Capitalist and Maoist Economic Development

By John G. Gurley

First published in the Bulletin of Concerned Asian Scholars, Vol. 2, 1970

While capitalist and Maoist processes of economic development have several elements in common, the differences between the two approaches are never theless many and profound. It is certainly not evident that one approach or the other is always superior, in regard either to means or to ends. What is evident, however, is that most studies by American economists of Chinese economic development are based on the assumption of capitalist superiority, and so China has been dealt with as though it were simply an underdeveloped United States — an economy that "should" develop along capitalist lines and that "should" forget all that damn foolishness about Marxism,

Mao's thought, Great Leaps, and Cultural Revolutions and just get on with the job of investing the savings efficiently. This almost complete and unthinking acceptance by American economists of the, view that there is no development like capitalist development has resulted in studies of China that lack insight and are generally unsatisfactory. Later on, I shall briefly examine some of these weaknesses and then suggest the types of economic studies that might be under taken if China's development efforts are to be given serious intellectual consideration. The main portion of this paper, however, is a comparison of capitalist and Maoist development processes.

I. Some Common Elements

There is a core of economic development theory concerned with ways of increasing a country's national product that would probably be accepted by both the capitalist and Maoist sides. This common core starts by recognizing that national output consists of goods and services that are consumed (consumption) and goods that are• accumulated (investment). The consumption of national output may be done by individuals, business firms, and governments; and the consumption items are generally food, clothing, housing services, household operation, and such things., The accumulation of national output — real investment or capital formation — is added to the country's capital stock, to its houses and business structures, its tools and machinery, its highways, its inventories and livestock, and its military equipment. Such capital formation may be undertaken by either the private or public sectors of the economy.

Current investment yields the plant and equipment and other capital goods that can be used to produce larger amounts of output in subsequent years. That is, as the capital stock builds up, a country becomes increasingly capable of enlarging the production of its goods and services. On the other hand, if national output is almost totally consumed year after year, the productive capabilities of the nation will remain depressed; consumption will continue to eat up output that might have taken the form of productive machinery, tools, and similar things.

The output capabilities of a nation, however, depend on more than the size : of its capital stock. They also are affected by the size of the labor force and by the amount of available land and natural resources. A nation's capacity to produce, in other words, depends on the amount of "inputs" it has — on its capital stock, labor supply, and land. An increase in any of these factors of production will generally raise a country's output' potential.

Since the amount of land is more or less fixed, the variable inputs are capital and labor." Inasmuch as output will generally grow with an increase of either, it would seem to be unimportant which one is emphasized. However, the growth of output is generally not considered as important an economic goal as is the growth of output per capita -that is, total output divided by the population. While an increase in population will eventually enlarge the labor force and so lead to a growth of output, the percentage rise in output will generally be smaller than the percentage increase in population. Consequently, if a nation depended solely on population gains to raise its output, it would find its output per capita declining over time, as an increasing number of workers applied themselves to the same amount of capital equipment, other capital items, and land. Total output would rise but at a diminishing rate, and so would fail to keep up with the growth of population.

Aside from some important considerations to be dealt with in a moment, an equal percentage increase in capital, labor, and land would bring about a rise in total output by the same percentage. Thus, suppose that each of the three factor inputs rose by 3 per cent in some year; then output would also rise by the same amount. Hence output per capita would in this case remain the same, provided that population grew by the same percentage as the labor force. It is clear, then, that in the absence of other considerations an increase in output per capita can be achieved only if the percenta~ e growth of the capital stock or of land outstrips that of the labor supply. Since, as I have said, it is usually "difficult to do very much about the stock of land, the growth of output per capita depends heavily on relatively large rates of investment — on the capital stock growing faster than the labor supply. This process is called "capital deepening" because it leads to the availability of more capital per worker; and so to more output per worker.

However, output per capita may be raised not only by capital deepening but also by improvements in the quality of the capital stock or of the labor supply. Technical advances, achieved by inventions and innovations, will raise the quality of a given capital stock and so permit the labor supply to produce more. Capital need not grow in total amount, to raise output per capita, if it "grows" in quality.

The quality of the labor force can also be raised — by improvements in 4ealth, by job training programs, by more formal education, and by better living conditions in general. The same number of workers can produce more, even with the same capital goods, if their quality is improved — if there has been investment in the nation's human capital. In addition, the growth of output per capita may come about because of improvements in organization and management techniques — better ways of combining the factors of production and more effective ways of inspiring the labor force to greater efforts. Finally, even in the absence of increases in the quality of inputs, and even though each .input grows by an equal percentage, output per capita may still rise owing to economies of scale — to inputs becoming more productive when" they are combined in larger and larger amounts.

Thus, if an economy wishes to increase its output per capita, the most promising avenues to success are large investment programs to build up the capital stock rapidly, expenditures for research and development for the purpose of stimulating fast technological advances, investment in human capital by way of health, education, and in-training programs, and efforts to improve organization and management methods. These expansionary policies may then call forth economies of scale and hence additional gains in output.

II. Capitalist Economic Development

Within the above framework, the theory of capitalism, as originally developed by Adam Smith almost 200 years holds that an economy can develop most rapidly if each and every person, whether he is an entre preneur, a worker, or a consumer, pur'sues his own self-interest on competitive markets, without undue interference from government. Progress is best promoted, not by government, but by entrepreneurs owning the material means of production, whose activities, guided by the profit motive, reflect consumers' demands for the various goods and services. Labor productivity is enhanced by material incentives and the division of labor (specialization); economic progress is made within an environment of law and order, harmony of interests, and stability.

