Chinese Economists on Economic Reform - Collected Works of Yu Guangyuan 1135082677, 9781135082673

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Chinese Economists on Economic Reform – Collected Works of Yu Guangyuan

This book is part of a series that makes available to English-speaking audiences the work of the individual Chinese economists who were the architects of China’s economic reform. The series provides an inside view of China’s economic reform, revealing the thinking of the reformers themselves, unlike many other books on China’s economic reform, which are written by outside observers. Yu Guangyuan (1915–) is a famous Chinese philosopher and economist. A member of the Chinese Communist Party from 1937, he has made significant contributions in the field of Marxist theory and in state planning. He was head of the Political Research Office of the State Council from 1975 and the first director of the Economic Research Institute of the State Planning Commission. He has held many other important posts, and was editor-in-chief of the Dictionary of Economics. This book is published in association with China Development Research Foundation, one of the leading economic and social think tanks in China, where many of the theoretical foundations and policy details of economic reform were formulated.

Routledge Studies on the Chinese Economy Series Editor Peter Nolan, Sinyi Professor, Judge Business School, Chair, Development Studies, University of Cambridge Founding Series Editors Peter Nolan, University of Cambridge and Dong Fureng, Beijing University

The aim of this series is to publish original, high-quality, research-level work by both new and established scholars in the West and the East on all aspects of the Chinese economy, including studies of business and economic history. 1 The Growth of Market Relations in Post-Reform Rural China A micro-analysis of peasants, migrants and peasant entrepreneurs Hiroshi Sato

10 The Theory of the Firm and Chinese Enterprise Reform The case of China International Trust and Investment Corporation Qin Xiao

2 The Chinese Coal Industry An economic history Elspeth Thomson

11 Globalisation, Transition and Development in China The case of the coal industry Huaichuan Rui

3 Sustaining China’s Economic Growth in the Twenty-First Century Edited by Shujie Yao and Xiaming Liu 4 China’s Poor Regions Rural-urban migration, poverty, economic reform and urbanisation Mei Zhang 5 China’s Large Enterprises and the Challenge of Late Industrialization Dylan Sutherland 6 China’s Economic Growth Yanrui Wu 7 The Employment Impact of China’s World Trade Organisation Accession A.S. Bhalla and S. Qiu 8 Catch-Up and Competitiveness in China The case of large firms in the oil industry Jin Zhang 9 Corporate Governance in China Jian Chen

12 China Along the Yellow River Reflections on rural society Cao Jinqing, translated by Nicky Harman and Huang Ruhua 13 Economic Growth, Income Distribution and Poverty Reduction in Contemporary China Shujie Yao 14 China’s Economic Relations with the West and Japan, 1949–79 Grain, trade and diplomacy Chad J. Mitcham 15 China’s Industrial Policy and the Global Business Revolution The case of the domestic appliance industry Ling Liu 16 Managers and Mandarins in Contemporary China The building of an international business alliance Jie Tang

17 The Chinese Model of Modern Development Edited by Tian Yu Cao

30 Eliminating Poverty Through Development in China China Development Research Foundation

18 Chinese Citizenship Views from the margins Edited by Vanessa L. Fong and Rachel Murphy

31 Good Governance in China – A Way Towards Social Harmony Case studies by China’s rising leaders Edited by Wang Mengkui

19 Unemployment, Inequality and Poverty in Urban China Edited by Shi Li and Hiroshi Sato

32 China in the Wake of Asia’s Financial Crisis Edited by Wang Mengkui

20 Globalisation, Competition and Growth in China Edited by Jian Chen and Shujie Yao

33 Multinationals, Globalisation and Indigenous Firms in China Chunhang Liu

21 The Chinese Communist Party in Reform Edited by Kjeld Erik Brodsgaard and Zheng Yongnian

34 Economic Convergence in Greater China Mainland China, Hong Kong, Macau and Taiwan Chun Kwok Lei and Shujie Yao

22 Poverty and Inequality Among Chinese Minorities A.S. Bhalla and Shufang Qiu 23 Economic and Social Transformation in China Challenges and opportunities Angang Hu 24 Global Big Business and the Chinese Brewing Industry Yuantao Guo 25 Peasants and Revolution in Rural China Rural political change in the North China Plain and the Yangzi Delta, 1850–1949 Chang Liu 26 The Chinese Banking Industry Lessons from history for today’s challenges Yuanyuan Peng 27 Informal Institutions and Rural Development in China Biliang Hu 28 The Political Future of Hong Kong Democracy within Communist China Kit Poon 29 China’s Post-Reform Economy – Achieving Harmony, Sustaining Growth Edited by Richard Sanders and Chen Yang

35 Financial Sector Reform and the International Integration of China Zhongmin Wu 36 China in the World Economy Zhongmin Wu 37 China’s Three Decades of Economic Reforms Edited by Xiaohui Liu and Wei Zhang 38 China’s Development Challenges Economic vulnerability and public sector reform Richard Schiere 39 China’s Rural Financial System Households’ demand for credit and recent reforms Yuepeng Zhao 40 Sustainable Reform and Development in Post-Olympic China Edited by Shujie Yao, Bin Wu, Stephen Morgan and Dylan Sutherland 41 Constructing a Developmental Social Welfare System for All China Development Research Foundation 42 China’s Road to Peaceful Rise Observations on its cause, basis, connotation and prospect Zheng Bijian

43 China as the Workshop of the World An analysis at the national and industry level of China in the international division of labor Yuning Gao 44 China’s Role in Global Economic Recovery Xiaolan Fu 45 The Political Economy of the Chinese Coal Industry Black gold and blood-stained coal Tim Wright

48 China and the Global Financial Crisis A comparison with Europe Edited by Jean-Pierre Cabestan, JeanFrançois Di Meglio and Xavier Richet 49 China’s New Urbanization Strategy China Development Research Foundation 50 China’s Development and Harmonisation Towards a balance with nature, society and the international community Bin Wu, Shujie Yao and Jian Chen

46 Rising China in the Changing World Economy Edited by Liming Wang

51 Chinese Firms, Global Firms Industrial policy in the era of globalization Peter Nolan

47 Thirty Years of China’s Reform Edited by Wang Mengkui

52 The East Asian Computer Chip War Ming-chin Monique Chu

Routledge Studies on the Chinese Economy – Chinese Economists on Economic Reform 1 Chinese Economists on Economic Reform – Collected Works of Xue Muqiao Xue Muqiao, edited by China Development Research Foundation

5 Chinese Economists on Economic Reform – Collected Works of Lou Jiwei Lou Jiwei, edited by China Development Research Foundation

2 Chinese Economists on Economic Reform – Collected Works of Guo Shuqing Guo Shuqing, edited by China Development Research Foundation

6 Chinese Economists on Economic Reform – Collected Works of Ma Hong Ma Hong, edited by China Development Research Foundation

3 Chinese Economists on Economic Reform – Collected Works of Chen Xiwen Chen Xiwen, edited by China Development Research Foundation

7 Chinese Economists on Economic Reform – Collected Works of Wang Mengkui Wang Mengkui, edited by China Development Research Foundation

4 Chinese Economists on Economic Reform – Collected Works of Du Runsheng Du Runsheng, edited by China Development Research Foundation

8 Chinese Economists on Economic Reform – Collected Works of Yu Guangyuan Yu Guangyuan, edited by China Development Research Foundation

Yu Guangyuan

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Chinese Economists on Economic Reform – Collected Works of Yu Guangyuan Yu Guangyuan Edited by China Development Research Foundation

First edition of A Collection of Yu Guangyuan’s Works on Economic Reform, written by Yu Guangyuan, ISBN: 978-7-80234-199-9, published 2008 by China Development Press. This edition published 2014 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon, OX14 4RN and by Routledge 711 Third Avenue, New York, NY 10017 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2014, selection and editorial material, China Development Research Foundation; individual chapters, Yu Guangyuan. The right of the editor to be identified as author of the editorial material, and of the author for the individual chapters, has been asserted in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data Yu, Guangyuan, 1915– [Works. Selections. English] Chinese economists on economic reform. Collected works of Yu Guangyuan / Yu Guangyuan ; edited by China Development Research Foundation. — First edition. pages cm. — (Routledge studies on the Chinese economy. Chinese economists on economic reform ; 8) title: Collected works of Yu Guangyuan Includes bibliographical references and index. 1. China—Economic policy—1976–2000. 2. China—Economic conditions—1976–2000. I. Yu, Guangyuan, 1915– Yu Guangyuan gai ge lun ji. English. II. China Development Research Foundation. III. Title. IV. Title: Collected works of Yu Guangyuan. HC427.92.Y77913 2014 338.951—dc23 2013019615 ISBN: 978-0-415-85755-0 (hbk) ISBN: 978-0-203-79720-4 (ebk) Typeset in Times New Roman by Apex CoVantage, LLC

Contents

Series preface About the author Author’s preface 1 Speech at opening ceremony of Fourth Symposium on Theory of Distribution According to Work (October 1978)

xi xii xiii

1

2 I return from a visit to Yugoslavia (1978)

11

3 Socialist development stages and economic restructuring (1978)

18

4 Suggestions on China’s economic restructuring (1979)

22

5 Socialist economic goal theory (1979)

40

6 Basic attitude toward socialist ownership (1979)

48

7 Economic and social development strategy (February 1981)

52

8 Why gross national product cannot accurately mirror a country’s economic life (February 1981)

56

x

Contents

9 The environment should be quantitatively measured (1981)

64

10 Develop Marxism as science for socialist construction (March 1983)

69

11 Regional Strategy in National Strategy and Regional Strategy in Regional Strategies (May 1984) 12 The economy in the primary stage of socialism (November 27, 1986)

79

87

13 Historical fate of the ‘Theory of New Democratic Society’ (November 25, 1988)

115

14 Modern market economy is needed (June 8, 1992)

121

15 China’s private and public ownerships in history and at present (July 15, 1993) Index

126

131

Series preface

This series of books is authored by economists who were witnesses to and direct participants in China’s ‘reform and opening up’ over the past three decades. Nearly three generations of Chinese economists are represented, for they include both older and younger economists. Articles that were selected display the characteristics of the period in which they were written. Most exerted a direct impact on China’s economic-reform policies, whether they were policy recommendations, theoretical works, or research reports. Most of these works are being published for the first time. The China Development Research Foundation organized and published this series in Chinese in 2008, to commemorate the thirtieth anniversary of the start of China’s ‘reform and opening up’ and to further promote this historic social transformation. Authors and their descendants responded enthusiastically to the proposal. All the articles were edited and finalized by the authors themselves, except for those of the late Xue Muqiao and Ma Hong, which were edited and finalized by members of their families. This series has been broadly welcomed in China. I am confident that this English edition will be helpful in giving foreign readers a better understanding of China’s economic-reform policies. I gratefully acknowledge the contribution of the World Bank, Ford Foundation, and Cairncross Foundation, who supported the translation and publication of this series in English. I would like to thank Justin Yifu Lin, Pieter Bottelier, Peter Geithner, David Dollar, and other experts for their valuable support and candid comments. My gratitude also goes to Martha Avery for her excellent translating and editing. Wang Mengkui Chairman, China Development Research Foundation

About the author

Yu Guangyuan, born in Shanghai on July 5, 1915, is a famous Chinese philosopher and economist. Previously named Yu Zhongzheng, he participated in the December 9th Movement in Beiping in 1935. He graduated from the physics department of Tsinghua University in 1936 and joined the Communist Party of China in 1937. After that, he was long engaged in the Party’s youth work, cultural and educational work, Marxist theoretical research work, and science management work. From 1948 to 1975, he worked at the Publicity Department of the CPC Central Committee, serving respectively as the head of the science section and the theoretical education section. During this period, he also worked concurrently as the editorin-chief of Study magazine, the deputy director of the Experts Bureau of the State Council and a member of the Central Science Group. He became the vice chairman of the State Science and Technology Commission in 1964, the head of the Political Research Office of the State Council in 1975, and the first director of the Economic Research Institute of the State Planning Commission in the same year. He became the vice president of the Chinese Academy of Social Sciences, the director of the academy’s Marxist Research Institute, and the vice chairman of the State Science and Technology Commission in 1977. At the same time, he was a member of the general editorial board of the first edition of the Encyclopedia of China and the deputy head of the general editorial board of the second edition of the Encyclopedia of China. He became an adviser to the Chinese Academy of Social Sciences in 1982 and served as a member of the Central Advisory Commission of the 12th and 13th CPC Central Committee from 1982 to 1992. He was elected a member of the Academic Committee of the Academy of Philosophy and Social Sciences of the Chinese Academy of Sciences in 1955, and an honorary member of the Academic Committee of the Chinese Academy of Sciences in 2006.

Author’s preface

The articles included in this collection contain my views on some aspects of China’s economic restructuring. To preserve the footprints of the times, they are arranged in the order of time. But this order can cause some confusion to the veins of issues and contents. To overcome this drawback, I deem it necessary to write a preface based on contents. Most of the articles included here were written two or three decades ago, in the late 1970s and 1980s. If the backgrounds of some articles are not explained, the readers may feel them rather difficult to understand. In view of this consideration, I shall focus my preface on the backgrounds of some issues discussed.

I. Discussions on theory of distribution according to work My speech at the Fourth Symposium on the Theory of Distribution According to Work is included in this collection. In all, five symposiums were organized on the theory of distribution according to work, with the first being held in 1977. The basic issue at the time was to emancipate the mind and shake off the mental yoke imposed by the ‘Cultural Revolution.’ I was rehabilitated at the end of the ‘Cultural Revolution’ and was assigned to work at the Political Research Office of the State Council headed by Comrade Deng Xiaoping. Our work was affected after the campaign to criticize Deng Xiaoping began in late spring and early summer in 1976, and began to change after the ‘Gang of Four’ was crushed in October of the same year. Despite the demise of the ‘Gang of Four,’ our efforts were still affected for a period due to the theoretical influence of the ‘Cultural Revolution.’ Most publications continued to dwell on the theories thriving during the ‘Cultural Revolution.’ As a result of the long ideological shackles and the ruthless crackdown on independent thinkers, many people dared not to think or speak. If this status quo was not changed, economic and political life could not thrive. In February 1977, I proposed to hold a series of academic discussions so as to remove the existing theoretical barriers. So, some people in the Beijing economic community organized a meeting to consider what issues would be discussed first in view of the theories propagated by the ‘Gang of Four.’ The conclusion was that discussions would begin with three issues. The first issue was distribution according to labor, the second issue was

xiv Author’s preface the relations between politics and economy and between revolution and production, mainly targeted on the repudiation of the theory of the unique importance of productive forces by the ‘Gang of Four,’ and the third issue was targeted on some issues discussed in Socialist Political Economics compiled in Shanghai under the instructions of the ‘Gang of Four.’ During the ‘Cultural Revolution,’ distribution according to labor was fiercely repudiated as a ‘bourgeois right.’ Yao Wenyuan wrote a long article, which was widely publicized by newspapers and periodicals. Distribution according to labor was billed as a soil for the new bourgeoisie, as something of capitalism and as the origin of sins. These allegations constituted an important theoretical foundation for the Party’s basic line put forward by Comrade Mao Zedong for the socialist period. Mao Zedong based this basic line on the following inference: during the historical period of socialism there existed classes, class contradictions, class struggles, the struggle between the socialist and capitalist roads, and the danger of a capitalist comeback. Then how could the socialist period have the bourgeoisie and capitalism? There must be an origin, and distribution according to labor became the origin. Accordingly, ‘all-around dictatorship’ became tenable. Distribution according to labor became a political taboo, and nobody dared to closely link remuneration with labor in economic activities. Bonuses were abolished, piecework wage was abolished, and timework wage also lost its meaning of labor measurement. Obviously, production was unable to increase if this mental yoke was not shaken off. While most economists were sure about this, many had misgivings about changes. This was because it was not only an issue of economic theory, but also the greatest political issue as it involved the so-called ‘Party’s basic line for the socialist period.’ For some time after the demise of the ‘Gang of Four,’ it was not clear whether the political line would change. This explained why people had misgivings. In fact, the political report delivered at the 11th Party Congress in August 1977 continued to affirm the theory of ‘continued revolution under the proletarian dictatorship’ and the basic line propagated in the ‘Cultural Revolution.’ Although the discussions in the economic community were directly targeted on the allegations of the ‘Gang of Four,’ they encountered the deeper obstacle of the ‘two whatevers.’ What was discussed seemed to be a specific issue of economic theory, but what was at stake was how to emancipate the mind. At that time, the discussions on the criteria for truth were not yet unfolded, and the obstacle of the ‘two whatevers’ was not yet removed from philosophy. However, the economic community was in fact touching this issue. The first symposium on the theory of distribution according to labor was held on April 13 and 14, 1977, with the participation of over 100 people from over 30 institutions. They included the Economic Research Institute of the State Planning Commission, the Economic Research Institute of the Chinese Academy of Social Sciences, the Party School of the Beijing Municipal Party Committee, Peking University, Beijing Normal University, Beijing Institute of Economics, the State Bureau of Labor, and Nankai University. I was then working as the director of the

Author’s preface

xv

Economic Research Institute of the State Planning Commission. The symposium discussed the relations between distribution according to labor and material incentive and the issue of whether distribution according to labor was the economic basis for the appearance of the bourgeoisie and capitalism. The participants voiced their views, and differences began to appear. The most sensitive difference was on the issue of whether distribution according to labor was the economic basis for the appearance of the bourgeoisie and capitalism. But this was not the most discussed issue, because political obstacles still existed and many people were fearful. I shared the view of some economists that it was theoretically wrong to say distribution according to labor was the economic basis for the appearance of the bourgeoisie and capitalism. This theory was precisely an important foundation for the ultraleftist political line. So as far as distribution according to labor was concerned, this was where the core theoretical issue lay. For this reason, special deliberations were held on this issue afterward and preparations were made for the next symposium. The second symposium was held on June 22 and 23 of the same year, attracting over 400 people from over 100 institutions, many of them from outside Beijing. At this symposium, many economists repudiated from different angles the allegation that distribution according to labor gave birth to the bourgeoisie and capitalism. Of course, some people had the opposite views. This symposium attacked one ‘taboo’ and enlivened the atmosphere in the theoretical community. The third symposium, held from late October to early November of 1997, represented a climax of theoretical debates. In addition to over 500 people from 135 Beijing-based institutions, over 300 participants were from over 130 institutions in 23 provinces, municipalities, and autonomous regions. Naturally, many of them came to listen, rather than to speak. The issues discussed at this symposium were deeper and more wide ranging. In addition to the issues mentioned above, they also included the equality and inequality in distribution according to labor, the difference between distribution according to labor and the ‘bourgeois right,’ and the forms of distribution according to labor and labor remuneration. Compared with the discussions at previous symposiums, the discussions on issues such as piecework wage and bonuses at this symposium were more technical and more economic. However, the issues that look highly technical today were highly political at the time. Some economists proposed that the reputation of bonuses should be rehabilitated and the bonus system be reinstated. This proposal caused quite a stir then. People who have not experienced that period find it very difficult to understand, but the ideological atmosphere then was really so. While hectic debates were going on in the economic community, what appeared in newspapers and magazines was largely the same thing propagated in the ‘Cultural Revolution.’ This situation continued till May 5, 1978, when the People’s Daily issued a commentary on distribution according to labor, which signaled the official rehabilitation of the reputation of this mode of distribution. That article was organized by the Research Office of the State Council and written by Feng Lanrui. The predecessor of this office was the Political Research Office of the State Council before the campaign to repudiate Deng Xiaoping. The

xvi Author’s preface office was abolished for some time after the beginning of the campaign and was retained and renamed the Research Office of the State Council after the collapse of the ‘Gang of Four.’ After this article was written, it was examined by Comrade Deng Xiaoping and was revised according to his advice before it was published by the People’s Daily. It was questioned by people sticking to the ‘two whatevers.’ On May 11, the Guangming Daily published an article entitled ‘Practice Is the Sole Criterion for Testing Truth.’ This article sparked hectic discussions in the academic community and echoes from provincial and municipal leaders. The issue of ‘two whatevers’ was solved ideologically and politically only after a central working conference was held in November 1978.

II. Diverse models of socialism The collection contained two articles about my visit to Eastern Europe: ‘I Return from a Visit to Yugoslavia’ and ‘Suggestions on China’s Economic Restructuring.’ After World War II, the Communist League of Yugoslavia seized power and proclaimed Yugoslavia a socialist country. Later, the League had differences with Joseph Stalin and was expelled from the socialist camp. Accordingly, the Communist Party of China also refused to recognize Yugoslavia as a socialist country and suspended its relations with the Communist League of Yugoslavia. In the 1950s and 1960s when the Chinese and Soviet parties were engaged in a polemic, we still regarded Yugoslavia as a negative example. In 1978, a delegation of the Party Central Committee visited Yugoslavia. The delegation was headed by Li Yimang, with me and Qiao Shi being his deputies. Our mission was to conduct field inspections and contacts and then submit a report to the Party Central Committee on the basic conditions of that country and on whether interparty relations should be resumed. Before that, I had contacted some economists from the Soviet Union and Eastern European countries for their views on reform but never conducted any field inspection. Yugoslavia’s practice left a deep impression on us. From this inspection, we drew a conclusion that socialist countries could have diverse economic models. The delegation submitted a report to the Party Central Committee after the visit. The report held that Stalin tried to impose the Soviet economic system and model on Yugoslavia but Joseph Tito rejected them, which led to a deterioration of the Soviet-Yugoslav relations, and that Yugoslavia was a socialist country and the Communist League of Yugoslavia was a party upholding socialism. Based on this report, the Party Central Committee decided to recognize Yugoslavia as a socialist country and to resume its relations with the Communist League of Yugoslavia. That meant that the Party Central Committee changed its views on the diversity of socialist models. In August 1978, the State Council convened a meeting to discuss principles. The meeting, attended by dozens of people, was a very important one. To me, this meeting could be regarded as a landmark event indicating that the senior Party officials began to pay much attention to reforms. The meeting was initiated by Comrade Deng Xiaoping and was chaired by Comrade Li Xiannian. Deng Xiaoping was reinstated at the Third Plenary Session of the 10th Party Central

Author’s preface

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Committee held in the second half of 1977 and was elected vice chairman of the Party Central Committee and a member of the Standing Committee of the Party Central Committee at the First Plenary Session of the 11th Party Central Committee. At this principle-discussing meeting of the State Council, several things deserved attention. One was the result of the inspection of Yugoslavia, which enabled us to know socialism could have diverse models and represented an ideological shake-off of the party from the shackles of the Soviet model. At this meeting, some people also questioned whether Yugoslavia was a socialist country, but most people favored the opinion of the delegation and the Party Central Committee. Nevertheless, many people indicated they could not accept the Yugoslav ‘autonomy’ system. In fact, our reform later did not follow that road. Another noteworthy report was presented by Gu Mu after a visit to six Western European countries. In the past, our ideology always repudiated capitalism. But this report held that the capitalist countries in Europe had things that we could draw from. For example, French farmers could not give their own farms as they liked to their sons for operations. To ensure the operations of the farms, the French government stipulated that if the sons wanted to operate the farms of their fathers, they must first obtain a graduation certificate from an agricultural school, practice two years on other farms, and pass tests before they were qualified to inherit their fathers’ farms. This enabled us to know that capitalist countries had some good systems from which we should learn. The article entitled ‘Act According to Objective Economic Law’, written by Hu Qiaomu, me, and Ma Hong in the name of the Research Office of the State Council, also drew attention at the meeting. And some speeches also caused repercussions. Yao Yilin said we should deal with capitalist countries, know capitalism, and be good at dealing with them. Citing a phrase from Vladimir Lenin, he said one had to learn how to howl like a wolf among wolves. He was very convincing to many comrades present at the meeting. This meeting lasted till the end of September, after which a report was submitted to and was highly valued by the Party Central Committee. Deng Xiaoping and Li Xiannian valued the meeting highly and in particular, Ye Jianying, vice chairman of the Party Central Committee, spoke highly of the meeting and described it as a very successful one. After the Third Plenary Session of the 11th Party Central Committee, the Central Financial and Economic Commission was in charge of concrete reform work. Four groups were set up to study the reform-related specific issues. One group, headed by Zhang Jinfu, would study the issue of systems; one group, headed by Wang Daohan, would study the issue of import; one group, headed by Xue Muqiao, would study the issue of structures, and one group, headed by me, would study theories and methods. At the end of 1979, the Party Central Committee dispatched me to head a delegation to visit Hungary for a reform inspection. This inspection deepened our understanding that socialism could have diverse models, and enabled us to have more understanding of many concrete issues in the course of reform.

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Author’s preface

III. Definition of productive forces and reform of ownerships After the demise of the ‘Gang of Four,’ one important theoretical work was to clear up confusions and bring things back to order. From the theoretical perspective, I believed that a clear definition of the productive forces constituted one important step for China to move to reform from bringing things back to order. The ‘Cultural Revolution’ repudiated the theory emphasizing the unique importance of productive forces and advocated a preference for socialist weeds instead of capitalist seedlings. The consequences were extremely serious. This theory was repudiated because Lenin had repudiated the theory of productive forces. In fact, this ground was questionable. What was criticized by Lenin was that Suhanov and other people repeatedly emphasized the ‘undisputable view’ that socialism needed certain productive forces rather than understood the history’s ‘particularity manifested in the form or sequence of development.’ Some Soviet scholars inaccurately labeled the view criticized by Lenin as the ‘theory of productive forces.’ It was even more inappropriate to use this to repudiate the so-called theory emphasizing the unique importance of productive forces. My view is that in philosophy, the theory recognizing material as being primary is called materialism, and the theory recognizing consciousness as being secondary is called idealism. So the theory recognizing productive forces as playing the decisive roles in social development is primary and should be called the theory emphasizing the unique importance of productive forces. And this theory is precisely an important view of Marx’s historical materialism. For some time after the downfall of the ‘Gang of Four,’ many people still regarded as a derogatory term the theory emphasizing the unique importance of productive forces and used the term so in some documents. People still dared not to truly consider system choice from the perspective of whether systems are conducive to the development of productive forces. I believed this was a problem that must be solved. In the winter of 1976 during the second conference on learning from Dazhai in agriculture, I saw the documents still treated this theory as an erroneous view, and I called the comrades who were drafting the document to indicate my disapproval. After my view was reported to the Central leaders, I was summoned by them to explain why the theory should not be repudiated. And I did as required. I said I was a Marxist, and I would prefer to be called a historical materialist. The productive forces were a decisive factor to social development, which was a basic principle of historical materialism. And this principle could be shortened as a theory emphasizing the unique importance of productive forces. I did not agree that the name of the theory should be regarded as a derogatory term or that the theory should be repudiated any more. I said that in order to show my firmness in this regard, I could be called a ‘theoretician emphasizing the unique importance of productive forces.’ Later on, I did some research on the theory along with Lin Zili and some other comrades. They wrote a book to repudiate the repudiation of the theory. This work coincided with the discussions on distribution according to labor and was an important aspect of the then theoretical debates.

Author’s preface

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In 1979, I wrote an article entitled ‘Basic Attitude Toward Socialist Ownership.’ In that article, I said a Marxist’s attitude toward ownership was: we support whatever can best promote the development of productive forces; we do not support whatever cannot effectively promote the development of productive forces; we firmly oppose whatever cannot promote the development of productive forces. Of course, what I said was targeted on something. I knew many officials had a different criterion on their mind, namely being ‘large’ and ‘public.’ This criterion was that the larger and more public the owner was, the better it would be. According to this criterion, being ‘large’ and ‘public’ should be unconditionally used as a criterion to evaluate the superiority of various ownerships and to formulate the ownership policy no matter how high the level of productive forces was and no matter which ownership could best promote the development of productive forces. For example, a popular opinion among some officials was that state ownership was unconditionally superior over collective ownership and that collective ownership was unconditionally superior over private ownership. Within the scope of collective ownership, they believed that commune ownership was unconditionally superior over production brigade ownership and that brigade ownership was unconditionally superior over production team ownership. And within the scope of production team ownership, they believed that the work-point system not linking remuneration with output was superior to the responsibility system linking remuneration with output. If this sequence of ownership superiority was not cast away, reform could hardly proceed. Many people still failed to have a clear basic attitude toward ownership even if they realized the necessity of economic restructuring. I said in 1980 that after we made up our minds to reform, we still had to solve issues at three levels. The issue at the first level was to define the direction of the reform. In defining the direction of the reform, the first issue was the definition of a form and a structure for socialist ownership. The issue at the second level was the definition of the policies on various nonsocialist economic components. The acceptable term at the time was the reform of economic management system instead of ownership reform. To this term, different people had different interpretations. While some people accepted and interpreted the term from the perspective that the management system could be divorced from the ownership system, others did so from the perspective that our reform was only designed to change management expertise and tools instead of ownerships. In the late 1970s and early 1980s, the economic community voiced its opinions and conducted discussions on the reform of the form and structure of ownership. Some economists put forward some important views, such as the necessity of reforming the state ownership. But they encountered the suppression of the people in charge of ideological work. This state of affairs continued for quite a few years. Discussions on ownership reform (now the reform of property rights) enlivened again in the late 1980s. The political background indicated that the enlivened discussions were related to the affirmation of the development of diverse economic components by the Sixth Plenary Session of the 12th Party Central Committee

xx Author’s preface and the 13th Party Congress. After the Third Plenary Session of the 11th Party Central Committee, the coexistence of diverse economic components became a growingly obvious reality. But the implications of this coexistence could not be clearly stated in political and policy documents. And the term ‘diverse economic components’ was not used for some time. We can review the gradual evolution of the term in the Central documents. The report delivered at the 12th Party Congress held in 1982 devoted one paragraph to the ‘issue of upholding the leading position of the state economy and the developing diverse economic forms.’ The term ‘diverse economic forms’ mentioned the nonpublic economic components such as private economy, and also the nonstate, collectively owned economy. The emphasis was that the State-owned economy should not dominate all sectors and all industries. The word ‘forms’ was deliberately used to avoid the use of the word ‘components.’ The Decisions on Economic Restructuring adopted by the Third Plenary Session of the 12th Party Central Committee in 1984 still used the term ‘diverse economic forms’ and also ‘diverse operational modes.’ The document on the Seventh Five-Year Plan began to use ‘diverse ownership forms’ to replace the former term ‘diverse economic forms.’ The document said that through practice, the outline and road for establishing a Chinese-style socialist economic system had become clearer and clearer. This indicated the wording was deliberately chosen. The resolution adopted by the Sixth Plenary Session of the 12th Party Central Committee held in 1986 used the term ‘development of diverse economic components,’ which offered greater policy space for the development of the nonpublic economies. This term was reaffirmed by the 13th Party Congress. Of course, some economists had been using the term ‘diverse economic components’ earlier. The practical implications of these terms must be understood against the policyrelated linguistic environment and background. Why was the use of the term ‘diverse economic components’ avoided repeatedly when ‘diverse economic components’ had already become a reality after the Third Plenary Session of the 11th Party Central Committee? There were reasons. There were a large number of nonpublic economies and a certain amount of public economy in the revolutionary base areas before the founding of New China. We used the term ‘existence of diverse economic components’ and called it the ‘new democratic economy.’ During the period from the founding of New China to the transformation of private ownership, we also used the term and called that period a period of transforming the private ownership of capital goods or a transitional period from new democracy to socialism. As a result, many people had the concept in their minds that using the term ‘diverse economic components’ meant a recognition that China was still in the new democratic period or the transitional period. That was unacceptable to them. Consequently, a phenomenon appeared: on the one hand, the Central and regional governments had in fact adopted many policies to enable the development of diverse economic components, and the diverse economic components had become a reality; on the other, document wording first avoided the term in order to avoid political criticisms or disputes but later gradually recognized the existence and development of diverse economic components. Documents were often products of compromises.

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In fact, ever since the appearance of properties, a society has always been a society featuring the coexistence of private and public ownerships. The slave society had both the private properties owned by slave owners and the public properties owned by the country of slave owners. The feudal society had both the private properties owned by the feudal lords and the public properties owned by the country of feudal lords. The capitalist society also had both private and public properties. The socialist society is also a society having both private and public ownerships. Only when both public and private properties are deemed as being sacred and inviolable can a socialist society long exist and develop. I had considered this issue for a long time, but began to write articles to explain it only in the 1990s. The two articles on ownerships included in this collection discuss the backgrounds of these articles.

IV. Discussions on objectives of production In the spring of 1978, I and some economists began to discuss the purpose of socialist production. The discussion was targeted on two things. The first thing was the method China learned from the Soviet Union in the early years of New China to plan and arrange social production. This method was based on the output growth targets of several main products. The second thing was the planning and arrangement of the whole social production in the previous stage of China’s reform according to the sequence of ‘heavy industry—light industry—agriculture.’ The article dealing with the theory of socialist economic targets, included in this collection, reflected my thoughts in this discussion. The article discussed the method of arranging production from the end of final products and the basis for this method. At first, the discussion involved only the method of economic planning and arrangement, instead of economic restructuring. In the ensuing research, however, I felt more and more strongly that it was a matter of utmost importance to handle the relations between economic restructuring and economic construction and development. In this process, it was imperative to properly handle the relations between the development of production and the improvement of the people’s living standard, which were already involved in the discussions of the purpose of production. When these relations were not properly handled, economic construction could hardly advance smoothly, and economic restructuring could hardly be successful if attention was paid only to economic growth to the neglect of the improvement of the people’s living standard. From the discussions on the purpose of socialist production derived the research and discussions in the early 1980s on China’s ‘economic and social development strategies.’ The article ‘Why Gross National Product Cannot Accurately Mirror a Country’s Economic Life’ was a written speech delivered at the first session of the forum on economic and social development strategies, in which several theoretical and practical issues concerning the strategic goals of China’s economic and social development were raised.

xxii Author’s preface The environmental issue was closely related to the quality of the people’s life and the economic development and received much attention in the research on the economic and social development strategies. The article ‘The Environment Should Be Quantitatively Measured’ discussed this in conjunction with the defects of the indicator of gross national product.

V. ‘Commodity economy’ and ‘market economy’ At the third symposium on distribution according to labor, commodity production and exchange by means of money were discussed along with distribution according to labor. In the early 1980s, many people in the economic community proposed that China should develop commodity production and commodity exchange. Some people used the term ‘commodity economy’ to emphasize the close and systematic links between this economy and commodities. For example, Zuo Jiong from Guangdong was one of the first and firm economists advocating the development of commodity economy. Some economists from Beijing and other places also wrote articles on the issue. In 1982, some people in charge of ideological work believed the advocacy for the development of ‘commodity economy’ was ‘spiritual contamination’ and it was not allowed to be published by newspapers and magazines. One unit prepared an internal document classifying the people advocating the development of commodity into four categories. The first category was ‘correct’ and included very few people. While the second and third categories were problematic, the fourth category was ‘seriously problematic’ and included those who actively advocated the development of commodity economy. During this period, those advocating the development of commodity economy were suspected of causing ‘spiritual contamination.’ Even the use of the term ‘commodity economy’ became a very sensitive issue. The tight control over ‘commodity economy’ caused some pressure on the academic community. Some people bypassed the term ‘commodity economy’ and dealt with it in a roundabout way. But some economists continued to use the term and voiced their opinion in various ways to prove the necessity of developing commodity economy. In 1984, the Third Plenary Session of the 12th Party Central Committee adopted the Decisions on Economic Restructuring. The most important part of this document was to affirm the development of commodity economy, and the economists no longer had to bypass the term ‘commodity economy.’ With regard to market economy, my view was that market economy and commodity economy were synonymous and should not be deliberately separated. In the 1980s, I used the two terms in a mixed way in some of my speeches. Some economists advocating for market-oriented reforms believed that the term ‘market economy’ was more accurate than the term ‘commodity economy’ and could better embody the direction of our reforms. So they especially emphasized the use of the term ‘market economy.’ Some others favored the use of developing commodity economy instead of developing market economy, fearing that developing market economy could mean a deviation from socialism. Some people opposed

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the term of developing commodity at first but gave in later after the document of the Party Central Committee affirmed the development of commodity economy. But they were still against the use of the term ‘market economy.’ Although there were different views over the issue for some time, some economists and economic workers were actually talking about the development of a market economy. The atmosphere changed somewhat in about two years between the early 1990s and the publication of the remarks made by Deng Xiaopoing during his south China inspection. The advocacy for the development of a market economy seemed to have some political risks, and many people avoided using the term ‘market economy.’ This state of affairs began to change after the publication of Deng Xiaoping’s remarks in 1992. I was staying at Beijing Hospital when I read Deng Xiaoping’s remarks, and I felt the remarks were extremely important. Under the then conditions, the remarks played very important roles in sticking to the reform direction and furthering the reform. In his remarks, Xiaoping affirmed socialism could practice market economy, thus freeing the economists and economic workers advocating the development of market economy from political pressure. In fact, when I began to use the term ‘socialist market economy’ in the mid-1980s, I regarded the term as being synonymous with ‘socialist commodity economy’ and did not think it necessary to distinguish them. Of course, ‘market economy’ was an internationally accepted term and was quite understandable, while ‘socialist commodity economy’ required lots of explanations and was difficult to understand. For this reason, my first use of the term ‘socialist market economy’ was targeted on foreigners. In short, after socialist commodity economy became the reform direction, I did not think it necessary to highlight the term ‘market economy.’ But I began to change my view in the early 1990s, thinking it necessary to advocate for a socialist ‘market economy.’I made this change because some people treated the advocacy for the development of market economy as something that should be suppressed for political considerations. In that case, using the term ‘market economy’ right away and advocating for the development of market economy became extremely necessary. Of course, this was what I had in mind. Other economists advocating the use of the term ‘market economy’ might have other considerations. I compiled the articles I wrote in 1992 into a collection, entitled Players of Socialist Market Economy (reading notes), from which I have selected one article to be included in the current collection. My view on the development of commodity economy can also be found in some other articles.

VI. Research on the stages of socialism The stages of social development had been an interesting issue to me. When organizing discussions on the theory of distribution according to labor, I emphasized that when we studied a host of issues, we must have a starting point: we must recognize that China was an undeveloped socialist country. In 1979, two economists summarized China’s mistakes in the economic system and economic policy and attributed these mistakes to the overestimation of

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China’s social development. Accordingly, they proposed that studies be made on the historical development stages of China’s socialism and emphasized adequate attention should be paid to the gap between China’s current stage of social development and the socialist society described by classical writers. They held that China was still in a stage of transition to socialism. The leaders in charge of ideological work regarded this article as negating the socialist system China had already established, and they intended to organize repudiation of it. But this approach was disapproved of by many economists. Even some of the economists who disapproved of this article were unwilling to repudiate this article at this time and against this backdrop. I was against that repudiation. I believed that the two economists raised an important issue, and that we must study what development stage China’s socialism was in. The repudiation failed to move on, because the economic community failed to respond. Likewise, the normal discussions on what stage the Chinese society was in failed to unfold, because of the existence of the ‘repudiation.’ But I deemed it important to clarify what stage China was in and to understand the gap between the Chinese society and the socialism described by classical writers as having highly developed productive forces and having eliminated commodity production. Therefore, in 1981 when I was participating in drafting the Resolutions of the CPC Central Committee on the Party’s Historical Issues since the Founding of New China, I insisted the document should include the judgment that China was still in the ‘primary stage of socialism’ so as to more profoundly understand the detours China had made. Some comrades did not agree with my proposal and we had an argument. In the end, the concept of a ‘primary stage of socialism’ was included in the document. Accordingly, the study of ‘primary stage’ was ‘legalized.’ The 12th Party Congress in 1982 touched on the issue of ‘primary stage’ again. The report to the Congress said, ‘China’s socialist society is still in the primary stage of development, and its material civilization is still undeveloped.’ The document began to mention some features of the ‘primary stage.’ In September 1986, the Sixth Plenary Session of the 12th Party Central Committee adopted the Resolutions of the CPC Central Committee on the Guiding Principles on the Construction of Socialist Spiritual Civilization. I participated in the drafting of this document, which highlighted the ‘primary stage of socialism’ instead of merely mentioning it. The resolution said: China was still in the primary stage of socialism and accordingly it must not only practice distribution according to labor and develop a socialist commodity economy and competition, but also develop diverse economic components for a considerably long historical period and under the precondition that public ownership must play a leading role and encourage some people to get rich first in order to realize common prosperity. This was a summary of the understanding of the stage China’s socialism was in. Although the resolution dealt only with the construction of spiritual civilization, the inference on the primary stage of socialism was put forward as a guiding principle of overall significance.

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But the Resolutions adopted by the Sixth Plenary Session after all dealt with a partial issue of the Party’s work, namely the guiding principle for the construction of spiritual civilization. The ‘primary stage of socialism’ was in fact an issue of greater overall significance. For this reason, many people held when drafting the political report to the 13th Party Congress after the closing of the Sixth Plenary Session that the statement that ‘China is in the primary stage of socialism’ should be taken as the main theme of the report and be explained in detail. I participated in these discussions and endorsed this position. The report prepared later precisely took the ‘primary stage’ as the main theme that ran through the explanations of the economic development strategy, the economic and political restructuring, and Party building. Did the affirmation of the statement that ‘China is in the primary stage of socialism’ mean that socialism without market economy and diverse economic components, as we had pursued in the past, represented a higher stage? I did not think so. The conclusion reached in the 1950s was not based on a scientific analysis of the social productive forces and other leading factors affecting the process of social development. We could not know what the higher stage we would enter looked like until we had made a scientific analysis based on practical conditions. This collection includes my article exclusively devoted to the discussion on the ‘economy in the primary stage of socialism.’ Besides, it includes another article devoted to the discussion on the relations between new democracy and the primary stage of socialism, which was taken from my book From the ‘Theory of New Democratic Society’ to the ‘Theory of Primary Stage of Socialism.’

VII. Land economics and the study of regional development strategies My inspections in various parts of the country beginning in the early 1980s constituted a very important part of my study of China’s reform and development. The practical activities of reform and development prompted me to think about many issues. The study of land economics and the study of regional development strategies were two of the efforts I advocated at the time. I noticed that economic studies targeted on land were already under way but failed to become a science. That was why I advocated for the establishment of land economics, devoted to the study of the protection, development, and utilization of land resources from an economic perspective. This collection includes my speech at the first academic symposium on land economics, which shed some light on my ideas. Later on, I, along with other scholars from the China Society on Land Economics, inspected Gansu, Qinghai, Guizhou, Jiangxi, and other provinces and the basins of the Pearl River and the Wujiang River. We accumulated some academic data and ideas. With regard to China’s economic restructuring and economic development, I very much emphasized regional initiative and regional experience. Based on this idea, I also worked hard to push forward the study of regional economic development strategies on the basis of studying the general issues concerning economic

xxvi Author’s preface development strategies. I believed that in China, the study of regional economic development strategies should emphasize two dimensions: regional strategy in national strategy and regional strategy in regional strategies. This collection includes one article on this subject.

