Is China Socialist?

say, for the sake of argument, you’re an alien tasked with studying human behavior by the great galactic committee Now, due to your species’ xenobiology, you cannot, and will never be able to understand human language The only thing you can do is to observe humans, and nothing else Now, because you can’t talk to humans, you can’t ask them what they think they’re doing, so everything you’d know about humanity would be about the structure of their society Now, let’s say the galactic committee drop you off somewhere here, near a major metropolitan area Since your presence would freak people out, the committee also gave you a stealth nanosuit, and because nobody really likes walking, they also gave you a teleportation device capable of jumping small distances So, you do your job and observe these weird creatures One thing you immediately notice is that humans, when procuring items to stuff their big upper orifice, would trade them for these thin rectangles, usually with ornate drawings of other humans, usually made out of shredded plants or processed underground liquid hydrocarbons You wonder how it works, so you start following these thin rectangles You find out these humans, up to thousands of them, would gather in these large hollow polygonal structures, and, after doing some tasks for a certain amount of time, would be given the thin rectangles Light cycles after light cycles, the humans would move back and forth between their own small hollow polygonal structures and the bigger ones Then, you also start to notice that humans have some sort of hierarchy The humans that give out the thin rectangles are usually nestled in a different area within the big polygonal structures You call these humans boss Sometimes bosses would meet with the humans underneath them, flap their meat sound maker, and the other humans would change their behaviors But the bosses are not at the top of the hierarchy, because there are other humans who meet with multiple bosses and are able to change the bosses’ behavior and the humans underneath them With this in mind, you start to chart the human hierarchy And, after observing tens of thousands of humans across hundreds of light cycles, you figured out that the human hierarchy is really quite tall and really rigid The progenies of humans at the top of the hierarchy never go below a certain level within it, usually still pretty close to the top Humans near the bottom of the hierarchy live in much smaller polygonal structures, receive much less nourishment, live shorter lives and seem to be in more distress You conclude that where humans are in this hierarchy determines what resources they can acquire As time goes on, you end up observing millions of humans, and when you graph the hierarchy, the chart is extremely wide near the bottom, with a really really tall middle and vanishingly small top Plus, you keep seeing the same humans over and over again at the top, even across vast distances And the humans atop the hierarchy are able to direct considerable resources to suit their needs just by flapping their meat sound maker You also notice something else interesting You wanted to figure out why these humans are accumulating so much stuff, not just the thin rectangles and their digital representation, but also real tangible stuff You couldn’t make sense of it because it seems like there’s no rhyme or reason to production, humans just keep on churning stuff out like they’re trying to destroy the planet Then, one day, you figured it out The people at the top accumulate stuff so they can accumulate even more stuff in the future, and the humans who can’t accumulate stuff fast enough would keep on losing, moving down the hierarchy, though not very much, but enough to make them seem distressed Everyone else is sort of just along for the ride You keep studying these humans until one day, the great galactic committee calls you to end this imaginary scenario because something something I don’t know, make something up I really need to start talking about China, or risk boring people to death, or worse, people would close the video Anyways, you might be wondering why I’m telling you this imaginary alien scenario Well, let me ask you this Where did the alien land, do you think? Like, given their data, would you be able to tell where the alien landed, intelligibility notwithstanding? I mean think about it like this, if there were two aliens sent to earth, one landed in China and the other landed in Japan, and they compare notes after their observation is over, would these aliens conclude that these two countries have the same economic system? If these two aliens landed in, say, 1955, would the result be different? Like, if an animal quacks like a duck, walks like a duck and looks like a duck, can it be a giraffe? To truly answer that ridiculous question we gotta dig deep and look at the history of China, how it evolved over time, how we got to where we are and what it looks like today So let’s jump in, and talk about Before we begin, there are a couple of things I want to say First, most of the stuff I will talk about here I lifted from Chuang, which is a Chinese leftist collective/journal Check them out because they’re really great, especially since most of the stuff online about China is either Chinese government propaganda or American government propaganda So if you’re looking for information that doesn’t come from either, go check it out Second, the title of the video is sort of a clickbait I mean like, I’ll eventually answer the question, but that’s not going to be the focus of this video Rather, as I’ve said earlier, the focus is more on the history and evolution of China And I’m going to compress 70 years of history in this video, so there are a lot of details that I won’t be covering because otherwise this video will be like 400 hours long So again, if you want to know more, check out Chuang Like seriously they’re really really good Third, if you haven’t noticed, this video is really long

So like grab some water and go pee now or something There will be a break later though And also, because it’s really long, I’m not going to do my usual schtick with tons of articles on screen, and do more like Shaun’s or Three Arrows’ videos with articles interspersed between this screenshot of my desktop The references will still be at the bottom of the screen though Fourth, I’ll be using a lot of acronyms and a couple of Chinese words, so there should be a glossary in the description I mean I don’t know if you’ll actually need it, but just in case you can’t remember certain words and need to look it up, you can just pause the video and scroll down And finally, please be nice I know you might disagree with what I have to say, but like, just chill I’m not one of those confrontational acerbic debate bros, so just like, don’t be a dick, yeah? If you think I’m wrong somewhere, comment down below with complete citation and just like, y’know, chill Also, if you’re a Chinese intelligence agent who happens to come by this video…just…y’know don’t hurt me, I guess? I swear I mean no harm to anyone Alright, with that out of the way, let’s really start Let me tell you a story my dad used to tell me when I was a little kid My grandfather was in the army He was some sort of a commander who would end up fighting the Japanese at the end of World War 2 But this story happened before that, during the Japanese occupation of the country The story goes, one night, one of his underlings told him the Japanese were about to raid his house because they found out he was conspiring against them, which was absolutely true He was working for the liberation of the country And so, he told his wife, my grandmother, to leave the house Then, he grabbed one of those big ass Rambo style machine gun and a bandolier with dozens of hand grenades And let me reiterate, this is not my story, this is my dad’s story Anyways, with a machine gun in hand and grenades slung all around his body, he made his way to a room in the middle of the house He was prepared to fight to the death with guns a blazin’ if necessary He waited a couple of minutes and then he started to hear quiet footsteps from afar The footsteps got louder and louder, and suddenly, the door flung open, but he didn’t fire But neither did they Everything stayed quiet A Japanese soldier entered the room, looked around and then left Are you confused? It is at this point that my dad would reveal the twist For you see, my grandfather was wearing an amulet that made him invisible Now, I don’t know about you, but I don’t think that story actually happened I mean, don’t get me wrong, Japan did invade Southeast Asia in the 1940s but my dad’s story is most definitely not what happened But he’s not lying, he’s telling a story with a certain narrative in his mind One that is designed to make my grandfather seems almost magical, if you will This kind of narrative building is part of our human nature But sometimes it obscures the reality of the situation, often leading us to the wrong conclusion But enough foreshadowing, let’s go back to the history of Asia Both of my grandfathers did fight Japan, that much is true Japan invaded the whole Southeast Asia under the pretense of freeing us from European colonialism But of course, they only wanted to replace it with their own colonialism, and establish what they called “Greater East Asia Co-Prosperity Sphere”, essentially a hierarchical system with them at the top Now, if we want to understand China, this is where we have to start While Japan’s imperial ambitions started with the occupation of the Korean peninsula in 1910, for our purposes, we’ll jump straight to the Japanese invasion of Manchuria in 1931 See, at the dawn of the 20th century, Japan was able to industrialize rapidly and transformed itself into a capitalist powerhouse Along with this, a fervent militarism developed and fascist/hyper-nationalistic politicians were able to take power And just like other capitalist countries, Japan eventually hit an economic crisis of declining profitability due to rising wages and market saturation This was exactly what happened in the west in the 1970s, which resulted in neoliberalism, but here, due to Japan’s colonial, militaristic and fascistic policies, they decided to invade Manchuria instead, build a new industrial base and forcefully open a new market there Essentially, this expansion was an attempt to reduce labor costs and expand their market But this also meant that Japan invested heavily in Manchuria, building factories and infrastructure, exporting capital goods (that is, goods that are used to produce other goods), and establish industrial structure in the region They did it to exploit cheap Chinese workers using a feudal-ish labor structure, and combined, the industrial production in these areas were twice as much as the entirety of China’s pre-war industry, mostly driven by the war-time production After Japan lost the war, the region was returned to China, but it was to the hands of Guomindang (GMD) See, before the invasion, China was stricken by a civil war between the nationalist GMD and the Communist Party of China (CPC), but only GMD was recognized by the world, due to, y’know, the whole communism thing So after World War 2, Manchuria was handed over to the GMD, who promptly lost the civil war and Manchuria was eventually handed to CPC But, after the invasion of Japan and the civil war, much of the Chinese economy was obliterated With the American invasion of mainland East Asia seeming to loom over the horizon, CPC’s first priority was to rebuild the industrial base of China But there were a couple of problems First, the only existing heavy industrial production facilities were located in the Northeastern region, where Manchuria is, built by Japan and inherited from GMD The problem was that there was no infrastructure connecting Manchuria to the rest of China, making it impossible for goods to flow south Second, even if there was infrastructure connecting Manchuria, they still needed technical assistance to operate the machinery and establish the bureaucracy required to manage these factories Third, even before the war, China was mostly a rural country, with decentralized production of goods spread over a large area in the countryside

