The Last Dynasties
Development in the imperial era does not begin with the stasis of a so-called “traditional China.” The imperial state, often in competition with members of the landowning elite, periodically intervened in rural society, each time reshaping its social character. In one of the last significant interventions (inaugurating the late imperial period), the Ming Dynasty (1368-1644) attempted to create an independent peasantry in order to eliminate rivals vying for control over the rural surplus product and to stabilize society. In order to do this, peasants were given land, although not as equitably as originally intended. At this time, as in much of the region’s history, peasants were not just farmers: they farmed but also produced handicraft items, in particular silk or cotton cloth. And the Ming state, as with earlier ruling dynasties, encouraged this dual production by requiring tax payments in grain, cloth and labor.
The dual nature of rural production was to last into the early socialist period, when collectivization would bring it to an end. Notably, handicraft production remained rural to a greater degree and much longer than in Europe. The urban nature of production in Europe made it more capital-intensive over time. Whereas production in the Ming and Qing had a rural and labor bias, over the same time period Europe had an urban and capital bias. This meant that the rural-urban divide was weaker in the Ming and Qing, and production was more diffuse. In fact, from the mid-13th until the 19th century, the urban population actually shrank relative to the rural population. In Europe the reverse was true.
In the rural-urban continuum common to mainland East Asia, numerous villages would surround a market town (shi). On market days, peasants, merchants and gentry would go to these towns which, by the Ming and Qing, had become linked to the global economy. Larger administrative and intermediate marketing towns (zhen) developed alongside Ming commercialization. A sharp rural-urban divide would emerge only in the 20th century, largely a result of socialist-era policies.
As production grew in the late-imperial period, so did rural surplus and regional and empire-wide trade. This developed into a Ming commercial revolution that brought increased inequality in rural landownership. With commercialization, the tax system became too complex to maintain, and the state shifted to tax payment in silver instead of in kind. Rural Ming society became dominated by the landowning gentry, which was particularly strong in the developed south. This gentry either rented out land or engaged in large-scale managerial farming, often using bonded labor from peasants who had lost their land and could no longer survive independently in the commercializing economy. With the commercialization of the rural handicraft industry, the control of female bonded labor became increasingly financially important to the managerial farms. A form of “patriarchal landlordism” developed, in which the estates managed female labor along with their marriage and sexuality.
With commercialization, tenancy contracts became more and more impersonal, and tenants grew poorer. The Ming gentry increasingly moved into the cities as absentee landlords, especially in the south. Rural poverty led to more migration and a general breakdown of the Ming state’s control over rural society and rural revenue collection. The early Ming system essentially disintegrated under the pressures of commercialization, and its experiment in creating a small-scale peasant economy ended in failure.
As the Ming state weakened in the late 16th century, peasants began resisting rent and in many regions this led to rebellion. New radical and millenarian critiques of “profit-seeking” arose alongside egalitarian and communal ideals. These peasant struggles forced the rural landowning gentry into a weaker position and led to expanded tenant rights in many areas of China, transforming landlordism from the Ming into the Qing Dynasty (1644-1911). It also largely ended bonded labor and patriarchal landlordism.
As a result of the tenant peasantry’s stronger position, investments in rental land brought lower returns for landlords, rarely above 8% before taxation by the 19th century, according to some estimates, and certainly lower than could be made by investments in commerce or usury. Farm size decreased from the late Ming, and by the early 20th century few managerial farms existed. Patriarchal landlordism transformed into the patriarchal peasant household. Peasant household patriarchy was mainly concerned with the control of household labor, and the economic logic of these household production units aimed at satisfying household subsistence. As labor could not be laid off from the household, the tendency was to keep adding labor inputs until consumption was met, even as the marginal productivity of those inputs continued to drop. Under these conditions peasant rationality “was the rationality of survival, not of profit maximization.” Agricultural labor productivity was largely stagnant, and increased production was the result of labor intensification. Instead of increasing labor productivity and economic development, as production increased labor productivity dropped, a process called “involution.”
The rural gentry shifted strategies in response to peasant resistance and rebellion at the time of the Ming-Qing transition, profiting more from commerce and usury than from land rents. In other words, rural labor was controlled by the patriarchal household instead of the gentry, while surplus was extracted by elite control over rural markets. This shift transformed the ways in which the rural gentry and the late-imperial state attempted to control rural surplus extraction during the Qing. Instead of focusing on land rents, the gentry would buy the surpluses produced by peasants and sell them to households that processed them, then buy them from those households in turn and sell them into the urban and mainly regional markets with a small amount ending up in international markets. This was not a putting-out system as was seen in Europe.
