the case for other aspects of the political economy of the transitional society presented in the text-book as well.

It is relevant to note that the treatment of commodity-money relations by the authors is more a by-product of other more fundamental postulates and it is clearly tied to strong pre-Marxist elements so characteristic of the Shanghai text-book. Their ‘marketism’ is a result of more basic considerations and adds little to the history of the question if looked from the historical perspective of the formation of Marxist thought and the struggle against right-wing deviations. Let us start the discussion with one of the most important conclusions drawn in the text-book.

‘The unfolding of socialist cooperation requires an extension of the communist work style, a firm adherence to socialist principles, a voluntary observance of fiscal policies, and the resolute implementation of various proletarian economic policies. Therefore, in the cooperative relations between the state enterprises and the collective enterprises, among state enterprises, among collective enterprises, among sectors and among regions, the principle of equivalent exchange must be observed, and fair pricing enforced’ (ibid, p. 297, our emphasis).

The sentence emphasised represents nothing more than the well-known law of value, or law of equivalent exchanges. The statement is explicit: the law of value regulates the exchange of labour among production objects in the transitional society, whether among state-owned and collective-owned enterprises, or among state-owned enterprises. This is not an isolated expression in the text-book of the most pure and elementary ‘marketism’ advocated by Dühring and all right-wing revisionists deviations after him. This statement is fundamentally pre-Marxist and constitutes one of the most important cornerstones of the petty-bourgeois interpretation of the political economy of the transitional society.

The citation which we bring to the readers’ attention is not an isolated blunder but a well-defined characteristic of the Shanghai text-book and it is consistent with the economic system advocated by them. The authors equate the ‘cooperative style of communism’ to the application of the principle of equivalent exchange. This applies to all sectors of the economy.

‘The exchange of manpower, material resources, and funds among enterprises must therefore be inspired by the cooperative style of communism and follow the principle of equivalent exchange’ (ibid, p. 404).

The economic history of the construction of socialism and the generalisation of vast economic data indicate that the law of equivalent exchanges is not the leading criterion and regulator of the portions of labour among production units. As a matter of fact, the law of value may be systematically violated in entire sectors of the economy if the tasks of the construction of the new economy demand it. The law of equivalent exchanges may be observed depending on the concrete-historical conditions, the policies of the proletarian state at a given time, and the tasks of the socialist construction, but it does not constitute a general law, a general principle of either the transitional or socialist or communist economies. For instance, the cooperation between the state and collective sector is bound to violate the law of equivalent exchanges at some stage; otherwise the mechanisation of the countryside would not be possible. While the state retains the property of the main means of production (tractors for instance), the collective farms enjoy their use. In exchange, a certain fraction of agricultural production is allocated by the collective farm to the state in a way that does not necessarily comply with the law of equivalent exchanges and conforms to an exchange of a different type. The same applies to the development of heavy industry or other sectors of the economy, which may not necessarily be profitable or even productive at all, and yet are indispensable to ensure extended socialist reproduction. The fact that the law of value is not the regulator of proportions of labour in the transitional and socialist economies is a very well-established fact and it is not within the scope of the present discussion to cover the different aspects of this fascinating question, as it has been covered elsewhere in the Marxist-Leninist literature. We have every reason to believe (although we do not have direct evidence) that Chinese economists were acquainted with the Soviet economic literature of the first half of the 1950s since this type of statement openly contradicts the spirit of the first five-year plan.

To proclaim that the principle of equivalent exchange is a general principle for the transitional economy is an expression of pre-Marxist thought so brilliantly exposed by Engels in Anti-Duhring:

‘The ‘exchange of labour for labour on the principle of equal valuation’, in so far as it has any meaning, that is to say, the mutual exchangeability of products of equal social labour, hence the law of value, is the fundamental law precisely of commodity production, and hence also of its highest form, capitalist production. It asserts itself in present-day society in the only way in which economic laws can assert themselves in a society of private producers, as a blindly operating law of nature which is inherent in things and relations, which is independent of the will or actions of the producers.’ (F. Engels, Anti-Dühring, Foreign Language Press, Peking 1976, p. 406.)

