Part 1 – The Factual Results of Reform and Opening Up
‘Over the past 95 years, the CPC has accomplished so many tasks which were thought to be impossible by other political forces. The reason for this has been precisely attributed to our adoption of Marxism as our guide of action, while the theories of Marxism have then been further developed. This has allowed our Party to free itself from the limitations of all previous political forces, which focussed on pursuing their own special interests. This has enabled us to hold on to the materialist dialectic view and selflessly lead China’s revolution, development and reform, while sticking to the truth and correcting mistakes we made. Our Party has never wavered in its belief in Marxism either in favourable or unfavourable circumstances… Marxism is the fundamental guiding thought for the establishment of our Party and our country. Departing from or abandoning Marxism, the Party would lose its soul and direction. On the issue of Marxism as the fundamental guiding thought, we shall not waver under any circumstances.’(1)
This statement by Xi Jinping on the 95th anniversary of the founding of the Communist Party of China (CPC) is particularly relevant as China celebrates the 40th anniversary of reform and opening up. A reason for this is because, despite this clear statement on the relation of China, the CPC and Marxism, attempts are made by some forces in the West, and even in China, to claim that China achieved its gigantic successes not ‘because of’ but ‘despite’ Marxism. Why this claim is made is simple. As this article will show in detail, systematic international and historic comparisons show that China’s economic achievement during reform and opening up is by far the greatest in the whole of human history - from the viewpoint of speed of improvement in living standards, rapidity of economic growth, the proportion of the world’s population benefitting from that growth, and the elimination of poverty. That is, in summary, under reform and opening up China’s economic achievement was the greatest of any country in human history not only for itself but for the overall wellbeing of humanity. Which system created such unprecedented success is therefore of not merely Chinese but universal global significance. Because:
If this success is due to Marxism and socialism then, as Chinese President Xi Jinping stated in his report to the 19th National Congress of the CPC in October 2017, socialism with Chinese characteristics, ‘offers a new option for other countries and nations who want to speed up their development while preserving their independence.’(2) Indeed, the unprecedented achievements of reform and opening up show the superiority of the socialist path of development to capitalism.
This latter admission is, of course, unacceptable to the West – if it acknowledged that the socialist path of development was proven to be superior to capitalism then the Western system would lose its legitimacy both internationally and domestically. Therefore, ‘the West’ necessarily has to claim that the unprecedented success of reform and opening up, of socialism with Chinese characteristics, occurred not because of Marxism but because China abandoned or deviated from Marxism.
The aim of this article is therefore simple. It shows that China’s analysis is correct and the claim of the West, made to attempt to safeguard its capitalist legitimacy, is false. To do so four interrelated points will be established:
First, it will be demonstrated that the economic success of reform and opening up, as already stated, is indeed the greatest of any country in human history.
Second, that reform and opening up was entirely in line with Marx’s concepts, and its success was therefore due to this. Indeed, reform and opening up was a ‘return to Marx’ after deviations from Marx which existed in the former USSR – this return to Marx’s concepts, in turn, allowed the further development of Marxism up to the 19th Party Congress.
Third, it will be shown that Marx’s economic concepts are proven correct not only as an issue of ‘dogma’, that is by analysis of Marx’s writings, but also by factual studies of the Western capitalist economies. The success of reform and opening up, and the Marxism on which it was based, is therefore due to the method of ‘seek truth from facts’.
Fourth, that because for ideological reasons the Western capitalism is forced to reject Marxism the West is itself caught in a trap of being forced to deny the facts of economic development - which weakens the West’s ability to overcome its own economic problems. This is one of the key reasons why the last 40 years saw in parallel in China the greatest economic achievement in human history in reform and opening up, but in the West the same period witnessed the road to the ‘new mediocre’ and the international financial crisis.
In summary, analysing the Marxist foundations of the reform and opening up is of significance not only for understanding the success of China but for understanding the road to the present slow growth, the ‘new mediocre’ in the Western economies. The scale of China’s success in reform and opening up is, therefore, of decisive importance to China and to the world both practically and theoretically – the two being necessarily interrelated.
In this article, following the method of ‘seek truth from facts’, first the full international and historical comparative scale of success of China’s reform and opening up will be established, and then the theoretical reasons for this success will be analysed in terms of both Marxist and ‘Western’ economics. Finally, some brief conclusions will be drawn on why countries which do not accept a Marxist framework can still benefit from the economic framework of China’s reform and opening up.
