Part 5: Deng Xiaoping and Socialism 2.0
Part 5: Deng Xiaoping and Socialism 2.0
Deng, as a direct witness of Socialism 1.0 and victim of Mao’s campaigns, had a good understanding of the challenges China would face in the years to come.
He joined the Chinese Communist Party in 1924, studied in Moscow from 1926, and was appointed party secretary of Ruijin province in 1931 during the civil war.
In 1952, he moved to Beijing and rose in political ranks, becoming a member of the Politburo and leading the central finance and economy authority.
Deng supported Mao during this period and remained loyal even during the “Great Leap Forward,” despite doubts about its success.
By this time, Deng, alongside Lin Bao (who mysteriously died in 1971), was considered a possible successor to Mao. However, during the Cultural Revolution, due to his economic pragmatism, he was repeatedly criticized by Mao and exiled; three times.
He was rehabilitated in 1973 and began implementing economic reforms to stimulate the stagnating economy.
Through his long-standing involvement in economic work within the Politburo, Deng’s political approach from the start leaned toward a pragmatic handling of China’s economic issues within a socialist framework.
After Deng, the core problems of Socialism 1.0 were not only the excessive focus on propagandistic class struggle across politics but also the internal contradiction of the socialist economic system itself—namely, the planned economy and its relative failure.
Reform of the Planned Economy
The problem of the driving mechanism, which became most apparent during the period of the people’s communes and their transition to a system of moral rather than material rewards, had to be solved to stimulate economic development for the vast majority.
It was essential to address this issue to promote growth.
The goal of a classless society remained, but on the way to abundance of the “spring sources of cooperative wealth“, Mao’s assumption that the advancement of productive relations would also lead to rapid development of productive forces proved false.
After extensive debates within the CCP, it was decided to “use profit, not revolutionary spirit, as the main driving force for economic development” and to recognize “social inequality” as a means to accelerate progress and ultimately benefit everyone.
In 1985, Deng stated in his speech “Reforms are the only way for China to develop its productive forces”:
“We believe in communism, and our ideal is to realize it. During our darkest days, we were carried by the ideal of communism. (…) A communist society is a society where there is no exploitation of man by man, where great material wealth exists, and where the principle applies: ‘From each according to his ability, to each according to his needs.’
This principle cannot be applied without overwhelming material wealth.
To realize communism, we must fulfill the tasks set in the socialist phase. These are numerous, but the most important is the development of productive forces, to demonstrate the superiority of socialism over capitalism and to create the material base for communism.
For a long time, we neglected the development of productive forces in socialist society.
From 1957 onward, their growth was slow. In rural areas, farmers’ incomes increased very little over ten years—by 1966, only marginally. Although in some regions farmers did better, many still lived in poverty. Of course, this was progress compared to old times, but the socialist standard of living was still far away. During the Cultural Revolution, the situation worsened further.”
Reform of the Communes
One of the first measures of the new leadership was transforming the people’s communes into the new “Responsibility System,” where farmers produced for the state at fixed purchase prices and could sell surplus freely on the market.
This surplus-market method was literally copied from Lenin’s New Economic Policy (NEP), the first Marxist-Leninist approach to creating a new driving mechanism, successfully adapted to Chinese conditions.
Consequently, grain harvests increased from about 280 million tons (by the late 1970s) to over 400 million tons in the mid-1980s.
Meat consumption doubled (!) between 1978 and 1988, reaching nearly 100 grams per person per day.
The average calorie intake rose from 1,876 kcal per person per day in 1976 to 2,505 kcal in 1988. For the first time in China’s 4,000-year history, hunger was sustainably defeated—today, the average is 3,206 kcal per person per day.
By comparison, Japan’s value in 2018 was 2,705 kcal, and Cuba’s was 3,344 kcal per person per day.
The conscious use of the relationships between commodities and money, aimed at restoring the real prices and self-costs relative to each other, had profound effects and led to rapid economic growth not only in rural areas.
For the first time in a long time, incentives for increased production were created:
The principle of performance and distribution based on the quantity and quality of work reemerged as significant, leading to renewed discussions about the role of markets and the law of value in other sectors of the economy.
Similar debates had existed since China’s founding and paused only during the Great Proletarian Cultural Revolution (GPKR), where the idea of further involving the law of value was seen as a deviation to the right.
“The policy of reform and opening-up”
The “Reform and Opening-up Policy” (ROP) was officially decided at the 3rd Plenum of the CCP Central Committee, and the first measure was the “Four Modernizations”:
The modernization of agriculture, industry, defense, and science became the highest priority for Chinese development.
To facilitate this development, special economic zones were established for the first time, modeled after Lenin’s state-capitalist control over “concessionaries” (see Part 2). These zones aimed to increase production while also bringing in know-how and capital to develop the state sector.
Foreign investments in China were, and still are, usually linked to majority state-owned enterprises, following the principle of the state’s ongoing control over the organized bourgeoisie.
However, “when we say ‘the state,’ we mean ourselves—the proletariat, the vanguard of the working class.” From 1980 onward, surplus markets were directed at industrial enterprises, and larger companies were allowed to sell their surpluses freely. This regulation helped China quickly become self-sufficient without imports, and through rapid development in heavy and consumer goods sectors, it was able to generate enough foreign exchange through exports to develop future economic theories.
Xu Muqiao, a leading theorist behind adapting the NEP to Chinese principles, deduced from Marx’s “Critique of the Gotha Program” (see Part 2.3) that China was in the first phase of socialism, which would take at least a century from the founding of the People’s Republic to complete, based on the idea that:
“We believe in communism, and our ideal is to realize it. During our darkest days, we were carried by the ideal of communism. (…) A communist society is one where there is no exploitation of man by man, where great material wealth exists, and where the principle applies: ‘From each according to his ability, to each according to his needs.’
This principle cannot be implemented without overwhelming material wealth.
To realize communism, we must fulfill the tasks set in the socialist stage. These tasks are numerous, but the most important is the development of productive forces to demonstrate the superiority of socialism over capitalism and to establish the material foundation for communism.
For a long time, we neglected the development of productive forces in socialist society.
From 1957 onward, their growth was very slow. In rural areas, farmers’ incomes increased only slightly over ten years—by 1966. Although some regions saw improvements, many still lived in poverty. Of course, this was progress compared to the old days, but the socialist standard of living was still far away. During the Cultural Revolution, conditions worsened further.”