The goal of economic development, according to capitalist theory, can best be attained by the above means, and the goal itself can best be measured by the national output. There is a heavy emphasis in capitalist development, as there now is throughout most of the world, on raising the level of national outp ut, on producing "things" in ever-increasing amounts. l Implicit in discussions of this goal is the view that man is mainly an input, a factor of production, a means to an end. The end is usually not the development of human beings but the development of output. 2

The practice of capitalism has not, of course, met the ideal specification of it, and the practice itself has changed markedly over time. In practice, many markets have been more monopolistic than competitive, government has interfered in numerous and extensive ways in competitive market processes in pursuit of greater equity in income distribution, higher employment of labor, and better allocation of economic resources. Capitalism of the individualist, competitive type has given way in many parts of the industrial capitalist world to a state welfare capitalism, in which government plays a larger role and private entrepreneurs and consumers somewhat smaller ones than envisaged by Adam Smith and his disciples. Despite these departures from the ideal model of capitalism, I think it is fair to say that the main driving force of the capitalist system remains private entrepreneurs who own the means of production, and that competition among them is still widespread.

There is no doubt that capitalist development, whatever importance its departures from the Smithian model have had, has been highly successful in raising living standards for large numbers of people. It has been relatively efficient in using factors of production in ways best designed to maximize the output that consumers by and large have demanded. And it has encouraged new ways of doing things — innovative activity and technological advances.

At the same time, however, capitalist development has almost always been uneven in several crucial ways — in its alternating periods of boom and bust; in enriching some people thousands of times more than others; in developing production facilities with much more care than it has devoted to the welfare of human beings and their environment; in fostering lopsided development, both in terms of geographical location within the country and, especially in lowincome countries, in terms of a narrow range of outputs, such as in one or two crop economies. The lopsided character of capitalist development has been evident historically in those nations that today hav~ advanced industrial economies, but it is especially evident at the present time in the underdeveloped countries (with their mixture of feudal and capitalist features) that are tied in to the international capitalist system -that is, those countries that, by being receptive to free enterprise and foreign capital, regardless of whether they are also receptive to freedom, are in the "Free World."

Most of these poor countries are either making no progress at all or they are developing in lopsided ways, within the international capitalist system, as satellites to the advanced capitalist countries. There is a sharp division of labor within this system, by which the underdeveloped regions supply raw materials, agricultural products, minerals, and oil to the rich capitalist countries, and receive in return manufactured and processed goods as well as basi c food items. Each of these poor coun tries is closely linked to a metropolitan region, and much more trade takes place between the underdeveloped and the advanced capitalist countries than among the underdeveloped countries themselves~ The consequence is that transportation is poor across South America, that it is difficult to go from one part of Afri ca to another, but that, nevertheless, good highways or railroads lead from mines, from banana and coffee plantations, from oil fields to the seaports for shipment to the rich capitalist countries.

The economic development of these poor capitalist countries is lopsided in many other ways, too. A few ci ties in each of these countries, with their airports, hotels, nightclubs, and light industries, are often built up to the point where they resemble the most modern metropolises in advanced industrial countries — but the rural areas, comprising most of the country and containing most of the people, are largely untouched by modernization. In most of these countries, industry, culture, entertainment, education, and wealth are highly concentrated in urban centers. A traveller to most of the poor "Free World" countries, by flying to the main cities, can land in the middle of the 20th century, but by going 30 miles from there in any direction he will be back in the middle ages. Education is usually for the elite and stresses the superiority of the educated over the uneducated, the superiority of urban over rural life, of mental work over manual labor. The burden of economic development, which is essentially a restraint on consumption, is shared most inequitably among the people; the differences between rich and poor are staggering, because they are nothing less than the differences between unbelievable luxury and just plain starvation.

While some of these characteristics are not peculiar to the poor countries tied in to the international capitalist system — they can be found in the S9yiet socialist bloc, too — and while. some'. are related more to feudalism than to capitalism, much of the lopsided development nevertheless is intimately connected with the profit motive. The key link I between the two is the fact that it is almost always most profitable, from a private business point of view, to build ~ on the best. Thus, a businessman locates a new factory in an urban center by existing ones, rather than out in the hinterlands, in order to gain access to , supplies, a skilled labor force, and high-income consumers; to maximize profits, he hires the best, most qualified workers; a banker extends loans to those who are already successful; an educational system devotes its best efforts to the superior students, and universities, imbued with the private-business ethic of "efficiency," offer education to those best prepared, most able; promoters locate cultural centers amidst urbanites' best able to appreciate and pay for them; the most profitable business firms attract the best workers and have easiest access to loanable funds; satellite capitalist countries, in the interests of efficiency and comparative advantage, are induced to specialize in cocoa or peanuts or coffee — to build on what they have always done best.

This pursuit of efficiency and private profits through building on the best has led in some areas to impressive aggregate growth rates, but almost everywhere in the international capitalist world it has favored only a relatively few at the expense of the many, and, in poor capitalist countries, it has left most in stagnant backwaters. Capitalist development, even when most successful, is always a trickle-down development.

III. Maoist Economic Development

The Maoists' disagreement with the. capitalist view of economic development is profound. Their emphases, values, and aspirations are quite different from t those of capitalist economists. To , begin with, Maoist economic development 1 occurs within the context of central planning, public ownership of industries, . and agricultural cooperatives or connnunes. While decision-m akirtg is decentralized to some extent, decisions regarding investment vs. consumption, foreign trade, allocation of material inputs and some labor supply, prices of goods and factors — these and more are essentially in the hands of the State. The profit motive is officially discouraged from assuming an important role in the allocation of resources, and material incentives, while still prevalent, are downgraded.

But perhaps the mest striking difference between the capitalist and Maoist views is in regard to goals. Maoists believe that, while a principal aim of nations should be to raise the level of material welfare of the population, this should be done only within the context of the development of human beings and of encouraging them to realize fully their manifold creative powers. And it should be done only on an egalitarian basis — that is, on the basis that development is not worth much unless everyone rises together; no one is to be left behind — either economically or culturally. Indeed, Maoists believe that rapid economic development 'is not likely to occur unless everyone rises together. Development as a trickle-down process is therefore rejected by Maoists, and so they reject any strong emphasis on profit motives and efficiency criteria that lead to lopsided growth., Their emphasis, in short, is on man rather than on "things."

