In what way is China capitalist?

In what way is China capitalist?

Kyle Geraghty

Msc Dissertation for 2013/2014

This dissertation is submitted in partial fulfilment of the requirements for the award of the

degree of MSc in East Asian Development and the Global Economy.

This dissertation contains no plagiarism, has not been submitted in whole or in part for the

award of another degree, and is solely the work of Kyle Geraghty.

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Abstract

This paper will provide an alternative to the currently reductionist interpretations of China’s

political economy, arguing that their key failure is the inability to conceptualise capitalism in

a way which can think beyond the historical examples from Europe, and deal with the

atypical complexity of China as a rising non-European power. To counter this we will utilise

historical materialism to focus the concept of capitalism around capitalist accumulation for

the production of surplus-value; forming and propagating a capitalist class who reproduce

by extracting surplus-value, and wage-labour who can engage in production only when

organised to do so by capitalists and to create commodities controlled by capitalist. From

this we will argue that China should be seen as wholly capitalist. Though in a form

articulated by the historical legacy of the Chinese state, which has been essential to ensuring

the expansive population and territory of China can remain coherent. This articulation is

explicitly non-European, however, its particular form has been key for capitalist

accumulation in China to remain successful. Especially in its attempts to catch up with

Europe. Consequently, the ability for this articulation to remain stable as an endogenous

form of Chinese capitalism should be at the centre of analysing the capacity for Chinese

capitalism to both develop, and remain successful.

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Word Count

15,246

This figure represents the total words count of the introduction, chapter one, chapter two,

chapter three, and the conclusion. It includes all chapter headings, in-text subheadings, in

figure text, and references. It does not include the bibliography.

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Table of Contents

1 Introduction: Providing a Historical Materialist Response to Challenge Reductionism

2 The Failures of New Institutionalist Economics: Recognising the Data but Missing the System

4 Historical Materialism as a Solution: Capitalism as a Historical Era

6 Turning a Theoretical Challenge into a Paper: Limitations and Finding a Focus

9 Chapter One: Capitalism as a Concrete Abstraction: Articulated Varieties of Capitalist Accumulation

10 Defining Industrial Capitalism

13 The Transition Debate: Problems with Responding to Theoretical Failure with Formalism

16 Free Wage-Labour as a Concrete Abstraction is Not so Free

18 Innovation as a Consequence of Capitalist Accumulation, Not its Definition

20 Translating the Transition Debate into Analysing Capitalism Today: Articulation as Varieties of Capitalism

23 Transitional Post-Capitalism: Socialism and State-Capitalism

27 Chapter Two: Chinese Capitalism: Articulations of Endogenous Development and State Management of China’s Place in Global Capitalism

28 The Trapped Transition of Chinese Protocapitalism: Articulations and Consequences

31 Developments of Endogenous Capitalism: Decentralisation and the Privatisation of an Informal Cadre-Capitalism

36 The Chinese Central States: Maintaining Competiveness for the Goal of Developmentalism

43 Summary

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45 Chapter Three: Stability, Meet Capitalism: The Developing Class Contradictions of Chinese Capitalism

46 The States Management of Class-Struggle: Supporting Development

48 The Chinese State as a Confusing Committee

51 Summary

52 Conclusion

53 Limits and Future Research

55 Bibliography

Figures

37 Figure 2.1: China's Exports of goods and services as a % of GDP 1980-2005

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Abbreviations

NIE New Institutionalist Economics

TVE Township-Village Enterprises

SOF State Owned Firms

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Dedications

[EXCLUDED FROM PUBLIC COPY]

1

Introduction

Providing a Historical Materialist Response

to Challenge Reductionism

Analysing China’s role in the world-economy is severely curtailed by reductionist approaches for

defining its political economy. This is not due to a lack of research. Instead analysis of China’s

complex national form of capitalism and unique historical drivers is usually only understood through

the idealised example of the former imperialist economies (Peck and Zhang 2013). Solving this is a

corollary of China’s increasing importance in the world as both a political and economic actor,

further problematized by China’s unique status as the first post-colonial economy to emerge as a

global power and decentring of Europe’s uniqueness in this period. In our view the key analogous

trend for solving this is the increasing contention about the structure of the early modern era.

Analysis of the “great divergence” between the economic growth of Europe and the rest of Eurasia

in the 1500s has shown that the pre-capitalist Eurasia showed relatively equal levels of development

and was clearly highly integrated through trade. China in particular has increasingly been identified

for showing signs of development similar to Europe. The key consequence of this has been to

challenge our conception of capitalism by decentring the extent to which our understanding can

reflect solely from European economic history (Anievas and Nisancioglu 2013).

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The purpose of our paper is to provide a foundation to resolve this gap by utilising historical

materialism. Reanalysing capitalism as a historically developed system through current historical

evidence to understand the specifics of Chinese development. This introduction will first provide a

review Global Political Economies primarily New Institutionalist literatures foundations failings in

relation to conceptualising capitalism. Then, secondly, pose a short summary of how historical

materialism may counter this, and an overview of how we will focus and structure our answer to

develop an alternative.

The Failures of New Institutionalist Economics: Recognising the Data but Missing the System

The analysis of specific models of capitalism draws extensively from New Institutionalist Economics

(NIE). Which explains the variety of successful forms of capitalism by highlighting the shared

effectiveness of the specific national cultural-institutional configurations their economics are

embedded in. Hypothesising their concurrent effect on producing different forms of economic

behaviour, actors, and interests (Deeg and Jackson 2007).

NIE’s sensitivity to the ways in which institutions in China are able to reproduce functions seen as

integral to the operation of capitalism, despite bearing little superficial resemblance to institutions

providing similar functions in other economies, has been its key advantage. This allows concrete

engagement with how China’s political economy functions. Although adept at analysing data from

China, NIE has been incapable of producing a non-reductionist analysis of China as a whole. The

archetypical representatives of this phenomenon are Nee and Opper (2012) who give prima facia

status to endogenous rural capitalism developing as state control withdraws and Chinese history and

culture helps form effective non-state capitalist institutions. Though not wrong in its empirical

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findings, the theory underlying this approach removes any consideration of the state from the role

of Chinese development. This fails to represent the continued, sustained, and even expanding

involvement of the state in the economy. Especially problematic when we consider the indisputable

role of the state in: developing the urban based foreign trade oriented sector of the economy which

has been key to the global sense of rising Chinese economic power (Hung 2008a), for the

advancement of the Chinese economy via funding research development to increase its

technological capacity, and utilising state owned firms to lead the global expansion of China

(Henderson et al. 2013). Thus, there is a sense NIE attempts to teleologically undercover what it sees

as the route to effective capitalism, rather than observing that it is being successful through

methods they discount.

This failure reflects NIE’s theoretical assumptions of capitalism. The school developed from Douglas

North’s critique of neoclassical economic history’s inability to deal with large-group behaviour and

consequent failure to actually explain how history developed. Correcting it by focusing on how social

institutions mediate rationality and embed economics in society; decentring the normative

prioritising of economic efficiency by recognising that institutions may increase transactions costs,

decreasing economic efficiency, but for non-market purposes which ensure, or increase, growth as a

whole (Milonakis and Fine 2007). However, this embeds rather than counters neoclassical precepts.

The market as a mediator between competing individuals over scarce resources is still considered

the natural foundation of human social-relations, this recreates history as the emergence of

capitalism with pre-capitalist societies understood only as pre-capitalist rather than containing their

own logic (Ankarloo 2006; Krul 2012). Its attempt to understand economic development then limits

varieties of capitalism to archetypes of core states, whose success reflects optimal institutional

coherence for providing stable economic growth. Thus although it recognises multilinear forms of

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development, development itself is still replicates the neoclassical focus on competitive private

markets (Peck and Zhang 2013).

Utilising this, for Nee and Opper (2012) a coherent Chinese capitalism is represented only in the

emergence of a free private sector. Literally eliminating the reforms in China bar where they copy an

idealised model of core capitalism. Limiting analysis to the extent such a sector is produced and

sustained by political institutions, which are recognised as increasingly coherent as they facilitate

this sectors growth. This constrains the possibility of recognising that China may already be coherent

in a form which doesn’t replicate the emergence of core capitalism. The Chinese economy has

certainly been able to advance its competitive ability and affect capitalist accumulation despite a

dependence on effectively managing multiple business systems utilising capital from the state,

domestic sources, informal networks, and core economies (Henderson 2011:33-38), and by

reforming rather than replacing institutions developed primarily for socialist goals, often focusing on

maintaining the ability to manage its uneven and complex system rather than allowing any specific

part to become central to its overall development (Hung 2008a).

Historical Materialism as a Solution: Capitalism as a Historical Era

In contrast we want to posit that seeing capitalism as a system provides a more coherent way to

provide a non-reductionist analysis. This starts from the premise that China is successfully

reproducing economically and attempts to investigate the extent to which it is doing so by utilising

capitalism, and the specific ways in which it is utilising capitalism.

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The method we will utilise to explore this is the Marxist conception of historical materialism. An

empirical theory that historical change develops from contradictions in the fundamentals of

economics: between the physical forces of production, represented by the technological means of

production as well as the methods of production through which labour is organised; and the social-

relations of production, which are the ways in which the means of production are controlled and to

what end. The ensembles of these are labelled modes of production, representing heuristic

categories which capture how a specific historical era is totalised around social-relations creating a

unique configuration of economic reproduction (Banaji 2010:1 Blackledge 2006:46 Haldon 1993:56-

57).

This provides a methodological solution. By focusing on how capitalism functions as a system we

can, in contrast to NIE, attempt to understand observe the relationship between how China

concretely reproduces and capitalisms features as a totality. Understanding the specific way in which

capitalist social-relations are maintained. In practice historical materialism has however been

accused of inverting reductionist conceptions of capitalism; drawing stark lines between each mode

of production by defining them as ideal forms which are staidly able to outcompete previous modes

of production. For capitalism this appears in the tendency to formally define capitalism by the

internal history of Britain as the first industrial power clearly able to overcome pre-capitalist limits,

defining the rest of world history negatively by its failure to endogenously follow this path (Blaut

2000:45-72). This formalist model isn’t incoherent, Charlie Post (2008) utilises it to argue Chinese

capitalism is only partial as peasants continue to have access to land. Therefore Chinese

development should be understood as inherently subordinated to core capitalism as it hasn’t

developed the conditions for endogenous capitalist development. This does allow us to understand

capitalism as a system. Though reductionism is re-established even more strongly than in NIE

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approaches as it cannot conceptualise China as more than failing to fit the ideal of British capitalism

and provides few insights into its development.

