Introduction to Markets & Socialist Transition 

Date: 29 October 2022

Author: Michael C.

Tags: Asia-Pacific, Economics

On July 9th, 1953, Chairman Mao Zedong wrote the following comment while attending the National Conference on Financial and Economic Work:

“The present-day capitalist economy in China is a capitalist economy which for the most part is under the control of the People's Government and which is linked with the state-owned Socialist economy in various forms and supervised by the workers. It is not an ordinary but a particular kind of capitalist economy, namely, a state-capitalist economy of a new type. It exists not chiefly to make profits for the capitalists but to meet the needs of the people and the state. True, a share of the profits produced by the workers goes to the capitalists, but that is only a small part, about one quarter, of the total. The remaining three quarters are produced for the workers (in the form of the welfare fund), for the state (in the form of income tax) and for expanding productive capacity (a small part of which produces profits for the capitalists). Therefore, this state-capitalist economy of a new type takes on a Socialist character to a very great extent and benefits the workers and the state.”

[emphasis added by Mount Tai Press author]

Just short of two months later, on September 7th, 1953, the Chairman gave a talk to representatives of the democratic parties and industrial & commercial interests, titled the Only Road for the Transformation of Capitalist Industry and Commerce. Both the date of this meeting, and the content of Mao’s talk are of importance. The date is worth noting, because it directly preceded the commencement of the 49th meeting of the enlarged Standing Committee of the National Committee of the Chinese People’s Political Consultative Conference (CPPCC)—the consultative organ of the Communist Party-led Socialist United Front, which today consists of 28 democratic parties and organizations[1]—on September 8th. The Chairman stated, in his typical straightforward manner: “The transformation of Capitalism into Socialism is to be accomplished through State Capitalism.” He elaborated on the developments of contemporary China at the time in regards to the economic work at hand, and the period of Socialist development then underway. 

It will take at least three to five years to lead the country’s private industry and commerce basically onto the path of State Capitalism… State Capitalism can also be applied in the case of private commerce which cannot possibly be dismissed by "excluding it". With approximately 3,800,000 workers and shop assistants, private industry and commerce are a big asset to the state and play a large part in the nation's economy and the people's livelihood. Not only do they provide the state with goods, but they can also accumulate capital and train cadres for the state… Some capitalists keep themselves at a great distance from the state and have not changed their profits-before-everything mentality. Some workers are advancing too fast and won't allow the capitalists to make any profit at all. We should try to educate these workers and capitalists and help them gradually (but the sooner the better) adapt themselves to our state policy, namely, to make China's private industry and commerce mainly serve the nation's economy and the people's livelihood and partly earn profits for the capitalists and in this way embark on the path of State Capitalism… 

Not only must the implementation of State Capitalism be based on what is necessary and feasible, but it must also be voluntary on the part of the capitalists, because it is a co-operative undertaking and co-operation admits of no coercion. This is different from the way we dealt with the landlords… So it is possible basically to accomplish the task of leading private industry and commerce onto the path of State Capitalism in three to five years. The preponderance of state enterprises affords the material guarantee for the fulfillment of this task… As for the completion of the task for the entire transition period, which consists of the basic accomplishment of the country's industrialization and the Socialist transformation of agriculture, handicrafts and capitalist industry and commerce, this cannot be done in three to five years, but will instead take a period of several five-year plans. On this question it is necessary to oppose both the idea of leaving things to the indefinite future and the idea of rushing things through. One is the leader while the other is the led; one seeks no private profit while the other still seeks a certain amount of private profit, and so on and so forth; that's where the differences lie. But under our present conditions, private industry and commerce in the main serve the nation's economy and the people's livelihood (which as far as the distribution of profits is concerned, take roughly three-fourths of the total).

[emphasis added by Mount Tai Press author] 

The Chairman’s statements here stand in stark contradiction to accusations that Mao’s successors, namely Deng Xiaoping, revived Capitalism in China following the Chairman’s passing. Any honest investigation into the history of the People’s Republic, and its path of Socialist development—Socialism with Chinese Characteristics—shows that China’s current path was precisely laid out all of those years ago, well before even the end of WWII , by the collective struggle and development of the Communist Party itself. What they show is not a China failing to achieve the great promises made by the revolutionaries of the Yan’an base area, but rather a China which, under the leadership and guidance of the Communist Party, has held to the same course of Socialist construction from the beginning; and the ignorance of many who wish to speak on such matters without first investigating them thoroughly. 

