What is socialist about “socialism with Chinese characteristics”?

Deng Xiaoping’s classic slogan is wonderful because of its strategic ambiguity: just what are those Chinese characteristics anyway? And this slipperiness has led to a tendency to think of “socialism with Chinese characteristics” as a kind of dodge, a way of saying, yeah, China is really capitalist but we just don’t want to admit it, wink wink nudge nudge. I’m not sure that was ever correct, and no one less than Xi Jinping himself seems to be urging us not to think that way. In his now-famous speech on Deng’s legacy, Xi had a pretty good one-liner: “Socialism with Chinese characteristics is socialism, and not some other -ism.” And Xi repeated that line again in his speech on Friday for the 95th anniversary of the founding of the Communist Party.

Yet for a speech that was billed as heavily ideological, and whose theme was supposedly the eternal verities of Marxism, there is not a huge amount of ideological content to be found. To me the speech feels not so much ideological as highly nationalist. Xi says the Communist Party’s main achievement is not realizing socialism in one country, or some other Marxist shibboleth, but “the march of the Chinese nation with its more than 5,000 years of civilization toward comprehensive modernization.” There is plenty of Deng-style pragmatism (“Whether socialism with Chinese characteristics is good depends on the facts, on the judgment of the Chinese people”) and focus on economic growth (“Development is the Party’s top priority in governing and reviving the nation, and is the key to solving all of China’s problems”).

So it would be easy to interpret “socialism with Chinese characteristics” as just meaning whatever makes China rich and strong. And such an interpretation would be pretty consistent with Deng’s own fundamentally nationalist perspective. Yet I’m not sure we can really view the Communist Party as pure maximizing pragmatists completely unconstrained by history or ideology–surely it does make a difference that the Party comes out of the socialist tradition? Of course, the most obvious consequence of the Party’s historical trajectory is its commitment to authoritarian rule. The political meaning of “socialism with Chinese characteristics” is so obvious that it hardly needs stating: the continued rule of the Chinese Communist Party. Or, as Xi put it on Friday, that the “choice of the Chinese Communist Party to lead China’s great revival is correct.”

But I’ve also been wondering whether there are other, more purely economic consequences: what do Chinese leaders think are the fundamentals of socialism that they cannot abandon and still call themselves socialist? So far, I’ve come up with two answers. And as so often, one of Deng’s own pithy comments provides the best summary. In a 1985 interview with American journalists, Deng said: “In the course of reform we shall make sure of two things: one is that the public sector of the economy is always predominant; the other is that in developing the economy we seek common prosperity, always trying to avoid polarization.” I think that’s exactly right.

I would propose, then, that in practical terms the “socialism” part of “socialism with Chinese characteristics” means 1) a continued large role for state-owned enterprises, and 2) generous regional development policies aimed at offsetting the inequalities produced by market forces.

That the Communist Party is committed to SOEs will probably not surprise many people. Still, it’s worth recalling just how deep the historical roots are. The economic model that China’s post-1978 leaders have been working with owes a lot to Lenin’s New Economic Policy of the early 1920s in Russia. To recover from the excesses and economic disasters of the early Bolshevik period, Lenin proposed a mixed-economy model, in which market mechanisms and private firms play a major role but SOEs occupy a strategic position (the famous phrase “the commanding heights” is often attributed to Lenin at this time, but it appears only in fragmentary form in his collected works; Nikolai Bukharin, the theorist of the NEP, should probably get the credit). This mixed model did not last long in Russia, but it has persisted for some decades now in China. Given that Chinese Communist Party documents still refer to “the basic economic system with public ownership playing a dominant role,” I am probably on pretty safe ground in saying that the Party feels that it cannot give up SOEs.

The regional development angle may be a bit less obvious. But I think it also has deep roots in a different strand of socialist thought: Maoist egalitarianism. Here a good guide is John G. Gurley’s 1970 essay “Capitalist and Maoist Economic Development,” a treatment of Maoism that is unusually sympathetic. Gurley introduced a distinction between capitalist “building on the best” (investing in the places and people with the greatest comparative advantage) and Maoist “building on the worst” (deliberately investing in the places and people that are disadvantaged). Here’s how he summarizes the difference:

Capitalist development, even when most successful, is always a trickle-down development. …. In many ways, then, Maoist ideology rejects the capitalist principle of building on the best, even though the principle cannot help but be followed to some extent in any effort at economic development. However, the Maoist departures from the principle are the important thing. While capitalism, in their view, strives one-sidedly for efficiency in producing goods, Maoism, while also seeking some high degree of efficiency, at the same time, in numerous ways, builds on “the worst.” … Maoists build on the worst not, of course, because they take great delight in lowering economic efficiency, but rather to involve everyone in the development process, to pursue development without leaving a single person behind, to achieve a balanced growth rather than a lopsided one.

Mao and Deng

Mao and Deng

Deng was very explicit that his reforms rejected Maoist egalitarianism in its pure form; what he derided as “everyone eating from the same big pot” was a recipe for poverty and backwardness. But he also made clear that his acceptance of some economic inequality was purely instrumental; as he told Mike Wallace“We permit some people and some regions to become prosperous first, for the purpose of achieving common prosperity faster. That is why our policy will not lead to polarization, to a situation where the rich get richer while the poor get poorer.

So at the level of principles egalitarianism was not totally abandoned. And one of the most consistent ways in which this principle has been expressed is in repeated efforts to boost China’s less developed regions: from the inland development projects of the 1960s and 1970s, to the “Great Western Development” project launched by Jiang Zemin in 1999, to the “Revitalize the Northeast” campaign under Hu Jintao after 2003. All of those plans were very clearly in the spirit of “building on the worst.” In the latest egalitarian gesture, the State Council announced, just before the Party’s July 1 anniversary, an aid program for the isolated mountainous areas where Communist revolutionaries sheltered during the civil war.

So a large role for state-owned enterprises and regional development plans are features, not bugs, in the China economic model. Unfortunately a lot of the obvious waste, inefficiency and misallocation in the Chinese economy in recent years are also attributable to these features. If I’m right about the political importance of these two policies, then fixing those problems could be quite challenging.

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