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Workers Vanguard No. 1047

30 May 2014

China: Bureaucratic Cancer Gnaws at Workers State

Workers Must Sweep Away CCP Tops, Princelings

Why China Is Not Capitalist

Last November, Zhou Yongkang, a former member of the Chinese Communist Party (CCP) Political Bureau, was placed under house arrest in a corruption investigation. As head of China’s domestic security apparatus before his retirement, Zhou had overseen a government department with a massive budget. After assets worth at least $14.5 billion were confiscated from Zhou’s family members and associates, the New Yorker (2 April) observed: “Chinese civil servants and their associates seem to have accrued a nest egg that is somewhat larger than the gross national product of Albania.”

On March 31, Lieutenant General Gu Junshan, former deputy chief of the General Logistics Department of the People’s Liberation Army, was charged with bribery, embezzlement and abuse of power. Gu has been accused of using his control over procurement of housing, infrastructure and supply contracts for China’s 2.3 million-strong armed forces to amass a fortune for himself and his family, including real estate holdings, art work and luxury items like a solid gold statue of Chairman Mao, founding leader of the People’s Republic of China.

On April 19, Song Lin, chairman of China Resources, was sacked over accusations that he misused $1.6 billion in funds, took bribes and laundered money through his mistress, a senior investment banker at the Hong Kong office of the Swiss bank UBS. China Resources is one of China’s largest state-owned enterprises with more than $120 billion in assets.

These are just a few choice examples of the massive corruption at the top of the workers state established with the 1949 Chinese Revolution. As top CCP bureaucrats continue to enrich themselves, many of their offspring have parlayed their privileged social position into places among the entrepreneurial elite. In a 2012 investigation into the descendants of top CCP officials, Bloomberg News traced the fortunes of 103 heirs of the “Eight Immortals” of the CCP who rose to political power in the period following Mao’s death in 1976. Among these “princelings” were 43 who had transformed themselves into capitalists in the space created by the regime’s “market reforms,” gaining private ownership of factories, investment firms and real estate ventures. Some launched joint ventures with foreign companies; others took executive posts in foreign investment banks.

Bloomberg noted that “the lifestyle of some members of the third generation tracks that of the global affluent class—people who were their schoolmates in Swiss, British and U.S. boarding schools” (“Heirs of Mao’s Comrades Rise as New Capitalist Nobility,” 26 December 2012). Having rubbed shoulders at elite prep schools and universities with the scions of the American and European capitalist rulers, the princelings were positioned to serve as intermediaries for world imperialism in China. This was not lost on JPMorgan Chase and other top American investment banks, which got some bad press at home for hiring the relatives of well-connected Chinese officials as a means to open doors for their investments in mainland China.

The overthrow of capitalist rule in 1949 laid the basis for a planned, collectivized economy that led to enormous social gains for the worker and peasant masses. But that revolution, carried out by a peasant guerrilla army, was deformed from its inception by the rule of the CCP bureaucracy, which based itself on the model of the Soviet Union under Stalin. More than six decades later, the bureaucratic cancer is increasingly gnawing away at the fabric of the workers state, fostering a domestic base for counterrevolution and undermining the defense of China against the U.S., Japan and other imperialist powers.

Defend China! For Workers Political Revolution!

The development on the Chinese mainland of a class of bourgeois entrepreneurs and a well-heeled urban petty bourgeoisie, along with the ever-present corruption in the CCP officialdom, are taken by most leftists as proof that the country has reverted to capitalism. Voicing a question that our comrades frequently hear, one reader of WV wrote us last year asking: “You at the Spartacist League hold China as a deformed workers’ state and regard it as not capitalist. Explain to me why China, a ‘socialist state’, has such a high Gini index, higher than dozens of capitalist countries?” Commonly used by bourgeois economists, the Gini index measures the extent of inequality in income or consumption expenditure in particular countries.

China is not a capitalist society. There is, indeed, a nascent capitalist class, tied to the imperialists by economic interest and to many CCP leaders by blood. But while this layer poses a grave potential danger of capitalist restoration, it does not hold state power. China remains a bureaucratically deformed workers state akin to the former Soviet degenerated workers state and to Vietnam, Cuba, North Korea and Laos today. Each of these societies was or is based on collectivized property forms.

The Stalinist bureaucracy is not a class—i.e., a social stratum with its own unique relation to the means of production—but a parasitic caste occupying an unstable position atop the workers state. In China, many CCP officials take advantage of their administrative positions, skimming funds and receiving gifts for favors and acting as middlemen for the imperialists. Yet the bureaucracy is at times compelled to defend the workers state in its own way, whether out of concern to maintain its own privileges or to ward off working-class revolt.

