Capitalist Revolution in China

We have seen communist revolutions in many places around the world. Most of them are bloody and disruptive because their aim is to overthrow the existing order. The political result is the communist party taking control over the whole country and most aspects of daily life. The economic result is that the people wind up poorer except the top 1% communist elites. Communism is obsessed with wealth distribution using brute force. The communist party ends up controlling most of the country’s wealth in the name of the state.

By contrast, all capitalist revolutions are bloodless albeit disruptive, and the process may continue for decades. The existing order is not overthrown. The revolution is usually triggered by new technologies accompanied by drastic changes in government policies. Three well-known cases are: the Industrial Revolution in England, a similar one a century later in America, and the capitalist revolution in China at present. Capitalism emphasizes wealth creation that spreads from the capitalists or entrepreneurs to the rest of society through increases in employment, wages, and private property ownership. The pace of this diffusion of wealth varies from one country to another. The result that really matters is the creation of a large vibrant middle class which is characteristically absent in the communist system. The size and strength of the middle class are the key indicators of the health and progress of the capitalist system.

The capitalist revolution in China beginning around 1980 presents a very unique case in modern times. It was not triggered by new technologies which played an important role only later. Paradoxically, it originated from the vision of Deng Xiaoping, head of the Chinese Communist Party (CCP), who believed that the country could not progress without private enterprise and opening to the outside world. The former provides material incentives to the people while the latter assimilates new technologies from foreign companies. Deng was considered a “Capitalist Roader” in the Cultural Revolution and was banished several times from high positions, but he managed to come back and eventually assumed the top post. His policy means in effect abandoning communist ideology that legitimizes the party that rules over the people. It is the boldest radical move because it means potentially liquidating his own political power and that of the CCP.

Deng faced heavy opposition from some of his comrades and the communist die-hards who thought that his suicidal plan would cause national disintegration. Besides losing political control, the opposition was afraid of uneven distribution of wealth once private enterprise was legalized, and the people would race to get rich quick. Deng was not afraid. He was convinced that material incentives absent in the communist system were all that required to move the country. Being a blunt and pragmatic leader, Deng was reported to have argued during a heated meeting that “Somebody has to get rich first if the whole country is to move forward”. His words aroused the material instincts of his comrades who suddenly realized that it would be they who would get rich first because in any society, the powerful elites always possess an inherent advantage. Thus the CCP lent full support to the capitalist revolution.

This revolution was a radical path of no return. The results make history in view of the country’s transformative growth, ideological contradictions, environmental degradation, and rampant corruption. In 1989, the CCP risked being overthrown by a rebellion coming from students, later supported by workers, which is known as the Tiananmen incident. Deng ordered the army into the streets to put out the fire, thereby ruining his image as the father of modernized China.

Despite sputtering recently, the Chinese economy continues to grow much faster than most countries. Its biggest achievement is the creation of a huge vibrant middle class numbering around 600 million from nearly zero back in 1980. The size of this middle class is big enough to self-sustain without relying on overseas markets. This is why the planners are shifting priority toward an internal consumer market with more emphasis on services than manufacturing for exports. One interesting fact is that among the Chinese millionaires and billionaires, most of them started out from nothing and don’t even belong to the communist party with a membership of 88 million.

What will happen to the CCP in the future? When they first launched the capitalist revolution, they knew that their power would be eroded due to the rise of market forces such as private ownership, the middle class, and big corporations. The communist elites and their offsprings are now fully invested in the new economy and have become part of the capitalist system. They would be foolish to do anything to harm their own interests. Many critics say the CCP cannot survive the huge contradiction between capitalist practice and communist ideology. Apparently they have succeeded after nearly 50 years of managing this contradiction. You may say that they have betrayed their communist ideals. The fact is, people do not care about ideology if they are given the opportunity to make a better life for themselves.

Communism in China has already become irrelevant in nearly all aspects of daily life. When the communist government wants to assert its authority, it finds itself bound by all the laws it has enacted to keep the capitalist economy functioning. Besides, the government is increasingly restrained by public opinion coming from the middle class which grows bigger, wealthier and more sophisticated. Thus we may say that all revolutions will eventually overthrow the existing order. However, the capitalist revolution takes much longer. Instead of using brute force to dismantle the existing order, capitalism corrodes it until it eventually falls apart.

This entry was posted in 21st Century, Business/Investment, Economics/Politics. Bookmark the permalink.

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