VIII. Develop Marxism as science for socialist construction Economic restructuring posed many new issues to Marxists. The Marxism I understood was a science instead of a dogma. Science was a cognitive system that developed based on new facts. This type of Marxism must use its new scientific achievements that could best comply with the new times and use its new standpoints and new theories to enrich itself and to guide people in opening the new horizons of human history. Marxism must develop in many aspects. I believed that in the face of many new social realities of reform and construction, one important aspect of the development of Marxism was to develop Marxism as a science for socialist construction. Compared with the Marxism as a science for socialist revolution, the Marxism as a science for socialist construction should be unique. Yu Guangyuan May 29, 2008

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Speech at opening ceremony of Fourth Symposium on Theory of Distribution According to Work (October 1978)

It has been almost one year since the closing of the Third Symposium on Distribution According to Work. The symposium was followed by the third campaign criticizing the Gang of Four and a series of new theoretical and ideological achievements. The most important breakthrough is perhaps the proposition put forward by the philosophical community that practice is the only yardstick of truth. The scale and influence of the discussions are so huge that it has become one of the hottest issues at the moment. The reason is simple: now that the Gang of Four has been smashed and the modernization drive is politically possible, the whole nation is going all out to make Four Modernizations (i.e., modernization in industry, agriculture, national defense, and technology) a reality as soon as possible. A new historical period has dawned, in which the priority is to make China a powerful, modern socialist country by the end of this century. We need to quicken our pace toward modernization and study a multitude of new issues instead of resting on old conclusions. A fundamental principle underpinning Mao Zedong Thought is to combine the Marxist principles and the reality of the Chinese revolution, whose mission at present is to accelerate the modernization drive. The Chinese theoreticians should bear this principle in mind and combine Marxism, Leninism, and Mao Zedong Thought with the task of modernization in exploring new issues. This is also an important mark of whether Marxism, Leninism, and Mao Zedong Thought are taken as the guiding ideology, and therefore crucial for the modernization drive. It is under such circumstances that the philosophical debate on practice as the only yardstick of truth has received extensive attention. At the same time, another debate is sparked off in the jurisprudential circle about enhancing socialist democracy and legal system. The past year also witnessed great academic achievements in economics. Earlier on, economic debates had concentrated on a few overarching issues that played a great role in people’s thoughts and work, for example, distribution according to work, the relationship between politics and economy, and the rediscovered importance of productive forces (as the determinative factor of social development, which is one fundamental thesis of historical materialism). The discussions became more specific and also more systematic over the past year. For example, surrounding the principle of distribution according to work, economists began to talk about forms of remuneration, the principle of material interests, and how people

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Speech at opening ceremony of Fourth Symposium

are paid according to their work in rural communes. Other hotly debated issues included socialist commodity production, law of value, introducing advanced foreign technologies, using foreign funds, technology-driven economy, and particularly agriculture and economic management. Vice Chairman Deng Xiaoping gives much attention to the last two issues, both deserving a careful study. The reason behind the recently intensified economic research is that the Central Party committee attaches great importance to economic issues and calls for an overhaul of the management system. In response, the economists should be well mobilized to study economic issues that have much to do with the reality. Since the ultimate purpose of economic research is to master and use well-proven economic laws to accelerate the realization of the Four Modernizations, discussions should not be limited to distribution according to work and a few other issues. More discussions, forums, and seminars will be needed in a wide range of issues in the future. Having said this, distribution according to work still remains an important topic for theoretical debate as many things about it are not clearly defined. We may break it down into smaller questions for the convenience of discussion and analysis, and any research into it should progress with the development of our thoughts and the needs of economic work. This conference has four questions on its agenda. The first is the law of distribution according to work. The second is the relationship between the principle of distribution according to work and the principle of material interests, or more specifically, whether the quality of enterprise management should be linked to distribution according to work and how to link them. The third is the forms of remuneration, especially bonuses and piece rates, related to distribution according to work. The fourth one is carrying out distribution according to work in rural areas. Some of these issues have been discussed before, but more research efforts are needed. This symposium can hardly present a satisfactory answer to all the problems, many of which may still await further discussions at the next conference. Distribution according to work is an issue that the Central Party committee is very concerned about. It decided last year that this distribution policy must be carried out and laid down ‘two priorities’ and ‘two supplements’ for this purpose; i.e., combining spiritual encouragement and material incentives and giving priority to spiritual encouragement, combining hourly rates and piece rates, and giving priority to hourly rates (hourly rates plus incentives). Then on several different occasions, the committee emphasized the importance of distribution according to work, seeing how some localities benefited from the policy while those that did not implement it performed poorly in production. Chairman Hua spoke repeatedly against the old policy of equal pay regardless of the amount and quality of the work done. The pay policy, pursued when the Gang of Four was in power, had provoked popular discontent as those who worked received less than those who did not, and those who did not work received less than those who engaged in street brawls. After the downfall of the Gang of Four, the performance-based distribution policy was implemented, but did not progress as fast as people expected over the past year. Many comrades voiced their discontent. I think it is an issue that deserves our attention.

Speech at opening ceremony of Fourth Symposium 3 Years ago, Lin Biao and the Gang of Four distorted many important rules of Marxism, Leninism, and Mao Zedong Thought. As a result, many cadres still have a lot of misconceptions about distribution according to work, working people’s material interests, etc. I think the reason behind slow progress in the new distribution policy is that some comrades are not completely emancipated from the Gang of Four’s pseudo-Marxism. Now distribution according to work must be implemented without delay. This requires further discussions so that we will pay sufficient attention to enterprises’ rights and interests in economic management, fully implement the policy and carry out the principle of quota management, and implement more pay for more work in agriculture. Next, I will talk about the symposium’s first three issues for your reference. First, I’ll discuss whether distribution according to work represents an objective truth, a law that cannot be changed at will. Some would doubt the objectivity of the distribution policy, saying: ‘We were doing without it in the years of the Gang of Four. Then why should it still be called a law?’ Indeed, a popular misconception in those years was that socialism did not have much to do with distribution according to work, let alone fully implementing the policy. In my view, distribution according to work is a law that exists independent of human will. A law, by definition, exists as it is, rather than what people wish it to be. In other words, only the rule that operates independent of human will can be termed a law. Thus under the socialist system, if the policy of distribution according to work is effectively implemented, and if other work (such as planning) is also well done, socialist production will certainly improve and the socialist system will consolidate; if we fail to implement the policy, socialist production will worsen, which may ultimately threaten the socialist system itself. Distribution according to work is a law as it operates in a way that is independent of human will. Society and social production often evolve in a way much different from nature. While some natural phenomena – for example, the earth revolving around the sun – are not affected by people at all, human will does come into play in a social process during which people, who have both purpose and will, act and help create history. However, even in a human society, there are still objective laws that are independent of human will. Such is the case for distribution according to work, which is important for developing socialist production. Only with a clear understanding of this would people actively implement the performance-based distribution policy to boost socialist production. It is also possible that some fail to understand the importance of the policy, shackled by old habits or prejudice or due to some other reasons. They cannot observe the policy, which impedes the development of socialist production. Here, human will works on a social process, though to a varying extent in different cases. Ours is still a society where leaders have a greater say. Compared with ordinary citizens, those who are in positions of authority may better exercise their will. But regardless of the will of an individual, distribution according to work remains an objective law that cannot be changed arbitrarily. In a March speech, I talked about three situations where this law is producing an effect. The first one has to do with builders of socialism. Their goal is to develop socialist

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Speech at opening ceremony of Fourth Symposium

production and consolidate the socialist system, and they achieve this end by implementing the policy of distribution according to work. The second has to do with enemies of socialism like the Gang of Four. They try every means to oppose and slander the performance-based distribution policy in order to sabotage socialist production and the socialist system. The third is also about socialist builders. Though they strive to develop socialism and socialist production, they are on a wrong track. They frown upon distribution according to work and are reluctant to implement it; as a result, socialist production has worsened, the socialist system has not consolidated and public awareness has not been raised, an outcome they never desire to see. Under all these situations, the law of distribution according to work comes into play. It improves production in the first case and the absence of it in the second and third leads to a decline in production (although people’s positions and goals vary in the two cases). Regardless of people’s actions and will, the law of distribution according to work always plays a part in socialist social and economic life and cannot be changed at will. We always say practice is the only yardstick of truth. Then could the above law be proven by practice? The answer is yes. Previous practices, especially during the period of the Gang of Four, have long confirmed the objective truth as represented by the law. A mass of evidence exists today – and will continue to be presented in the future – pointing to the objectivity of the law. An important reason for many enterprises to boost their production successfully is that they have effectively pursued the policy of distribution according to work, while many other enterprises that fail to carry out the policy see a sagging production. We believe distribution according to work is a long-term policy for us to pursue as it is determined by the nature of socialism and is thus crucial for the survival of the socialist system. I hope this symposium could present an opportunity for people to explore the objective truth as represented by ‘distribution according to work,’ how we shall put it into words, and why there is such a law in the first place. The second issue is the principle of material interests. A People’s Daily editorial titled ‘How Do Marxists Treat Material Interests’ introduces and analyzes classical writers’ discussions on this issue. During the period of the Gang of Four, ‘material interests’ remained a taboo; and the very mention of it would cause the speaker to be labeled a ‘revisionist’ whose overriding concern is said to be material benefits rather than spiritual or political pursuits. This is quite ironic as Marxists are materialists and their analysis of social issues is based on the principles of historical materialism. Historical materialism holds that people must be able to survive and have their needs for basic necessities met before they can engage in other activities. In order for them to survive, they must carry out production and enter into relations of production, the foundation of all other social relations. The relations of production are relations of material interests. Class struggles arise when the interest of one class comes into conflict with that of another. The Communist Party of China seeks to maximize the material interests available to the proletariat and all working people. Distribution according to work reflects the principle of material interests which, in the socialist context, means linking socialist production to individual, collective, local, departmental, and corporate interests. Distribution according to work

Speech at opening ceremony of Fourth Symposium 5 is essentially a matter of material interests, with more pay granted for more work. Material interests include, but are not equated with, material interests of individuals, while the latter include, but are not equated with, the adherence to the principle of distribution according to work. In socialist production, we should give play to the initiative of different stakeholders. In the past, we often talked about the initiative of Central and local authorities, which alone is not enough. The enthusiasm of enterprises (including agricultural enterprises) shall also be aroused. As to the initiative of Central and local authorities, there also exists an issue of material interests. How do Central and local authorities share the revenue? This is an issue that people talk a lot about. If local authorities, e.g., a province, get some extra money, can it be deemed the material interests of just the secretary of the provincial Party committee or the director of the provincial revolutionary committee? Certainly not. With the money, local authorities can give play to their socialist initiative better. Giving play to initiative requires material conditions and basis. What should local authorities do if they want to run an institution or enterprise but find money tight? In this case, material interests are not personal gains. The sharing of material interests involves not only money, but also material resources. For example, Anshan Iron and Steel Company, a Central government-owned enterprise, will allocate a small percentage of its steel production at the disposal of its host province, Liaoning. This is an example of material interests, not of individuals, but of a province. Some material interests of individuals are not obtained based on the principle of distribution according to work. Such is the case for poverty relief. For another example, unproductive laborers also participate in distribution of material interests, but not according to their work. The combination of material interests and production is vital to giving play to the initiative of various stakeholders. Distribution according to work is related to the issue of the initiative of every productive laborer; the relationship between Central and local authorities, between the State and enterprises involves giving play to the initiative of both sides. Giving play to the initiative of various stakeholders is the fundamental prerequisite for rapid development of socialist economy and an issue crucial for socialist construction. For this purpose, we must effectively carry out the principle of material interests. The issue of material interests stands at the heart of the so-called economic management through economic means, which is essentially means of material interests. As we have always advocated, well-performing enterprises shall be distinguished from poorly performing ones and profitable enterprises from loss-making ones in terms of material interests. For example, well-performing enterprises can retain a certain proportion of profits, and use them for employee welfare, individual bonuses, or expanded reproduction; poorly performing enterprises are not allowed to share profits. For another example, the wages of all employees, including managers of an enterprise, can be linked to its operation. Enterprises operating differently obtain different material interests. This plays a major role in improving enterprises’ operations. The initiative of enterprises, an issue not often touched upon in the past, deserves a careful study now.

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Speech at opening ceremony of Fourth Symposium

We should also look at the possibility of different pay for workers with different State-Owned Enterprises even though they are at the same grade level and do the same kind of job. We used to believe an important feature of ownership by the whole people, or State ownership, is that people working in the State-Owned Enterprises receive the same remuneration for the same work. At present, it seems that remuneration should also be linked to an enterprise’s business performance. This calls for further research into the concept of ownership by the whole people. Next, I’ll talk about the contract system. A contract will be meaningless if no penalty is imposed on the breaching party. The contract system must be combined with material interests. The contract must clearly stipulate the financial obligations of both parties. Either one in violation of the contract shall be subject to a fine. Sometimes disputes will be submitted to a court, making the existence of economic legislations and courts highly necessary. A large proportion of socialist legislations should deal with economic affairs. Unfortunately, the work of economic legislations proceeds badly, with virtually no laws formulated on people’s communes, factories, or land. We used to have a land reform law, which was annulled with the completion of the reform long ago. Now except for a few provisions, we do not have any land law in the real sense. This causes great trouble, for example, when a public housing project has to be suspended because one household was unwilling to relocate. There should be a law that stipulates the State’s responsibilities toward the relocated residents. If the State fulfills its responsibilities under the law, the residents need to relocate, or they will violate the law. We have no law on grassland protection, either. Visitors and vehicles are admitted freely, causing great damages to grasslands. The grasslands, totaling hundreds of millions of hectares, is a great asset of ours. Its surprisingly fast deterioration at the moment has much to do with the absence of a protection law. We do not have a forest conservation law either, which greatly hampers the growth of the forestry sector. A seed law that could have benefited agricultural production has not yet been formulated. There is an abundance of such examples on which I won’t elaborate here. But it is imperative for there to be a contract law, otherwise the contract system will come to nothing. The core of the contract law is about material interests and the assumption of economic responsibilities. Besides, enterprises’ profits and losses should be linked to material interests of individuals so that contracts can really come into play. Without contracts, the State plan can hardly be ensured or implemented. Plans should be well combined with contracts. Contracts should be concluded not only between enterprises, but also between the State and enterprises. If enterprises suffer losses because of the State, the State should bear responsibilities and pay indemnities. Only by a wise use of material interests and economic means can the economy be managed in a more efficient way. Last year, the Third Symposium on Distribution According to Work discussed the principle of material interests. The understanding of this issue has since been greatly enhanced. It involves various aspects of economic management and deserves a careful study theoretically. The third issue is remuneration and its various forms including bonuses and piece rate.

Speech at opening ceremony of Fourth Symposium 7 Most people are familiar with the various forms of remuneration, but not its precisely academic definition. It remains an ambiguous concept even for some working with the payroll departments or engaged in political economy research or teaching. Therefore, a probe into the concept is highly necessary. Remuneration means money paid for the work one has done. If our State ownership was replaced by one in which workers directly manage all the affairs and distribute the income among them, whether the concept of remuneration would exist at all would be questionable. But the truth is that remuneration is still a useful concept at the current stage as it captures reality. Because of State ownership, the interests of the State are not the same as those of individuals, which is why remuneration needs to be there. Wage is also an issue that needs to be clarified through research. Wage, bonuses, and allowance are all forms of remuneration, and need to be clearly defined when we study the methods of distribution according to work. Why are there so many different forms? Do wages alone work? Can we do without bonuses? These questions need to be answered. The various forms of remuneration work together to make ‘distribution according to work’ possible. We should thus study their different roles and in light of that, consider how to best carry out the distribution policy. Certain allowances (for example, seniority allowance based on length of service), though not distributed according to work, also fall under the category of material interests. They are not linked to the amount of work done, but can play a role in retaining employees, reducing staff turnover, etc. Some forms of wage, for example, piece rates and bonuses, may still provoke dispute today. Many believe they will bring problems, like widened income gap, capitalism, and preoccupation with material benefits. Actually, the Central Party committee has already clearly approved piece rates. Both piece rates and hourly rates are forms of remuneration. Then exactly how widely is piece-rate wage used in real life? It was used in some places in the 1950s, but is rarely seen now. Take the construction industry as an example; a piece-rate pay system was implemented in the 1950s. Before the Cultural Revolution, piece-rate wage was used for loggers in some localities, but whether the practice survives today is open to question. Some forestry officials think piece-rate wage works best in forest regions. The piece rates we are talking about are actually a kind of incentive in addition to basic wage. They are used to reward any work in excess of the production quota. Whether they belong to bonuses or piece-rate wage needs further research. Many people, including me, prefer to put them into the category of bonuses, as they are not quite the same as a piece-rate wage that is fully based on the pieces of work completed. Bonuses include overall bonuses and bonuses on separate items. Should we give priority to overall bonuses or bonuses on separate items? Although this question is very specific, our theoretical workers should also study it, as it involves many issues of political economy theories. There is another question: i.e., shall we link the amount of bonuses to the payroll, stipulating, for example, that bonuses can account for no more than 10 or

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Speech at opening ceremony of Fourth Symposium

20 percent of the total amount of standard wages? Theoretically, this approach may cause some problems. One possible situation is: if an enterprise reduces its workforce by half and its output remains the same thanks to improvement in labor productivity – which is an outstanding achievement – the total bonuses will be halved as well as a result of decline in total standard wages. Certainly, there are fewer people on the payroll now, which makes the bonus for each individual stay the same as before. However, efforts toward higher productivity go unrewarded. Apparently, this method is unreasonable and will do no good for an enterprise’s initiative to downsize its personnel and improve labor productivity. Or let’s suppose the number of workers is fixed and the amount of payroll unchanged. The total amount of bonuses, if a fixed percentage of the payroll, will remain a mathematical constant. However, people’s initiative and work conditions change. For example, in an enterprise, many people meet the criteria for bonuses, but due to the limited amount of bonuses, people might find themselves in one of the two situations: only some of the qualified people receive bonuses while the others cannot; or alternatively, all the qualified people receive bonuses, but in a greatly reduced amount. Each situation will lead to fierce contention for bonuses, which is not conducive to the unity or initiative of workers. Those model workers who end up receiving bonuses may be embarrassed, feeling as if they had taken it away from someone else. To avoid all these troubles, some enterprises simply implement a rotation policy that everyone has a chance to receive bonuses. In some other enterprises, those receiving bonuses often quickly spend it up by inviting their colleagues to restaurants, for fear of any hard feelings. I think linking the total amount of bonuses to the payroll is not right. It compasses many economic issues deserving our attention. Payroll is one of them. Under the planned economy, the State controls the total amount of payroll to balance the supply of consumer goods and the income of residents. People put a ceiling on the total amount of bonuses out of the consideration that failure to do so will lead to an imbalance between the total pay (including standard wage, bonuses, and allowances) and the total consumer goods. It is certainly reasonable, but we may also try to approach the issue another way. Putting standard wages aside, if the amount of bonuses is not related to production and if more bonuses are given, there will not be equivalent consumer goods for people to buy and the market supply will tighten. However, things will be different if we stick to the principle that each payment of bonuses would represent a ramped-up production and that the bonuses are far less than the value of production increase. To put it another way, an enterprise needs only to pay, say, RMB1 in bonuses, for an extra production worth RMB5. While employees’ purchasing power increases, the goods supply also goes up – and at a faster rate. Thus putting a limit on bonuses will be unnecessary as it means limiting the increase in production as well. It is doubtlessly worthwhile to pay a bonus of, say, RMB10 for RMB100 worth of coal saved. There still remains a problem: what if it is producer goods rather than consumer goods that we are talking about? If we save on producer goods that are not meant for daily consumption, for example steel rather than coal, what will happen? Some producer goods can turn into consumer goods. For example,

Speech at opening ceremony of Fourth Symposium 9 steel can be used to build houses, make furnaces, pans, hairpins, shavers, etc., and the ultimate goal of producer goods is to produce consumer goods. That is to say the steel used to produce machines will ultimately be used to produce things for people’s daily consumption. Thus, like consumer goods, producer goods also serve human wants, though in an indirect way. And even in the case of consumer goods, some of them may fail to meet consumers’ needs in terms of performance, design, and color. In view of these, the proportion of bonuses to the value brought by an increase in production should not be too high. Meanwhile the proportional relationship between production departments should be adjusted as necessary and a good balance shall be maintained between production and demand. As long as we maintain an appropriate ratio between the bonuses paid and production and make sure more bonuses means more goods for personal consumption, it is not necessary to put a limit on them. Therefore, when we implement the policy of distribution according to work, we need to make sure both wages and bonuses are linked to production. The advantage of bonuses is flexibility. More bonuses means more products. If you do not produce or save RMB100 worth of coal, you can’t receive RMB10 in bonuses. If bonuses are not linked to production, imbalance might occur. It will do us no harm to allow workers to receive more pay for more work. Therefore, whenever people talk about distribution according to work, they tend to speak of the importance of balance, which is certainly correct as ours is a planned economy. But how should we view balance? What kind of balance is positive? Or negative? Much remains to be researched, including the above-mentioned balance between consumer goods and wages and bonuses. Another example is balance between industry and agriculture. Some fear that increasing workers’ wages might widen the income gap between them and farmers and thus run into resistance. I don’t think so. Farmers who have a high political consciousness would welcome a pay raise and thus a better life for workers as they are the staunch ally of the working class. This is one reason. Another reason is that many farmers and workers have family ties. If the wife in a family works in the countryside and the husband works in the city, will the wife oppose an increase in her husband’s wages? The third reason is that workers’ better life is a prerequisite to raising the prices of agricultural products. After increasing workers’ wages, it will be easier to solve the pricing issue in agriculture. By saying so, however, I am not attempting to reduce the issue of distribution according to work to payment of more wages. What I mean is the distribution policy should be linked to production, and designed to improve production. Theoretically, distribution is determined by production. If nothing is produced, what can be distributed or consumed? Therefore, distribution should not grow too fast. It needs to be understood that the top priority for China, a poor and backward country, is to greatly boost production. Only by so doing can we gradually improve people’s lives. Any attempt to raise the living standard without giving any consideration to production will end up in failure. The theoretical circles need to respond to the following questions: Can distribution have an effect on production? Should we pay attention to this counteraction? How can we ensure the desired

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Speech at opening ceremony of Fourth Symposium

effect of distribution? Similarly, we should also look at the counteractive effects of consumption on production. This and many other consumption issues have been inadequately examined in the past, either by the academic community or the media. Now, while emphasizing the importance of abiding by the laws of economics, we should make a close study of how production works on distribution and consumption and vice versa. Today, we need to study the basic laws of socialist economics, which are about developing production on a high-tech basis and meeting the people’s growing material and cultural demands. The purpose of our production is to meet the demands. Ignoring this and producing for production or accumulation’s sake, socialist production will suffer huge losses and people’s lives will hardly improve. I asked some people about the factories, counties, and communes where they worked. They talked about overall production, per unit area yield or gross industrial output value, but none spoke of improvement in living standard. What are people producing for? Simply to make the statistics look good? Of course not. The ultimate and also the only meaningful goal of developing production is to improve the living standard. For example, if a commune or county north of the Yellow River has a per-hectare grain yield even higher than its southern counterparts (which almost always means a high cost) but reports poor harvests in other economic crops, and if people’s living standard remains low, what is the use of the seemingly attractive production figures, except for kindling media interests? This is a problem we need to be wary of. Another view holds that to increase production, we should reduce consumption and increase accumulation. The truth is if we pay attention to consumption and ensure a reasonable increase in consumption, it will stimulate the growth of production and eventually accumulation. We should admit that in productive forces, people play the decisive role and remain the most important assets. If their political and ideological consciousness is heightened, and working and living conditions are improved, they will be better motivated and productive forces will improve accordingly. If public services and working conditions get better in cities, productive forces will improve. If consumption and living standards stay at a low level for a long time, greater work efficiency can hardly be achieved. If living in a bigger house, workers may think about how to carry out technological innovation and intellectuals can do more reading or research. In principle, improvement in living conditions can in turn improve production. In sum, while studying labor wages and forms and amount of remuneration, we should have a positive and balanced view. Research into the above issues is very important as it may guide our practices and actions. Without revolutionary theories, there will be no revolutionary actions. This is an overall perspective. If we don’t figure out a certain theoretical issue, the actual work will be affected. Thus, only after comprehensive research that sheds light on distribution according to work, can the policy be truly and effectively implemented. This is of great importance to socialist construction.

2

I return from a visit to Yugoslavia (1978)

I joined a delegation of our Party and went to Yugoslavia as the deputy chief of the delegation. The task of our visit was to study this country’s lines and policies. Before the trip, I read some materials about Yugoslavia which gave me a good impression about the country that we had long misunderstood. I had never been to Yugoslavia before and had no perceptual knowledge of it at all. During the threeweek stay in the country, we worked very busily, traveling across republics, cities, and rural areas, and visiting factories and government departments to understand more about their economic achievements. Meanwhile, we talked with many Yugoslavian comrades, and brought back many useful documents. I asked many questions there, in the hope of gathering more information and generating discussions. Asking questions is one of my specialties, which didn’t go unnoticed by our hosts. After returning to China, I read a telegraphic dispatch of Xinhua News Agency saying that the number of questions asked by Yu Guangyuan, deputy chief of the CPC delegation, was the largest. Of course, the three weeks’ time was very short, but I got a very deep impression. We conducted an analysis based on the knowledge we gained during the visit and concluded that Yugoslavia was undoubtedly a socialist country and that the Yugoslavian Communist League was a Marxist and Leninist party. Yugoslavia’s social and economic organizations are quite peculiar. Though we knew long ago about their socialist autonomy system, no one in China had conducted a serious study or had a clear understanding of that. Our trip helped clear some of our previous doubts. Yugoslavians devised a series of measures to guarantee that workers are masters of social and economic organizations. There is not only a constitution, but also an associated labor law. As basic laws, they stipulate in detail workers’ rights. Our hosts refused to call their ownership systems state ownership or collective ownership; rather, they called them ‘societal ownership.’ In spite of some briefings and a number of questions and answers, we still could not completely understand why ‘societal’ is used because it seems to us ‘societal ownership’ means, at least literally, public ownership. As we know, state ownership and collective ownership are both public ownerships. If a form of ownership is neither state ownership nor collective ownership, there should be an expression for what public ownership is. However, they failed to give a clear explanation. Judging from what they said, it is really peculiar, not state ownership and different from what we often call collective ownership. However,

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I return from a visit to Yugoslavia

we don’t want to give another name to their ownership either. They liked using the term ‘socialist autonomy system.’ So let’s call it this way as well. In Yugoslavia, workers have a strong sense of being masters. This is shown by one example: in their country, there is no word for ‘wage.’ Their reason is that wage suggests employment relationship, so it cannot be used. People who know German can easily understand this, because in German the word ‘lohn’ stands for both ‘wage’ and ‘employment.’ We can translate one of Marx’s books as either Employment, Labor and Capital or Wage, Labor and Capital. They said that under Yugoslavia’s socialist autonomy system, workers are not employees and therefore cannot accept the idea of ‘wage.’ In Yugoslavia, there is not even the idea of ‘payment for work.’ They said that workers under the socialist autonomy system are masters. How can masters pay themselves? Therefore, they only use the idea of ‘income.’ This guides many other aspects of their daily practices. In Yugoslavian enterprises, workers are masters, so managers are recruited by workers. Recruitment measures are also provided by laws. Recruitment notices must be published by newspapers. Any recruitment not announced this way would be deemed private and illegal as people believe it will lead to malpractices. The newspaper notice should state clearly the requirements on the candidates’ professional background, education, language competence, and years of experience. It is also required that the notice must appear in a newspaper for at least two weeks – not one day less. After a notice is published, the workers’ committee will form a recruitment team to carry out an investigation, mainly into a possible candidate’s performance at his former work unit. After the investigation, if deemed suitable, he will be invited to the factory, given the factory’s files and various materials, and allowed to contact the workers and other personnel. Then he will decide himself whether he will apply for the job. Those willing to apply are required to write a ‘thesis’ stating ‘what I plan to do if I am the manager,’ expressing their opinions and proposing some plans. It is up to the workers’ committee to decide which applicant is best suited for the job. Finally, secret ballots will be cast at the workers’ meeting. According to the Yugoslavian socialist autonomy theory, a factory’s highest organ of power is the workers’ meeting, roughly an equivalent to our People’s Congress. The workers’ meeting elects the workers’ committee, which, as the factory’s leading organization, discusses and decides on its important affairs. The factory manager directs and oversees daily production and operation. He is recruited by the workers’ committee. Workers have the rights to elect and stand for election, but not the manager. The manager may be dismissed by the workers’ committee and is not the master of the factory. According to the socialist autonomy system, the manager is not regarded as superior to workers. Local people call the idea of recognizing managers’ superiority ‘technocracy,’ which is not allowed. A manager must know laws and guarantee the factory’s activities will comply with the requirements of national laws. Because laws are numerous and complex, it is unlikely for all workers or all the members of the workers’ committee to be familiar with them, so ensuring law compliance is within the responsibilities of the manager, his obligation toward the country. The workers’ committee is the factory’s administrative body, but if the manager thinks that a decision of the

I return from a visit to Yugoslavia 13 committee violates laws, the manager has the authority to stop it. If he does not do that, he will bear legal responsibilities. Whenever we visited an economic organization, we asked about workers’ income. Thus we had a clear idea finally. At a hotel where we stayed, we got a monthly income notice, which tells us how this economic organization calculated the income for its workers. The notice says how much gross income was obtained during this period, how much was left after deducting the money turned over to the State and various public organizations, how much was reserved for accumulation, how much for public welfare, etc., and how much was left in the end. Then it states the recipient’s conditions, work situation, and allocated income, etc. A notice on a worker’s income is actually a financial report. We brought one back to China. In Yugoslavia, a grassroots economic organization is called economic association, meaning workers’ free association. What controls grassroots organizations is also called ‘association.’ The country has a great variety of ways of calling economic associations or communities. It took us three whole weeks to have a clear idea of these nouns. In an association, relationships between individual members or between member organizations are mostly defined by covenants and agreements. Therefore, covenants, agreements, and contracts are very common in Yugoslavian society. Beside the Constitution that sets down the basic political and social principles, Yugoslavia has a second Constitution called the Joint Labor Law, which provides in detail the socialist autonomy system. In addition, there are various other laws. Four kinds of courts exist, based on these laws. The first one is called the constitution court, hearing cases involving violation of the Constitution. The Yugoslavian Constitution is a bulky volume, almost the size of a 100,000-word book in China. The second one is called the joint labor court. It will decide on charges of violating the Joint Labor Law and, as its mission, protect workers’ autonomy from bureaucrats and technocrats. In Yugoslavia, the Defender of People’s Rights refers to both an institution safeguarding workers’ autonomy and its staff (except supporting personnel and personnel doing odd jobs). The Yugoslavian Communist Party consultant who accompanied us during the visit has a wife who works as a defender in Slovenia. If a defender of people’s rights finds any evidence of a manager’s monopoly of power, or attempts to infringe upon the rights of the workers’ committee or workers, he will warn the manager against bureaucracy and technocracy. If the manager fails to mend his behaviors after repeated warnings, the defender may bring him to court and the joint labor court will decide on the case. The third one is the economic court, which examines cases concerning contract performance. Whoever violates a contract has to pay a fine or indemnity subject to the contract. If the breaching party duly performs the fine and indemnity clause under the contract, there is no need to bring an action against him. Otherwise, if a dispute arises, it needs to be submitted to the economic court for a decision. The fourth court is the general court, hearing cases of violence, fighting, theft, traffic accidents, etc. Particularly noteworthy is a Constitution article which provides all accounting units must submit their monthly and quarterly financial statements to the social

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I return from a visit to Yugoslavia

bookkeeping institution. This applies to the accounting departments of factories, shops, farms, and government institutions, including even the Central Party leadership. Therefore, the social bookkeeping institution is huge, with one thousandth of Yugoslavia’s 21 million people working in it. It also receives financial statements from banks and supervises their transactions. A notice must be given by a bank for each entry into an account. If the social bookkeeping institution finds any incompliance with laws, it has the right to notify the bank of ceasing payment. Each organization shall disclose its financial affairs to the institution, which, in turn, needs to maintain the confidentiality of the financial statements submitted. Whoever submits false accounts or does not submit accounts violates the Constitution, and the institution may file a lawsuit in the constitution court. This bookkeeping institution is managed under the authority of the Federal Congress. It is established at the district level, and a district has the responsibility to pay wages and provide materials for it but cannot supervise it; rather, the institution supervises all the other organizations with no exception. Therefore, though Yugoslavia relaxes its control over some affairs, strict supervision still exists. Besides, this bookkeeping institution provides two lines of service. For example, the manager of one factory borrows money from the manager of another, and the latter does not know whether the former can repay. He may thus go to the bookkeeping institution that knows the financial performance of both factories. If the institution says the borrower can repay, the money will be lent. If it says the borrower might be unreliable, the money might not be lent. If a foreign bank is asked to lend money and wants know whether the borrower has the ability to repay, it can only go there for information. The institution may assure the bank, ‘No problem, the borrower has the ability to repay. If it cannot, we will pay you instead.’ Or they may refuse to guarantee for the borrower as its financial standing is dubious, and would accept no responsibility for any lending to it. Just imagine, such an organ has one thousandth of the Yugoslavian population working for it. Were the same system existing in China, it might boast 9 million workers. Besides, 80 percent of them are equipped with electronic computers; the other 20 percent use either mechanical or electrical computers. Macedonia has only a population of 1.8 million, but its social bookkeeping institutions have to deal with more than 20 million requests for service every year. The bookkeeping institutions are responsible for and thus very familiar with the country’s fund dynamics. They are quite unlike the statistics bureaus that keep track of economic dynamics. Regrettably, the three-week stay was too short to give us a full picture of Yugoslavia. Beside success stories, it must have problems, inadequacies, and even cases of failure for sure. Exactly how well Yugoslavia can implement its policies – some of which are seemingly idealistic – is still unknown to me. However, the ideas underpinning many of their policies really put a spell on me. A talk with a local comrade impressed us a lot and helped us understand the mentality of Yugoslavians. We had been talking about opinion polls. According to the Yugoslavian comrade, his country carries out not only opinion polls, but also comprehensive surveys and research. The opinion polls, though of some use, should not be overestimated; rather, they need to be deemed as an auxiliary means.

I return from a visit to Yugoslavia 15 At the University of Belgrade, there is an agency specialized in conducting opinion polls that in a way is more or less the same as elsewhere in the world. One opinion poll aroused my interest, in particular. In Yugoslavia, large-scale polls often involve questionnaires sent to not only local people, but also Yugoslavians abroad. This time, questionnaires were sent to a large Yugoslavian community in Federal Germany. Two questions were asked: do you favor Yugoslavia’s foreign policies or Federal Germany’s? And do you think Yugoslavia’s production is organized in a better way than in Federal Germany? As a rule, a large percentage (over 90 percent) of the people responded to the questionnaires. About 90 percent of the respondents favored Yugoslavia’s foreign policies over Federal Germany’s; however, an almost equal number of respondents believed Federal Germany organized its production activities in a better way. When telling me about this, the Yugoslavian Communist Party consultant made a gesture, as if to say this is what they think and what can we do about it?! He admitted frankly to the fact that his country lags behind Federal Germany in production, but he had not lost faith in catching up. I think this is a truly Marxist attitude – realistic and sticking to a mass line. The masses say production is poorly organized compared with Federal Germany, which has long emphasized production management, operation management, efficiency, and disciplines. Now in Yugoslavia, there are traffic lights for cars and pedestrians alike. At a cross section, going through a red light is prohibited, and people have to wait until the light turns green. All the traffic lights are automatically controlled and change every dozen seconds. Sometimes even when there is no car, the light still turns red. In this situation, a Chinese person will usually go, and so does a Yugoslavian since there is no car at all. But Yugoslavian people told me that German people will stop until the light turns green. They have been trained to observe rules since their childhood. One may think they lack flexibility, but it seems we have just too much flexibility. During the visit, I felt that Yugoslavia pays much attention to democracy in social and economic life. A reporter of the Xinhua News Agency in Yugoslavia told me that Yugoslavia’s TV stations often hold public discussion, sometimes on very important issues. For example, when Belgrade carried out urban planning, the sketch and map of the city were given to each ordinary citizen for comments. Some discussions were aired on TV. Out of the numerous comments made by residents, the urban planning department selected 2,000 who expressed their own views, and then compiled them into a book and circulated the book among residents to generate further discussion. People could even express their opinions on such specific issues as where houses should be built and in what style each house should be. In the end, two issues were not agreed upon. One was about an island and a forest at the place where the Sava River and the Danube River converge. One group proposed to build a tourist spot there; the other group insisted tourism would threaten the water sources there. Both groups were supported by experts and reached a deadlock. In the end, a senior Swedish expert was invited to carry out research on the issue. He put forward a solution that could both protect the water sources and enable people to build a tourist spot. Thus, a consensus was reached. Another

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I return from a visit to Yugoslavia

argument was about a medical center. The majority of people proposed to dismantle some houses and build a new medical facility, while some preferred a less costly plan that involved only slight renovation. These two opinions could not be reconciled. In the end, the issue was submitted to the congress, and the congress supported the minority’s opinion. The city planning of Belgrade lasted more than one year and was discussed from top to bottom and from bottom to top. This practice was very democratic. Yugoslavian leadership also uses TV to learn about public opinion. Once, a factory wanted to discipline a worker for his poor performance. Some proposed to dismiss him while some disagreed. The debate was televised live. A TV host provided the background information and encouraged the audience to phone in and make comments. The participants were introduced one by one, including the one to be disciplined. A heated argument began, and the worker defended himself against the accusation. Then the host announced a phone call from a viewer who lived in a certain place. The caller cautioned people against bias and unbalanced views, saying, ‘You keep blaming the guy, but do you know about the good things he has done? I happen to know one of them.’ He went on to give an example in support of the worker. After his comment was broadcast, the discussion continued for some time until another call was received, saying, ‘Why only talk about this person’s shortcomings? Why not your workshop or factory? Why not your own shortcomings? I don’t see the point in this.’ After the TV program, debate on the matter continued among viewers. Thus, TV programs can also be made an important way of collecting public opinions or conducting investigation, in addition to many other approaches. Another interesting thing is when a Yugoslavian announcer reads international news and home news, there is always a telephone on a table nearby. In the middle of the program, he may receive a call and then turn to announce the latest news he has been just informed of. Yugoslavian TV announcers do not read scripts as rigidly as ours do. Their news is reported faster. Mao Zedong said that every country has its strong points and advantages, all of which can be used as reference. Our stay in Romania was short, so what we learned there was less than in Yugoslavia. In Romania, remuneration was the economic issue that attracted most of my attention, perhaps because we paid a visit to the Ministry of Labor. In Romania, people do not use the concept of wage, the same as in Yugoslavia, but unlike Yugoslavia, they do use the concept of labor remuneration. Forty percent of the excess profit obtained by a Romanian factory is allocated to the enterprise and 25 percent to workers. If a factory is profitable, workers earn more; if not, they earn less. There are workers’ congresses. If a factory is badly run and workers’ incomes are low, they will complain and press for improvements. For a factory to be successful, counting on the decisions or supervisions from the top alone does not work. In Yugoslavia and Romania, which are much smaller than China, the government can hardly direct the operation of each of the many enterprises. Therefore, besides supervision from the top, motivation at the lower levels is also important. Romania’s factory directors, company managers, and ministers are given only 80 percent of their wages. The remaining 20 percent will be paid depending on their fulfillment of four targets (5 percent paid for each target

I return from a visit to Yugoslavia 17 achieved), and 120 percent will be paid if the targets are exceeded. The targets for assessing factory directors are determined by companies, the targets for company managers are determined by ministries, and those for ministries are determined by the State Council. It is important to note, however, these specific measures cannot be copied. China should lay down regulations in light of its own situation. Recently, Romania has carried out an economic reform, using net output value instead of gross output value to assess the performance of enterprises, and new rules are made on corporate revenue and distribution, which I think is reasonable. During our visit to Yugoslavia and Romania, we paid much attention to the construction there. Our general impression is that they have developed faster than us these years. Take the building of houses, for example. I went to Skopje, the capital of Macedonia. A great earthquake in 1963 almost destroyed the whole city. All the houses we see now were built after the quake. Fortunately, not too many people were killed on the day because the quake was preceded by a small one and most people had been on the street when the great quake happened. But they were made homeless with the collapse of the houses. Each Yugoslavian employee donated their monthly income, and some other countries also came to the rescue. They immediately solicited the city reconstruction plan all over the world. It was said that the proposal of a Japanese designer was adopted. The beautiful new city was completed six years ago, and is still expanding, much bigger than it was before the earthquake. Local people came up with many brilliant ideas in the city reconstruction process. A station has been kept intact. Looking exactly the same as at the time of the quake, it has become an earthquake museum. It has a big clock that stops at 5:17, the moment when the quake hit. The clock is there to remind local people and cadres of the 1963 earthquake. According to local people, the museum attests to the superiority of the socialist autonomy system (the phrase used more often in Yugoslavia rather than ‘the socialist system’): though our houses collapsed, our workers rebuilt this city, the other republics gave us support like brothers, and people all over the world also helped us. Look, we have built such a beautiful city. This station also provides evidence to the devastating impact of the quake as even a building as solid as this collapsed. This station is also a place much visited by tourists. When foreigners come to Macedonia, they can go there and see what it looked like when the earthquake happened. It is a pity that it never occurred to us that we should preserve certain destroyed buildings in the memory of the massive Tangshan earthquake years ago – to run a museum, you need to keep the original appearance of things. In Macedonia, you can see how fast a city was built. It is the case not only for Skopje but also for the whole of Yugoslavia. For example, in Belgrade, a new town on the other side of the Sava River with a population of more than 200,000 was built in several years. It is estimated that the population will reach 300,000 by 1980. They build houses and streets without much difficulty, but construction of one subway line of Beijing has lasted eight years and is not yet completed even now – it seems another year is needed to complete the construction. It is also true of agriculture. Romania’s per capita output of grains stays at nearly one ton, Yugoslavia 800 kg, and Hungary 1.3 tons. Our agriculture has low productivity, and so does the industrial sector that serves agriculture.