The state controls foreign trade and regulates capital markets and currency, with credit determined primarily according to quotas, not by the market. The core of the economy remains collectivized, with state-owned enterprises controlling 90 percent of assets in oil, electricity, communications and other key sectors. There is a CCP cell with the power to veto decisions in every private company, including foreign-owned operations. While the government has opened the door wide to capitalist investment and market forces, it maintains strict controls over the capitalist class, which is prevented from organizing political parties and is subject to strict censorship. This, of course, also applies to the working class: the CCP would see its legitimacy challenged by the development of any workers movement outside its control.

Despite bureaucratic deformation, the Chinese workers state testifies to the superiority of a collectivized economy over capitalist production for profit. The 1949 Revolution in short order led to huge gains for workers, peasants, women and all the downtrodden. Since then, China has gone from a backward, peasant country to a majority-urban one capable of landing a lunar rover. Notwithstanding the yawning gap between rich bureaucrats and princelings on the one hand and the working class and peasants on the other, more than 600 million people were lifted out of poverty in the last three decades. The population on average now eats six times more meat than in 1976, and 100 million people have exchanged bicycles for automobiles. Having done away with guaranteed medical care in implementing “market reforms,” the regime has spent the equivalent of $180 billion on improving health care since 2009. Now 99 percent of the rural population, including migrant workers, have access to basic health insurance.

Compare these gains to the unspeakable misery and despair that define life for the hundreds of millions of urban and rural poor in India: This is the short answer to those ostensible socialists who portray China as capitalist or irrevocably on that road. It is also a starkly clear argument for our Trotskyist program of unconditional military defense of China and the other deformed workers states against imperialism and domestic counterrevolution.

In the past quarter alone, as the capitalist world remained mired in stagnation, the Chinese economy expanded by 7.4 percent, on top of many years of remarkable development. However, China’s explosive economic growth, impressive as it is, is not a harbinger of steady progress toward socialism—a society of material abundance based on the highest level of technology and resources. The all-round modernization and development of China, including its rural hinterland, require the aid of proletarian revolution in the advanced capitalist countries, which will set the stage for a globally integrated and planned socialist economy. The CCP bureaucracy, whose program is based on the nationalist Stalinist dogma of building “socialism in one country,” has always opposed this perspective.

Today, CCP spokesmen claim that China is far along the road to becoming a global economic “superpower” by the mid 21st century. This view ignores the economic vulnerabilities of China in its relations with the world capitalist market and the implacable hostility of the imperialist bourgeoisies, above all the U.S. ruling class. Further, it ignores the internal instability of Chinese society. With an enormous divide between corrupt government officials, capitalist entrepreneurs and privileged petty bourgeois on one side and the hundreds of millions of proletarians—in both state-owned and private enterprises—and poor peasants on the other, China has for years experienced a high level of strikes and social protest against the consequences of bureaucratic misrule.

This ferment points to the potential for a proletarian political revolution that will sweep away the Stalinist regime and replace it with the rule of workers and peasants councils (soviets). As Bolshevik leader Leon Trotsky wrote in the 1938 Transitional Program, the founding programmatic statement of the Fourth International, in regard to the Soviet Union: “Either the bureaucracy, becoming ever more the organ of the world bourgeoisie in the workers’ state, will overthrow the new forms of property and plunge the country back into capitalism; or the working class will crush the bureaucracy and open the way to socialism.”

Parasites and Princelings

The CCP bureaucracy is beset by enormous contradictions. Although it zealously guards its privileges, it does not own the means of production or have at its disposal all the methods of social control that a ruling capitalist class possesses. Its power stems from its political monopoly of the government apparatus. Trotsky’s explanation of the material roots of the Soviet Stalinist regime in The Revolution Betrayed (1936) applies with full force to China:

“The basis of bureaucratic rule is the poverty of society in objects of consumption, with the resulting struggle of each against all. When there are enough goods in a store, the purchasers can come whenever they want to. When there are few goods, the purchasers are compelled to stand in line. When the lines are very long, it is necessary to appoint a policeman to keep order. Such is the starting point of the power of the Soviet bureaucracy. It ‘knows’ who is to get something and who has to wait.”