On top of that, most of the economy, outside of Manchuria, was made up of self-sufficient, localized and geographically dispersed artisans, handicraftsmen and small farmers in rural areas, while the coastal cities had small light industries that survived the war China would need to unify all of these disparate regions if it were to industrialize Fourth, industrialization requires boatloads of grain to feed the people building all the stuff After the war, grain production was barely able to feed the population itself, so agricultural production would need to increase, but without increasing the number of farmers since labor was needed to build the industrial base That’s only ever possible if agriculture is modernized and mechanized, which won’t happen until the 1970s in China, but we’ll get to that later All of these meant that the state had to refocus its development efforts in urban areas, where industries could actually be established As Mao Zedong himself said in March, 1949, “the center of gravity of the Party’s work has shifted from the village to the city” He needed to stitch together a national economy, connecting urban areas with each other and with rural areas One that lined up with the goals of communism, and, due to his Marxist-Leninist heritage, this was to be accomplished through central planning This meant that industries in coastal cities would have to be seized by the state Well, that was the theory, in reality the central state couldn’t just seize them Unlike with land appropriation from landlords, they’d need to rebuild the necessary bureaucracy and management from the ground up, and there was not enough manpower in the Party for that Essentially, they had to keep the pre-existing capitalist structure in urban areas for a little bit longer So the state came up with a two-pronged approach to get the industries running again: Sino-Russian friendship for fixed capital and technicians, and capitalist appeasement in urban areas The first one involved $300 million loan from the USSR to rebuild the heavy industrial base in Manchuria On top of that, the USSR also sent technicians to get the production up and running as fast as possible and train Chinese engineers The second approach essentially boiled down to utilizing the elements of capitalism the Party thought were beneficial and not harmful to the national economy In other words, they wanted to control and not eliminate capitalism, at least for now See, after the civil war, in many southern port cities, private owners and non-state managers remained present, using their technical skills and access to foreign credit in exchange for favorable treatment by the party It made sense then for the Party to utilize them to get the industries running back up In fact, “by 1953 approximately 80 percent of the managerial personnel were of bourgeois background and 37 percent of these were pre-1949 graduates, returned overseas Chinese students, or factory owners.” While some parts of capitalism were allowed, the government reigned in on the volatility of the market The only stock exchange in Shanghai was closed down and all government funds were concentrated in the state banks But this ended up slowing down production and the closure of about 10% of all commercial establishment In response, the government provided a massive stimulus, which, coupled with the Korean war, were able to jump start production again Now, if you think this looks like capitalism starting up again, well you’re not alone By the early 1950s, the coastal factory workers were not happy with the capitalist-esque development, and worried that this would lead to China transitioning to capitalism So the state responded to this dissatisfaction by increasing wages and creating mass organizations, including new unions and a national Labor Board to provide less disruptive means to solve workplace grievances Finally, after higher wages and other concessions could no longer be given, the Party responded with the “Democratic Reform Movement” That reform movement took the form of mobilizing millions of workers to denounce their employers, which provided catharsis for the workers But the mass mobilization ended up disrupting production Obviously, if you’re being mobilized all day to attack your employers, nothing will get done, hence disrupting the production The campaign also resulted in many private enterprises closing down, effectively crippling the influence of private capital in China But what the state feared the most was that it also set a precedent for giving workers power over their managers and enterprise owners, which they did not want Fearing demands of seizures of enterprises by workers, the state began rolling back the reform movement So capital lost power and the economy was reoriented around the state It became central to production, and they were able to create a commercial infrastructure to replace the privately-owned market State retail stores and corporations increased massively between 1950 and 1952 Rural production and marketing were connected to urban consumers’ coops, state stores and other coops Essentially, they succeeded in creating a single “socialist commercial network” Now, let me ask you this Have you heard all of these before? If you live in the west, you probably didn’t realize how the Chinese economy actually functioned under Mao You’ve probably been told that Mao was an authoritarian or even a totalitarian, but that’s not exactly correct The government, at that time, was pretty responsive to people’s demands, especially the urbanites In fact, this whole thing was widely accepted among the workers, despite disappointment and agitations here and there Most workers actually limited their attacks to the enterprises and managers themselves instead of the state So, just like my dad’s story, the narratives about China created by western governments and the media were made to sell you certain points of view But instead of making my grandpa seemed like a cool dude, these narratives only serve the interests of capital, making it seem like this era of socialism was a failure But this goes both ways too, because the modern Chinese government narrative about the era isn’t accurate either It makes it seem like what the government did was solely driven by ideology, while in reality, they had to contend with material limitations and was mostly driven by the material conditions on the ground And there was one especially important material limitation they couldn’t fix

Namely, the agricultural production problem The solution they came up with would end up haunting China, even to this day So let’s move on and talk about Now if you go to my Twitter, my bio says that I’m a “some-sort-of-socialist” There are two reasons for this First, I actually appreciate adroit alliterations They’re totally, transcendentally thrilling to think through Second, I’m still unsure what metaphorical toppings my socialism pizza should have I believe in workers and communities owning the means of production for use instead of for profit, but how that should be done, what count as workers and communities, what means of production are, how can production for use be stable etc etc, are a matter of debate For example, Marxists-Leninist-Maoists (MLMs) believe that a vanguard party or the state can be the representative of the people, and as such, them owning the means of production still falls under socialism, though that usually pertains more to industrial production On the other hand, they believe land should be owned collectively by the people who are using it There are other metaphorical toppings for MLM pizza, but this is enough for our purposes The question, then, was China following their own standards of socialism? Did they have socialist policies? Well see, what was supposed to happen, what they wanted to do, was to collectivize agriculture and nationalize industry in stages, and it kinda happened but it didn’t exactly cohere into a complete, consistent and reproducible modes of production Instead, a mish-mash of different modes of production sort of organically developed by itself in certain areas, while other modes were imposed on other regions by the central government, more so in the countryside Alright, let’s start with the industries The government aimed to nationalize production in 5 stages In the first stage, the so-called “bureaucratic capital” and foreign enterprises were seized In this instance, “bureaucratic capital” consisted of the important industries necessary for development So stuff like electricity, iron, steel, coal, cement [zizek] In the second stage, banks are nationalized After the civil war, private banks were indeed nationalized 52% of all private banks were closed, and the rest were consolidated into one national bank The third stage, nationalizing private firms and factories, was implemented by turning the enterprises into official joint enterprises between the state and the private owner Before, the state would contract them for production, but now production was guided by state-planned targets and the ultimate authority was transferred from investors and owners to the state To soften backlash from the former owners of these enterprises, the state reimbursed them at a fixed rate of interest out of future revenue The implementation of the third stage involved three million private firms and factories, and directly affected seventy million people, completely restructuring the industrial organization from the ground up, mostly in coastal cities, where there were a lot of private enterprises It was hoped that this nationalization would stop China transitioning to capitalism, and it kinda worked for a little bit The fourth stage was the formation of co-ops for handicraftsmen and artisans in rural areas It was implemented by encouraging small rural businesses to first join co-ops called “supply and marketing co-operatives”, and then “producer co-operatives” These co-ops would see the handicraftsmen pooling their labor together to obtain cheaper raw material, marketing their products, and pooling their profits and collectively manage it The produced goods were directly sold to the state, essentially abolishing private merchants After the first 4 stages were implemented, the state became the sole driver of production through planning because the law of value could not dictate investment, goods distribution and people’s movements anymore See, to make an economy work, a complex system of coordination is absolutely essential In a market economy, that coordination comes in the form of…well, the market itself Private individuals buy and sell goods for profit, which forms networks of trade and distribution that coordinate production So during this era in China, money, wages, profits and bank still ostensibly existed, but they only served as ways to plan and quantize the economy and coordinate production, and capital accumulation was not the primary directive of the economy The state essentially had to replace a ginormous private trade network with a planned one so goods can be distributed to make sure production ran smoothly However, if that sounds really difficult to make it work smoothly, well you’re right Perverse incentives led to wastes, inefficiencies and corruption, where, for example, managers would inflate production numbers to satisfy the central planners The state tried to fix this by allowing the workers to participate in planning and supervise production It was thought that by including workers in management, production numbers would actually increase so that the managers wouldn’t have to inflate production numbers But it didn’t really work Workers and machinery still had to work to their breaking point because the problem was poor equipment and lack of training, which only investment can fix Another side effect of central planning was the ballooning of the number of party bureaucrats, because, again, managing a planned economic system over a vast area was incredibly difficult and would be impossible without a shit ton of people This increase in bureaucrats was driven by two competing methods of industrial organization developing in China: the Soviet model and the East China model To put it simply, the Soviet model favors large-scale heavy industries managed by technicians, mostly Soviet or Soviet-trained Chinese, and party members, with some input from the workers through workers’ councils, while the East China model favors distributed production, wherein many small to medium-sized industries supported a few large industries, with distribution between those enterprises managed by the local party apparatus These two organizational methods competed with one another and ended up influencing