First and foremost, it is necessary to establish a correct understanding of basic Marxist economic terminology. One of the most under-discussed, under-investigated, and therefore most misunderstood aspects of Marxian economics is the existence and function of markets

Markets, in basic terms, are the real-world exchange of goods and services. From ancient Babylonia to modern Beijing, whenever two or more individuals meet to exchange one thing for another, that is a market. Many enterprising young revolutionaries today have been led to believe that this exchange—these markets—are synonymous with Capitalism. This is not the case! From Barcelona, to Phnom Penh, to Baltimore, attempts to “abolish markets” despite incongruent productive development—either as economic institutions completely, or specific black markets—has led to abject failure, suffering, and socioeconomic regression. This is not a moral judgment of the intentions or ideals of those believing this to be the correct path for whatever reason; it is rather a material judgment that such idealism is not, and has never been, the program of Marxism-Leninism. To be clear, Communism is the stage of societal development wherein the commodity form, and therefore markets, will be abolished. We are not there yet.

Chairman Mao Zedong waves to the attendees at the closing ceremony in Beijing during the first session of the 1st NPC, which was held from Sept. 15 to 28, 1954. /Xinhua Photo

Markets are not monolithic. As any exchange of goods or services on a societal scale constitutes a kind of market, markets naturally have taken on a variety of forms at various points in history; from the earliest bartering economies to modern commercial economics. This economic evolution carried with it, dialectically, social evolution, as discussed in Marx’s Social Ontology by Carol Gould. As humans developed the ability to speak, they developed the ability to trade. As trade developed, stand-ins for stock used in bartering (sheep, for example) became necessary—currency—and with it, the commercialization of markets. The first recorded usage of paper currency as we know it today dates back to China’s Tang Dynasty (618–907), wherein merchants used banknotes to replace cumbersome quantities of copper coinage. This practice became the norm, and was carried onwards into the Song (960-1279), and later Yuan (1271–1368), Dynasties.

With these pieces of paper, made as I have described, [Khubilai Khan (1215—1294)] causes all payments on his own account to be made; and he makes them to pass current universally over all his kingdoms and provinces and territories, and whithersoever his power and sovereignty extends. And nobody, however important he may think himself, dares to refuse them on pain of death. And indeed everybody takes them readily, for wheresoever a person may go throughout the Great Kaan’s dominions he shall find these pieces of paper current, and shall be able to transact all sales and purchases of goods by means of them just as well as if they were coins of pure gold. And all the while they are so light that ten bezants’ worth does not weigh one golden bezant.

Marco Polo, c. 1300 AD

Would we describe the pre-industrial peoples of the Tang, Song, and Yuan Dynasties engaged in this commercial market exchange as capitalists? No. Because markets are not Capitalism. As we can see here by looking at the history and socioeconomic development of humanity, markets in fact pre-date the development of Capitalism by several centuries. This is because Capitalism itself is the evolutionary development of the commercialization of markets coupled with the birth of industrialization. Commerce is specifically the market exchange of goods and/or services for currency; here we have seen how this developed the usage of paper banknotes, first in China, out of necessity in order to carry out larger market exchanges. In Europe, a similar development occurred during the Crusade era (1096 and 1291), carried out by organizations such as the Knights Templar; in their case, it was primarily the necessity for compartmentalized storage and safekeeping in order to carry out market exchanges in far-away places (after pillaging them). Whereas before a chicken could be traded for a chicken (bartering), ten chickens could then be traded for one copper piece (commerce); as the volume of commerce became unmanageable (too many chickens, too much copper), it then became necessary to utilize stand-ins for either end of the transaction—commercialization giving birth to credit, paper currency, etc. These economic—market—relations, as stated above, developed in a dialectical relationship with social relations. Social status, for example, evolved from being determined by the hunter’s individual prowess, to the farmer’s harvest, to the Lord’s farmer’s harvests, to the merchant’s haul, to the Capitalist’s hoards. Each shift accompanied a shift in economic relations; all of which, with the possible exclusion of the hunter (based on whether or not engaged in bartering) involved market relations. Should we say, then, as the capitalists do, that “Capitalism is the natural state of mankind?” We say no. Markets have not always existed, nor will they always exist. However, in the current age, and for the foreseeable future, markets appear as the primary medium for allocation of goods and services in human society. 

The point at which pre-capitalist societies developed into Capitalist ones is not universal, as some societies shifted earlier or later than others, and some—the Lao People’s Democratic Republic, Socialist Republic of Vietnam, and People’s Republic of China—make the case that their societies never really developed into Capitalist ones at all. For those that did, it was not merely as a result of having market relations, although the existence and commercialization of markets was vital. Nor was it merely the result of technological development; the steam engine giving birth to the age of industrialization. Rather, it was the accompanying relationship with the other sphere; social relations. The stratification of the whole—or critical mass—of society between the proletariat and the bourgeoisie; subjugation of the former to the latter. The dictatorship of capital. The whole-society, inescapable subjugation of the people to the whims of capital, namely through the enforcement of private property. 