3

Socialist development stages and economic restructuring (1978)

As to the question of ‘By what stages on earth should socialism develop,’ I think there must be more than one answer and different countries differ greatly. In the past, we usually said that all roads lead to communism. This also means that the development stages of socialism may vary in different countries. When researching the development stages of socialism today, we must study, in an in-depth way, the histories, present situations, and development prospects of many countries. First of all, we need to investigate the countries in which the proletariat has already come into power, as these countries have abundant experiences in socialist construction. We need to investigate what stages the history of socialism in such countries has experienced, are experiencing, and are heading toward. The Marxist theory of social development gives an overall concept on the development stages of socialism, which is familiar to us all: from the primitive communal society, via society of private ownership, finally to the socialist society and the communist society. The society will even develop forward after the advanced stage of communism. This is our general knowledge of the development of human society. Nevertheless, we are now discussing the specific stages of socialist development, and what we are particularly concerned with is: given the particular conditions in various countries, what process would there be as socialism replaces capitalism, i.e., how socialism triumphs over capitalism, and what society would be initially built after the victory and then how it would develop forward. Our research should be specific, as the issue of overall social development was solved by Marxism early, and currently there are no new issues posed which are worthy of particular research; besides, specific development stages are concerned much with our practice. What we need to do now is to conduct research into the abovementioned problems according to the available data of various countries. We should do scientific research based on concrete data, try to make proper judgments, set forth hypotheses, and raise questions on a well-founded basis, rather than daydream without any scientific basis. I’d like to talk of a question here, which is the difference between the primary and advanced stages of communism. It seems unexpected to raise this question, as the socialist system has existed for decades, and we know clearly the difference between the primary and advanced stages of communism after we obtained direct understanding about socialism. It is not enough to consider the question only

Development stages and economic restructuring 19 from the relationship between individuals and society, nor is it enough to consider from the relationship between two societies; we should also consider it from the entire economic structure and production organization of both societies and the relationship of the production of society as a whole. For reasons almost the same as those given in Critique of the Gotha Programme by Karl Marx for distribution according to work, all grassroots economic organizations must put the economic accounting system into effect. Varieties of relationships in material benefits exist between the central and local governments, departments, and enterprises, and some material benefits relate to individual consumption; some don’t, but they may affect people’s enthusiasm to develop their own units. Therefore, when the relationship between one another is established, the category of value must be employed to measure advantages and disadvantages. In this case, such relations are certainly commodity relations, and the exchange is the exchange of commodities. In other words, only by exchanging commodities can socioeconomic activities be well organized, the economic organs operate in a normal way, and workers in various sectors are enthusiastic. That is to say, in the primary stage of communism, there are scientific grounds for the necessity of distribution according to work and for the necessity of commodity production and exchange. We talked before of a formula in an article Lenin had written before the October Revolution, ‘Socialism is Equal to the Public Ownership of Means of Production and the Distribution According to Work.’1 We may rewrite this formula as ‘Socialism = the public ownership of means of production + distribution according to work + commodity production,’ or more mathematically customary, as ‘Socialism = the public ownership + (distribution according to work + commodity production).’ By so doing, commodity production and distribution according to work are taken as the basic feature that distinguishes the primary and advanced stages of communism. Some said that many articles proposed similar opinions but did not supplement this formula of Lenin’s. Discussion is expected as to whether it is correct to put it in that way. Starting from such a viewpoint, I think the question arises as to regarding no existence of commodities as the mark of the establishment of socialism. Therefore, we should carefully research and discuss the issue of development stages of socialism. Now we are considering the economic system of our country by means of investigating the historical experience of China and foreign countries in the development of socialist economies. We need to emancipate the mind to address this issue. Some people said that our minds should be tied neither to the thoughts proved by practice to have resulted in failure, nor to ones proved by practice to have led to success. I totally agree with that, simply because first, the situation has changed a lot as history has advanced; second, we should be smarter and not be satisfied with the experience we have already had. For example, many comrades commented recently that for the past 30 years since the founding of China, except for the period of economic recovery, our work on economic construction was relatively successful. That was indeed true: in that period, our economic development was relatively fast, and our work in various aspects proceeded smoothly, thanks

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Development stages and economic restructuring

to the social and political stability in the country at that time. From 1958 on, there were ups and downs, and in the decade following 1966, except for a short period in 1975, the national economy was badly damaged. The situation in 1953–1957 was indeed better than that in the years that followed. When talking about this fact, however, some people thought the economic system in the ‘First Five-Year Plan’ period seemed not that bad and need not be reformed thoroughly. I disagree with this opinion, as it is limited to the practice proved to be correct, with the mind not adequately emancipated. We should neither indiscriminately imitate the mode of other countries, nor blindly copy successful experiences we have obtained. Instead, we should find an economic system most suitable for our current conditions. As is known to all, the economic system implemented during the ‘First FiveYear Plan’ was basically one copied from the U.S.S.R. This system promoted our economic development under the then historical conditions, but it had already been found defective at the time. Therefore, as early as in the 1950s, some comrades expressed their opinions on the economic system. Today, to realize the modernizations of agriculture, industry, national defense, and science and technology (the Four Modernizations), we should better understand the necessity of reforming the economic system established at that time. Undoubtedly, what we carried out during the ‘First Five-Year Plan’ period is the socialist system, which has tremendous superiority over the capitalist system. Such superiority is indispensable for the replacement of capitalism with socialism, while the latter is a proof of the former. But it is not that any socialist economic system has the same degree of superiority; a socialist economic system may be perfect or imperfect, or perfect to different degree. In the book Economic Problems of Socialism in the U.S.S.R., Stalin describes the basic socialist economic law as ‘the securing of the maximum satisfaction of the constantly rising material and cultural requirements of the whole of society through the continuous expansion and perfection of socialist production on the basis of higher techniques.’2 We stressed the first part of this description, namely, about the economic goal of socialism, but paid less attention to the second part, i.e., ‘continuous expansion and perfection of socialist production.’ The first part is indispensable for formulating completely the basic economic law of socialism, but we didn’t discuss it. As a matter of fact, this first part is very rich in content. ‘Continuous expansion’ of socialist production, I think, refers to the productive forces, and ‘continuous perfection’ of socialist production refers to the relation of production. Perhaps Stalin himself did not realize that ‘continuous perfection’ would be applicable to the economic system of the U.S.S.R. implemented at his time. ‘Continuous perfection’ means that necessary reform to the economic system should be conducted under certain conditions, to meet the needs of development of the productive forces. Much work can be done surrounding the word ‘continuous,’ and a lot of research is needed into it. The economic restructuring should be done by taking into account the national conditions in various countries. For example, an economic system suitable for small countries is not necessarily good for big countries like China – a country with a population of more than 900 million.

Development stages and economic restructuring 21 A country, if as big as a province of China, would be a very big one in Europe, and it could not be counted as a small country even if it were as big as a prefecture of China. In such a country, there would not be that many levels as China has from Central to grassroots levels, and there would be no need to solve the problems on relations between all levels from Central to grassroots ones like we do. Besides, an economic system suitable for an economically and culturally highly developed country is not necessarily suitable for economically and culturally backward countries either. What’s more, a country’s history and experience may affect what economic system it decides to adopt. For the present, I can’t exactly summarize features of China, but I think it’s safe to say that with a vast territory, a big population, abundant resources, and a less-developed economy and culture, China is a socialist country that developed from a semifeudal and semicolonial country and has accumulated many lessons and experiences in its long-lasting revolution and construction. On the basis of this reality of China, today we are going to consider the economic restructuring issue in China by means of summarizing China’s experiences and making reference to foreign experiences.

Notes 1 Selected Works of Lenin (Vol. III). Beijing: People’s Publishing House, 1972, p. 62. 2 Stalin, Economic Problems of Socialism in the U.S.S.R. Beijing: People’s Publishing House, 1961, p. 31.

4

Suggestions on China’s economic restructuring (1979)

At the invitation of the Chinese Embassy in Budapest, a five-member group, including Su Shaozhi, Liu Guoguang, Huang Hai, Chen Guoyan, and me, visited Hungary from November 25, 1979, through December 22 of the same year, and had the chance to make a survey of its economic reform. Through consultation with Hungary, our activities were arranged by its Ministry for Foreign Affairs. The Hungarian personnel who met and had talks with us included: economists who had participated in economic restructuring research and decision making since 1964; heads of the academy of sciences and of research institutes in the government sector who were acquainted with Hungary’s economic restructuring and economic situation; officials of the Hungarian Bureau of Planning, Bureau of Statistics, Ministry of Metallurgy and Machine Industry, Ministry of Agriculture and the Secretariat of International Economic Relations directly under the Council of Ministers; professors of the Karl Marx University of Economics; the deputy editor-in-chief of the newspaper Observer that gave publicity to the economic policy of Hungary, and so forth. In addition, we also visited Hungarian factories, agricultural producers’ cooperatives, department stores, capital goods storage and distribution companies, etc., and held forums with the chiefs of these grassroots units. There were 21 forums altogether during the three weeks. During the talks, the Hungarian personnel who met us were sincere and answered with great patience all our questions. They provided much information that was hardly seen in newspapers and periodicals, and some of them frankly talked of their unique opinions, some disputes inside Hungary, and some faults and mistakes in their work. In addition, two of us had a personal conversation with several research fellows in one of their houses. Records on each talk were sorted out in an accurate and detailed way, so that they could be used as raw data for investigation into the Hungarian economy. During the whole study tour, we were accompanied by both officers in the research office of the Chinese Embassy in Hungary and the journalists of the Xinhua News Agency in Budapest, with records sorted out mainly by them; in the meanwhile, they helped us a lot by providing information on the Hungarian economy. We also read some books and periodicals that were bought in Budapest or presented as gifts by the Hungarian side. On the basis of the information we had learned from the survey and the data we had acquired from Hungarian publications, we produced three survey reports: (a) An Introduction

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to the Current Economic System of Hungary (drafted by Huang Hai and revised by Su Shaozhi and Chen Guoyan); (b) An Appraisal of the 12-Year Economic Restructuring in Hungary (written by Liu Guoguang); and (c) The Views of Hungarian Economists on Several Theoretical Problems in the Hungarian Economic Restructuring (written by Su Shaozhi). We verified the materials already available at home when writing these survey reports. Although our survey in Hungary lasted for more than three weeks, it was too short after all to know accurately the economical situation of the country. We had been aware at the time that we did not get acquainted with some issues as the time was too short, and when sorting out the materials, we found that there were more things we were not clear about. There were many issues that even Hungarians we met were not clear about or have different or contrary ideas. Through the verification of the three survey reports, therefore, the facts we considered reliable were described in an affirmative way, while some facts could not be treated so. In the three survey reports, we also tried to indicate what facts need to be further researched. We consider this survey only a beginning, with the hope to conduct further and in-depth research. Although Hungary is a relatively small country, we found in Budapest tons of newly published economics books, statistical books, and economics publications, and there is an economics bookstore and a statistics bookstore in the city. There must have been more back numbers of books and periodicals. As long as we’d like to read, many issues may also be researched in an in-depth and specific way without going abroad for surveys. We are planning to confer with related comrades on organizing the economic research work in Hungary. Though this survey was neither deep nor thorough, it can be said that a big step ahead has been made as to our knowledge of the economic system and economic development in Hungary. In addition to the original records and the survey reports, we also would like to take this opportunity to talk about our feelings on this survey, and to propose several suggestions on how to prepare for the work on economic restructuring in our country. The guideline of economic restructuring in China is to combine the general principles of Marxism with the reality of modernization in China. Carrying out the economic restructuring may be considered another reform of major historical significance in China in terms of production relations, following the completion of socialist transformation in 1956 in respect of the ownership of the means of production. Why can we say so? Obviously, after the proletariat has triumphed over and captured the political power from the exploiting class in a country, it will establish a new socialist economy, or the economy of State ownership, as it will immediately employ the State machine established in the revolution to expropriate the exploiting class, and to manage the whole national economy. The scope of this ownership, of course, mainly includes the ownership of the means of production (the means of production of the whole society is mainly owned by the State) and the ownership of the means of circulation (the State possesses a great deal of money and the right of currency issuance, as well as a vast number of commercial establishments and commodities that may be put into the fields of circulation). This public ownership

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Suggestions on China’s economic restructuring

economy grew stronger along with the transformation of some nonsocialist sectors of the economy (for example, the capitalist industry and commerce in China) and the development of the public sector. This is the first integral part of the socialist economy. The second integral part is the collectively owned sector. Its immediate emergence after the victory of the proletarian revolution in a country depends on whether or not this country had a relatively developed cooperative economic sector – for example, various forms of cooperative agriculture, and cooperative commerce and cooperative factors – before the victory of the revolution. If it already has, then after the victory of the revolution, the collectively owned sector will immediately appear like the public sector, as the nonsocialist cooperatives with various capitalist maladies will immediately change their nature, as a result of the change of the nature of the country and of the establishment of the socialist Staterun economy; otherwise it will appear and gradually develop in the transformation of a small commodity economy and even a self-sufficient patriarchal economy. Besides the two socialist sectors of the economy, there is also the socialist auxiliary sector of the economy. These are the three forms of socialist economy. On the other hand, in a period quite long after the revolution victory, some nonsocialist sectors will still exist, and they differ from one country to another in what they are and what shares they have. For example, in China, such sectors as capitalist economy, small commodity economy, and self-sufficient patriarchal economy existed at that time. The situations in Russia after the victory of its October Revolution and some other socialist countries were similar to that in China in this regard, while some were different from China in that they didn’t have self-sufficient patriarchal economy but had capitalist and small commodity economy. These nonsocialist sectors certainly cannot coexist long with socialism. In the socialist countries that have already won the victory, therefore, there would inevitably be a stage of socialist transformation of the ownership of the means of production, in which there was a combat between the socialist economic sector and nonsocialist ones, with the latter destroyed by or transformed into the former. Although the nonsocialist sector was not thoroughly eliminated in this stage, the task of this stage was basically fulfilled when the nonsocialist sector counted for little in the national economy. The existence of some nonsocialist sectors suggests that a certain struggle still exists between socialist and nonsocialist sectors. But now that the nonsocialist sectors have already become insignificant, their existence doesn’t hinder the socialist production and construction from developing toward a new stage. And it is not inappropriate to say that a socialist economic system covering the whole of the national economy has already been established in the socialist transformation of the ownership of the means of production. The socialist economic system established through proletarian revolution and socialist transformation is called so because of its specific modality instead of its fundamental principle. The concept ‘economic system’ sometimes refers only to the economic relations between the State, enterprise, and individual in the public sector, between Central and local management departments, between function departments (for example, departments for planned management and labor, finance, commodity prices management, etc.) and the sector management organs (for example, for

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industry, agriculture, transportation, etc.), and between enterprises. It sometimes also includes the relationships between and inside several economic sectors under different ownership. We now adopt this concept in its broader sense; the socialist economic system, established after the socialist transformation in the ownership of the means of production, was formed in practice in a natural way in various socialist countries. Before the victory of revolution, there was only, and could only be, some extremely general conception of the socialist economic system, without and impossible to have research and design in detail. Because the socialist transformation in the ownership of the means of production took a not long period in all socialist countries and not much experience was gained during the period, there wasn’t, and it was impossible to have, detailed research into the socialist economic system after the socialist transformation. To find a socialist economic system appropriate for the development of productive forces, therefore, became an issue that various socialist countries must address after the transformation. In the posttransformation period, more and more experiences and lessons in socialist construction were accumulated, and the problems were more clearly realized, which thus created both objective and subjective conditions for finding such an economic system. Some countries realize the importance of such a system earlier than other countries, and some countries did not even realize that. Some countries have not only established and implemented a proper system, but also spent a certain period of time on testing it and consolidating and improving it accordingly. But most countries are still in a stage of finding or experimenting. As already proved, it takes a longer time than the socialist transformation to find such a system, implement and test it in practice, uphold the right direction of reform, overcome difficulties in the reform, remove people’s doubts about the new system, and improve this system; besides, this process is more complex than the transformation. The difficulty and obstruction encountered in practice, though different in nature in the two stages, are considerable. The task of completing economic restructuring, which is of great significance, is in no sense smaller than the socialist transformation of the means of production. Realizing the socialist economic restructuring, therefore, can be regarded as another great change in production relations following the socialist transformation. This reform is the fundamental guarantee of realizing the Four Modernizations in China. The time our economic workers proposed economic restructuring was not late, in the mid-1950s. And when looked at today, the problems raised then were also to the point. It is natural that there is controversy over such problems. The problem is that we didn’t follow the policy of ‘letting a hundred schools of thought contend’ all through, failing to make such research and discussion continue in a sound way. In the years when Lin Biao and the Gang of Four ran amuck, all research and discussion on economic restructuring was simply out of the question. Because of the destruction by Lin Biao and the Gang of Four and our unawareness of some shortcomings in their work, our country has already lagged behind quite a few socialist countries, such as Yugoslavia, Hungary, and Romania. Therefore, we should learn from foreign countries. It is often asked, ‘Exactly which country shall we learn from for our economic restructuring, Yugoslavia, Hungary, or Romania?’ Learning

26

Suggestions on China’s economic restructuring

from other countries is one of the general guidelines of economic restructuring in China. We came up with the slogan of ‘Learning from Soviet Russia’ in the early years after the liberation; there is also another argument that we should combine the general principles of Marxism with the concrete practices of China. When we passed by Belgrade, Ambassador Zhou Qiuye said to us that he disagreed with the idea of learning from some particular country and regarded it as a sluggard’s thinking, for it seemed to imply that we just copy foreign experience and practices without making painstaking efforts to research on our own. We agree with him. Given the then particular conditions, we cannot say that it was completely wrong to pose the slogan of learning from Soviet Russia in the early years after the liberation, but we were also taught many lessons. It is therefore indeed unsuitable to adopt this approach in the future. When initially summarizing this survey in Budapest, we considered that the only correct guideline for China’s economic restructuring was to combine the general principles of Marxism with the concrete practices of China. It seems that what all socialist countries must do is to find an economic system that meets the development requirements of productive forces; however, considering the past lessons from blindly copying the experience and practice of some particular country and its unique national conditions, these countries are doing independent research on what kind of an economic system should be established. Only by combining the general principles of Marxism with the concrete practices of China can we avoid dogmatism and experimentalism, guide this great reform of production relations with strict scientific thoughts, and finally achieve expected results. Now let’s look further at this issue from the following four aspects.

I. To implement China’s economic restructuring by following the thought of combining the general principles of Marxism with the reality of modernization in China, we must develop the general principles of Marxism and the Marxist theories of political economy and scientific socialism There actually is an idea, though not definitely literally uttered, that merely regards the general principles of Marxism as a world outlook of dialectical and historical materialism. We don’t think this opinion is correct; especially for the purpose of economic restructuring in China, we must correct this mistaken view. It must be noted that philosophy is only a part of Marxism, and other parts of Marxism, such as political economy and scientific socialism, should be of course also included in the general principles of Marxism. The two integral parts of the general principles of Marxism matter a lot to economic restructuring in China. In addition, there is another popular view that sees the general principles of Marxism as a ready-made thing and thinks the combination of the general principles of Marxism with the concrete practice of the country merely as the use of this ready-made thing under the country’s particular historical conditions. If we say this view were passable in the fashion of the period of China’s democratic revolution or socialist transformation, it does not hold water when dealing with

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the economic restructuring. Today, we neither can say that the part of the Marxist political economy dealing with socialism is thorough, ready-made, and already mature, nor can we say that the part of our political economy dealing with capitalism is thorough enough to illustrate the economic development law of contemporary capitalism. In the aspect of political economy, we learned in this survey the issues on which Hungary has placed research emphasis for preparing and carrying out its economic restructuring, including: (i) What is the meaning and extent of commodity production under the socialist system? Is commodity production necessary during the whole socialist period? And exactly what are the grounds for commodity production to exist under the socialist system? (ii) Under the socialist system, can the whole social production be considered as production in a large factory, so that a central organization can manage the social production in a centralized way, require all enterprises to follow strictly and precisely the plans, and allocate all financial, labor, and material resources? (iii) How can we correctly understand the functions of the country in the economic work, and how can we correctly divide the authorities of the country and its enterprises? (iv) What means of production and consumption regulation are there in the socialist system, and how can we classify them according to their nature? (Currently, in Hungary, there are administrative and economic means; the latter of which includes direct ones, such as taxation and subsidy, and indirect ones, such as a market-based pricing system.) How can we analyze theoretically such economic categories as prices, net income, wages, bonuses, collective welfare funds, production funds, interest, taxation, and subsidy under the socialist system? What are their roles as economic means in regulating production and consumption, and how can we correctly use these economic means? With the national economy developing and the economic restructuring advancing, what means of regulation have played bigger and bigger roles, and what means have been less used? (v) Why should importance be attached to letting a social center formulate the plan of developing the national economy? How can we ensure the correctness of economic plans fundamentally? Which can better ensure that the development of national economy is better planned, making plans known directly or indirectly to lower levels? (vi) What essential differences are there between the socialist market and the capitalist market? How are these differences reflected in real life? As the planned economy is influenced, both in good and bad ways in the way we admit and apply the market principles, how can we apply correctly the market mechanism to exert its favorable roles toward planned economy and avoid its unfavorable effects? (vii) How can we carry out the principle of distribution according to work under the socialist system? How can we correctly treat the differences between different workers, so that such differences can reflect the amount of labor and the performance of work, and the workers don’t think such differences are unbearable? How can we make such differences to stimulate to the largest extent the enthusiasm of the masses of workers? How can we carry out the principle of distribution according to work among sectors, regions, and enterprises? These are the issues in respect to socialism in the political economy which all socialist countries need to research when carrying out their economic restructuring.

28 Suggestions on China’s economic restructuring At the same time, it is quite clear to us that the Marxist theory of scientific socialism also urgently needs new development today. In the nineteenth century, Karl Marx and Friedrich Engels drew the conclusion that socialism is bound to replace capitalism, only according to the law of the capitalist economic movement, and gave a limited depiction of a future socialist society. In the early twentieth century, based on the historical facts in the monopoly stage of capitalism, Lenin discovered the law of unbalanced development of capitalism, and demonstrated the possibility that the proletarian revolution would win victory over the weak links of capitalism and build socialism after the victory. As history advanced, many new problems have arisen, requiring scientific answers. For example, the productive forces in many capitalist countries gained further great development following WWII, but why is capitalism bound to perish, and how? Why is socialism bound to win in these developed capitalist countries? How can countries where the socialist system has triumphed over the capitalist system further develop, after their socialist transformation in the ownership of the means of production? Although many people have studied and written many books and articles about these problems, we cannot say that these problems have already been made clear; instead they are far from being clear. Answers to these problems are not ready-made, and require the painstaking efforts of Marxists. To realize the economic restructuring in China, how should we research the Marxist theory of scientific socialism? We also thought about it during the survey, feeling that we should research the process of the objective development of socialism as Marx and Engels did on the theory of scientific socialism then, and research the past, present, and future stages of each socialist country. Here we may not necessarily discuss the ambitious ideal of the advanced stage of communism – ‘From each according to his ability, to each according to his needs’ – because there is no major controversy over this point, and it is not a task of top priority. We should research today, first of all, and find out to what kind of a society the political transition period of proletarian dictatorship and the corresponding period of transition from capitalist to communist economy as described by Marx in the Critique of the Gotha Programme refer. Now that we acknowledge that there is a political transition period of proletarian dictatorship in the development of a socialist society, we should research the economic regularities of this period. Lenin intended to write two books, titled Economics in the Era of the Dictatorship of the Proletariat and Politics in the Era of the Dictatorship of the Proletariat, but failed to finish them. The stage that follows, according to Marx, is the first stage of communism: what society is it then, and what characters does it have that differ from the previous stage? One character that distinguishes the two stages, Marx thought, lies in no commodity, no value any longer, but maintaining the principle of distribution according to work. We think, according to the six-decade’s experience since the ‘October Revolution,’ that distinguishing these stages in this way does not necessarily accord with the process of historical development, and it is probable that distribution according to work and commodity production either coexist or perish at the same time. We wonder whether we can change the expounding of Marx to the extent that after the historical period of proletarian dictatorship gives place

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to the first stage of communism described in Marx’s Critique of the Gotha Programme, commodity production is still preserved, the category of value still exists, and the value rule still functions; in other words, whether we can revise Lenin’s formula that ‘socialism = public ownership + distribution according to work’ to socialism = public ownership + (commodity production + distribution according to work). That is to say, even if the dictatorship of the proletariat has already completed its historical mission and human society has developed into a higher stage, in socioeconomic life, the common interest of the whole society still exists, requiring comradely mutual cooperation, on the one hand; on the other hand, material interests also exist – there are large numbers of economic units and individuals caring for advantages and disadvantages in their economic activities, which constitute the whole society. Therefore, even if society has developed into that stage, neither distribution according to work nor commodity production will perish. Distribution according to work, together with commodity production, will become unnecessary only when society has developed into a higher stage, in which commodities are tremendously abundant, the people are highly conscious and accustomed to obeying completely and consciously the standards of conduct regarding work and social life, and work becomes a factor of life enjoyment. This idea, we think, probably better accords with the development process of world history, allowing us to have a deeper and more thorough understanding of the necessity of maintaining commodity production and applying the law of value under the socialist system. It is a more complex problem as to what parts the historical stage of proletarian dictatorship can be further divided into and what stages the socialist countries of the world now are in. Nevertheless, there are more concrete materials available for investigation into this problem. As long as we conduct in-depth research into the socialist countries one after another, we can raise more inspiring problems. Scholars in many countries now are researching such problems. A scholar we met in Hungary thought it hard to say Hungary has already developed into a mature socialist stage, because the country, though not lagging behind any other socialist countries in both production and living levels, was still a moderately developed country from the perspective of productive forces. There are State ownership, cooperative ownership (including economy of both large and small scales), and supplementary economy in the country. The existence of the three types of economy probably indicates that socialism is still in an immature stage. In some stages of the proletarian dictatorship period, some nonsocialist forms of economy might also exist, in addition to socialist ones. The Hungarian economy is quite developed, but there are still 20,000 individual farmers and other self-employed workers. These nonsocialist forms of ownership can play a positive role when treated well. They have existed for a quite a long period, so it seems that they are not necessarily regarded as a mark of incompletion of socialist transformation. The development stages of socialism is a theoretical issue of great practical significance, and a fundamental issue in the theory of scientific socialism, in the research of which emphasis must be placed when considering economic restructuring.

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Many comprehend the general principles of Marxism as those principles, expounded by classic Marxist writers, which should never be changed at any time, in any place, and under any condition. Are there such principles? Yes, but only several of the simplest ones given in dialectical materialism and historical materialism. In our opinion, a general law – a scientific conclusion that doesn’t change with the particular condition of a country – is just a general principle of Marxism. From this perspective, the general principles of Marxism are vigorous, plentiful, and developing in content. To solve the issue of economic restructuring in China by combining the general principles of Marxism with the specific reality of the country, we think, in no case can the ready-made things be applied to the actual issues of China simply; we must carry out in-depth research on and wide discussions about the Marxist theory of scientific socialism, as well as the political economy as the basis of this theory, especially the socialism part therein. During our survey in both Hungary this year and Yugoslavia in 1978, we found they both have attached importance to the research of socialist theory and discussed a great deal of new issues, which, we think, is natural. In order to develop these general principles of Marxism, we have no choice but – pursuant to the principle that practice is the sole criterion for testing truth – to summarize the considerable experience and lessons over the past 60 years of the socialist countries, especially China, and the scientific achievements Marxists have obtained in this regard. For example, if we say that there was no clear idea about the economic law of socialism before the 1950s, then today there are tons of positive and negative experiences provided by the countries all over the world, and there are numerous relevant books and articles written by scholars. Therefore, as long as we can draw scientific conclusions on major theoretical issues through emancipating the mind, doing away with superstition, and carefully researching, there are no insurmountable difficulties; the key lies in how much importance we attach to this theory. Our survey of Hungary this time was mainly to have a clear idea of the process of the system of reform in that country, the various aspects and links of its current economic system, and the relationship between the problems with its economic restructuring and economic development. Due to limited time, we only met a small number of economists and failed to have a full discussion of theoretical issues. Through more than three weeks of survey, we felt that although the new economic system of Hungary, as with Yugoslavia’s system of socialist autonomy, may be appraised in such-and-such a way, it is and should be certain that it is a historical phenomenon that cannot be ignored by those who research the development of contemporary socialism and even the development of the world as a whole. Though the Hungarian economic restructuring has taken a period 18 years shorter than the socialist autonomy in Yugoslavia, Hungary’s economic system should be recognized as consolidated. Based on the history, we found in this survey the vigor of this system, so we should not doubt the correctness and necessity of the economic restructuring just because of problems and difficulties with economy. Good economic results, for example, the rapid economic development in Hungary for a time following its new economic restructuring, are

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attributed largely but not wholly to economic restructuring; there are also other reasons, such as correct economic policy and organization, relatively favorable international conditions, and so forth. The difficulties that Hungary encountered in industry in the following several years were created largely by objective conditions, because the country’s export, which yielded 50 percent of the national income, was deeply affected by the crisis in the capitalist world after 1973. At the same time, the officials themselves also admitted that there were other reasons, such as competent leaders’ lack of knowledge of the change of the world market and prompt response to that change, and failure to cut down investment in time to slow the pace of living standard improvement and industrial development. There seemed to be disputes in Hungary over whether or not the economic restructuring was responsible for economic difficulties, which was later solved as reflected in articles summarizing experiences of the one-decade economic restructuring. Now their conclusion is that the economic restructuring has played a positive role, rather than a negative one; the economic difficulties should be solved by furthering the economic restructuring according to the resolution of 1968 regarding economic restructuring, instead of taking a road back. We may not make a final judgment for the time being about their opinion, but if we doubt the system of reform only because of some difficulties that appeared in Hungary, it is certain that such a doubt is groundless, and is mistaken methodologically. We think the Hungarian economic restructuring is relatively successful. This country has always been unswerving in the economic restructuring. And how to further development is an issue of another nature. Some other countries in Eastern Europe, such as Romania, Bulgaria, and Poland, are following suit to break away from the model established during the leadership of Stalin featuring the denial of the market’s role and the one-sided emphasis on centralization. The countries that basically stick to the model of the Soviet Union, such as Czechoslovakia, and even the Soviet Union itself, are also carrying out some reforms; economists have discussed a lot and written numerous books on socialist economic restructuring. The practice has proved that the superiority of the socialist system can be relatively well exerted in countries that have already cast off the Soviet Union’s framework of economic system, while problems arose in countries that have not yet done so. It has become a historical trend to break away from the Soviet Union’s model and carry out economic restructuring. It is thoroughly necessary to research this historical phenomenon, to develop the socialist part of Marxist political economy and the Marxist theory of socialism.

II. To implement China’s economic restructuring by following the thought of combining the general principles of Marxism with the reality of modernization in China, we must criticize earnestly the current economic system, and analyze and research various conditions for economic restructuring To combine the general principles of Marxism with the concrete practices of China, we must make efforts to develop the general principles of Marxism on the one hand,

32 Suggestions on China’s economic restructuring and to research the reality of the country on the other hand. If we don’t discover, analyze, and criticize the problems and maladies resulting from the economic system prior to reform, it is impossible for us to make a correct reform plan, nor can we arouse the enthusiasm of the people to carrying out economic reform. Before studying its economic restructuring, Hungary published books by two economists (one was the then director-general of the Central Bureau of Statistics) that criticize the Hungarian economic system, for the purpose of drawing the attention of the public to economic restructuring; this gave an impetus to the determination of the Party Central Committee of Hungary to research economic restructuring. Established in 1964, a group, entrusted by the Party Central Committee of Hungary to research and formulate the theory of economic restructuring, first spent one and a half years to criticize the then economic system, while developing gradually the conception of reform. We think that Hungary’s practice of preparing for a reform plan tallied with the development law of things. The so-called criticism is nothing but scientific analysis of a particular thing as an object. The criticism of an original economic system is just – according to the principle that practice is the objective criterion for testing truth – to make it clear what good and bad roles were played by the current system in developing production and increasing the people’s living standard, to distinguish the bad practices and the good ones, and to find out which practices, correct in the past, begin to impede the further development of productive forces. In no sense does criticism negate everything. At the same time, reform is not equal to the abandonment of all either, but through scientific analysis, keeps what should be kept and discards in a determined way what should be discarded. According to economists who had been involved in researching and determining the economic restructuring in Hungary, the one-and-ahalf-year criticism played a decisive role in both formulating the reform plan of the country and later carrying out the reform. They thought the practice was worthwhile. This experience, we think, is worthy of attention. We also think that such criticism for a certain period in China can help us make clear the economic situation of the country. Living in China does not mean that we already have a good understanding of the economic situation of the country. Now there are different opinions about the present economic situation, economic system, and economic work of the country; one of the reasons is that we don’t have a checked comprehensive material regarding the economic situation of the country. We propose to compile a white paper on the economy of the People’s Republic of China, to make a summary of economic information on each sector and region over the past 30 years, providing the Party Central Committee and the practical and theoretical workers responsible for the research on economic restructuring and other economic issues of the country with comprehensive material regarding our economic strength, the problems with the conditions (including resources, national conditions, and human resources) for our economic development, and the favorable conditions for exerting our economic strength. A big country with a population of nearly one billion, China has many problems and tons of difficulties in the economic work for various reasons, and the sectors and regions differ considerably in terms of their conditions. Therefore, even if there is basic agreement, it will be still very difficult to produce meticulous, systematic, and scientific analysis and description of the economic situation of the country without strenuous

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investigation and research. What’s more, we deeply feel that the country’s economic work is poor and not scientific. Take the statistical work as an example. There are not only incomplete statistical items and lack of research on statistical approach, but the statistical work is also sometimes subject to many interruptions; besides, statistical figures are in small quantities, usually unreliable, and frequently kept secret from the people and even the economic research personnel. How can we ensure that the economic work and economic research will be done in a scientific way under this condition? Hungary is a small country with a population of only 10.7 million, but the personnel in the Central Bureau of Statistics amount to over 1,000, accounting for one ten-thousandth of the total population. The Hungarian Central Bureau of Statistics is directly under the Council of Ministers, with all local statistical agencies reporting to it, and Hungary has the statistical law. In comparison, our National Bureau of Statistics has only over 160 persons, who frequently are unconfident in the authenticity of statistical figures. In such a circumstance, it is impossible to have a clear idea of the economic situation of our country without considerate analysis and criticism and without checking the basic facts together. Besides, clarifying the economic situation means to collect essential, reliable information that reflects major problems, rather than minor information, and analysis of and research on the current economic system is the best way to find out such information. We think, therefore, in researching and determining economic restructuring in China, it is an important task to analyze and research the pre-reform economic system by combining the general principles of Marxism with the reality of the country. It is generally acknowledged that there are many maladies in the country’s current economic system that must be reformed. The Party Central Committee also indicated several times the necessity of reform, and reform must be carried out based on national conditions, including geographical and demographic conditions, economic and cultural conditions formed in the past thousands of years, and conditions formed over the past 30 years since the founding of China, especially in the past 10–20 years. Besides these objective conditions, there are subjective ones including the knowledge, will, and determination of the people. Objective conditions are existing facts that man cannot change at will. Some cannot be changed at all – for example, our national and geographical conditions – and some cannot be changed in the long term – for example, demographic conditions. All our subjective actions and our system of reform must consider these conditions and admit these facts, so it is certain that our system to be established will have characteristics of its own. The subjective conditions, such as the public’s recognition of economic restructuring, can be changed fast through discussion, conviction, and education. Subjective conditions should be considered when taking actions for economic restructuring, but not on a decisive basis on which the principle and direction of economic restructuring are made.

III. Research foreign experience in economic restructuring In this survey, we learned that Hungary, when researching and determining economic restructuring, not only studied theoretical articles on socialist economic

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systems written by foreign economists, but also sent people to countries such as Yugoslavia and Czechoslovakia to research their economic reform theory and practice. The economists we met admitted that the Hungarian economic reform had been affected by and borrowed a lot from Yugoslavia, both theoretically and practically. They also told us that the thoughts of Czech economist Ota Sik, the vice premier of Czechoslovakia during the Prague Spring period, also inspired them, and they are still studying his books and papers; besides, they also researched during the reform the books by Polish economist Bruss, as reflected by the clear links between the later economic restructuring in Hungary and the books by Bruss. Up to now, Hungary still pays close attention to the movement of economic reform in the Soviet Union and Eastern European countries. Through this survey, we feel more deeply that the Hungarian economic restructuring was not isolated. As Hungary was deliberating its economic reform, quite a few Eastern European countries wanted to cast off the model they had copied from the Soviet Union under the reign of Stalin. Not only had Yugoslavia advanced workers’ autonomy early in 1952, but Czechoslovakia also had walked ahead of Hungary. Therefore, Hungary made great efforts to study foreign experience when researching their economic reform. Hungarian economists said that they had gone anywhere they could for this purpose. By so doing, they do not have only an understanding of the guiding principles of economic restructuring of other countries, but also know about many concrete practices of these countries. The better we know foreign conditions (under what circumstances did this country adopt a particular policy?), the better we can decide the principle and approach of economic restructuring in our country according to the differences between our country and other countries. We have attached importance to foreign experience in recent years in the course of researching economic restructuring in China. As required by the Central Finance and Economic Committee of China, the economic institutes of the Chinese Academy of Social Sciences, and the ministries under the State Council, quite a few universities and the agencies subordinate to the Ministry of Foreign Affairs and the Xinhua News Agency have provided substantive materials concerning economic restructuring in foreign countries, including those for this survey. From these materials we got a basic idea of the Hungarian economic restructuring and economic situation. We advise that the research on foreign economic systems be reinforced by domestic agencies and schools and our embassies and journalists in foreign countries. In the past decade, due to the decreased communications between China and Eastern European countries, many cadres acquainted with Eastern European languages changed their professions. We should encourage those capable of collecting and studying economic materials to reassume their work, and at the same time, make efforts to collect economic books and periodicals from these countries and publish translated materials. With more support from the superior authority, the Institute of World Economy of the Chinese Academy of Social Sciences may lead other units to do this work and to take the lead, and comrades of other units to participate; seminars and other activities may be organized to let scholars interested in foreign economic issues study the translated

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materials so that better achievements shall be made. At present, because many important foreign materials have not been introduced and there is a lack of scholars to study translated ones, many things that should have been clarified lead to misunderstandings of foreign situations and repeated work; besides, not studying relevant materials available at home, some went abroad to ask questions that have been answered many times, due to a lack of research materials already available at home. This not only wastes manpower and material resources, but also makes no good impression on foreigners. The research on foreign countries relies mainly on day-to-day work; planned and purposeful surveys abroad, of course, are necessary. As long as we make full preparations and conduct surveys in an earnest way, we can get much information that cannot be learned in books and periodicals. We had read many materials before the survey, and had doubted at the beginning whether we could get more profound information there and whether we may make no substantial progress in understanding the Hungarian economic system, which was quite possible if Hungary were unwilling to answer our questions honestly. But it turned out a worthwhile trip, as we were treated in a friendly way and learned a lot. The shortcomings of this survey are inadequate research into the Hungarian economic restructuring prior to the survey, and failure to produce a preliminary research report in advance so that we could raise more profound and specific questions. Regarding positive results, we surveyed the economic issues of Hungary in a comprehensive and systematic way and received during the survey close cooperation from comrades of the embassy and the Xinhua News Agency. Many people were sent to Yugoslavia and Romania before and gathered quite a bit of information which, nevertheless, was not as detailed and systematic as that obtained in this trip. It is suggested that the societies of economic research on Yugoslavia and Romania study the existing materials regarding both countries in a systematic way to see how many issues remain unclear and then send people there for careful surveys on them. Because it is not an easy thing to survey abroad, sound preparations should be made prior to surveys in advance to avoid repeated investigation. We also think that comparative research on several countries will be better. We should research not only countries with successful economic restructuring and booming development but also those with poor performance in this regard. Only by so doing can we have broader thoughts. When we started to employ this important approach in 1977, we had no idea that foreign countries or regions such as Japan, Western Europe, Yugoslavia, and Hungary had already attached great importance to it. The Karl Marx University of Economics based in Hungary provided the curriculum of comparative research on socialist economic systems, and it is said that the school has already written considerable teaching materials. Our research institutes and societies and our schools should also work out research plans in this regard, and make efforts to start the work. In such research, we should not only compare different socialist countries but also compare socialist countries with capitalist ones. Some practices of Eastern European countries were borrowed from capitalist countries. Not only are socialist countries learning from advanced capitalist countries in microeconomic

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management, but they also are affected in some way by the latter in the macro aspect; obviously, the latter was influenced by the former in developing the planned economy. In addition, by comparing two countries in terms of economic development, we can also raise some questions for research. For example, Austria, Hungary, and Czechoslovakia all belonged to the empire of Austria-Hungary, while the latter two become socialist countries, believing in Marxism and Leninism, and the remaining one is a capitalist country with a Lassallist prime minister. Austria used to be more developed than Hungary but less so than Czechoslovakia, but now has surpassed both Hungary and Czechoslovakia considerably. Unfortunately, such comparison work has not yet been started.

IV. Determine the nature of our economic reform plan As to what kind of an economic reform plan our country should adopt, we can only express opinions on the basis of in-depth research on the Marxist theory of socialism, the reality of China, and foreign experience, rather than simply after a survey of the economic reform in a particular country. Our problem is whether we should formulate a fundamental plan or a temporary or tentative one for the economic reform; whether we should formulate general principles or concrete measures which are just meant to change organizational relations and forms of institutions; and whether we should formulate a thorough and reasonable plan in theory or merely a revised plan based on old ones. Noticing this problem, we’d like to give our opinion by giving consideration to the Hungarian economic reform. The workers’ autonomy of Yugoslavia in 1952 was a measure adopted after Yugoslavia had broken up with Stalin and the Intelligence Agency of the Soviet Union. Without adequate time to consider and design its economic system, Yugoslavia had decided a fundamental principle of autonomy first of all to cast off the Soviet model at its root, and then solve step-by-step the problems confronting the new economic system. Yugoslavia was the first country free of the Soviet model, without experience of other countries to refer to, and its economic system research started after rather than before that. Therefore, the country has undergone numerous difficulties and hardships in the development of the autonomous system and spent a long period of time perfecting this economic system. Different from Yugoslavia, Hungary had comparatively adequate time to prepare for its economic restructuring in a stable situation; it first formulated the principles, methods, and implementation steps for reform, and then put them into practice. Considering the similar situation of China with Hungary’s, our country may and should also make full preparation and then work out a policy of reform. In May 1966, the Party Central Committee of Hungary determined in a resolution to establish a new economic system with long-lasting effects through thorough reform. This new economic system was a new system different in principle from the previous ones. And Hungarians were aware of the necessity to guide this reform with a definite, relatively thorough theory (we use the phrase ‘relatively thorough’ because there are aspects that are not thorough, as reflected by the opinions of some economists we met on this trip). The economic restructuring

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of our country, we think, should also be guided by a theory similar to that of Hungary; it should be a fundamental, long-lasting, and principled reform, rather than a temporary one intended only to deal with some problems encountered. Today, some Eastern European countries, and even the Soviet Union itself, adopt the latter practice. For example, some countries practice three-level and two-level administration alternatively; waver between centralization and decentralization; and establish incorporate companies above enterprises for a while and then establish bureaus and management centers above enterprises. Such practices are just wasting time rather than solving any fundamental issues. Why is such theoretical guidance so important? Because only by doing so can our country keep the economic restructuring from being blind and justify the economic reform and, in particular, a reform of such a kind; only in this way can we keep unswerving as to the direction and policy of the reform that has been decided. If some problems do arise, we may only be swayed on specific problems rather than fundamental ones, so as to maintain the stability of the reform and implement the new economic system in the long run. The Hungarian economic reform has lasted for 12 years; despite setbacks, the resolution made in May 1966 has been followed, which could partly be attributed to the pre-resolution debate as it solved many theoretical issues. At the same time, the reform should be implemented depending on the organized efforts of officials and the public, and their consciousness of the system reform is essential to the success of the reform. Therefore, they must be educated mainly on theories about economic restructuring. Without adequate and thorough theoretical research, we would have nothing to teach people. After the Party Central Committee of Hungary made the resolution in May 1966, large-scale training courses were provided to educate the managers of all main enterprises, and then to educate managers of minor enterprises. Such education is still conducted on a regular basis. System reform is by no means paper-writing, but requires action of all Party members, officials, and the public, which would never be real without compromises. We learned in our survey of many such compromises by the Hungarians, but such compromises in action should not hinder the theoretical thoroughness. Restructuring should be thorough in theory: problems remaining unsolved by science should be further discussed; solutions, scientific but not widely accepted yet, should be given publicity; and different opinions should be further discussed or debated so that disputes can be solved thoroughly. We should, if not affect the whole picture and due to lack of subjective conditions, wait for good opportunities to solve tough problems that are theoretically possible to solve. We noticed that Hungary did so in its economic reform. For example, there are overlapping departments (i.e., many departments of industry still include departments of other economic sectors) under the Hungarian Council of Ministers, which, pursuant to the theory of economic restructuring, should be merged and reorganized. But at that time, the Party Central Committee of Hungary, considering the gigantic workload involving many people and departments, decided to maintain such a structure and solve the issue later – but these departments have remained unchanged for 12 years. Another example is that, according to the original theory of economic

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reform, Hungary’s ‘direct economic regulation’ of enterprises should have been decreased continuously until the minimum was achieved. Since 1979, however, thanks to the influence of the economic crisis of the capitalist world, Hungary has encountered tremendous economic difficulties, and such direct economic regulation has increased rather than decreased. But the country upheld the principle of reducing direct economic regulation, and through efforts decided to considerably reduce it from 1980 on. We can learn from how Hungary balanced the theoretical thoroughness and necessary actual compromises. Such circumstances, we think, will also be encountered in the economic restructuring of our country, so there should be a definite guiding principle in advance. When a country carries out a fundamental economic reform, the principle of the reform should not be changed easily once decided. Over the past 12 years, Hungary has stuck to the principle set out in the resolution of May 1966. But because both international and domestic environments, economic situations, and conditions for economic development of a country change continually, there should be certain flexibility in economic restructuring. Therefore, Hungary formulated a ‘regulation system’ for the year and revised it according to the new situation every several years, changing some provisions and enacting decrees that better cater to the economic situation at the time. Such an approach to sticking to principles and maintaining flexibility meanwhile has been an important experience of Hungary. The country’s meticulous economic work was reflected in statistical work and economic research on the one hand, and by careful and thoughtful formulation and execution of a ‘regulation system’ on the other hand. The ‘regulation system’ varied as the situation changed, allowing for principles applicable to various cases. To conclude, Hungary’s stable principle and temporary and frequently changing regulation system sets a good example to follow. Hungary used more than three years to prepare for its economic restructuring, from October 1964 when the Central Theory Group was set up, to May 1966 when the Party Central Committee made the resolution, and then to January 1, 1968, when the economic reform was officially launched, which should be regarded as fast, considering the complexity of research and implementation of such a reform. We asked why Hungary could finish such complex work in such a short time, and learned from the answer that it can be attributed to the then best conditions for economic restructuring and the small size of the country. China cannot be that fast, due to its large population, complex national conditions, poor ability in scientific research, and weak material foundation for economic restructuring. In one and a half years since the forum on theoretical work of the State Council held in summary of 1978, we have made progress of economic reform at a pace which cannot be said to be slow, but are still far away from formulating a investigationand-research based fundamental economic reform plan that can be carried out stably in the long term; what’s more, it may take more time to implement such a plan in a big country like China. Nevertheless, we cannot slow our pace too much, for economic restructuring is urgently needed to realize the Four Modernizations. It is therefore necessary to make more effort to research such an issue.