A. Emphasis on Man

In Maoist eyes, economic development can best be attained by giving prominence to man. "In building up the ... country, we — unlike the modern revisionists who one-sidedly stress the material factor, mechanization and modernization — pay chief attention to the revolutionization of man's thinking and through this command guide and promote the work of mechanization and modernization. ,,4 The Maoists' stress on this point most sharply distinguishes their thinking on the subject of economic development from that of capitalist economists. For Maoists, correct ideas can be transformed into a tremendous material force to push socialist construction to ever-higher levels. "Once Mao Tse-tung's thought is grasped by the broad masses, it will become an inexhaustible source of strength and an infinitely powerful spiritual atom bomb."S If, on the other hand, one concentrates on machinery, techniques, and things, economic deveiopment will proceed at a snail's pace. There can be ~ig leaps forward only by putting man at the center, and so releasing his huge reservoir of energy, creativity, and wisdom, which up to now have been submerged by bourgeois society and by the ideas and behavior patterns it generates.

Capitalist economists have recentJy stressed the importance for economic growth of "investment in human capital" -that is, investment ip "general education, job training, and better health. It has been claimed that expenditures in these directions have had a large "payoff" in terms of output growth. The Maoists' emphasis, however, is quite different. First of all, while they recognize the key role played by education and health in the production process, their emphasis is heavily on the transformation of ideas, the making of the Communist man. Ideology, of course, may be considered as part of education in the broadest sense, but it is surely not the part that capitalist economists have in mind when they evaluate education's contribution to economic growth. Moreover, ideological training does not include the acquisition of particular skills, or the training of specialists — as education and job training in capitalist countries tend to do. The Maoists believe that economic development can best be promoted by breaking down specialization, by dismantling bureaucracies, and by undermining the other centralizing and divisive tendencies that give rise to experts, technicians , authorities, and bureaucrats remote from or manipulating "the masses." Finally, Maoists seem perfectly willing to pursue the goal of transforming man even though it is temporarily6 at the expense of some economic growth. Indeed, it is clear that Maoists will not accept economic development, however rapid, if it is based on the capitalist principles of sharp division of labor and sharp (unsavory, selfish) practices.

B. The Making of Communist Man

The proletarian world view,7 which Maoists believe must replace that of the bourgeoisie, stresses that only through struggle can progress be made; that selflessness and unity of purpose will release a huge reservoir of enthu, siasm, energy, and creativeness; that active participation by "the ma sses" in decision-making will provide them with the knowledge to channel their energy most productively; and that the elimination of specialization will not only increase workers' and pe~sants' willingness to work hard for the various goals of society but will also increase their ability to do this by adding to their knowledge and awareness of the world around them.

Struggle — It is an essential part of Maoist thinking that progress is not made by peace and quietude, by letting things drift and playing things safe, or by standing for "unprincipled peace, thus giving rise to a decadent, philistine attitude ••• "8 Progress is made through struggle, when new talents emerge and knowledge advances in leaps. Only through continuous struggle is the level of consciousness of people raised, and in the process they gain not only under standing but happiness.

Mao sees man engaged in a fierce class struggle — the bourgeoisie against the proletariat — the outcome of which, at least in th~ short run, is far from certain. The proletarian world outlook can win only if it enters tremendous ideological, class struggles.

In China, although in the main socialist transformation has been completed with respect to the system of ownership, and although the largescale and turbulent class struggles of the masses characteristic of the previous revolutionary periods have in the main come to an end, there are still remnants of the overthrown landlord and comprador classes, there is ..s~Ul ~'. bourge.0~isie, and the remoulding of the petty bourgeoisie has only just started. The class struggle is by no means over. The class struggle between the proletariat and the bourgeoisie, the class struggle between the different political forces, and the class struggle in the ideological field between the proletariat and the bourgeoisie will continue to be long and tortuous and at times will even become very acute. The proletariat seeks to transform the world according to its own world outlook, and so does the bourgeoisie~ In this respect, .the question of which will win out, socialism or capitalism, is still not really settled. 9

Selflessness — Maoists believe that each person should be devoted to "the masses" rather than to his own pots and pans, and should serve the world proletariat rather than reaching out with "gra~ping hands everywhere to seek fame,material gain, power, position and limelight. "10 They think that, if a person is selfish, he will resist criticisms and suggestions and is likely to become bureaucratic and elitist. He will not work as hard for narrow, selfish goals as he will for group, community, or national goals. In any case, a selfish person is not an admirable person. Thus, Maoists deemphasize material incentives, for they are the very manifestation of a selfish, bourgeois society.

Active Participation — While selflessness is necessary to imbue man with energy and the willingness to work hard, this is not sufficient, for man must also have the ability as well. And such ability comes from active participation — from seeing and doing • As Mao has written in a famous essay:

If you want to know a certain thing or a certain class of things directly, you must personally participate in the practical struggle to change reality, to change that thing or class of things, for only thus can you come into contact with them as phenomena; only through personal participation in the practical struggle to change reality can you uncover the essence of that thing or class of things and comprehend them .•• If you want knowledge, you must take part in the practice of changing reality. If you want to know the taste of a pear, you must change the pear by eating it yourself •••. All genuine knowledge originates in direct experience ••. There is an old Chinese saying, "How can you catch tiger cubs without entering the tiger's lair?" This saying holds true for man's practice and it also holds true for the theory of knowledge. There can bi no knowledge apart from practice. 11

To gain knowledge, people must be awakened from their half slumber, encouraged to mobilize themselves and to take conscious action to elevate and liberate themselves. When they actively participate in decision-making, when they take an interest in State affairs, when they dare to do new things, when they become good at presenting facts and reasoning things out, when they criticize and test and experiment scientifically -having discarded myths and superstitions — when they are aroused — then "the socialist initiative latent in the masses [will] burst out with volcanic force and a rapid chanfe [will take] place in production." 12