The revolutionary victory of the People’s Republic of China, proclaimed from the gates of the Forbidden City—once-abode of the Emperor, believed to have been chosen by heaven itself—overlooking Tiananmen, has shaken the world, and requires a re-evaluation of Marxist orthodoxy. Under the original, orthodox, Marxist analysis of the evolutionary nature of socioeconomic development, the birth of Capitalism (the dictatorship of the Bourgeoisie) was a necessary antecedent to the development of Socialism, and eventually Communism. 𝑨→𝑩→𝑪. What if 𝑨 wasn’t necessary though? The specific undertakings of the Communist Parties and movements in China and Southeast Asia differed considerably from those in Europe and elsewhere; a full recounting and analysis of those differences, and how they have given rise to the exact conditions of our times, remain elusive in the Western Communist movement. What has been forgotten, perhaps intentionally, is that China’s was the revolution that shouldn’t have been. Per the orthodoxy of the day, as described above, China in the 20th century was among the last candidates for what was viewed as viable revolutionary conditions. With a population composed almost entirely of peasants and other such agricultural workers, the only real center of industrialization—a key facet of the developments necessary to create Capitalism, and therefore Socialism—was Shanghai. As such, the Communist Party focused greatly on Shanghai, and put its greatest efforts to the task of organizing the growing new class of industrial proletariat coming into existence there. They were largely successful, but the remaining 90%+ of Chinese society remained outside of their reach! What was to be done? The prevailing orthodoxy of the period, under the leadership of Chen Duxiu and informed to a great extent by the burgeoning young Soviet Union, was that China must continue to industrialize and develop bourgeois democracy first before revolutionary conditions could materialize. For this reason, the First United Front was established between the Communist Party and the Nationalist Party (Kuomintang), with the stated goal of bringing about an end to the warlordism plaguing the country; to unite it, under bourgeois democracy, and set about the great industrialization of the nation. A different view, however, was beginning to be put forward in this time by the rural Comrades, including one Mao Zedong. In their view the peasantry, comprising the vast majority of Chinese society, represented the revolutionary class capable of waging—and winning—Socialist revolution. This position was suppressed, and Mao himself came close to being purged over accusations of warlordism. It is here very much worth noting that he did not break with the democratic centralism of the Party, maintained his view in comradely struggle internally, and upheld the Party line of the period in spite of his disagreements. And so Mao himself supported the CPC-KMT alliance to the best of his abilities; even serving in official roles within the KMT itself.

Then, on April 12, 1927, hell was unleashed on the city of Shanghai—the Communist Party’s primary base of operations and support. By the end of the day, the counter-revolutionary coup claimed the lives of 5,000-10,000 Communists, trade unionists, students and their supporters. Despite the best efforts of both Chen Duxiu and Zhou Enlai, Shanghai fell to the white terror. Subsequent uprisings and counter-attacks aimed at dislodging Chiang Kai-Shek’s Nationalist forces were quickly, brutally, put down and driven back into the countryside. Into the area of expertise of Mao Zedong. The ultimate victory of the People’s Liberation Army, and the proclamation of the People’s Republic, broke the orthodoxy of the primacy of the industrial proletariat. This “miracle” would be repeated.

In these “miraculous” places—namely China, Vietnam, and Laos—where the non-industrialized peasant masses successfully waged revolution under the guidance of the Communist or People’s Revolutionary Party, Capitalism had, by definition, not developed. This posed many new questions for the Marxist movement, and raised contradictions that would go on to have disastrous consequences. Namely, how would Socialism be established in a society that hadn’t first evolved into Capitalism? The Chinese looked to the Soviets as a point of reference, however, having broken the dogma of orthodoxy by succeeding in their revolutionary struggle, they did not simply repeat the same policies—they simply couldn’t, their conditions were too different. One example from the Soviets they did have, however, was the New Economic Policy (NEP) established under Vladimir Lenin.

The proletarian state may, without changing its own nature, permit freedom to trade and the development of Capitalism only within certain bounds, and only on the condition that the state regulates (supervises, controls, determines the forms and methods of, etc.) private trade and private Capitalism. The success of such regulation will depend not only on the state authorities but also, and to a larger extent, on the degree of maturity of the proletariat and of the masses of the working people generally, on their cultural level, etc. But even if this regulation is completely successful, the antagonism of class interests between labor and capital will certainly remain. Consequently, one of the main tasks that will henceforth confront the trade unions is to protect in every way the class interests of the proletariat in its struggle against capital. This task should be openly put in the forefront, and the machinery of the trade unions must be reorganized, changed or supplemented accordingly.