Part 1 – The factual results of reform and opening up
In such serious matters as China’s economic development there is no virtue in optimism, and no virtue in pessimism, there is only a virtue in realism. It is therefore necessary to be clear that China’s economic achievement during the 40 years of reform and opening up is the greatest in the whole of human history whether measured by speed of economic development, by the number of people whose lives were improved by this development, by the proportion of humanity which directly benefitted from this, by the sustained speed of increase in living standards achieved, and by poverty reduction. These clear facts will be established through a systematic series of historic and international comparisons of China’s reform and opening up with development in other countries.
It is, furthermore, crucial to establish these objective facts as the starting point for analysis. First, because it relates to the question of China’s accurate judgement of its own achievements and ‘self-confidence’. US ‘neo-con’, ‘economic nationalist’ and other enemies of China wish to factually hide the scale of China’s achievement because to admit it would transform the world's understanding of China – including changing the US population’s judgement on China. Second, because this determines how significant for economic theory China’s reform and opening up is. If the results of reform and opening up were a minor or medium scale economic event, then it would not be extremely significant to analyse the reasons for its success. Because the success of reform and opening up is a gigantic event it, in contrast, it is absolutely necessary to theoretically explain it. More generally in terms of the impact of reform and opening up:
For developing countries, that is the overwhelming majority of the world's population, to openly admit that China’s economic achievement is the greatest in human history would be to show that China's socialist 'economic model' is by far most effective practical way to achieve economic growth, to gigantically and rapidly improve the living standards of the average population, and to radically eliminate poverty.
For the advanced economies China's socialist market economy, with its decisive role of the state sector, but combined with a private sector, shows a clear and more successful alternative to the failure of neo-liberalism in the 'Washington Consensus' and the neo-liberal ‘austerity’ policies pursued by advanced countries.
Most seriously of all for US neo-cons and economic nationalists, China shows that the most successful economy in the world in producing economic growth and improving living standards is a socialist and not a capitalist one. Understanding of this situation by the US population would, of course, change the political situation in the US.
Within China the ‘comprador intelligentsia’, that is those who are tied to foreign interests and not those of China, also wish to hide the true scale of China’s development. This is because accurate understanding of the scale of China’s achievement would destroy their claim that foreign models were superior to China.
Therefore, the first issue is to make a systematic international and historic comparison of China’s economic achievements compared with other countries since reform and opening up was launched by Deng Xiaoping and Chen Yun.
The pre-reform and opening up period To accurately judge the effects of reform and opening up it is necessary to put it in its historical and international context. However, to avoid making this article unnecessarily long, the period of China’s period of development prior to reform and opening up, from 1949-1978, will not be analysed in detail here – this is dealt with in The Great Chess Game (一盘大棋? ——中国新命运解析). However, to put ‘reform and opening up’ in context certain key points regarding its starting point must be established.
First, it is necessary to accurately understand how extraordinarily poor China was in 1949 after a century of foreign interventions and invasions. The data accompanying Maddison’s classic work on long term economic development, The World Economy, shows that in 1950 only two Asian and eight African countries had lower per capita GDPs than China - Myanmar, Mongolia, Botswana, Burundi, Ethiopia, Guinea, Guinea Bissau, Lesotho, Malawi, and Tanzania while India’s per capita GDP was 38% higher than China’s. The Conference Board, analysing the same year, estimates that, for countries for which it gives data, Tanzania had a slightly higher per capita GDP than China, but Burkina Faso, Cambodia, and Mozambique had lower per capita GDP’s than China – it also concludes that India’s per capita GDP was only 27% higher than China’s. It is evident such details make no significant difference – in 1949 China was not merely underdeveloped it was one of the poorest countries in the world.