Earlier in the Ming, most rural households had not produced commodities for sale on markets, but had instead produced a variety of goods for subsistence and then sold a small surplus to the rural gentry, who would then re-sell those products as commodities. But with increased commercialization and specialization, more households began to focus on commodity production without abandoning subsistence production for their family units: a situation of commercialization without development. Over time many began to satisfy their reproductive needs through market purchases as well, with areas that produced higher-end goods buying food through regional markets from more peripheral areas. And it was the rural gentry that controlled those markets.
In this situation, gentry landlords rarely intervened in the production or labor process itself, instead buying low and selling high. They controlled access to markets and capital, but not the production process. Surplus was extracted by a gentry, in other words, that cared little about the relative productivity of the production process, and thus did not invest in transforming production. Furthermore, under this labor-intensive system, almost the whole economy remained rural in nature. The late imperial Chinese economy lacked an urban entrepreneurial class comparable to the one in Europe that turned the rural surplus of the agrarian revolution into capitalist development. Whatever rural surplus existed—the exact amount a point of much debate—that surplus was not easily directed towards increasingly capital-intensive development that significantly raised labor productivity.
From Household to World Market
The late 19th century until the 1930s marks the period in which most developed areas of Chinese agriculture became formally subsumed within the global capitalist market. At that time, rural China, in particular coastal regions, was tied into the new global price-setting market for agricultural commodities known as “the first global food regime.” Foreign merchants, their Chinese agents, and Chinese merchants reached into the rural-urban continuum, transforming markets and squeezing peasant producers. The wave of commercialization since the Ming together with the subsumption of rural markets within global capitalism meant that, by the 1930s, in many areas up to 40% of agricultural production ended up on the market, the number reaching 50% in the most developed regions.
While merchants and gentry-merchants often did well with the integration of Chinese and international markets, the results for peasants households were more mixed. Nonetheless, rural consumption levels were not far below that of urban residents, estimated at between 81 and % of average urban consumption in the 1930s, ratios that probably lasted until the mid-1950s, although this perhaps says more about the weakness of the urban economy than the strength of the rural. The effects of integration depended on the product one specialized in. Tea producers, for example, suffered from the 1880s onward once the British tea plantations in South Asia were producing in full swing. In the cotton textile industry, spinners of yarn had a hard time competing with foreign, machine-spun yarns. In contrast, the cheap imports of such yarn initially allowed cloth weavers to do well, and only over time did they, too, have increasing trouble on the new market. Foreign-owned industrial weaving facilities along the coast—mostly built since the turn of the century—began to cut into the handicraft market. Sourcing much of its yarn from abroad, the industry led in part to the initial disintegration of the rural-urban continuum.
The emerging international market in agricultural commodities began to break up following World War One due to the war itself and shrinking trade during the Great Depression. This led to the first attempts to construct a national capitalist economy in China. By the 1930s, the industrial sector (manufacturing, textiles, mining, utilities and construction) still constituted only 7.5% of China’s economy, agriculture employed about 80% of the working population, personal consumption accounted for about 90% of national income, and international trade was still quite small. During this new phase, the Nationalist Party (Guomindang, hereafter GMD) that had taken over much of China by the end of the 1920s attempted to complete the capitalist transition and build a national economy by creating a stronger link between industrial facilities in the coastal cities and the raw materials produced in rural China. By the early 1930s, factions of the GMD consciously looked to an Italian Fascist model of economic independence and productivism to reintegrate the rural and urban spheres. This implied strong government control over internal markets and state-private cooperation in industrialization. Yet these policies were sidelined by administrative weakness, GMD leader Chiang Kai-shek’s focus on military development, and the subsequent Japanese invasion of the Chinese coast in 1937 that inaugurated World War Two in Asia.
Despite its problems, agriculture probably still produced a surplus above consumption levels in the 1930s, although most likely a very low one. Yet the economy was structured in such a way that this surplus was not “mobilized for investment” in an industrialization process. Uneven subsumption of preexisting regional markets within global capitalism had led to a disintegrated economic landscape, and no real “Chinese” economy came into existence. The GMD attempt to build a national economy in the 1930s had failed with the descent into war. Creating a national economy together with increasing the absolute surplus produced were problems that the socialist developmental regime would aim to overcome with the institutionalization of a new rural-urban relationship that began to emerge in the 1950s, one that would break the rural-urban continuum for good.
Party, City and Peasant
By the time of the Japanese invasion, the GMD found its main opposition in the form of a peasant army mobilized by a reinvented Chinese Communist Party (CCP). But the CCP itself had begun decades earlier, born out of the same tumultuous intellectual milieu as the GMD itself, both of which began as largely urban affairs. The CCP’s 1921 founding congress was originally intended to take place in Shanghai. Disrupted by police, the meeting was moved north to Jiaxing, where twelve delegates founded the CCP as a branch of the Communist International. As this early CCP grew, it remained a mostly urban project, staffed by intellectuals and skilled industrial workers. Six years after its founding, it was again in Shanghai that this first incarnation of the CCP came to its violent end. In a Russian-backed alliance with the GMD, revolutionaries seized control over most of China’s key cities in a series of worker-staffed insurrections. After victory was secured with the success of the 1927 Shanghai Insurrection, the GMD turned against the communists, arresting a thousand CCP members and leaders of local trade unions, officially executing some three hundred and disappearing thousands more. 