I noted above that both attributes of selflessness and active participation were necessary for the making of the Communist man. For a selfish person, who has nevertheless become fully aware and knowledgeable through correctly combining theory and practice, will be given to sharp practices for his own ends and will become bureaucratic and divorced from the masses. A passive, unknowing person who has nevertheless become selfless, will be well-meaning but largely ineffective, for he will not be able to use his energies productively. In fact, it is likely that in the long run "selfless" and "active" cannot exist separately, only together. If one is not active, he will eventually revert to selfish behavior; if one is selfish, he will eventually become passive, bureaucratic, and unable to gain true knowledge. 13

Finally, if men become "selfless," there will be discipline and unity of will, for these "cannot be achieved if relations among comrades stem from selfish interests and personal likes and dislikes."14 If men become "active," then along with extensive democracy they will gain true consciousness and ultimately freedom, in the Marxian sense of intelligent action. lS Together, selflessness and active participation will achieve ideal combinations of opposites: "a vigorous and lively political situation ••• is taking shape throughout our country, in which there is both centralism and democracy, both discipline and freedom, both unitl of will and personal ease of mind. ,,16

It is :important to note the "discipline" and "unity of will." So far as the basic framework of Marxism- Leninism is concerned, Maoists believe that everyone should accept it, and they are quick to "work on" those who lag behind or step out of line. But, within this framework, the Maoists energetically and sincerely promote individual initiative, "reasoning things out and not depending on authorities or myths," "thinking for oneself," etc. Outside of this framework, an individual stands little chance; inside the framework, an individual is involved in a dynamic process of becoming "truly free,"in the sense of being fully aware of the world around him and an active decisionmaker in that world. Mao's thought is meant to lead to true freedom and to unity of will based on a proletarian viewpoint.

Non-Specialization. — For Marx, specialization and bureaucratization were the very antitheses of communism. Man could not be free or truly human until these manifestations of alienation were eliminated, allowing him to become an "all-round" communist man. 17 Maoists, too, have been intensely concerned with this goal, specifying it in terms of eliminating the distinction between town and countryside, mental and manual labor, and workers and peasants. The realization of the universal man is not automatically achieved by altering the forces of production, by the socialist revolution. Rather it can be achieved only after the most intense and unrelenting ideological efforts to raise the consciousness of the masses through the creative study and creative use of Mao's thought. Old ideas, customs, and habits hang on long after the material base of the economy has been radically changed, and it takes one mighty effort after another to wipe out this bourgeois superstructure and replace it with the proletarian world outlook. This trans~ formation of the "subjective world" will, then have a tremendous impact on the "objective world."

Intellectuals, party and administrative cadres, and other mental workers are prodded into taking part in physical labor — in factories and out in the fields. This will not only "encourage the initiative of the workers and. peasants in production and uproot the ingrained habit of bureaucracy, but even more important, it can ensure that leading cadres work among the people like ordinary laborers, and opens up a'way for the gradual integration of mental and manual work." Physical labor by intellectuals will eventually get rid of men whose "four limbs do not move and [who are] unable to distinguish the five grains."18

And laborers should become intellectuals.

“The characteristic feature of these efforts has been, and remains, a massive attack on the notion that . culture, science and technology are attributes of intellectuals … the widely propagated rallying cry is that the 'masses must make themselves masters of science and culture.' For example, the purpose of 'half-work and half-study' programs is proclaimed to be to develop 'red and ex pert socialist laborers who can grasp the principles of science and technology ... and who are both mental workers as well as people who can go to factories and fields to engage in industrial and agricultural production,' thus refuting the notions of bourgeois intellectuals who 'oppose mental labor to physical labor and who hold that physical labor is the task of workers and peasants while only they themselves can engage in mental labor. ,19

C. Maoist Ideology and Economic Development.

In many ways, then, Maoist ideology rejects the capitalist principle of building on the best, even though the principle cannot help but be followed to some extent in any effort at economic development. However, the Maoist departures from the principle are the important thing. While capitalism, in their view, strives one-sidedly for efficiency in producing goods, Maoism, while also seeking some high degree of efficiency, at the same time, in numerous ~Tays, builds on. "the worst." Experts are pushed aside in favor of decision-making by "the masses"; new industries are established in rural areas; the educational system favors the disadvantaged; expertise (and hence work proficiency in a narrow sense) is discouraged; new products are domestically produced rather than being imported "more efficiently"; the growth of cities as centers of industrial and cultural life is discouraged; steel, for a time, is made by "everyone" instead of by only the much more efficient steel industry.

Maoists build on the worst not, of course, because they take great delight in lowering economic efficiency, but rather to involve everyone in the development process, to pursue development without leaving a single person behind, to achieve a balanced growth rather thah a lopsided one. If Maoism were only that, we could simply state that, while Maoist development may be much more equitable than capitalist efforts, it is surely less efficient and thus less rapid; efficiency is being sacrificed to some extent for equity. But that would miss the more important aspects of Maoist ideology, which holds that the resources devoted to bringing everyone into the socialist development process — the effort spent on building on "the worst" - - will eventually payoff not only' in economic ways by enormously raising labor productivity but, more important, by creating a society of truly free men, who respond intelligently to the world around them, and who are happy.20

IV. U.S. Studies of Chinese Economic Development

The sharp contrast between the economic development views of capitalist economists and those of the Chinese Communists cannot be denied; their two worlds are quite different. The difference is not mainly between being Chinese and being American, although that is surely part of it, but rather between being Maoists in a MarxistLeninist tradition and being present-day followers of the economics first fashioned by Adam Smith and later reformed by J.M. Keynes. Whatever the ignorance and misunderstanding on the Chinese side regarding the doctrines of capitalist economics, it is clear that many western economic experts on China have shown little interest in and almost no understanding of Maoist e.conomic development. Most of the economic researchers have approached China as though it was little more than a series of tables in a Yearbook which could be analyzed by western economic methods and judged by capitalist values. The result has been a series of uni11uminating studies, largely statistical or institutional in method, and lacking analysis of the really distinctive and interesting features of Maoist development. But befor e pursuing this critical line any further it is best to turn briefly to what has been done in this area.