Instead we will draw on the anti-formalist historical materialism associated with the work of Banaji

(2010) which limits modes of productions to the rules of its reproduction that can be discerned from

historical abstraction. Through this we can create a less reductionist concept of capitalism that can

better account for endogenous characteristics of Chinese capitalism without reducing its success to

solely the integration with core capitalism.

Turning a Theoretical Challenge into a Paper: Limitations and Finding a Focus

The contradiction we have presented here is extensive, and solving it is completely outside the

scope of this paper. The extensive diversity that characterises China is largely still mystified in the

literature which tends to focus on the coastal urban areas and their hinterlands, as is the specifics of

much of its economy due to the prevalence for informal relationships. Developing a historically

complete model of capitalism is similarly limited, simply because historical evidence is highly partial

and often filtered through extensive theoretical presumptions. This is an empirical limitation though

not a theoretical one, and consequently our paper will attempt to be a foundation for a less

reductionist approach to analysing China. Limiting its arguments to firstly how anti-formalist

historical materialism conceptualises capitalism, and secondly identifying the key features of Chinese

capitalism.

Our argument will be that historical materialism can identify key characteristics of how Chinese

capitalism operates and in particular its maintenance and articulation by the specific historical legacy

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of a central state which maintains the coherence of China as a whole. In turn the key contradiction

that exists in China should not be the extent to which it can become more or less capitalist, but the

extent to which the state can maintain this role as capitalist accumulation and control the increasing

prevalence of inter-capitalist competition which causes intense stress on both its ability and desire

to manage the development of China as a whole.

The first chapter will provide our theoretical basis by looking at debates within historical materialism

on economic history, drawing from the transition debate to argue that capitalism should be

identified less with industrial capitalism and more with the development of the capitalist social-

relation generally from late-feudal commercialisation. Focusing on the historical debate we will draw

this into a parsimonious definition of capitalism sing the concept of articulation. Arguing that in

opposition to its typical Althusserian formulation it is best understood as specific ways in which the

capitalist social-relation is formed in line with a territorial units history; thus capitalism was

essentially varied from the beginning. To ensure that we also have the full theoretical tools for

analysing China this chapter will also include an analysis of debates on socialism. Critiquing the

concept of state-capitalism to argue that socialism should be seen as essentially a specific

articulation of capitalist accumulation but within specifically a post-capitalist class context of the

accumulation rooted in capitalism.

The second chapter will present our analysis of Chinese capitalism, layering evidence from

reductionist attempts to categorise China within our model. This will be presented as three key

features of how capitalism is articulated in China. First, the legacy of the Chinese state which

developed in the late-feudal/commercial-capitalist period, which produced a specific set of class

forces and a specific form of social reproduction that has remained through the legacy of socialism

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and the specific construction of capitalism. Second, the development of an endogenous form of

capitalism in the reform era built from informal linkages between decentralised subnational

government actors and an emergent capitalist class, who produced a specific route to industrial

capitalist social-relations from privatisation. Third, the continued role of the Chinese central state as

an agent for maintaining the “rise of China” by ensuring it can independently control the

competiveness of its economy due the specific way in which wage-labour is articulated, as well as

maintaining some control over how capital is accumulated and ensuring it results in qualitative

development.

The third chapter will present what we see as the key contradiction in Chinese capitalism,

highlighting that although the second chapter presents a coherent form of Chinese capitalism it is

not simply static. In particular we want to highlight the growing contradiction between the rise of

workers unrest affecting the system as a whole but appeal to the central states focus on stability,

and the extent to which the Chinese central state is becoming a mechanism for inter-capitalist

competition. As it becomes reliant on capitalist accumulation for the reproduction of its economy

and increasingly faces an independent capitalist class who rely on maintaining specific economic

biases for specific forms of capitalist accumulation.

The paper will end with a conclusion focused on assessing our models advantages over both NIE and

more reductionist inclined forms of historical materialism, arguing that by focusing literally on

historical induction throughout our theory and our analysis of China we provide a far strong basis for

understanding how it functions and generate contradictions from that. Furthermore we will provide

some insight into where future research to expand on our analysis should focus.

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Chapter One

“Capitalism as a Concrete Abstraction:

Articulated Varieties of Capitalist

Accumulation”

The purpose of this chapter is to outline and analyse historical materialist debates on capitalism and

produce a parsimonious model of capitalisms essential features and the extent this can be

articulated as national forms of capitalism. Our primary argument is that formalist historical

materialism privileges the formation of industrial capitalism in Europe and consequently misses

earlier developments of a semi-global commercial-capitalism in which the capitalist accumulation

developed. By recognising that commercial-capitalism is part of the capitalist mode of production

we want to argue that the core of capitalism is its specific accumulation process rather than the

drive for systemic increases in productivity of industrial capitalism. In turn national forms of

capitalism need to be treated as articulations of a countries specific history and social-relations;

including its interactions with other forms of capitalism globally.

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The structure of this chapter will reflect the nuances of our argument. Firstly, we will explain

Marxism’s typical view off industrial capitalism’s social-relations to provide some essential

theoretical underpinnings. The main sections of this chapter will be drawing from debates within

historical materialist economic history. Specifically we will critically analyse defined in the transition

debate by assessing different conceptions ability to match historical complexity. Though we won’t be

producing an alternative model of how capitalism developed, our third section will utilise these

discussions to create a parsimonious definition of capitalism through the concept of articulation. The

final section will analyse post-capitalism, and although it will utilise our definition of capitalism it will

develop independent conclusions. Our aim is to provide a tenuous critique of the theories of state-

capitalism, drawing on the socialist bloc to argue state-capitalism tends to be simplistically defined.

Instead we need to be conscious of how the capitalist model of accumulation can be disrupted in a

multiplicity of ways, with socialism serving as a specific post-capitalist framework for surplus-value

production rather than as its own mode of production.

Defining Industrial Capitalism

The much vaunted key element of Marx’s argument that capitalism contained a progressive element

irrespective of the social tragedy that followed draws on capitalism’s systemic development of

humanity’s capacity to economically reproduce itself, by improving the means of production and

thus the productivity of labour (Blackledge 2006:31-39). This effect is personified in the rapid

technological development of industrial capitalism. Consequently, Marxist political economy has

focused on discerning and understanding the capitalist accumulation process and the social-relations

that produce this tendency.

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The integral feature of a mode of production is its reorganisation to reflect its ruling classes’

economic reproduction (Haldon 1993:88). For capitalism this reflects the capitalist classes’ collective

monopoly of the means of production, allowing them to control the production process and thus

directly realise a surplus through market exchange, and secondly its dependence on this process to

maintain reproduction affecting the generalisation of production for profit, allowing it to both realise

a surplus and renew production (Bhandari 2008).

The need to realise profit in the market in turn reconfigures workers as free wage-labour. The

foundation of this reflects capitalist monopoly of the means of production in that workers solely own

their labour power and are unable to access the means of production except through capitalists,

leaving them dependent on selling their labour as a commodity for a wage to buy the necessary

commodities to live from the market. In doing so they are bought as abstract labour which can be

measured in relation to other forms of labour as a basic commodity irrespective of what it

concretely produces (Fine and Saad-Filho 2004:20) and in turn bought at a price which reflects the

competition between all labour and its collective dependence on wages for survival (Saad-Filho

2002:44-53). Their status as ‘free’ subjects wage-labour to competition; forcing them to be mobile,

and therefore capable of being expelled from the production process by capitalists if they are

replaced by technology or attempt to demand higher wages, as well as being able to leave firms

themselves for more productive firms capable of paying higher wages (Post 2013:80-81; Prakash

1997:9-10). This relationship then produces unequal access to production and allows labour to be

bought at a price below its contribution to production; in turn providing capitalists with a source of

profit, in the surplus-value produced between labours contribution to production and the wages

they are paid.

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This social-relation means capitalists depend on maximising surplus-value which is in an absolute

and relative sense. Increasing absolute surplus-value involves expanding production capitalists

control, increasing the amount of time utilised per day for work by reorganising the labour process,

and lowering wages. However, this is limited. There are only twenty four hours in a day, the control

of the labour process must be socially stable, and wages must be at least a level which can then

allow the worker to purchase the basic necessities required to reproduce their labour power. In

contrast relative surplus-value is only limited by physics itself as it reflects innovations of the means

of production, for example by introducing machinery. Making labour more productive by increasing

the amount of value labour can produce in each moment (Fine and Saad-Filho 2004:31-44).

The need to do this is impelled by the fact that capitalists create profit individually and in

competition with each other as profits can only be realised by individual capitalists if they can sell

what they produce (Saad-Filho 2002:28). For the capitalist social-relation this is especially important

between capitalists producing commodities with the same use. Competition over the same markets

means maintaining reproduction necessitates lowering unit costs to increasing the efficiency of

production. This relies on relative surplus-value as it reduces the amount of labour time necessary

for the production of value. In contrast although absolute surplus-value allows capitalists to expand

the total surplus-value produced by lowering wages or expanding production, it cannot intensify

production like relative surplus-value and allow unit costs to be lowered by increasing the amount of

value abstract labour creates (Fine and Saad-Filho 2004:82-87; Saad-Filho 2002:58-61). The effect of

this is to generate capitalism’s systemic capacity for innovation, which becomes necessary for

capitalists to constantly reproduce in a competitive environment.

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In sum, the historic role of industrial capitalism to surmount the limitations of the pre-capitalist

modes of production is generated, firstly in the development of the capitalist social-relation which

depends on the direct exploitation of workers by capitalists and creates an incentive to control and

expand production, and secondly, the competitive individuation of capitalists and wage-labour

which creates a systemic prevalence for relative surplus-value extraction among capitalists who

want to ensure their production is realised.