[emphasis added by author]

In this way, we can see, thirty years later, Mao himself echoing the same analysis and development undertaken by Lenin. China, like the Soviet Union, underwent a period of unimaginable hardship and warfare; as did Laos, as did Vietnam. The key differentiating characteristic, here, are the class characteristics of the revolutionary vanguard. In the case of the Soviet Union, the vanguard was the industrial proletariat; such was the orthodoxy in accordance with Marx’s original analysis, although not completely. A large peasant population existed in Russia. However, organizing largely into the Socialist Revolutionaries, they had split into Right and Left SRs, and been to some degree an opponent of the Communist movement. In China, Vietnam, and Laos, it had been quite the opposite: the masses, being primarily peasants, had been the vanguard of the revolutionary movement and wars of liberation. One immediate result of this difference was that a drastically different approach to economic work was necessary in order to secure the revolutionary victories of the latter countries; a topic Mao wrote about frequently. What we see from the period, and remaining today, is a series of lessons and influences from the Soviets, but not a dogmatizing of Soviet policy or Marxian orthodoxy; market reforms as established under Lenin’s NEP have served as a reference and basis for the further development of market policies in Actually-Existing Socialist (AES) countries, but also developed to include policies later established under Joseph Stalin’s Great Turn; such as the collectivization of land, periods of social revolution accompanying economic transition, and industrialization. Attempts at collectivizing agricultural production and economic relations through the establishment of communes and abolition of markets, in each instance, were met with failure, as recorded by both Mao and Stalin. In both cases, it was understood that these failures came as a result of idealism and limitations of productive forces. In spite of some limited successes, productive and social development had not, and still has not, advanced to the point where such policies are feasible on a national level—for this reason both Mao and Stalin, as well as the Communist leadership in Laos, Vietnam, and Cuba, all reoriented and began reforming market policy around meeting the needs of Socialist construction; ie developing productive forces.

The Socialist Oriented Market Economy of China, like the Socialist Transition periods in Vietnam and Laos, all reflect a reality that has gone largely unnoticed, unanalyzed, and uncared for in Western Marxist circles. A shame, considering the extremely important insights and lessons which may be learned from them; information and guidance which might be the key factor in establishing Socialism in the West. The NEP and Great Turn periods of Soviet history lasted for roughly 20 years, whereas the Socialist Oriented Market Economy and Socialist Transition have lasted far longer; this points towards the greatest contradiction facing the world today, and perhaps also the source of these nations’ ability to bypass the bourgeois dictatorship period of socioeconomic evolution as well—we speak here, of course, of imperialism. As the commercialization of markets led to the development of monopolies, and capital accumulation at the level of nations began to feel the pinch of diminishing returns, it was time to do as they had done when localized markets experienced the same conditions; expand or die. This new globalization of markets marked a distinct evolution in Capitalism, as discussed by Lenin. Markets expanding from national to international. With it, too, came the further development of social relations. As the local and national market relations of the global south were ravaged by imperialist vultures, so too was the development of national bourgeois forces. This is one key aspect of the Socialist United Front in China today, and a key line of demarcation between the development of Socialism in the Soviet Union—which had evolved from an imperialist power—and countries like China, Vietnam, Laos—which all evolved from imperialized nations.

In each stage of Socialist development—both in the Soviet Union and in China—voices contended that the solution to the problem of achieving Socialism was simply one of belief. That if economic planners, cadres, and workers deputies merely believed hard enough, and engaged in the whole-sale collectivization of the entirety of society, including markets, that Socialism would be achieved. Not only have such attempts failed when attempted by small groups of idealists and ultra-leftists, both in the United States, Russia, and China; they also lended minimal accomplishment—if not outright failure—when attempted at the larger (national) scale. Here we may observe the upper boundary of what is feasible in the current age of American imperialist hegemony. However, that age is ending, and a new age, with China at the helm of global affairs, appears to be dawning. The development of so-called “State Capitalism”—market and productive forces under the dictatorship of the proletariat rather than the dictatorship of the bourgeoisie—has shown its prowess with the emergence of a new Socialist Superpower, and common prosperity has become the rallying cry of imperialized peoples around the world. 