and modifying each other, along with future organizational methods And as the name suggests, the East China model was implemented in coastal cities, whereas the Soviet model was implemented mostly in Manchuria But having said all of that, from 1952-1957, that developmental push was, well…developing the economy pretty nicely From a baseline of abject poverty due to wars and conflicts, China was able to vastly increase national income and industrial production The groundwork for sustainable future growth was also laid through massive investment in education and training, which led to rapid mobility as farmers urbanized and students entered college But after people’s income rose, so did inflation To combat it, the state provided food and basic necessities to urban workers This was the start of danwei, or translated as “work-unit” in English It provided food and basic necessities to workers, and functioned to reduce labor turnover, stave off inflation, and make workers directly dependent on the central state’s allotments of resources rather than monetary wages Danwei can be seen as an attempt by the state to decommodify labor, and as such, its removal later would signal an economic transition But we’ll get to that later For now, just remember that it’s called danwei and it means the provision of basic necessities to urban workers with stuff like housing and food If you forget later, it should be in the glossary in the description However, by 1957, there were unrest in coastal cities See, because the state invested heavily in developing new industrial areas, already existing cities were left underfunded On top of that, these cities’ industrial outputs were mostly focused on light industries, such as textiles and consumer goods, while the state was focused on developing heavy industries to further accelerate industrial development The workers in these areas also saw the benefits they had wrested from factory owners over the past decade gradually stripped away, which meant they had to deal with less workers’ management, long working hours and falling wages, though some of the falling wages were offset by danwei Meanwhile, management and bureaucracy expanded greatly, which was seen by workers as unproductive Workers’ anger, especially young and migrant workers, spilled onto the streets as strikes became widespread This led the government to launch “Hundred Flowers” campaign, where workers were allowed to air their grievances against the state and the management But when the demands became untenable and workers started to echo the Hungarian rebellion of 1956, the government turned around, repressed the strikes and rolled back the campaign People who were too harshly critical of the state was severely punished, and, due to the divisions among the workers, a seed of yet another revolution was quashed The thing is though, the government couldn’t actually fulfill all of the workers’ demands because there was a structural economic problem underneath all of this mess See, this type of planned economy required a gigantic number of bureaucrats, which drained the resources out of the state’s budget On top of that, focusing on industrial development meant that most investment would have to be funneled to either building those industries, or other infrastructure required to build those same industries, instead of being used to increase wages for example This actually led to over-investment which caused a bottleneck in production and caused shortages On top of on top of that, there was a massive migration from the countryside to the cities, so China had a lot of pissed off workers the government had to appease or, more realistically, repress The problems in the urban areas would eventually converge with the problems in the rural areas, so let’s shift gears and talk about the rural areas Simply put, the state policies resulted in the destruction of the previous modes of production in the countryside Many small handicraft industries that had been existing for hundreds of years were wiped out because the goods they were producing could not be sold on the market anymore as it was dismantled by the state Trade networks that had existed for centuries were destroyed and the state couldn’t replace them completely This essentially pushed many former handicraftsmen and artisans into agriculture work or migrate to the cities See, the state wanted to boost agricultural output, so rural production was collectivized, and this was to be done in 4 stages In the first stage, mutual aid teams of 6 or more households were formed with the aim of assisting production on individual farms This usually amounted to sharing work animals, utilities and other scarce resources, and was largely a local and voluntary response after the landlord class was abolished In the second stage, most mutual aid teams were consolidated into “lower agricultural producers’ cooperatives”, consisting of groups of about 20 households It’s important to note that this wasn’t forced on the peasants Rather, the government used financial credit and technical aid as incentives to join By 1956, 98% of rural households were members of the cooperatives Anyways, at this point, agricultural output was growing, but slower than expected There were two factions with two different ideas on what to do next The majority of the CPC Central Committee seemed to favor slower collectivization, and were worried that things would be disorderly if cooperatives expanded too rapidly Mao Zedong, on the other hand, favored rapid collectivization There were two reasons for this First, to develop industries, the government needed to feed the people building said industries, which required the extraction of grain surplus from the rural areas With a growing urban population and thus a growing grain requirement, the government needed to modernize agriculture, but there was a problem See, much of the Chinese countryside lacked the necessary infrastructure to support modern agriculture Roads, rails, electricity, [zizek] did not exist in many areas in rural China, so heavy industries were needed to develop them But to build those heavy industries, you need people supported by modernized agriculture, so they were caught in a catch-22 Mao believed that accelerating industrial development would enable them to break through that catch-22

Second, this was around the time the Sino-Soviet relations were deteriorating, which meant that China was getting less assistance from the USSR But more than that, it also meant China had to beef up its military, which required industrial expansion, just in case a war breaks out, either with the USSR or the US But Mao was able to push the policies through the government, and from 1956 to 1957, the third stage of rural collectivization was implemented The “lower-stage producers’ cooperatives” were turned into collectives, in which individual households gave up their ownership of land, livestock and agricultural implements to collectives of between 40-200 households Essentially, this was done to increase the amount of grain surplus the state could wring out of the peasants so it could accelerate industrial development The government also started to implement the hukou registration system Hukou is a residency registration system that essentially locks people into either rural or urban areas Its main purpose is to control rural-to-urban migration since rural hukou holders cannot migrate to the cities without authorization and don’t get the same social services offered to people with urban hukou Note that I’m using the present tense here This, along with danwei, will be really important later, so let’s put that in our glossary Remember, hukou is a residency registration system, and an individual can either hold rural hukou or urban hukou So this is where the urban and rural problems converged Remember, there were unrests in urban areas and over-investment led to a production bottleneck To escape the bottleneck, they wanted to accelerate industrial development even further, while at the same time meeting some of the urban workers’ demands Both of these required an increase in grain extraction from rural areas And so, the state enacted the Great Leap Forward, or GLF for short, which was aimed at accelerating industrial development by decentralizing production and increasing grain surplus extraction by building rural agricultural infrastructure It’s an important acronym so it should be in the glossary I’m pretty sure you’ve heard of GLF It caused a famine that killed between 15-45 million people in 3 years, a significant number of people in such a short time What happened? See, after the third stage of collectivization, even larger communes sprung up locally and organically in many rural areas Whereas the third stage collectivization units consisted of between 40-200 households, these communes encompassed a whole town and its surrounding villages, with tens of thousands of members Originally, these communes were not planned centrally, but rather arose as a response to local conditions and the need to deploy large scale labor force to build massive agricultural infrastructure such as irrigation and reservoirs, which was necessary for increasing productivity After seeing this, the central government adopted the practice and spread it to the rest of China They also set up Commune and Brigade Enterprises (CBEs), which were essentially big collective co-ops spanning many villages with thousands of people consolidated from many smaller co-ops CBEs will be quite important later on in our story, so it should be in the glossary These communes were portrayed as a quick way to communism, as stated by the Central Committee, “The realization of communism in our country is not far off We should actively exploit the People’s Commune model and discover the concrete means by which to make the transition to communism.” But here’s a problem These communes were established to build large scale infrastructure projects and develop rural industries And they did exactly that Around 100 million peasants were moved from agricultural work to building rural infrastructure and industrial projects I mean imagine a third of America, all of whom are farmers, suddenly stop working on agriculture and do something else You see the problem now, right? fewer agricultural workers led to decreasing grain production which led to the famine But even then, the worst of the famine wouldn’t have been so catastrophic had the government just like, chilled the fuck out a little bit See, when the government collectivized land in the fourth stage, they really collectivized it Before the fourth stage, peasants actually had small private plots of land that could be used as a buffer against bad harvest, but the Party put that under the control of the collective And worse, many communes and their production were controlled by people whose main goal was to appease the central government instead of the local people, which led to over-extraction This was unlike the earlier stages of collectivization, where peasants’ collectives at the village level had control over their land What’s left of the private market for grain and agricultural goods completely disappeared, replaced with communal dining halls, with some offering free food These dining halls and the large size of the communes made it almost impossible for peasants to see how their labor affected their own subsistence, and thus led to the breakdown of accounting and remuneration system All of these led to crop yields reduction in 1959 and famine began to ravage the countryside, which drove peasants out of the rural areas Sidenote, there’s an article written by Twitter user ICE must be destroyed (nice name)/FrightfulHobgoblin/itmechr3, focusing more deeply on GLF and the peasantry I highly recommend it if you wanna know more about the dynamics between the governments, whether local or central governments, and the peasants What’s surprising to me is the fact that the peasants didn’t revolt against the Party this time, even though it was mostly the peasants that manned the communist revolution It’s a great read, really in-depth Alright, let’s talk about GLF policies in urban areas I don’t know if you noticed, but earlier I said nationalization was to be done in 5 stages, and yet I’ve only described 4 Well, like in rural areas, the fifth stage of nationalization is the establishment of urban communes This entailed extending danwei provisions by, for example, setting up tens of thousands of dining rooms to serve meals to millions of people On top of that “approximately 50,000 nurseries provided accommodations for some 1.46 million children,” and, “in the beginning of March, 1960, there were 55,000 service centers rendering