The Transition Debate: Problems with Responding to Theoretical Failure with Formalism

The transition debate attempts to understand the transition from feudalism to capitalism. Its original

form in the 1950s between Paul Sweezy and Maurice Dobbs was academically inconclusive,

however, it setup a key division in historical materialism between Political Marxism advocated by

Robert Brenner, which is now seen as the classical Marxist model among many Marxists and in the

perceptions of non-Marxist academia; and the commercialisation model advocated by Andre Gunder

Frank and Immanuel Wallerstein which is now seen as Neo-Marxist (Blackledge 20006:119-127;

Blaut 2000:48). This ideological delineation is correct in so far as Political Marxism represents an

indisputable theoretical advance over the commercialisation model. Beyond its critique though,

Political Marxism’s definition of capitalism is too narrow and doesn’t have the capacity to analyse

the historical complexity of the rise of capitalism recognised in the commercialisation model, instead

favouring a reductionist definition of capitalism.

Political Marxism draws its analysis from Marx’s work on primitive accumulation, the process

through which the essential features of capitalist accumulation develop, arguing it occurred first in

rural England. As the crisis of late feudalism resulted in landlords’ increasing inability to deploy extra-

economic coercion after the collapse of serfdom, thus increasingly having to rely on exploiting their

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tenants, yet also remaining powerful enough to consolidate and expand their land by appropriating

peasants. Thus, workers were separated from the means of production and forced to become free

wage-labour, and landlords were made to increasingly rely on the market to access economic

surpluses. Though the crisis of feudalism was a wide event, only rural England is perceived to have

contained the specific conditions for free wage-labour and increasing reliance on markets to develop

(Davidson 2012:397-427). The development of capitalist social-relations is thus prior to the process

of accumulation which over time consolidates itself and slowly leads to the prevalence of relative

surplus-value as competition develops, culminating eventually in the industrial revolution (Heller

2011:83-86).

In contrast the commercialisation model is more evolutionary. Focusing on the rise of commodity

production for creating new opportunities for surplus creation during the late-feudal era as long-

distance trade developed from 1500 AD along extensive trade networks, linking the Silk Road from

China to the Middle East with naval routes in the Mediterranean Black Sea and Persian Gulf

connecting Europe and Africa and leading to the rise of an urban merchant class who reorganised

production as it became centred in towns providing a place for peasants to flee the relatively less

developed rural areas for better conditions despite losing access to the means of production

(Davidson 2012:535-536; Gills and Frank 1990; Silver 1983; Suresh 2010:57-65). Focusing on trade;

this produces a model of capitalism focused on the realization of profits through markets with

capitalist social-relations to match the requirements of generalised commodity production. This

decentres wage-labour, accepting that it is congenial for supporting relative surplus-value

production and therefore cultivated in core economies, but in turn arguing capitalism can be found

where these relations are not, as integration into the capitalist led world-economy commodity

production forces any production system to be restricted by their role in the system as a whole

(Blaut 1994; Heller 2011:76-86).

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Though the commercialisation model has not by any means been shown to be historically invalid,

Brenner’s (1977) convincing and influential critique means it is now seen as at best Neo-Marxist or at

worst simply reproducing neoclassical models of capitalist development in which capitalism unfolds

as new opportunities are presented. Though accepting the commercialisation model’s empirical

position that trade was an extensive source of absolute surplus-value, Brenner argues it fails to

causally account for the social-relations which specifically underpin capitalist competition. This

creates the systemic emphasis on relative surplus-value which enabled capitalism to overcome pre-

capitalist stagnation by reconfiguring growth (Bernstein 2013:323-325). Political Marxism is correct

here, in that relative surplus-value has been key for capitalisms development as a mode of

production and the failure of the commercialisation model to casually account for the development

of the social-relation underpinning this is a major theoretical omission. However, by countering this

clear theoretical failure Political Marxism in turn relies on a reduction of capitalism to essentially a

single ideal-typical phenomenon in which market dependence creates relative surplus-value. This

does highlight the historical uniqueness of capitalism but reflects a reductionism of capitalism to

only a single feature which developed from the world’s first industrial revolution in Britain (Blaut

1993; Davidson 2012:408-420). The key concern here is not that this model is incoherent, but rather

that it relies on a reductionist approach to history, and produces a model of capitalism built from

abstracting the innovative contribution of capitalism into the past, rather than developing how

capitalism exists as a whole from historical induction (Rioux 2013:106-107). To integrate historical

complexity we will critique the two key ways this flaw expresses itself in Political Marxism’s two key

concepts: free wage-labour and innovation, considering the effects of these complexities on a

definition of capitalism.

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Free Wage-Labour as a Concrete Abstraction is Not so Free

As our analysis of industrial capitalism demonstrated, as a whole free wage-labour is certainly key

for allowing competition to develop. Problematically though, Political Marxism’s use of the concept

is simplistic, identifying free wage-labour purely as workers separated from the means of production

and dependent on the competing in markets for their reproduction. However, in this form wage-

labour has existed far beyond capitalism. There is extensive evidence of the use of free wage-labour

in antiquity; Rome, Greece, and Egypt all utilised wage-labour for construction, mining, workshop,

and even agricultural work. These workers competed in markets and clearly sold their labour power

on a free basis, drawing up contracts to organise compensation for either the worker or employer if

the work was left unfinished (Banaji 2010:117-130). This era was clearly not capitalist though. What

this simple identification then misses is that key to capitalism is wage-labour taking on a concrete

form. As abstract labour to produce surplus-value through a production process owned by capitalists

and producing a commodity owned by capitalists, capital-positing capital-producing labour rather

than just as labour reliant on selling its labour power as the sole source of gaining subsistence

(Banaji 2010:52-55; Bhandari 2008; Saad-Filho 2002:10-12). This stands in stark contrast to pre-

capitalist use of free wage-labour. For example late feudal European manorial estates involved

extensively supplemented peasant production with free wage-labour; organised rationally for

creating output, and often producing for exchange in markets. Though these features of capitalism

were present and built around the exploitation of free wage-labour, the aim of this was not to

produce surplus-value but rather to produce commodities for consumption or to efficiently produce

commodities for exchange to consume a commodity produced elsewhere. Thus labour was not paid

for at a price reflecting abstract-labour and the ability to create a profit in the marketplace, but

instead to maintain proportionality between the estate’s income and its requirements for

consumption from production (Banaji 2010:45-101).

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This more historically situated definition questions whether wage-labour is/must be “free”. For Marx

wage-labour’s “freedom” was always an illusion of self-ownership, hiding impersonal dependence

on capitalist markets, and contrasting the forced personnel dependence on a particular feudal

landlord. The key role of wage-labour’s “freedom” is to allow capitalists expel wage-labour from

production and replaced for increasing the efficiency of the production process for the capitalist. The

ability for workers themselves to break contracts is not necessary for capitalist accumulation’s

production of surplus-value, despite being conducive for the generalisation of relative surplus-value

by allowing the supply of labour to match market competition. Thus, although there is an imperative

for capitalists to allow freedom, their primary aim is to maintain their own reproduction; their

priority is the accumulation of surplus-value itself (Banaji 2010:131-154; Bhandari 2008; Rioux 2013).

Capitalists are then primarily reliant on wage-labour to produce surplus-value; free wage-labour is

simply a specific form in which competition between workers has been fully realised. Capitalism can

also utilise unfree wage-labour in a number of intermediary forms, and is certainly capable of

reorganising pre-capitalist forms of production without changing their appearance (Amin and Van

Der Linden 1997). For example, analysing Indian peasantry in 1800s Deccan, Banaji (2010:277-332)

showed that although peasants were able to semi subsist from land they owned they were

reconstituted as wage-labour by forcing them to become reliant on capitalists for advances on rent,

capital, and equipment in the form of loans which were then subsequently paid back in the form of

interest either as a share of their crops or as cash, and leaving them with a de-facto subsistence

wage. Through this process a capitalist can control the process of production, and extract surplus-

value, despite the apparent status of the wage-labourer as a formally unfree peasant reliant on

servicing debt.

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From this analysis then capitalist social-relations are certainly able to exist in conditions where

workers are not free. The process of capitalist accumulation is instead dependent on recreating

workers as wage-labour. That their involvement in commodity production becomes controlled by

capitalists, who advances capital to begin production and appropriates everything that is produced

as capital, in return for paying labour on the basis of abstract labour and thus realising surplus-value.

This concrete abstraction of wage-labour can then see the unity in all forms of production that

produce surplus-value while also recognising the specific advances that developments toward fully

proletarian labour can provide.

Innovation as a Consequence of Capitalist Accumulation, Not its Definition

The second concern is Political Marxism’s teleological reduction of capitalism to its capacity for

innovation which allowed it to overcome feudal stagnation. This is firstly a historical exaggeration.

Within Political Marxism development of capitalist social-relations in Britain dates back to the 1500s

and although agricultural production did advance enough to prevent a renewal of pre-capitalist

stagnation, the primary developments were in the production of absolute surplus-value for driving

an expansion of production. The role of relative surplus-value was relatively modest in comparison.

The tendency to overstate relative surplus-value even extends to the industrial revolution, which

although relying on some major technological and achievements, involved relatively modest labour

productivity increases compared to the capacity for innovation to allow further expansion of

production (Blaut 2000:59-62; Heller 2011:87-89). This demonstrates that although relative surplus-

value is now central to industrial capitalism, it is not the only unique aspect of capitalism. The

production of absolute surplus-value and its ability to expand capitalist accumulation is just as

important for overcoming pre-capitalist stagnation. In contrast to Political Marxism then we want to

highlight capitalist accumulation for surplus-value in general as key.

19

Though this theoretical shift doesn’t undermine the relevance of relative surplus-value to industrial

capitalism it does demand a reappraisal of the pre-industrial era of commercial capitalism, in which

production increasingly became organised for the purpose of producing surplus-value though with

little sense of producing systemic productivity increases (Banaji 2010:280). Typically this is

considered non-capitalist due to the perceived limits of commerce’s ability to affect production

because its profits depend on circulation, buying low and selling high and maintaining monopolies to

isolate consumers and producers rather than extracting surplus from production. Thus, social-

relations have to change first for capitalism to emerge (Post 2002; Post 2013:85-89).