The “Shanghai Massacre” initiated the nationwide destruction of the urban communist movement. Uprisings in Guangzhou, Changsha and Nanchang were crushed. In the space of twenty days, more than ten thousand communists across China’s southern provinces were arrested and summarily executed. All in all, in the year after April 1927, it is estimated that as many as three hundred thousand people died in the GMD’s anti-communist extermination campaign.
The only surviving fragments of the CCP were its rural bases among the peasantry. By the conclusion of the Long March seven years later, the Party had recomposed itself by recruiting peasants, expropriating land and focusing its agitation on the long-standing tensions in the commercialized countryside, thereby expanding this rural base. Transformed into a peasant army, the new Party ran only a marginal, underground urban wing even after regaining national influence. As more and more territory fell under communist control in the fifteen years between the Japanese invasion and the expulsion of the GMD via Civil War, the CCP found itself taking control of urban areas in which it had little, if any, organic influence—its linkage to its own urban past having been thoroughly severed by the nationwide massacres twenty years earlier. By this point the Party itself had been transformed, its organizational apparatus fundamentally fused to the operation of a peasant army and the requirements of rural administration. Having travelled its long road from city to countryside, the Party now returned as a stranger.
Foreign Capital and the Port Cities
The cities to which the CCP returned in the course of the war were hardly the same as those it had left. Between 1902 and 1931, foreign investment had quadrupled. Prior to the Sino-Japanese war, in “1936, foreign capital was estimated to constitute 73.8% of China’s total industrial capital.” The vast majority of large-scale enterprises were funded by foreign investment. But even this amount of foreign investment did not initially amount to much. Surveys conducted by the GMD government found that “between 1929 and 1933, only 250 units could be registered as modern factories,” and “in 1933, of the 18,708 private-owned factories, only 86 were enterprises of more than a thousand workers […] 16,273 had less than thirty workers.” Not only did these “modern” factories represent a small portion of employment in China prior to the war, they also represented a modest fraction of industrial output despite their large share of industrial capital: only accounting for some 28%, with the remaining 72% produced by the small, often rural, handicraft workshops that composed the bulk of the country’s pre-war industrial structure.
This is not to say that pre-war Chinese industry in the cities was necessarily inefficient or outdated. Despite not being organized into large, centralized industrial conglomerates, China’s own decentralized urban business networks composed of small enterprises and handicraft producers excelled in their ability to both be smoothly incorporated into foreign business ventures and to out-compete foreign goods in the domestic markets of the country’s interior (as well as, in select instances, in international markets). Though dating back in some places to the Southern Song and revived significantly under the Qing, these city-based production networks were by no means resistant to technological transformation.
Handicraft production in the cities of the Qing and Republican periods was able to absorb new machine techniques while retaining its decentralized, small-scale and networked character. Both the official GMD government and de facto independent warlords such as Guangdong’s Chen Jitang engaged in campaigns of industrialization in cities such as Guangzhou, Nanjing and Chongqing (the Nationalists’ wartime capital), but these campaigns seem to have mainly reinforced and expanded pre-existing production networks, bolstering them with new technological inputs rather than simply replacing them with more “modernized” factories.
This networked, administratively distributed and flexible industrial fabric was the basic building block of China’s port cities, where “coolie” labor had become a central feature of both production itself and the myriad services required to keep the export industries functioning smoothly—this coolie labor was in many cases little more than slavery, similar to the forms of bondage used in capital’s other frontiers. Early Chinese labor markets were especially adept at facilitating the deployment and sale of this labor, both into cities like Guangzhou and overseas, where coolies could be found cutting sugarcane on Cuban plantations, building railroads across the Rocky Mountains, and mining silver in Peru. Practices such as this clearly marked China’s early transition to capitalism. This transition took a quasi-colonial form, with only small portions of the country directly subordinated to capitalist imperatives, even while international demand began to exert a strong gravitational pull on domestic production. The disciplining and selling of labor was integral to this process.
But this did not take an immediately “modern” form. Instead, the Republican period had inherited the system of “official supervision and merchant management” (guandu shangban). Designed for an era when merchants were distinct from the formal Confucian-scholar ruling class, the guandu shangban system subordinated the economic interests of merchants to the political interests of scholar-officials. In the Republican period, the collapse of the imperial officialdom and the rise of significantly more powerful merchant-entrepreneurs disrupted but did not entirely overturn the practice. Numerous officials had since become entrepreneurs, while the bureaucracy of the GMD provided a new, albeit much transformed, official sanction for industrial development in an era of “bureaucratic capitalism.”