assistance to approximately 450,000 people.” These service centers provided “laundry, tailoring, repairing, hairdressing, bathing, house-cleaning and health-protecting services.” Essentially, housework was socialized, which freed up women workers for production To appease restive workers, CPC forced the supervisors and party cadres to participate in manual labor, and gave workers some voice in management Migrant and new urban workers were incorporated into regular employment with access to danwei benefits Extending danwei also meant they had to build new housing, and new medical and educational facilities, but this strained the state’s resources, which necessitated more grain extraction But the most important thing GLF did in urban areas was the decentralization of industrial governance Control of some industries was shifted down to more local levels, like to the city Targets from the central government were not absolute anymore Instead, local authorities were allowed to set, and even speculate, their own output targets, though the bulk of their profit still had to be sent to the central government Nonetheless, that little bit of profit incentivized local leaders to compete against one another, ramp up production, and sometimes, even over-report actual production numbers The decentralization also allowed enterprises to recruit from society directly Before, recruitment was controlled by the central government, who had complete authority over labor allocation This led to a boom of the urban population, mostly migrants from rural areas In the span of several months, beginning in 1958, around three million peasants migrated to urban areas, starving the countryside of much needed agricultural labor But, while GLF urban policies were effective at appeasing workers, output target speculations eventually led to an economic crisis Without a reliable way to quantify production, investment became unstable and production was disrupted This was made worse by the chaotic nature of the decentralization as different segments of local authorities competed for control over the new industries Essentially, the central state had lost control, and with a famine ravaging the countryside, they had to do something and reign in the chaos Before we move on to the government’s response to this mess, let’s ask ourselves, was this socialism? I mean, one thing for certain is that this wasn’t capitalism because capital accumulation couldn’t happen Instead, it was a mishmash of different modes of production, usually unstable and kept changing over short periods of time Different regions would have multitudes of different modes of production, and a region could have 2 different modes of production in different time periods You can argue it was tending towards some sort of socialism, but it was never completed The only driving force behind the economy was the push for development To quote Chuang, “China between the 1950s and 1970s was neither a replication of Russian socialism, nor was it “state capitalist,” nor was it simply a process of government-facilitated, proto-capitalist original accumulation as in the other developmental states of the region, nor was it a continuation of some age-old “oriental despotism.” It was also not a period in which lingering tendencies toward capitalism wrestled with nascent tendencies toward communism in a situation of “two-line struggle,” requiring a “permanent revolution” to complete, as certain factions within the Party would argue It was an uneven, constantly changing regime of development cobbled together from inconsistent elements Its only true unifying factor was the developmental push itself, founded on the siphoning of grain surplus from countryside to city.” As we go forward in time, it’ll become clear that China’s economic evolution was never intentionally planned There was no grand plan put forth by its leadership, no coherent strategy that would’ve led China to one economic system, whatever it may be Decisions were made due to historical inertia on one hand, the momentum of masses of people on the other, and material limitations on the other other hand Essentially, the China that we know today is the result of cobbled together haphazard and contingent policies, with chaotic transitions mixed in every now and then Speaking of which Let’s take a break real quick, yeah? Grab some water or something, we’re like halfway there You can pause the video if you want, but I’m just gonna ramble for a minute before we continue on So uh…you like chicken? Here’s a chicken who roams around my neighborhood It’s really goddamn aggressive and it’s just so mean Like if I walk too close to it, the thing would just chase me and shit I guess it used to be a dinosaur or something so the angry genes are still there Y’know what’s interesting about chicken though? Chickens, and really all birds in general, actually evolved feathers before they could fly I mean just look at dinosaurs, they had feathers too Feathers were actually used for heat regulation at first, but when some birds evolved to fly, this already existing structure really helped them master the skies. it’s a phenomenon called exaptation, in which an evolved trait used for one function ended up beneficial for other functions unrelated to the first one Pretty interesting, right? Now, why did I tell you this? Idk, maybe it’ll be relevant later, we’ll see Anyways, breaks over, let’s recap Unrest in urban areas, caused by a structural problem within the Chinese economy, led the government to accelerate industrial development, which led to the over-extraction of grain from the countryside Due to the governance structure of rural areas, peasants and local authorities were not able to control the flow of grain, nor were they able to see how their labor affected grain production, which contributed to the problem of over-extraction Infrastructure and industrial projects mobilized hundreds of millions of agricultural workers, significantly reducing the available labor for agriculture, which led to the problem of food under-production As grain was siphoned off of the countryside to cities, a famine started which would end up killing tens of millions of people This led to even more people fleeing the countryside to urban areas, worsening the agricultural labor situation While this was happening, decentralization had caused a crisis of over-speculation in

urban areas, disrupting investment and industrial production So, I think it’s fair to say GLF was an abject failure Its goal of accelerating development did not materialize, and Chuang argues this was the starting point in what would become the collapse of the communist project in China, and thus starting its transition into capitalism Through the famine, the government began to lose their popular mandate among the peasantry And “As its popular mandate was lost, the communist project was torn up at the roots to feed the developmental regime The opposing potentials that arose did so within the Party, becoming factional conflicts and, later, purges If the first step in the dissolution of the communist project was its absorption into the body of the [CPC], the second step was the purification of this body in the name of securing development.” But first things first, the government had to fix the famine and the crisis First, basic necessities were rationed for obvious reasons, and resources were funneled back to the countryside Additional food was bought from the international markets, while domestically, limited grain markets were reopened with the hope of increasing food supply Agricultural production management was devolved back down to the village level from the commune level, though it was still collectivized Most of rural economic activities were dropped in favor of agriculture, which closed down most CBEs Agricultural remuneration system kept changing, as the government experimented with many different types of compensation systems to increase production until it settled on household contract system This system contracted grain production to groups of households, and sometimes even individual households, with specific quotas attached which were exchanged for cash and workpoints By 1962, agricultural production slowly began to grow again, though it remained not mechanized and investment remained low Sidenote, as I was editing this, I realized I never actually defined what workpoints are, so I’m just going to do it here I mean the name is descriptive enough, but essentially they were used to track how much labor a person has done over a period of time The workpoints can then be traded for cash, grain or other products It’s like money, but you can only trade it with the government Or like those tickets you get from the arcade In urban areas, control over the industries was recentralized, while danwei provisions were reduced That last part meant that welfare was reduced, workday was limited to 8 hours and the wage system was restored to how it was before the GLF, among other things And though ostensibly called recentralization, it wasn’t exactly a complete centralization Management over the economy didn’t actually go back to the central government, but rather to the provincial level, which is the equivalent to states in the US During GLF, decentralization led to power shifting chaotically all over the place, including to the city level, the county level, the district level, etc In this case, then, recentralization meant that the management over the economy was middle heavy, with provincial governments holding the most power in how to manage the economy, while the central government just set the targets And to this day, it’s still more or less like this Next, the government needed to stem the tide of migrants fleeing rural areas, so the hukou system was modified Now, peasants can’t move to urban areas without proper authorization which was difficult to obtain, and even if they get it, they don’t get the same danwei privileges as urban hukou holders The industrial workforce was significantly scaled back by sending literally tens of millions of people back to their villages in the countryside And again, this was possible due to hukou registration system One important thing to note also is the fact that hukou status is heritable through the mother, meaning a child would have the same hukou status of their mother And like recentralization, to this very day, the hukou system has more or less stayed the same and remains a central feature of class division in China, but we’ll touch on it later Facing the risk of stagnating productivity due to a massive reduction in workforce, CPC leadership encouraged factory managers and local officials to recruit back temporary workers Y’know, the same workers that were just deported, but this time, due to their rural hukou, with reduced wages, no danwei provisions and could be sent back during the growing season And, again because these workers had rural hukou, they could be sent back at any time, effectively reducing the bargaining power they had By 1964, things had stabilized somewhat, allowing the state to start a new investment drive Around the same time, America was ramping up its wars to contain communism and Sino-Soviet relations had completely broken down Increasingly isolated, China became heavily focused on self-sufficiency and started to invest in regions with geostrategic importance, mostly in the interior, far from the coast or the China-USSR border On top of that, after realizing agricultural production wouldn’t increase without some sort of modernization, the state decided to revive and expand CBEs and county-level state enterprises to produce modern agricultural machinery along with cement, iron, and energy, but, y’know, gradually this time At the same time, urban production became increasingly militarized, especially post 1969 as conflict with the USSR seeming to loom on the horizon and political power and day-to-day managerial functions increasingly concentrated in the local Party branches That last part would eventually ensure the merge of the technical and the political class, as those who want to hold power were incentivized to be both “red” and “expert” Actually, this fusion, along with the rural-urban divide, was how class would eventually come back to China, but we’ll get there later Alright, at this point, I’m going to jump to the 1970s I’m going to skip the Cultural Revolution because if I did this video will be like 4 hours long, so if you want to know more about it, go read Chuang’s article “Sorghum and Steel” part 3 and 4 For our purposes, just know that the Cultural Revolution was supposed to be a social movement