The argument is historically and theoretically unconvincing though; retrospectively applying Marx’s

view of how merchant capitalism functions as a subordinate of industrial capitalism within the

developed capitalist mode of production to the history of capitalism. Discounting commercial-

capitalism via a circular argument in which its contributions and historical specificity are ignored

simply because it did not automatically become industrial capitalism (Banaji 2013; Bernstein

2013:312-313). Though commercial-capitalism did not seem to have a systemic interest in

innovating production, it did engender widespread investment in gaining control and reorganising

production to utilise wage-labour through a variety of mechanisms which extracted surplus-value on

an absolute basis (Banaji 2010:271-273). For example, Holland, the archetypical example of

commercial-capitalism after it gained control of the Baltic grain, and subsequently European, trade

(Arrighi 2010:130-162) reorganised its internal production on the basis of commercial profits.

Utilising wage-labour to set up processing industries for a number of commodities such as rope and

tobacco (Brandon 2011). Dutch involvement in Asia also focused on controlling production, for

example it utilised the advance system to expand and maintain the production of Indigo from India

(Banaji 2010:272).

20

Though careful empirical analysis is necessary to separate commercial-capitalism from feudal

mercantilism in concrete analysis; there is robust evidence that commercial-capitalism was based on

the expansion of surplus-value, and was able to expand economic reproduction rooted in wage-

labour, despite being limited in its ability to give primacy to competition rooted in the systemic

innovation of the means of production. The effect of this on how we conceptualise the capitalist

mode of production is to draw a distinction between the subordination of reproduction to the self-

expansion of surplus-value, and the era of industrial capitalism in which relative surplus-value

expansion became an essential feature of capitalist reproduction.

Translating the Transition Debate into Analysing Capitalism Today: Articulation as Varieties of

Capitalism

Our analysis of the transition debate presents the core of capitalism as solely the rise of individual

capitalists and their reorganisation of labour into wage-labour as a concrete abstraction. In this

section we want to provide a tenuous argument that all forms of capitalism should be considered

concrete articulations between this simple view of capitalist social relations, and the specific

historical conditions that effect how it competes with other forms of capitalism.

The concept of articulation stems from Althusser, who argued that concrete social formations are

constructed from combining multiple modes of production in which a single mode of production is

dominant (Blomström and Hettne 1984:81-91). This utilises modes of production as specifically

ideal-typical forms of relationships between two classes typified in specific production relationships,

and separates them from non-ideal social formation in which transitions between multiple modes of

production can occur, as different modes of production can gain relative weights in the reproduction

21

of the social formation as a whole (Brewer 1990:226-236). Problematically, the reliance on an ideal-

typical form of capitalism means that rather than providing a framework to recognise the complex

forms of capitalism that share a qualitatively similar set of social-relations, it simply reinforces a

singular narrative of capitalism in its attempt to conceptualise the complexities of transition (Haldon

2013:41-42). In contrast we want to focus on the unity of commercialisation in late feudalism across

parts of Eurasia to argue articulation should be seen as occurring only within modes of production as

a reflection of how a country specifically reproduces itself in respect to its history. So in this case

capitalist articulation occurs essentially between the capitalism and history.

Blaut (1993; 2000) whose analysis draws extensively on the formation of a world market and the rise

of agricultural commercialisation up to 1492, focuses particularly on the similarity between specific

interlinked global cities and their hinterlands across the entirety of Eurasia; including Flanders and

south-east England in Western Europe; north Italy and Nile Valley on the Mediterranean; the Gold

Coast and Sofala in Africa; Malabar and Bengal across Near-Asia; and the southern coast of China in

East-Asia. The use of wage-labour was common, production was organised by an elite whose

reproduction depended on trade, banking, limited manufacturing, and commercial agriculture.

These formed a continuous mercantile trading route which moved extensive staple commodities

including crude textiles, iron tools, key carbohydrates including wheat and rice; as well an extensive

trade in luxury items such as spices and sugar. In terms of political, economic, and social

development they were largely equal and were key centres for joining together their respective

region’s late-feudal economies (Blaut 1993:165-173).

Though without qualitative analysis of each it is impossible to assume the extent to which each

centre of mercantilism was able to win in local class-struggles and force workers into wage-labour

22

relations, and thus become commercial-capitalist. We want to focus on apparent signs that the

development of these regions seemed to have all produced ruling classes that depended on market

exchange for reproduction and attempted to gain some control over production, in order to argue

that there was certainly widespread potential for commercial-capitalism. In addition where wage-

labour relations did arise they were able to use varieties of capitalism that were produced out of the

specific historical conditions of each region and their relationship to the wider societies which they

were embedded in.

Thus we want to strike a balance between Political Marxism and the commercialisation model. In

contrast to Political Marxism which utilises an ideal-typical form which, despite rejecting, fits neatly

with Althusser’s concept of articulation by essentially treating formally non-capitalist production as a

non-entity (Rioux 2013). In contrast our analysis genuinely does not allow for modes of production

to sit alongside each other. Instead social-relations should always be considered as reorganised to fit

the dominant form irrespective of their appearance albeit, producing an articulation as the effects of

the specific way production is reorganised has consequences for how a national form of capitalism

operates. The commercialisation model simply mirrors this failure though, because it essentially

simplifies capitalism into a new ideal-typical form around commodity production for markets and

reduces national differences to the extent their formally capitalist components allow them to

compete in these markets. Allowing no appreciation of the differences between commercial-

capitalism and late-feudal mercantilism in which production was organised for different purposes

and contained different impulses (Banaji 2010:61-66).

To summarise then our model of capitalism works on essentially three levels:

23

1. For a territorial unit to be considered capitalist; production must be organised as capital-

positing, capital-creating wage-labour for a capitalist class whose reproduction depends on

extracting surplus-value. Though this isn’t enough to create industrial-capitalism automatically

this does produce a tendency for the expansion of production which prevents pre-capitalist

stagnation.

2. This form of capitalism can include any appearance of exploitation as long as labour’s entry into

production is organised as wage-labour. These differences should be expressed as articulations,

representing the specific way in which capitalism developed historically within a territorial unit

and producing its capacity to expand via absolute surplus-value accumulation and develop

towards relative surplus-value accumulation as separate categories.

3. Though our model has greatly complicated the automatic rise of Europe, it was certainly the

centre of industrial-capitalism. Consequently forms of articulated capitalism should be

considered in competition with one another internationally. Because international inter-

capitalist competition as a historically concrete phenomenon developed specific capacities for

production on the basis of access to specific forces of production.

Transitional Post-Capitalism: Socialism and State-Capitalism

The concept of socialism is generally defined negatively, focusing on what it opposes and its self-

regarded limitations. Capitalism is opposed for exploiting wage-labour to support an essentially

parasitic capitalist class, and for the irrationality of its production which aims to create profits rather

than match social needs. Though in turn socialism is the conscious attempt to replace capitalism, it is

also self-defined as a limited stage towards the final aim of communism. In which class divisions will

have ended, the means of production are held in common, and production will be rationalised to

match needs with the minimum of labour. In this context we want to propose that following from

24

our analysis of capitalism as a concrete abstraction socialism should be defined as consciously

constructed post-capitalism.

Our primary concern then is defining post-capitalism, the discussions on state-capitalism are a useful

starting point here as they essentially attempted to uncover to what extent a conscious attempt at

socialism was pushing the limits of capitalism. This theory has taken numerous forms within the

wider rubric of “Western Marxists” who shared political independence from the Soviet Union as well

as an antipathy to regarding it as socialist, however drawing from Marcel Van Der Linden’s (2007)

extensive analysis of Western Marxism’s views of the Soviet Union we will focus specifically on

Charles Bettelheim, who Der Linden argues is the only scholar who utilised capitalism at the same

level of complexity as our model and focused on the internal structure of the Soviet Union. He

argued that although surplus-value appropriation was an acceptable transitional form to generate

surplus for production as long as it was captured by the state, the increasing reliance on profit as a

measure for industrial productivity and increasing shift towards autonomy for firms since 1965

showed that the state represented a form of the capitalist class organised around accumulation in

the state, rather than existing as a judicial form of working class ownership (Van Der Linden

2007:180-190).

The acceptance of surplus-value production is key as it means to some extent socialism can

acceptably exploit wage-labour. This came across explicitly in the “Great Debate” that took place in

Cuba on whether the Soviet model of socialism should be adopted. The appropriation of surplus-

value was defended on the principle that it allowed economic advances by allowing accumulation

from the production process itself and that furthermore it could be managed by changing its class

25

context. In essence then, although it serves as the essential source of worker exploitation, its use

was defended as a transitional form as long as its use was managed and planned (Yaffe 2009:45-69).

As a result Bettelheim’s apparent identification of a class whose reproduction depends on the

appropriation of surplus-value is clearly a far more appropriate way to identify the nature of a

potentially post-capitalist political economy. However, his justification for the state being controlled

by a state organised capitalist class was weak because it depends on an association between

economic reforms by their similarity to capitalism, rather than by their concrete economic effect

(Van Der Linden 2007:190-192). In reality although the label profits was utilised, it played a distinct

role due to the wider organisation of the economy. Existing as an accounting mechanism to

represent productivity with no direction connection to the continued reproduction of a firm as once

appropriated by the state investment from profit is determined by planning. Therefore finding a

causal mechanism through which a capitalist class could reproduce itself is difficult (Szymanski

1979:36-79).

This position is supported by wider evidence on the low levels of economic differentiation between

people of different occupations in the Soviet Union: wage distinctions existed but were minor with a

trend towards equalisation, the planning of pricing undervalued basic goods and overvalued luxury

goods, there were few distinctions in housing quality and no signs of income based segregation.

There was evidence of social differentiation; ownership of status luxury goods such as cars and

pianos were far more common among those in managerial, education, technical and scientific

positions, as was access to work based privileges such as summer homes. Lastly although upward

mobility correlated highly with education, only the children of those working in education showed

any tendency to reproduce their parent’s social position (Szymanski 1979:36-79). This evidence then

26

shows that detecting an economically determined and reproducing class structure in the Soviet

Union is difficult.

In this analysis then socialism should be seen as an experimental attempt to alter the class

relationships that configure the production of surplus-value into a post-capitalism form. Therefore,

to a certain extent, we should expect typical capitalist mechanisms to be utilised to increase

productivity despite the reliance on exploiting the working class as abstract labour, however, we

should concurrently see conscious efforts to ensure this surplus-value is distributed both towards

securing egalitarian conscious developmentalist goals, and towards experiments that may allow a

new forms of production to occur. This second element should be discerned from qualitative

analysis, our analysis above of how profit was managed and its effects on the social distinction in the

Soviet Union is an example we would see as strongly post-capitalist since the state was able to

effectively replace the role of capitalists in the production of surplus-value to produce egalitarian

goals.