The statement proposed by the authors is meant to be universal under socialism and applies, in particular, to state enterprises. It represents one of the most explicit statements throughout the political economy text-book that their authors advocate nothing more and nothing less than a programme for the construction of ‘market socialism’, in probably one of its most naïve expressions. In this respect the authors of the political economy text-book conceive economic relations under socialism in a way similar to Dühring, and Engels’ critique applies equally well to them as it did to Dühring. Needless to say, the ‘marketist’ stand of Bogdanov-Bukharin-Rykov and their heirs in the post-war period, Voznesenski being the most prominent of them, conceived the nature of the exchange of labour in the transitional society and socialism in a very similar way. They differ little from Dühring in this respect. Revisionist economists of the post-Stalin era take up this tradition, although they make significant efforts to ‘substantiate’ it in more elaborate and academic terms.

It goes without saying and it is most unfortunate that such anti-Marxist formulations are accompanied by seemingly revolutionary statements, which are aimed at nothing other than confusing the reader. To state that socialist cooperation requires an extension of the communist work style while at the same time appealing to the law of value is either an empty phrase or a glaring contradiction. It seems contradictory to us that the principle of equivalent exchange, understood as a general law in socialism, is consistent with socialist cooperation, socialist principles and communist work-style. It makes little or no sense to proclaim either strict or relaxed ‘adherence to socialist principles’ or ‘resolute implementation of various proletarian economic policies’ if the basics of the economic relations are generally determined by the law of value. It represents the well-known doctrine of ‘revolution in command’, which has nothing to do with Marxist-Leninist political economy, and whose anti-Marxist character will be elaborated in somewhat more detail in the last section.

In the meantime let us elaborate a bit more on the line of thought followed by the authors in order to arrive at this openly revisionist conclusion. This is interesting for understanding the internal structure of the revisionist deviation that is specific to what is commonly known as Maoism. The Shanghai text-book initiates the discussion by formally agreeing to the Marxist-Leninist formulation of the source of commodity-money relations under socialism. The text-book accepts the fact that commodity production under socialism is due to the existence of two forms of property:

‘In the state economy, products are transferred from one state enterprise to another state enterprise … The product is still owned by the socialist state, and there has not been no transfer of ownership rights. Furthermore, product transfers among enterprises are usually allocated and delivered according to state plans rather than taking place through the market. Therefore, this type of product transfer is basically not commodity exchange. It already possesses many characteristics of the communist distribution of products’. (ibid, p. 314.)

This is a very well-known statement formulated in Stalin’s Economic Problems, which was a document that, unlike in the post-Stalin Soviet Union, was allowed to circulate and was not censored. Moreover, Stalin’s works were referred to in official documents and discussions for a number of years, at least until the end of the Cultural Revolution. It is important to remind the reader that this statement had become widely accepted by economists in the 1950s throughout the whole socialist and progressive-minded world, and in this sense it is not surprising to appreciate ‘remnants’ of the ‘old thought’. This point will be elaborated further below. Nevertheless, as we hope to clarify in this section, this type of assertion holds a purely formal character and uncovers a serious deviation from the spirit of Economic Problems.

Despite formally accepting this Marxist-Leninist statement, the text-book authors run into a terrible contradiction. Such a seemingly correct assertion is made under the assumption that the products in the transitional economy, including that of the collective farms, embody direct social production. While considering all production under socialism as being directly social, the authors of the text-book advocate the need to preserve commodity production because of the existence of two forms of property:

‘Socialist direct social production is conducted on the basis of these two forms of socialist ownership [state and collective – our note]. Products are owned respectively by the socialist state and various enterprises under the collective ownership system. This determines that direct social production under socialism cannot eliminate commodity production and exchange’ (ibid, p. 313, our emphasis).

The anti-Marxist idea that the production of collective farms, i.e. of vast non-socialised sectors of the economy, is a manifestation of directly social production is further substantiated by the authors, who argue that the restrictions under which the collective farms are placed subvert the private nature of their production to the extent that their labour becomes directly social.