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Given the particular conditions in our country, it seems that we should not only research a long-lasting and fundamental issue, but also discover tentative, specific reform methods that can be carried out at the present, and implement these methods soon. By doing so, we can mitigate the acute contradiction between the current economic system and the actual requirements of economic work on the one hand, and create conditions for fundamental economic restructuring on the other, including making public opinions and observing the results of reform as a test. It is correct and important that we are doing so now and carefully; otherwise, new difficulties will be encountered in carrying out the new economic system. Of course, the practice may distract our attention from research into fundamental system reform issues. In the interest of the long term, we need to make more effort to prepare for a fundamental system reform, which requires that we be more determined and to mobilize all possible forces for the preparation work.

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Socialist economic goal theory* (1979)

To achieve modernization in China, a great deal of economic theoretical issues must be researched, among which is the issue of ‘socialist economic goal theory,’ to further clarify the purpose of our socialist production and the ultimate goal of all our economic activities, as well as to find out the basis of our planning and arrangement for the social production and the standard to appraise the whole national economy. It is apparently significant to study this issue. Our initial opinion on this issue is that, according to our experience obtained in economic development since the founding of the PRC and the socialist nature of our economic system, our goal of economic development should be nothing but increasing, to the largest extent possible, the production of final goods that the people need. Then what are final goods? They include, first of all, consumable commodities, the most important part of final goods; second, goods needed for developing the social causes such as education, science, culture, and health care; third, goods needed for social management and class struggle (they are used mainly to strengthen national defense); and fourth, export products. The final goods mentioned here are theoretically based on the socialism part of the Marxist political economy, having a different meaning from that of final goods that capitalist economists talk about. Capitalist economists usually use the term ‘final demand.’ For example, according to Leontief (not the Soviet economist Leontief who writes textbooks of political economy, but the one who moved from the Soviet Union to the United States and conducted input-output analysis), there are four final demands: investment demand, consumption demand, government procurement, and export demand. Among them, ‘consumption demand’ and ‘export demand’ are the same as what we use, while the other two are different from ours. It is reasonable that capitalist economists say investment demand to be final demand, for it reflects the economic life of capitalist society. Capitalist production yields not only the value but also the surplus value; what’s more, it pursues maximum profits with minimum cost and the widening of capital. Considering this, to meet the investment demand is one of the goals of capitalist production. The means of production used for investment, therefore, are a type of final goods of a capitalist economy. But under the socialist system, goods are produced to satisfy the increasing needs of society, which is a basic character of socialism as clearly

Socialist economic goal theory 41 pointed out in Stalin’s formulation of the basic economic law of socialism. In the socialist economic life, therefore, investment is not the final demand, and the means of production used for investment are not final goods. It is also reasonable that capitalist economists see government procurement to be the final demand, for it, too, reflects the economic life of capitalist society. Because capitalist production, in essence, is production by capitalists, the state monopoly capitalism in capitalist-imperialist countries is also the combination of private monopoly capital and state monopoly capital with the former as the basis. Capitalists sell their products to the government, so these products should be seen as final goods. But socialist production is mainly done by the sector under the ownership of the whole people. As the products are owned by the state, goods sold to the government cannot be regarded as final goods. In summary, as far as the capitalist economic life is concerned, the products produced and sold by capitalists can all be seen as final goods, and only those in the process of this capital movement are intermediate goods. For the social production of a country, the products used for export, whether the means of production or the means of consumption, should be all regarded as final goods; under the socialist system, only the products ready to enter various fields of consumption are final goods. The three aspects enumerated above are all about the consumption fields of socialist society. Under the socialist system, we should take the increase of final goods as the ultimate goal of our whole economic activities. Here, whole economic activities, above all, are direct production activities, including activities producing services to satisfy the consumption needs of people, and activities of people in the circulation, service, science, and education and management organs, which serve and have an effect on production, but excluding the distribution and consumption activities following the production of final goods as they belong to the scope of realization rather than production of final goods. The specification of the goal of socialist economic activities as a whole may increase consciousness and reduce blindness of each production sector and economic sector; otherwise, it will be inevitable that some sectors develop their production in an isolating way due to lack of a holistic idea. Based on this understanding, we can undoubtedly arrive at one of our conclusions: that the planning and arrangement of the whole social production should serve the goal of increasing final goods. Since last spring, we have emphasized this point of view, targeting: a)

The planning approach we learned from the Soviet Union in the early years after the liberation to arrange the whole social production. Of the main products, the most important, about 30 or 40 varieties, may be extended at most more than 100 varieties. Among these varieties, there are heavy industrial products as well as light industrial products and agricultural products. Up to now we still use this approach. b) The situation in which the whole social production is planned and arranged in order of heavy industry, light industry, and agriculture, a practice we have

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Socialist economic goal theory followed in fact for a very long period; especially the situation in which ‘steel as key link’ is regarded as the guiding principle to plan and arrange the whole social production (although we often stress the order of agriculture, light industry, and heavy industry, and even truly think so subjectively). That is to say, it should be emphasized that the ‘monism’ starting from final goods should substitute the ‘pluralism’ starting from an increase in targets of a certain number of main products, and the ‘monism’ starting from heavy industry and ‘steel.’

The thought of planning and arranging the whole social production by starting from final goods is not one that no one has proposed before. Some foreign countries also raised similar issues for discussion. There are three opinions of economic communities in some countries about the planning approach under the socialist system: the resource approach, which involves planning and arranging the whole social production based on the country’s sources; the sector approach, which involves planning and arranging according to the targets of increasing products of each sector; and the final goods approach. The focus of debate was on which of the three approaches was superior. In practice, however, the first and the last approaches have never been used, while the second one or the amended sector approach is widely used, as it is easy to implement. However, it has many shortcomings. Resources are a condition that must be considered, but the purpose of production cannot be to exert the functions of resources, so the resource approach is not appropriate. The final goods approach also has problems and difficulties in implementation, due to lack of experience, but should be studied. However, our view is not completely the same as the final goods approach that foreigners speak of, for the final goods we talk about exclude any means of production (except for export), which is different from that in the above-mentioned final goods approach. Only by sticking to this point, we think, can the final goods approach be theoretically consistent. Planning and arranging production with the goal of increasing final goods approximates, in our country, Comrade Mao Zedong’s proposal of the order of agriculture, light industry, and then heavy industry. Because final goods make up a large proportion of agricultural and light industrial products yet a small proportion of heavy industry, the amount of agricultural and light industrial products may denote – to a certain extent – the amount of final goods. However, agricultural and light industrial products and final goods, and heavy industrial products and intermediate goods, are essentially different concepts. Many heavy industrial products, such as washing machines and refrigerators, are means of livelihood and final goods as well. But a great many agricultural and light industrial products are means of production, and they are intermediate goods. Therefore, both sets of concepts, agricultural and light industrial products and final goods, and heavy industrial products and intermediate products, may be similar or quite different from each other. Starting from final goods does not certainly take the order of agriculture, light industry, and then heavy industry. In developed countries, for example, heavy industrial products make up a large proportion of final goods. Of

Socialist economic goal theory 43 the three pillar economic sectors in the United States, cars and residential buildings certainly belong to heavy industrial products, but they are also final goods. If our economy is as developed as America’s, we can’t say that starting from final goods and taking the order of agriculture, light industry, and then heavy industry is similar. At the same time, the order of agriculture, light industry, and then heavy industry is also an embodiment of the guiding principle of developing national economy with agriculture as the basis. Such a guideline is built on the objective law that ‘Agriculture is the base of national economy.’ This objective law is applicable to any societies under any conditions, but only in China where agriculture is far from being developed should the basic role of agriculture and the order of agriculture, light industry, and then heavy industry be particularly emphasized for arranging and preparing production. That is to say, an important thought underlying such an order, or its theoretical basis, is different from that underlying ‘starting from final goods for production planning and arrangement’ and its theoretical basis. Therefore, we should find out both similarities and differences between them, and put equal emphasis on them so that both of them can supplement each other. If we decide to adopt the final goods approach, the following problems must be researched. First, when adopting this approach, we are confronted with the already existing production capacity of various sectors; relations between production, supply and marketing, circulation, service and management organs; the thinking and working habits of people, and so forth. Therefore, it will be a long process to change from the ‘sector approach’ to the ‘final goods approach.’ And careful research is required as to what steps should be taken in this process. The specification of the goal of socialist economy only addresses the problem of the direction of reforming the planning approach, while taking concrete steps requires separate research. The settlement of principle-related issues does not mean that all other issues will be readily solved. The economic and planning work is very complex and specific, each step of which needs precise elaboration and careful consideration. Second, the final goods approach still fails to solve the problem of structure and amount of final goods. Though people around the world have similar needs in food, clothing, housing, and daily necessities, these needs vary in different countries, even in different periods of the same country. That is, the composition of consumer goods is different in different countries and in different periods. In addition, the amount of consumer goods is limited by production capacity. And the composition of other products is different too. The reasonable structure and amount of final goods, therefore, can only be determined according to such factors as a country’s historical background, economic conditions, and international environment; and the planning and arrangement cannot be exactly predicted, but need a great deal of measure and calculation as well as constant balancing. Third, the final goods approach by no means justifies ignorance about the production of intermediate products; to the contrary, without dealing well with the production of intermediate goods, it is absolutely impossible to increase maximally final goods. The final goods approach may make the production of

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intermediate goods be more reasonable, and may better arrange the import and export. That is to say, through this approach, we can give priority to the production of intermediate products urgently needed for the production of final goods. If we attach full importance to final goods such as meat, we will think highly of various machines needed for developing animal husbandry, and other means of production, to which priority was not given in the past. This approach requires that, based on concrete national conditions in various aspects and according to the structure and amount of final goods, the structure and amount of intermediate products can be determined, which are also affected by the way the final goods are obtained. For example, chemical products may be made out of coal or petroleum as the raw material; electricity consumed for producing these products may be generated either by thermal power or water power, and so forth. What’s more, the balance between the production of means of consumption, and that of means of production, and between various means of production, is always relative. Some imbalance can be regulated through import and export, while some cannot. There are still many other complex problems here. Besides the above three problems, there are other problems that need to be researched. Thus, to adopt the final goods approach, we should conduct considerable research and economic work. When thinking about the superiority of socialism several months ago, we further thought of the issue of using the increase of final goods to measure the results of the economic work as a whole. Now that we plan and arrange production by starting from the targets of increase of main products, we have no choice but to measure the whole economic performance by referring to how well the targets are reached. In other words, the main criteria for measuring the development of national economy are the yields, output values, and the annual growth rate of main products, which we are still using now. Is that right anyway? The yields, output values, and annual growth rate of main products are very important to measuring the development of a sector, a region, and even the whole of economy. Especially when appraising the performance of a particular sector or the production of a particular product, what methods can we adopt, if we don’t examine the yields and output values? These figures should be used to measure the whole national economic development, if no other figure is available for that purpose. Now, such figures of foreign countries are available for us to research and compare with ours. In addition to the growth rate of products in the major sectors, the gross output value of industry and agriculture is used to express approximately the amount of all products of social production, but it includes considerable repeated calculations. Therefore, the absolute value of this indicator has no precise meaning. Nevertheless, year-by-year comparison and comparison with other countries that adopt the same statistical method can be made based on such figures. Now it is absolutely necessary to use such figures. However, it must be noted that such a criterion is theoretically defective and, in practice, may be detrimental to our economic cause. Why is it theoretically defective? The growth of a certain number of main products is not certain to be in proportion to that of final goods. It is probable that the growth rate of the main

Socialist economic goal theory 45 products reflects a high pace of economic development, while, as a matter of fact, the increase rate of the final goods indicates the contrary. That is to say, it is likely that large quantities of intermediate products are not turned into final goods, as they might be overstocked, stagnate in the process of production, or be made into tools of production, while a large amount of equipment is inadequately used, or too many raw materials are consumed. These intermediate products, as time passes, would lose their use value and become simply valueless. Statistics only reflect that these products have been produced, not how they were wasted. This will be the result if we look only at the yields and output values of the major sectors. Another criterion for the development of national economy is the gross national income, which is more scientific than gross national product or gross output value of industry and agriculture, for it gets rid of the factor of repeated calculation and the value of materialized labor consumed in production. What’s more, this figure is relatively a rational statistical item in capitalist countries. In fact, it is very close to the sum total of the four varieties of final goods that capitalist economists speak of. It is also a reasonable statistical item for a socialist country. We should compare with foreign countries in terms of this figure, because it is better to use the gross national income or the value of wealth newly created in a year than the gross national product or gross output value of industry and agriculture to measure the whole economic development, as no better methods are available at this point. Nevertheless, we prefer the increase of the final goods and figures reflecting such an increase as the criterion to measure the economic development of our socialist country. Such figures may reflect whether the ‘product structure’ is reasonable, whether the economic development is balanced, whether the economic effectiveness in production is high, whether labor resources are used to the fullest, and so forth. What’s more important, it may reflect more directly people’s living standard, as well as the country’s development level of science, education, and culture. Of course, we should calculate separate statistics and conduct research on such aspects as product structure, overstocking of products, production cycle, consumption of raw materials, the utilization ratio of equipment, labor productivity, and employment. But in comparison with others, the growth of final goods is the most appropriate comprehensive indicator for reflecting the economic development of a socialist country. Of course, it is impossible that intermediate goods can be transformed into final goods immediately, and even in the year they are produced. In particular, the completion of a gigantic project usually takes many years; before that, it cannot increase final goods or even produce intermediate products, but requires other units to provide large amounts of intermediate products. Therefore, the approach of using final good maximization to measure economic development is only suitable in the long run, say, five years, 10 years, or longer. Even annually calculated, these figures can only reflect the work over a long period, rather than just for the year. In fact, this problem also exists with statistics on products of a particular sector, gross output value of industry and agriculture, and gross national product and national income, but it is less obvious than with final goods.

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Regarding production of the means of consumption and production, we should notice this situation: because of failure to regard the increase of final goods as the economic goal of socialism, the production of more final goods as well as of intermediate goods is badly affected. But we should also realize that, within a period of time, intermediate products increase faster than final goods; but after the production capacity for intermediate products has been formed, the final goods will increase faster. With regard to the relationship in growth between the means of consumption and the means of production, we should conduct historical and logical research, to learn from the experiences of advanced countries and see what particular arrangements should be made for production under particular conditions. To sum up, the socialist economic goal is an important guiding principle for developing a socialist economy. What we should research, above all, is whether or not this guiding principle has theoretical grounds, and whether or not it is helpful to realize the great cause of the Four Modernizations in China. It is very complex work that needs to be dealt with carefully, as to how to formulate plans, arrange production, conduct statistical work, and reform the current systems and methods according to this guiding principle. Nevertheless, despite these difficulties, it is a must to clarify the socialist economic goal as a guiding principle.

Excursus Many readers of the Economic Research Journal said they didn’t read this article after it had been published in Finance and Trade Fronts. Then, I sent it to the editorial department of the Economic Research Journal, asking for a republication, and was obliged. Now, I’d like to take this opportunity to raise several questions. 1

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On what objective economic law of socialism is the socialist economic goal – maximally increasing final goods within the possible range – based? Is this law the basic economic law of socialism? What bad things would happen if we do not follow this law? Should our national economic plan include plans of increasing consumption and improving people’s living standard? If the socialist economic goal is mainly to produce consumable commodities, should we regard the target of improving people’s living standard as the first part of the national economic plan and then develop production plans to that end? How should we figure out the possibility of improving the people’s living standard? Can the plan that is so formulated motivate people’s enthusiasm? What risks might there be by doing so? What characteristics do the previous Five-Year Plans have in terms of formulating methods? What are their advantages and disadvantages? Our first Five-Year Plan dealt with improving the people’s living standard and set forth related targets. Is this practice appropriate? How did the thought of production for the purpose of production evolve in our country? What are its origins? What’s its ideological essence? Why is it so difficult to overcome? Under what conditions are ‘Production first and

Socialist economic goal theory 47

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livelihood second’ and ‘Harnessing slops first, and then building houses’ appropriate, and under what conditions are they not correct? Exactly how should we understand the relationship between agriculture, light industry, and heavy industry? In his article ‘On the Ten Major Relationships,’ Comrade Mao Zedong said: ‘Is your desire to develop heavy industry genuine or feigned, strong or weak? If your desire is genuine or strong, then you will attach importance to agriculture and light industry so that there will be more grain and more raw materials for light industry and a greater accumulation of capital. And there will be more funds in the future to invest in heavy industry.’ But now there is the following view: If your desire is genuine or strong, then you will attach importance to heavy industry so that there will be more heavy industrial products and a greater accumulation of capital. And there will be more funds in the future to invest in agriculture and light industry. There indeed is the relationship between agriculture, light industry, and heavy industry and between production of the means of subsistence and the means of production – and they are conditions for one another – but the two views are obviously different in essence. How to untie this knot? What is the suitable order for agriculture, light industry, and heavy industry? Is light industry the top priority as it was decided at the Third Plenary Session of the 11th Party Central Committee, to increase the prices of agricultural products and increase the farmers’ buying power? How should we look at the excessive fronts of capital construction? Why has it caused such considerable damage to our economy? Why did such a problem remain untouched and unresolved for years? How should we look at the growth rate target of our national economy? What target do we want? What role does this target play in our socialist economic activities? Are there phenomena that only concern figures, regardless of whether products are needed or not? If there are any, how can we correct them? What is the relationship between the socialist economic goal theory and the term ‘readjusting’ that holds the key position today in carrying out the general policy of readjusting, restructuring, consolidating, and improving China’s economy?

Note * This article was originally published in Economic Research Journal, 1979, Issue 11.

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Basic attitude toward socialist ownership (1979)

To modernize China and build it into a great socialist country by the end of this century is a historic mission that calls for the strongest measures and our best efforts. And what attitude should we take toward the socialist ownership system is one of the important questions that needs to be answered first. In my opinion, the basic attitude a Marxist should have toward the socialist ownership system is: fully supporting whatever boosts the development of productive forces most effectively, cautiously supporting those things that can help, but not so effectively, in achieving this end, withdrawing support from those things that do not help, and strongly opposing those things that prove to be a fetter upon productive forces. Only in this way can socialist modernization become a reality. It is a golden rule for any society that the relations of production have to suit the development of productive forces. However, prior to the birth of Marxism, virtually no one recognized this rule, let alone applied it to economic activities. What’s more, in societies ruled by exploiting classes, even in capitalist societies characterized by socialized mass production, the rulers always try to maintain the relations of production that are beneficial for their rule even when those relations have already begun to shackle the development of productive forces. In such societies, no focal points exist that consciously apply the law to guide social development. Even in the case that some individual scholars or statesmen in the ruling class do have certain knowledge of the law, they would hate to use it to adjust the relations of production to the development of productive forces. It was not until the establishment of Marxism in the nineteenth century that the proletariat, who had always been oppressed and exploited by the ruling class and undertook the mission of smashing capitalism, began to understand the law. On the strength of it, they launched a revolution against the capitalist relations of production that had come into conflict with the productive forces. Once they won, the class struggle between them and the bourgeoisie changed accordingly. They would establish a regime and form a central force guiding the macroeconomic development. The socialist relations of production would replace the old ones and be adjusted continuously and consciously to best suit the development of productive forces and make constant social advancement possible. Although the socialist economic system is fundamentally conducive to the development of productive forces, we still need to keep economic institutions and

Basic attitude toward socialist ownership 49 policies attuned. Only if we always choose the relations of production, economic institutions, and policies that fit the productive forces most can we give full play to the advantages of the socialist ownership system. The success of the proletarian revolution and socialist transformation has allowed us this possibility, and to translate the possibility into reality, we first need to research into the socialist political economy. In my view, the major task for Marxist researchers is to examine the interaction between the relations of production and the specific form of productive forces. Based on useful research findings in this regard, we can proceed to examine the relations of production that better suit and promote the productive forces, implement the new relations, and try hard to overcome all the difficulties that may arise. Such a study will be especially meaningful for China, whose economic restructuring has reached an important juncture. Once the economic system is determined, the relations of production will stay relatively stable, and the fundamental systems that ensure such relations need to be in place for at least dozens of years, although readjustment may still be needed now and then. Given that productive forces are constantly progressing, the quest for the fittest relations of production is one that will never cease. In judging which relations of production are good or even better, the only criterion should be whether they best promote the productive forces then and there. This is a key idea of historical materialism, and the overarching rule for a Marxist. To be more specific, in a socialist country, the best relations of production, which vary over time, are those better serving the development of the prevailing productive forces at a certain time and place. In a certain period, different socialist ownership systems may exist simultaneously and be regarded as the fittest for different sectors, economic organizations of different sizes, or regions with different development levels. For example, the coexistence of State-owned, collectively owned, and other supplementary sectors is perhaps the best choice for the development of productive forces in today’s China. The State-owned sector can give full play to modernized large-scale industrial production; while for the vast rural areas, the collectively owned sector is apparently a better fit; and for small-sized businesses in cities, collective ownership rather than State ownership is probably a good choice. The other supplementary ownerships also have a unique role to play in encouraging family-based production and other activities, irreplaceable by the State ownership or the collective ownership. Examples include private plots set aside for farmers and household sideline production. Though expected to adopt the above-mentioned criterion of facilitating the productive forces, a number of our cadres used to and still have other ideas. They consider, for example, socialist State ownership absolutely superior to collective ownership; and in the collective sector, the commune-level accounting superior to the production brigade-level accounting which, nevertheless, outdoes the production team-level accounting. Some of them believe that in a production team that keeps its own accounts, the salary system always fares better than the workpoint system; and where a work-point system is implemented, the contract system linking remuneration to output is always a poorer choice than the contract system not doing so. These cadres seem to list the ownership systems or the related

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arrangements in order of priority that shapes their judgments. They use a criterion other than the one that ‘the relations of production must be able to promote the development of productive forces.’ Rather, they believe public ownership always comes first, and the larger a publicly owned entity is the better. Regardless of the level of productivity, local conditions, or whether the best fit can be achieved between the productive forces and relations of production, they measure the various ownership systems against two gauges – size and ‘being public.’ This accounts for many of the previous mistakes made by policy makers concerning the choice of ownership systems. In order to better clarify the issue, it is quite necessary to distinguish ‘the level of superiority’ from ‘advancement’ or ‘backwardness.’ The superiority of a relation of production is measured by how it can promote the productive forces, while ‘advancement’ or ‘backwardness’ speaks of a relation of production that well or poorly fits the changing productive forces. To put it this way, during the evolution of human society, the old relations of production will inevitably be replaced by new ones as the productive forces develop. The old relations could be regarded as ‘backward’ and the new ‘advanced.’ Or, it is deemed one step forward when the ‘advanced’ replaces the ‘backward’ and one step backward when it happens the other way. That’s to say, when judging whether or not the relations of production are advanced, we must consider them in the context of the dynamic development of productive forces. Otherwise, no judgment would hold true. Then with the development of productive forces, what will happen to the socialist ownership system? This is a rather complicated question. Among all the socialist ownerships I mentioned, some may continue to exist for quite a long time, some may last for a certain period and be replaced, and some may disappear after transient existence. Some may have their future clearly in sight, but for the others, the future is still blurred. Some of the above-mentioned ownership systems may even not be adopted or realized, and some currently unknown ones may appear in the coming years. In a word, to judge the future of socialist ownership systems and to determine which of them is advanced or backward, we have to conduct systematic and comprehensive research that includes, under any circumstances, the review of historic experiences at home and abroad, and that needs to be guided by the Marxist principle that the relations of production must be appropriate to the productive forces. Therefore, the above-mentioned views held by some cadres are not strictly scientific. They can be used to determine neither the superiority of an ownership system, nor its development in the future. For example, the socialist collective ownership will not necessarily evolve into socialist State ownership. In fact, academia is discussing whether these two ownerships will both evolve into a third system. Some of the above-mentioned views may prove correct, while the others may not. For example, a mandate for the replacement of production team-level accounting by accounting at the commune level might be a bad choice. The above-mentioned views, as I have said, are based on biased thinking in favor of large size and public ownership, neither of which can be used in a simplistic

Basic attitude toward socialist ownership 51 way to measure the superiority of an ownership system or its future development. Now it is quite clear that, even in a highly developed country, ‘small-scale economy’ (i.e., the economic sector mainly featuring medium and small-sized businesses and the self-employed) is still needed, and will exist hand-in-hand with the ‘large-scale economy’ (i.e., the economic sector mainly featuring large businesses) in the long run. Since the business entities in a socialist economy do not necessarily start small and end big, why term small public entities ‘backward’ and large ones the opposite? And the definition of ‘public’ also deserves further probing. In the above-mentioned views, ‘public’ means ‘owned by the people,’ giving no explanation as to in which socialist ownership system the people can better assume the master role. Therefore, big size and public ownership are two flawed measures in judging an ownership system. As to which ownership system is advanced and which is backward, we should not be manacled by the thinking that is in vogue, but rather, we must emancipate our minds and carry out scientific research and discussion based on the basic Marxist principles.

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Economic and social development strategy* (February 1981)

We are considering organizing several seminars concerning China’s socioeconomic development strategy. At present, a general target has been set, which is to basically solve the problem of food and clothing by the end of the century and then to achieve gradually a higher level of modernization. In order to find out what way to follow and what measure to take toward this end, it is necessary for us to overcome any old and new obstacles, to have a clear knowledge of the country’s basic condition, and also to take into account the interaction between various factors. Thus a discussion on the nation’s socioeconomic development strategy seems to be imperative. The issue to be addressed in the upcoming seminar, first and foremost, is from what perspective we should examine China’s socioeconomic development strategy. Now, I would like to invite your attention to the following questions and whether they should be given priority. First, for a developing socialist country, what are the principles that underpin its socioeconomic development target? The debate on the objective of socialist production has lasted for more than a year among Chinese economists. A clear understanding of this will be of strategic importance to social and economic development. Once it is settled, can we set it as our primary objective to satisfy the basic consumption needs of individuals and the society as a whole through improving the socialist political and economic systems and other aspects of our work? With regard to this, we need to define the standard of people’s basic needs in light of the reality. China’s GNP per capita (in USD) by the end of this century could be seen as a general target. GNP is an index to measure the total goods and services produced by one country within a single year. Therefore, GNP per capita is an important figure when measuring the country’s economic development. However, that two countries have the same GNP does not necessarily mean they have the same level of social and economic development. In other words, the relationship between the two factors is not proportional; there are even cases in which the living standard in one country is lower than the one with lower GNP. Therefore, we need to study the GNP per capita of one country in relation to its social and living conditions, and draw conclusions that are of significance to our own country.

Economic and social development strategy 53 One country’s social and economic life is first of all influenced by its income. But in addition to the aggregate or per capita national income, the country’s industrial structure, consumption structure, and other production and consumption conditions are also important factors. As a result, to research into China’s socioeconomic development strategy, it is necessary for us to figure out a practical structure of demands, an industrial and consumption structure based on that, and also which of our traditional lifestyles and consumption styles need to be carried on or abolished gradually. In addition, we should be aware of the fact that the living standard of one country is not solely decided by its economic and cultural development level, but also by its social systems, i.e., the way in which its social wealth is produced or distributed. Therefore, the issue of economic restructuring should also be included in our research agenda and how far the reform should go in a certain period of time is an important question to be addressed by the development strategy research. Besides, the research should not be limited to economy, but extended to other areas such as education, science, and arts. It is important to bear in mind that the development strategy in question deals with both the social and economic aspects. Second, the socioeconomic development strategy should be based on a thorough understanding of national conditions. Our national conditions include: the natural environment, or the land resources; the population (both as labor resources and consumers); various economic development conditions; and the level of development in science, education, and culture as well as other important aspects of the society, including social relationships and conflicts of all kinds. Besides what Old China left behind, national conditions also include the changes that happened to the nation from the establishment of the PRC till the end of the Cultural Revolution, and the changes during the four years after the Cultural Revolution. When studying national conditions, it is obligatory for us to know the power of the country and the potential of development, as well as the favorable and unfavorable conditions related to realizing such potential. In order to have a clear knowledge of the national conditions, we are required to answer the following questions: what have we already achieved in research and information gathering? What more do we need to do? These things are worth discussing. It is not true to say we do not have a good knowledge of our national conditions, yet we nonetheless need to have a comprehensive and scientific generalization. The issue of development strategy is a big one, thus attention to minute details should not be included. Yet we still need to possess all sorts of necessary materials, to ensure they are precise and will not mislead the decision makers. It might be possible and necessary, under the current situation, to make a collective effort to analyze national conditions from different perspectives and to prepare one or more reports on the basis of group discussion for the Party and government to use as a reference. Before this kind of research is conducted, we need to make it clear what factors we should pay special attention to when studying the country’s socioeconomic development strategy. In this way, we will be able to have a comprehensive understanding of the basic national conditions, which is essential

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in the establishment of our country’s socioeconomic development strategy. Also, we are able to give different proposals on the strategy, including target, phase, and principles of development. To achieve this will be of great importance to our decision making. What is the defining characteristic of our socioeconomic strategy? The answer lies in the national conditions. Every basic aspect of the national conditions will be reflected in China’s socioeconomic strategy. For instance, Old China was a semicolonial and semifeudal society and was backward economically and culturally. The self-sufficient handicraft and small peasant economy took up 90 percent of the national economy, and hand tools were widely used. Though major achievements have been attained in social reform and industrial development during the 30 years after the foundation of the PRC, no fundamental change has occurred to this backward situation. Moreover, as a result of the mistakes during the 20 years since the fifties and the sabotage by Lin Biao and the Gang of Four, a lot of severe problems arose in the economy, industrial structure, and ecological balance. As a result, becoming a moderately prosperous society by the end of the century is a realistic goal established after carefully weighing the situation. An important question is how we should build a strong sense of the national condition into the socioeconomic development strategy, from start to finish. The following are some of the considerations in formulating the strategy. First, with 80 percent of the population of one billion being peasants, what will be the most reasonable industrial structure, development roadmap, and focus of work for us? Second, China has a population density of 100-odd per square kilometer, more than three times the world average and ranking thirteenth among the countries with an area of 100,000 square meters and above. However, land use is still inadequate in some places, with a great wealth of resources underexploited either on or under the ground. The situation is even more complicated by the population, resource endowment, and economic conditions that vary widely from region to region. It is important to examine how these will affect our socioeconomic development strategy. Third, science and technology is another important consideration. Though lagging far behind the developed countries, China has already built a strong contingent of science personnel in many fields. In the economic sector, we also have accumulated plenty of experience, including both successes and failures, and boast lots of insightful economists and other professionals. How will this affect the development strategy? Fourth, how will China’s cultural traditions shape its socioeconomic development? Is it of research value? What scientific judgment can we make out of this? Fifth, what should we make of the world economic and political climate? What effect will it have on our socioeconomic development? How about its future development? In this respect, we need to gather information and at the same time be aware of the prevailing thoughts of foreign strategists. While making our own strategy, we need also to take into consideration foreigners’ opinions on China’s role in world affairs to keep ourselves levelheaded. As a developing country, what lessons shall we learn from other developing countries as well as developed countries when working on our socioeconomic development strategy? As a socialist country, China needs to take advantage of

Economic and social development strategy 55 other countries’ experience in socialist construction. We have already done some research in this area, and further efforts are needed in pooling the information gathered for in-depth study. A study of socioeconomic development strategy involves many economic theories and methodologies. Thus we should consider whether we are well equipped with theories necessary for research on ‘the interaction between various elements governing economic activities,’ and whether we can use them adeptly. Here, particular attention should be paid to the theoretical research in socialist reproduction and circulation, an important subject of Marxist political economics, so that it can guide our socialist economic construction. Though the general consensus of opinions is that we shall act in conformity with objective laws in a study of the socioeconomic strategy, exactly how we can achieve this calls for further research. Economic theorists have an important role to play in this regard. Third, adjustment is the first big step in the current economic development strategy. A deepened understanding of the nation’s entire socioeconomic development strategy is necessary, particularly at a time when the economy is undergoing adjustment, as this would better ensure we implement the right policies in the benefit of the long-term strategic goal. Note that economic adjustment may be made simultaneously with setting economic guidelines right (to correct the deep-seated ‘main errors’ – the ‘left’ ideology). If this is indeed so, in-depth analysis should be conducted into the nature of the ‘left’ ideology, its impact on socioeconomic development strategy, and the possible manifestations of the ‘right’ ideology. Such analysis will be necessary for establishing the principles for our long-term plan and a pragmatic Sixth Five-Year Plan. As China is now in a transitional period in terms of socioeconomic development, its goal, basic steps, and policies for the period remain top of the agenda for development strategy researchers. A careful forecast needs to be made on possible effects of the adjustment blueprint on future economic development, so as to provide a sound basis for adjustment strategy research. Socioeconomic development strategy is an overarching issue. Are there any other things worth noticing in addition to the three mentioned above? Is it necessary to summarize and judge its merits and inadequacies when discussing the future development strategy? Consideration needs also to be given to the strategy research approaches, contents and methodologies of information gathering, the ways to generate more enthusiasm for the research, and interdisciplinary and interdepartmental collaboration. These and many other issues may be discussed at the beginning of the seminar.

Note * This is a summary of a notice the author drafted for a socioeconomic development strategy seminar.

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Why gross national product cannot accurately mirror a country’s economic life* (February 1981)

The annual gross national product (GNP) of a country is one of several indicators used to measure all the products and services produced by the country in the same year. It is a result of annual net national product (NNP) plus depreciation. Compared with the gross national product, the net national product is a statistical indicator that is closer to the total amount of goods and services produced by a country within a year, because depreciation is a consumption of the original material product instead of something produced in the same year. But as depreciation is difficult to accurately calculate and as the gross national product is easier to compute and grasp, the gross national product has become the most used of these indicators. Both the net national product and the gross national product are originally worked out at the current market prices. Due to price changes, however, none of the net national product and the gross national product calculated at the market prices can accurately indicate the amount of material products and services. For this reason, the price index has to be used to correct them so that the corrected values can better mirror the amount of the actual material products and services. However, as the gross national product is related to the size of a country’s population, this indicator cannot be used to indicate the level of a country’s economy. Accordingly, the per capita gross national product is used to indicate the level of the country’s economy. If a country’s per capita gross national product is higher, the country’s economy is deemed as a relatively developed one, and vice versa. Furthermore, the per capita gross national product can be used as a standard to rate the levels of economic development of different countries. This indicator is important to the comparative studies of the levels of the economies around the world. For this reason, a developing country often takes a specific value of the per capita gross national product as the target to be reached at the end of a specific period, when it sets its development goals. It is quite understandable and also reasonable why people so emphasize this indicator. But in the past few decades, more and more economists have been questioning whether the per capita gross national product can accurately reflect the level of a country’s economy and especially the people’s real living standard. In their 1972 book Is Growth Obsolete?, American economists William Nordhaus and James Tobin argued that ‘gross national product’ should be replaced

Why GNP cannot mirror economic life 57 with ‘economic welfare.’ Although the two economists were discussing the issue against the American backdrop and they, too, avoided the issue of class exploitation and related social problems as the bourgeois economists generally did, they noted in their analysis that the indicator of gross national product failed to reflect the result of the wage-free household labor of housewives or the length of the leisure time, or the environmental and ecological problems and other factors. But they were right when they said this indicator failed to accurately reflect the society and social life. And I believe their argument is not only applicable to a capitalist society, but also to a modern society in any other form. I mean it is also applicable to a socialist society. First, we all know that in a real capitalist society, it is first and foremost the laborers working in capitalist enterprises that create social material wealth. They receive their wages in the primary distribution of the values they have created in their work, with the remaining part of the values becoming the profits of the enterprises. And in the redistribution of wages and profits, some of them become the taxes paid to the state and the donations given to social institutions and some become the land rent paid to the landowners, with the remaining profits being distributed among the owners of industrial capital, commercial capital, and banking capital. Of the tax payments to the state and the donations to social groups, some become the incomes of the people who do not participate in labor. Of course, not all laborers in a real capitalist society are working in capitalist enterprises. Some of them are small commodity producers, and they also produce material products to be sold on markets. There are many other individuals who sell their labor. Their labor is also a productive labor and they, too, make their own contributions in production. The gross national product represents the sum total of the material products and services produced by the above people. But in a capitalist society, not only the abovementioned people but also the wage-free housewives produce material wealth and produce consumable services. And there are a great number of housewives. They turn flour and rice into bread and turn raw meat and vegetables into cooked food in kitchens, which constitutes the production of material products. And they do even more services for consumption. But all the fruits of their labor were completely excluded from the gross national product. This is what happens in a capitalist society. In a socialist society, most people do a great amount of household labor in their family life, which is also excluded from the gross national product. Moreover, about 80 percent of the Chinese people live in rural areas, where not only is their household labor not calculated into values or wages, but also many labor products in the agriculture and livestock industries are merely for their family consumption instead of being sold on markets. They are all excluded from the gross national product. Even in large-scale farmland capital construction, as the completed projects are not calculated into values and as unpaid labor accounts for a considerable portion of the construction projects, a great deal of labor is also excluded from the gross national product. Therefore, the gross national product is lower than the value of the actually produced labor output and services. Second, we all know that as a result of the rise in the material living standard, more, better, and diverse products are required to constantly meet the people’s

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new living demands and make life richer and more colorful. But this is only one side of the coin. The other side is that people want to have more leisure time to enjoy, to develop, and to display their talents. In a capitalist society, boosting the productivity of social labor is naturally designed to enable the capitalists to possess more surplus values from the perspective of these capitalists. (In the book Capital, Karl Marx called this acquisition of more surplus value the production of relative surplus value.) But from the perspective of the whole society, the production of the same amount of material products now no longer requires the consumption of the same amount of labor time. This can mean an extension of leisure time. But the capitalists are reluctant to give the laborers the leisure time arising from enhanced labor productivity in order to acquire more profits. Otherwise, the laborers could have much more leisure time than they have today when technologies are so developed. Even so, many countries have introduced the 40-hour workweek. A socialist society can more consciously give the laborers more leisure time as long as their labor productivity reaches a specific level. The length of leisure time cannot be shown in a country’s gross national product. From the gross national product, we cannot determine whether the same amount of gross national product is acquired through a 48-hour workweek or a 40-hour workweek. Besides, the consumer goods used by many families (especially cars and home appliances) are designed to lessen their household labor and save the time required for their survival so that they can have more leisure time to enjoy. This, too, cannot be reflected in the gross national product. The arguments here are apparently applicable to either a capitalist society or a socialist one. In the long run, the progress of a society cannot be reflected merely in the growth of material wealth and service production. It should also be reflected in the growth of the average leisure time of the laborers. Leisure time should become a factor to correct the gross national product. How to use leisure time to correct the gross national product is an issue requiring statistical studies. For example, the gross national product produced in a 40-hour workweek can be taken as a base figure; the gross national product can be corrected by adding a 5 percent value if the workweek is 38 hours or 5 percent less than 40 hours. Conversely, the gross national product can be corrected by subtracting a 5 percent value if the workweek is 42 hours or 5 percent more than 40 hours. This correcting method is naturally of a man-made nature, and other methods can be adopted. But one point is certain: no matter what statistical and calculating method is used, the corrected figure is always closer than an uncorrected figure to the real state of social and economic life when a comparison is made between the economic levels of the same country in different periods or between the economic levels of different countries in the same period. Third, the gross national product cannot indicate whether the environment has been polluted or whether the rational ecology has been damaged. This issue is more important than the preceding two. We can analyze the issue from the following two aspects. The first aspect is how to evaluate it from the perspective of the quality of the people’s life.

Why GNP cannot mirror economic life 59 We know that the pollution from water, air, dust, garbage, dreg, or noise is highly harmful to human bodies. If increased nutrition and improved clothing and residential conditions have positive impacts on the people’s lives, environmental pollution has negative impacts on the people’s lives. But the gross national product only includes the positive factors such as food, clothing, and houses and excludes the negative factors such as environmental pollution. Accordingly, the results thus worked out cannot comprehensively reflect the impacts of human activities on human health. For the same reason, if a factor having positive impacts on human health is a positive value to the gross national product, environmental pollution should be a negative value. And if both positive and negative factors work simultaneously, the gross national product should be a result arising from the mutual offsetting of the positive and negative values. In other words, environmental pollution should be used to correct the gross national product, and it would be wrong not to make such a correction. To me, this is quite easy to understand. A person will also feel such a correction is necessary even from the perspective of his own real life. The second aspect concerns natural resources and the protection or damage of the favorable natural conditions. We know that natural resources can be classified into two categories. There are resources that will be wasted if they are not utilized. But if they are utilized and utilized in a rational way, they can be utilized forever. For some resources, the more they are used, the richer they will become. For example, the water resource can be used as energy. But if no dam is constructed to store water and no power plant is built, water will naturally flow to lower places, and this resource will be wasted for nothing. Conversely, if dams and power plants are built and reservoirs are well protected from silting up, this resource can be utilized forever. For example, the forest resource is the source of timber. Over-logging damages the forests and reduces the forest resource. But if logging is done properly, new trees are planted in time, tree species are improved in a planned way, and forests are well managed, the annual timber growth can exceed the volume of the pre-logged natural forests. The experience of various countries in managing forests tells us that the annual timber growth of the manmade forests can outpace that of the natural forests. If the mature trees and the over-mature trees in the forests are not logged and rationally renewed, not only will timber growth be reduced but also timber storage will drop because trees can become decayed wood. So it is possible that forest resources can be used forever and can become richer and richer. These two examples tell us that natural resources can be utilized forever. But we must mention another category of natural resources. They cannot be utilized forever: the more they are developed, the less will be available. The inflammable minerals belong to such a category. The coal, petroleum, natural gas, and other inflammable minerals on our globe today are evolved from the plants on the ancient globe that could absorb the solar energy and the animals that took these plants as nutrition for growth and breeding. When they are developed, they can play roles in our production and life. But we have only one globe, which has a history of only billions of years since the appearance of life. Besides, most of the organisms

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that once existed on the surface of the globe have decomposed. Only a fraction of the energies contained by them have been reserved, such as coal, petroleum, and natural gas. Once used, they cannot be renewed. In general, the more humanity uses these inflammable minerals, the more difficult the mining conditions will become and the higher the production costs will become. Inevitably, these resources will deplete sooner or later. Therefore when we calculate the gross national product today, we should include these inevitable future losses. As far as the losses of the natural resources arising from the wastes in production and construction are concerned, they should also be included from the perspective of science. For example, if one square kilometer of forest in a place is destroyed, we should calculate how many years this loss will last and how much money this loss is equivalent to in the RMB value today. Even if a very conservative calculating method is used, the result will be astonishing, forcing us to more correctly understand how devastating the damage done by the ‘leftist’ ideology in our economic work in the past is, to more profoundly understand how serious the ecological problem is, and to pay greater attention to the protection of natural resources. The pollution of the environment, the development of limited natural resources, and in particular the irrational development of and damage to these resources should be the factors to correct in the gross national product. The above three points explain that the gross national product cannot very well reflect the economic level or the economic life of a country. It should be corrected. A correction according to the first point can slightly increase the gross national product; a correction according to the second point can increase or reduce the gross national product; and a correction according to the third point will reduce the gross national product due to environmental pollution and ecological damage. But whether the overall result is an increase or a decrease depends on the practical conditions of the country. Apart from the above three points, we want to raise some other issues. To us, there are other more important factors that make the gross national product unable to accurately reflect a country’s economic life. Of these factors, the first and foremost is the difference in social systems. With the same amount of gross national product, people can have very different economic lives under different social systems. This is something self-evident, which needs no argument. In a capitalist society, the workers can only acquire the consumer goods equivalent to the price of their labor, and the capitalists can live a luxury life while they pursue a maximization of their capital power. This state of affairs certainly cannot be reflected in the indicator of gross national product. One must always remember that the state of social and economic life depends on the state of the country’s social and economic systems. This is because the social and economic life is determined not only by what is produced and how much is produced, but also by what is produced in what kind of relations of production and how to distribute what is produced. Moreover, even under the same social system and even in the different periods of the same country, the state of social and economic life should not be measured exclusively by the gross national product.