A. Economic Research on Communist China

Like seagulls following the wake of a ship, economists pursue numbers. The main concentration of numbers pertaining to the economy of Communist China is in Ten Great Years, which was published in September 1959 by the State Statistical Bureau: This volume contains a wealth of data on almost all phases of economic activity, and so it has become one of the main sources for much of the empirical work on Chinese economic development. But throughout the 1950s economic data were published in hundreds of other sources — in official reports, statistical handbooks, economics books, and articles — so that altogether massive information, of varying degrees of reliability, became available on the first decade or so of China's development efforts. After 1958, however, the release of aggregate data pretty much came to a halt, which meant that little research on the 1960s has been done by economists outside of China. The data of the 1950s continues to be worked over, adjusted, and refined, though there is no longer much more that can be said about it.

Much of this research has been concerned with China's national output its absolute size; its rates of growth; its components, such as agriculture and industrial output or consumption and investment goods; the extent to which national output has::been affected by international trade and Soviet aid; and the planning methods utilized in its production. The most detailed study of the measurement of China's national output during the 1950s was made by T.C. Liu and K.C. Yeh in their The Economy of the Chinese Mainland: National Income and~onomic Development 1933-1959, but other intensive investigations have been made by Alexander Eckstein and William Hollister. 2l Two recent compilations of research work — An Economic Profile of Mainland China, 2-Volumes (Joint Economic Committee of the U.s. Congress) and Economic Trends in Communist China (A •. Eckstein, T.C. Liu, and W. Galenson, eds.) — contain many specialized studies of agriculture, industry, investment, foreign trade and aid, manpower and natural resources, money and banking, and taxation. The most comprehensive work on Communist China's economic insttutions, which carries the story well into the 1960s, is that of the Britisher, Audrey Donnithorne, The Economy of Communist China.

These four works contain most of what is now known in t he West about China's economy, though there have been scores of other studies, mostly of an empirical nature, on specialized aspects of the economic process. Notable among these are Kang Chao, The Construction Industry in Communist-ahina(Aldine, 1968); Charles Hoffman, Work Incentive Practices and Policies in the People's Republic of China 1953-1965 (State University of N. Y. Press, 1967); Y.L. Wu, I I The Steel Industry in Communist China (Hoover Institution, 1965); Sidney Klein, t Politics versus Economics: The Foreign Trade and Aid Policies of China (International Study Group, Hong Kong, 1968); George Ecklund, Financing the Chinese Government Budget Mainland China, 1950-1959 (Aldine, 1966); Dwight Perkins, Market Control and Planning in Communist China(Harvard, 1966); and Alexander Eckstein, Communist China's Economic Growth and Foreign Trade (McGraw-Hill , 1966). Since data on China's foreign trade in the 1960s can be gathered from most of her trading partners, this area of research has received a great amount of attention. Finally, a few western economists have actually visited China infrecent years and have returned with much information, but mainly of a qualitative nature.

B. Criticism of Economic Research

Economic research on China suffers from an ailment common to most of economics — a narrow empiricism. Thus, most of the research studies of the Chinese economy deal with very small segments of the development process, and within these tiny areas the researchers busy themselves with data series — adding up. the numbers, adjusting them in numerous ways, deflating them for price caanges, and doing a lot of other fussy statistical work. Each economist tills intensively his small plot, gaining highly specialized knowledge in the process, finally ending up an expert in his cramped quarters.

There are not many economists in the China field who try to see Chinese economic development 'as a whole, as "the comprehensive totality of the historical process." If the truth is the whole, on China must be so far from the truth that it is hardly worthwhile listening to them.

Moreover, listening is often painful. Even a casual reader of the economic research on Communist China cannot help but notice that many of the researchers are not happy, to say. the least, with the object of their investigation. Ordinarily economists are utterly fascinated and almost in love with their special areas of study — even with such an esoteric one as "Game Theory Applied to Nonlinear Development." But not so our China experts! Indeed, it is quite apparent that many of them consider China to be, not The Beloved, but The Enemy. And in dealing with The Enemy, their research often reveals very strong biases against China.

These biases show up in a variety of ways, from such trivial things as changing Peking to Peiping (~ la Dean Rusk), which reveals a wish that the Communists weren't there; to the frequent use of emotive words (e.g., the Communists are not dedicated but "obsessed"; leaders are "bosses"; a decision not to release data is described as "a sullen statistical silence"; the extension of the statistical system becomes "an extension of its tentacles farther into the economy"); to the attribution of rather sinister motives to ordinary economic and cultural policies (e.g., education and literacy are promoted for the purpose of spreading evil Marxian doctrines; economic development is pursued for the principal purpose of gaining military strength for geographical expansion — which is the theme of W.W. Rostow's book on The Prospects for Communist China); to dire forecasts of imminent disaster which are based on little more than wishful thinking; to data manipulation of the most questionable sort.

This strong propensity to treat China as The Enemy has led, in my opinion, to some grossly distorted acco'unts of China's economic progress. The picture that is presented by these studies as a whole as Hegel claimed, most economic experts is one in which China, while making some progress for a time in certain areas, is just barely holding on to economic life. It is a picture of a China always close to famine, making little headway wl)ile the rest of the world moves ahead, being involved in irrational economic policies, and offering little reason for hope that the lives of her people will be improved. Our China experts, furthermore, know what is wrong, and that in a word is Communism. They seldom fail to pass judgment on some aspect or other of Chinese economic development, and this judgment is almost invariably capitalist-oriented. Thus, national planning and government-controlled prices cannot be good because they do not meet the criteria of consumer sovereignty and competitive markets; ,communes violate individualism and private ,property; ideological campaigns upset order and harmony; the deemphasis on material incentives violates human nature and so reduces individual initiative and economic growth; the breakdown of specialization lowers worker.' s productivity. This sort of thing pervades much of the economic literature on China.