‘Seen as a whole, the production of the state economy and the collective economy based on socialist public ownership is organised according to plans throughout the whole country. It is conducted to directly meet the needs of society, namely, to directly meet the needs of the proletariat and the whole labouring people. This kind of production has lost the nature of private production. Looked at from its basic aspect, it has become direct social production. Labour products are also socially useful from the start, and therefore are no longer private products but they are direct social products’ (ibid, p. 312).

To argue that a product is useful hence is directly social is a type of argumentation that was followed by Bukharin and was bluntly exposed by Lenin as anti-Marxist. As a matter of fact products in capitalist economy also meet social needs, but that does not make them directly social. To openly state that collective production is a form of directly social labour is a peculiar contribution to the history of the economic thought of modern revisionism. The Soviet economists of the post-Stalin period were careful enough not to make such an openly anti-Marxist statement. Indeed, the ideologists of modern revisionism, in order to advocate the commodity character of products under socialism, assumed one way or the other that labour under socialism had not yet achieved the of directly social labour. Neither do Marxist-Leninists treat the labour of the collective farms as a form of directly social labour.

It is very important to note that the argumentation we use here is valid as long as the main means of production belong to the collective farms. This was the case of the Chinese people’s communes and the Soviet Kolkhoz in the post-Stalin period. This point will be touched upon in the Section on collectivisation. We would partially agree with the authors of the Shanghai text-book in their assessment of the character of the labour of the collective farms if the socialist State had preserved the property of the machine tractor stations, as a result of which a significant fraction of the labour exchanged between the collective farms and the state began to have elements of directly social labour. However, in this case the infamous law of equivalent exchange would not be observed, as the authors of the Shanghai text-book advocate. In addition, Chinese economic reality was such that the main means of production belonged to the communes and these acted as independent producers with respect to the State, despite what the authors of the text-book want the reader to believe.

The fact that the authors of the Shanghai text-book advocate the anti-Marxist and anti-scientific illusion that the labour of collective farms is directly social is probably not the most serious problem in their conception of commodity-money relations. What we find most absurd is that the authors advocate the need for commodity-money relations among two sectors of the economy which according to them display socially direct labour. This is a preposterous absurdity:

‘Since direct social production and direct distribution preclude any exchange of commodities, they also preclude the transformation of the products into commodities (at any rate within the community) and consequently into values as well’ (F. Engels, Anti-Dühring, Foreign Language Press, Peking 1976, p. 401).

It is impossible within Marxist economic thinking to conceive of commodity-money relations as a form of economic bond among producers who display directly social production. It is equally hard to imagine the need for the existence of two forms of property in an economy that has reached the level of the socialisation of labour that the authors of the Shanghai text-book claim it has. However, in order to sound revolutionary and to formally dissociate themselves from the mainstream revisionism of that time, the authors of the Shanghai text-book argue that existence of commodity-money relations is dictated by the existence of two forms of property. One contradiction is followed by another contradiction. The train of thought followed by the authors of the Shanghai text-book lacks self-consistency.

The absurdity of the contradiction into which the authors fall is reiterated in the text-book. The authors, despite starting with seemingly Marxist-Leninist assertions with regard to the role of commodity-money relations, basically come to the same conclusions as their counterparts in the Soviet Union, that the law of value regulates the flux of labour in the transitional and socialist economies.

Efforts are made by the authors of the Shanghai text-book to convince the reader that the operation of the law of value is restricted in China They treat the concept of allocation and the role of the law of value in this type of transactions in a formally correct manner.

‘… the exchange of important means of production must be allocated by the state strictly according to the plan rather than through market transactions… Here, the law of value no longer has any regulatory significance; it merely has a little influence. The law of value, however, does have a regulatory function in socialist commodity exchange’ (ibid, p. 417).

They formally agree with the concept of allocation of assets to state enterprises. However, such declarations are deceiving and are meant to confuse the reader. As a matter of fact, the authors contradict themselves in this respect and admit that, in the economic practice of China, state enterprises function as independent producers, which exchange commodities according to a plan. The extent of such an economic relation of allocation was restricted to a particular class of transactions, namely the bond between the state and state enterprises with regards to strategic means of production. The relative weight of such transactions fell as a result of the economic reforms that followed the Great Leap Forward, to the extent that they become more like exceptions to the rule, rather than typical of the transitional economy in China.