In this way we can see that not only has the present development of globalized markets as a form of international economic relations been, in Marxist terms, a natural evolutionary process, but that “abolishing” markets would likewise mean a regression in that development. A step backwards rather than forwards. We may likewise see that markets, as such, do not constitute Socialism or Capitalism on their own; rather, markets represent merely a specific (natural) phenomena of natural relations. The determining factor of Capitalism and Socialism remains, as always, the monopolization of political power; the dictatorship of the bourgeoisie, or the dictatorship of the proletariat, respectively. Only one nation in the world claims to have fully achieved Socialism in the Marxist sense (the DPRK, which for reasons of brevity we will not belabor here); for the rest—China, Laos, Vietnam specifically—it is not a question of being Socialist but one of Socialist construction. In order for this to be accomplished, what Lenin and Mao termed “State Capitalism”[2] is utilized. This does not mean that these countries, often referred to as Actually Existing Socialism, are Capitalists. In the case of all but Cuba, the implementation of such policies is of paramount importance for the sake of building Socialism. The line of demarcation is the orientation of economic relations and the class character of power relations. Under Capitalism, economic relations are oriented purely towards capital accumulation (“profit motive”), and political power—often described as a monopoly on violence—is held by the bourgeois Capitalist class; bourgeois dictatorship. Under Socialism, however, economic relations are oriented purely towards social wellbeing, and political power is held by the proletarian working class; the people’s democratic dictatorship, or dictatorship of the proletariat. For countries such as China, Laos, and Vietnam, which did not develop productive forces or independent national bourgeois forces on their own (or at least not to a considerable extent) due to imperialism, an intermediary “primary” or “pre-socialism” stage of development is necessary. And that is precisely what they have established, why they have established it, and what they are building towards. The cultivation of market relations then is, rather than a hindrance, a vital necessity. 

Some dogmatic left-anticommunists today will contend that China in particular had in fact been on the correct path. They claim Deng Xiaoping and the second generation of Party leadership turned away from the Socialist road as a result of market reforms in that period; that Mao Zedong had single-handedly saved the Chinese nation, and without him, she was lost once again. These anti-communists are little more than the bastard grandchildren of Leon Trotsky. Still others, the liberal revisionists, contend that China had fallen because of Mao, and that it was Deng Xiaoping who had saved the Chinese nation. These anti-communists, left- and right-deviants respectively, reveal themselves ultimately as wholly failing to contribute to Marxist analysis of Chinese history and development. It was neither Mao Zedong nor Deng Xiaoping alone who saved the Chinese nation; it was the millions of China’s own sons and daughters, under the collective leadership of the Communist Party as a whole, who have saved, and continue to save the Chinese nation: first against the Japanese imperialists, second against the Chinese compradors, and third, today, against the American imperialists. In the final analysis, the rapacious lies, slander, and “criticism” leveled at the People’s Republic, along such grounds, betrays only the authors’ own ignorance as regards the history and development of China, and the underlying chauvinism driving such attempts to discredit the world’s only actually-existing Socialist Superpower. The proliferation of such vulgar displays of such chauvinistic historical and political illiteracy, and their focus on China—with little to no reference whatsoever to Laos or Vietnam in particular—show us only that Communists in the west have an uphill battle ahead of them in combating imperialist propaganda and educating the western masses. 

The author concludes with a hypothesis: that just as the development of Capitalist—bourgeois dictatorial—forces gave rise to the emergence of global imperialism, so too the further development of so-called “State Capitalist”—proletarian dictatorial—forces will give rise to the emergence of global Socialism. The abolition of poverty in China, and overall developments underway throughout the Socialist world has punctured the upper limits of Capitalism; the imperialists have produced, namely, their own gravediggers. As this socioeconomic evolution continues, the imperial core will continue turning itself inside-out and regressing both socially and economically; while the imperialized world will achieve new victories, new developments, and new prosperity. 

Socialism is not pauperism; to get rich is glorious.


[1] The 28 democratic parties and organizations of the Socialist United Front led by the Communist Party of China: 

[2] As Marxists, we do not participate in hero-worship. We may then say openly and clearly that “State Capitalism” as a term is absolutely terrible and archaic; most people assume based on the word “Capitalism” that it refers to a form of Capitalism (bourgeois dictatorship) rather than a form of Socialist transitionary construction (proletarian dictatorship prior to the complete abolition of profit extraction in economic relations), which is a great shame and leads to many, many unnecessary misunderstandings and confusion. In modern times the term has been replaced by others, such as “Socialist Transition,” “Socialist Market Economy,” etc. This is a positive development, but, without being clearly noted as such, has led to some confusion and misunderstanding in the west; these terms are not contradictory, and are in fact different ways to describe the same essential socioeconomic evolutionary process.

Editor's note: In response to some questions and principled criticism from our readers, this article has been further edited for clarification, 04/12/22