Given all this — the narrow specialized studies that are sometimes useful but not often enlightening, the distortions by omission or commission, the capitalistoriented approaches and assessments, not to mention those evaluations of Communist Chi~a . that a're inspired by a s tr'9ng allegiance to Chiang Kai-shek — gi~en all this, it is little wonder that a fair picture of China's economic progress seldom gets presented. Seldom, not never: Barry Richman's new book on Industrial Society in Communist China, Carl Riskin's work, for example in The Cultural Revolution 1967 in Review, and several other research efforts are refreshingly objective, relatively free of capitalist cant, and approach Maoist ideology in a serious way.

The truth is that China over the past two decades has made very remarkable economic advances (though not steadily) on almost all fronts. The basic, overriding economic fact about China is that for twenty years she has fed, clothed, and housed everyone, has kept them healthy, and has educated most. Millions have not starved; sidewalks and streets have not been covered with multitudes of sleeping, begging, hungry, and illiterate human beings; millions are not disease-ridden. To find such deplorable conditions, one does not look to China these days but rather to India, Pakistan, and almost anywhere else in the underdeveloped world. These facts are so basic, so fundamentally important, that they completely dominate China's economic picture, even if one grants all of the erratic and irrational policies alleged by her numerous critics. The Chinese all of them — now have what is in effect an insurance policy against pestilence. famine. and other disasters., In this respect, China has outperformed every underdeveloped country in the world; and, even with respect to the richest one, it would not be far-fetched to claim that there has been less malnutrition due to ma1distribution of food in China over the past twenty years than there has been in the United States. 22

If this comes close to the.truth, the reason lies not in China's grain output far surpassing her population growth -for it has not — but rather in the development of institutions to distribute food evenly among the population. It is also true that China has just had six consecutive bumper grain crops (wheat and rice) which have enabled her to reduce wheat imports and greatly increase rice exports. On top of this, there have been large gains in the supplies of eggs, vegetables, fruits, poultry, fish, and meat. In fact, China today exports more food than she imports. As I have indicated, the Chinese are in a much better position now than ever before to ward off natural disasters •• There has been significant progress in irrigation, flood control, and water conservancy; the use of chemical fertilizers is increasing rapidly, the volume of which is now over 10 times that of the early 1950s; there have been substantial gains in the output of tractors, pumps, and other farm tmplements; and much progress has been made in the control of plant disease and in crop breeding.

In education, there has been a major breakthrough. All urban children and a great majority of rural children have attended primary schools, and enrollments in secondary schools and in higher education are large, in proportion to the population, compared with. preConnnunist days. If "school" is extended in meaning to include part-time, partstudy education, spare-time education, and study groups organized by the connnunes, factories, street organizations, the army — then there are schools everywhere in China; then China may be said to be just one great big school.

China's gains in the medical and public health fields are perhaps the most impressive of all. The gains are attested to by many recent visitors to China. For example, a Canadian doctor a few years ago visited medical colleges, hospitals, and research institutes, aad everywhere he found good e quipmen t, high medical standards, excellent me dical care; almosZall comparable to Canadian standards. 3 A member of theU.S. Public Health Service, a few years ago, stated that "the prevention and control of many infections and parasitic diseases which have ravaged [China] for generations" was a "most startling accomplishment." He noted, too, that "the improvement of general environmental sanitation and the practice of personal hygiene, both in the cities and in !he rural areas, was also phenomenal.,,24

While all these gains were being made, the Chinese have devot\ed an unusually large amount of resources to industrial output. China's industrial production has risen on the average by at least 11 per cent per year since 1950, which is an exceptionally high growth rate for an underdeveloped country. And industrial progress is not likely to be retarded in the future by any lack of natural resources, for China is richiy endowed and is right now one of the four top producers in the world of coal, iron ore, mercu:tly, tin, tungsten, magnesite, salt, and antimony. In recent years, China has made large gains in the production of coal, iron and steel, chemical fertilizers, and oil. In fact, since the huge discoveries at the Tach'ing oilfield, China is now selfsufficient in oil and has offered to export some to Japan.

From the industrial, agricultural, and other gains I have outlined, I would estimate that China's real GNP has risen on the average by at least 6 per cent per year since 1949, or by at least 4 per cent on a per capita basis. This may not seem high, but it is a little better than the Soviet Union did over a comparable period (1928 1940), much better than England's record during her century of industrialization (1750-1850) when her income per capita grew at one-half of 1 per cent per year, perhaps a bit better than Japan's performance from 1878 to 1936, certainly much superior to France's 1 per cent record from 1800 to 1870, far better than India's 1.3 per cent growth during 1950 to 1967, and much superior to the postwar record of almost all underdeveloped countries in the world.

This is a picture of an economy richly endowed in natural resources, but whose people are still very poor, making substantial gains in industrialization, moving ahead more slowly in agriculture, raising education and health levels dramatically, turning out increasing numbers of scientists and engineers, expanding the volume of foreign trade and the variety of products traded, and making startling progress in the development of nuclear weapons. This is a truer picture, I believe, than the bleak one drawn by some of our China experts.25

The failure of many economic experts on China to tell the story of her economic development accurately and fully is bad enough. But even worse, I think, has been the general failure to deal with China on her own terms, within the framework of her own goals and methods for attaining those goals, or even to recognize the possible validity of those goals. Communist China is certainly not a paradise, but it is now engaged in perhaps the most interesting economic and social experiment ever attempted, in which tremendous efforts a re being made to achieve an egalitarian development, an industrial development without dehumanization, one that involves everyone and affects everyone. But all those efforts seem not to have affected Western economists, who have proceeded ahead with their income accounts and slide-rules, and their free-enterprise values, to measure and judge. One of the most revealing developments in the China field is the growing belief among the economic experts t hat further research is hardly worthwhile in view of the small amount of economic statistics that have come out of China sine e 1958. Apparently it does not matter that 775 million people are involved in a gigantic endeavor to change their environment, their economic and social institutions, their standard of living, and themselves; that never before have such potentially important economic and social experiments been carried out; that voluminous discussions of these endeavors by the Maoists are easily available. No, if GNP data are not forthcoming, if numbers can't be added up and adjusted, then the economy is hardly worth bothering about!