With regard to relations between state enterprises, the authors of the text-book explicitly admit that the bond between state enterprises does follow the law of equivalent exchange of values:

‘Meanwhile, with the present level of productivity, material conditions demand that the state enterprises maintain their relative independence of operation and management and that they trade with each other according to the principle of exchanges of equivalent value. Therefore, although the commodities exchanged among state enterprises are basically no longer commodities, they still possess certain commodity characteristics, and must be expressed in terms of price and purchased with money’ (ibid, p. 314).

This paragraph is indeed very interesting, as it well reflects the idiosyncrasy of what is commonly referred to as Maoism with regards to economic questions. While formally advocating formulations that had been adamantly rejected by the ideologists of Soviet modern revisionism, when it comes to addressing the role of the law of value in the transitional economy, the authors of the text-book reproduce well-known revisionist arguments in favour of the commodity character of the exchange between state enterprises. To argue that the underdevelopment of the forces of production in the concrete historical conditions of a backward agricultural country is an objective reason for the existence of commodity-money relations in the state sector in the transitional economy is a well-known right-wing revisionist statement. Revisionist literature both in the post-Stalin Soviet Union and elsewhere is plagued with such assertions, which in essence are meant to suppress the Marxist-Leninist formulation regarding the real cause for the existence of commodity-money relations in the transitional society (the existence of two main forms of property), which the authors of the text-book also explicitly advocate. It is evident to us that the authors of the text-book were aware of the ‘potentially’ revisionist character of such assertions. While adhering to them the authors are impelled to come up with some sort of statement which, on the surface, looks Marxist-Leninist but is fundamentally anti-Marxist.

In an attempt to resolve the contradictions discussed above the authors of the text-book resort to a rather interesting line of thought. It is evident to us that the authors have a particular view of the definition of a commodity. This definition fits very conveniently into an economic system which operates according to the principle of exchange of equivalents and which needs to be portrayed in a very different fashion. When covering the different types of labour exchange, the authors make it clear that they reduce their understanding of the concept of commodity to the exchange of ownership, which corresponds to a superficial understanding of Stalin’s assertions in ‘Economic Problems’:

‘Here, after an exchange, the ownership rights to the products have been transferred. Therefore, they still possess the basic features of general commodity exchange. This form of exchange should be called commodity exchange’ (ibid, p. 416).

Therefore, whenever the exchange takes places among objects of the socialised sector, then the authors mechanically declare that this type of exchange

‘… should be called product exchange to distinguish it from commodity exchange between owners’ (ibid, p. 416).

The differences between a commodity and a product are far more subtle that those indicated by the authors. However, it is convenient for the authors to reduce those differences to the transfer of ownership. Such a definition fits well into their scheme to keep a façade of revolutionary thought, but unfortunately it is plagued with obvious metaphysical elements that are used for the authors’ benefits. The authors turn one aspect of the definition of a commodity into the leading criterion to identify the concept of a commodity, while they de facto ignore the economic relation embodied by it. The contradictions discussed above are not resolved; they are simply hidden under the rug and their resolution is simply assumed or postulated within the context of a well-known ‘marketist’ scheme discussed above.

The essential features and requirements of the basic law of socialism might be formulated roughly in this way: the securing of the maximum satisfaction of the constantly rising material and cultural requirements of the whole of society through the continuous expansion and perfection of socialist production on the basis of higher techniques.’ (J.V. Stalin, Economic Problems of Socialism in the USSR, Peking, Foreign Language Press, 1972, pp. 40-41.)

This economic fact goes far beyond the power of the socialist state to predict or consciously coordinate the economic activity of economic units which exchange labour according the principle of equivalent values. The fact that this relationship is more or less predicted in the form of a plan by itself does not overcome the backwardness intrinsic to the market relationship. It is a false and anti-scientific illusion, common to all the right-wing revisionist deviations, to reconcile the concept of a socialist plan and the market relationship embedded in the principle of equivalent exchange of values. Using pseudo-Marxist phraseology, the ideologists of revisionism want to substantiate the idea of the subjugation of the market relationship to the socialist plan as the modus operandi for the transition to communism. As opposed to the Marxist-Leninist principle of the progressive liquidation of the market relationship embodied in the principle of equivalent exchange of values, modern revisionism as well as the authors of the Shanghai text-book maintain that such a form persists and even becomes further developed under socialism. History has flagrantly proven that such a scheme ultimately leads to the restoration of open forms of capitalist exploitation via more or less lengthy processes in which capitalist exploitation is concealed under certain forms inherited from a revolutionary past.