This meant that the formal owners of factories and workshops (including Chinese capitalists) were rarely that interested in the details of their investments, so long as they continued to turn a profit. It was therefore common to hire third parties to act as technical and administrative managers. But even these managers were not directly responsible for production:
Managers, hired to produce profit, were evaluated for results regardless of the means used to obtain them. They were the middlemen between workers and owners and their government allies. Loyalty to the owner was far more important than competence. Administrators, therefore, had to delegate primary authority for operations to skilled, experienced workers known as gang bosses.
Much of the day-to-day labor in the factory or on the docks was in many ways self-managed by workers on-site. These workers were organized into loose units which themselves were yoked together in a decentralized hierarchy, with the “gang-boss” (batou) or labor contractor acting as the nodes in this network that were directly accessible to administrators. These administrators were foreign to the technical details of the work itself, not to mention that many were literally foreigners, incapable of even speaking to the workers at the bottom of the chain. All of this was of course embroidered with the predictable brutality, in which rich managers would come to oversee their factories on velvet-cushioned sedan chairs carried by coolies, the managers paid monthly wages some three hundred times those of the workers themselves.
Alongside the gang boss and labor contractor there were also guild masters and secret societies. Though often initially founded under the Qing as rebel organizations of one kind or another, under the Nationalists the guild and secret society took on the character of criminal rackets. Each also helped to shape the forms of labor deployment that would develop in this early period of capitalist integration. Guilds deemphasized the art of the craft in favor of seeking lucrative contracts. They “became fledgling capitalist construction companies whose managers, the guild masters, hired people for wages that were quickly returned to the guild in the form of membership fees […] Brutality in enforcing the guild’s monopoly over hiring and construction was common.”
Secret societies, outlawed under the Qing, had helped staff the 1911 Republican revolution and, in return, were permitted to operate openly for the first time. This fundamentally transformed the function of the secret society and ended the period in which they could be understood as “primitive revolutionaries.” Some “remained faithful to their ‘social bandit’ origins” and joined the Communist Party. But the rest became run-of-the-mill reactionaries:
They bore, for the remaining decades of the republican period, a close resemblance to the Sicilian Mafia, operating as terrorist syndicates, and shedding what elements of ‘social banditry’ they once possessed. Their continued and mutually profitable liaison with the Kuomintang during the 1920s and 1930s earned them the reputation of hired assassins of the government (used against unarmed workers in Shanghai, 1927), and agents of the most corrupt and reactionary elements of the Nationalist Party.
The influence of such groups grew in the vacuum created by the destruction of the communist labor unions and Party cells after 1927. The result was a city in which labor contractors, the gang boss system, the guilds and the secret societies all formed a complex mesh of labor deployment defined by both the dependence on the wage and the threat of direct violence common in colonial regimes of accumulation.
Aside from these port cities, China had only limited urban industrial projects in its interior, “confined to isolated islands within the huge agricultural economy.” These were usually established as attempts by government officials in the Qing and Republican periods to build military infrastructure capable of strengthening their respective provinces. Such industrial “islands” were largely self-sufficient, as were the few interior projects built by foreigners. The vast majority of industry was light industry located across the rural-urban continuum. It was not until the Japanese invasion that a truly “modern” industrial structure was constructed on the Chinese mainland.
As the revolution moved into the rural sphere starting in the late 1920s, the CCP found it hard to organize in southern villages. The Republican state was able to intervene into rural social relations in the southern countryside in a way that it could not in the north. As many southern landlords had moved to the cities as absentee landlords in the late-imperial period, the state played a much bigger role in mediating class relations in southern villages, allowing it to “penetrate local society, and to coordinate the activities of different social groups and classes for its own purposes, without employing a despotic, coercive force.” In the north, however, villages were less divided by class and more unified against state intrusion, especially since late-Qing attempts to increase taxes on them. This geographic difference in state-society relations created more opportunity for the CCP to organize in the north during the war, where it worked with unified villages against the Nationalists and the Japanese. Exacerbating class differences, in other words, was not the most effective strategy for the CCP, and the village became the “basic unit” of mobilization efforts. This relationship was strengthened by the land and taxation policies of the CCP during the war.
This success in the relatively unified northern villages became a model for the revolution. The Party’s new populism developed out of the social contradictions produced over the preceding decades by the uneven subsumption of the rural sphere within global capitalism. These conditions helped to create two contradictory political tendencies: a politics of class struggle, which responded to increased rural inequality and the gentry’s tightening control over rural surplus and markets, and a politics of national unity, which faced foreign invasion, imperialism, and subservience to foreign powers. While there were many moments of sharp class antagonism that played out during the revolution, the politics of national unity dominated in the revolutionary and much of the post-revolutionary periods. In this sense, the conditions of CCP politics mirrored that of the GMD, with its focus on national unity, although the CCP was better able to bridge the contradiction between these two politics with the concept of “the people.” A focus on national unity was incomplete and one sided. “The people,” by contrast, was defined neither solely by national citizenship nor by one’s class. Instead, one’s subjective stance towards the revolution placed one within or outside of “the people.” Thus even the national bourgeoisie (Chinese capitalists who did not collaborate directly with foreign powers) and patriotic rich peasants and landlords could become members of “the people,” so long as they threw their weight (and resources) behind the revolution. This focus on subjectivity would remain a strong component of CCP politics from that time on.