V Some Suggestions and Conclusions

What can be done? Probably not very much until a substantial number of younger economists becomes interested in China. It is a hopeful sign that many young economists are now breaking away from the stultifying atmosphere of present-day "neo-c1assica1" economics and are trying to refashion the discipline into political economy — as it once was — so as to• take account of the actual world and not the world of highly abstract models, scholastic debates, a nd artificial assumptions — all designed to justify the existing state of things and to accept, without question, the rather narrow, materialistic goals of capitalist society. This reformulation by the young will have to take place first, but once this task is well along, China is bound to be attractive to many of these "new" economists. Only then will we begin to get a substantial amount of research on China that makes sense.

The research that would make sense is any that takes Haoism seriously as a model of economic development, in terms both of its objectives and of the means employed to attain those objectives. A thoughtful consideration of Maoism means paying proper attention to Marxism-Leninism as well as to the Chinese past of the Maoists. The Marxist-Leninist goal of the Communist man within a classless society in which each person works according to his ability and consumes according to his needs — this goal of the Maoists.shou1d be taken seriously in any economic analysis of what is now going on.

I mentioned earlier, when discussing the core of development theory that would probably be accepted by both the capitalist and Maoist sides, that economic growth can be attained by increasing the amounts of labor, capital goods, and land used in production, by improving the quality of these factors of production, by combining them in more efficient ways and inspiring labor to greater efforts, and by taking advantage of economies of scale. Now Maoism undoubtedly affects everyone of these ingredients of economic growth, and often in ways quite different from the capitalist impact. For example, it is likely that Maoist ideology discourages consumption and encourages saving and investment, and so promotes the growth of the capital stock; and does this by preventing the rise of a high-consuming "middle class," by fostering the Maoist virtues of plain and simple liv~ng and devoting one's life to helping others rather than to accumulating "pots and pans."

As another example, it is possible that Maoist economic development, by deemphasizing labor specialization and reliance on experts and technicians, reduces the quality of the labor force and so slows the rate of economic growth. On the other hand, as Adam Smith once suggested, labor specialization, while increasing productivity in some narrow sense, is often at the expense of the worker's general intelligence and understanding. For "The man whose whole life is spent in performing a few simple operations •••generally becomes I as stupid and ignorant as it is ~ossible for a human creature to become." 6 A major aim of the Maoist is to transfor m man from this alienated state to a fully aware and participating member of society. The emphasis on "reds" rather than experts is just one part of this transformation which, it is felt, will release "an atom bomb" of talents and energy and enable labor productivity to take great leaps.

In addition to this argument, which is based on Maoist interpretation of their own history and experience, particularly during the Yenan period,27 it is also possible that the "universal man" in an underdeveloped economy would provide more flexibility to the economy. If most people could perform many jobs moderately well, manual and intellectual, urban and rural, the economy m~ght be bette~ able to cope with sudden and large changes; it could with Ii ttle loss infefficiency mobilize its labor force for a variety of tasks. Further, since ,experience in one job carries over to others, a person may be almost as productive, in the job-proficiency sense, in anyone of them as he would be if he specialized on it. A peasant who has spent some months in a factory can more easily repair farm equipment, and so on. Finally, a Maoist economy may generate more useful information than a specialist one and so lead to greater creativity and productivity. When each person is a narrow specialist, communication among such people is not highly meaningful -your highly specialized knowledge means little to me in my work. When, on the other hand, each person has basic knowledge about many lines of activity, the experiences of one person enrich the potentialities of many others.

The point is that this topic ~- which, 1 should stress, includes not only labor productivity, that is the developm ent of material things by human beings, but also the development of human beings themselves — this topic of generalists vs. specialists, reds vs. experts, the masses vs. bureaucrats, or whatever, is not a foolish one to be laughed away, as it has been in effect by some China experts. How men, in an industrial society, should relate to machines and to each other in seeking happiness and real meaning in their lives has surely'been one of the most important problems of the modern age. There is also another basic issue here: whether modern industrial society, capitalist or, socialist, does i~ ~act diminish man's essential powers, his capacity for growth in many dimensions, even though it does allocate him "efficiently" and increase his skills as a specialized input. Is man Lockean in nature, reactive to outside forces, adjusting passively to disequilibrium forces from without? Or is he essentially Leibnitzian, the source of acts, active, capable of growth and having an inner being that is selfprop~ lled? If the latter, how are these powers released?

The Maoists claim that the powers exist and can be released. If they are right, the implications for economic development are so important that it would take a bunch of absolute dunces on this side of the Pacific to ignore them.

FOOTNOTES

I should like to thank John Despres, Edward Friedman, and Mark Selden for answering my call for help.

1. This is always a main point. However, two other goals of producing the "right" composition of goods and achieving an "equitable" distribution of income are often stipulated.

A few of the better books on capitalist development are: Charles Kindleberger, Economic Development; Henry Bruton, Principles of Develop~ Economics; Gerald Meier, Leading Issues in Economic Develop!ent; Albert Hirschman, ~ Strategy of Economic Development; and W. Arthur Lewis, The Theory of Economic Growth.

2. In recent years, capitalist economists have paid increasing attention to "investment in hlUllan capital." (See, for example, Gary Becker, Human Capital.) Although this might seem to represent a basic change in their concept of man in the development process, actually it does not. "Investment in hlUllan cap i tal" means that economic resources are invested for the purpose of raising the educational, health, and skill levels of labor, not as an end in itself but as a means of increasing the productivity of labor. Thus, economists are concerned with the "payoff" to investment in human capital, this payoff being the profit that can be made from such an expenditure. Indeed, the very term "human capital" indicates vhat these economists have in mind: man is another capital good, an input in the productive engine that grinds out commodities; if one invests in man, he may become more productive and return a handsome profit to the investor — whether the investor is the State, a private ca~italist, or the laborer himself. Thus, the preoccupation of capitalist economics is still with man as a means and not as an end.