This illusory attempt to reconcile market and plan is in essence a pre-Marxist consideration that has been propagated by the ideologists of right-wing revisionism over and over again in the 20th century. The authors explicitly uphold this postulate and turn it into one of the most important pillars of the Shanghai text-book, which is portrayed by many as an innovation but which unfortunately has nothing original in it:

‘Ultimately, the subordination of the value-creation process to the labour process is for the purpose of creating an ever-increasing quantity of social wealth to satisfy the needs of the whole labouring people’ (ibid, p. 323).

The attempt by the authors to show that the value-creation process can be subordinated to the main law of socialist production in an economic system that operates according to the principle of exchange of equal values is performed within the context of the doctrine of ‘revolution in command’. The idealist and metaphysical approach to the place of politics in the economy plays a fundamental role for the authors to give reassurance about this illusory subordination. This will be elaborated further in the last section of the present article.

The authors of the Shanghai text-book are somewhat shy when it comes to openly acknowledging the commodity character of all products in the transitional economy, as their counterparts in the Soviet Union concluded towards the end of the 1950s. The universality of the commodity character of products in the Chinese economy is implied throughout the text and it is made almost explicit in quotes such as this:

‘The duality of socialist products is reflected in the duality of the production process for socialist products. As production for direct social products, it is a labour process which creates in a planned manner various use values to satisfy the needs of the proletariat and the whole labouring people. As commodity production, the labour of the producer not only creates various concrete use values but also exchange values. The socialist production process is a unity of this labour process and the value-creation process’ (ibid, p. 317, our emphasis).

From this follows nothing less and nothing more that the socialist product is a commodity, and therefore the socialist product harbours a dual character, following the duality of the nature of the commodity unveiled by Marx. In essence, the duality of the product under socialism is a result of the necessary duality of the commodity. The authors, without stating it openly, for fear of not sounding revolutionary, definitely come to the conclusion that the product under socialism is a commodity. In doing so, they still strive to pretend that their ‘marketism’ is not of the same kind as that shown by the Soviet revisionists. They exonerate themselves in a way that is very hard to reconcile with the very basics of Marxist political economy. Capitalist production is also a unity of labour process and value-creation process. According to the ideologists of right-wing revisionism¸ the main difference between the capitalist and socialist unity of use value and exchange value lies in the fact that in the latter the market is subjugated to the plan. In this regard the authors of the Shanghai text-book reinforce this revisionist thesis with the doctrine of the ‘revolution in command’. This doctrine is a tool in the hands of the authors to resolve the glaring contradiction involved in the assertion that ‘the socialist production process is a unity of labour process and the value-creation process’.

Revisionist political economy assumes that prices and value have to coincide, otherwise the interrelations among the branches of the economy and the equilibrium in the flux of labour is violated. The law of equivalent exchange is materialised through the fact that value and price should coincide. It is evident that the authors of the political economy text-book do indeed advocate that view. As a matter of fact, even when the authors admit to the possibility of a deviation of the price from value, they do it in a way that is perfectly consistent with the conception of ‘market socialism’:

‘Under the socialist system, because of different production conditions and supply-demand, the state plan prices may not always be identical with the value of products’ (ibid, p. 408).

The reasons why price and value do not necessarily coincide are significantly broader and bear far-reaching implications, which can only be understood within the context of the Marxist-Leninist definition of the main law of socialist production. The reason why price and value may not coincide under socialism is not determined by supply and demand, or even by the different production conditions. Such conclusions can only be drawn by those who think like capitalist and/or petty bourgeois producers and has nothing to do with the Marxist-Leninist political economy of socialism.