Given China’s extreme poverty and economic underdevelopment in 1949, some authors emphasise that in 1949-78 indispensable initial industrial bases were created from which reform and opening up could be launched. This is correct. But the most extraordinary achievement in China in 1949-78, a literal ‘miracle’, was in the social field. In the 27 years between the establishment of the People’s Republic of China in 1949, and the death of Mao Zedong in 1976, life expectancy in China increased by 31 years – or over a year per chronological year. To understand the true scale of such an achievement in comparative terms, it need simply be noted that China’s rate of increase of life expectancy in the three decades after 1949 was the fastest ever recorded in a major country in human history – detailed comparisons establishing this fact are given in The Great Chess Game. In comparison, in the most comparable country to China, in 27 years after India’s independence average life expectancy increased by 19 years – this is shown in Figure 1. The theory of ‘historical nihilism’, denying the quite extraordinary social achievements of China prior to reform and opening up, is therefore simply false. As Xi Jinping noted regarding the two periods of China’s post-1949 development: ‘The two phases – at once related to and distinct from each other – are both pragmatic explorations in building socialism conducted by the people under the leadership of the Party. Chinese socialism was initiated after the launch of reform and opening up and based on more than 20 years of development since the socialist system was established in the 1950s after the People’s Republic of China (PRC) was founded. Although the two historical phases are very different in their guiding thoughts, principles, policies, and practical work, they are by no means separated from or opposed to each other. We should neither negate the pre- reform-and-opening-up phase in comparison with the post-reform-and -opening-up phase, nor the converse.(3)
China's is the fastest growth in a major economy in human history Turning to the post-1978 period, the first point which may be established is that China’s economic growth under socialist reform and opening up is the fastest in a major economy in human history. The comparison made here is systematic - with all countries both after and before World War II. Taking the most rapidly growing major economies, and also the largest economies, the following is the situation – see Figure 2.
Between 1978 and 2017 China’s economy expanded at an annual average 9.5% growth rate, growing in size almost 35 times.
For comparison the fastest rates of growth of other major economies over a 39- year period were by the so called ‘Asian Tigers’. These were:
Taiwan Province of China, expanding at an average 8.9% and increasing in size almost 28 times in 1950-89;
South Korea expanding at an annual average 8.4% or increasing in size almost 24 times in 1952-91;
Hong Kong SAR growing at an average annual 8.2% or expanding almost 22 times in 1958-1997;
Singapore growing at an annual average 8.2%, or expanding almost 22 times in 1951-1990.
But all the ‘Asian Tiger’ economies were very small compared to China. They comprised only 1.4% of the world’s population compared to the 22.3% for China in 1978. Taking really large economies, which are therefore more comparable to China, the fastest growth over a 39- year period ever recorded, outside recovery from almost total devastation of an economy by wartime defeat, was Japan in 1950-89 when it expanded at an annual average 6.9% or by almost 14 times.
It is also clear China far outperformed the advanced economies:
As already noted, prior to China, the fastest prolonged growth recorded in a large economy, outside recovery from devastation by defeat in war, was Japan in 1950-89 when it expanded at an annual average 6.9%.(4)
The fastest growth recorded by the US over a 39-year period was 660% in 1933-1972 – an annual average 5.0%.
The fastest growth ever recorded by Germany, outside recovery from devastation by defeat in war, was in 1950-89 when it expanded at an annual average 4.2% or by almost five times.(5)
The UK’s fastest ever growth was 270%, an annual average 2.6%, in 1950-1989.
This data therefore also shows clearly that it is misunderstanding to believe that at some point in the past the Western advanced economies grew as rapidly as China and that they have slowed. The advanced economies never grew in a sustained way remotely as rapidly as China.
The size of China's economic achievement Although the fact that China’s is the fastest sustained growth in a major economy in human history is by itself astonishing nevertheless, stated in that way, it greatly understates the scale of China’s economic achievement. This is because China is a far larger part of humanity than any other country which has ever undergone sustained very rapid economic growth. . The chart and the table below therefore show the percentage of the world's population at the time when major economies began sustained rapid economic growth. Analysing these historical examples in chronological order:
The first country to experience sustained rapid economic growth was the UK in the Industrial Revolution, with 2.0% of the world’s population.
The US grew rapidly from soon after its creation in 1776, but at that time the United States was a small part of the world economy – in 1820 it is estimated it was only 1.8% of world GDP. The consolidation of the US as the world’s largest economy came following its Civil War – by 1870, it was approximately 8.9% of world GDP compared to 9.0% for the UK and 17.0% for China. This post US Civil War growth was in a country with 3.2% of the world’s population.
After the unification of Germany in 1870 it immediately began rapid growth – in 1870 Germany was 3.1% of the world’s population.
When Soviet rapid industrialisation began at the end of the 1920s the USSR contained 8.4% of the world’s population.
Japan’s rapid post-World War II growth was in a country with 3.3% of the world’s people.
The growth of the four ‘Asian Tigers’ (Hong Kong, Singapore, South Korea, and Taiwan Province of China) was in economies which together only comprised 1.4% of the world’s population.
No other economy commencing sustained rapid economic growth therefore even comes close to the 22.3% of the world’s population in China in 1978 at the beginning of reform and opening up.