Why GNP cannot mirror economic life 61 For example, whether a country’s industrial structure is rational has a major impact on the country’s social and economic life. According to the basic principles of the Marxist political economics on the objective of socialist production, as we know, the level of social and economic production is first of all expressed in the variety, quantity, and quality of the products and services required to meet the people’s growing demand for personal consumer goods and required for social development and for educational, scientific, cultural, and health undertakings, which is also expressed in the structure and mode of social consumption. We call these products and services the final products (final products also include those used for national defense, for domestic class struggle, and for social management and constitute the external conditions created for the whole socialist production and the people’s socialist life). The production of other capital goods turns out intermediate products, which in the final analysis constitute the different stages of the process of acquiring the final products. Their roles are embodied in the final products. If a portion of the products produced in the same year is used for equipment updating and investment that do not have enough time to impact the output growth in the same year, their roles will be manifested in the output growth of the final products in the next year or the ensuing years. So if the industrial structure is relatively rational, which means a basic balance exists between the production of consumer goods and the production of capital goods, the gross national product can reflect the level of social consumption or the level of the people’s life in a relatively accurate manner. But if the industrial structure is irrational and there exists an imbalance between different sectors, which means production overemphasizes the growth of the gross national product instead of being not planned and arranged according to the objective of socialist production, the gross national product of this kind can be very different from the actual conditions of social and economic life. This situation had existed for a long time in China, and still exists despite great changes. The economic adjustment now going on is designed to completely change this situation. The fact that this situation has occurred in a socialist country is often linked with the defects of its economic system. In the past, China regarded the output value as overriding, failed to take the people’s demand as the starting point, and failed to consider whether the products turned out could dovetail well with the production in other sectors. One of the reasons was that the products turned out by the enterprises would be purchased by the State. If they could not sell these products, they would stay in the warehouses and continue to produce. This situation changed shortly after our systems were preliminarily reformed, and the enterprises must produce to meet market demands. Therefore, if the gross national product is used to measure a country’s social and economic life, the industrial structure will have a major impact, even in a socialist country, only that the three points discussed earlier require the factors to correct the gross national product. I still think I may have not covered some aspects of the issue regarding whether the gross national product can accurately reflect a country’s economic life. For example, the changes to the product structure and the setting of the prices of new products when calculating the gross national product are all related to this issue.

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While we cannot but include new products into this indicator, new products in the strict sense are an incomparable factor to the original products. Likewise, the changes to the product structure also change the original meaning of the gross national product. I think the study of this issue is of significant importance to the setting of our country’s strategic goal for economic development and even to our day-to-day economic work. Clarifying this issue can further concretize our understanding of the objective of socialist production. Based on the above discussions, the use of the indicator should be considered in light of the following two aspects. The first aspect is how to correct the ‘gross national product.’ We have explained why corrections must be made. Although making some corrections cannot fundamentally solve this issue, it can make the indicator closer to reality. However, this is a very important issue. In particular, it is very difficult for this indicator to be recognized by economists and statisticians in other countries. The second aspect is how to measure the people’s living standard. This requires a scientific analysis of the people’s material life. To me, the people’s material life covers no more than three areas: health and life expectancy, material enjoyment, and development and manifestation of personal ability and character based on material products and services. Naturally, the people’s life also involves the issue of whether the spiritual life is pleasant and happy. But this is an issue beyond the scope of economics, and thus we do not want to discuss it here. I think the Chinese economists can work out a Chinese-style indicator system (even though it carries man-made features) that can mirror the state of the above three areas of the material life. This indicator system is close to the first corrected gross national product, but it mirrors the actual conditions of the social life from different angles. As far as the reality of the social and economic life is concerned, the second indicator system is more direct, because it represents the final result. On the other hand, the gross national product (even though it is corrected) is only a material tool. The third aspect is that the original ‘gross national product’ should continue to be used. This is a very practical issue. The gross national product is an indicator that has long been used, and has to be used for historical comparisons. Meanwhile, it is also an indicator that is used by all countries, and has to be used for comparisons with China. At present, many economists and statisticians are also studying the issue of how to correct the gross national product, but the statistical institutions fail to adopt the corrections. So the gross national product must continue to be used due to the simplicity and international universality of the statistical indicators and the dovetailing with historical statistical data. But as we have to continue to use the gross national product, we must have a scientific understanding of to what extent this indicator can indicate a country’s social and economic life. Finally, I want to repeat that the study of this indicator is highly technical. But just as the study is highly technical, it is very important because it involves many fundamental issues concerning the results of China’s economic and social development. Only after we clearly understand that the gross national product cannot

Why GNP cannot mirror economic life 63 accurately mirror the social and economic life can we understand why we should not take the gross national product as the sole or the most important indicator and use the rise of this indicator as our main objective. A clear ideological understanding of this issue can have an important and favorable impact on China’s economic work. In the meantime, the study of the indicators to indicate the quality of the people’s life will guide the vast numbers of officials to demonstrate more concrete and thoughtful care for the people’s material life, for their health and longevity, for their enjoyment, and for their development. In this way, these officials will be closer to the people both ideologically and emotionally. And the study of the leisure time can enable us to pay attention to the issues that are closely related to the people’s life and guide us to study the issues of how to increase leisure time. The same is true regarding the study of the issues of environmental pollution and ecological balance. I am not sure whether the above explanations are tenable, and I welcome comments from economists, statisticians, and those who are interested in this issue.

Note * This is a written speech delivered by the author at the first session of the Symposium on Economic and Social Development Strategies.

9

The environment should be quantitatively measured (1981)

Environmental measurement is essential for raising public awareness of environment protection. To measure the environment means to express the losses caused by environmental deterioration and the benefits gained from environment protection in the amount of money in statistical reports, and to calculate the losses and benefits in this way when developing national strategies and plans as well as relevant policies and measures. It is of great significance for the socialist construction of China. Without environmental measurement, we cannot fully understand environmental issues, nor can we make informed decisions by weighing losses and benefits even if we perceive the importance of environmental protection in a general sense.

I. Calculation of losses caused by environmental deterioration and labor input for environmental protection Why can and should the environment be measured? Let’s start with a discussion of the relationship between the environment and production. After a one-and-a-half-year debate over the purpose of socialist production, it has been widely agreed that production under the socialist system should aim at improving people’s living conditions rather than production itself. Physical fitness is one of people’s basic needs, the standard of which is the primary indicator of quality of life. To survive and keep healthy, we need necessary nutrients, clothes, and houses suitable for various climates, fuel for heating, etc. Medicines and medical appliances are as well requisite when people’s health is undermined or threatened. All these materials, so-called ‘means of subsistence’ in the Marxist Theory, should be produced by the society to meet the foregoing needs. They are so termed thanks to their positive effects, through consumption, on people’s health. Similarly, an environment beneficial to people’s health, such as fresh air and clean water, might as well be called ‘means of subsistence’ as it brings about the same effect that the labor-based means of subsistence does. And what is the difference? In human history, such means of subsistence as air and water have long been offered by nature, requiring no labor input and thus receiving no particular attention. But things have changed. On one hand, the production of the means of subsistence has increasingly polluted the environment or products

Environment should be quantitatively measured 65 themselves, a problem calling for urgent attention at present. On the other hand, the quality of air and water deteriorates in some places, and many products including food, which are expected to bring about positive effects on people’s health, have become curses after being polluted. Therefore, negative and positive effects may sometimes coexist in producing means of subsistence, both of which should be taken account of in the calculation and evaluation of the overall effects of these activities upon human survival. In the meanwhile, labor input is increasingly required to prevent more pollution and improve the environment. Nowadays, although nature still endows many places with fresh air and clean water, in many cities access to them has become increasingly expensive, because they have become products of labor, and the labor input for environment protection shall also be calculated. Two issues hence emerge concerning environmental measurement, i.e., the calculation of losses arising from environment pollution and deterioration, and the calculation of labor input for environmental protection.

II. Environment protection as a kind of productive activity A theoretical issue needs to be addressed here: is environmental protection a kind of productive activity? And can the substantial amount of labor input, including living labor and materialized labor, in the process of environmental protection and improvement be deemed as a kind of productive labor? The answer is ‘yes.’ And we may ask anyone who would answer ‘no’: do you believe that the labor for a pro-health environment is basically the same as the labor for pro-health physical products in terms of ultimate effects? If you firmly believe the latter to be productive labor, then why doubt the former? Accordingly, there is no denying that the materialized labor put into environmental protection and improvement is a kind of productive cost, just the same as that in production of pro-health physical products. It is unreasonable to argue otherwise, I think. Actually, when it is about the immediate ‘microenvironment’ that surrounds them, people will not object to reckoning living labor in environmental improvement as productive labor and materialized labor for the same purpose as productive cost. For instance, when a factory makes use of air conditioning equipment to improve its ‘microenvironment,’ the labor input for installing and controlling the equipment will be considered as productive labor, and the wear and tear of the equipment and relevant electricity consumption will be taken account of as productive costs. However, the living labor and materialized labor for improving the environment in the broader sense are often excluded from productive labor and productive cost in public cognizance, and instead deemed as an additional burden by many enterprises and even some government departments. Two things might account for this. First, people have long been taking it for granted that fresh air, natural water, and other resources are not products of labor, a concept already out of date in modern society, especially in big cities. Second, the benefits from a better ‘macroenvironment’ will not be exclusively enjoyed by any single organization

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and may not be perceived in the short term, unless we develop a broad, future-oriented vision. On the contrary, production of material products and improvement in ‘microenvironment’ generate more easily perceivable benefits. The foregoing discussions on the relations between the environment and production are mainly based upon examples directly relating to our daily life. In fact, such relations also exist in the environment directly connected with production but only indirectly concerning our daily life. Immoderate logging, for instance, would denude the forests that have been there to preserve water and prevent soil loss, and result in an environment that is increasingly unfavorable to agriculture and forestry. The activities of felling will, therefore, adversely affect biological equilibrium and agriculture and forestry development though contributing to timber production. Here is again the issue of the overall evaluation of logging by calculating both positive and negative effects. No doubt the labor input for protecting forests and improving biology should be deemed as productive labor. Preservation of natural resources and favorable natural conditions is important today. Protection of the environment has two purposes: to maintain people’s health and to preserve natural resources and conditions favorable for production. Ever since the establishment of the PRC, due to a lack of awareness of environmental protection and especially the fact that some people only pursue short-term and partial interests while neglecting long-term and overall interests, natural resources have been unreasonably exploited, and national conditions in favor of production have kept deteriorating. If no effective measures are taken promptly to curb the tendency, the environmental problems will build up and lead to unimaginable disaster. It is thus imperative to measure the relevant losses and use accurate facts and figures to educate ordinary people and cadres alike about the consequences of environmental deterioration. In addition, only when we successfully carry out environmental measurement can we better develop and implement plans on land reclamation, development, and utilization.

III. Environmental measurement and the Labor Theory of Value The foregoing arguments, though tenable theoretically, are far from enough, for the above-mentioned overall evaluation calls for actions to calculate the financial losses from environmental deterioration and financial benefits from environmental improvement. The ‘environment’ here surely includes such inartificial environments as natural forests. People might ask: since such things as natural forest are not produced by labor, thus holding no value, aren’t we deviating from the Labor Theory of Value by calculating financial gains or losses connected with them? It is widely known that ‘the utility of a thing makes it a use value,’ ‘[use values] are, in addition, the material depositories of exchange value,’ and that ‘it is only the amount of socially necessary labor that determines the amount of a use value.’ Therefore, to produce a use value is to create a value equivalent to the amount of socially necessary labor (assumed to be W). When the use value is completely destroyed and comes to naught, this value will consequently become zero; and under

Environment should be quantitatively measured 67 this circumstance, the loss in value can be easily measured to be W. This happens when, for instance, some food is badly polluted beyond the accepted standard so that all its use value simply vanishes. A further study reveals that the ‘use value’ is not only a concept of quality, but also one of quantity. We know that the use value of one kilo of wheat is less than that of two kilos, and it is also common sense that the use value of stale and partially decayed wheat is less than that of newly harvested wheat. Thus an object, once polluted, will lose some use value to a certain extent (let’s assume the value loss to be W’). The remaining value will be W-W’. The calculation of W’, though complicated, is possible, since the extent of pollution can be measured by, for example, the proportion of harmful substances in the total weight of the food and the negative impact of those substances upon human health. I believe that hygienists, sociologists, environmental economists, and statisticians will be able to come up with a good measurement approach. Environmental measurement is rather complicated. Even the relatively simple measurement of food pollution, as mentioned above, needs various experiment data and comprehensive hygiene statistics. The hygiene statistics in China over the past years has been quite inadequate due to our limited understanding about the purpose of socialist production. I suggest that more efforts be made in this field in the future. Some other environmental problems, deforestation for example, are more difficult to measure. As stated above, the timber industry creates values which are presented in various statistical reports, and which loggers get rewarded for. Nevertheless, the losses arising from improper logging practices have never been calculated as they should be, perhaps because such losses, highly diversified in their forms, build up over time before they are clearly and widely manifested, and because the situation is often made even more complicated by the workings of many other factors. The consequences of deforestation include soil and water loss, difficulty in forest restoration, decrease in annual growth of lumber, a drier climate, more severe flooding, widespread agricultural degradation, silt buildup at downstream reservoirs, weakened self-cleaning mechanism of the atmosphere, threatened habitats of beneficial or rare wildlife, etc. Though deforestation can take a huge toll, the measurement of such losses can be very difficult. But I do believe that as long as the significance of environmental measurement is fully understood, experts will manage to quantify the losses in a proper way, and forestry economists, environmental economists, and statisticians may team up for this purpose. A foreign approach to measuring the public benefits of forests may provide much inspiration for us, i.e., to calculate the financial worth of the different public benefits brought by a forest per year. One such method is to work out the financial resources to be spent on obtaining the same public benefits if the forest was not there. The produced result is deemed the financial benefits generated by the forest. For example, in regard to water conservation, we may calculate the amount of water that can be conserved by a tract of forest, and then figure out the annual cost of a reservoir with the same water conservation capacity, which will be reckoned

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as the financial benefits of the forest in terms of water conservation. Adding up the costs, we will get the total public benefits of the forest. Through such means, many countries have come to recognize the substantial benefits offered by forests. According to a three-year survey on public benefits of forests carried out by the Forestry Agency of Japan since 1971, the forest soil all over Japan had a water conservation capacity of as much as 290 billion tons, or 230 billion tons when the amount of water evaporated or otherwise consumed (i.e., 60 billion tons) is subtracted. If we want to achieve the same water conservation effect by building reservoirs, we would have to pay 1.6 trillion Japanese yen. Yet water conservation is just one of the various benefits of forests. Their total public benefits would be worth 2.08 billion Japanese yen per year, equivalent to the fiscal expenditure of Japan in 1972. Finnish scholars have concluded that the forests all over Finland can produce timber worth 1.7 billion marks each year, while their values in environment protection are as high as 5.3 billion marks.

IV. GNP failing to reflect environmental performance Here I would like to reiterate the great significance of environmental measurement. Since China’s development strategy aims at enhancing people’s life quality, the environmental issues, counting much for that end, bear strategic relevance. In no way could such statistical indicators as GNP and gross output value of industry and agriculture reflect environmental conditions – a problem calling for a change in our practices. Environmental indicators need to be introduced as an important and requisite supplement to GNP and other statistical approaches. In consideration of the crucial role statistics plays in national economy management as well as the influence of environmental issues on people’s living conditions and the development of a socialist economy, we need to pay special attention to environmental measurement and take prompt actions to design a set of measures duly reflecting environmental conditions and performance. It should be admitted that environmental statistics remains an under-explored field in China, with almost no environment-based loss or profit included in statistical reports. This will greatly undermine environmental protection and many other undertakings of ours. While underscoring the necessity of environmental measurement, we must be aware of the challenges to be met and the large amount of research to be conducted in the process of both establishing and implementing the measurement system. It is quite likely for us to run into lots of difficulties or even resistance in the beginning as many people find it hard to grasp the significance of such an entirely new undertaking. Therefore, the reasons behind the undertaking should be clarified before things get done. And that is exactly why I am writing this paper. It is a pity that my research in this regard is not yet adequate. I apologize for any mistakes I may have made, and your comments and suggestions are warmly welcomed.

10 Develop Marxism as science for socialist construction* (March 1983)

I In the century after Karl Marx passed away, the greatest development in world history must have been the establishment and successful construction of socialist systems in several countries. This achievement should be attributed to the growing support from generations of outstanding persons of Marx’s theory of scientific socialism and stronger material force produced by increasing working people. Today, when we celebrate the centennial of the death of the greatest man in world history, we can proudly claim that there is no other sociological theory in history that can be compared with Marx’s scientific socialism. Due to the inherently great and scientific power of this theory, the world has undergone tremendous and profound changes in a century toward the direction it foresaw and expected. One of the most remarkable features of Marxism is that it is not a self-enclosed system. On the one hand, it has absorbed the essence of various cultures in mankind’s history; on the other hand, it has summarized the contemporary working people’s practices toward social progress and human emancipation. Marxism is always the crystallization of an era. It should always enrich itself with new scientific achievements catering to the time, and its new viewpoints and theories, so as to guide people to open a new era in human history. To develop Marxism as the science for socialist construction is a great step forward to adapt at this time. As early as when Marxism was created, it was a science to guide the proletariat to carry out the socialist revolution. To defeat its enemies, the proletariat has to produce more powerful material force than the capitalist does. Therefore, it should raise its political awareness and improve its solidarity, remain resolved and brave, and tactically organize actions for struggles. By establishing scientific socialism, Karl Marx intended not only to explain but also to change the world. His theory helps the proletariat to fulfill its historical task. The victory of socialist revolutions and struggles in almost half a century had been won under the guidance of Marxism as the science for socialist revolution. At present, the mission of socialist revolution has not been accomplished yet all over the world. Marxism as the science for socialist revolution shall keep playing an extraordinary role. It is continuously developing. Marxists all over the world are studying the new phenomena and new problems occurring in the world and their own countries

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and are focusing on the guiding principles, statics, and organization of striving for the victory of socialist revolution in their own countries and the whole world. Meanwhile, in countries that have established the socialist system and are working on socialist construction, it is required by the times to develop Marxism as the science for socialist construction and supplement and add new contents to the scientific socialism developed by Karl Marx. The theoretical issues concerning socialist construction are much discussed in Marx’s and Engels’s works, and many of these discussions are still very inspiring to our present research. The first milestone for the scientific research on socialist construction was laid by the founder of the scientific socialism. However, it is impossible and unnecessary to undertake any specific research due to lack of data when the socialist system has not been realized yet. Preventing themselves from falling into a daydream, Marx and Engels only gave an in-depth analysis on the actualities of capitalism at that time to identify some characteristics of socialist construction, and refused to make any ungrounded presumptions or descriptions of future society. When capitalism had developed into the monopolization stage, and the victory of socialist revolution in some countries was about to be achieved after Marx had passed away, Lenin put forward some more specific assumptions regarding the solution of economic and political problems in the future stage of socialist society based on the new situation in the monopolization stage of capitalism. However, the rapid development of Marxism as the science for socialist construction could only be possible after the socialist system appeared. After Lenin, Marxists all over the world conducted considerable research in this field, and made remarkable achievements. Nowadays, the socialist system has existed in the world for more than six decades and over three decades have passed since the People’s Republic of China was founded, so there is very rich experience and resourceful data available for a theoretical summarization. Moreover, theoretical solutions are needed to many problems in socialist construction. At present, Marxists should focus their theoretical research on developing Marxism as the science for socialist construction and make their due contribution in this regard.

II What are the objects, tasks, and methods of Marxism as the science for socialist construction? What does it consist of? These questions need to be further studied and specified. It is safe to say that it contains rich contents that can be generalized into two parts, finding out the objective law of development and identifying the path for smooth socialist construction. The research on the objective law of historical development should include prescriptive studies on the essence of socialism or studies on the nature of socialism. The historical experience has indicated that despite many discussions about socialism, people may still fail to clearly understand the nature of socialism in many circumstances. For instance, what on earth is the socialist construction for? What kinds of contradictions are there in the socialist system? What is the driving

Marxism as science for socialist construction 71 force for the socialist construction? How should we understand the principle of material benefits in Marxism? What conditions are necessary for giving play to an individual’s enthusiasm and creativity in the socialist system? Is it possible that under the socialist system, people can cooperate with and help each other like comrades and compete with each other at the same time? What behaviors in the socialist system conform to the nature of socialism and what behaviors do not? What should we understand about the planning behind the socialist system? What should the relationships be between democracy and leadership as well as between freedom and discipline under the socialist system? What conditions are necessary for demonstrating the superiority of socialism? All these questions concerning the nature of socialism should be solved thoroughly, but the study of these questions is still not systematic and insightful enough. The research on the objective law of historical development should also contain the study on the correlation between the forces of production and relations of production under the socialist system. In some period of the socialist construction in a country, there may be both socialist and nonsocialist economic sectors, while various economic forms may exist in the socialist economic sector. Various socialist economic forms and economic sectors take different shares in the national economy, and combine to constitute the aggregate of certain relations of production of a country in a specified period of time. The correlation between this aggregate and the forces of production at that time should be a significant subject of the research on Marxism as the science for socialist construction. Such research shall concentrate on whether such relations of production can best facilitate the development of the forces of production. It can be based on the specific situation in a country at a given period, or delve into a general conclusion with regard to this. As the study on the correlation between economic basis and superstructure is similar, it should be included in the research as well. The research on the objective law of historical development should also include a study on the prospect of socialist construction and stages of socialism development. Regarding social development after the victory of socialist revolution, Marx stated that it would undergo: (1) a transitional period from capitalism to communism, (2) the initial stage of communism, and (3) the advanced stage of communism. This argument was proved by history to be an objective truth. It plays a significant guiding role in socialist construction. Nevertheless, we should also make a more specific judgment on the basis of the data obtained in the decades’ socialist construction. We would not like to be utopian, but to analyze the reality and find out the trend of future development. That is a task of scientific Marxism. In addition, the research on the law of objective processes should consider the problem of ethnic groups. For instance, we should study the features in the objective process of socialist development in China based on the special national conditions. The more profound the objective law is studied, the more solid the scientific foundation is for the search for the path of smooth socialist construction. Marxism, as the science for socialist revolution, as we know, contains research in the subjective approach, such as the strategy, statics, and organization of socialist

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revolution, while Marxism as the science for socialist construction also includes research on the strategy of socialist socioeconomic development, basic economic and social policies, socioeconomic development plans, and the organization and management of the economic and social life, etc. Through these specific studies, the research on the objective law of the historical development of socialism can be combined with practical socialist construction. Therefore, enough attention must be paid to studies in this field. Undoubtedly, the subjective study on Marxism as the science for socialist construction shall show more distinctive national features, as we must find a way suitable for the socialist construction of our own country. As pointed out by Mao Zedong, we should integrate the general principles of Marxism with the specific reality of the country. Nowadays, we need to seek a Chinese path of socialist modernization. Of course, Marxism as the science for socialist construction only touches on relevant fundamental principles, instead of many specific and technical issues. The enrichment of socialist theory on socialist construction should be under the guidance of dialectical materialism and historical materialism, and conduct in-depth analysis on the economic form in a society – the socialist economic form – as Marx used to do to capitalism and Lenin to the monopolization stage of capitalism. Only in this way can the questions mentioned above be answered systematically. The principles of dialectical materialism and historical materialism are generally applicable. However, Marxism should move forward; in other words, it should be developed to meet the demands of the present era in order to satisfy the needs of socialist construction. Meanwhile, Marxist economics, politics, sociology, and other social sciences studying the economic relation, political relation, and other social relations of socialism should be included in Marxism as the science for socialist construction and be better developed. Marxism as the science for socialist construction is not only one science, but also a scientific system consisting of several sciences. It is certain that Marxism as the science for socialist construction and Marxism as the science for socialist revolution cannot be separated from each other completely due to the following reasons. First, many principles are applicable to both socialist revolution and socialist construction. For instance, a lot of general principles of Marxism are applicable to both revolution and construction, as the subject of the revolution and construction activities is the proletariat and its allies, and the leadership of these activities is assumed by the communist party. Second, socialist construction itself is the continuance of socialist revolution, which must be taken into account in the analysis of various problems in socialist construction. For instance, the formation of a socialist state ownership economy and its status in the socialist economic system must be totally attributed to such revolutionary movements as the proletariat overthrowing the capitalist regime and depriving capitalists of their own state apparatus. Third, the construction of socialist countries and the struggle for the victory of the socialist revolution shall support each other. There are many other reasons for the impossibility of completely separating the two. In a word, the close tie between socialist construction and socialist

Marxism as science for socialist construction 73 revolution has determined that Marxism as the science for socialist revolution and Marxism as the science of socialist revolution are two integral parts of the same Marxism. However, the two parts have their different objectives, tasks, and methods as well as different contents. In our opinion, it is very necessary to develop Marxism as the science for socialist construction.

III Socialist construction should not only rely on common sciences, but also depend upon the science of Marxism. To our knowledge, the major difference between socialist construction and socialist revolution is that the task of the latter is to destroy an old world. Although the revolution also needs common sciences, e.g., general military knowledge applied in battles, including some natural sciences, general sciences were used in a quite limited way. In socialist construction, people must carry out construction in many fields, such as economic and cultural, physical and spiritual, political and military, etc.; people must solve various social problems, pay attention to all kinds of social activities, and build ties in all respects with other countries. Socialist construction requires a very wide range of complicated work to do, and common sciences are often needed in the process of construction. For instance, natural sciences are usually needed in production, but it does not fall into the range of Marxism. Besides, part of management science belongs to general sciences. Furthermore, we should also realize that the socialist system has been established for more than 30 years in China, but it is still very young compared with the capitalist system. With regard to the management of corporate and government, the proletariat has less experience than the bourgeoisie, generally. Most of its corporate leaders and governmental officers have received poor education, mainly due to the backward economy and culture before the victory of revolution. Therefore, we should learn from advanced capitalist countries in the application of common sciences. However, we should stress that socialist construction must depend on Marxist science and Marxism as the science for socialist construction. This is extremely important. The importance of Marxist science can never be reduced due to the necessity of common sciences in socialist construction. It is necessary to make this point clear now, given the tendency of making light of Marxism. The establishment of the socialist system is of historical significance for mankind. The full comprehension of this significance is closely related to the problem we are discussing. According to Engels, the establishment of the socialist system distinguishes human beings from other animals in terms of social relations and distinguishes humans as completely separate from the animals and masters of their own social formation. Only at this time can people create their own history completely and consciously. Becoming the master of their own social formation means that ‘the laws of human being’s own social activities that are still now opposite to human being like the laws of nature which are alien to and controlling human being shall be

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proficiently utilized at that time [which can be changed to “at present” now – author].’ In other words, the proletariat can rely on the laws pointed out by Marx, which include that production relation should adapt to the development of productive forces and superstructure to the economic basis, to shatter the bourgeoisie’s State apparatus and replace it with the proletariat’s State apparatus, and to replace the bourgeoisie’s relation of production with that of the proletariat. Moreover, such laws shall be, after the victory of the socialist revolution and the establishment of the socialist system, the guidance for the further improvement of socialist relation of production and the necessary reform of the socialist economic system and political system; besides, by following these laws, we can work out basic economic and social policies to deal with various social relations and make specific rules as the situation changes. All these are of decisive significance for socialist construction. As it is feasible and compulsory to rely on Marxist science, I’d like to discuss here the issues in preparation for and implementation of plans for a socialist country. As we know, the national economic development plan, especially the industrial and agricultural production plan, occupies a prominent position in the socioeconomic development plans. To work out the production plan of social products, technical and economic data are needed to calculate the rate of the consumption against the output, and strike the balance between them. In this process, it is essential to employ common sciences (including general production knowledge, as well as knowledge in natural sciences and mathematics). Nevertheless, our plan, far more than the calculation of such a rate, is a socialist socioeconomic development plan, rather than a simple production plan or material balance plan. This is to say, in the course of economic development, various social relations should be properly handled; meanwhile, social problems should be resolved, and the socialist social life and social relations be developed in a planned way. Therefore, the application of the science of Marxism in a plan will become more necessary. In the socialist system, development can be carried out in a planned manner, which is a feature that distinguished socialism from capitalism. When discussing this feature, which is also an advantage of socialism, economists often hold that production can be regulated with a plan in the socialist system to ensure proportional development of economic sectors. As a matter of fact, this reveals only one aspect of the issue, which is not the most important. Being the master of social relations and independently creating history includes but is not limited to the balanced development of the national economy. Only by incorporating the development of socialist social life and relations and the construction of both material civilization and spiritual civilization into our plan (which we are actually doing but should be further clarified in theory and ideology) can the difference between the planning in a socialist system and the ‘planning’ in a capitalist system be fully presented. Marxists have admitted all along that ‘planning’ is possible within a certain range and in some sense under the capitalist system. ‘The organization of production in several factories’ means ‘the planned division of work in these factories.’ Such planning, however, only relates to and results from the organization of socialized production and the application of common sciences, while what the capitalist

Marxism as science for socialist construction 75 private ownership produces is anarchy in social production. ‘The opposition of the organization of production in several factories to the anarchy in the whole social production’ is by nature an embodiment of ‘the contradictory between socialized production and capitalist occupation.’ Differently, planning in the socialist system is based on the settlement of the inherent contradictory between socialized production and capitalist occupation in the capitalist system. It is totally different from the planning in the capitalist system. For instance, it is impossible in the capitalist system to make use of the law of production relation adapting to the development of productive forces to promote the development of productive forces in a planned manner, as the bourgeoisie has to give up the capitalist system that has restrained the large-scale socialized production to do so. The proletariat can freely use the above-mentioned law to win the socialist revolution, but such a law represents an objective and adverse force imposed upon the bourgeoisie. After the socialist system is established, we can rely more on the science of Marxism to solve various problems in social relations in a planned and step-by-step manner so as to promote the development of social productive forces and enhance the people’s material and spiritual life. It is a great driving force to the further development of socialist society, so it is absolutely wrong to think little of this in socialist construction. To conclude, the bourgeoisie in the capitalist system is unwilling to and will never utilize the science of Marxism. However, we, constructors of socialism, can construct socialism by using Marxism. That is important evidence that the socialist system is superior to the capitalist system and all the other social systems.

IV We must also consider the development of Marxism as the science for socialist construction from the perspective of strengthening socialist education. In the socialist system, laborers, as the master of the new society, have their awareness of socialism greatly improved. However, many new ideological problems will emerge and need to be solved due to new contradictories in the new situation and under new historical conditions. Every laborer has his own opinion on what he should do to meet the demand of socialist construction and what are right and good behaviors in the socialist construction. A lot of such problems have never occurred in the socialist revolution. In addition, more and more new problems will be run into as the socialist construction proceeds. It is very important to solve the ideological problem of the laborers (including leaders in various fields) in socialist construction. Only through general enhancement of laborers’ understanding about socialism can they be more enthusiastic in socialist construction and try all out to work for socialism. Can we strike the balance between the individual and the collective and between the partial and the whole so as to ensure the synergy of actions? Can everybody be concerned about and provide suggestions on how to properly cope with a lot of problems popping up in socialist construction, to better carry out the socialist construction? As we can see, some ideological problems in socialist construction can be solved by resorting to the existing scientific conclusions of Marxism. These problems can

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be attributed to the fact that many youths are still growing up and have not received enough education on Marxism yet. Many truths that the old generation has been familiar with may not be learned or comprehended deeply by many youths. What the old generation has known well may be never understood by youths, so they have not thought through it thoroughly, or are still confused with it. Another reason underlying these problems is that many people, not the young though, have not received any thorough education on Marxism and are still confused about many problems. They may have been familiar with slogans about socialist construction, but have no idea of their meaning. Under such circumstances, it is also necessary to explain to them even the well-known truths. As pointed out by Stalin, the best way of advocating Marxism among these people is to systematically and repeatedly explain the well-known truths. However, we must realize that it is insufficient for solving the ideological issues emerging in the new situation, or even impossible to solve the fundamental issues in people’s minds. Many issues are just generally addressed in books, but practical problems are more complicated and specific. Therefore, it works little to repeat these all-known principles. Nowadays, ideological education appears powerless in many institutions, including schools, which must be much attributed to the fact that the contents of the education are not well connected with the reality in the socialist construction and fail to explain Marxism by targeting practical issues. Under such circumstances, competent officials should not be blamed, since they are also confused about many problems. Even the theorists of Marxism may not achieve sufficient research results regarding some of these problems, and cannot give specific answers to these problems. Therefore, to strengthen the theoretical research and develop Marxism as the science for socialist construction has become a prerequisite of education of Marxism. From the perspective of education, it is therefore necessary to spread Marxism as the science for socialist construction while doing well in further studying it. In order to spread it, it needs to be further studied. Only ‘further study’ can make it ‘understandable,’ as to be ‘understandable’ requires gaining a thorough understanding of it. On the other hand, it is uncertain that ‘further study’ is bound to make it ‘understandable.’ I hope more people can know how to make it understandable.

V Owing to different contexts, conditions and methods for developing Marxism as the science for socialist construction are different from those in the revolution period. Since the socialist construction is led by the Communist Party under the guidance of Marxism, the major method for developing Marxism is to summarize our own experience. Compared to the summarization of the experience of foreign countries, it is easier to collect sufficient data and get to know the most basic and essential factors in practice and people’s ideas, such as motivation, thought, and decision. However, this approach also has some disadvantages in that analysis and judgment may not be done objectively, and as the interests of people involved may be hurt.

Marxism as science for socialist construction 77 In the summarization of historical experience, it is necessary to analyze the human’s practices by considering the specific background, and reach common conclusions accordingly. Generally speaking, like any other issues, problems in socialist construction should be analyzed in various aspects, and the analysis results should be then integrated to reveal the interrelation between and movement of things in general. Moreover, such summarization is different from that done for resolving a specific difficulty in practice, as it requires that we examine experience in a wider scope and longer period, make further scientific abstraction, and present the conclusions in a logical and organized way, so as to reach a high theoretical level. The summarization needs a lot of work, but it has been often carried out by the actual workers in all kinds of occupations under the socialist system, as it is helpful to translate experiences into theories. The work they have done enables theorists to have access to a large amount of semifinished products, so it has helped save much more labor than starting everything from scratch. This is a very advantageous position for developing Marxism as the science for socialist construction. Besides, under the socialist system, joint efforts can be made to do the summarization. Therefore, rapid progress can be achieved if it can be well organized, despite the wide-ranging and complicated problems that require meticulous work. It is necessary here to point out that the necessary theoretical work should contain the study of modern capitalism. Considering the comparatively or seriously backward economy and culture of most socialist societies before the victory of their revolutions, our judgment may be limited if we depend only on the experience of these countries to develop Marxism as the science of socialist construction. For instance, we have no idea at present in what form the socialist relations of production will be established in advanced capitalist countries after the victory of their revolution and how the socialist construction will be carried out in these countries. Therefore, we should keep in mind this point, especially when making conclusions that are considered generally applicable. Despite the lack of the experience of socialist construction in developed capitalist countries that have succeeded in the socialist revolution, it will be helpful for conducting research on Marxism as the science for socialist construction if we reinforce the study on contemporary monopoly capitalism. As Marx, Engels, and Lenin could make a lot of scientific statements and judgments regarding the future socialist construction based on the contemporary study on capitalism, why could we not use our findings from the study on contemporary capitalism in order to prove, supplement, and make up for shortcomings of the conclusions reached only through the study of the experience of socialist construction? In order to develop Marxism as the science for socialist construction, it is necessary not only to study both practical and theoretical problems based on historical experience, but also to develop disciplines in the range of philosophy and the social sciences. The scientific Marxist methods shall be applied in the study of common sciences, which, we believe, is helpful for the study of common sciences, but that does not mean we should include common sciences into the scope of Marxism. All social sciences of various social relations under the socialist system should be

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treated as within the range of Marxism as the science for socialist construction, and their development is a part of that of the latter. In 1913, Lenin had definitely pointed out three sources of Marxism in an article to the effect that Marx’s theory is founded by inheriting from the outstanding achievements made by human beings in the nineteenth century – German philosophy, British political economics, and French socialism1 – and must absorb more outstanding achievements during its development. There is a metaphor to describe this process. Marxism is like a great river, at the head of which many streams meet, and many other streams will flow into it on its way to the sea. The three sources mentioned above are like streams in the upper reaches. Due to its inclusiveness, Marxism as the science for socialist construction shall absorb essences from common sciences and non-Marxist social sciences. We should make efforts to facilitate that process. Of course, all cultural achievements must be criticized and transformed before being integrated into Marxism. The three sources of Marxism, German Classic Philosophy, British Classic Political Economics, and French Utopian Socialism, had been carefully criticized and improved by Marx and Engels before they became three components of Marxism, and constitute the unified and scientific Marxist system with elaboration on other subjects. Such criticism and transformation shall be upheld in the following development of Marxism. As the complete science of Marxism has been established, and we have grasped the basic idea and methods for the specific observation of the natural world and the history of mankind, it is much easier to critically absorb what is useful to develop Marxism in all respects. However, we must keep in mind that indiscreetness, whether it is nihilist or of uncritical affirmation, is not allowed. The above are just some simple thoughts of mine, which are presented to be discussed on the centennial of the death of Marx.

Notes * This article was the author’s address at the Centennial Conference of the Death of Karl Marx and originally publicized in Issue 3 of Chinese Social Sciences Today in 1984. 1 Selected Works of Lenin (Vol. II). Beijing: People’s Publishing House, 1972, pp. 441–442.

11 Regional Strategy in National Strategy and Regional Strategy in Regional Strategies* (May 1984)

Based on available information, almost all the provinces, municipalities, and autonomous regions in China are studying the strategy of economic and social development of their regions. Many of them have established special organizations with different names. The study of the development strategy for trans-provincial economic zones, river basins, and mountainous areas are also under way. Moreover, many under-provincial cities (especially coastal cities), districts, and even counties are also thinking of their development strategies. This is a new and good phenomenon in recent years. Studies on this phenomenon are necessary and meaningful. The socialist construction in a region cannot be achieved without a specific guideline and an overall consideration, and a long-term plan is also necessary. From the perspective of regional development, the strategic study is as important as the prelude to the formulation of a plan. In consideration of the whole nation, the development plan of a region is the foundation of that of the nation, or the national planning shall be based on provincial plans. I stated that the national plan will be groundless without specific provincial plans when I found that the importance of the former is overstressed while that of the latter was totally ignored. Now we gather together in Wuhan to discuss Wuhan’s development strategy. I would like to share my ideas on ‘Regional Strategy in National Strategy’ and ‘Regional Strategy in Regional Strategies.’ ‘Regional Strategy in National Strategy’ and ‘Regional Strategy in Regional Strategies’ are two phrases I have come up with recently, so it is necessary to give a simple explanation of them first. ‘Regional Strategy in National Strategy’ means to regard the regional strategy as a sub-strategy and an indispensible component of the national strategy. When talking about the regional strategy, we are talking about an issue within the national strategy. I think the formulation of ‘Regional Strategy in National Strategy’ can precisely express my above idea. On the other hand, ‘Regional Strategy in Regional Strategies’ carries a different meaning, as it studies regional issues from the perspective of the region itself. It refers to regional strategies that all provinces, cities, and autonomous regions are studying, by giving consideration to the national master plan, of course. The basic idea of the master plan has been roughly described in the report presented

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by Comrade Hu Yaobang at the 12th National Congress. Some thoughts relevant to the strategy have been also presented and discussed in other documents and the speeches of officials in the Central government. However, the prominent feature of ‘Regional Strategy in Regional Strategies’ is that it studies problems by starting from specific regional situations. Of course, there are strategies of smaller regions like districts and counties under the provincial one. All of them are sub-strategies of the provincial one. The relationship between the two, like that between the regional strategy and the national master plan, is a partial-whole one. Today I shall not discuss too much regarding the regional strategies at the provincial level or lower. The phrase of ‘Regional Strategy in Regional Strategies’ is used in comparison with ‘Regional Strategy in National Strategy’ in order to be impressive. Although the former might not be as precise as the latter, there is no better phrase in my mind at this moment. After the brief introduction, I’d now like to talk about them in detail. As for the ‘Regional Strategy in National Strategy,’ we should first address how China should be divided into regions. It is too specific to talk about the regional strategy in the national master plan if we follow the administrative divisions (i.e., 29 provinces, municipalities, and autonomous regions in the mainland, plus Hong Kong and Taiwan). Rough division should be done first, since analysis shall be made step by step. Meanwhile, the division shall be made in accordance with different standards, as ‘Regional Strategy in National Strategy’ shall be discussed from different perspectives. I attempt to divide the country into two parts by the isohyet with the annual rainfall of 400mm. The areas on the east and south sides and that on the west and north sides of this line are almost the same in size, 48 percent of the whole country for the former and 52 percent for the latter. The latter includes the alpine Qinghai-Tibet plateau and northwestern arid region, while the former is the warm and humid monsoon region. Such a rough division, in my opinion, is scientific. The two parts are obviously different from each other in their national conditions as well as their economic and social development. The west and north parts have a sparse population and less developed economy, while the other part has a dense population and developed economy with its percentage of output value perhaps larger than that of its population. If expressed in numbers, the west and north parts accommodate about 6 percent of the total population, with only 6 persons per km2, while the other part has around 94 percent of the total population with up to 200 persons per km2. Based on this division, the regional strategy in the national master plan shall, first of all, admit such a fact. Based on this fact, we should do our best to develop Southeast and Northwest China to accomplish their rapid development on the one hand; on the other hand, we should strive to further develop relatively rich Southeast China as the key point of our development in this century and make it the foothold of the socialist construction, so that it can provide funds, equipment, technology, experience, and talent to develop West and North China on a large scale when conditions permit. The CPC Central Committee has thought of this strategy. In the summer of 1983, Comrade Hu Yaobang said during his visit to Qinghai that the comrades in the CPC Central Committee intended to switch

Regional Strategy 81 the focus to develop the grand Northwest region at the turn of the century. To my mind, what he said is related to the idea of the above-mentioned strategy. However, that strategy is too general, and more specific analysis should be conducted on the two parts. For instance, Taiwan in Southeast China is one of the 30 provinces, and our country will be reunified sooner or later. Therefore, Taiwan should be taken into account in our long-term development. However, that is impossible for now, as we have no idea about the specific time of national reunification. Meanwhile, Hong Kong in Southeast China will attract more and more attention of scholars in its development strategy, as China’s sovereignty over Hong Kong will be reinstated in 1997. Nevertheless, this is not an urgent issue; besides, considering the ‘One Country, Two Systems’ principle, we should admit that the development strategy of Hong Kong is a complex issue in the national master plan. Even if Taiwan and Hong Kong are put aside, the Southeast region should be further divided into three parts, namely the coastal area, the central plains, and the Northeast and Southwest regions. In my opinion, the coastal region is not equal to those coastal provinces, but consists of coastal cities and the nearby areas with the most developed economy in China. These areas have absolutely advantageous industries at present, which include: the coastal regions at the North Sea in Guangxi and Zhanjiang in Guangdong, Hainan Island, the Pearl River Delta, Shantou in Guangdong, the coastal regions of Fuzhou and Xiamen in Fujian and Wenzhou and Ningbo in Zhejiang, Hangzhou and the Hangzhou Bay region, the Yangtze River Delta, Lianyungang and its neighboring areas, and the surrounding areas around Qingdao and Yantai, the Beijing-Tianjin-Hebei region, Shenyang, and the Liaodong Peninsula. This area has a population of almost 100 million. It currently has developed industry, the output of which has taken a dominant part in both urban and rural areas, contrasting sharply with the small proportion of agriculture. In some areas, the income per capita has reached or come close to USD800. More aggressive goals shall be set for this area. For instance, it will reach to a more developed level in the several years ahead and take the lead in realizing the Four Modernizations. If this can be achieved, the region will be able to play an exemplary role in realizing modernization all over the country; besides, the modernization of science and technology will become a prominent feature of this area, and the proportion of traditional industries will decline while that of emerging industries will greatly increase. Therefore, this region can provide the modernization of the whole nation with more services, of which advanced technology and talents are the most outstanding. As a part of the Southeast region, the coastal area has a special development strategy that holds a special position in the national master plan. The basic purpose of this strategy is to serve other parts of the country as well as possible on the one hand, and assiduously get close to the level of developed countries on the other hand. If such division is useful, we should take into account its development strategy from the perspective of the national strategy. In my opinion, it is also needed to line out another region in Southeast China, namely, the central plains and Northeast

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region, which is the base of agriculture and traditional industries in China. This region includes many less developed areas in the coastal provinces (autonomous regions), e.g., Guangxi, Guangdong, Fujian, Hubei, Jiangsu, Shandong, Hebei and Liaoning, most areas of Heilongjiang, Jilin, Hebei, Henan, and Hubei, and part of Shanxi, Shaanxi, and Inner Mongolia, as well as the whole areas of Anhui and Jiangxi. This region accommodates more than half of the total population in China and guarantees the provision of the necessary crops, agricultural products, raw materials, minerals, and the processed products of basic industries for the whole nation. Moreover, it will play a major part in fulfilling the objective of doubling GDP by the end of this century. Therefore, its development is decisive for national development. As this region has a large population, it will cost more energy and take more time to develop the region on the whole than to develop the coastal region that I mentioned before. By the end of this century, this region may and should realize a relatively comfortable standard of living. The strategy for this region should be to continue developing its agriculture and industries, including traditional ones, enhance and solidify its current status, and make its contribution to the development of other regions, including the coastal region and southwestern area of Southeast China, in terms of raw materials and market. Next, I’d like to talk about the southwest part of the Southeast region, which includes a part of areas in Yunnan, Guizhou, and Sichuan, and a small part of Hunan, Hubei, Shaanxi, and Henna. Although these provinces and areas in the region have different conditions and different sizes of plains (most of them are basins or small basins) and some of them are wealthy, this region as a whole has more mountains, less farmland, inconvenient traffic, and is far away from the coastal region and central plains. Therefore, its economy and culture is less developed. This region is especially inhabited by minority ethnic groups that take up a larger percentage of the total population in this region than in the other regions in Southeast China. This is also a factor underlying the backwardness due to historical reasons. However, this region also has many advantages, such as the warm weather and rich rainfall, abundant water and mineral sources, and more convenient traffic to the coastal region and the region of the central plains and Northeast than Qinghai, Tibet, and Xinjiang. Besides, thanks to the construction after the founding of the PRC, this region has certain industrial foundations and railways and highways connecting it with other areas. It also has central metropolises, such as Chongqing, Chengdu, Guiyang, and Kunming. Since the development of this region started later, it will be greatly beneficial to the coastal region and the region of the central plains and the Northeast. The strategy of this region is to actively develop itself to give full play to its resources, so as to serve the construction of the whole country. However, as many limiting factors, including a backward economy and culture and the need for a large amount of investment into traffic construction, cannot be removed immediately, we shall not make any impractical estimation for the pace of development in this region. The above analysis reveals the necessity of such a division of Southeast China to study its regional strategy in the national master plan.