27

Chapter Two

“Chinese Capitalism: Articulations of

Endogenous Development and State

Management of China’s Place in Global

Capitalism”

This chapter will introduce our analysis of China by outlining what we see as the key features of how

capitalist accumulation is articulated in China; highlighting that it developed some form of

commercial-capitalism in the same era as Europe, although the historical role of the state prevented

this from occurring in a form which did not stagnate and arguing that that this created a specific

class relation around the state. This specific class structure is essential to identifying the

development of an endogenous form of capitalism centred around subnational state actors and

informally integrated private actors who share a unitary focus on capitalist accumulation for

reproduction despite having a variety of control mechanisms. Lastly, the role of the central state has

been to firstly maintain two specific articulations of wage-labour between: the rural sector where

28

wage-labour was constituted in a form which retained access to agricultural land, and an urban

sector where wage-labour has developed as free wage-labour; to provide the economy with a strong

base for absolute surplus-value accumulation. Second, it has been supporting relative surplus-value

accumulation by ensuring interactions with global capitalism functioned with a framework which

supports the development of the domestic capitalist class.

The Trapped Transition of Chinese Proto-Capitalism: Articulations and Consequences

The pre-capitalist development of China is strongly indebted to the rise of a bureaucratic imperial

state from unification in 211 BC which was able to become increasingly coherent across both

changes of leadership and the changing shape of Chinese territory despite their often chaotic nature

(Wickham 1985). Its essential role was to govern the competing regional interests within China, a

process involving populations comparatively similar to the whole of feudal Europe (Pomeranz

2000:7-8). The development of a bureaucracy occurred from about 600 AD onwards as feudal

landlords essentially combined with state-led systems of patronage to produce a system of

reproduction premised on taxing land worked by peasants who subsisted and produced surpluses

from land that they either owned individually, or rented from a landlord who paid tax from collected

rent. This system was managed directly by the bureaucracy who organised taxation, organised

agricultural production as a whole, maintained contracts, and created agricultural, transport, and

military infrastructure; and importantly prevented challenges to its dominance by ensuring landlord

power was mediated through officials focused on Chinese development as a whole (Elvin; 1973:69-

83; Grant 1997:13-41; Wickham 1985). Following from our discussion on the similarities across

Eurasia the Chinese economy was highly advanced and although the data is contentious, the latest

evidence suggests that it was able to avoid pre-capitalist stagnation and maintain land and labour

productivity with Britain till the early 1800s (Allen 2009).

29

The extent this was capitalist is complex. China was highly integrated with late-feudal

commercialisation and became increasingly so under the Sung Dynasty from approximately 1200 AD,

when the state’s tax base came under threat by extensive nomadic incursions along China’s northern

border and increasingly came to rely on taxing private merchant activity along the southern coast.

Shifting state infrastructural investment to supporting trade as well as creating state monopolies in

lucrative trades such as salt, tea, and alcohol. Production became increasingly commercialised to

support this and increasingly utilised wage-labour on a wide basis. For example 3,600 wage-

labourers worked full time across 36 mining and production facilities for iron and steel in Kiangsu

(Banaji 2010:29-30; Mielants 2007:48-55). These potential developments were, however, cut short

by the Mongol conquest of China in the late 1200s with the imperial state only re-emerging under

the Ming dynasty in 1368 who refocused the state on pre-Sung form of reproduction. Depending on

land taxation though now articulated with a merchant class. Who although formally banned from

inter-state trade were integral to the operation of agricultural production which remained based on

inter-regional markets organised by merchants for basic commodities such as cotton and grain.

Allowing extensive regional divisions of labour, and development of agriculture productivity (Hung

2008b; Mielants 2007:55-60).

The dialectical shift that had occurred between these dynasties is key to understanding the

development of modern China. The re-emergence of the state was not the re-emergence of pre-

capitalist social-relations but rather the creation of a Chinese commercial-capitalism rooted

primarily in maintaining a peripheral capitalist class to increase the tax base by increasing

production. The capitalist nature of the merchants is certainly clear from how they reorganised

production they could control. For example cloth was dyed and calendared by independent artisans

reliant upon merchants for access to cloth and equipment and thus were reconstituted as wage-

30

labour (Hamilton 2006:113-117). They were able to buy cotton directly from peasants through

markets at prices reflecting abstract labour prices from the 1600s onwards. However, peasant

production was mediated by their need to supplement consumption as per household agricultural

land was insufficient to provide either the food necessary or money from sale in the commercialised

economy to maintain reproduction. Consequently production process as a whole was capital-

producing, but merchants were unable to make it capital-positing as peasants grew their own cotton

for production. Consequently peasant production was fundamentally orientated around their needs

for consumption, and need to maintain ownership of their land through taxes, and couldn’t be

expanded by merchants (Brenner and Isett 2002: Huang 1990:58-92).

The state’s support for merchants was also highly focused on ensuring they remained peripheral and

solely limited to supporting peasant consumption. Consequently, through the state supported

surplus-value production by defending merchant’s property rights, providing subsidised loans, and

preferential tax rates, expanding profits was severely curtailed. For example in the aftermath of

unrest in the Suzhou textile workshops during the late 1600s to early 1700s the state responded by

asking merchants to increase wages and lower working hours, providing no support for increases in

absolute surplus-value production beyond expanding production itself. In times of crisis ensuring

food production and social stability was always the priority, with merchants often forced to sell at

discounted prices (Hung 2008b). The consequence of these limits meant that despite these

developments the articulation of capitalism developed in China eventually outright collapsed as

although it was able to expand production and productivity to a limited extent, its inability to even

fully expand absolute surplus-value production meant that these eventually reached a limit which

eventually was discounted by population growth and resulting eventually in the re-emergence of

pre-capitalist stagnation in the form of a Malthusian crisis in the 1800s (Brenner and Isett 2010:639-

642).

31

Though it is difficult to draw a continuous line between this legacy and the socialist state, the unique

form of the Chinese state which was able to act as a ruling class independent from capitalist

accumulation and focused on maintaining the coherency of China as a whole does need to be taken

seriously. The role of the Chinese revolution in essentially solving the 1800s crisis in which the

imperial state collapsed under massive rebellions and consequently shattered into a more localised

production around local landlords who sold goods to the market and peripheral merchants were

able to produce limited industrial development in coastal areas by integrating solely with European

merchants means it essentially reformed the imperial states social role in the absence of

independent capitalist states emerging from Chinas disaggregation as in Europe (Heartfield 2004;

Hung 2008b; Wong 1999). Though it would be an exaggeration to argue that the socialisation of the

means of production by the Chinese socialist state can be seen as a simple recreation of the state

ruling class. The rediscovery of a focus on social stability certainly seems to have been recreated as a

consequence of Chinese socialism’s rooting in the peasantry, and after the failures of the great leap

forward, the focus on a developmentalist form of socialism. Rather than wholesale extraction of

surpluses from the rural sector utilised by the Soviets where the rural sector had been better

integrated into the developing industrial economy (Allen 2003:21-46; Bernstein 1967).

Developments of Endogenous Capitalism: Decentralisation and the Privatisation of an Informal

Cadre-Capitalism

The key, and first, reform of economic governance in China was the decentralisation economic

autonomy to subnational governments from 1979. Providing local cadres with direct control over

collected tax, land, firms, and resources within their constituency as well as the ability to implement

reforms within a strategic framework provided by central government who remitted a portion of

32

collected taxes. The consequence of this has been to facilitate extensive support for pro-growth

measures among subnational governments as increasingly their ability to function has become

dependent on their own ability to manage their economy. This is further supported at the level of

individual cadre by the continued control of local government actor’s career paths by central

government. Creating a sense of competition between subnational governments who are considered

relative to each other for advancement (Hung 2008a; Xu 2011). In this section we will analyse how

this formed the basis for the creation of a single articulated form of the capitalist class in China

around endogenous accumulation articulated primarily by informal links between local cadres and

the increasing space reforms gave to private capitalists.

The Chinese capitalist class emerged from two sets of central state reforms which autonomous

subnational governments operated within. The initial phase delinked firms from the post-capitalist

planning system. The rural sector was the initial site of reform, beginning in the late 1970s with the

replacement of collective landownership with the leasing of small plots to households in return for a

tax of agricultural produce; this created extensive increases in agricultural productivity. Freeing up

labour for non-farm work, and in turn the land provided was specifically distributed to provide

sustenance only and consequently ensured non-farm work was key for increasing incomes (Nee and

Opper 2012:162; Trichur 2012). The increasing capacity for non-farm work was utilised by

subnational government’s investment in township-village enterprise (TVE) to produce the rural

inputs necessary for agricultural production. These were organised autonomously from the state

planning system as they were officially owned by the community residents, though they were de

facto owned by subnational governments due the ambiguity of collective ownership mechanisms

(Weitzmann and Xu 1993). The autonomy of subnational governments also allowed them to gain

from supporting and taxing development of a limited private sector built around household firms.

These firms depended on informal relationships with subnational governments to ensure their

33

property was respected (Huang 2008:50-108) as well as between each other. As the absence of

formal support created a reliance on mutually and publicly defined reputation to ensure payments

were met, and informal cooperation within local production networks to ensure private actors could

successfully operate in markets and maintain control of their production (Nee and Opper 2012:32-

40).

These developments were highly successful. Producing extensive growth throughout the 1980s.

Industrial production increased at an average rate of 20 percent, allowing a shift in rural production

from industrial inputs to consumer goods, creating a massive expansion of non-farm rural

employment by 50 million a year, and a dramatic drop in absolute poverty as incomes were able to

rise dramatically (Andreas 2010:66; Ho 1995; Webber 2008). Though typically this is seen as an

intermediary phase between the expansion of industrial-capitalism in the urban sector and the

decline of socialist planning from our model we would characterise it as capitalist accumulation

focused on absolute surplus-value accumulation.

TVEs utilised capital owned de facto by subnational governments and de facto produced capital

owned by subnational governments, and although they remained interlinked with post-capitalist

mechanics of distribution; with surplus largely distributed according to legal mechanisms or back

into production. TVEs reproduction was dependent on expanding absolute surplus-value to indirectly

support local cadres careers in government (Gabriel 2006:80-88; Webber 2012:47-50). In contrast

reproduction of private firms relied on a typical form of capitalist accumulation utilising credit

accessed through their informal linkages with subnational government or from informal cooperation

between firms. They still remained articulated within post-capitalist mechanics which limited their

34

size though, and consequently tended to remain reliant primarily on the absolute surplus-value

(Andreas 2010).