to uproot the remaining Chinese capitalist elements from the society, but it ended up with heavily suppressing the “ultra-left” faction, whose ideas were similar to that of left-communism and anarchism. and that the Cultural Revolution mostly happened in urban areas, and as such, it disrupted urban production Because of that disruption, cadres in some villages near big cities retooled their CBEs production to serve neighboring urban markets while the urban production was in chaos On top of that, many workers and technicians, who were punished for participating in the unrest, were sent down to the countryside, which ended up helping develop these CBEs More importantly, local branches of the People’s Bank of China, the only bank back then, heavily lent to these CBEs, with lending to collective industries increased as high as 75% in one year It kinda starts to look like capitalism, doesn’t it? I mean it’s not, but sure does look kinda like it Nonetheless, despite the growth, people’s wages continued to stagnate Surplus from that growth was funneled to the relatively undeveloped interior parts of China to build industries and infrastructures in investment drives, which sucked money out of the coastal cities Though, it made sense why they picked the interior After all, it’s far from the China-USSR land border, and far from the coast, where the US would have likely invaded from And, due to stagnating wages and shrinking welfare, coastal workers weren’t happy In 1974, a new wave of industrial unrest swept through urban areas, but, because the “ultra-left” faction of the populace was heavily suppressed in the cultural revolution, the demands were mostly of liberal nature, demanding democratization and marketization The current regime, still Mao Zedong at that time, was now explicitly named in the critiques due to his harsh treatment of dissidents, his cult of personality, and the rising “new nobility” of the bureaucratic class Interestingly, the protestors started to compare China’s development with nearby capitalist countries such as South Korea and Japan, and wondered why China lagged behind Eventually, these protests would allow for the ascendancy of the market-oriented leaders after Mao’s death by the ousting of his faction out of the government What’s worse, it became increasingly clear that isolation was fundamentally unsustainable economically Before, China could depend on the USSR for capital goods, that is goods that are used to make other goods, but after the complete breakdown of the China-USSR relations (which was teetering closer and closer to war), the increasing demand for capital goods kept unfulfilled, which hampered development Now what would you do if you’re the leader in that situation? And let me remind you the USSR didn’t particularly care for the US either, to say it mildly Well, around the same time, seeing it as a way to drive a wedge in the socialist sphere, Nixon tried to soften the US’s relationship with China, which China saw as a way out of isolation and further development And so, China started to open its market to international capital It started really slow The first opening was via informal channels, beginning with the exchange of ping-pong players No, really, that’s how it started, which was cool I guess, I mean ping-pong is really fun to watch, but whatever This was followed by a series of secret meetings between Zhou Enlai, China’s then-premier, and famed war criminal Henry Kissinger, who, on an unrelated note, killed millions of people By the end of 1971, the US embargo against China was lifted, and the next year famed crook Richard Nixon and famed war criminal Henry Kissinger both formally visited China, which marked the first time a sitting US president visited the country The meeting laid out the future policies in the region, y’know, stuff like “the US isn’t seeking hegemony in the region”, and “there’s only one China, the PRC Huh? Taiwan? Never heard of it” Domestically, the thawing of the relationship was seen as an extremely limited program of liberalization aimed at solving the capital goods problem The leadership hoped it would preserve and revitalize the developmental regime, and there was never any long-term plan for a transition to a market-based economy, which was exactly what would eventually happen Instead, everything just kinda fell into place, with the rural industrialization through CBEs and the diplomatic opening converging with the capitalist economic crisis of the 1970s, all of which would eventually lead to the complete marketization of the Chinese economy Okay, let’s unpack that last sentence After Mao’s death in 1976, the paramount leadership, which is like the highest political office in China…sort of, but it’s informal, I don’t know it’s weird Anyways, the paramount leadership was passed to Hua Goufeng and then passed again to Deng Xiaoping in 1978 Now, I’m going to focus on Deng Xiaoping because he’s much more important for this video See, he was a market reformer and he did something no Chinese leadership did before him, he significantly increased agricultural investments, and surprise surprise, it finally led to growth in production Interestingly, the growth occurred even as the total sown area decreased, meaning that agricultural production per person was increasing which then led to an increasing rural per capita income But these investments only lasted a couple of years because they were getting really expensive and contributed significantly to state deficit On top of that, the increasing rural income also caused inflation, even in the cities So by the early 1980s, state investment in agriculture was cut, and investment was left to the local levels, specifically by shifting production to contracting peasant households, who’d use their own profit for investments This system is called Household Responsibility System (HRS), put that in the glossary, and essentially the way it worked was that the government would significantly reduce their quota and peasants could now sell whatever they have left on the market at an unregulated price So now, instead of the government eating all of the profits and losses, it was now the farmers that did so And as the agriculture was marketized, inequality started to rise Note that the intention was never marketization, but rather to reduce state deficit and control inflation It just kinda fell into place

This marketization of rural production was matched by the decollectivization of rural administration The institutional functions of the commune were replaced by the township government and the brigade level was replaced with village leadership The land was ostensibly still owned by the village collective, but individual farmers could produce what they wanted on it as long as they filled the low quota set by the central govt, and even then, eventually they just ignored the quota altogether because there was no strong collective system to enforce it By 1985, the government got rid of the quota system for most agricultural products As rural production increased, CBEs too started to grow rapidly Remember CBEs? The commune and brigade enterprises that were set up during GLF? Well, as agricultural production was marketized, the government called upon these enterprises to process the agricultural output, essentially turning them into value-added goods But more importantly, they also recommended urban factories to outsource part of their component processing to CBEs, which formed trade networks between rural and urban areas Eventually, CBEs would be renamed to Township and Village Enterprises (TVEs), and these TVEs would become the main suppliers of components for urban state-owned enterprises (SOEs) Alright these two terms are mighty important, so let’s put them in the glossary Remember, TVE is Township and Village Enterprise, which are enterprises converted from CBEs, mostly in rural areas, while SOE is state-owned enterprise, mostly in urban areas Around this time, the government also reoriented the economy towards consumer-oriented growth and emphasized the light industry As such, to drive that growth, investments became decentralized Now, anyone with cash could invest in some TVEs, and, as these TVEs grew, they began to be more and more privately owned, as joint-stock owners replaced commune or brigade ownership TVEs also played a central role in China’s re-integration into the global capitalist market, especially TVEs in the coastal regions See, China didn’t open its market everywhere at once International capital could only operate in Special Economic Zones (SEZs) at first, usually in coastal areas with proximity to the global shipping lanes Enterprises in these regions would then reoriented their production towards export For example, in Guangdong province, local officials began reorienting local agriculture and rural industries toward export to Hong Kong Before long, Hong Kong began to invest in these areas by supplying equipment in return for industrial products TVEs in this region became so highly dependent on Hong Kong’s economy that a recession in Hong Kong shook the area’s economy I also want to note that in this time period, most of the investments didn’t come from western countries directly, but rather from the so-called Bamboo Network The Bamboo Network formed when the Communist revolution kicked out the bourg capital owners, who then fled to Taiwan and Hong Kong When those places boomed economically because America invested shitloads of money there, those capitalists became really wealthy So when they needed to invest their money in the 1970s, right around the time when investing in Hong Kong and Taiwan started to be unprofitable and the global economy was shaken due to an oil crisis, it was serendipitous that China was beginning to open itself to foreign capital This meant they could park their money in China in the hopes of continuing accumulation These foreign-invested TVEs were deemed successful, and in fact, this Guangdong model was promoted throughout China by Premier Zhao Ziyang He emphasized that now production should be thoroughly focused on foreign trade, and pushed for TVEs to play a more pronounced role in China’s foreign trade precisely because of their flexible ownership and management which allowed them to more readily adapt to market changes And, by the late 1990s, most of these TVEs were fully privatized and operated according to the capitalist imperative of accumulation Do you remember when I talked about birds’ feathers and exaptation? Why does that sound so…relevant right now? Anyways, let’s talk about how the urban areas were doing Unlike other neoliberal market reforms in places like Chile, the opening of China to the international capital didn’t involve the privatization of state-owned enterprises, at least not initially The output of the planned sector was, for the most part, kept the same because the leadership still envisioned urban SOEs to be the backbone of the Chinese economy But, as the economy was reoriented towards consumption, investment was slowly shifted from SOEs’ producer goods to TVEs’ consumer goods, housing, and services, which led to a significant decline in the importance of SOEs over the 1980s This would’ve caused urban unemployment because most urbanites were employed by SOEs, but the government eliminated the state’s commercial monopoly, allowing for a massive expansion and diversification of trading and retail collectives, along with urban private peddlers, which employed millions of people This greatly expanded the role of the market, even while large enterprises were ostensibly state-owned And actually, SOEs became even more and more dependent on the market and thus found themselves competing with other SOEs, as well as newly formed TVEs and foreign firms Competitions also meant that state investments became increasingly reliant on firms’ own retained funds instead of centrally-budgeted allocations, and profitability became the main decider on where to invest So, let’s bring urban and rural areas together I’ve already mentioned that SOEs would outsource some of their production to rural TVEs, but their relationship went much deeper than that Because value accumulation was now the main incentive for production, SOE managers were driven to expand their enterprises One way they could accomplish this was by going to the countryside and build their own TVEs specifically tailored to produce what they needed at a much lower price, and sometimes the TVEs would even just produce the whole final product while letting the SOEs sell them to the market In return, the township or village would receive loans, equipment and technicians to train the TVE personnel, which in turn would increase the area’s revenue and employ its people