The progress of land reform—entailing a series of campaigns and grassroots movements for the redistribution of land—ebbed and flowed with the politics of the Party. In northern areas under Party control before 1949, land reform began in 1946 as the Civil War with the GMD was reignited. Initially the Party only gave “approval” for peasants who took land from landlords, but by 1947 it turned the “egalitarian redistribution of land” into “a guiding principle.” This initial process was ended in 1948 when the Party decided it had been carried out in too radical a fashion. A more radical land reform process that eliminated the rural gentry only restarted after the CCP took power nationally, leading to a large-scale redistribution of land.
Though often growing out of repeated peasant rebellions that had occurred independent of the Party, the process itself involved Party cadre identifying key active elements among the poor peasantry to lead the struggle against the landlord and rich peasant classes. This aimed to eliminate the rural exploiting classes while at the same time cultivating an active group of local supporters. Such a two-pronged approach was crucial to building state power within the villages, since it gave the new administrative structures a local mandate. This process would also provide the seeds of a new class structure that would develop over the course of the socialist era, since the process entailed publically categorizing villagers into five class categories, depending on their relationship to exploitation prior to the communist seizure of the territory. In North China, this process was more violent as class divisions were aggravated in the previously more unified villages. Once the process was complete, a new village power structure emerged. In the South, the process was milder, with only surplus land redistributed from rich peasants. Most pre-war landlords were absentee, and thus did not live in the villages once land reform began. The guiding principles in the post-1949 land reform process were to increase production while also knocking out classes that could compete with the state for surplus.
Despite the variation in methods, land holdings were largely equalized within villages across China. The vast majority of peasant families benefited, and the Party obtained critical support. Officially, 300 million peasants gained land and over 40% of landholdings were redistributed. The landholdings of those designated landlords dropped from 30% to 2%. This strengthened rural household production, with many peasant families now having direct access to the means of production for the first time. Land reform was basically completed by 1953, creating landholding equality at the village level, strengthening Party control over the villages and eliminating the rural gentry, a state rival in the extraction of rural surplus. By facilitating the process, the Party had won a widespread popular mandate. Meanwhile, the rural economy recovered from a long wartime slump, producing a surplus that the new state now aimed to extract.
The Japanese invasion had contradictory effects on the Chinese economy. First, it brought with it unparalleled destruction. The national transportation infrastructure built in the Qing and Republican periods was bombed to pieces. The newly-created banking system, which had stabilized prices for the first time since the American silver-buying program, quickly collapsed under the occupation. This resulted in desperate attempts to print banknotes to support war expenditures, initiating an inflationary crisis that would ultimately devastate the Republican economy. Faced with the destruction of the southern rice belt, food commodities became scarce and the country’s one million industrial workers and ten million handicraft workers were faced with unemployment and hyper-inflated food prices. Much of this economic chaos continued into the Civil War era in zones under GMD control, and all of these problems would then be inherited by the CCP after its victory.
But destruction was not the only inheritance. With the Pacific War looming, the Japanese made enormous investments in Manchuria and Taiwan, essentially constructing an entirely new industrial structure from the ground up in the space of a few years, the scale and scope of which far exceeded the investments made by foreign capitalists over the century prior. Combined, these Japanese-built manufacturing belts were twice as large as the entirety of China’s pre-war industry.
The productive geography of the East Asian mainland was thereby reformatted, with less dependence on ports and export-zones and much more of the new inland heavy industry producing for domestic (primarily military) consumption. Meanwhile, the entire Northeastern region saw a spate of urbanization that would not be matched in scale or speed until the 1980s. In 1910, Manchuria’s city-dwellers composed only 10% of its total population. By 1940, the urban population had doubled. Many of these new residents were themselves migrants from other parts of North China and would frequently return to their villages after completing a work assignment, facilitated by the Japanese railway and steamship networks.
In contrast to the decentralized, small-scale industrial networks of the port cities, the Japanese manufacturing zone was large-scale, vertically-integrated, and thoroughly incorporated into the bureaucracy of wartime production. The factories’ structure attempted to mimic the massive Taylorist conglomerates of the US industrial belt, with capital-intensive enterprises based on the most advanced machines, all operated by “cheap Chinese labor and almost feudal labor management.” Early on in the region’s development, more skilled Japanese labor was also used, but even this soon gave way as the Japanese trained cheaper Chinese technicians to take their place.