The concurrent process in the urban sector was far less autonomous as urban firms continued to be

governed as state owned firms (SOF) to supply post-capitalist distribution: subsiding all basic needs

from housing to healthcare, and ensuring access to work (Webber 2008). Thus, although SOFs

remained dominant through the 1980s the key reforms were to incrementally delink them from

socialist planning to closer resemble capitalist firms. Profits increasingly became the key source of

finance for firm reproduction and pricing mechanisms were dismantled, allowing SOFs to sell at

market prices. From 1986 the allocation of workers was replaced with a fixed contract system,

though it remained difficult to outright remove workers from production. This provided a

mechanism for removing subsidies. Especially as SOFs increasingly competed with rural industrial

production, severely cutting into their profits. This process can certainly be seen as a form of

absolute surplus-value accumulation, although one premised entirely on removing the subsidies

provided to workers and changing their working conditions (Hung 2013; Naughton 2007:310-313). In

the absence of alternative forms of sustenance for workers this process was slow though as although

subnational governments were becoming increasingly reliant on profits the central state ensured

they were still responsible for the welfare of all workers within their constituency. The development

of capitalism in the urban sector should then be seen as a the emergence of a genuine state-

capitalism in which workers were increasingly exploited to ensure the state could maintain profits

but in contrast to the rural sector there was little space for the expansion of production separate

from planning.

35

This first phase then created a layer of subnational governments whose reproduction became

premised on the extraction of surplus-value though it is the second phase, inexorably linked to the

process of liberalisation and privatisation which accelerated from the early 1990s, in which they

were able to gain autonomy from post-socialist mechanisms of distribution. It is difficult to separate

these two processes as they essentially unfolded alongside each other as central government

reforms increasingly allowed private capital, both foreign and domestic, to own firms while

simultaneously providing subnational governments with the autonomy to privatise firms for the

purpose of creating growth, including simply selling firms which were loss-making (Gallagher 2004;

Girma and Gong 2008; Xu 2011:1124-1126).

In our view the form this reflected a breakdown of the informal but firm split between private and

subnational government actors as subnational governments were able to sell-off assets they de

facto controlled on the basis of political relationships. Their governance framework allowed them to

effectively form profitable companies by stripping state assets and utilising lines of credit available

to subnational governments, and then sell them to the previously state-linked managers (Hart-

Landsberg and Burkett 2005:54-61; So 2005; Naughton 2007:324). The liberalisation of private firm

laws also allows a consolidation of the incipient rural private capitalist class into larger firms, though

concurrently their reliance on informal relationships with the state has also expanded as extensive

growth relies on the still state monopolised banking and land-use markets (Andreas 2010:74-79; Nee

and Opper 2012 226-258). This generated an extensive capacity for competition, albeit mediated

through subnational governments. Relative surplus-vale accumulation has also become increasingly

important. The evidence for this was found repeatedly by Nee and Opper (2012:195-225) in their

analysis of the Yangzi Delta regions small private sector firms, though of course, as per our analysis,

this occurs in a highly articulated form with a focus on developing innovations in production chains

as a whole through informal networking to not only ensure that the costs of innovation is shared but

36

also that mutual benefits prevent outright stealing of innovations in the face of low quality patent

laws in China.

The highly informal nature of this is essentially a reflection of numerous mechanisms through which

the capitalist class appropriate surplus-value. In subnational governments they primarily rely on a

combination of corruption to outright expropriate funds, legal mechanisms in which increasing the

tax base via surplus-value accumulation can allow for bonuses or promotions, or by informal linkages

with production to direct profits into their households (So 2007). In contrast the private sector relies

on a more direct ability to retain profits from surplus-value accumulation which they utilise to

reproduce and to renew production. Though in turn the pervasive informal relationships between

private and state actors means there is often an interlinking of how these mechanisms allow the

appropriate of surplus-value (So 2009:56). Despite this by highlighting their shared relationship to

the development of wage-labour relations in which the appropriate of surplus-value became

essential to their reproduction it does present a case for seeing them as a highly complex capitalist

class; produced from a the endogenous changes to social-relations within Chinese production.

The Chinese Central States: Maintaining Competiveness for the Goal of Developmentalism

Though China’s endogenous form of capitalist accumulation formed robust inter-capitalist

competition, its history as a developing country means that barriers have been produced for its

ability to compete in international inter-capitalist competition irrespective of this processes

development. The role of the central state as broadly independent from capitalist accumulation,

which it specifically devolved to subnational government has been to provide a macro framework for

ensuring growth occurs to support qualitative change of the Chinese economy as a whole.

37

To offset its low level of development China has sought access to foreign capital and foreign markets

to underpin its production. This has created some signs of dependency, as shown in figure 2.1 above

export to foreign markets has in particular become central for a major part of production to be

realised further aggravated by the concentration of foreign capital in the export trade with nearly 40

percent of exports in 2004 coming from foreign firms utilising foreign capital (Hung 2009; Li 2008:69-

82; Xing 2010). Despite this China has also been able to maintain a remarkable capacity for

developing higher value forms of manufacturing and simultaneously preserving domestic industries

as it upgrades (Strange 2011:545-547). This section will argue that this contradiction is best

explained by the state’s ability to promote a contradictory joining of competiveness stemming from

its continued ability to govern the specific articulation of wage-labour and promote extensive

absolute surplus-value accumulation, as well as its ability to maintain some control over firms due to

the only partial-reform of planning mechanisms.

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Figure 2.1: China's Exports of goods and services as a % of GDP 1980-2005 (Worldbank 2014)

38

The primary foundation of Chinas ability to be competitive is the legacy of the socialist era for

creating wage-labour with levels of education and healthcare comparable to many middle-income

economies while maintain low wages (Li 2008:24-66). Though post-capitalist mechanics were

stripped in the reform era as we described above, the formal maintenance of the socialist state

allowed its underlying organisational mechanism of household registration to remain. This system

links all households to a specific location which is itself characterised as specifically urban or rural

and determines the location in which a worker can gain access to lawful state support in-work and

social-services. Though it has become increasingly liberalised, permanent relocation is largely

restricted to high-skill educated workers, capitalists, and promotions within the state or military. In

contrast rural wage-labour has remained largely restricted in becoming more then temporary

migrants who have few opportunities for permanent residency (Chan and Buckingham 2008;

Naughton 2007:114-126; Wang 2005).

This mechanism has allowed for China to maintain a strict division between two forms of wage-

labour. The rural sector is articulated by continued access to the land for sustenance. This allows the

price of rural wage-labour to remain artificially low as their wages need to only reflect their own

reproduction and supplementing their household, while urban workers who must pay for their

entire household (Lee 2005:27-29). In contrast urban workers are constituted as free wage-labour as

the massive privatisation of urban SOFs delinked them from post-capitalist mechanisms forcing them

to compete by lowering their effective-wage as a reduction of subsidies or by making them accept

lower wages, though also providing them with the ability to move to higher paying roles (Webber

2008).

39

This has been essential for China’s ability to rapidly expand production far beyond its national base

by accessing capital and markets globally through creating a developmental bias for urban coastal

development (Hung 2008a). Though private firms in rural hinterlands of coastal cities have certainly

been able to interlink with this, and even become part of expanding urbanisation. Their capacity for

generate non-farm rural employment decreased dramatically from this period as they became

increasingly uncompetitive relative to urban firms which had better access to capital, technology,

and the higher income urban and foreign markets. Concurrently the integration of rural workers into

markets meant that although they were still able to subsist off their land, the decline of agricultural

prices as grain imports rose from 1996 as a result of increased foreign exchange from exports caused

a rapid drop in their ability to maintain their non-food components of their reproduction on

agriculture alone (Andreas 2010; Zhan and Huang 2013:90-92). These crisis precipitated a major

increase in rural-urban migration as a solution to decreasing incomes with the migration of at least

one family member becoming a necessity for most rural households (Zhan and Huang 2013:97-100)

Though urban workers articulated as free wage-labour have been able to escape the rural crisis,

maintaining relative privilege in the form of higher wages and better working conditions than rural

workers. The intensely competitive labour market rural-workers has meant their freedom has

allowed few increases in wages (Knight and Song 2005:229-252; Meng and Zhang 2001). The

formality of the household registration system has also allowed control over workers to be stretched

to its limits outside of wages. The inability for migrant works to readily access housing has allowed

firms to provide low quality housing at the workers expense, take control of their ability to move

jobs by taking control of their paperwork or withholding wages, and force them into intense

disciplinary regimes with long work hours (Alexander and Chan 2004).

In effect then by maintain the formal division between two forms of articulated wage-labour

absolute surplus-value accumulation has been pushed to its limits. Though as we detailed above,

40

relative surplus-value was certainly key for inter-capitalist competition within China and is acute in

the export sector which is highly price-sensitive, the ability for capitalist accumulation to be

supported by extensive absolute surplus-value accumulation allowed innovation to focus on

effectively reorganising labour intensive production for example by breaking apart the production

process into numerous repetitive low skill tasks. This has allowed fairly extensive increases in labour

productivity relative to other countries with similar technological levels, but it has done little to

promote the labour replacing capital intensive innovation typical characteristic of relative surplus-

value accumulation (Li and Qi 2014). Though this certainly allows for production to expand it

provides few opportunities for the development of a domestic market or taking control of

production chains, and subsequently has the potential to cause the Chinese economy to stagnate as

profit remains entirely premised on maintain low wages and creates little systemic space to shift

towards relative surplus-value accumulation. In response to this the central state has mixed

maintaining low-wages with mechanisms for controlling the flow of foreign capital to ensure

domestic development is ongoing by maintain control over three mechanisms: the regulation of

foreign capital to ensure it can only partially gain control of Chinese production, widespread

investment in internal mechanisms to spur innovative production, maintaining control over the

largest globally-orientated firms to ensure they play a developmental role.