And the economy was booming These networks expanded so rapidly that people just assumed it’d go on forever, growing infinitely without ever saturating the market See, before this boom, demand exceeded supply by a wide margin, and shortages were common So it made sense that people didn’t expect supply to eventually exceed demand, which was exactly what happened The economy crashed, some TVEs and SOEs were closed down, the rest were privatized, people lost their jobs and capital finally truly ascended Then, many institutions and enterprises established in the name of socialism by the previous governments, like TVEs and SOEs, were morphed and reformed to serve capital accumulation, and actually helped China transitioned into capitalism These institutions and enterprises were exapted, became a sort of scaffolding for the spread of capitalism Hukou system became an essential tool for controlling labor, and, with a relatively high human development index due to its socialist healthcare and education policies which produced high quality labor that capital didn’t have to pay for, China was able to outcompete other developing countries and became the juggernaut that we know today See? The chicken was relevant after all And there’s one event that would solidify capital’s ascendancy in China An event in 1989 that solidified the ruling class into a coherent political authority whose directives are indistinguishable from that of capitalists Before we jump into Tiananmen Square protests, there’s one question we have to answer, and it’s a really basic question What is capitalism? See, this is actually much harder to answer than you think Is the defining characteristic of capitalism private property? Or is it market? Or both? I ask because these things existed before capitalism arose in Europe, in places like the 14th-century middle east with traders trading goods from China But we wouldn’t call that capitalism, now would we? Alright, what about the private control of the means of production? That’s a lot better, but what’s the definition of “private” here? Like, let’s say a dictatorial government controls the day-to-day production of the economy All of the profit made from that production is funneled to the ruling class, and they decide to use that capital for more capital accumulation That’s still capitalism, right? Even if the government says they’re doing it in the name of the people See, this is why I like the definition of capitalism that looks at the relationship between production, accumulation, and capital In my humble opinion, capital accumulation should be the very center when defining capitalism It’s not merely that production is in the hands of private owners, but also that their imperative is to accumulate even more capital so that they don’t get smothered by the competitions This means the flow of money and commodity is largely driven by that imperative In capitalism then, investments are made for the sole purpose of getting even more capital in the future, embodied in either commodities or cold hard cash And from here, everything just falls into place Wage labor with garbage pay, exploitation, inequality, hierarchical management, compounding growth, [zizek], all done in the name of accumulation Capitalism is essentially a self-expanding system that reforms anything outside of it, shapes them according to its imperatives, and consumes them Alright, I’m pretty sure all of this talk about capitalism isn’t going to be relevant AT ALL, so let’s go back to the Tiananmen Square protests By the mid-1980s, marketization led to a small but growing number of urbanites breaking out of danwei and jumping into the private sector created by an expanding consumer market selling cheap goods produced by TVEs and migrant labor As the marketization expands, SOEs, which were the primary provider of the danwei system, became increasingly unable to compete with the private market, straining the danwei system itself Coupled with high inflation and bureaucratic corruption, these factors led to urban dissatisfaction which would eventually explode in the 1989 Tiananmen Square protests At first, from 1986-1987, it was only the university students that protested, but that was easily suppressed by the government Eventually, specifically in 1989, workers were pissed off enough that they’d join the protests But here’s the thing, these two groups didn’t exactly see eye-to-eye on the issues These students represented the rising class of entrepreneurs and managers in the expanding market economy I mean, they were university students for a reason The students were mostly critical of the way that the reforms were being implemented, not the content of the reforms itself, and were connected to a faction in the government led by Zhao Ziyang They wanted the reform to move faster, be better organized and more efficient, and feared corruption was going to weaken the reform The workers, on the other hand, were critical of the content of the market reform itself They’ve lost out in the reform sweeping China at the time, with socialist institutions like danwei dying, rampant inflation, and stagnating SOE worker wages Workers wanted the reform to be slowed down or significantly redesigned, and they saw corruption as the emergence of a new form of class inequality On top of that, the workers and the students, while both calling for democracy, had two very different ideas of what it should look like The students were more or less liberal in their view of democracy, in that intellectuals and elites representing the people And, weirdly enough, some students actually wanted Zhao Ziyang to be a sort of dictatorship who’d implement market reforms, but like Marxist and democratic…or something, I don’t know, it’s weird Look up neoauthoritarianism The workers meanwhile wanted democracy in the sense of democracy in the workplace, similar to the demands of the workers decades prior in China These two factions did not like each other, and it should be pretty obvious why, right? Their goals were diametrically opposed to one another In the beginning, the students controlled the protests, and were able to organize a widespread boycott of university classes and occupied Tiananmen Square, while workers were sidelined Eventually though, they realized they couldn’t accomplish much without the help of the workers,

especially after martial law was declared, so they called for workers to do a general strike, and the workers obliged But even then, the workers were still acting in a supporting role instead of at the front and center of the protests I’m pretty sure you know the rest The government deployed forces to quash the protests, suppression followed and thousands were killed But here’s the thing, workers were hit the hardest in terms of prison sentences and executions in the days and weeks that followed, with students getting more lenient sentences Some of these students would even ended up being absorbed by the Party, which means that they actually won, though it hella slow and gradual See, after 1989, the economic interests of students and workers diverged even further In the 1990s, new middle and entrepreneurial classes emerged in China, mostly filled by the same students who protested I mean, they became university students precisely because it would allow them to benefit from the market reforms Workers, meanwhile, were eventually laid-off from SOEs, finally creating a proletariat dependent on wages living precariously within the global manufacturing system In the mid-1990s, workers and peasants protested their living conditions, but the students, in general, did not support them Why would they? They were actually successful in reshaping China to their interests The student protests, in a way, were a demand for their incorporation into the ruling party They were the new rich, highly-educated urbanites and intellectuals who supported liberalization, privatization, and marketization The difference between them and Deng Xiaoping was that Deng was in power, and they were not That and plus they wanted to accelerate liberalization, which would benefit them immensely And in a way, they got their wishes The managerial class would eventually be fused with the Party and crystallized into a coherent ruling class See, there was this question among the Party throughout the 1980s as to how much power and political leverage the private capitalist should be allowed to hold because there were a large number of private capitalists who stood entirely out of the Party’s control But the Tiananmen Square protests made it clear that there could be no tolerance for reforms that were out of the control of the government So an easy fix for that was to just absorb those private capitalists into the organs of the Party by opening itself to managers, intellectuals and the newly rich And thus, a new bourgeoisie was born This new bourgeoisie functions as the de-facto management of the state’s economy with only one directive: growth at all costs, or else risk China be outcompeted and falters This means intense resource extraction (which oftentimes paired with environmental destruction), lowering labor costs through any means necessary (including workers repression) and developing high-tech production methods To quote Chuang again, “The defining activity of the bourgeoisie as a class…is the perpetual maintenance of the material community of capital It is in this sense that the Chinese Communist Party ultimately became a party of capital, acting as both the attendants of original accumulation and the intraclass managerial organ for the domestic bourgeoisie.” And note that none of these were intentional There was no person who conspired to turn China capitalist or formed the bourgeois class Rather, it just fell into place as the country took the path of least resistance The economy morphed slowly but surely, from a mish-mash of arguable socialist modes of production into a definitely capitalist one The ruling class formed out of an alliance between the political and technical elite, which eventually led to their fusion in the form of “red experts” or “red engineers” As such, when large-scale privatization of SOEs and TVEs occurred, the ownership of those enterprises oftentimes fell into the hands of the party officials who managed them before, ostensibly under the authority of the “people”, and this basically folded them into the ruling class By the 1990s, these large-scale privatizations were in full swing Do you remember when I said TVEs were growing rapidly? That was actually a bubble, fueled by massive debts owned by a decentralized and out of control financial sector, and much of the TVE sector was actually not productive at all And when the debt could not be repaid, a recession started, which saw consumption declined along with investment The unemployment level increased, especially in the countryside, which, serendipitously for capital, provided a large pool of labor So when the bubble burst, the market reformist faction, who was in power, recentralize the financial sector to bring it under the central state control The government consolidated the financial sector and spun it off into “big four” banks: Industrial and Commercial Bank of China, Agricultural Bank of China, Construction Bank and Bank of China Don’t worry, these banks aren’t really important for this video, so you don’t have to memorize them For our purposes though, just know that these banks tried to salvage all of the bad investments made during the bubble by doing some financial magic shit, but failed and resulted in the Chinese financial system being really prone to even larger speculative bubbles for the sake of maintaining investment The TVEs in the countryside, meanwhile, were either forced to close down or privatize This meant that the dividends from the profit of the enterprises, along with their ownership, were transferred from the village and township itself into the hands of private individuals, usually the existing managers or non-local capitalists The hope was to make TVEs more responsive to market forces, and be less restricted by nepotism, petty corruption, and collective regulations That last part, collective regulations, included the requirements to employ local residents instead of cheaper migrants So now, a labor market formed because enterprises could hire and fire people at will Alright, let’s talk about the urban areas now The state reformed SOEs with the aim of making them globally competitive and open to foreign investment, though as minority owners They did this by restructuring the SOEs from a mess of disaggregated planning units into

