Capitalism With Chinese Characteristics: Why the Communist Party Has Abandoned Marxism in Deeds But Not In Words

August 14, 2016 Updated: September 18, 2016

This is the final of a four part series. Parts one, two, and three were published previously.

Since Marx created his communist theory, China’s has become the first capitalist economic system under communist party rule. The Chinese Communist Party (CCP) started its reign by eliminating capitalism—transforming private ownership into state ownership—but was unable to create a successful socialist economic system. It finally had to switch back to a capitalist system to extend its rule.

During the reform to private ownership, CCP officials at all levels, and their families, became entrepreneurs, large property owners, and huge financial asset owners. Their process of wealth accumulation has been one of darkness and crime. They thus needed the red regime to protect their property and lives, and they also needed government monopolies to continue amassing more wealth. Therefore, these people are the strong supporters of China’s current system, rather than facilitators of democratization.

Unlawful Misappropriation

How did the CCP’s red elite go from owning nothing to becoming super wealthy in a short period of 20 to 30 years? This is the communist-capitalists’ secret and the guide to understanding the communist capitalist system and the future political direction of the CCP interest groups. Basically, they achieved it through unlawful misappropriation of public assets, maintaining monopolies of important industries, and by manipulating policies to gain benefits and maintain their authoritarian rule.

Cheng Xiaonong (NTD)

Unlawful misappropriation of public assets refers to the CCP elite directly taking over small and medium-sized state-owned enterprises (SOE) and obtaining free shares in large SOEs during the privatization process.

Maintaining monopoly industries refers to large SOE’s in the financial, energy, electricity, transportation, telecommunications, and other industries in which the red elite or their second generation offspring occupy key positions. Some of these enterprises are among the world’s top 500 enterprises. They provide large amounts of tax revenues to support the regime and allowed the red elite to quickly become rich through acquiring shares, kickbacks, pay and bonuses.

By influencing and manipulating policy-making, the red elite and their relatives were the first to get involved in many industries and projects and hence easily gained tremendous benefits.

Maintaining authoritarian rule refers to the red elite’s extreme hostility to democratization and to their hope to eternally keep the red regime in power, so as to permanently have their privileges and huge amounts of illicit wealth be protected by the CCP regime.

Red Capitalists

When a large number of China’s enterprises and wealth lie in the hands of red capitalists, the only reliable system of protection for them is neither market economy nor the rule of law, but “the proletarian class dictatorship,” which means their permanent dictatorship over all other members of society.

They clearly know that the traditional socialist economic system is not workable; they have access to wealth that is more readily available than wealth earned by entrepreneurs in democratic countries; they also have an excellent political position without competition, and they are able to prevent political democratization that might lead to political and economic liquidation. This is the essence of the “China model.”

An elderly Chinese farmer stands outside her home on farmland backdropped by a new housing development in Hebei on Nov. 21, 2014. (Kevin Frayer/Getty Images)

Obviously, under the CCP’s regime, this red capitalism will not spontaneously transform into a capitalist democratic system. For a long time, Western scholars have held the belief that, after economic liberalization, the red elite will naturally embrace democracy and freedom. China’s transformation has proven this idea to not only be naive, but also wrong.

However, the red elite is also very clear about the fact that the China model faces constant threats from the bottom of society. Therefore, they have been transferring personal assets to Western countries while arranging for their family members to immigrate to Western countries should the need arise. This indicates that the future of the “China model” is actually very fragile.

Revisiting Marx

In early 1989, the Friedrich Ebert Foundation, a German NGO, arranged for several visiting scholars to visit the Karl Marx House in Trier. Someone wrote in Chinese: “Mr. Marx, you really harmed us.”

Now it seems this statement was only half right, as Marxism was also harmed by the China model. If Marx were able to comment on today’s communist capitalism, he might be irritated and pleased at the same time. Irritated, because communists have married their enemy in order to survive; and pleased that a few communists are still around, no matter what kind of anti-Marxist theories they employed. So Marx might feel that he hasn’t become totally irrelevant.

But Marx would still be disconcerted by a huge contradiction. According to his theoretical framework “the economic base determines the superstructure,” and “advanced productive forces inevitably change a backward superstructure.” However, the China model would force Marx to completely overthrow his core concepts and thus the entire Marxist ideology, because under the present communist capitalist system, the superstructure of the “proletarian dictatorship” relies, in fact, on the economic base of capitalism.

A broken desk is seen at the top of an enclosed conveyer belt at an abandoned chemical factory on the outskirts of Beijing on April 4, 2016. (Greg Baker/AFP/Getty Images)

So, the big question remains on what the fate of this residual superstructure of the old socialist economic base will be. Is it to be totally eliminated on the scrap pile of history, or does it indeed contain an “advanced” nature that will inevitably breed a new communist revolution to eradicate communist capitalism?

Alternatively, in order to learn from the China model, Marx might need to update his theory from, “the economic base determines the superstructure” to, “the superstructure determines the economic base.” This would not only be a tough lesson for Marx to face, but also poses an unavoidable ideological crisis for the CCP.

Marx is still revered by the CCP because he provides ideological legitimacy to the privileged red bourgeoisie as well as to the continuation of the “dictatorship of the proletariat” model. The paradox is that the China model itself is anti-Marxist.

The CCP’s trick of survival is to hold the banner of Marxism while building and consolidating a capitalist economic system that is the opposite of Marxism. The China model thus is opposed to both Marxism and democracy.

Dr. Cheng Xiaonong is a scholar of China’s politics and economy based in New Jersey. He is a graduate of Renmin University, where he obtained his Masters degree in economics, and Princeton University, where he obtained his doctorate in sociology. In China, Cheng was a policy researcher and aide to the former Party leader Zhao Ziyang, when Zhao was premier. Cheng has been a visiting scholar at the University of Gottingen and Princeton, and he served as chief editor of the journal Modern China Studies. His commentary and columns regularly appear in overseas Chinese media.