Regional Strategy 83 Apparently, the regional strategy in China’s national strategy cannot be explained if Northwest China is not further divided. At first, the arid areas in Northwest China are very different from the alpine Qinghai and Tibet. The former can be further classified into arid and semiarid; a part with snowy mountains and rivers suitable for developing oasis agriculture and the other part with no snowy mountains and rivers, which is totally a desert; a part close to and the other part far away from the region of the central plains and Northeast. The strategy for this region should also be active. We should make efforts to make the best use of the valuable resources, such as the water power resource at the upper reaches of the Yellow River in Qinghai, the oilfield under exploitation in South Xinjiang, the nickel ore in Jinchang, Gansu, the coal in Ningxia, and the animal agriculture in all the southwestern provinces. These resources should be actively exploited in order to satisfy the national needs on the one hand and develop the regional economy on the other hand. Moreover, it will lay the reliable economic and social foundation for switching the focus of the construction onto the grand Southwest region at the turn of the century. I have never visited the alpine area in Qinghai and Tibet. Although I have been to Qinghai, I only paid a visit to Haixi, Haidong, and the Chaidamu Basin. I did not go across Mt. Kunlun and Mt. Ela, and have not consulted with others about issues in this area. Therefore, I cannot talk much about this. To study the regional development strategy in the national master plan, we should take into account many factors other than the above simple division of regions, in China. For example, the collaboration among all the regions is an extremely important issue in the study on the ‘Regional Strategy in National Strategy,’ which is mentioned above but not analyzed in detail. Considering the vast territory, the large population of China, the difference in resources of the various regions, and the imbalance in economic and cultural development, the economic and technical cooperation between regions is of vital importance in the national strategy. It is necessary to point out that the study on ‘Regional Strategy in National Strategy’ will not only focus on the status and role of each regional strategy in the national strategy (the status and role are based on the above-mentioned division and the specific situation of each region), but also take into account the relationship between all these regions, their particular functions and collaboration, their opening to and competition with each other, and their unification against other countries. These regions shall perform different functions based on their particular advantages, which will affect the whole picture of national development. The division of work for all these regions should be listed and specified in the national strategy. Their collaboration needs to be developed based on their division of work. The collaboration can be built on mutual help, or on the difference in their economic and technical levels. It can be also be formed between neighboring regions, the regions that have close economic relationships due to historical and geological reasons, and the regions that are far away from each other and were rarely related to each other in history but realize the benefits of mutual collaboration. Such division of work and collaboration can give these regions benefits that cannot be

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gained by working alone. The emphasis on the division of work and collaboration among these regions is a very important part in the national strategy. Such special importance is related to and determined by such national conditions as the vast area, the difference in regional situations, and the imbalances in economy, technology, and culture. The division of work and collaboration between regions may not be as important in small countries. I would like to illustrate through an example the strategic meaning of interregional collaboration due to their different economic, technical, and cultural levels. In 1982, I attended the ‘Symposium on Economic Effect of Technical and Economic Collaboration between Shanghai and Inland China’ convened by the China Association for Science and Technology and the Shanghai Municipal People’s Government in Shanghai. At the symposium, I quoted a poem on modernization written by Comrade Hu Yaobang. Across the area of over 61 million km2, Shanghai accommodates 11 million people with up to 1,800 people per km2. It owns few mineral resources and rare agricultural resources. The utilization of its production capacity and the achievement of its economic benefits cannot be realized without the support of all other regions in China, which has been a reality. Now we would like to discuss developing the collaboration in a conscious, planned, and large-scale manner. It cannot only bring benefits to inland China, but also to Shanghai. Comrade Chen Pixian paid much attention to the collaboration between Hubei and Shanghai when he went to Hubei. When I paid a visit to Jingjiang with him in 1981, I read his thesis about the collaboration with Shanghai. In my opinion, the collaboration is helpful to both Hubei and Shanghai. I do not know how well the collaboration is developed now. I think that the advanced region can gain great benefits from its collaboration with the less developed region. If not, why are developed countries so enthusiastic about developing economic relations with our nation? Do we still have insufficient knowledge of this? The cost must be greatly reduced; suppose a part of 100 million towels, 100 million handkerchiefs, and 100 million pairs of socks is produced in the countryside of inland China. Shanghai provides services and technology, controls quality, and keeps its good reputation, while the other regions provide laborers and houses (the houses for household industry can be provided by the civilians themselves). Collaboration in this way does not only bring in economic benefits, but also the social benefits of mitigating the increasing crowdedness in Shanghai. Opening up and competition are also very important. Consider the conflict of interests there might be in competition between regions. However, only competition between enterprises can result in the survival of the fittest. No region will be washed out from competition, even though the enterprises in different regions may be eliminated through competition. In some less developed regions, some reject the inflow of products from advanced regions so as to protect local products. Such an idea of safeguarding their backward conditions should be prevented. Instead, we should strive to enhance the level of technology and management in backward regions by opening up to other regions. Otherwise, the backward conditions will remain unchanged in the long run. It is certain that less developed regions will go through a painful process if the open-up policy is carried out. However, they cannot be well developed if they skip such a process.

Regional Strategy 85 Competition between the regions should not damage the interest of the whole nation in the international market. The unification against other nations, or the alliance against other nations, should be taken into account in the discussion about regional strategy in the national strategy, which has been mentioned in a lot of documents of the Party, including the political report to the 12th National Party Congress. Now I would like to move to the second part: the Regional Strategy in Regional Strategies. First of all, the regional strategy is always different from departmental strategy in terms of its high comprehensiveness. The size of the region definitely has an impact on the degree of comprehensiveness. For instance, a county’s strategy may not refer to large-scale enterprises and standard higher education institutions, etc. However, even in a small region, there are many economic sectors and various links of social reproduction, as the old saying goes – small as the sparrow is, it possesses all its internal organs. In a regional plan, the plans of all the departments in the region must be considered as its sub-strategies. Conceptually, regional economy is similar to national economy. Although sectoral economy can be considered as macroeconomy, it is different from national economy after all. The study on the Regional Strategy in Regional Strategies refers to the research on issues of overall significance for regional development based on the actual conditions and the development expectations. Now we should research the regional strategic objective and measures of overall importance by analyzing advantages and disadvantages (including natural conditions, climate, products, traffic, and the existing economic foundation of industry and agriculture, etc.) to understand information on economy, technology, and society, under the guidance of general law of regional economic and social development and according to the goal of quadrupling the gross annual value of industrial and agricultural output by the end of this century on the premise of continuously enhancing economic benefits of the whole nation. Through the research, whether in data collection, analysis, or innovation, we should keep in mind the importance of the strict scientific approach. The ‘region’ mentioned in the phrase refers to one of many regions in China. As its development must be related to the whole nation, we should, when studying the Regional Strategy in Regional Strategies, take into account the general situation of the country and try to promote the exchange of materials and talents with other regions and obtain funds and other support from other regions. Therefore, there is the issue of depending on the regions themselves and the external forces for development. The dependence on external forces should not be ignored, and even more developed regions in China still need external support. The so-called external support can be classified into two types: one is to ask for money from the Central government, which is more emphasized in less developed regions; and the other is to strengthen collaboration. Both types are universal to some extent. I have no objection to taking this into account in the study on strategy. Nevertheless, we should attach importance to self-dependence and collaboration with other regions, rather than asking for money from the Central government. Even less developed regions shall not be encouraged to ask for money from the Central government, since they will never become developed in this way.

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I wrote three essays, namely, ‘Skills of Asking for Money and Making Money,’ ‘Skills of Making Money and Spending Money,’ and ‘On the Skills of Asking for Money.’ In these essays, I underscored that we should focus on the skills of spending money and making money rather than asking for money from a superior for development. Moreover, no money will be allocated from the government or borrowed from the bank if we are not good at spending and can gain no economic benefits. Self-dependence does not mean that nothing can be done without money or that the amount of work is determined by the amount of money. Instead, we should try by all means to raise funds, to integrate labors with means of labor, and to give full play to human and material resources. To this end, a great deal of knowledge should be utilized based on local conditions. The development strategy varies from one region to another. I feel it difficult to make comments on the point of Wuhan’s development strategy. Although I had worked in some places in Wuhan and Hubei during the war of resistance and came here several times in recent years, it still does not come easily to present any pertinent suggestions. Upon arrival, I read some materials and articles written by other comrades who have provided many good suggestions, but I do not want to give any comments randomly. I felt a similar way at many seminars discussing the regional strategy. I am a ‘frank’ person, but my ‘frankness’ must be based on my ‘knowledge.’ Likewise, I provided no substantial suggestions at the conference of northeastern regional strategy in Liaoning, and only talked about methodology and then made a little contribution by signing for the application to Liaoning People’s Publishing House for the publication of a collection of theses called Strategic Studies and Regional Strategy. I hope I can give some specific comments on the strategy of certain regions one day. I have kept this in my mind, but I cannot talk about it right now, rather only on some methodological issues and trivial issues. One of these issues that I want to talk about is the real estate development in cities. Economic benefits should be always kept in mind in our work; otherwise, fiscal difficulties might be encountered, and we may beg with a golden bowl in hand. I have heard that RMB40,000–RMB50,000 shall be paid for requisitioning one mu of land. If it is true, that amount of money can be saved as a part of income for the city government, if we reclaim land of the same size from rivers. I got this idea from Comrade Lin Yishan. As we took the same train to Wuhan, he told me that he had been thinking of this issue for a whole decade, and he will express his idea on this issue at this conference. He said he was sure of the technical feasibility of the land reclamation from the aspect of water conservancy. Here I just talk about real estate from the aspect of economy. We used to reject the concept of real estate under the socialist system, but I did not agree with it. Today, I don’t want to talk about any theoretical issues in the socialism of political economics, but I only want to discuss the possibility and necessity of establishing the real estate industry in China.

Note * This article is the abstract of a speech given by the author in Wuhan.

12 The economy in the primary stage of socialism* (November 27, 1986)

I. Initiation of the concept of the primary stage of socialism The concept of the primary stage of socialism was proposed for the first time when discussing the historical issues of the Party since the foundation of the PRC at the Sixth Plenary Session of the 11th Central Committee of the CPC. It was recorded in Section 33 of the last part – ‘Unite and Strive to Construct a Powerful Country of Socialist Modernization’ adopted in ‘The CPC Central Committee’s Resolution on Certain Issues in the History of Our Party Since the Founding of the People’s Republic of China’ on June 27, 1981. In this document, the concept is mentioned in the following text: Only socialism can save China. It is an unshakable conclusion reached to by the people of ethnic groups in China from their own 100-year experience and also the most basic historical experience within the 32 years since the foundation of PRC. Although in the primary stage, it is undoubted that China has established the socialist system and entered into the socialist society, so any argument that denies such a basic fact must be wrong. In the socialist conditions, we have made unprecedented accomplishments in China’s history, and demonstrated the superiority of socialist system preliminarily but powerfully. We can overcome various difficulties by ourselves, which also reveals the powerful vitality of socialist system. Of course, the socialist system shall inevitably experience a long-term process to become perfect. Therefore, we should, on the premise that we stick to the fundamental socialist system, make efforts to reform those specific systems inadaptable to the development of productive forces and the people’s interests, and should unwaveringly fight against anything sabotaging socialism. In the course of development, the tremendous superiority of socialism is bound to be revealed more and more. Although the above Resolution does not particularly elucidate the meaning of the primary stage of socialist society, it states clearly the following points. First, it clarifies the stage that China’s socialism is in. As known to everyone, socialism is the primary stage of communism, so the primary stage of socialism is then the primary stage of communism. Socialism is relative to the advanced stage

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of communism, and its primary stage of socialism is relative to its intermediate stage and the advanced stage. The primary stage of socialism is specific and quite different from other stages. Second, it confirms the disadvantages of the primary stage and that the ‘socialist system shall inevitably experience a long-term process from its imperfection to perfection,’ which means that the primary stage is not a short period in history. The past documents of the Party have never specifically and expressly pointed out the stage that China was in, and merely said China has entered into socialism. On the contrary, the claim made at the Sixth Plenary Session of the 11th Central Committee of the CPC is much more specific than the statement in the past. We should advocate and publicize this brand-new and important statement. Now, it becomes clearer and clearer that socialism is a very long stage in history. A general statement that a country has entered into the stage of socialism is not enough for a party in any socialist country to correctly understand the state of the country, realize the historical mission of the country at the present stage, and work out the basic economic, political, cultural, and social principles suitable for the current development stage of the country. Therefore, almost all socialist countries are eager to know what stage of socialism they are in, so is China. Not emphasizing this point though, the resolution passed at the Sixth Plenary Session of the 11th Central Committee admitted the stage issue was meaningful and significant. It has been proven that overemphasis on the fact that China entered into socialism without pointing out the specific stage is of little importance. One year and two months after the Party had passed the Resolution on Certain Issues in the History of Our Party since the Founding of the PRC, Comrade Hu Yaobang gave a political report at the 12th National People’s Congress of the CPC on behalf of the Party Central Committee. This report again stated the concept that China was still in the primary stage of socialism, which was included in the section Endeavor to Build Advanced Socialist Spiritual Civilization. It was said in the report that the social transformation and the progress of the social system will be embodied in the development of material civilization and spiritual civilization in the end. Our socialist society is still in the primary stage of development and its material civilization is less developed. However, we are able to build an advanced socialist spiritual civilization during the construction of material civilization after the socialist system is established, just as the socialist revolution could succeed with developing a modern economy and the most advanced class of the era – the working class and its vanguard, the Communist Party. This was another confirmation in the Party’s document of the statement that the socialist society in China was still in the primary stage, which was first put forth at the Sixth Plenary Session of the 11th Central Committee. This report was given at the National People’s Congress of the CPC, making the statement more authoritative. Nevertheless, the statement of the primary stage of socialism in Hu’s report has been mentioned while discussing the synchronous development of spiritual civilization and material civilization. Therefore, it only described the productive forces by saying that its ‘material civilization is less developed,’ but did not touch on the status of the relation of production. It was clear that the primary stage of socialism mentioned at the Sixth Plenary Session of the 11th Central Committee

Economy in primary state of socialism 89 and the 12th National People’s Congress of the CPC focused on the stage of development of socialist society in China, rather than on whether the specific form of socialist production relation was ‘advanced’ or ‘primary.’ It was unprecedented that the documents of the Party Central Committee of a socialist country stated that the country was in the ‘primary stage of socialism’ at present. The resolution approved at the Sixth Plenary Session of the 11th Central Committee of the CPC concluded in September 1986 has attached more importance to the statement of primary stage than the two previous documents of the Party Central Committee. The statement was included in the section ‘Establish and Promote Socialist Morals and Customs’ in The CPC Central Committee’s Resolution on the Guidelines for the Construction of Socialist Spiritual Civilization. It was stated that: Ethics are the reflection of economic basis, rather than abstract concepts divorcing from historical development. As our country is still in the primary stage of socialism, we should not only necessarily carry out the distribution according to work and develop the socialist commodity economy and competition, but also should develop diverse economic sectors on the premise of taking the socialist public ownership as the mainstay in a long period and encourage some people to become rich first with the objective of common prosperity. This resolution has taken a step forward compared to the previous two documents, given its primary stage statement. First, it directly discussed the statement. Second, it specifically pointed out that this stage was a ‘very long period.’ The phrase a ‘very long period’ has been used in the Party documents many times. Although it was not specified how many years this period would last, it certainly will be much longer than just one or two decades. Third, it defines the features of some relations of production in the primary stage. As described in the Resolution, the two things mentioned with ‘not only’ and ‘but also’ in the passage cited previously – ‘carry out the distribution according to work’ and ‘develop the socialist commodity economy and competition’ – are features of the whole stage of socialism (which is the primary stage of communism and different from the advanced stage). To ‘develop diverse economic sectors on the premise of taking the socialist public ownership as the mainstay’ and ‘encourage some people to become rich first with the objective of common prosperity’ are the features that distinguish the primary stage of socialism from the advanced stage. These phenomena have existed in fact for long. It is very significant that the Party Central Committee confirmed them in the Resolution now, to which much importance should be attached in the theoretical circles and all sectors of society.

II. Primary stage of socialism and coexistence of diverse economic sectors The CPC Central Committee’s Resolution on the Guidelines for the Construction of Socialist Spiritual Civilization considers ‘to develop diverse economic sectors on the premise of taking the socialist public ownership as the mainstay’ as a feature of the primary stage of socialism in China. What does the concept of diverse economic sectors mean?

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It has been well defined literally in the Resolution. ‘To develop diverse economic sectors on the premise of taking the socialist public ownership as the mainstay’ has two meanings: first, in the primary stage of socialism, the economic sector of public ownership has taken the dominant position among economic sectors with different ownership. Second, there is more than one nonpublic economic sector in the primary stage of socialism. What are these nonpublic sectors of the economy? There are a variety of answers from Chinese theorists. Therefore, I shall not focus on the controversial answers. There seems to be individual economy, private-operation economy, foreign-funded enterprises, etc. How to analyze these economies is an issue to be seriously studied. However, in terms of internal relations, these sectors, as not based on public ownership, are not socialist in nature completely or partially. Therefore, the coexistence of the public and nonpublic sectors means that the economic sector in the nature of socialism coexists with other sectors that are completely or partially not socialist. Therefore, ‘to develop diverse economic sectors on the premise of taking the socialist public ownership as the mainstay’ is different from, or more advanced than, the statement of developing diverse economic forms and modes of business operation and even developing diverse forms of ownership. As we all know, the section ‘On Persisting in the Dominant Position of Staterun Economy and Developing Diverse Forms of Economy’ in the report to the 12th National Congress in 1982 has stated that: socialist state-run economy takes the dominant position in the whole national economy. Consolidating and developing that economy is crucial to guarantee that the collective economy can develop in the track of socialism and the individual economy serves socialism. Given the poor and unbalanced development of productive forces in China, the coexistence of diverse economic forms is necessary for a long time. In the countryside, the cooperative economy of the collective ownership is still the principal form of economy. The handicraft, industry, architecture, transportation, commerce, and service industry in cities and towns should not and are impossible to be solely undertaken by the State-operated economy at present, and some of them should be undertaken in the collective economy. The cooperative economy operated by youths and other residents in urban areas through pooling of capital has been developed in many places in recent years and has made good achievements. The CPC and the local government should support and guide it and prevent any harm against it. Both in rural and urban areas, individual economy should be encouraged to develop within the State-allowed range and under the Administration for Industry and Commerce, as the necessary and useful supplementation for the public sector. Only through the reasonable allocation and development of diverse economic forms is it possible to develop the urban and rural economy and improve people’s living standard. In this passage, we can see that diverse economic forms include the economic sectors of nonpublic ownership as it mentions that ‘Both in rural and urban areas, individual economy should be encouraged to develop within the State-allowed range and under the Administration for Industry and Commerce, as the necessary and useful supplementation for the public sector.’ These economic sectors include ‘the cooperative economy of the collective ownership’ in which

Economy in primary state of socialism 91 there is the cooperative economy in diverse forms in cities and towns. As shown in this passage, to develop diverse economic forms is proposed mainly by considering that business cannot be solely assumed by the State-run economy. It is not entirely identical to the idea that the economy in China at the present stage should not be an exclusive economy of public ownership and a single socialist economy (or economy ‘totally in the nature of socialism’). In this report, the phrase ‘diverse economic forms,’ rather than ‘diverse economic sectors,’ is used, indicating that this statement has been made after careful consideration. The Decision on Restructuring the Economic System adopted by the Third Plenary Session of the 12th Central Committee in 1984 still uses the phrase ‘diverse economic forms’ and adds the expression ‘diverse modes of business operation’ (but the title for Section 8 of this Decision is ‘Actively Develop Diverse Economic Forms and Further Expand the Economic and Technical Communication within and outside China,’ not mentioning ‘diverse modes of business operation’ at all). The relevant statement in the Decision is that: to rapidly develop various undertakings of production and construction and realize our national prosperity and the people’s well-being, we must mobilize all positive factors to make joint efforts to develop diverse economic forms and diverse modes of business operation, under the guidance of national policies and plans. The joint efforts still refer to the concept of diverse economic forms as mentioned at the 12th Central Committee, and the addition of ‘diverse modes of business operation’ after diverse economic forms indicates that there can be a variety of ‘modes of business operation’ for one economic form. The change of mode of business operation will not necessarily result in the change of economic form. Clearly, the concept of diverse economic forms mentioned in the report to the 12th Central Committee and the Decision adopted by the Third Plenary Session of the 12th Central Committee has a wider range of connotation than diverse economic sectors. As shown in the citation from the report to the 12th Central Committee and the statement of ‘make joint efforts’ (of the State, collectivity, and individual) with regard to diverse economic forms, the concept of ‘diverse economic forms’ contains ‘diverse forms of ownership,’ but the expression of diverse forms of ownership is not used. The concept of ‘diverse forms of ownership’ is first used in documents of the Seventh Five-Year Plan. It is mentioned in the Report on the Seventh Five-year Plan by the leaders of the State Council in their discussion about the achievements in the economic reform during the Sixth Five-Year Plan period. It is stated in the report that the enterprises’ ability in terms of self-transformation and selfdevelopment has gradually improved, the socialist market has continuously expanded, diverse forms of ownership and modes of business operation have prominently developed, and various forms of lateral economic connection have increasingly strengthened; besides, great changes in the operation system have invigorated the national economy, effectively motivating the enthusiasm and creativity of the workers and masses. Through the practices during the Sixth Five-Year Plan period, especially within more than one year after the Decision on Restructuring the Economic System was adopted by the CPC Central Committee, the outline and path of building the socialist economic system with Chinese characteristics are

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becoming clearer and clearer. It is the first time that ‘diverse economic forms’ was replaced with ‘diverse forms of ownership,’ while retaining ‘diverse modes of business operation’ and adding ‘various forms of lateral economic connection’ at the same time. The Resolution adopted by the Sixth Plenary Session of the 12th Central Committee is the first document of the CPC Central Committee that uses the concept of diverse economic sectors. Although this term had been used as early as in the 1950s, it was a scientific description of the structure of ownership in the revolutionary base areas before the victory of the revolution and within the period between the foundation of the PRC and the successful completion of socialist transformation of ownership of the means of production. After the socialist transformation of the means of production was completed in 1956, the expression of ‘diverse economic sectors’ was not used any more to describe the structure of ownership in China’s society. That’s reasonable since we have established the single socialist economy, extinguished the capitalist economy, transformed individual economy, and cut off the rest of the activities in the nature of individual economy as the leftovers of capitalism, within more than two decades from 1957 to the opening of the Third Plenary Session of the 11th Central Committee. In these years, diverse economic sectors cannot coexist. However, it is proven that the status with the single socialist economic sector is not suitable for the primary stage of socialism that China is in at present. The stagnancy of the Chinese economy in the two decades is attributed to numerous reasons, among which a very serious one is that such a single socialist economy and a single economy of public ownership do not match the level of China’s productive forces and the requirements of the current development of China’s social productive forces. After setting things right and restoring the guideline that practice is the sole criterion for testing truth at the Third Plenary Session of the 11th Central Committee, the policy of opening up to the outside world and relaxing internal restrictions was carried out to allow the existence of individual economy and the other nonpublic economic sectors that play an active part in developing socialist productive forces in China to exist and develop within a certain range – and even allow foreign funded enterprises and joint venture. After that, various economic sectors that are not based on the public ownership boomed, while the study on the coexistence of diverse economic sectors started again in China. Although diverse economic sectors have been developed for several years, and the term ‘diverse economic sectors’ has been used for a long time in economic articles and books, it was not used in the document of the CPC Central Committee until the Sixth Plenary Session of the 12th Central Committee recently held. Why is that? In my opinion, one reason is that diverse economic sectors coexisted at the revolutionary base areas before the foundation of the PRC and before the successful completion of socialist transformation of private ownership of the means of production. The difference between them is that the economy of public ownership in the revolutionary base areas before the victory of the revolution was not dominating, and it was called new-democratic economy at that time. After the victory of the revolution, the powerful socialist economy of State ownership was established all at once as the bureaucrats’ capital and the imperialists’ assets were

Economy in primary state of socialism 93 confiscated, so the socialist economy took the dominant position rapidly as the originally weak strength of national capital in China had been further attenuated in the war for years. However, there was still individual economy and capitalist economy at that time, so diverse economies were still coexisting. Accordingly, we put forth the mission of ‘industrialization and three transformations’ that included the transformation of capitalist industry and commerce, transformation of individual farming, and transformation of the individual handicraft industry. At that time, we called the contemporary stage of history the period of transforming the private ownership of the means of production, and the transitional period from new democracy to socialism. After the socialist transformation of the means of production was completed in 1956, our economic system became a single socialist economy, so we claimed that our country had developed into a new stage of history. While we declared before the socialist transformation that ‘China is in the transitory stage from new democracy to socialism’ (this was our original statement, and it was later changed to the transitory stage from capitalism to socialism and was then changed back in recent years to the transitory stage from new democracy to socialism), we declared that the transition had been fulfilled and our country had entered into the stage of socialism as soon as the socialist transformation was completed. Therefore, many people are affected by the notion that it seems that to admit there are still diverse economic sectors in China is to admit that China has not completed the transition (or returned to the transitory stage) and even returned to the period of new democracy, which is hardly accepted. Thus, the fact that the status of a single socialist economy has actually changed into the coexistence of diverse economic sectors after the Third Plenary Session of the 11th Central Committee is not admitted. That phenomenon has lasted for all these years. On the one hand, we have instituted some correct policies of relaxing restrictions and invigorating the economy, which has actually admitted the existence of diverse economic sectors on the premise of taking the socialist public ownership as the mainstay; on the other hand, the expression has progressively changed from ‘diverse economic forms’ to ‘diverse forms of ownership’ and then to ‘diverse economic sectors,’ to avoid disputes. Lacking clarity though, this approach did not impede the actual work. At last, the concept of ‘diverse economic sectors’ is finally specified in the Resolution adopted by the Sixth Plenary Session of the 12th Central Committee. There are still some questions needed to be answered and discussed with regard to ‘diverse economic sectors.’ I would like to list some of them for discussion. First, what economic sectors of nonpublic ownership are there in the primary stage of socialism? I think that is easy to answer. The nonpublic sector includes individual economy, Chinese-operated capitalist economy, foreigner-operated capitalist economy, and other complex economic forms of nonpublic ownership. As for individual economy, it exists both in urban and rural areas and is more prominent in urban areas. All individuals or their family members who make use of their own means of production and materials for circulation in the production and operation to make profits fall into this category, such as individual

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handicraftsmen, individual peddlers, individual carriers, individual service providers and stall owners, etc. Differently, it is complicated in the countryside. Whether farmers covered in the all-around responsibility system should fall into the category of individual operation or individual economy is still in dispute in the theoretical community. In order to prevent criticism of ‘land distribution for individual cultivation,’ the individual household operation was excluded from individual economy after the all-around responsibility system was implemented. This is because (1) land is not owned by the rural households, but contracted to them by the community who, therefore, has the right to change the status of land use of the land contractors; (2) households’ obligations are all determined by the collectivity, such as the minimum output of farming produce and the amount of money they should pay for contracting the land; (3) rural households shall accept services provided by the community-run businesses and cannot even work without these services in some places; and (4) farmers depend on the industrial enterprises run by the community to a large degree. In a word, the rural household economy under such circumstances is based on the collective economy, so it does not belong to individual economy. However, it is not easy to make such an assertion, as the connection between farmers and community can be close but also can be weak sometimes. Under such circumstances, it is hard to theoretically distinguish the individual economy from the collective economy. As for the capitalist economy operated by the Chinese, I think that its typical form is private businesses that employ many workers to operate in the capitalist methods no matter what they produce and operate. I have not gathered the overall data about how much percentage this kind of economy takes in the whole national economy. Although it has developed in recent years, it only takes a small part, which I can hardly specify. However, I am sure it exists among diverse economic sectors. As for the foreigner-operated capitalist economy in China, we welcome foreign capitalists to come and invest in China, and their investment is called ‘capital export’ in Marxism political economics. The term is not a taboo even to foreigners. As we all know, capital is the value generating surplus value. It is obvious that foreigners are operating under a capitalist economy as they invest in China for surplus value. Besides the three basic economic sectors, there are other various intermediate and complicated forms. These three can exist and develop within a certain range according to laws and policies, considering their contribution to the socialist construction. Meanwhile, we should also admit that some nonsocialist economic sectors sabotage our socialist economic development, and we should not tolerate their existence and especially their development. They are illegal in China and must be banned. However, we should also admit that they cannot be destroyed all at once and will last for a while, although we make policies and take measures to destroy them. Then how should we analyze the nature of all nonpublic economic sectors? As we mentioned above, the nature of household operation under the household contract system has not been settled yet. The nature of employment economy is

Economy in primary state of socialism 95 another hotspot in recent years. To understand the nature of these nonpublic economic sectors can greatly affect the theoretical study as well as the practical work. This issue falls into the theoretical and ideological category in Marxist political economics. After the victory of the Russian October Revolution, Lenin pointed out the issue of ‘State capitalism’ in a socialist country. This ‘State capitalism’ has a very special meaning and is different from that in the capitalist society. It means that State capitalism is considered as contributive to the consolidation and development of the socialist system, and must follow the law of the socialist country and be under the supervision of the country. How can the nature of such a State capitalism be analyzed? Taking external conditions as example, will the relationship between the socialist country and such a capitalist economic sector change or affect its nature of capitalism? That needs research. After the socialist system was established in Poland, Gomułk, the earliest leader of the Polish Communist Party, wrote an article under the pen name of Wieslaw in the 1940s, in which he stated that the individual economy in a socialist country would have the nature of socialism as it was related to socialist State-operated economy in the process of circulation. I read this article shortly after it was published. When I studied this article, I believed that the nature of an economic sector should be determined based on its internal economic relation and its internal ownership and economic interest relationship, so it is improper to claim that an individual economy has the nature of socialism since it is related to the socialist State-operated economy in the process of circulation. Such a discussion is being resumed now in the study on the nonpublic economic sectors. Further research is needed to settle this issue. That is a complicated issue, and I still hold that the nature of an economic sector should be determined based on its internal economic relationship and ownership, rather than their relationship with the outside world. This is to say, individual economy, capitalist economy, foreigner-operated capitalist economy, and the Chinese-operated capitalist economy are all just economic sectors. Their external relationships are decisive for their stations and function, and can restrain the economic activities of these sectors. Marx underscored that the property (in German, ‘own’ or ‘ownership’ is the same word as ‘property,’ while ‘proprietary right’ and ‘property right’ share the same word as well) will be totally meaningless, if it cannot bring economic benefits to the subject. He also emphasized that ownership should be considered as the fundamental point of relations of production in order to define the ownership. Therefore, the issue of property or ownership is very complicated. Especially in the socialist system, the nonpublic economy has a very special external environment and has various interest relationships with an economic sector. However, if such an interest relationship, e.g., tax payment and interest payment, can affect the nature of the economic sector, ‘economic sector’ will lose its independent meaning both in the modern capitalist system and in the modern socialist system. It is sure that an economy in the nature of cooperation, such as various forms of cooperation between the capitalist economy (whether foreigner-operated or Chineseoperated) and the socialist economy of public ownership, should not be simply classified into the above-mentioned socialist or nonsocialist economic sectors.

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Such an economic sector is compound (it consists of two or more economic sectors), which is determined by the internal economic relations. Moreover, only by their internal relationship can we judge whether such a cooperative economy is dominated by the public economy, or by capitalist economy and individual economy. Perhaps no economic sectors are dominant. The second is about the status and role of nonpublic economy in the primary stage of socialism. As mentioned before, the individual economy and capitalist economy in the primary stage of socialism is greatly different from those in the transitional period in terms of their status, role, and meaning. To realize the difference is a very important and realistic theoretical and practical issue of Marxism. Then how are they different, to be specific? First, they again have different historical backgrounds. It is said that the winner was not decided yet between socialism and capitalism in the transitional period. As pointed out by Lenin in Economy and Politics at the Era of Dictatorship of the Proletariat, a transitional period stands between capitalism and communism (which refers to communism including primary and advanced stages. The ‘communism’ mentioned here refers to the primary stage of communism. In the Great Leap Forward movement, it had been considered as the advanced stage of communism and the transition mentioned here was called as ‘Great Transition’). It is impossible that the transitional period has no features or characteristics of the two social economic structures. It must be the period of a fight between the declining capitalism and the developing communism, or a battle between the defeated yet not eliminated capitalism and the established yet very vulnerable communism (with both primary and advanced stages). It is sure that the relationship between diverse economic sectors in such a historical stage must be different from that in the primary stage of socialism, because socialism (which is the same as the communism mentioned by Lenin) in its primary stage in China is not very vulnerable, and we intend to develop capitalism after we have destroyed it. Therefore, the fight still exists but has experienced a tremendous change in its situation. Although the primary stage of socialism is in a very crude stage of development, it is not in the transitional period any more. I would like to define the two concepts, transitional period and primary stage of socialism, in Part IV of this speech. Now, I want to explain through some data that the power of socialist public ownership in the transitional period was far weaker than that at present. Although public ownership takes the dominant position in both of the periods, the word ‘dominant’ has greatly different connotations. Let’s look at the ‘Net Value of SOEs’ Year-end Fixed Assets’ for the first year (1952) of the transitional period and the first year (1957) after its end, which were RMB16.7 billion and RMB38.2 billion, respectively. The figures for the first year (1979) after the Third Plenary Session of the 11th Central Committee and the year of 1984 were RMB 344.9 billion and RMB507 billion, respectively. Comparison shows that the ‘Net Value of SOEs’ Year-end Fixed Assets’ in 1979 is over 20 times and over 9 times that in 1952 and 1957, respectively, while that in 1984 is over 30 times and over 13 times that in 1952 and 1957, respectively.

Economy in primary state of socialism 97 Besides, the collective economy in urban and rural areas is not considered, and the socialist economy of the public ownership must have made great progress in the countryside. As the situations in both the historical periods are so different, the status, role, and meaning of the nonpublic economy greatly differ. The relationships between the nonpublic and public economic sectors are the criteria for measuring the status, role, and meaning of the nonpublic economy. At first, attention must be paid to whether they play a negative or a positive part in consolidating and developing the socialist economy. In the transitional period, we basically believed that they play a negative part (which appears not entirely correct at present) and the socialist economy cannot be developed if the capitalist economy or even an individual economy is not reduced (but Lenin also said that socialism could be consolidated within one year if State capitalism could develop within half a year in Russia). Therefore, capitalist economy and individual economy are the only objects to be transformed in the transitional period and should be destroyed in the end. At that time, we had adopted the concept of ‘utilize, restrict, and transform,’ but we only ‘utilized’ them for a very short time and then generally transformed and eliminated them. This is the actual situation in the transitional period in our country (even though such an attitude seems to be incorrect today). As the primary stage of socialism has lasted till now, and the economy of the public ownership has become so powerful, we can confidently consider the existence and appropriate development of individual economy and capitalist economy on the premise of taking the socialist public ownership as the mainstay and as useful to the further consolidation and development of socialist public ownership. These nonpublic economic sectors should not be transformed or eliminated today. When we talk about this issue and the development of nonpublic economies, we always remember adding ‘suitable’ and ‘within a certain range,’ which indicates that we attach much importance to maintaining the socialist nature of the economic development. Moreover, as the socialist economy of public ownership has greatly developed now, we don’t have to consider any more whether or not socialism can beat capitalism. Today, the relationship between capitalism and socialism should not be the relationship of ‘decline’ and ‘growth,’ but a relationship in which the nonpublic economies supplement the economy of the public ownership. Furthermore, such a relationship will exist for a long time and through the whole primary stage of socialism. In my opinion, it can be proven that we could not treat individual economy and capitalist economy from the same approach, once the existence of such a relationship is pointed out. Based on the Marxist principle that the fundamental task of socialism is to develop productive forces, we should admit and allow the longterm existence of individual economy and capital economy in the primary stage of socialism in our country, but not necessarily define them as economic sectors in the nature of socialism. Moreover, I should stress again that some diverse economic sectors may damage and sabotage the socialist economy rather than facilitate it. Their existence must be forbidden and uncompromisingly prevented. In this case, the relationship of ‘decline’ and ‘growth’ must exist. In other words, the development of socialist

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economy will be affected if these economic sectors are removed or do not ‘decline.’ Lenin’s argument on the difference between ‘civilized’ and ‘uncivilized’ capitalism in Economy and Politics at the Era of Dictatorship of the Proletariat is applicable still now. As the times have changed, ‘civilized’ and ‘uncivilized’ have the same and different connotations now. Now we shall discuss whether diverse economic sectors can only coexist in the revolutionary base areas before the victory of the revolution in the whole country – the new democratic society, or in the transitional period after the victory of revolution. Can it be possible that diverse economic sectors can coexist in the long period of socialist construction after the socialist transformation? If that’s possible, what are the similarities and differences of the diverse economic sectors between the new democratic society and the transitional period? What is its significance? I would like to share my views on these questions. 1

With regard to the socialist transformation, the Resolution adopted by the Sixth Plenary Session of the 11th CPC Central Committee states that: our Party has carved out a unique path of the socialist transformation with Chinese characteristics in the transitional period, and the state capitalism and cooperative economy have demonstrated their prominent superiority during the process of transformation. By the year of 1956, the socialist transformation of the private ownership of the means of production had been basically completed in most areas of the country. There were shortcomings and deviations in the transformation. After the summer in 1955, some issues remained unsolved for a long time due to the hasty and careless cooperative transformation of agriculture and transformation of handicraft and individual commerce in a simple form. After the transformation of capitalist industry and commerce was basically completed in 1956, some original industrialists and businessmen were improperly treated. Generally speaking, however, it is a great success to complete such a complex, difficult, and profound social reform in a country with so large a population and facilitate the development of this country’s agriculture, industry, and the national economy as a whole. The Resolution adopted by the Sixth Plenary Session of the 11th Central Committee is intended to summarize experiences. In retrospect, people are wondering whether it is proper to claim the basis of completion of the socialist transformation in 1956, considering the complexity of the reform, and the above-mentioned shortcomings and deviations. I think that the claim is basically true, but the ‘basic completion’ has a specific meaning that the single socialist economy had been realized not thoroughly and completely and that we had only realized the socialist transformation of the private ownership of the means of production, but not that of political ideology. It does not cover the shortcomings and deviations mentioned in The CPC Central Committee’s Resolution on Certain Issues in the History of Our Party since the Founding of the People’s Republic of China. These shortcomings and deviations

Economy in primary state of socialism 99 have become even more serious in the two decades after 1957, and were not rectified until the Third Plenary Session of the 11th Central Committee. The policy of relaxing restrictions and other policies are measures to correct these mistakes and deviations. 2

However, these measures mean more than just solving remaining problems of the socialist transformation. I think that the coexistence of diverse economic sectors in the period of socialist construction is very different from that at the revolutionary base areas and in the transitional period. As mentioned above, at the revolutionary base areas before the success of the revolution, the coexistence of diverse economic sectors was not based on the dominance of public ownership. At that time, there were the government-owned sector and various forms of cooperative economy, but all these sectors were too weak to become the mainstay in the socialist economic system. Meanwhile, other economic sectors were leftovers from the old days, including a considerable feudalistic economy – in which farmers rented the land owned by landlords and paid high usurious loans to them. The feudalistic economy is the object that we were struggling against at the revolutionary base areas. However, the policy of reducing rent and interest was carried out to just weaken the feudalistic economy, which was not eliminated until the land reform. Besides, individual economy and the capitalist economy abiding by the governmental regulations were encouraged rather than being limited or transformed. During the transformation period after a short period of restoration following the victory of the revolution, there were diverse economic sectors, including old economic sectors like capitalist economy and individual economy; traditional economic forms like State capitalist economy and the transitional cooperative economy (e.g., mutual-aid group and elementary cooperative); and the socialist State-owned sector. Due to the absence of imperialism and bureaucrat capital, the public sector grew so strong that it took the dominant position in the whole national economy. Compared with the present condition, its status was much weaker at that time. In the ‘period of socialist transformation of the private ownership of the means of production’ or ‘transitional period of socialism,’ our policy was to be in conformity to the master plan that was not only to gradually strengthen the socialist public sector, but also to focus on eliminating and transforming the nonpublic sector. Various transitory forms were only allowed to exist in the process of transformation. That’s how diverse economic sectors coexisted in the transformation period or the transitional period. The task in the later socialist construction period was to develop the socialist economy. As it is still in the primary stage of socialism, China should not only focus on developing the public sector, which takes the dominant position in the whole national economy, but also should allow the existence of the nonpublic sector and its development in a certain range as the supplement to the development of the public sector. The nonpublic sector can help solve a lot of economic and social problems that cannot be solved by merely

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Economy in primary state of socialism depending on the public sector, so it plays an active part in consolidating and developing the public ownership. The historical experience from 1957 to 1978 proved this to us. Later, it was proven again in the experience starting in the year 1979 after the Third Plenary Session of the 11th Central Committee. Take the sufficient employment of urban residents as an example. Currently, in the public sector, the government has to invest more than RMB10,000 on average to provide job opportunities, while it invests nothing in the individual economy; then it can spend more on key projects, so as to better promote the development of the public sector. It is clear that the existence and development of the nonpublic sector is necessary to the socialist construction in the long run. It is therefore not appropriate any more now to consider the current coexistence of diverse economic sectors as a phenomenon before or during the period of socialist transformation from the leftovers of the old days, even though such an idea might be applicable to the transitional period. That is how diverse economic sectors coexist in the primary stage of socialism. To conclude, the coexistence of diverse economic sectors in the three different historical conditions are indeed different from each other.