something more resembling modern corporations, and consolidated many of them into a few large enterprises called jituan or “conglomerates” in English What arose is very similar to that of Korean chaebol or Japanese zaibatsu, which are these gigantic conglomerations of companies that make up most of their economies Not all SOEs survived, however, as some were forced to close down With that restructuring also came the abolishment of the danwei system Now, SOEs employees wouldn’t get housing, healthcare or food anymore, thus making them solely dependent on wages to survive Many underperforming SOEs, mostly in the Northeast region like Manchuria, which was where we started, were closed down or privatized, and thus the workers were laid off, with most of them being older workers But it wasn’t all bad for them Now that enterprises didn’t have to house their employees anymore, the housing units were sold off and the older laid-off workers would buy most of them, who’d turn around and rented them out, essentially turning them into landlords The remaining workers were mostly migrants from rural areas fleeing the economic downturn there See, because they hold rural hukou, employers can just deport them if they started to act out Hukou, then, became an essential tool for controlling labor, as it gave employers way more power in the relationship It made it difficult for migrant workers to strike or even ask for better pay So hukou ended up becoming yet another policy exapted from the socialist era that supported China’s transition to capitalism Matter of fact, to this day, most people in China still hold rural hukou, even if they live in urban areas Class then arose out of this arrangement, with rural hukou holders at the bottom Before, urban hukou holders had danwei and rural hukou holders had collective land as the alternative subsistence methods, but after the reform, all of those things were abolished or privatized, and those who are not in the ruling or capitalist class had to work for wages without any sort of alternative The hukou system also allows the state to divide the workers into several different groups, making collective actions harder to accomplish And thus, the proletarianization of China’s working class was complete With privatization in full swing, the state then reoriented its economic policies Now, GDP growth became the primary goal as the economy grew ever more dependent on constant injections of gigantic investment packages to continue said growth Capital accumulation, also known as growth, then became the prime imperative of the state, surpassing other considerations, with most of the institutions and policies established during the socialist period gobbled up and exapted to serve that ever-expanding system Now, you might argue China was able to lift hundreds of millions out of poverty, which is true But so what? The question is whether China is socialist or not And I mean, if you’re using income as the metric for poverty, then of course poverty was decreasing The driving force behind capitalism is accumulation, both of commodities and capital, which allowed for compounding growth Income levels skyrocketed right around the time the state reoriented its economy towards accumulation, which should tell you something But should you use income as the end-all-be-all metric, though? In a world with accelerating environmental degradation, shouldn’t we at least use metrics that are best for, y’know, not destroying the world? See, the strongest predictors of a country’s CO2 emissions are affluence and population size, which correlates with GDP per capita, which meant that the richer a country gets, the more CO2 it emits But what if the metric was environmental conservation, calories, education, and health? I’d argue capitalism, in all of its forms, cannot deliver us good standards of living if we use that metric, especially relating to environmental conservation, especially especially with growth at the center of it I don’t know…just a thought Alright, let’s jump to the 2000s We really can’t talk about the decade if we’re not going to talk about THE event An event in the early 2000s that changed the world and reshaped the relationships between countries in ways that we’ll see unfold in the next hundreds of years I’m of course talking about Yao Ming’s draft into the Houston Rockets See, Yao Ming’s move to the NBA was not just a symbol of the complete opening of China’s economy, but also their complete integration into the global capitalist system With rapidly increasing income, a bigger and bigger portion of the Chinese population now has extra cash to spend Obviously, being capitalists that they are, western companies would like to get some of that sweet sweet yuan Thus, they started to market their products to the Chinese market I mean hell, that’s what Marvel is doing All of that stuff really started with Yao Ming’s draft, which was essentially a really big marketing campaign to sell NBA products to China Now, that is not to say that that was the sole purpose of drafting Yao Ming From what I can gather, he was a pretty good player Not like a GOAT candidate or anything, but pretty good I’m just saying the stars aligned, if you will, in that NBA could kill two birds with one stone by getting this dude A good player and increasing Chinese market share? They’d be really stupid to not take that deal A year before Yao Ming was drafted, China finally joined World Trade Organization (WTO), making it easier to trade with other countries Though China’s export sector was growing in the previous years, it was around this time that the economy truly exploded By this time, the Chinese economy has already been definitively transformed into a capitalist one, with the private sector making up the bulk of it, but with strong government control through the managers and financial instruments As China was signing trade deals left and right, investment from other countries started to pour in, eager to exploit the newly proletarianized cheap labor And the economy fucking skyrocketed like…uhh…like a rocket That explosive economic growth was mostly driven by rural hukou labor Essentially, before this whole shenanigans, ruralites were underutilized in a capitalist sense That is, their labor wasn’t creating surplus value for the economy

Thus, there was a gigantic pool of cheap labor with relatively high human development standards ready to be exploited by capital Chinese transformative growth then, was driven by that gigantic pool of labor finally being utilized to create surplus value Of course, just like any other capitalist country, the massive amount of investment, and y’know the fact that it’s a market, would create its own boom and bust cycles, though the state control of the economy has made these cycles less volatile and severe See, what they would do when a recession is about to hit is to spend an incredible amount of money through a massive government stimulus program building construction projects and infrastructure, similar to what FDR did during the New Deal This essentially buffered the economy so that it keeps on growing On the other side of this stimulus though, is a rising mountain of debt, not in the central government mind you, but local governments and SOEs This meant that the economy has to keep growing indefinitely, or else risk not being able to pay the debts, and thus be forced to sell off assets, lay workers off and other bad stuff, which would lead to massive unrest That, and because, y’know, if they want to make any profit the economy has to keep on growing To pay back those debts, local rural government sold the remaining collective land to developers, which oftentimes results in unrest The thing though, the unrest wasn’t caused by ruralites losing their means of production or subsistence (i.e. farming), most of them actually live in the cities and don’t know how to farm, but, because they hold rural hukou, they are supposed to get the money when their collective land was sold Of course, because the profit motive is the main driver, the local governments bought the land for really cheap and sold it for exorbitant prices to the developers, and the ruralites have no say in the process Thus, the unrest was caused by that discrepancy in price This capitalist expropriation completed the decollectivization of rural areas, making wage labor the only way to subsist for ruralites Now, what happens when the country runs out, or nearly runs out of cheap rural hukou labor? Well, as wages rise, industrial production becomes less competitive, essentially increasing the price of goods produced in China Now, increased price would lead to lower demand which eventually leads to slowing growth or even an economic contraction If this happens, if China were to suddenly become less competitive, well, let’s just say they’d be in a gigantic trouble And wages have been going up since the 2010s through increasing numbers of strikes, riots and other workers actions While all of these collective actions have resulted in increased wages, with the state acquiescing to the workers’ demands, those wages can’t keep going up forever, and will eventually lead to high inflation, higher prices, lower profit, or all of the above, which would be catastrophic for Chinese growth Overall this has slowed GDP growth in China, from an insane average of about 10% each year between 2000-2010 to around 6-7% since 2012 For every other country on earth, this is still a respectable, if not great, growth rate But for China, it signifies that the economy is starting to crack This is why China is trying to move up the production ladder, so to speak Instead of producing cheap low-tech labor-intensive products, China is trying to expand to expensive high-tech goods to keep itself competitive and continue the growth gravy train going That’s why the 13th 5-year-plan, the most recent one, really emphasizes the high-tech industry, and that’s why China’s manufacturing sector is becoming a smaller and smaller part of the economy while the service sector is growing See, this results in two things First, China is now looking for cheaper sources of labor, hence the Belt and Road Initiative If you didn’t know, the Belt and Road Initiative (BRI) is an ongoing Chinese infrastructure project spanning the whole globe, along with massive investments in hundreds of countries The price tag for the project is around $4-8 trillion, which is just insane What this does is essentially the same as what western countries did to China, pouring in a massive amount of money so that unproductive rural labor in those countries can be utilized to produce surplus value, except for China this time Essentially, China has to be a hegemonic power, or else risk imploding by economic contraction Now, you can argue whether this is a good thing or not, but two things you cannot argue against are that China didn’t do this out of the goodness of their hearts, and that China is essentially doing a neoliberalism to other countries, but maybe nicer this time Just like other investments, China is looking for returns on those investments or control over certain strategic areas Didn’t some famous bald guy say something about how the export of capital is the highest form of capitalism or something like that? And how capital exportation is a form of imperialism? Something something imperialism the highest form of something? Idk something to think about, I guess Second, this is why China tries really REALLY hard to keep its territory together, by all means if necessary For example, Xinjiang is an important source of natural resources in China, especially that sweet sweet oil and coal Domestic reserves of strategic resources like this would allow China to depend less on the international market, which can be both unstable and expensive Meanwhile, Hong Kong represents a financial nexus in which investment flows through Control over the island would ensure that investments can and will continue To maintain all of this sprawling system, someone has to keep everything in check This is where the current paramount leader Xi Jinping comes in Essentially, China needs a strongman leader to keep everything together, willing to dish out violence when necessary and be vicious to anyone threatening the project See, this is precisely what’s happening in Xinjiang Now I’m not going to go too in-depth into it because Chuang actually has a really really good article on the suppression of Uyghurs and I highly recommend it, but there’s a couple of things I want to point out First, yes, Uyghurs are being repressed They face discrimination and fucked up policies set by the central government Second, repression really started after the proliferation of capital in China