These Chinese workers were, in Manchuria as elsewhere, procured by gang-bosses or labor contractors, who would receive the total sum of wages from the Japanese employers and distribute them to the workers as they saw fit, reserving a large cut for themselves. But whereas the gang-boss system used in the southern port cities saw gang-bosses, in competition with guilds and other contractors, commanding smaller networks of labor recruits who were dispatched to much smaller enterprises, these modern Japanese factories required labor deployment on an entirely different scale. Many used only “a small number of batou who supplied and managed several thousand workers.” This management was distributed down a vertically-integrated hierarchy of gang bosses, with “Number 3 batou” at the bottom commanding squads of “about fifteen workers.” At the same time, the gang-boss hierarchy was itself buffered by an extensive bureaucracy, with “other functionaries as well, such as a xiansheng or sensei (who was clerk, accountant, and paymaster), cooks, and runners.”
Below all of this were the workers, seen as temporary, and the even worse-off “casuals” who didn’t have the protection of a gang boss. The non-casual workers were paid wages, often daily, and were provided with certain additional handouts by the gang-boss, including food, housing, medical care, protection and recreational activities. Wages themselves were often scaled according to the workers’ origins, with migrants being paid only two-thirds what local workers received. In some instances, such as at the Fushun coal mines, workers were hired and paid by the enterprise directly, but the work was still supervised by gang-bosses operating in the capacity of labor administrators. At a higher level, the management of the entire region had a Taylorist character, with experts such as Wada Toshio, director of the Daitō Psychology Institute of Hiroshima, shipped in to test workers’ aptitude, increase their efficiency and standardize production.
Faced with a labor shortage toward the beginning of the 1940s, the Japanese soon turned to more coercive means of recruitment. This included forcing students, prisoners, vagrants and the floating population of unemployed or casual workers into largely unpaid and compulsory labor service, all formalized by the April 1940 National Army Law which sought universal conscription into the military and industrial development projects. Those not pulled into the army itself were sent to the national labor corps “between the ages of twenty and twenty-three [to] work in military construction, essential industries or local production.” The brutality of this labor regime is not to be underestimated, and has been quite fairly compared to the European holocaust in the scale and scope of its devastation.
Throughout this period, then, attempts to rationalize and modernize labor deployment through the implementation of Taylorist methods and the use of hourly wages co-existed with and were ultimately superseded by regimes that relied, in the last instance, on the threat of violence, whether this be at the hand of the gang-boss or through the revival of systems of corveé labor and “tributary” methods of production and trade. This bore degrees of similarity to various forms of pre-capitalist accumulation seen throughout Eurasia, and authors writing on the Manchurian labor system have sloppily referred to it as “feudal.” More importantly, these “feudal” aspects of the labor regime are often portrayed as being in tension with the properly “rational,” Taylorist system of labor deployment through the wage relation.
But this opposition is not so clear. Despite its allegedly “feudal” elements, the Japanese industrialization of the Chinese mainland can well be seen as the initiation of a transition to an explicitly capitalist mode of production dominated by value production. Rather than seeing the build-up of the Japanese wartime complex (or its German, Italian or American counterparts) as driven by simple military madness, we must understand these military expansions as necessities of accumulation posed by states facing limits to their growth and mired in a crisis of value production. The Japanese colonization of the mainland was a response to a crisis of global capitalism. In one sense, this can be understood as a process of “primitive accumulation,” but only if we sever the term from its connotations of an expanding commercial capitalism, circa the European gestation of the capitalist mode of production in its Genoese, Dutch or British sequences.
Japanese entry into Manchuria marked an attempt to move from the simple colonial practice of “capitalist firms operating mainly through archaic (‘precapitalist’) modes of labour-organisation at low and generally stagnant levels of technique” (a slight simplification for China, but largely consistent with how things worked in the port cities) into large-scale, highly mechanized and coordinated industrial enterprises capable of increasing productivity and thereby generating relative surplus value, rather than simply harvesting more absolute surplus value from more workers. The proceeds of this process were intended to be exchanged and invested across the growing domestic and international markets, both of which the Japanese were actively (re)constructing.
The Japanese scaling-up of the gang-boss system and the implementation of forced labor were not, then, in any way a form of backsliding into pre-capitalist modes of production. They were instead a capitalist logic of production taken to its extreme—literally a last-ditch effort to preserve the capitalist social relations that ensured the continued accumulation of value on the East Asian mainland. Compounding growth rates, the increasing circulation of commodities across the domestic market and the beginning of the urban demographic transition all followed, alongside the mass proletarianization of ex-peasant migrants. These forms of labor deployment were in fact the ultimate complement to the Taylorist “rationalization” campaigns, because, in the face of labor shortage and military defeats, it was only these forms of labor deployment that worked, or, more accurately: got people working.