III. The primary stage and encouraging some people to become rich first As pointed out in The CPC Central Committee’s Resolution on the Guidelines for the Construction of Socialist Spiritual Civilization, another feature of the primary stage of socialism in China is to allow some people to get rich first to achieve common prosperity. That means, to a large degree, these people can get rich not by depending on distribution according to work; otherwise, it is unnecessary to develop diverse economic sectors as a feature of the primary stage of socialism. Of course, the income gap between people from different walks of life may be widened if the principle of distribution according to work is authentically carried through. Some talented scientists, artists, and entrepreneurs should have been highly paid and become rich first according to the principle of distribution according to work; however, these people account for a little part of the whole population. If the principle of distribution according to work is carried out for most laborers, it can only widen the income gap to a certain degree, but will be unable to let some people get rich first. It should be admitted that the consumer goods have not been totally distributed according to work in the primary stage o f socialism and it did not exist from long ago. Take the income gap between farmers as an example. In my opinion, the gap between farmers is more serious than that between farmers and workers. The farmers engaged in the same work at the rich coastal areas have higher incomes than that of farmers in the remote and poor areas. Such a difference may be caused by different productivities of the land (differential rent 1A) and traffic conditions (differential rent 1B) or the difference of economic capabilities (farmers in the poor areas cannot afford machinery and fertilizer, etc). Moreover, they have no

Economy in primary state of socialism 101 ability to better develop sidelines. There is also the problem of differential rent II (the differential rents mentioned herein all refer to those under the socialist system). When a large part of differential rent is given to farmers (a part is gained by the country through agricultural tax and procurement, etc.), the income gap between farms in prolific areas and those in infertile areas will be not caused by the distribution according to work. Meanwhile, distribution according to work was actually not entirely carried out in the countryside even in the same region, even before the economic reform. For instance, the rich-poor gap between villages is determined by the difference in their means of production to a large degree. This is to say, the principle of distribution according to the occupied means of production is always functioning. Therefore, it has been a standing reality since the foundation of the PRC that some, beyond the scope of distribution according to work, got rich first, which we feared to accept and admit. The principle of distribution according to work could not be carried through and was distorted by and opposed to equalitarianism, which was used to judge the people’s life in the past, so it is sure that the distribution outside the principle of distribution according work cannot be admitted and accepted in principle. Under such pressure, the fear to be rich had haunted all the laborers. The guiding principle of some getting rich first put forth by Comrade Deng Xiaoping has admitted the objective reality, gotten rid of a large ideological obstacle, and rectified misunderstandings. That played a significant role in liberating the productive forces. It should be pointed out that allowing some people to get rich first, as one of the features in the primary stage of socialism, not only confirms the existing reality, but also brings new important contents to history. It is closely related to the statement that the socialist economy is still a commodity economy as stated in the Third Plenary Session of the 12th Central Committee. In the commodity economy, wealth can be obtained not only by work but also by business operation. Good business operation can make one rich. Anyone can gain good economic benefit if they can, in a timely way, master correct, plentiful, important, and useful market information and make good use of it, correctly use the knowledge of the relationship in socialism, and build the necessary economic relations with relevant parties to facilitate the participation in the course of socialism, and skillfully handle production and circulation. Business operation is of course a kind of work, which requires painstaking efforts. As the result of assiduous study, good business operation also requires hard work. The quantities of work input by different business operators in the same period will be different as well. Moreover, it is also related to whether the quantity of work done by a person can be admitted in the society. However, the effect of business operation does not depend entirely on objective conditions, subjective decisions, and opportunities during the operation. Therefore, the income of business operators should not be all distributed according to work, but also by following some other principles. In addition, the principle of ‘distribution according to ability’ initiated by SaintSimon may also act a part in the primary stage of socialism (perhaps in other stages as well). The ability should be acquired through hard work, so those capable ones

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will do more work in the same working hours considering the complexity of their work. Nevertheless, distribution according to ability and distribution according to work are two absolutely different concepts after all, as capable ones may not work hard. Furthermore, allowing some people to get rich first and developing diverse economic sectors are connected to each other. If we only develop diverse economic sectors, people devoting themselves to developing nonpublic sectors will be discouraged as they are not allowed to get rich. Conversely, a very important means of getting rich will be missing if a part of the people are allowed to become rich but diverse economic sectors are forbidden from developing in the meantime. In general, the idea that a part of people become rich first will not be an independent policy or a feature of the primary stage of socialism if we merely carry out the principle of distribution according to work. The primary stage of socialism is undoubtedly a part of the development course of socialism. Distribution according to work is still the basic principle in the stage while diverse economic sectors are still operating on the premise of taking the socialist public ownership as the mainstay. In such a specific stage, the aim of allowing some to get rich first is to encourage and help others to follow suit so as to achieve common prosperity. Therefore, such an idea is not contradictory to the goal of common prosperity, and is an important means to realize it. When we put this idea into practice, it is necessary to correctly handle its relationship with the common prosperity for the whole society, so as to avoid a wide rich-poor divide as seen in a society with private ownership.

IV. Economic construction in the primary stage of socialism From the approach of productive forces, the primary stage of socialism has a basic feature that ‘material civilization is less developed’ as mentioned in the Report to the 12th National Congress. It is certain that spiritual civilization is also less developed in this stage, but I will not talk about this, as my speech focuses on economic issues. In other words, the less developed material civilization refers to the poor productive forces, which are far below the level of the developed capitalist countries in the world. The status of productive forces in any country must result from historical reasons, so it does in China. Before its victory of revolution, China was economically poor. Owing to peculiar historical conditions (that are excellently analyzed in Mao Zedong’s works), China, such a very backward country, won in the socialist revolution much earlier than developed countries and established the socialist system under the leadership of the Chinese Communist Party headed by Mao Zedong and the guidance of Marxism and through the arduous and longlasting struggle of the laborers and masses. Nevertheless, the victory can only enable China to create a favorable condition for its quick progress, but cannot change its original status of having a backward economy within a short period; therefore, long-term construction is required. For a long period, China has been trapped in a dilemma as pointed out in the documents of our Party many times that China has established the most advanced social system in the world – socialist system – on

Economy in primary state of socialism 103 the one hand, but was still backward in economy and culture on the other hand. It is the root cause underlying the necessity of such a long primary stage. The above-mentioned feature is an embodiment of such a low level of social productive forces in socialist China. The match of the current socialist productive forces with relations of production in the present stage of China results in the productive forces in the current stage. The primary stage of socialism after the ‘transitional period from new-democratic society to socialist society’ has the prominent change that the historical mission of social progress in China is changed from revolution to construction. Economic construction becomes the key point of the whole construction due to its fundamental role. This change was proposed in the Party at the end of the transformation, as reflected in the report and resolution of the Party’s 8th National People’s Congress. Unfortunately, the proposal was not solidly supported as people did not have a deep understanding of it, resulting in ignorance of the construction and prolonging overemphasis on class struggle. In 1962, the slogan of ‘taking class struggle as the key link’ was proposed at the Tenth Plenary Session of the 8th Central Committee, requiring the conducting of class struggle ‘every year, every month and every day.’ Such anti-objective-law practice was maintained for two decades in China, till it was radically eliminated at the Third Plenary Session of the 11th Central Committee in 1978. Since then, our country has steadily realized the historical change from revolution to construction. The primary stage should be essentially the primary period for socialist construction. Due to the wrong guiding principle, the change was not realized till 1979. The period from 1957 to 1978 was very special, in which the objective laws of historical development were not followed, the historical mission was not correctly comprehended, serious mistakes were made regarding guidelines, and the economic development was stagnant for a long time. Therefore, it was neither the transitional period as mentioned above, nor the period of socialist construction. The basic principle in the primary stage is to construct China into a powerful modernized socialist country. The ‘Four Modernizations’ is a slogan for this stage. Therefore, this stage can be considered as aiming at realizing socialist modernization. Why can we say so? Because it is unnecessary to put forward the catchword ‘modernization’ if China is already a modern country. As a matter of fact, China falls far behind developed countries in economy and culture; in other words, there are many ancient things that need to be modernized. For example, modern agriculture needs modern agricultural machines and equipment, and modern agricultural laborers need to receive an education of modern sciences and master modern techniques. However, in China’s countryside, especially in remote areas, most farmers are still using implements that their ancestors once used, and they know almost nothing about modern sciences. A little better than agriculture though, China’s industry is still far behind that of developed countries in terms of technology and management. A basic task in the primary stage of socialism is to change such a situation. According to the State Statistics Bureau, the GNP per capita in US dollars in 1980 was USD11,360 for the US, USD9,890 for Japan, USD13,590 for the

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Federal Republic of Germany, USD7,920 for the UK, USD11,730 for France, and USD290 for China. The simple average (not a weighted average) of the GNP per capita of the first five developed countries is USD10,878. The absolute difference between that simple average and our country’s GNP per capita is USD10,588. Relatively, the former is 37.5 times the latter. This difference is an underlying reason for our need of modernization. According to the State Statistics Bureau, the annual growth rate of GNP for the above-mentioned countries from 1981 to 1985 was: 2.6%, –2.0%, 3.8%, 6.9%, and 2.4% for the US, with the average growth rate being 2.6% and an increase of 14.2% in 1985 over 1980; 4.2%, 3.1%, 3.0%, 5.8%, and 5.0% for Japan, with the average growth rate being 4% and an increase of 22.9% in 1985 over 1980; –1%, 1.0%, 2.6%, and 2.3% for the Federal Republic of Germany, with the average growth rate being 1.1% and an increase of 5.0% in 1985 over 1980; –1.3%, 1.9%, 3.3%, 2.3%, and 3.4% for the UK, with the average growth rate being 1.9% and an increase of 10.1% in 1985 over 1980; and 1.2%, 0.2%, 0.7%, 2.0%, and 1.2% for France, with the average growth rate being 1.2% and an increase of 5.5% in 1985 over 1980. Not very high though, the annual growth rates of the five countries are between 1.2% and 4%, with the average being 2%. In his communication with foreign guests recently, Comrade Deng Xiaoping pointed out that China’s modernization should be achieved through two steps: the first step is to fulfill the strategic objective set forth at the 12th National Congress, and the second step is to strive to render our country’s economic development close to the level of developed countries by the middle of the next century; that is, to reach the moderately developed level, with the annual GNP per capita being about USD4,000. If GNP in 2050 can be 4.5 times that in 1980, the per capita national income shall be between USD4,000 and USD5,000 at that time, which is still 10 times lower than that of developed countries. Although being greatly narrowed compared to 37 times in 1980, the difference is still large, and its absolute value will be larger. Nevertheless, that is a great achievement, considering China’s large population and its goal of common prosperity. If our country can keep the development at a speed much higher than that of developed countries, the absolute difference will be narrowed down, which is time-consuming and by no means an easy thing to do. We should give full consideration to the long-term task of realizing modernization, and we must fully understand that the primary stage of socialism shall last a long time. If the modernization is approached from its possibility instead of its necessity, our previous discussion about the unbalanced social development appears to be universal and not only applicable to capitalist countries. Since leading countries have no experience to draw on, they have to grope their way to a large extent and may take a roundabout course and even do something stupid. But their followers can follow an easier route if they learn carefully from their forerunners, although they may still need to explore many uncertain areas and make the same mistakes of their forerunners. Much more time and effort should be spent on the discovery of new natural science and the creation of new technologies than on learning them. In Capital, Marx had mentioned that the person might spend numberless

Economy in primary state of socialism 105 hours in finding the binomial theorem, but it only takes a middle school student a class to learn it now. The fact that the latecomers surpass the oldtimers is called the theory of ‘Latecomer’s Benefit’ by some economists in modern times. It means that a latecomer country might get close to or catch up with the country in front. The basic socialist system in China has the superiority that capitalist countries cannot obtain. If the superiority can be well utilized, it will become an advantage for the latecomer socialist countries to catch up with the developed capitalist countries. In the past years, this superiority has not been well demonstrated, due to the shortcomings and defects in the socialist system (which refer to the specific socialist system other than the fundamental socialist system) and the wrong guiding principle (including the wrong or partially wrong ideology inherited from the past and formed in real life). Although some problems remain unsolved in the process of reform, that does not deny the superiority of the socialist system, but rather should be used to explain the necessity of the reform of the socialist system and the renewal of thinking. In the reform and renewal, anything good, including that which we inherited from our country’s history, that which we are working on, and that which foreign countries have but we do not have, should be absorbed. Only in this way can China in the primary stage of socialism obtain the basic conditions for gradually catching up with the developed capitalist countries. We also should notice that it is hard for backward countries to catch up with developed ones. First, backwardness impedes further development. For instance, an urgent task can be easily handled in a developed country due to its sufficient material resource. A good project may be set aside for a long time in a backward country due to poor affordability. Moreover, to produce an advanced industrial product requires not only advanced technology and equipment, but also a general high level of production and technique. The production cannot be finished in one factory. It may need raw materials supplied from other factories and even some parts produced in other factories. Therefore, the producing plant may run into harsh difficulties that may be not overcome for a while or in a short period, if the production in the whole society is very backward. Poor quality of people is also a serious problem of backward countries. Taking material production as an example, the quality of people directly involved in production or operating businesses is critical to giving play to and developing the existing productive forces. Furthermore, people’s competence cannot be improved in one day. People should improve themselves through schooling or practice. Besides, the improvement should be based on particular conditions. For instance, some advanced knowledge must be learned from practice in advanced enterprises, and theoretical education cannot be enough. If one needs to study at school, the school must have a competent faculty and advanced facilities, etc., which can help one learn better. There are other difficulties caused by backwardness, which are too many to cite. To conclude, there are both objective and subjective reasons underlying the backwardness. If the root cause remains, backward countries can never catch up to developed ones. People may say particular conditions are needed for a backward country to become a comparatively developed one fast; and they also may say this country should develop itself first to obtain these conditions. The chicken and the egg

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dilemma can be solved by abstract thinking. But we can solve it by finding an opening and through painstaking efforts in practice, so it is with turning a backward country to an advanced one. It is necessary to point out that we should understand the law of the ‘Latecomer’s Benefit’ and find out the way to obtain it, rather than depend on subjective wishes. We must be prudent and knowledgeable and combine our passion in construction with scientific approach, as both passion and preciseness are decisive for backward countries to catch up with developed ones. Such a scientific spirit should be upheld in many important things, such as construction objective and speed. A backward country in the primary stage of socialism should pursue high growth rate to realize modernization. I think that the faster, the better – provided that the objective and speed can be achieved reasonably and will not result in the ‘plunge’ in the future. However, we must not believe without any ground that we can grow at an unachievable speed; the greatly abundant products can be provided within a very short period; we are now in stages higher than the primary stage of socialism, or we can rapidly develop into the intermediate stage and then the advanced stage. As for technology, we must introduce advanced technologies, which is the essential path to modernization. In the meantime, we should also keep in mind that China’s economy is so unbalanced that our country has to spend a lot of energy in spreading the ‘suitable technology’ and taking the ‘primitive method of modern science’ as we mentioned before. So far, we are still discussing the internal relationship of productive forces. Besides the two ideas of developing diverse economic sectors and making a part of the people to become rich first, the mutual relationship between regions in China can be also exemplified for the discussion about relations of production. As it is known to everyone, there is a tremendous development gap between Northwest China and Southeast China. If China is divided along the 400mm-precipitation line, the monsoon region of the Southeast area occupies 48 percent of the total area of our country but accommodates about 94 percent of the total population, and a similar percentage of the total national output value. The arid areas in Northwest China and the severe cold areas in Tsinghai and Tibet occupy 52 percent of the total area of our country, but have 6 percent of the total national output value, revealing a great gap between the two regions. Southeast China, especially the most developed coastal areas, inevitably takes the lead in realizing modernization, while Northwest China will follow suit. The former supports the latter with capital, talent, technologies, and experience and will gain economic benefits in the meantime, while the latter can gain its own economic benefits from the support. The proportional relationship between consumption and production can be used as an example. It turns out that attention must be paid to promoting the people’s consumption along with peaceful construction since it is the objective of socialist production. Meanwhile, the great facilitation of consumption for production must be realized. We should underscore that sufficient material products should be input in enlarging reproduction so as to quicken development. We should be particularly active and prudent in improving people’s consumption, as required due to the features of the primary stage of socialism.

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V. Several theoretical questions regarding the primary stage of socialism The first question: What on earth is the difference between the primary stage of socialism and the period of revolutionary base areas or ‘the transitional period from new-democratic society to socialist society,’ since the public and nonpublic economic sectors co-exist and some people are much richer than others? Why don’t we just claim that our country is still in the transitional period? That argument makes sense to some degree. In the summarization of historical experience, it was too hasty to claim the end of the transitional period and entry into the socialist society in 1956, which is implied in the passage cited above from The CPC Central Committee’s Resolution on Certain Issues in the History of Our Party since the Founding of the People’s Republic of China. It’s easy to be wiser after the event. Many hold that a longer transitional period would be much more useful to our country’s development in the long run. I agree with that. However, I had never thought of it prior to the Third Plenary Session of the 11th Central Committee. Even so, I still do not advocate the claim that our country is still in the transitional period and always support the concept of the ‘primary stage of socialism’ which, I think, can better reflect today’s national condition and better help the construction of China than the former. One of my reasons is, as I mentioned when talking about diverse economic sectors, that the coexistence of diverse economic sectors during the transitional period is caused by the new socialist economy generated due to the victory of the proletariat-led revolution and the remaining individual economy and capitalist economy from the old society. After a short period of restoration, the task of transforming old economies in all respects was therefore put forward, and then the socialist transformation period started, of which the nature is to reform old economic sectors. We have not discussed whether China should only focus on ‘transformation,’ or stick to the ‘utilize, restrict, and transform’ principle as mentioned above and allow their development within a certain range, as we had no experience and did not thoroughly study Marx’s and Lenin’s theories on the transitional period based on the situation of China in particular and the world in general. We just thought that China, after the victory of its revolution, had to experience a transitional period similar to that mentioned by Marx and Lenin. After restudying this issue, we find that Marx pointed out that there must be an economic transitional period to replace capitalism with socialism after the proletariat seizes power, and correspondingly, there should be a period of dictatorship of the proletariat. It is indeed a very incisive statement for the capitalist country in the process of socialist revolution at that time. The statement indicates that the transition from capitalism to socialism cannot be achieved all at once by toppling the power of the bourgeoisie. After seizing power, there is still a period of vehement class struggle, a period of the battle between the dominant proletariat and the bourgeoisie that has been toppled but not extinguished, and between a newborn socialist economy and the old capitalist economy. It is totally in accord with the law of historical development. Around the October Revolution, Lenin had underscored that there must be a period after the victory of revolution, considering the situation of class

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struggle at that time, and said that there is a transitional period between capitalism and communism (referring to socialism: as socialism is the primary stage of communism, the entrance into socialism means to enter into communism consisting of primary and advanced stages – author’s note), which is theoretically undoubted. The transitional period will not have no features or characteristics of the two social economic structures (which refers to two economic sectors in different natures – author’s note). It must be the period of a fight between the declining capitalism and the developing communism, in other words, the period of a battle between the defeated yet not eliminated capitalism and the established yet very vulnerable communism.1 In my opinion, Lenin’s statement was totally correct in terms of Russia at that time. Are these statements made by Marx and Lenin suitable for China? We should answer this question from two aspects according to the current situation. On the one hand, we must realize that, in the early years after the victory of revolution, imperialism, bureaucrat capitalism, and feudal forces were still very powerful in China, domestic and overseas enemies were still sabotaging the newborn People’s Republic of China, the contradiction between the proletariat and the national bourgeoisie was sharpening to some extent, and the class struggle was fierce; economically, the new dominant position of the socialist economic sectors needed to be intensified. Considering all these factors, the class struggle and socialist transformation should be stressed at that time. The historical stage at that time is similar to that mentioned by Marx and Lenin in some aspects. On the other hand, China has its own features, such as poorly developed capitalism, and serious contradiction between China’s national capitalism and imperialism and bureaucrat capitalism, making the national capitalism an object to be transformed. Before the foundation of the PRC, the Common Programme adopted by the first CPPCC National Conference had described these features in detail. Therefore, the idea of consolidating the order of new democracy, which was put forth in the early days of the foundation of the PRC, may have been something unsuitable, but it takes into account the historical features of China. It might be more helpful if we could better combine the thought of furthering economic restructuring (it is very necessary to point out and underscore this aspect that was not sufficiently understood by some comrades) and put more emphasis on China’s unique features, rather than transit to socialism in a hurry, and work out a more suitable guideline for China’s development. Considering China’s national condition, the transitional period pointed out by Marx and Lenin is applicable to some extent, but may also be totally inapplicable in some cases. China’s transitional period was not proposed until 1953. An explanation was given at the same time, which, however, seems to fail to fully analyze China’s situation, if viewed from today. I had participated in drafting the Propaganda Department of the Central Committee of the Communist Party of China’s Outline of Learning and Propagandizing the General Line of CPC in the Transitional period (the ‘Outline’ hereinafter). The Outline cites Marx’s and Lenin’s statements about the transitional period and also points out that the current reality in China has also proved the correctness of these statements. Now, I think we should carefully reflect on this. However, the idea of ‘the transitional period from new democracy to socialism’ proposed in

Economy in primary state of socialism 109 1953 reflects that the transitional period has its own characteristics. In September 1955, Mao Zedong changed ‘the transition from new democracy to socialism’ to ‘the transition from capitalism to socialism’ in the Prefaces to Socialist Upsurge in China’s Countryside, which made me feel confused at that time since China has never been a capitalist society. However, I did not dare to question the correctness of Chairman Mao’s words, fearing that my ideological backwardness might be revealed. Today, we realize that the blind copy of Marx’s and Lenin’s statements about the transitional period was detached from China’s reality. It is the historian’s job to find out whether China’s development in the following years was significantly influenced by this idea. Here I just share my somewhat immature ideas. China’s socialist transformation was unique and was conducted smoothly and made great achievements, as we had noticed that China’s national condition must be considered when taking steps and adopting approaches of transforming the capitalist and individual economies. Perhaps it is because of the success in tactics and policies that failure in understanding the historical stage of social development in China has been concealed. It should be pointed out again that we are studying the history, which requires us to be wiser after summarizing experiences and lessons. At that time, I only felt confused with the statement of ‘the transition from capitalism to socialism,’ and never thought of anything else. When I composed the Textbook of Common Sense of Politics in 1951, I wrote about ‘consolidating the order of new democracy’ in accordance with the documents of the Party Central Committee. Later, the slogan was criticized by the Party Central Committee, so I accepted it immediately and never gave it a second thought. I blindly worshipped Comrade Mao Zedong so much that I did not even use my head. Within a very long period, I have not changed my mind in the concept defined in the Outline. It was not until the end of the ‘Great Cultural Revolution’ that I resumed my study on the historical background for the formation of the ‘theory’ of ‘continuous revolution in the dictatorship of the proletariat,’ and felt that the theory might be traced back to the originally simple copy of Marx’s and Lenin’s theories about the transitional period. Although the two are totally different, we all have seen the consequences in China of the emphasis on these theories of Marx and Lenin. Looking back at those years, people were required to repeatedly study Chairman Mao’s quotations. Therefore, when the theoretical community proposed that China was in the transitional period in 1979, I reserved my opinion and thought that Marx and Lenin’s ‘transitional period’ statement did not totally match China’s reality. On second thought, I believe that the concept of a ‘primary stage of socialism’ is much better. It has no direct relation to Marx’s and Lenin’s definition of a transitional period and qualitative prescription, etc., so we can study the theoretical and practical issues based on the theories and methods of Marxism and according to the specific reality of China. Although I do not agree with the transitory-period argument, I believe that the country was gradually progressing into a socialist country after its establishment. It was so in the 1950s, and so is it now. ‘Historical period with the nature of transition’ is different from ‘transitional period.’ The latter is a well-explained term in Marx and Lenin’s literature and is more specific than the former. In my opinion, the coexistence of diverse

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economic sectors reflects the nature of transition of the society. I talked about that in an outline article named ‘Marxism and Socialism’ around 1981. However, such a statement is made from the approach of philosophy. I don’t think China was in the ‘transitional period’ as specified by Marx and Lenin or by us in the 1950s. It is improper to directly copy the concept of ‘transitional period’ defined by Marx and Lenin even in the 1950s, let alone today. As mentioned above, the nonpublic economic sector is allowed and encouraged, based on complete elimination of capitalist economy and transformation of small-scale production, in order to meet the needs of the socialist cause. Therefore, the coexistence of diverse economic sectors is for no purpose other than facilitating socialist modernization. The approach to thinking is different from that of the 1950s. As mentioned above, it is very natural to put the transformation and elimination of old economic sectors first in the ‘transitional period.’ If the concept in the transitional period is adopted at present, people may misunderstand and think that we are still following the basic way of thinking at that time. However, we shall and should not do it in fact. With regard to the policy of ‘utilize, restrict, and transform,’ ‘utilize’ becomes more applicable today. However, it must be specified that our utilization of the nonpublic economic sector will last for a long time, which is quite different from the 1950s. ‘Restrict’ is applicable in some cases. Different from the 1950s when the nonpublic sector was transformed and eliminated, this sector is allowed to develop today, within a certain range now. Today, the nonpublic sector is still limited, but its development, in a moderate way, is more important. ‘Transformation’ and ‘elimination’ are not direct tasks at present. It is certain that the nonsocialist sectors will be changed to socialist ones sooner or later. In this sense, they will finally be transformed and eliminated. However, if we treat that as a direct task, is it useful to reinvigorate these nonsocialist economic sectors after the single socialist economy has been realized in China? This sector might be transformed when the primary stage of socialism is approaching an end, but it might be unnecessary to do so, as it is more possible that those nonsocialist economic relations have been naturally transformed into socialist ones at that time due to the change of diverse economic sectors in the primary stage of socialism. This is the first reason why I do not agree with the transitional-period statement. Another reason is that the transitional period always leaves an impression that it is temporary. We have mentioned that the transitional period takes the transformation of nonpublic ownership as its mission. The more quickly a task is completed, the better. However, it is not applicable to the primary stage of socialism whose mission is to realize the Four Modernizations and develop our country into a powerful socialist country. The general objective in the transitional period is about revolution and transformation, while that in the primary stage of socialism is about construction. A reform seeks for a socialist economic system that is more suitable for the reality. The primary stage requires reform, but its objective is still about construction. In other words, the coexistence of diverse economic sectors in the primary stage of socialism should be subject to construction and to the development of socialist production. Different from the transitional period of the nonpublic economic sector, the primary stage of socialism does not deny the

Economy in primary state of socialism 111 nonpublic sector only if it is helpful to the development of social production. In view of maintaining such coexistence longer, the concept of the primary stage is also more suitable than the concept of transitional period. It is certain that the specific coexistence of diverse economic sectors may experience many changes within the long primary period of socialism, but it will not change the critical features of the primary stage. In the present social economic structure, there are diverse forms of socialist ownership on one hand, and diverse economic sectors on the other hand, and the coexistence of diverse sectors may disappear when the primary stage of socialism ends. As the development of diverse economic sectors is put forth as a path of facilitating construction, these sectors will remain unchanged as long as China is still in the primary stage of socialism. Considering that we have claimed the end of socialist transformation and the entry into socialist society in 1956, the use of ‘transitional’ period may have serious influence, though not fundamental, which requires that we pay close attention to. But the concept of the primary stage of socialism may avoid these influences. The second question is: Does every country have to experience the primary stage of socialism after its victory of socialist revolution? My answer is no. If some developed countries realize socialism, they may experience the transitional period from capitalism to socialism as specified in Marxism, but not the primary stage of socialism, since its basic feature is poor productive forces, which does not exist in developed countries. Of course, the socialist development of these countries shall proceed from a lower to a higher stage. However, the lower stage is greatly different from the condition after a backward country realizes socialism. It is inferred in abstract logic. As there is no such socialist country in the world and we cannot see that socialism is about to be realized in any developed country now, it is difficult to make any scientific judgment about the stage of socialist development in these countries. However, I do not think that the primary stage of socialism is a phenomenon only appearing in China. Some countries, in which the socialist system was built after World War II, were economically and culturally backward like China. These countries might undergo a primary stage of socialism whose features and tasks, however, are not exactly the same as those of China. Chinese theorists have to focus their efforts on studying the features of China in the primary stage of socialism and issues confronting China now, as we have done. The third question is: What bases are there in the works of Marxism for the concept of the primary stage of socialism? ‘Primary stage of socialism,’ as a specific stage in the development of the socialist country, has not been mentioned in Marxist classics. However, everyone knows that socialism is a long process, which inevitably should be divided into several stages. It is a simple theory. When not in a specific stage, people cannot explain in detail particular features of that stage, but can only have some abstract discussions. It is the basic attitude of scientific socialism to make no judgment when lacking data, as reflected in Lenin’s words. Based on Russia’s situation, he said he knew that the socialist society should be developed through stages, but had no idea about what exactly they were. When the Soviet Union claimed that the

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transitional period had ended, its scholars and politicians often discussed, sometimes fiercely, what stage the socialism in the Soviet Union had developed into. For instance, the argument of the Soviet Union’s being in the stage of ‘advanced socialism’ was changed to the stage of ‘developing socialism’ recently. From 1959 to early 1960, Comrade Mao Zedong also talked about the division of socialism into stages when he read the Textbook of Political Economics in South China. However, the concept of a primary stage of socialism is a brand-new concept adopted by the Party in 1981 for the first time. We can and should study it and give a new Marxist explanation. The explanation belongs to the range of creatively developing Marxism, and we should do our job well on it. The fourth question is: Which features does the economy in the primary stage of socialism have, besides those we mentioned before? In recent years, the theoretical circles in China did not study the primary stage of socialism very much. In my article composed in 1981, ‘Marxism and Socialism,’ I could only write that ‘the ideal status in the lower stage of socialism has some similarities and differences with the actual situation of a socialist country at a specific moment in a period of history. The specific study on the present stage of socialism must be carried out so as to solve the problems we meet here and now.’ That means, although it is acceptable to say that China entered the primary stage of socialism after 1957, the actual situation is far from being ideal, due to subjective reasons. It is not until 1979 that the essential features of the primary stage of socialism were revealed. Except the statement that ‘material civilization is less developed’ in the report to the 12th National Congress, we have not discussed yet what exactly the features of the primary stage of socialism are. In my speech ‘Objects of Socialism in Political Economics’ in 1984, I said, ‘What are the features of the primary stage of communism? That is a question we must answer clearly. Do these features include a comparatively low form of socialist ownership, necessity of more material incentives, dealing with the bureaucracy existing in the administration, and allowing foreign capitalism in the socialist country as well as the coexistence of nonsocialist and socialist economic sectors?’ In my opinion, the two statements about allowing the coexistence of diverse economic sectors and allowing some people to get rich first pointed out in the resolution on the guideline of socialist spiritual civilization construction at the Sixth Plenary Session of the 12th Central Committee are the most crucial economic features of the primary stage. I shall not talk too much about the politics in the stage of socialism due to the scope of this seminar. Bureaucracy, mentioned in the speech in 1984, can be regarded not only in the scope of economy, but also in the scope of politics. It is difficult to claim that there is no bureaucracy in the higher stage of socialism, but bureaucracy does exist in the primary stage of socialism and is particularly serious at the beginning of this stage. If Marx and Lenin underscored the dictatorship of the proletariat in the transitional period, which means that the proletariat does not share the political power with other classes, the emphasis of the primary stage of socialism in politics is to build high socialism. On the one hand, high socialism at the beginning of the stage is impossible; on the other hand, it must be the

Economy in primary state of socialism 113 goal of this stage. This is to say, we cannot give specific and clear ideas about the political mission in this stage, but it is certain that we should develop the socialist democracy from low to high.

Excursus: Supplement to the speech about the economy in the primary stage of socialism In my speech, there are two sections, namely, ‘Primary Stage of Socialism and Coexistence of Diverse Economic Sectors’ and ‘Primary Stage and Encourage Some People to Become Rich First.’ I feel it necessary to add another section: ‘Primary Stage of Socialism and Reform of Socialist Economic System’ before Section IV. This is because ‘coexistence of diverse economic sectors’ and ‘encourage some people to become rich first’ are the features of the primary stage of socialism in China, as specified in the Resolution adopted by the Sixth Plenary Session of the 12th Central Committee. It is totally all right. However, as for the socialist economic system, the primary stage of socialism has features different from those of the transitional period in the past and the intermediate stage or advanced stage of socialism in the future. Therefore, it is not an integral discussion about the economy in the primary stage if ‘Primary Stage of Socialism and Reform of Socialist Economic System’ is not added. The ‘Reform of Socialist Economic System’ here refers to the ongoing economic reform, which has specific historical contents and is more suitable for the level of social productive forces in the primary stage of socialism. It should be discussed with the topic of the primary stage of socialism. I realized that on the day before the conference, and the copies of the outline had been prepared. Therefore, this section cannot be included in the draft, so I made a statement and provided a supplement to my lecture on that day. Now I’m rewriting and improving my supplement. The primary stage of socialism has the commonest feature of communism as discussed in the first part of my lecture, since the socialist society is the primary stage of communism. It is only necessary to give a special explanation and then mention this point when needed, since I have discussed that many times. However, I have never specifically talked about such a complicated issue as how the socialist economic system can adapt to the productive forces in the primary stage of socialism in China. In my opinion, this must be particularly studied by the researchers of political economics who are interested in it, including myself. My lecture is to explore the unique economic features in the primary stage, which should include the socialist economic system, besides the coexistence of diverse economic sectors and allowing some people to become rich first. This is to say, the socialist economic system should also have the features of the primary stage of socialism. This is a basic point of view in my supplement. I usually analyze the socialist economic system from the following perspectives: 1

The socialist economic setup and the basic economic system of socialism both belong to the scope of the socialist economic system, but the former is specific, peculiar, and separate, while the latter is universal to socialist countries.

114 2

Economy in primary state of socialism A socialist economic regime is different from a country’s socialist economic system in the period. The latter does not only contain the dominant socialist economic sectors, but also includes the nonsocialist sectors that are not dominant.

The socialist economic system includes: a) the structure of socialist ownership and b) a socialist country’s management system of national economy. I believe analyzing in such a way can be methodologically meaningful in the consideration of the socialist economic system in the primary stage of socialism. Now I make a slight change from ‘a socialist country’s management system of national economy’ to ‘socialist economic operating mechanism including the State’s management system of national economy.’ In Hungary, the new economic system is called NEM, in which M is short for MECHANISM. NEM can be literally translated to ‘new’ ‘economic’ ‘mechanism.’ If the focus is on the last part, mechanism and system can be the same. But that is not proper to identify the two, as I consider the form of socialist ownership as an important part of socialist economic system. In the socialist economic operating mechanism, the State’s management is very important, and may be a principal part. I used to regard it as equal to the structure of socialist ownership, but realize now that it should be more inclusive. However, I have not further analyzed it yet, as I just have had my train of thought clear recently. What socialist (which must be paid attention to) economic system is required in the primary stage of socialism? In other words, how can a socialist economic system adapt to the primary stage? I think that it can be clearly answered in the structure of ownership. For instance, if the coexistence of diverse forms of socialist ownership is not merely the feature of primary stage of socialism – in other words, there may still be the collective ownership and the ownership by the whole people in the intermediate stage of socialism – then the low-level form of socialist cooperative economy that actually exists and is developing adapts to the primary stage of socialism. But I cannot explain what in the socialist economic operating mechanism is in accord with the primary stage of socialism. For instance, I have no idea about and should do more research on the differences between the distribution according to work in the primary stage of socialism and that in the intermediate and advanced stages, between the commodity economy in the primary stage and that in the intermediate and advanced stages, between the State’s economic management in the primary stage and that in the intermediate and advanced stages.

Notes * This article was the lecture notes for the 11th Economics Speech held by the author. 1 Selected Works of Lenin (Vol. IV). Beijing: People’s Publishing House, 1972, p. 84.

13 Historical fate of the ‘Theory of New Democratic Society’* (November 25, 1988)

I had thought of providing the conference with two papers, one titled ‘From Theory of New Democracy to that of Primary Stage of Socialism’ and the other commenting on Liu Shaoqi’s views and practice in this respect. The former, however, with about 50,000 to 60,000 words, is too great an endeavor for our typist to complete before the conference, so only its table of contents and abstract were printed for circulation. Due to the same reason, the other paper cannot be presented either, and I have to dash off a speech instead. First, I want to cite my reasons for researching the theoretical development from new democracy to the primary stage of socialism. People may argue that we should ‘look forward’ and ‘new democracy’ would be too old a topic to talk about as it has been more than 40 years since the victory of the new-democratic revolution and more than 30 years since the completion of the transition from a new-democratic society to a socialist society. True, we have a lot on our agenda today, some indeed more important than studying a slice of history. But as a significant trend, Marxist researchers begin to examine socialism in a new light, which is closely associated with a new understanding of capitalism, of the relation between socialism and capitalism, and of the age we are in. All of these need to be firmly grounded in a careful study of history. To score yet another success based on what we have achieved in Marxist studies in the 10 years after the Third Plenary Session of the 11th CPC Central Committee, we should not only focus on what is on now, but also what was in the past. Aren’t we interested in the primary stage of socialism? Then why not study one of its theoretical cornerstones, the Theory of New Democracy? Aren’t we considering the development of the primary stage? Then why not learn from decades of experience and lessons after the formulation of the Theory of New Democracy? The Theory of New Democracy and that of the primary stage of the socialist society – neither a universally applicable generalization – deal specifically with modern Chinese society and political economy. We should summarize our decades’ practice in revolution and socialist construction, including both success and failure. The reason why I research Liu’s theory and practice is its close relation with the development ‘from the theory of new democracy to that of the primary stage of socialism.’ In The Eight Requirements for Communist Party Members, a document he drafted for the Party’s First National Conference on Organization Work in March 1951, he observed, ‘the

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ultimate goal of CPC is to implement the communist system in China. Now it is fighting for consolidating the new-democratic system.’ This is the earliest reference to ‘consolidating the new-democratic system’ now known to us. This and Mao Zedong’s criticism of the statement ‘firmly establish new-democratic social order’ at the meeting of the Central Politburo of the CPC on June 15, 1953, were two milestones in the transition period. (Experts on Liu have found in his works or speeches no evidence ascribing the latter statement to him as well. However, it was widely known at the conference that Mao was placing his blame on Liu; and the statement, even if not made by him, distinctly echoes Liu’s thoughts.) As my research shows, the Theory of New Democracy includes two inseparable parts: the Theory of New-Democratic Revolution and the Theory of NewDemocratic Society. The former is about the characteristic, driving force, targets, process, and future of the revolution in China, and more generally, in all the semicolonial countries after the victory of the Russian October Revolution. The latter is about the independent new-democratic society that China would go through after the victory of its new-democratic revolution. Mao contributed to the former by his systematic, comprehensive, and vivid analysis, and by integrating Marxist tenets about the revolutions in all the semifeudal and semicolonial nations with practice in China, though he didn’t go beyond the principles of Marx, Engels, and particularly those of Lenin and Stalin. The Theory of New-Democratic Society, on the other hand, was something that had never appeared in Marxist canons, and was brand new in every sense. Judging from the social, economic, and cultural backwardness in China, Mao affirmed the existence of such a social system and stage of development, providing illuminating insight into the issue. The emergence of the Theory of New-Democratic Society in China was by no means accidental, but was determined by the features of the society and the course of the revolution then. It was proposed at a time when Chinese revolutionary bases gave birth to a new form of society and new social systems. The Shanxi-GansuNingxia base in particular, due to its geographical conditions, enjoyed a period of relative peace and stability during the Anti-Japanese War, and it was thus possible for people there to engage in ‘peaceful construction.’ I think this was an important reason behind the formulation of the theory. Now, it is the new-democratic society, not the new-democratic revolution, which calls for more research efforts. In On New Democracy, Mao defined such a society in many aspects. Later on, he, Liu, and other people enriched and developed the theory in their works. The main idea is that China would remain a new-democratic society for quite a long time. This is not a period of capitalismsocialism transition as suggested by Lenin, not one featuring a war between the living socialism and dying capitalism; rather, socialist economy would develop rapidly while capitalist economy would be allowed to develop as well to cater to the needs of growing social productivity. It would take China at least decades to complete this process. One limitation of the Theory of New-Democratic Society is that, though it distinguishes new-democratic society from socialist society, it pays less attention to differentiating it from a society transforming from capitalism to socialism. Thus

‘Theory of New Democratic Society’ 117 when circumstances changed later, the theory came closer to Lenin’s transition period theory until it was completely abandoned by its former supporters in favor of the latter. Here I want to point out that ‘the new-democratic society,’ ‘society in transition from capitalism to socialism,’ and ‘the primary stage of socialist society’ are three correlative but different concepts that we should try to make a distinction between. The point is to differentiate the roles of various types of economy, especially the capitalist economy, in each society. In the first type of society, socialist economy’s dominance has not been established, so it is improper to deem capitalist economy and other nonsocialist economies its complements – obviously not the reality in China. In order to develop social productivity, the new-democratic society would allow a full development of capitalist and other nonsocialist economies, but not without restriction, that is, such development must be beneficial to national welfare and the people’s livelihood. Please note this ‘restriction’ is by no means the same as those placed later on in order for capitalism to undergo socialist transformation and eventually be eliminated. When spoken of in combination with ‘utilization’ and ‘transformation,’ ‘restriction’ takes on a different meaning. Therefore, we can see that the new-democratic society and the transitional society are different in the status and function of capitalist economy in social development. In the transition period, a socialist transformation was conducted on capitalist and other nonsocialist economies to ensure the victory of socialism and the successful transition to a socialist society. In the primary stage of socialist society, with the socialist economy achieving its dominance, other economies advantageous to social productivity become useful complements. Hopefully, this will provide a simple yet clear account of the differences between the three societies. In the above-mentioned essay ‘From Theory of New Democracy to that of Primary Stage of Socialism,’ I look into the history from late 1939 or early 1940 to 1956 in an attempt to trace how Mao formulated, developed, and finally abandoned the Theory of the New-democratic Society, one of his own great contributions to Marxism. Liu, on the contrary, remained steadfast in his support of that theory during the period. He emphasized ‘consolidating the new-democratic social system.’ After the founding of New China, Liu noted on more than one occasion that private capital should fully play its positive role, and only when its mission was completed and excess supply occurred decades later would a socialist revolution take place. Liu noted, many people mistake exploitation for an awful crime that will lead to court trials and even death penalty. But the truth is capitalist exploitation has its merits and is even progressive when taking the place of feudalist exploitation. Hiring workers or starting one’s own business should be allowed. If a rich family bought some horses, we should not prevent them from keeping several hired hands. It doesn’t mean that they could do as they pleased. There will be ways to deal with the rich peasants in the future. We should let them develop now and place restrictions later on when necessary.