Therefore China, at the time of the beginning of reform and opening up:
was more than ten times the percentage of the world population of the UK when it began rapid growth;
was seven times the percentage of the world population of the US or Japan as they became major economies undergoing rapid growth,
was almost three times the proportion of the world’s population of the USSR when it began rapid growth.
The scale of China’s rapid economic growth during its socialist ‘reform and opening up’, in terms of the proportion of the world’s population experiencing that growth, therefore dwarfs that of any other country experiencing rapid growth in the whole of world history.
China’s improvement in living standards Despite the extraordinary reality that China’s economic development under reform and opening up is both the fastest and by far the largest in scale of any major country in human history GDP growth is not the aim of economic policy - it is simply a necessary means to achieve other ends. The fundamental aim of economic policy is the improvement of the human conditions of the Chinese people and the all-round rejuvenation of the Chinese nation. Furthermore, it is practically important to understand which is the aim and which is the means. If GDP growth is set as the main aim, and not as the means to achieve other aims, then damage to the environment, pollution, dangerous working practices, failure to raise living standards of the mass of the population etc may be carried out in pursuit of GDP growth. It is well known examples of this have occurred in China. Correction of any misunderstanding on this, and placing the emphasis firmly on ‘people centred’ development was one of the most important emphases of the 19th Party Congress as analysed below.
Nevertheless, while it is extremely important to understand the correct relation of ends and means, it is also crucial not to ‘throw the baby out with the bathwater’. Although economic growth is only the means to achieve other aims it is an indispensable means to do so. The close international correlation of average life expectancy, the best single indicator of overall human conditions, with per capita GDP confirms that while economic growth is not the aim of economic development nevertheless it is an indispensable means to achieve human well-being - international comparisons show that per capita GDP accounts for more than 70% of differences in life expectancy between countries. Consequently, as Xi Jinping noted: ‘Development is the top priority of the Party and our country, and holds the key to solving all problems in China’(6).
The same principle applies to consumption – the direct material basis of human living standards. The aim of economic development is the fastest possible sustainable increase in consumption – sustainability including that it protects and does not damage the environment, and that the rapid increase in consumption can be sustained over a long period of time. But while the goal in this area is the increase in consumption, not increase in GDP, the strong international correlation between increase in consumption and increase in GDP means GDP growth is a necessary means to achieve increases in consumption – internationally more than 80% of the increase in consumption over the medium/long term is accounted for by the increase in GDP growth.
Confusion over consumption Regarding growth in consumption during reform and opening up some confusion has existed in both international and some sections of the media in China. Clarity on this issue is crucial because as Xi Jinping has stressed: ‘Prosperity for the people is the basic political position of the CPC.’(7) It is sometimes stated that consumption has been ‘underdeveloped’ in China during reform and opening up. But this is based on a simple confusion between two different things - the percentage of consumption in GDP and rate of growth of consumption. As will be shown, the increase of consumption in China during reform and opening up has been the greatest of any country.
Comparison with developing countriesData on the growth of household consumption is unfortunately only available for a smaller number of countries than data for GDP - and for a shorter period. World Bank internationally comparable data on household consumption is generally only available from 1960, and it does not include Taiwan Province of China. Fortunately, however, in practice this data limitation does not turn out to be a major problem in making an historical and international comparison of reform and opening up for two fundamental reasons:
China’s lead over other countries in the growth of household consumption turns out to be so large that inclusion of other data would not change the situation.
The most rapid period of economic growth of developing countries took place not only after World War II but from the 1960s onwards. (8)
To analyse the growth of household consumption, first the comparison of China with other developing countries (defined as being a developing country at the beginning of the period of growth), will be taken and then a comparison of China with advanced economies will be made.
Figure 4 therefore shows the 10 major developing economies with the most rapid growth of household consumption over a 38-year period between 1960 and 2016 – a major economy is defined as one with a population of more than five million. China’s 1,816% growth in household consumption in 1978-2016, an annual average 7.9%, is the fastest for any developing country. The second highest is Hong Kong SAR in 1961-1999 with a growth of 1,605%. However, Hong Kong SAR in 2017 had a population of only 7.4 million and therefore only just meets the population criteria for a major economy. The first really large economy after China, in terms of household consumption growth, is South Korea, with a population of 51.4 million in 2017, which saw growth of household consumption of 1,479% in 1964-2002. If really large countries, which are therefore most comparable to China, are considered then those with the most rapid household consumption growth are Indonesia with 920% growth in 1966-2000, an annual average increase of 6.0%, and India with 752% in 1978-2016, an annual average increase of 5.5%.