Observing that the bureaucracy’s “appropriation of a vast share of the national income has the character of social parasitism,” Trotsky wrote:

“To the extent that, in contrast to a decaying capitalism, it develops the productive forces, it is preparing the economic basis of socialism. To the extent that, for the benefit of an upper stratum, it carries to more and more extreme expression bourgeois norms of distribution, it is preparing a capitalist restoration. This contradiction between forms of property and norms of distribution cannot grow indefinitely. Either the bourgeois norms must in one form or another spread to the means of production, or, conversely, the norms of distribution must be brought into correspondence with the socialist property system.”

As in Stalin’s USSR, while the CCP bureaucrats and their princeling offspring feed off state resources, they chafe under the legal restrictions placed on private wealth. Capturing an aspect of this phenomenon, the Financial Times (28 November 2012) wrote, “The fact that property rights cannot be taken for granted means that capital flight has also become an issue,” including money salted away in offshore tax havens. Another conduit is the channeling of funds through relatives living abroad. According to an internal report by the CCP’s Organization Department, 76 percent of the senior executives in China’s 120 flagship state-owned companies have immediate family members who live overseas or hold foreign passports. In a New York Times (11 May) opinion piece, Chinese author Yu Hua reported how corrupt officials are prone to hiding their money rather than depositing it in banks for fear of its discovery. Among the well-known cases are one who stashed 25 million yuan in safe deposit boxes, another who hid his cash in cardboard boxes in the bathroom of his apartment and a third who used a hollow tree, a latrine and other places.

Of the 500 protests, riots and strikes estimated to take place every day in China, many are sparked by anger at profiteering officials who are ostensibly devoted to communist ideals. One response of the regime is to cover up the extent to which the workers state’s resources have been diverted for the use of these parasites. In its 2012 investigation, Bloomberg noted that state controls over the media and Internet help cloak the business dealings of bureaucrats and princelings from view, while public documents often obscure the culprits by using multiple names in Mandarin, Cantonese and English. A mouthpiece of finance capital, Bloomberg News well knows that such practices pale in comparison to the looting by the ruling classes of capitalist countries, as seen several years ago in the hundreds of billions of dollars doled out to the corporate bosses of failing banks and automakers in the U.S.

After he came into office in 2013, Chinese president Xi Jinping launched a campaign for the “thorough cleanup” of corruption in the CCP. According to the CCP’s Central Commission for Discipline Inspection, more than 180,000 party officials were punished for corruption and abuse of power last year, with 31 senior leaders investigated. No doubt political maneuvering plays a role here: Purged official Zhou Yongkang is known as a factional opponent of Xi, and there is a CCP tradition reaching back to Mao of using anti-corruption campaigns to get rid of rivals.

The Xi government also aims to help stabilize Chinese society by reining in the ostentatious flaunting of wealth and privilege. Xi’s campaign has included a crackdown on luxury spending. In January, high-end clubs in public parks in Beijing, Hangzhou, Changsha and Nanjing were closed, with a government statement declaring: “The buildings should be used to provide services for the general public rather than the privileged few” (Xinhua, 17 January). Officials have been banned from hosting elaborate banquets and military license plates are no longer allowed on luxury cars. Such a campaign is simply inconceivable in the U.S., where the “right” of the capitalist ruling class to its obscene wealth, and to dispose of it at will, is enshrined in law.

A particular focus of Xi’s anti-corruption drive has been the waste, fraud, nepotism and buying and selling of rank that undermine military effectiveness. Soon after taking office, Xi placed blame for the collapse of the Soviet Union in part on the loss of control of the armed forces by the Kremlin under Mikhail Gorbachev. Xi’s cleanup has included antigraft measures, audits and criticism sessions; enlarged drills to upgrade “battle readiness”; and contentious plans to reform the military’s bloated and outmoded structure.

In our defense of China, we support the development of an effective and advanced military. However, Xi is himself the leader of the bureaucratic regime that endangers the workers state by its utopian pursuit of “peaceful coexistence” with imperialism. The imperialists aim for nothing less than the overthrow of the People’s Republic of China and the reconquest of the mainland for their untrammeled exploitation. To this end, they employ both economic and military pressure—the latter seen, for example, in the Obama administration’s “pivot” toward Asia and U.S./Japan military provocations in the East China Sea.

The Spectre of Tiananmen

China at the time of its revolution was qualitatively poorer and more backward than even tsarist Russia at the time of the Bolshevik-led workers revolution in October 1917. The Bolsheviks under Lenin and Trotsky’s leadership knew that such backwardness could not be overcome without the extension of proletarian revolution to the advanced industrial countries. This understanding is utterly alien to the Stalinist perspective of “socialism in one country,” a false ideology embraced by the CCP bureaucracy from Mao Zedong to Xi Jinping.