In terms of relative openness, China is largely supportive of foreign capital; offering low taxes and

legal protection. Though all contracts require government approval, the presence of decentralised

subnational governments intimately linked and supportive of capitalist accumulation actually adds to

this support, as competition between them means they are often happy to provide further resources

such as land in return for investment (Naughton 2007:410-411). The national framework in which

this sits though is focused on only allowing foreign capital into specific areas of production;

‘encouraged’ sectors are completely open; ‘restricted’ sectors are limited to joint ventures with a

41

dominant Chinese partner; and ‘restricted’ sectors are completely closed. These categories are

highly specific, often with different statuses for different sections of a single commodities

production and serve to defend indigenous firm’s production for the domestic market. Ensuring this

system continued has been a key priority for the central state, and even as they have joined the

WTO there has been a constant aim to ensure the domestic market opens at a speed useful Chinese

development with headline changes of sectors statuses often compromised with extensive

loopholes which maintain mechanics such as restricting access to marketing in the domestic

economy and obligatory technology transfers on investment, as well as increased state support for

firms which are increasingly competed against (Bach et al. 2006; Breslin 2007:86-102).

These mechanism provide Chinese firms with extensive access to technology, however, alone they

are not sufficient to ensure technological take up and the support of the central state for innovation

has been an essential support structure for ensuring domestic firms have the capacity to integrate

with technology they gain access to. The rise of China’s capacity for producing electronics and

software has been a key example of this, with indigenous investment in research and access to high

quality human capital as key for taking advantage of innovations (Zhou et al. 2011). This has been

supported by the central state: supporting research investment in specifically organised economic

areas where high technology production has become increasingly centred accounting for 80 percent

of total by 2001 and act as focus points for research grants and supporting autonomous

organisations which support translating research into commercial opportunities (Appelbaum et al.

2011; Huang et al. 2004). Furthermore the scale of the Chinese population and its control of labour

have meant this investment can be combined with maintaining its low-value export industries

simultaneously and allowing China to increase its share of world exports across high and low value

production, rather than just among high-tech manufacturing (Hu and Matthews 2008).

42

The third mechanism of the Chinese central state is the continued support for remaining SOFs and

their partial integration with planning mechanisms by maintaining control rights, embedding firms in

developmentalist strategies by controlling high-level appointments, and possessing the power to

bypass boards of directors. Though in turn allowing extensive autonomy in firm management as

well as tying their assessment by the state to profits (Lin and Milhaupt 2013:735-756; Naughton

2010:452-453). This produces two distinct strategies, firstly, the development of multinational firms

such as Lenovo or Haier. Which have developed from expanding subcontracting relationship with

core firms. These firms are autonomously managed with the central state supporting them by

provided special access to research infrastructure, ensure they have access to finance either through

underwriting loans or providing them through the extensively state owned financial sector (Child

and Rodrigues 2005). This has been particularly key for allowing these firms to gain control over

strategic assets for expanding their capacity which are not currently available in China. For example

Lenovo’s acquisition of IBM-PC was underwritten by Chinese state owned banks, and legally

facilitated by being allowed to establish headquarters in the United States. Allowing it to gain access

to production facilities, management teams and a brand legacy specifically geared for selling directly

in core markets (Deng 2009).

Second, using SOF to ensure China has access to the fundamental resources for industrial-capitalist

economies: energy production fuels, metallurgical inputs, industrial chemicals, transport and

aerospace services/technology, and pharmaceuticals. This is supported by the central states support

for their globalisation to specifically secure basic resources necessary for production rather than

expanding China’s the competiveness of Chinese exports. These needs are far from speculative, for

example increasing demand from China caused extensive price increases in the global steel industry

which Chinese firms were largely unable to avoid due to the lack of coordination between small-firm

purchases, often paying $3-$4 more per ton (Ciccantell 2009). Consequently outward investment of

43

SOFs has focused primarily on securing natural resources as part of contracts secured directly

between the Chinese state who is seeking to insure its investment, and the recipient state who is

supported by wider investment in infrastructure or developmentalist projects; typically in peripheral

economies in the Americas or Africa where the Chinese state can offer relatively extensive support

(Mohan 2013; Ramasamy et al. 2012).

Though the integrations of firms into strategic planning has been key to continued state support; the

framework as a whole could not be called post-capitalist firms and the central state has been careful

to ensure the governance of these firms remains competitive irrespective of their control. For

example as SOFs have increasingly been allowed to list on stock markets which provides them with

funds, though simultaneously forces them to compete with capitalist forms of firm management to

maintain stock prices. For example the petrochemical refiner Sinopec fired 20% of its workforce and

agreed to reduce costs by 1.6 billion dollars. This has been specifically promoted by the central state

as it allows their firms to be seen as integrating with international norms separate from their

subservience to state-led strategies (Tobin and Sun 2009). The effects of this have been clear in

analysis of globalised SOFs behaviour. Downs (2007) analysis of Chinese SOFs focused on oil in Africa

for example has shown that although Chinese oil firms have focused on gaining access to Sudanese

oil specifically useful for the Chinese economy this more reflects its similarity to domestically

produced Chinese oil and requires less infrastructural investment to refine. There is also no evidence

that Chinese SOFs are specifically forced to sell to China and instead allowed to sell at market prices

(Brautigam 2009:280-281).

44

Summary

Bringing this together we have argued that China does have an endogenous form of capitalism,

albeit articulated differently from Europe. Historically its specific relationship to commercial-

capitalism developed within the maintenance of a state independent from the capitalist

accumulation process, and in turn today it has created industrial capitalist social-relations by

primarily reforming the role of post-capitalist mechanics rather than simply replicating European

primitive accumulation. The continued role of the central state is to essentially act as a mediator to

ensure that accumulation is both supported, and remains subservient to developmentalist goals.

Its coherency around this form of capitalist accumulation has certainly been successful. The sheer

scale of China has allowed extensive increase in income as the massive expansion of production and

specific way in which wage-labour is articulated has allowed extensive absolute surplus-value

accumulation. This has deeply suppressed domestic demand as surplus-value is primarily captured

by capitalists, and furthermore allowed incredible increases in inequality between the capitalist class

and wage-labour and spatially between rural workers with less access to higher paid positions.

However by allowing rural wage-labour to maintain access to land this has to some extent been

offset by allowing the majority of the populations income to act as an income supplement, while

urban wage-labour has in turn been able to capture disproportionate gains to offset the loss of post-

capitalist support structures (Arrighi 2007:370-372; Naughton 2007:209-228).

45

Chapter Three

“Stability, Meet Capitalism: The Developing

Class Contradictions of Chinese Capitalism”

In contrast to the last chapter which explored the coherence of Chinese capitalism around a specific,

articulated, form of capitalist accumulation; this chapter will attempt to draw out what specific

contradictions this creates within it. Focusing in particular the state’s inability to avoid being a site

for inter-capitalist competition, and the consequences of this for its social role of maintaining

stability as capitalist accumulation increasingly creates sites of class struggle in both the rural and

urban sectors. These contradictions are still developing though we want to argue that key to

understanding this is that the capitalist class in China is not peripheral and consequently the

responses from the central state to maintain stability are increasingly limits its ability to produce an

alternative model of development.

To show this we will divide the chapter into two parts. The first will explore the ways in which the

state has managed increasing signs of class struggle among wage-labour through the development

of capitalism, and the consequences of this to maintain its crutch of absolute surplus-value

46

accumulation. The second part will focus on the extent to which the Chinese central state can be

seen to reflect inter-capitalist class conflict. In particular highlighting the contradiction between the

states desire to move from exports and the direct interests of Chinese capitalists, and how this

conflict shows a diminution of the central states capacity to maintain independence.

The States Management of Class-Struggle: Supporting Development

As we outlined in the last chapter; the maintenance of China’s rural-urban divide was a product of

both the household registration system and the systematic abandoning of rural development,

driving a systemic expansion of rural-urban migration within a framework that prevented

urbanisation itself. The result of this process was outright destitution in the rural sector as it largely

found itself unable to functionally reproduce without remittances from migrant workers (Zhan and

Huang 2013). This was further exacerbated by the continued presence of a subnational government

largely dependent on capitalist accumulation that predominantly utilised predatory practices to

survive; utilising extensive corruption, excessive taxes, and abusing the ambiguity of land-ownership

to supplement the failure of local growth. In response to this the 1990s saw an escalation of rural

worker conflicts against subnational government. This was far from a stable, and confrontation often

took the form of outright rebellions; with 1997 alone seeing risings of a combined half a million rural

workers across four provinces which violently seized state assets and attacked subnational buildings

and officials (Walker 2006).

Though these protests reflected a widespread dissatisfaction with the development of Chinese

capitalism the relative immunity of the central state reflected its continuing ideological basis in the

revolutionary Maoist era and subsequently its official support for the peasantry. This was directly

articulated by rural wage-labour throughout the 1990s that utilised cultural revolution era slogans as

47

a direct way to identify the central state as the authority they were appealing to for resolution (Li

2004; So 2007). In the absence of a threat to its stability the central state was able to offset the

urban-bias by expanding capitalist accumulation to the countryside from 2005 onwards. This

involved financial assistance for non-coastal regions to revive rural industrialisation; and reforming

of the agricultural sector by removing taxation, and reinvesting in health and education social

programs. These policies have been broadly successful, increasing income growth in rural areas to

8.8% a year from 5.2% a year through the 1990s as a result of the returning capacity of the rural

sector to create high quality non-farm work in the increasingly better supported local industries and

or as labourers in the increasingly profitable agricultural sector (Kwong 2010; Zhan and Huang 2013).

In doing so though the central state has increasingly undermined its support for differently

articulated wage-labour to maintain high levels of absolute surplus-value accumulation, as urban

migration has increasingly become uncompetitive for rural workers compared to selling their labour

locally where they continue to have access to the increasing benefits of the rural household

registration system. The effect of this fundamental change has been increasingly realised by

academics in discussions on China’s apparent shortage of migrant labour, with Guangdong alone

unable to fill 2,000,000 jobs in 2004 (Zhan and Huang 2013). The effect has been to greatly increase

pressure to place limits on absolute surplus-value accumulation with the urban sector increasingly

becoming a site of class-struggle as urban workers and a new generation of migrant workers

progressively turned their focus to defending workers interests, supporting wage increases and

better working conditions (Chan 2013).