Gradualist Conception of Collectivisation

The topic of collectivisation in China is a rather intricate one. It is not within the scope of this section to cover the evolution of the views of the Chinese economists and the policies of collectivisation. This should be the subject of a separate work. In this section we concentrate on the gradualist conception of collectivisation, which in our opinion played a central role in the role of the people’s communes in the socialist transformation of the economy and differ fundamentally from the Marxist-Leninist conception of collectivisation. We consider these features within the framework of the overall view of the economic transformation summarised by the authors of the Shanghai text-book. It is our view that the basic features of the authors’ conception of collectivisation are consistent with other crucial elements of their economic views, which we regard as anti-Marxist. Overall, the path of collectivisation summarised by the authors is in essence not socialist and is based on a number of assumptions common to well-known right-wing theories that we will to refer to in the present article under the generic term of gradualism.

It is most relevant to bear in mind that in this section we do not touch upon the actual process of formation of the people’s communes and its internal class structure. In order to avoid confusion, we ask the reader associate the term collectivisation as referred to in this section to the process of elevation of the people’s communes to the level of social property unless it is explicitly specified that the two are different processes. On the other hand, it is our view that the Chinese people’s communes represent an incipient aggregation of peasant on the basis of simple cooperation. From this point of view, the people’s communes, as they emerged after the Great Leap Forward, represent a lower form of collectivisation with respect to that achieved in the Soviet Union during the 30’s (i.e. on the basis of mechanisation of labour while the main means of production remain in the hands of the socialist state). Therefore, when we refer to the process of elevation of the people’s communes to the level socialised production we do not want to imply that the tasks of collectivisation were completed by the Great Leap Forward. In a sense, we are putting ourselves in the authors’ shoes, who assume that the tasks of collectivisation were in fact completed and think about the question of the elevation of the collective property from that perspective.

Before jumping into the authors’ views on collectivisation it is most relevant to clarify what we mean by the concept of gradualism from the point of view of the Marxist-Leninist critique of right-wing political economy. Gradualism represents one of the most prominent tenets of the theory of right-wing revisionism with regard to the transformation of the collective ownership into full-fledged socialist ownership. Gradualism can be best defined as following: A belief that the process of elevation of collective ownership to the level of social ownership will occur by means of the development of the forces of production in the countryside on the basis of commodity-exchange and collective ownership of the main means of production. According to the conception of gradualism, the collective farms exchange values with other collective farms, the state and consumers according to the law of value, as they own all the agricultural production. The conception of gradualism rests upon the concept of economic independence (commonly known in China as self-reliance) and the assumption that the basic difference between state-owned and collective enterprises reduces itself to the degree of concentration of forces of production. The conception of economic independence of the productive unit was implemented differently by the revisionists depending of the country and the stage of development and it applied to both state and collective enterprises. In general¸ the concept of economic independence applied almost equally to state-owned and collective enterprises, as a result of which they were considered on a similar footing by the planning organs. Following this line of thought it is natural to argue that the main means of production should belong to the collective farms. Therefore, the dogma that the collective farms should retain the ownership of the main means of production is intrinsic to the right-wing theories of ‘market socialism’ and should be considered within this context as a manifestation of self-consistency within that system.

Gradual transformation of the countryside is not necessarily connected to the speed of the transformation. As a matter of fact, the process of creation of the communes during the years of the Great Leap Forward was a rather swift process which, strictly speaking, is to be considered within the gradualist conception of collectivisation. Many bourgeois and petty-bourgeois authors who discuss the economic history of China analyse the economic reforms of the Great Leap Forward in the countryside by concentrating on the speed and the role of ideological elements characteristic of that process. They hardly see any differences between the conception of collectivisation before and after the Great Leap Forward other than these two issues, whereas a Marxist analysis uncovers major qualitative differences.

It is particularly instructive and useful to the discussion to remind the reader of Bukharin’s views on collectivisation. Bukharin’s objection to the party’s general line on collectivisation is probably the most representative example of right-wing revisionist thinking on these questions. Modern theories of right-wing revisionism ultimately relate to Bukharin’s critique.

‘One point of view sees economic forms and market relations, but sees no classes; another, sees classes, but does not see the market relations, econo