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Unfortunately, Liu’s thoughts based on the Theory of the New-democratic Society were criticized by the main creator of the theory, and could not be put into practice. Today the great loss caused by giving up the theory has been clearly recognized. Here the criterion for dividing historical stages should be discussed. If the criterion is the relation between class contradiction and the revolution, things will be like this: after the victory of the people’s anti-imperialist and antifeudal struggle, the main class contradiction is that between the working class and the bourgeois. Consequently, the revolution will move to a stage similar to ‘the capitalism-socialism transition period.’ I think this is a logical conclusion. However, what if we adopt another criterion? That is, acknowledging the change of the main contradiction from one class struggle to another, and realizing in theory and methodology that the success of the democratic revolution is followed by a period in which the development of social productivity is emphasized while the class struggle controlled to an extent that it would be beneficial to the development. I guess things would be very different in the last few decades, as this will give rise to a new-democratic society rather than one undergoing a transition from capitalism to socialism. Liu was conscious of this after the democratic revolution. He made shaking off poverty and backwardness an important part of efforts toward establishing and consolidating a new-democratic social system, and insisted on the central importance of developing production. He pointed out that capitalism was still in its youth in a new-democratic society like China, and should play an important and active part in making contributions to the country. It was not easy for Liu to express such explicit and insightful viewpoints at that time. However, restricted by the historical conditions, Liu didn’t take into consideration the criterion of dividing revolution stages, and thus couldn’t avoid his subsequent leaning toward Lenin’s theory of the transition period. I think Liu’s words are both theoretically and logically correct. The view that development and consolidation stand in opposition is illogical because consolidation doesn’t exclude development. Every social system is under development, but whatever system’s facilitating social progress should be consolidated with great efforts. Only ‘complete consolidation’ as suggested by the Soviet Union book Political Economy: A Textbook is incompatible with development logically, and Mao’s criticism against it cannot be more correct. There was another popular view then that new-democratic society could not be consolidated as it was a transitional rather than basic form of society and that it was wrong to consolidate something changing from time to time. I think this is too absolute. First, strictly speaking, every society is transitional since it will turn into another sooner or later. A social system, whatever it is, can always be strengthened. Second, it is true that there are basic and ‘transitional’ socioeconomic formations, and the new-democratic society and the society during the transition period belong to the latter. Indeed, a transitional society witnesses faster changes than a basic form of society. But even in a transitional society, different things would change at different rates, and some cannot be consolidated while others can. Many comrades say that if the PRC had chosen to consolidate the new-democratic social system instead of transforming hastily into the socialist society in its early

‘Theory of New Democratic Society’ 119 days, it would have been in a much better situation, and the economy would have fared much better. After what has happened in those years, we can now easily tell it is the truth. I agree we need to draw lessons from the past, but I don’t think it is appropriate to argue for moving back to the stage of new-democratic society, as it violates the principles of materialism in the same way as the argument against ‘new-democratic society.’ To better illustrate this, we may use an analogy here. For example, there is a man whom we believe has a weak constitution because he was inadequately breastfed in infancy. It is right for us to make such a judgment. However, it is useless to breastfeed him now since he is already a grown up. Medical treatment or nourishments are perhaps the more sensible choice depending on his health condition. In the same way, it is simply impractical for China to move back to the stage of new-democratic society. However, there are some who oppose ‘moving back’ simply because of their bias against new-democratic society itself. They would argue that those in favor of ‘moving back’ are essentially advocating a capitalist road and a capitalist society. As a matter of fact, Mao made it clear in about 1940 that the very reason for the existence of new-democratic society was to prevent ours from becoming a capitalist society. These critics have thus made two mistakes: first, they arbitrarily put the label ‘capitalist’ on others; second, they have totally forgotten what new democracy is about. Here I am not going into details about the history because the brochure I had prepared for the conference includes a careful analysis of historical events to support my argument and refute some popular fallacies. Your comments are welcomed after the publication of the book, and I won’t take up too much of your time on that. However, there is one issue I really want to discuss, which is, at which point in time did China give up the ‘new-democratic society’? My research shows it is a long and gradual process that even the persons directly involved were unaware of, without mentioning the general public. Things go like this: as early as at the meeting of the Central Politburo of the CPC in September 1948, the issue of main contradiction was studied and it was agreed that the contradiction between the proletariat and the bourgeoisie would be the most important after the national victory of the people’s revolution. Later on, the contradiction between socialist and capitalist economies was also counted in. In this way, the Theory of New-Democratic Society turned gradually to the transition period theory. When criticizing in 1953 Liu’s proposal of ‘consolidating new-democratic social order’ and formulating the guidelines for the transition period, Mao virtually abandoned the Theory of New-democratic Society. It was completely given up in 1955 when Mao acknowledged the CPC’s debt to Lenin on the transition period theory. By then, the transition period was about to come to an end. It should be admitted that China has been in the primary stage of socialism since 1956, as a result of the socialist transformation of the private ownership of the means of production after the founding of New China. In 1956, only socialist ownership existed, which, unsuitable for the productive forces then, failed to promote greatly the social productivity and led to the economic and social stagnancy in the following 20 years. At that time, though China claimed itself a socialist society, it lagged behind in economy and culture, even compared with a developed

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new-democratic society. Therefore, the question arose: could socialism be built in a backward society? As far as I am concerned, China could be considered as a socialist country in spite of its backwardness. We should stop idealizing socialist society. We are not talking about idealized socialist society, but one in reality, which is not necessarily more advanced than a new-democratic society. In reality, a society can be socialistic as long as it meets basic requirements, such as social ownership of the means of production, even if it is poor and backward. Therefore, we should admit that what we had in 1956 was a socialist society, though in a much distorted form. In 1956, Mao abandoned completely the views on new-democratic society he had proposed in On New Democracy. Since China proclaimed itself a socialist society, it should have followed that Lenin’s theory on the transition period is no longer applicable. But that is not the case, and the theory remained the guiding ideology in the primary stage of socialism. In the later period of the Cultural Revolution, Zhang Chunqiao and Yao Wenyuan had Lenin’s quotations on the transition period published and forced cadres and workers to study them. The transition theory held sway until the Third Plenary Session of the 11th CPC Central Committee. The long-forgotten Theory of the New-democratic Society was not mentioned until more flexible policies were adopted on nonsocialist economy after the session. Both ‘the new-democratic society’ and ‘the society in transition from capitalism to socialism’ have passed into history, but the lesson learned from the past still rings loud and clear.

Note * An excerpt from From Theory of New Democracy to that of Primary Stage of Socialism, Beijing: People’s Publishing House, 1991.

14 Modern market economy is needed (June 8, 1992)

As for the market economy that will play the leading role in China after the reform, what exactly will it be like? Unquestionably, it is a socialist market economy with Chinese characteristics since it is developed in China, a socialist country. The issue we’re going to discuss is what kind of market economy we need from the perspective of culture. I believe market economy is a cultural as well as socioeconomic phenomenon. In China, we should pay special attention to the developing culture. I once defined culture as excellent human creations which are heritable and open to dissemination. Human society has accumulated a rich wealth of culture in terms of material goods production in the economic field, as is known to us all. Science and technology in industry, agriculture, and material goods production and management are all such creations. The same is true of circulation. I once watched a TV show about a man being praised for returning to the owner a bagful of money he had picked up in a train. This reminds me of roles in martial art novels who have to find an armed escort agency if they want to carry gold and silver to a faraway place. Compared with these valuable metals, cash is a step forward in cultural development, and checks and credit cards are even more so. Market economy contains advanced cultural creations. Now that China implements the policy of reform and opening up to make itself a modernized country, ‘modernization’ becomes a widely used slogan, for example, in industry, agriculture, defense, and technology. There are also a few fields where modernization is barely mentioned. Socialist market economy is one. Then is modernization an important issue for our efforts to develop socialist market economy and ensure its leading role? Can we make it a slogan as well? My answer is yes. The reason, as I have mentioned above, is that market economy is not only a socioeconomic issue, but also a cultural issue. Market economy has developed to such a high cultural level that modernization is inevitable and needs to be promoted as a slogan. That’s why I gave this paper its current title. In answer to the question above, it is a modern market economy that the reform will strive toward. Though I have never conducted extensive research on the history of market economy from the perspective of culture, I do know some differences between ancient and modern market economy. By ‘ancient’ I don’t mean ‘antiquity’ or even ‘precapitalist.’ The history of market can be traced to the remote past, and it

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is not until many centuries later that market economy came into being (though I have not studied exactly when and how this occurred). I use ‘ancient’ to refer to a period in the capitalist era. Capitalist society has been there for centuries, and it witnessed the birth and growth of market economy. What I mean by ‘ancient market economy’ is the market economy in the early days of the capitalist world. It is much simpler than its well-developed modern counterpart, which is a far more intricate, giant system judging by economic organizations and individuals engaged in market activities, goods on the market, market organization modes and extent, operation modes and rules, state regulation, control and plans, and science and technology applied. If ‘ancient market economy’ is compared to a hand tool, modern market economy is a modernized machine. There are transition periods somewhere between ancient and modern capitalism. For example, capitalist market economies in the late nineteenth century were very different from those in early capitalist era. By then, Marx hadn’t finished his well-known book Capital, but he had noticed many new phenomena of market economy which already took on modern features. By the time Marx died at the end of the nineteenth century, market economy developed further and could not be deemed ‘ancient’ any more. It may be named an ‘early modern market economy’ (some Chinese historians make a distinction between modern and early modern times, with the latter referring to the period from the mid-nineteenth century to the early twentieth century). The ‘modern market economy’ I’m talking about started in the late 1950s or the early 1960s. In the past 30 years, it has maintained its momentum for growth, becoming something brand new in scope, scale, and other aspects. A more detailed description of the many aspects discussed above might have given you a better idea about modern market economy. But I am not going to labor the point here. Just taking a look at how the market is carefully organized in a modern market economy, and how the wide use of computers, modern telecommunication, editing, and printing tools results in a surprising efficiency gain, we will understand the essential features of modern market economy. Many of the modern market economy’s cultural achievements, though made by capitalist societies, are not characteristic of capitalism, and therefore can also be used in a socialist country that is in great need of them due to long-term negligence to market economy. Therefore, learning cultural fruits from capitalist countries should be an important way of realizing modern market economy. Now we are in the last decade of the twentieth century. If we decide now to set the reform goal of establishing a new system centering around socialist market economy, we can probably achieve it by the end of this century. Of course, the sooner we achieve it, the better. Then the new century is coming, and there will be no doubt that we should develop a modern market economy. In recent years, China’s socialist market economy has made rapid progress, especially after Deng Xiaoping’s talks during his South China tour. However, as it was built on a poor foundation before the reform, the fledgling market economy inevitably has many problems to deal with. For example, the market system is

Modern market economy is needed 123 not well developed, the regulations are not complete, incompliance with some of the basic regulations occurs from time to time, and the people engaged in market activities are often found without the necessary educational or professional background. Besides, the coexistence of the market economy and planned economy at the moment and the many complex problems it has brought present another challenge, and we will have a long way to go in building a modern market economy. Fortunately, other countries have provided us with a lot of useful examples in this regard, and may save us a lot of time compared with capitalist countries. I should emphasize a marked distinction between modern and ancient market economy, that is, the former features government’s carefully planned and welltargeted control and guidance schemes, while the latter depends entirely on market regulation. Not long ago in China, many people still mistook market economy for one entirely subject to the workings of the market. In fact, market economy has gone through a long process. At first, people knew nothing about state control and guidance because the state then had no such capability or experience. Even economists admitted only market’s self-regulation, ‘the invisible hand.’ Gradually, the state was capable enough to control and guide the market. Accordingly, economists divided into two groups. One approved state regulation while the other insisted on the market’s self-regulation. Market economy developed as the two opinions interacted with each other. Neither market regulation nor state control is able to entirely exclude the other. Nevertheless, state control and guidance of the market economy has been strengthened, because of three reasons. First, the state has more financial resources to exercise control and provide guidance due to growing taxes and other government revenues, and an indirect control on more bank funds through national banks’ monopoly on currency issues and other financial rights. Second, the state implements laws to better ensure its capability. Third, the state puts forward cultural development and incorporates it into the market economy. All three points are characteristic of modern market economy. Of course, the state control and guidance should be carefully planned, well targeted, and in the interest of the market economy, rather than adversely affecting, impeding, or checking its growth – as has happened in some countries, especially socialist countries. In exercising such control and guidance, the state should fully realize its due role, and create favorable conditions to promote socialist market economy, so proper control and guidance is a prerequisite to the existence and development of modern market economy, and is also characteristic of modern socialist market economy. It should be emphasized that every country has to establish relationships with others in the international market. Isolation from each other belongs to the past, and closed-door policies will only result in a country’s long-term backwardness. Now the countries are increasingly dependent on one another, and the international market has become better organized. Such organization, however, doesn’t mean restriction on countries’ autonomy in foreign trade, but better standardized market behaviors to improve efficiency and avoid troubles. Obviously, China’s socialist market economy will have an ever closer tie with the international

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market. As a modern international market calls for a modern market economy, we should make it our goal. In short, according to the need of the developing socialist economy, the times in which the new system is established, and the relationship with the international market, China’s economic reform should aim at a modern market economy that is placed under the government’s carefully planned and well-targeted control and guidance. I understand why some economists can’t accept the term ‘planned commodity economy’; the formulation itself is flawed, making it more easily grouped under planned economy. These economists are particularly uncomfortable with a recent explanation of the term, which says commodity economy can’t be socialist until it is modified by ‘planned’ economy. Personally, I think the term acceptable, but only based on a different understanding of it. I have also thought of using ‘planned market economy’ (after the use of the term ‘market economy,’ it is only natural to ask whether we should use or accept the term ‘planned market economy’). But I forgo the name anyway, for fear that people are too familiarized with ‘planned commodity economy’ – and even the justifications for it – to accept any other expression. Besides, I think ‘plan’ is self-evident for a modern socialist market economy since it is a market economy that accepts the state’s carefully planned and welltargeted control and guidance. There is another important point I want to make. Human effort is always the decisive factor. In order to build a modern socialist market economy in China, those who are actively engaged in market activities should be highly qualified people who know much about the modern operations of the market economy. At present, many of the heads of our economic organizations have received education in modern market economy, and they can be classified into three groups. First are the people who worked for many years under the planned economy system and who came to understand market economy and are now able to work under it through on-post learning to adjust to changing working environment and requirements. The advantage of these people is their rich experiences and the ability to quickly understand the key points about modern market economy since they know the many shortcomings of the planned economic system. The disadvantage is that it will take time for some of them to change their minds as they are used to the old system. Second are those who received college education in noneconomic subjects but are now required to take charge of economic entities. They work hard to familiarize themselves with the culture of market economy. They are quick learners thanks to their educational background and freedom from the shackles of the old system. However, they also have their weak points. Not trained in economic management, they must start with learning the basics. Some may still lack a systematic knowledge and required skills even after years of study. Third are the successful entrepreneurs. Most of them are managers of medium and small enterprises, and quite a few run township enterprises. They are adept at doing business and well recognized for their talents, but they often have poor schooling and need to improve their cultural level and ability in modern business

Modern market economy is needed 125 administration. Overall, China is in need of people who received formal education in modern market economy. Countries with a full-fledged market economy boast a large contingent of such trained professionals. China should follow their example. In my opinion, we should strengthen college education in this aspect. To start with, we can establish a College of Modern Market Economy in southern China, say Guangdong Province. The college would be so named to restore the reputation of market economy in China.

15 China’s private and public ownerships in history and at present (July 15, 1993)

‘China’s Private and Public Ownerships in History and at Present’ is such ‘a big topic’ that I should have written a dissertation, if not a book, to elucidate it. However, I had only over two hours to write before I thought of this subject as my written statement for the coming seminar on Chinese private economy. Therefore, I wrote in a hurry a ‘short paper’ which was ‘general and vague.’ Thereafter, I once thought of writing a dissertation, but never put the thought into action. It was five days before the opening of the fourth seminar of the ‘Chinese Market Economy Forum’ with the theme of private economy. Without enough time to write that thesis, I came up with this makeshift paper to write an outline of Supplementary Remarks and include it together with my former speech in this paper.

Part 1: Short paper with big topic Private property appeared in later primitive society. It was after its emergence that material resources shared by the commune became property. The concept of public property didn’t appear until possessing private property had become a fact. This concept will become meaningless as private property disappears in the future. Human society begins with no property and its concept and will return to such a situation in the end. It will develop non-stop with such social formation. Ever since the origination of property, all societies have both private and public ownership. In slavery societies, there was private property belonging to a single slave owner and public property belonging to the nation. Similarly, private property of a single feudal lord and public property of the nation coexisted in feudal society. The only difference is that peasants and residents other than feudal lords could also have some private property, while slaves had nothing of their own at all. In the same way, capitalists’ private property and the state-owned property coexisted in capitalist society. But except for the proletariat, the petty bourgeoisie and social groupings possessed private property. The socialist society also allows the coexistence of the two kinds of ownership. We can see from this process of development that such coexistence may last centuries. Socialist countries in history have never succeeded in eliminating private property, although they dreamed to do so. In fact, socialist society cannot exist and develop unless both kinds of property are considered sacred. Public property is not a characteristic of socialist society because it exists in all societies in history. Marx and Engels never mentioned that public property is the essence of socialist society, and they use the phrase ‘social property’ instead. ‘Public

China’s private and public ownerships 127 ownership’ in Chinese is mistranslated from Marx and Engels’ ‘social ownership.’ As a result, ‘social ownership’ has not attracted much attention of the theoretical community and its meaning, therefore, has not been discussed. Consequently, the nature of the dominant wealth in socialist society has not been clarified. One of the distinguishing features of the public property in socialist society is that, besides state property, public property of social groupings is also developed. In fact, such property had already existed before and achieved significant development in capitalist society, and becomes more significant in socialist society. There is a gray area between public and private ownership: the nature of the property is kind of private in terms of ‘state property,’ but public in terms of ‘individual property.’ For example, in A Dream of Red Mansions, the public property of Jia’s mansion is private compared with that of the State, but is public compared with Wang Xifeng’s personal savings. So it is hard to draw a clear distinction between the two kinds of property in some cases. Similarly, it should also be researched whether private ownership is the essence of capitalist society or not. I recommend the following excerpt from Engels’ Zur Kritik des sozialdemokratischen Programmentwurfs 1891, to the effect that. ‘As far as I am concerned, capitalist production is a form and a stage of economic development in which capitalist private production is just one phenomenon. Then what exactly is it? It means the production managed by individual businessmen which, however, is becoming an exception. Production managed by a joint-stock company is no longer private business, but one which brings benefits to many people closely connected. If we study the trust dominating and monopolizing the entire industrial sector from the example of a joint-stock company, we’ll find that not only private production stops there, but also . . .’ (All italics were added by Engels himself.) I wonder if those present are interested in what is written above. While writing this paper, I made up my mind not to talk about Chinese market economy and private economy for I was considering their theoretical basis.

Part 2: Supplementary remarks (outline) I. Law of the negation of the negation in the development of human society 1 We always say that human society develops in such a ‘negation of the negation’ process as primitive communal society – private ownership society – communist society. I knew this concept in the early 1930s, but it was not until the early 1950s that I noticed ‘primitive’ as the modifier of the ‘communal society’ while there is no modifier before ‘communist society,’ which I thought was imperfect. I came up with the question in a report in 1952 without further reflection or papers published. 2 I started to research the issue in 1980 and drew the conclusion that we should label the new ‘communist society,’ the negation of private ownership society, with ‘social’ or ‘socialist’ to modify it. In this way, the above formula

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becomes ‘primitive communal society – private ownership society – social communist society,’ which means that the new communist society is based on large-scale socialized production and ‘social’ or ‘socialist ownership.’ I stated the opinion in a lecture at Xiamen University on October 26, 1982, and the lecture notes were later published in Chinese Economic Issues and collected in my Political Economy: Exploration of Socialism (III). 3 Since 1980, I have studied only the historical definition of ‘communist society’ instead of the other parts of the formula or the formula itself. In Short Paper with Big Topic, I worked out another formula: ‘Society without property and its concept – society with private and public property – society without property and its concept’ with brief explanation. I didn’t mean to replace the old formula with this one. Instead, I considered them compatible and complementary. On the one hand, the former emphasizes the major contradiction between ‘socialism’ and ‘private ownership’ in the social development process. On the other hand, the latter describes the outline of that process in a logical and comprehensive way. I think the integration of the two might be more helpful to have a better view of the historical development. II. Private and individual ownership 4 In part one, I didn’t mention ‘individual ownership,’ a concept totally different from ‘private ownership.’ I quoted from Engels’ Criticism on Alford’s Guiding Principles, where only ‘individual businessman’s management and production’ is considered as ‘capitalist private production’ and stops after a stock system is adopted. According to Marx in Capital, under the joint-stock system, the capital, based on socialized production and premised with socialized centralization of the means of production and labor force, has directly taken the form of social capital (the directly combined individual capital), and corresponded to individual capital, which was the ‘Aufheben’ of capital as individual property in capitalist production. By telling ‘private property’ from ‘individual property,’ Marx makes it clear that the former is isolated individual property whose nature would be changed if united, while the latter could still keep its nature even if so. 5 In Anti-Dühring, Engels quoted a passage from Marx’s Capital, ‘This is the Law of the Negation of the Negation, which rebuild individual ownership on the basis, however, of the achievements in the capitalist age, that is, on the coordination and cooperation among free laborers and the sharing of both land and means of production produced by laborers themselves.’1 (Vol.1; the second edition of the German version was published in 1872.) This part was revised in its fourth edition to ‘This is the Law of the Negation of the Negation, which rebuild not the private ownership, but the individual ownership on the basis of the achievements in the capitalist age, that is, on the coordination and cooperation

China’s private and public ownerships 129 among free laborers and the sharing of both land and means of production produced by laborers themselves.’2 The distinction between the two kinds of ownership was made clear by such revision. III. Public and social ownership 6 Public and social ownership in German and English are very different from those in Chinese. Through textual research, I found that Marx and Engels use ‘public’ as a general concept, and use ‘social ownership’ when mentioning inherent ownership of socialism or communism. ‘Public ownership’ and ‘social ownership’ in Marx and Engels’ original works, mainly written in Germany, were translated into their respective counterparts in English as well as in Russian. Although the same prefix of the Russian words for ‘public’ and ‘social’ might be confusing, the two words were carefully distinguished in the Russian version of Anti-Dühring published by Marxism and Leninism College in 1950. However, the two words are both translated into ‘public’ in Chinese, even when they appear in the same paragraph or sentence. I discussed the problem in 1987 in ‘Public Ownership’ and ‘Social Ownership’ Cannot be Translated into ‘Public Ownership’ without Distinction, which was later collected into my Political Economy: Exploration of Socialism (V). A translation should be faithful to the original work. No matter how much has been known about the two concepts, the mistranslated words should be corrected. 7 Despite the difference between the two concepts, I have no doubt that public property has existed in many societies, while social property only appears in the process of sublating property after socialized production and thus becomes the characteristics of socialist society. Public ownership has various forms and ‘social ownership’ is just one of them. 8 Further studies can be conducted if the mistranslation is corrected. 9 The concept of ‘social ownership’ can be formulated because public property has existed in different societies, including slavery, feudal, and capitalist societies. The similarity is that they are not the private property of the individual nor of a specific family, while the difference lies in that they have respective subjects. More complicated situations can be found in further research. Similarly, different sorts of private ownership also have similarities and differences, and the latter helps us distinguish between the ownership in different societies, which is familiar to us. I wrote the paper to draw attention to not only private ownership, but also public ownership in different societies. Besides, there are various forms of public ownership. Social ownership means that public ownership has plenty of ‘basic forms’ and ‘combined forms.’ IV. Coexistence of public and private ownership 10 One feature of Short Paper with Big Topic is that it points out that all human societies have both private and public property, which is obvious in my eyes,

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after the origin of private property is clarified. Based on that, we can analyze the specific and often changing conditions of coexistence of the above property in different societies, ‘societies with different nature,’ and ‘societies with the same nature but different conditions.’ 11 Another feature of the paper is that it declares socialist society also has both public and private property, a fact expressed in a new way. Particularly, it stresses that the socialist society will last a long period, and indicates that in the present-day society, two types of property still coexist, to which more attention should be paid. 12 The paper also indicates that socialist society cannot exist and develop unless both kinds of property are considered sacred. That does not mean private property should not be deprived in the establishment of socialist society. Until now, the foundation of all such societies was accompanied by such deprivation and defiance of private property. Here I don’t want to discuss whether or not it is a rule. I just refer to the situation after the establishment of socialist society. In this stage, if private property is still deprived, the society will not move on, not to mention make progress. (Of course, the deprivation of the criminal’s individual property is a different kettle of fish.) V. Private and public ownership in present China 13 Though the subtitle of Short Paper with Big Topic, which I used as the title of this paper, contains ‘Present China,’ I have talked nothing about relevant issues and stressed at the end ‘While writing this paper, I made up my mind not to talk about Chinese market economy and private economy because I was considering their theoretical basis.’ Despite all this, the basic theories discussed here have a close relationship with the two types of ownership in present China. Therefore, it was reasonable to add ‘Present China’ in the title. It should be noted that those theories are concerned with China’s public sector as well as the private one, but the former was not mentioned at the end of the paper as it was written for a Seminar on Chinese Private Economy. Of course, in China, the former is of more significance and complexity and should be given more attention. Anyhow, I still don’t want to talk much about the issue, as the article Supplementary Remarks is also written for ‘Chinese Market Economy Forum: Seminar on Private Economy.’ VI. Conclusion 14 Supplementary Remarks is written for those interested in theoretical studies. It can be ignored by those uninterested, since the main ideas are all included in the first short part.

Notes 1 Engels quoted from Capital (Vol. 1), the second edition of the German version published in 1872. 2 Karl Marx and Friedrich Engels: Collected Works (Vol. 23). Beijing: People’s Publishing House, p. 832.

Index

accumulation 10, 13 Administration for Industry and Commerce 90 agriculture 3, 9, 20, 43, 44; see also farmers all-around responsibility system, farmers in 94 Anti-Dühring (Engels) 128 backwardness 50, 104–5, 106 bonuses xiv, 6–10 bookkeeping, in Yugoslavia 13–14 bourgeoisie xv, 75, 118 British Classic Political Economics 78 bureaucracy 113 business operations 91, 101 Capital (Marx) 58, 104–5, 128 capital goods 61 capitalism 20, 27, 28, 40–1, 57, 58, 72, 77, 95–6; communism and 96; distribution according to work and xv; in diverse economic sectors 94; market economy and 122; planning in 74; proletariat and 48, 69; revolution against 48; science and technology and 73; State 95, 97; see also transitional period of socialism capitalist economic system 96, 117, 119 Central Bureau of Statistics, of Hungary 33 Central Finance and Economic Committee of China 34 centralization 37 Central Theory Group, in Hungary 38 Chen Guoyan 22, 23 Chen Pixian 84 Chinese Academy of Social Sciences 33 circulation, means of 23, 25, 93–4 class struggles xiv, 4, 40, 108, 118 coastal region 81

collective economy 90–1, 94 collective ownership 11, 49, 50, 90–1 commodity economy xxii–xxiii, 24, 89, 101, 124 commodity production 28, 29 commodity relations 19 Common Programme 108 communism 18, 28, 71, 96; negation of the negation and 127–8; primary stage of socialism and 19, 113; socialism and 87–8 Communist Party 4, 13, 76 competition, between regions 84–5 construction 50, 91, 102–6; see also socialist construction consumable commodities 40 consumer goods 61, 100 consumption 10, 27, 106 consumption demand 40 contract system 6, 49 cooperative agriculture 24 Council of Ministers, of Hungary 37 The CPC Central Committee’s Resolution on Certain Issues in the History of Our Party since the Founding of the People’s Republic of China 98, 107 The CPC Central Committee’s Resolution on the Guidelines for the Construction of Socialist Spiritual Civilization 89, 112 Criticism on Alford’s Guiding Principles (Engels) 128 Critique of the Gotha Programme (Marx) 19, 28, 29 Cultural Revolution xiii–xiv, xviii, 7, 53 culture 40, 53, 69, 121–2 Czechoslovakia 34, 36 dams 59 decentralization 37

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Decision on Restructuring the Economic System 91–2 deforestation 67 democracy 15, 108, 114; see also Theory of New-Democratic Society Deng Xiaoping xiii, xvi, xvi–xvii, 2, 101, 104, 122; on market economy xxiii depreciation 56 dialectical materialism 30, 72 dictatorship, of proletariat xiv, 28–9 differential rents 101 distribution according to means of production 101 distribution according to work xiii–xvi, 1–10, 2, 6, 27, 100–2; Marx on 28; socialism and 3, 29; socialist production and 3–4 diverse economic sectors 91, 92, 93, 97–8; capitalism in 94; encouraging some to get rich first and 102; for modernization 110; ownership and xix–xx; in primary stage of socialism 96, 111; in socialist transformation 99; in transitional period of socialism 107–8 diverse forms of ownership 91–2 diverse modes of business operation 91 division of work 83 economic court, in Yugoslavia 13 economic development 45, 52–5, 106; backwardness and 104–5; GNP per capita and 56; living standard and 53; modernization and 104; in regions xxv–xxvi economic management 5 Economic Problems of Socialism in the U.S.S.R. (book) 20 economic restructuring 22–39; analysis and research for 31–3; completion of 25; Four Modernizations and 25, 38; in Hungary 30–8; ownership and xix; research from foreign experience for 33–6; social development stages and 18–21 Economics in the Era of the Dictatorship of the Proletariat (Lenin) 28 economic system 24–5; criticism for current conditions 31–3; of Hungary 32, 114; relations of production and 49; of Yugoslavia 36; see also capitalist economic system; socialist economic system

economic welfare 57 Economy and Politics in the Era of Dictatorship of Proletariat (Lenin) 96, 98 education 40, 53, 75–6, 124–5 The Eight Requirements for Communist Party Members 115–16 employment, in urban areas 100 employment economy 94–5 Endeavor to Build Advanced Socialist Spiritual Civilization 88 Engels, Friedrich 28, 70, 73, 77; on negation of the negation 128–9; on public ownership 126–7, 129 enterprise management 2 environment 53; GNP and 58–9, 68; ‘left’ ideology and 50; means of subsistence and 64–5; quantitative measurement of 64–8 equal pay 2 export demand 40 exports 40, 44 farmers 92, 94, 100–1 Federal Congress, in Yugoslavia 14 Feng Lanrui xv final demand 40–1 final goods 42, 61; in capitalism 40, 41; intermediate goods and 43–4, 45, 46; in socialism 40, 41, 44, 46 financial statements, in Yugoslavia 13–14 Five-Year Plan 20, 91; diverse economic sectors and xx foreign-funded enterprises 90 forest conservation law 6 forest resources 59, 67–8 Four Modernizations 1, 20, 25, 38, 46, 103 French Utopian Socialism 78 Gang of Four xiii–xiv, xvi, 1, 2, 3, 4, 25, 54; productive forces and xviii general court, in Yugoslavia 13 German Classic Philosophy 78 GNP see gross national product GNP per capita 52, 56–7, 103 government procurement 40 grasslands 6 Great Transition 96 gross national income 45 gross national product (GNP): for comparison with other countries 62; corrections to 62; depreciation and 56; environment and 58–9, 68; growth rate of

Index 104; as inaccurate mirror of economic life 56–63; labor and 57; leisure and 58; as measure of economic life 61–2; pollution and 58–60; prices and 56; socialist systems and 60; see also GNP per capita gross output value 44 Gu Mu xvii handicraft industry 92 heavy industry 41–3 historical development, objective law of 70, 71 historical materialism xviii, 30, 49, 72 Hong Kong 81 household contract system 94 ‘How Do Marxists Treat Material Interests?’ 4 Hua (Chairman) 2 Huang Hai 22, 23 human will 3 Hungary 22–3, 25; Central Bureau of Statistics of 33; Central Theory Group in 38; Council of Ministers of 37; direct economic regulation in 38; economic restructuring in 30–8; economic system in 114; economic system of 32; industry in 31; Karl Marx University of Economics in 35; national income in 31; NEM in 114; regulation system in 38; socialism in 29; U.S.S.R. and 34 Hu Qiaomu xvii Hu Yaobang 80–1, 84 imports 44 income: of farmers 100–1; in Yugoslavia 12, 13; see also national income individual economy 90, 92; capitalist economy and 96; collective economy and 94; farmers in 94; in rural areas 93–4; in urban areas 93–4 individual ownership 128–9 industrialization and three transformations 92 industry 9, 41–3, 44; handicraft 92; in Hungary 31; modernization of 20 initiative 5 Institute of World Economy 33 Intelligence Agency, of U.S.S.R. 36 intermediate goods 43–4, 45, 46 international market 123–4 investment demand 40–1 Is Growth Obsolete? (Nordhaus and Tobin) 56–7

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Japan 68 Joint Labor Law, in Yugoslavia 13 joint-stock system 128 Karl Marx University of Economics, in Hungary 35 labor 57; environment and 66 labor law, in Yugoslavia 11 Labor Theory of Value 66–8 labor time 58 land reform law 6 large-scale economy 51 Latecomer’s Benefit 104–5, 106 law of value 2 Learning from Soviet Russia 26 ‘left’ ideology 50, 55 leisure 58 Lenin, Vladimir 19, 29, 72, 78; capitalism and 28; Economy and Politics in the Era of Dictatorship of Proletariat by 96, 98; productive forces and xviii; on socialist construction 77; on State capitalism 97; on transitional period of socialism 107, 108, 109, 116 Leninism 1, 3, 11, 36 Leontief (economist) 40 light industry 41–2, 43 Lin Biao 3, 25, 54 Lin Yishan 86 Lin Zili xviii Liu Guoguang 23, 115–18 living standard 62; economic development and 53; GNP per capita and 56–7; rise in 57–8; socialist systems and 53 Li Xiannian xvi, xvii Li Yimang xvi Ma Hong xvii management system 2, 40, 114 Mao Zedong xiv, 1, 3, 16, 72, 102, 109, 117; on final goods 42; On New Democracy by 116, 120; on stages of socialism 112; ‘On the Ten Major Relationships’ by 47; Textbook of Political Economics by 112 market economy xxii–xxiii; capitalism and 122; control of 124; culture and 121–2; education and 124–5; international market and 123–4; modernization and 121; need for 121–5; planned economy with 123; self-regulation of 123 markets 27

134

Index

Marx, Karl 19, 29, 58, 69–78, 95–6, 122; Capital by 58, 104–5, 128; on distribution according to work 28; on Latecomer’s Benefit 104–5; on negation of the negation 128–9; on public ownership 126–7, 129; on socialist construction 70, 77; on transitional period of socialism 107, 108, 109 Marxism 1, 4, 76; in Czechoslovakia 36; economic restructuring and 23, 28–9, 30; Gang of Four and 3; in Hungary 36; Mao Zedong and 72; means of subsistence in 64; modernization and 26–33; ownership and xix; planning and 74–5; political economy in 26–31; primary stage of socialism and 111–12; productive forces and 97; proletariat and 69; science and technology and 77–8; as science for socialist construction 69–78; scientific socialism in 26–31; social development stages and 18; socialist construction and xxvi, 69–78; socialist ownership system and 48; socialist revolution and 69–70, 72–3; socialist systems and 77–8; sources of 78; in Yugoslavia 11 ‘Marxism and Socialism’ (Yu Guangyuan) 110, 112 material interests 1, 2, 4–5, 6, 62 means of circulation 23, 25, 93–4 means of consumption 44, 46 means of production 19, 27, 42; distribution according to 101; in individual economy 93–4; means of consumption and 44, 46; ownership of 24, 92; private ownership of 92, 98, 119 means of subsistence 64–5 microenvironment 65 Ministry of Foreign Affairs 34 modernization 20, 84, 104; backwardness and 106; diverse economic sectors for 110; economic restructuring and 23; market economy and 121; Marxism and 26–33; in primary stage of socialism 103–6; socialist economic goal theory and 40; see also Four Modernizations monism 42 monopolies, in capitalism 28, 72 National Bureau of Statistics 33 national conditions 53–4, 84 national defense 20 national income 31, 45, 53 natural resources 50, 59–60, 66

NEM, in Hungary 114 net national product (NNP) 56 NNP see net national product nonpublic economy 90, 96, 97, 99–100, 110 nonsocialist sectors 24, 29 Nordhaus, William 56–7 Northwest region 83, 106 objective law of historical development 70, 71 October Revolution, in Russia 24, 95, 107 One Country, Two Systems 81 On the New Democracy (Mao Zedong) 116, 120 ‘On the Skills of Asking for Money’ (Yu Guangyuan) 86 ‘On the Ten Major Relationships’ (Mao Zedong) 47 open-up policy 84, 92 opinion polls, in Yugoslavia 14–15 ownership: diverse economic sectors and xix–xx; economic restructuring and xix; Marxism and xix; Marx on 95–6; of means of circulation 23, 25; of means of production 24, 92; in primary stage of socialism 90–1; productive forces and xviii–xxi; see also specific types People’s Daily 4 piece rate 6–10 planned economy: commodity economy and 124; with market economy 123; markets and 27 planning: in capitalism 74; Marxism and 74–5; for socialist production 41–2; for socialist system 74; in socialist system 74, 75 pluralism 42 political economy 26–31 Political Economy: A Textbook, in U.S.S.R. 118 Politics in the Era of Dictatorship of the Proletariat (Lenin) 28 pollution 58–60, 64–5 population: as national condition 53, 54; in rural areas 2 poverty relief 5 Prefaces to Socialist Upsurge in China’s Countryside 109 prices, GNP and 56 primary stage of socialism xxiv–xxv, 87–114; backwardness in 106; communism and 19, 113; construction in

Index 102–6; consumption in 106; definition of 96–7; distribution according to work and 100–2; with diverse economic sectors 89–100, 96, 111; encouraging some to become rich first 100–2; initiation of 87–9; Marxism and 111–12; modernization in 103–6; ownership in 90–1; productive forces in 102–3, 111; public ownership in 97; socialist transformation in 119; theoretical questions regarding 107–13; Theory of New Democracy and 115; transitional period of socialism and 107 private-operation economy 90 private ownership: current status of 130; history of 126–30; individual ownership and 128–9; of means of production 92, 98, 119; negation of the negation and 127–8; with public ownership 129–30; socialism and 128 production: backwardness and 104–5; of capital goods 61; in capitalism 41; of consumer goods 61; Decision on Restructuring the Economic System and 91; environment and 65–6; labor time and 58; natural resources and 50; resources and 42; see also means of production; relations of production; socialist production production team 49 productive forces: in capitalism 28; encouraging some to get rich first and 101; Marxism and 97; ownership and xviii–xxi; in primary stage of socialism 102–3, 111; public ownership and 92; relations of production and 49, 50; socialism and 97; socialist economic system and 25, 48–9; socialist ownership system and 50, 119; unbalanced development of 90 profits 5, 6, 58, 93–4 proletariat 48, 69, 73, 75; dictatorship of xiv, 28–9; relations of production and 74; revolution by 23, 24 Propaganda Department of the Central Committee of the Communist Party of China’s Outline of Learning and Propagandizing the General Line of CPC in the Transitional period 108–9 public economy 97, 99–100 public ownership 23–4, 51; current status of 130; history of 126–30; in primary stage of socialism 97; productive forces and 92; socialism and 19, 29; socialist

135

economy of 97; in transitional period of socialism 96 Qiao Shi xvi quota management 3 recruitment notices, in Yugoslavia 12 Regional Strategy in National Strategy 79–86 Regional Strategy in Regional Strategies 79–86 regions: competition between 84–5; economic development in xxv–xxvi; external support to 85–6; national conditions and 84; open-up policy and 84; socialist construction in 79–86; see also specific regions regulation system, in Hungary 38 relations of production: advancement of 50; backwardness of 50; in capitalism 77; economic system and 49; historical materialism and 49; productive forces and 49, 50; proletariat and 74; in socialism 49; superiority of 50 reservoirs 59, 67 revolution 23, 24, 25, 107–8; against capitalism 48; diverse economic sectors and 98; Marxism and 1; to transitional stage of socialism 118; see also October Revolution; socialist revolution ‘right’ ideology 55 Romania 16–17, 25 rural areas 2, 57, 93–4 Russia 24, 26, 95, 97, 107 salary system 49 science and technology 40; backwardness and 106; capitalism and 73; Marxism and 77–8; modernization of 20; as national condition 53, 54; socialist construction and 73 scientific socialism 26–31, 69–78 seed law 6 self-dependence 86 self-regulation, of market economy 123 seniority allowance 7 Sik, Ota 34 ‘Skills of Asking for Money and Making Money’ (Yu Guangyuan) 86 ‘Skills of Making Money and Spending Money’ (Yu Guangyuan) 86 small-scale economy 51 social autonomy system, in Yugoslavia 12, 30, 34, 36

136

Index

social development stages: economic restructuring and 18–21; see also communism; primary stage of socialism; transitional period of socialism socialism: capitalism and 20, 28, 95–6; commodity production and 29; communism and 87–8; distribution according to work and 3, 29; diverse models of xvi–xvii; economic goal of 20; economic law of 41; economic system of 24–5; economy in 24; final goods in 40, 41, 44, 46; Gang of Four and 4; goal of 3–4; in Hungary 29; leisure in 58; markets in 27; Marxism and 28; means of production and 19, 27; nonpublic economy and 96; private ownership and 128; productive forces and 97; public ownership and 19, 29; relations of production in 49; scientific 26–31, 69–78; in U.S.S.R. 20; see also primary stage of socialism; transitional period of socialism ‘Socialism Is Equal to the Public Ownership of Means of Production and the Distribution According to Work’ (Lenin) 19 socialist construction: dialectical materialism and 72; education and 75–6; historical materialism and 72; ideological problems in 75–6; Marxism and xxvi, 69–78; of nonpublic economy 100; in regions 79–86; science and technology and 73; socialist revolution and 72–3 socialist economic goal theory 40–7 socialist economic system 48–9, 97, 113, 114 socialist management system 40, 114 socialist ownership system 48–51, 114, 119 socialist production 2, 3–4, 10; continuous expansion of 20; final goods from 61; in new-democratic society 117; planning for 41–2; purpose of xxi–xxii; regulation of 27; in U.S.S.R. 41 socialist revolution 69–70, 72–3, 75; stages of 71 socialist systems 73, 74, 75; GNP and 60; living standard and 53; Marxism and 77–8 socialist transformation 99; end of 111; in primary stage of socialism 119; Theory of New-Democratic Society and 116–17 social ownership 127, 129

social property 126 societal ownership, in Yugoslavia 11 socioeconomic development see economic development Southeast region 81–2, 106 Southwest region 82 Soviet Union see U.S.S.R. Stalin, Joseph 20, 34, 41 State capitalism 95, 97 State-operated economy 90–1 State-Owned Enterprises 6, 7 State-ownership 11, 23–4, 49, 50, 92–3 state property 127 subsistence, means of 64–5 surplus value 58 Su Shaozhi 22, 23 Taiwan 81 taxes 57 Textbook of Common Sense of Politics (Yu Guangyuan) 109 Textbook of Political Economics (Mao Zedong) 112 Theory of New-Democratic Society 115–20; capitalist economy and 117, 119; socialist production in 117; in transitional period of socialism 117 Theory of New Democracy: historical fate of 115–20; Mao Zedong and 117; primary stage of democracy and 115; socialist transformation and 116–17; transitional period of socialism and 116 Tobin, James 56–7 transitional period of socialism: class struggles in 108; definition of 96–7; diverse economic sectors in 107–8; new-democratic system in 117; primary stage of socialism and 107; public ownership in 96; revolution to 118; temporary nature of 110–11; Theory of New Democracy and 116 TV, in Yugoslavia 15–16 urban areas 93–4, 100 use value 67 U.S.S.R. 34; Intelligence Agency of 36; Political Economy: A Textbook in 118; socialism in 20; socialist production in 41 utility 66–7 value 45, 66–7 wages 12, 57; equal pay 2 water 59

Index workers’ committee, in Yugoslavia 12–13 work-point system 49 Xinhua News Agency 11, 15, 34, 35 Yao Wenyuan xiv Ye Jianying xvii Yugoslavia xvi–xvii, 11–17, 25; accounting in 13–14; accumulation in 13; bookkeeping in 13–14; Communist Party of 13; democracy in 15; economic court in 13; economic system of 36; Federal Congress in 14; financial

137

statements in 13–14; general court in 13; income in 12, 13; Joint Labor Law in 13; opinion polls in 14–15; recruitment notices in 12; social autonomy system in 12, 30, 34, 36; societal ownership in 11; TV in 15–16; U.S.S.R. and 36; wages in 12; workers’ committee in 12–13 Yu Guangyuan xiii–xxvi, 11, 86, 109, 110, 112; Cultural Revolution and xiii–xiv Zhou Qiuye 26 Zur kritik des sozialdemokratischen Programmentwurfs 1891 (Engels) 127