In response to this the Chinese central state has clearly prioritised stability over maintaining the

capitalist accumulations capacity for extensive absolute surplus-value accumulation. This has been

48

clear at the local level where the central state has extensively supported workers in winning wage

increases, through ensuring that their conflicts remain socially stable. For example reforming

national policy following the strikes from 2004 in the Pearl River Delta export region to increasingly

support labour rights by allowing union representation in foreign firms such as Wal-Mart from 2006.

This culminated in the Labour Laws which came into effect in 2008 which provided extensive new

legal support for wage-labour and widely expanded their rights, and have been widely supported

even against firms such as Huawei which receive support from the central state (Silver and Zhang

2009). In supporting this though the central state has also attempted to ensure wage-labour remains

focused solely on challenging capitalists for being exploitative and subnational governments for not

enforcing laws. There is outright suppression of any alternatives to the official trade union, a focus

on solving workplace struggles as individual cases and are not linked into wider campaigns and

support remains paternalistic with little focus on class (Friedman 2014).

The Chinese State as a Confusing Committee Of the Bourgeoisie

The desire to increase wages reached an apogee with the financial crisis in 2008 as the capacity for

continue depending on foreign markets became increasingly threatened by the collapse of core

demand. In Guangdong 2542 firms collapsed and 30 million migrants were laid off in 2008 alone

(Dunford and Yeung 2011:40). The response to this was to focus on developing a domestic market by

accelerating wage increases to facilitate consumption. This has effectively helped translate the

piecemeal responses to class struggle into a more coherent model for post-crisis development (Hung

2009). In this section we want to highlight the potential problems that the Chinese central state is

facing in trying to implement this model as a consequence of the increasing ability for the capitalist

class to act both autonomous from the state, and to influence the state. Though we wouldn’t

characterise the developments as the Chinese state becoming completely subservient to capitalism,

we would argue it is increasingly confused about how to provide stability independent from

49

supporting the capitalist class. A process that is clearest in the apparent inter-party struggles over

new regional models of Chinese capitalism.

The independence of the capitalist class has been reflected on multiple levels. The reliance on

autonomous subnational governments with extensive informal links to the capitalist class has

allowed many localities to simply ignore reforms. For example in response to the Labour Laws

subnational governments have been instrumental in facilitating markets for the ballooning of wage-

labour employed through agencies from 20 million to 60 million between 2008 to 2010, allowing

firms to avoid regulations (Friedman 2014). The party itself has also developed a capitalist

contingent after membership was explicitly opened to them by Jiang Zemin, and increasingly if a

capitalist is not a party member then someone in their family is (Goodman 2008). Their influence is

seen to be central to the “elitist” faction who are highly linked to the coastal export-led model to

ensure rapid economic development could be maintained, and although they are currently

secondary to the “populist” faction linked who have been key for increasing wages in an attempt to

maintain stability there are clear signs their influence hasn’t waned (Gray 2010; Hung 2009:13-14).

This has created concrete limits for the Chinese capitalism to reform the economy around

consumption, as beyond the capacity for subnational governments to resist, the increasing sense

that the central state expresses only a specific form of stability aligned with the capitalist class has

provided few opportunities for extensive investment in alternatives. For example, though the post-

package stimulus package did increase social spending it primarily invested in infrastructure and

construction projects to offset the loss of core demand for industrial commodities, a focus further

buoyed by the liberalisation of lending which allowed autonomous subnational governments to self-

50

fund production to maintain surplus-value accumulation but within soft budget constrains (Ten Brink

2013).

The visibility of this conflict has been sharpest around the rise and fall of the inland province

Chongqing’s attempt to integrate the rural and urban sectors as an alternative to export led

development (Cui 2011). This relied on creating a market for leasing state-owned land and utilising

the profits to invest in infrastructure and SOFs, with the express purpose of supporting the city’s

ability to compete for capital and to direct investment in human infrastructure including, for

example, the creation of mass housing for migrant workers (Huang 2011). This model was highly

successful, Chongqing urban population boomed and it became a rising centre of manufacturing. Its

goal to limit inequality was supported ideologically by Bo Xilai who equated the Chongqing model

with resurgent socialism. In particular reviving the Maoist concept of a mass line, pushing cadres to

regularly visit poor areas and provide forums for mass participation in decision making, which were

further utilised for a brutal crackdown on corruption. The success and popularity of this model

became increasingly noticed by the central state which began to openly promote its model through

2010 and 2011 as a clear alternative to the export led model (Cartier and Tomba 2012; Huang 2011;

Zhang and Peck 2014).

The opposition from pro-export factions developed rapidly, becoming increasingly public in

discussions between the new left and liberals, and eventually resulted in Bo Xilais arrest in 2012 on

corruption charges as the wider party apparatus moved against him. Though it is difficult to link this

directly to the emergent pro-capitalist faction Bo certainly seems to have been opposed directly by a

range of elites across the traditional factions who were opposed to his direct approach to solving

inequality and willingness to crackdown on the informal underpinnings of the capitalist class

(Fewsmith 2012; Hunag 2011). In turn though the capitalist class has apparently not gained complete

51

independence, and increasingly the post-Chongqing consensus contains a willingness to promote

some wage increases along the coast to promote technological development. However export

dependence will continue to be key to the development of China with rebalancing emerging slowly

and contingently based on moving low-wage production to inland provinces where wages will

remain low (Mulvad 2014).

Summary

The key contradiction of the Chinese articulation of capitalism is then the central states increasing

inability to manage the whole of China as it becomes increasingly reliant on endogenous capitalist

accumulation. By contrasting the major changes in state economic policy which have become

essential for maintain stability after the 1990s, and the failures to produce an alternative not linked

to continuing support for the export focused capitalist class we argue that the Chinese state has

been unsuccessful at preventing the emergence of an independent capitalist class over the reform

era. Though in turn the state should not be considered subservient either. The conflict around

regional models for the non-coastal development demonstrates this, although the capitalist class

were able to prevent a dramatic shift towards rebalancing this has had to be met with some

compromise with the “populist” faction of the party in the acceptance that production needs to be

better integrated with non-coastal regions.

In our view this will create an inevitable contradiction within how social relations in China are

currently constituted, simply expanding mechanisms for absolute surplus-value focused

accumulation to the entire of China will eventually mean further removal of the rural workforce

from farm work and inevitably undermine the mechanism which itself allows a reliance on constant

expansion of absolute surplus-value as low wages cannot be maintained. To maintain profits then a

52

shift to relative surplus-value centred accumulation will eventually be needed and the increasingly

independent capitalist class will find the state is a key barrier to the mobility of labour and

competition between firms that will require for profits to expand between independent capitalists.

This is not a teleological inevitability. The Chinese state could simply try to maintain the current

system; however, it represents an unsolvable contradiction. Either Chinese capitalism must be

allowed to stagnate in favour of stability as a policy choice which would itself undermine stability, or

Chinese capitalisms social-relations must be provided space to alter to allow greater development

despite the consequences of that for stability. Though this shouldn’t be seen as either moving

towards a “pure” capitalism, it does imply that the specific social relations accumulation depends on

in China seem to have developed an endogenous contradiction which sits parallel to contradictions

that face others engaged in capitalist accumulation.

53

Conclusion

In conclusion we have presented an analysis of China which can bring together the disparate analysis

in reductionist models to argue that it is coherent and has an endogenous dynamic. In our analysis

key to understanding China is its pre-capitalist legacy, in which the ruling class were linked primarily

to a highly developed state and consequently capitalist social-relations are best understood as highly

integrated with the state who maintain control over China as a whole.

This history reflects a specific class context for the accumulation process which China has maintained

as the historical balance of forces have maintained some lineage through to today. In China today

this is clearest at the local level where the capitalist class are articulated by subnational

government’s informal linkages with a more traditional capitalist class. In contrast the central states

primary influence on capitalism is reflected in its management of the duality between the

articulations of rural and urban wage-labour.

The coherency of this position was further supported by our analysis of the central contradiction of

Chinese capitalism as essentially pressure on these roles to be maintained. The central state seems

increasingly willing to alter the articulation of wage-labour to support stability, though are facing

concrete limits as it comes into contradiction with the capitalist classes reliance on firstly capitalist

54

accumulation to ensure their reproduction, and specifically absolute surplus-value biased

accumulation to ensure it can realise its production on foreign markets.

Coming to this position has reflected our methods ability to minimise reductionism, developing a

model of capitalism primarily from historical induction to identify the specific elements that

constitute the basics of capitalism and allowing for extensive flexibility beyond that. Consequently in

contrast to NIE perspectives we do not reduce Chinese capitalism to solely the emergence of a

private sector as it is clear that the state, and particularly subnational governments, have structured

in such a way that they can both replace and augment the private sector. Parralell to this in

discussing how Chinese social relations operate in regards to accumulation, and showing it does

have an essentially endogenous basis we have show that rather than the articulated nature of rural

wage-labour acting as any sort of block for Chinese capitalism, it actually exists as a central feature

which has been key to its ability to maintain exports in the absence of access to the technology and

capital necessary for sustained growth. With contradictions developing concretely, rather than in

terms of failing to reach an ideal status.

Limits and Future Research

From the introduction we posited that our limits were largely empirical rather than theoretical. In

our view we have matched this by highlighting the ability for theories of capitalism to be reoriented

around the complexity of history, and utilised to recognise the complexity of the Chinese economy.

Despite this some limitations are still clear from our paper and here we want to highlight two

potential areas which future research should focus on to expand our model:

1. Though there is existence evidence on different regional forms of capitalism in China, the extent

to which this has produced factions within the capitalist class is difficult to detect. Though it is

55

clear that there are extensive informal links between subnational governments and private

entrepreneurs, who share a reliance on capitalist accumulation. It is difficult to identify clearly if

they represent separate conflicting parts of the capitalist class, or interdependent parts

reflecting the specific organisation of Chinese capitalism.

2. Though there is detailed literature on regions of capitalism from Critical NIE scholars such as

Zhang and Peck (2014) they focus exclusively on regions which have successfully developed and

consequently to some extent is reliant on exports. Though it seems counter-intuitive an analysis

of stagnant locations in the periphery of China and the nature of surplus-value accumulation

there would be essential to discovering full consequences of Chinas articulation of rural wage-

labour where capitalist accumulation is highly underdeveloped. Especially to understand if it

should be seen as solely a mechanism for ensuring absolute surplus-value accumulation, or it

should be understood to have consequences for stability in independent of this function.

56

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