See, to dig up all that coal and oil, the state needed to invest in infrastructure first Instead of hiring the local people, the state decided to incentivize Han Chinese to move to Xinjiang, and millions of them moved there That investment led to inflation, and due to discrimination, made life much harder for the native Uyghurs Most high paying jobs are controlled by the Han, while Uyghurs are left to do the low paying jobs So it shouldn’t be too surprising that Uyghurs are way more likely to live in poverty More importantly, the reason why the government didn’t hire the local people was because it feared separatism and didn’t want to give them too much power See, after the fall of the USSR, the whole region of Central Asia was reopened after being cut off due to the Iron Curtain People in Xinjiang were able to reconnect with their neighboring countries and saw that they were more culturally connected with them than the central state In a sense, they rediscovered their own heritage through cultural and religious exchanges with their neighbors, which added to the whole separatist sentiment The central government, on the other hand, needs to crush that sentiment so they can control the area’s natural resources, hence the repression So you can see why there is discontent among Uyghurs, right? This led to high strung racial tension, in which violence was done by both sides, including mass killings As a response, the central state implemented draconian laws against the Uyghurs in 2014 Now, almost any crime involving an Uyghur and a Han is deemed terrorism for the Uyghur, in a similar vein to America’s War on Terror And if you’re wondering what the criteria for being sent to re-education camps are, read this Pause the video if you want Now, don’t get me wrong, ethnic conflict had been prevalent before 2014 What’s different this time is that now the laws are racialized, in that being an Uyghur, especially a muslim-practicing Uyghur, while not illegal by itself, carries a negative weight in the eye of the law, if you will, tipping the scale against the Uyghurs And the Uyghurs aren’t the only people being suppressed China is doing their hardest to keep Hong Kong on a short leash After the handover of the city in 1999, Hong Kong has maintained its relative autonomy But when a bill that would allow a person in Hong Kong to be extradited to China almost passed through its legislative body, well…let’s just say shit really hits the fan with protests and unrest The protesters in Hong Kong have 5 demands: the withdrawal of the extradition bill, retraction of the riot designation for the June 12th protests, amnesty for arrested protesters, inquiry into police conduct, and implementation of universal suffrage Here’s the thing though, Carrie Lam, the chief executive of Hong Kong, can’t actually fulfill any of those by herself Her boss is the central government and it’s up to them to grant that And there’s no way in hell they’d meet those demands See, as I have said earlier, Hong Kong is of high importance to China as it’s the main financial interface between China and the outside world, at least it used to be Now, cities such as Shanghai competed as that interface Nonetheless, Hong Kong is still an important city for China It funnels cash and credit from the bamboo network and the west into China itself, and vice versa So losing its grip on such an integral part of the economy is just unacceptable for the government Oh one more thing, these protests aren’t monolithic That douche who asked for Trump support? Yeah, he’s part of a minority of a minority The movement is diverse and undeveloped, without a single prevailing ideology in control There are right-wingers, liberals and anti-authoritarian leftists in the movement and they all fight for different end goals So no, you can’t generalize the protestors because, besides the 5 demands, there’s not really a coherent goal uniting them all If you want to learn more about the protests, there’s a leftist Hong Kong collective called Lausan who runs a blog which I highly recommend Alright, it’s also important to note that the reason why China is trying so hard to keep its territories together goes way beyond economic reasons There’s a nationalist sentiment brewing across the populace and the state itself, which legitimizes Xi’s action in Xinjiang and Hong Kong under the banner of Chinese sovereignty…or something like that This is usually paired with Han hegemony and ethnic subsumption, but I’m not going to get into that so let’s just move on Anyhoo, do you remember when I said China is trying to move up the production ladder by becoming a high-tech manufacturer? Well, guess who else is currently the top producer of high-tech goods and feel very much threatened by that? That’s right, it’s Greenland! Just kidding, it’s obviously America If you look at it from this perspective, then this whole trade war thing going on between America and China makes complete sense On the one hand, China is facing its own profitability crisis, with increasing wages eating up said profit and a need to move up the production ladder On the other hand, America doesn’t like competition and would like to be the world’s sole superpower, so Stuck in the middle of this is Hong Kong The city becomes a sort of proxy for this 21st century cold war, with America exerting its soft-power by supporting some protesters on the ground and China deploying police forces to quash the protest And actually, the rest of the world, especially developing countries, are caught in the middle of this newly brewing cold war, with gigantic amount of money in the form of investment promises being used to buy support by both sides Chinese investments don’t only come from the government either After finding themselves with shitloads of money, Chinese companies have now invested or straight-up owned other companies, western or otherwise, integrating them even further into the global capitalist economy In a way, this is also done to solidify Chinese hegemony, since there’s no clear line dividing the Chinese government and Chinese companies I mean, just recently, China flexed its muscles and was able to make Activision-Blizzard, a full-blown western capitalist company, bent its knees This is the kind of power China seeks to expand, utilizing capitalism’s own weaknesses for its own benefit And this period really started with the draft of Yao Ming some dozens of years ago

This is the future we all will face Stuck between two states trying to stave off their own demise by extending their power as far away as possible Growth will eventually meet its own limitations, where accumulation is no longer possible, whether due to rising energy cost, technological stagnation, complete environmental destruction, or all of the above, or something else And we’re barreling towards that, with two hegemonies duking it out on the global stage If it feels like the last gasp of a dying economic system trying to claw its way out of the grave, well that’s because it is After all, infinite growth on a finite planet is just infinitely stupid So, what now? So what does the future hold? Believe it or not, there’s a strong current of right-wing fuckery growing in China right now, just like everywhere else on earth Young Chinese people are being pulled more and more towards the right While, yes, there have been true marxist movements in China supporting workers, they are always harshly opposed by the government As such, the right-wing can recruit more readily And it makes sense, right? I mean, for example, there were leftist students who supported workers’ strikes, but they were disappeared by the government because they threaten the growth gravy train, while right-wing fuckery doesn’t In fact, right-wing ideologies support the current Chinese imperative of infinite growth So if you want to imagine how future Chinese political landscape would be like, just look at literally any right-wing nationalist countries whose policies emphasize strength over everything else And I mean like…look at this *cop support tweet* Now let’s talk real quick about all of those investments China made around the world See, there’s a reason why the IMF and the World Bank impose austerity on developing nations More money for the people means less money for the creditors So, while yeah, those Chinese investments and loans are more forgiving in their terms, in the end, if they’re not profitable, what do you think will happen? China is already taking ownership of the infrastructure it built in developing countries when debts cannot be repaid If that turns out to be unprofitable, then what? Would China start to impose austerity measures in other countries? If not, then how would it recoup all the losses? If they can’t, what do you think will happen? Do you think hundreds of billion dollar holes can just be swept under the rug? Do you see where I’m coming from? Now, I’m not saying China will disintegrate or anything (though to be honest, I don’t think our current concept of “countries” will survive past the 2100s but that’s another video) What I’m saying is that China has been completely subsumed by capital, and has to play by its rules See, this is the trap that all capitalist countries see themselves fall into Do you remember when I mentioned how strikes and such increased wages in China? Well, you have decreasing profits on one side, and angry workers demanding wage increases on the other Fixing one makes the other worse America, and pretty much the rest of western world, quote unquote “fixed” this problem with neoliberalism, exporting industrial production to, ironically, China and destroying unions and workers ability to bargain Japan never got out of this problem, and now China is inching closer and closer to that point too So now we have a country with 1 point something billion people marching into a crisis (and I haven’t even mentioned the Chinese demographic time bomb) Coupled with rapid environmental degradation, it wouldn’t be surprising to see an existential crisis happening in China in the next, like 30 years With right-wing fuckery growing in online spaces among Chinese youth, well…let’s just say I don’t think it’s going to be pretty Alright, after all of this you might argue “but China is building socialism”, which, okay, sure But what policies are they enacting towards building socialism? From my perspective, China is becoming more and more capitalist, not less What once was an extremely regulated financial sector is now full of the same arcane financial instruments that are used in America What once was a labor system that tried to not commodify people now exploits them through wage Now, the main economic imperative is capital accumulation Remember my dad’s story from the beginning? Just because someone tells you a story, doesn’t mean that it’s the truth The Chinese government can say they’re socialist, or I guess Socialist with Chinese Characteristic, but what does that mean? Would a socialist government commodify their workers? Would a socialist government export so much capital to developing countries? Would a socialist government have capital accumulation as its main imperative? After all, if an animal looks like a duck, walks like a duck and quacks like a duck, it might be a chicken, but it sure as hell ain’t a giraffe