The Industrial Inheritance
After this Japanese military complex collapsed under Soviet and American offensives in 1945, the capital fixed in Manchuria was transferred to GMD state ownership. This industrial structure was predominantly geared toward the production of electricity (63% of the country’s electrical industry was state-owned by the GMD after the Japanese defeat, produced by plants seized from the retreating Japanese) and primary industrial materials (steel and iron: 90%, tungsten: 100%, tin: 70%, cement: 45%). The total value of state industrial capital had increased a hundredfold in ten years, from 318 million yuan in 1936 to 3,161 million yuan in 1946, when it composed 67.3% of the total industrial capital.
The GMD was utterly unable to manage this vast new bureaucracy. Incapable of reining in inflation, the dire economic trends initiated under the Japanese continued under the Nationalists, who were ill-suited to restart the project of imperial expansion begun by their predecessors. The middle class that had started to form prior to the invasion was now all but liquidated. A new bureaucratic warlordism arose alongside and within the collapsing GMD, creating nearly perfect conditions for the growth of the communist armies in the countryside.
As the GMD began to cede territory to the CCP in the Civil War, this Japanese-built state-industrial structure was the most intact component of non-agricultural production that the communists inherited. Manchuria was conquered early on with substantial military assistance from Russia, which gave significant amounts of ammunition, artillery, tanks and aircraft to the communist army while also assisting in the reconstruction of the Manchurian railroad system. But this assistance also came at significant cost, as Stalin ordered Russian troops to partner with the GMD and loot Manchurian factories in order to recuperate the USSR’s own war-strained industry.
It was in Manchuria, then, that the CCP first confronted the questions of industrialization and urbanization that would become increasingly central to the socialist era. This meant not only that the Party had to find ways of overcoming technical hurdles, since its “urban wing could not supply the necessary trained cadres to deal with getting urban production going again,” but also that it had to fuse its urban and rural wings, which had previously operated with relative autonomy. The urban wing, headed by Liu Shaoqi, had been engaged in clandestine activity during GMD control and Japanese occupation, necessitating that their organization stressed secrecy, highly-regulated chains of command and tight discipline.
When the urban wing was given responsibility for wartime production and the first stages of communist-led industrialization, it was still operating under an extensively regimented command structure designed for clandestine activity. The problems with this were recognized, but there was no alternative at hand. Even where workers themselves could step in to keep the machinery running after Japanese and GMD managers had fled, the urban wing of the Party was the only remaining force capable of coordinating production across factories and managing distribution of this product beyond the geographically concentrated belt of heavy industry in Manchuria.
The decisions confronted there, more than anywhere else, cut to the root of the communist project. If the Party were to simply seize the industrial infrastructure built by the Japanese, they risked reigniting the brutal expansionary process for which these industries were built and reconstructing the bureaucracy necessary to keep them running. Even if the Party devolved direct control of these industries to the remaining workers trained to run them, this would have done nothing to solve the structural problems inherent in how these large-scale factories functioned, nor the challenge posed by their geographical concentration. The gang-boss hierarchy could be filled with elected representatives, but this would have simply replaced a more Darwinian bureaucracy with a democratic one.
In other words: the industrial infrastructure of Manchuria was not a politically neutral engine of production that could simply be seized and driven to better ends. On the contrary, the entirety of its logistical networks, its uneven geography and its basic factory-level organization (ranging from physical construction to administration), were designed precisely to suck migrant laborers into the new urban-industrial core, severing them from their own means of subsistence and forcing them to rely on various strata of management for their own reproduction, whether through wages or gang-boss-provided housing and medical care. This doesn’t mean, of course, that this infrastructure was inherently bad or inherently useless for a communist project—but simply that the gains of modern technology and increased productivity were closely alloyed with these limits.
The problem was how, precisely, to utilize the productive capacity of this inherited infrastructure while simultaneously transforming society’s relations of production—a transformation that can only occur at a scale much larger than the individual enterprise, and which is in no way produced by a linear agglomeration of small changes made in individual workers’ relationships to individual workplaces, though these are obviously important and occur at every stage in the process. It was only in confronting this larger problem, then, that the Party’s own theories of industrial organization would become relevant. These top-down theories, meanwhile, were often paired with the bottom-up activity of workers in these industries, whose own opinions on these questions contributed to the overall heterogeneity of the communist project, which was by no means reducible to the CCP. The next three decades would be marked by struggles over the transformation and expansion of this industrial inheritance, with the Party absorbing many of these heterogeneous positions in the securing of its strategic hegemony—a hegemony premised on the potentials of production.