3. This has been expressed by Maoists in many ways. As Mao Tse-tung has put it: "of all things in the world, people are the most precious" (The Bankruptcy of the Idealist Conception of History," in Selected Works of Mao Tsetung, Vol. IV, p. 454). ThePetlngReview adds: "Whatever we do, we give prominence to the factor of man and-put man at the centre" (Nov. 11, 1966, pp. 19-20).

4. Mao Tse-tung, quoted in Peking Review, Nov. 11, 1966, pp. 19-20.

5. Peking Review, Dec. 23, 1966, p. 7.

6. For 3,000 years the Chinese have paid much more attention t,o human relations than to conquering nature. Mao Tse-tung, as a Chinese and as a Marxist, cannot help but follow in this tradition. But, .as a Chinese, he wishes to make China powerful in the eyes of the world> and, as a Marxist, through socialism. The world views power in terms of GNP and nuclear weapons, not in terms of perfection of human relations. So Mao has to go both directions at the same time, and the two goals often conflict with one another, at least in the short run.

7. Mao Tse-tung follows MarxismLeninism in adopting the world outlook of dialectical materialism, which is a. philosophy of hlUllan and natural change and interaction. Changes in society, for example, according to Mao, are not due chiefly to external causes but instead to internal ones — to the internal contradictions between the productive forces and the relations of production, between classes, etc. There is internal contradiction in every single thing, and it is the development of the contradiction that gives rise to chang"es — "eventuaily to qualitative changes." External causes by themselves could explain only changes in quantity or scale, but they could not explain qualitative or "leap" changes. "The development of things should be seen as their internal and necessary self-movement, while each thing in its movement is interrelated with and interacts on the things around it." See Mao Tse-tung, "On Contradiction," Selected Works, Vol. 1, p. 313.

8. Mao Tse-tung, "Combat Liberalism," Selected Works, Vol. II, p. 31.

9. Mao Tse-tung, "On the Correct Handling of Contradictions Among the People," in Quotations of Mao Tse-tung, pp. 17-18.

10. Peking Review, March 10, 1967, p. 22.

11. Mao Tse-tung, "On Practice," Selected Works, Vol. 1, pp. 299-300.

12. Peking Review, February 24, 1967, p.22.

13. Lenin implies that to reach the Marxian goal — "From each according to his ability, to each according to his needs" — people will have to become selfless and highly productive. If each j person is to take freely according to I his needs, he cannot be selfish. If there is to be enough for everyone, people will have to be highly producj tive. The latter is achieved by active participation, by seeing and ., doing, by theory and practice. See V • i 1. Lenin, "The State and Revolution," in Selected Works (International Publisher, 1967), Vol. 2, pp. 340-41. I

14. Peking Review, January 6, 1967, p. 13. 1

15. Marxian freedom is real knowledge of a subject, intelligent action. I J A free individual "is no longer history's pawn, no longer condemned by the blind mechanics of social and economic forces to the mere suffering of history, but one who is a maker of history, who, knowing the nature of these forces, becomes, by choice and action, a part of them, thus changing them, and changing, too, himself, thus guiding both along those paths where each may live its fullest fruitfulness and history become,.at .1ast~.approptiate to the best that human nature can be, come." (Vernon Venable, Human Nature, The Marxian View, p. 204).

16. Peking Review, December 23, i 1966, p. 21.

17. Vernon Venable sums up the position of Marx and Engels on this point when he writes: "by forcing men \ into a specialization of function that becomes more and more narrow, less and less interesting, less and less inclusive of his various potentials of ability, it has had the effect of stunting him, dehumanizing him, reI mduacn,i nga hcirmip ptole da mmeornes tfrroagsimtye,n t aon f apa pendage to a mach~ne." (Venable, £E.. cit. , pp. 123-24). For further views by Marx on specia1i,zation, see The Economic and Philosophic Manuscripts of 1844, pp. 110, 161; Capital (Modern Library), pp. 397-98.

18. Quoted in Maurice Meisner, Ascetic Values arid Utopian Goals in Chinese Communist Ideology (Mimeo., May 1967), p. 76.

19. Ibid., pp. 77-78.

20. This emphasis on man was expressed by Marx in many ways, inc; tuding the.fo11ow~ng: "A. critique of religion leads to the doctrine that the highest being for man is man himself, hence to the categorical imperative to overthrow all relationships in which man is humbled, enslaved, abandoned, despised." (Karl Marx, "Zur Kritik der Hege1schen Rechsphilosophie," in Marx and Engels, Der Historische Materia1ismus; Die Fruhschriften (Leipzig: Alfred Kroner Verlag, 1932), I,p. 272.

21. Alexander Eckstein, The National Income of Communist China; William W. Hollister, China's Gross National Product and Social Accounts, 1950-1957.

22. Much of. the material in this paragraph was suggested by John Despres, but he is not responsible for my interpretations of his remarks.

23. G. Leslie Willcox, "Observations on Medical Practices," Bulletin of the Atomic Scientists, June, 1966, p. 52. See also William Y. Chen, ''Medicine and Public Heal th," in Sciences in Communist China, pp. 384, 397-99.

24. Chen, op.cit.

25. The above account of China's recent economic progress is largely taken from my testimony before the Joint Economic Committee. See Mainland China in the World Economy, Hearings, JEC, April 5, 10, 11 and 12, 1967, pp. 184-88.

26. Adam Smith, The Wealth of Nations, Book V, Ch.I, Part III. -27. See the essay by Mark Selden, "People's War and the Transformation of peasant society: China and Vietnam," to appear in Edward Friedman and Mark Selden (eds.) America's ~, Pantheon, 1970