The situation is therefore clear. China’s growth of household consumption was more rapid than for any other major developing country.
Comparison to advanced economies Turning to the comparison of China with advanced economies, data is not available for all advanced countries for a long period which would take in growth prior to World War II. However, as will be seen it is certain no advanced economy has ever achieved household consumption growth as fast as China. This is clear for two reasons:
The fastest growth ever experienced by a large advanced economy was Japan after World War II, and long-term data is available for Japan and it shows clearly that its household consumption growth was not as fast as China.
Advanced economies experienced more rapid long-term growth during or after World War II than before it and data is available for major economies for this post-World War II period.
Figure 5 therefore shows the data for three advanced economies for which long term data including before World War II is available – the US, Japan, and UK. It may be seen immediately that Japan’s growth of household consumption far exceeded the US or UK. The household consumption growth figure of 1,554% for Japan in the period 1946-84 is boosted by the extremely low starting point constituted by Japan’s economy in 1946 – Japan’s consumption in that year was severely depressed by devastation of its economy by defeat in World War II. However, even if the exceptional situation of the extreme depression of Japan’s economy after defeat in war is excluded, Japan’s growth of household consumption still is much faster than any other major advanced economy – if the peacetime period 1950-1988 is taken, for example, Japan’s total growth of household consumption is still 1,236%. The fact that China’s growth of household consumption in 1978-2016, of 1,816%, exceeds even the artificially high figure for Japan starting in 1946 therefore shows just how much faster China’s growth of household consumption was than any advanced economy. Taking other comparisons, US household consumption growth of 473% in 1933-1971, and the UK’s 281% in 1969-2007, is clearly far behind China’s – China’s total growth of household consumption was almost four times that of the US and over six times that of the UK. In summary, China’s growth of household consumption during reform and opening up was faster than any developing or advanced country, and therefore the fastest in a major economy in human history.
Total consumption in developing economies So far household consumption has been analysed. However, although household consumption is by far the largest part of consumption, a significant part of GDP is also consumption of government goods and services. Unfortunately, long term data for total consumption, i.e. household consumption plus government consumption, is not available for most countries. World Bank internationally comparable data for total consumption is only available from 1990. Therefore, in this case, it is not possible to make a comparison for China to other countries during the whole period of reform and opening up but only since 1990. This comparison, however, shows the same pattern as for household consumption – i.e. China’s growth of total consumption is far higher than for any other country. To make this comparison Figure 6 shows the growth of total consumption in 1990-2016 for the developing economies already analysed, which had the most rapid growth of household consumption in the period since 1960. As can be seen China’s 990% growth of total consumption in 1990-2016 far outperformed any other major economy – the next most rapid growth of total consumption in this period among these economies was 490% in Malaysia. China’s growth of total consumption was more than twice as fast as any other major economy in this period.
(1) (Xi, 2016 July 1, p. 33)
(2) (Xi, 2017 November 3)
(3) (Xi, 2012 January 5)
(4) It should be noted that even if the extraordinary situation of Japan’s recovery from wartime devastation is taken, when in 1945 the Japanese economy was only 49% of its size in 1940, Japan’s fastest ever growth over a 39-year period was 1,728% from 1945-1984 - still only about half the growth of China’s 3,453% in 1978-2017.
(5) But it should be noted that even if the extraordinary situation of Germany’s recovery from wartime devastation is taken, when in 1946 Germany’s economy was only 38% of its size in 1940, Germany’s fastest ever growth over a 39-year period in 1946-1985 was 820%, or an annual average 5.5% - less than a quarter of China’s total growth of 3,453% in 1978-2017.
(6) (Xi, 2016 July 1, p. 38)
(7) (Xi, 2016 July 1, p. 40)
(8) For example, taking the ‘Asian Tigers’, which after China experienced the most rapid economic growth of any countries, Taiwan Province of China’s annual GDP growth was only 8.0% in 1950—60 compared to 9.6% in 1960-70 and 9.8% in 1980-1990; in Singapore annual average GDP growth was only 5.3% in 1950-60 compared to 9.2% in 1960-70 and 9.0% in 1970-80; in Hong Kong SAR annual average GDP growth was only 6.9% in 1950-60, compared to 8.9% in 1960-70 and 9.0% in 1970-80; in South Korea annual average GDP growth was 5.%% in 1950-60, 8.7% in 1960-70, and 8.4% in 1970-80.
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