Inequality in China began to grow rapidly in the aftermath of Mao’s Cultural Revolution, a bitter intra-bureaucratic struggle launched in 1966 that threw economic and social life into chaos. Having benefited from Soviet aid in the first decade after the 1949 Revolution, China increasingly pursued economic autarchy after the Chinese and Soviet bureaucracies fell out. By the early 1970s, Beijing had treacherously struck an alliance with U.S. imperialism against the Soviet Union, which Mao castigated as “social imperialist.”

Maintaining its own privileges, the bureaucracy under Mao promoted a model of “egalitarianism” that amounted to generalized want among the masses, based on China’s still backward industrial base. When they took the reins after Mao’s death, the Eight Immortals led by Deng Xiaoping resorted to the whip of the market to increase economic productivity. With Western and Japanese imperialist and offshore Chinese concerns invited to invest in designated sections of the mainland, the economy regained its feet, but at the price of greatly increased inequality and the growth of pro-capitalist forces within China.

Twenty-five years ago, popular anger over inflation, official corruption, the rise of the princelings and the bureaucracy’s stifling political control erupted in mass protests centered on Beijing’s Tiananmen Square. In April 1989, a group of students from Beijing University laid a wreath in the square in honor of Hu Yaobang, who at the time of his death shortly before was regarded as relatively open to student protest and as one of the rare CCP officials not to be corrupt. By the time of Hu’s funeral a week later, a mass student protest had assembled and begun to draw in contingents of workers. While sections of the student protesters looked to Western-style capitalist democracy, the protests were dominated by the singing of the Internationale—the international workers anthem—and other expressions of pro-socialist consciousness. The protests were transformed into a mass working-class outpouring against the bureaucracy and the effects of its “market reforms.”

For almost two months, the government was unable to curb the protests, which developed into an incipient political revolution. Workers organized their own defense guards. Even the police were joining the demonstrations, a clear reflection of the class difference between a workers state and a capitalist state. The first army unit called in to crush the demonstrations refused to do so as workers fraternized with soldiers. Not only enlisted men but also elements of the military brass and some of the regime tops came down on the side of the protesters—a manifestation of the nature of the bureaucracy as a brittle caste. The regime finally found loyal units and used them to crush the uprising, marked by the massacre of mainly working people in Beijing on June 3-4. Mass strikes broke out in protest and at least 80 cities throughout China were caught up in the turmoil.

Crucially missing in May-June 1989 was an authentically communist—i.e., Leninist-Trotskyist—workers party, which would have fought to lead the workers to political power. Having regained control, the bureaucracy lashed out not mainly at students but at the proletariat. Arrested workers were paraded through the streets and many were shot.

Corruption, profiteering, political repression, inequality: 25 years later, the scourges that drove students and workers to protest en masse are back with renewed force. At the same time, economic growth has drawn new layers of the population into the working class. Migrants from the countryside have flocked to manufacturing and light industrial jobs in urban areas, where they are subject to systematic discrimination. Meanwhile, renewed investment in state-owned industry has strengthened the economic position of workers in that sector. Due to combative struggle by workers and a shortage of labor, wages have risen dramatically. In a recent display of workers’ militancy, 10,000 employees of the Yue Yuen shoe factory in the southern city of Dongguan went on strike on April 14 demanding that the Taiwanese company pay the full amount of legally mandated social security and housing compensation. Strikers returned to work following a combination of company and government promises and repression.

The devastation wreaked by capitalist counterrevolution in the Soviet Union and East Europe is not lost on the Chinese proletariat, which has the power and the objective interest to sweep away bureaucratic misrule. As we wrote in Part One of “China’s ‘Market Reforms’: A Trotskyist Analysis” (WV No. 874, 4 August 2006):

“At some point, likely when bourgeois elements in and around the bureaucracy move to eliminate CCP political power, the multiple explosive social tensions of Chinese society will shatter the political structure of the ruling bureaucratic caste. And when that happens the fate of the most populous country on earth will be starkly posed: either proletarian political revolution to open the road to socialism or a return to capitalist enslavement and imperialist subjugation.”

Victory for the workers in that conflict will require the leadership of a revolutionary workers party, a Chinese section of a reforged Fourth International.


Workers Vanguard No. 1047

WV 1047

30 May 2014


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