The Urban Divide
Despite the country’s peasant majority and its rural revolutionary base, it was the cities that became central in the attempt to expand the gains of modernization beyond the borders of Manchuria and the southern ports. This would knit together the industrial archipelago into a true “national economy” for the first time in the region’s history, while simultaneously creating a major beachhead in the hoped-for transition to a global communist society. At the Second Plenary of the Seventh Central Committee of the CCP in March, 1949, Mao declared that “the centre of gravity of the Party’s work has shifted from the village to the city.” But the “industrial islands” of the cities proved to be serious obstacles—not so much to the construction of the “national economy” (in fact, they would prove to be dangerous accelerants), but instead to the construction of anything approximating a communist project in the 20th century.
The socialist era was indeed a time of transition, in which a “national economy” was gradually sewn together out of disparate economic sub-regions and various methods of labor deployment. But the most fundamental characteristic of this “national economy”—the one feature that could be said to span city and countryside, determining the relationship between the two—was the implementation of the grain standard and the net funneling of resources from countryside to city. In other words, the lynchpin of the entire development project was the widening of the urban rural divide, despite the increase of the country’s total social wealth.
The basic riddle posed by the existence of the city was as follows: How was it possible to implement an agrarian revolution to cheapen the basic costs of life, allowing for an equality that was not equality-in-scarcity in the world’s poorest country, without also undermining the basis of that egalitarian project by privileging geographically concentrated industrial zones and generating new hierarchies through urbanization? To put this in perspective, we need only remember that the East Asian mainland, at the time of its revolution, was one of the most underdeveloped regions in the world. Compared to China in 1943, Russia in 1913 (itself a largely undeveloped agrarian country on the eve of its revolution) already manufactured three times as many tons of steel, twice as many tons of iron, had twice as many kilometers of railways and produced thirty times as much petroleum. All of this is in absolute, rather than per capita, terms, not taking into account the strikingly larger Chinese population. Of this population, very few people were employed in modern urban industries. Up until the early 1950s, less than 2% of China’s population were “workers and employees.” The vast majority were peasants.
Urbanization is no simple problem. Theories of the city are often unabashedly saturated by ideology. The most popular is the “commercialization model” of capitalist development, which portrays capitalism as an inevitable outgrowth of human nature, and also generally assumes “that cities are from the beginning capitalism in embryo.” This implies “that towns were by nature antithetical to feudalism, so that their growth, however it came about, undermined the foundations of the feudal system.” This model also tends to infer that cities are, in fact, antithetical to any mode of production other than capitalism and that all forms of urbanization are inherently capitalist.
In reality, capitalism has not been the only mode of production that saw major processes of urbanization. Nevertheless, it is often simply assumed that the abolition of capitalism entails the abolition of the city and the explosion of industry into a “garden city” of fields, factories and workshops,” in which population itself must be roughly equalized across inhabited territory. Marx and Engels’ own work exacerbates this confusion. The “more equitable distribution of population over town and country” is one of the ten measures advanced in the Communist Manifesto. Though this can be understood as a response to the particular rural-urban inequalities that had arisen in Europe at the time, it is then made ahistorical in The Origin of the Family, where Engels claims the city as a basic “characteristic of civilization,” and thereby an origin-point for all early class structures. 
In the early years of the Chinese socialist era, a similar principle would quickly be enshrined in official documents, mirroring the language of the Manifesto. Little attention was given to the fact that, contra the European standard observed by Marx and Engels, the East Asian mainland already had a highly equitable distribution of population over town and country. The policy was written to respond to a problem that only barely existed, and the result was that every attempt to create the conditions whereby the distinction between town and country might be abolished tended to widen the inequality between the two. But the recognition of the problem also ensured that urbanization itself would soon be halted—effectively doubling the divide by fixing more of the population in the under-funded countryside. The urban divide was therefore exacerbated by all attempts to escape it.
New Democracy, Old Economy
Though confronted early on in Manchuria, the question of the city was only foregrounded with the end of the Civil War, as all of China’s major urban areas fell to the revolutionary army, save those in Hong Kong and Taiwan. Previously, the problems posed by urban industry had been either partially solved or temporarily postponed by the war. The cities of the North and Northeast became hubs for wartime production, necessitating both high levels of employment and a more complete take-over of these industries from their previous owners, be they private capitalists or Japanese and GMD bureaucrats. In these earlier-liberated areas “many private enterprises were in fact run by workers after being abandoned by their former owners and all or most of their management personnel.” The same was largely true of the state-owned industries in the early stages of wartime production, prior to the import of Soviet managers and technicians.
The situation changed, however, upon the completion of the Civil War. In the later-liberated southern port cities, many owners and managers remained present, leveraging precious technical skills and access to foreign credit in exchange for favorable treatment by the Party. More importantly, victory in the war meant that the communists had seized several of the country’s largest urban areas precisely when the wartime stimulus to these cities’ industries was faltering and the US-backed economic blockade had just begun. The number of workers and wartime refugees skyrocketed, but many of the industries in the coastal cities had been bombed by the Japanese or sabotaged by the retreating GMD. In Guangzhou alone, “it was reported in December 1949 that less than a quarter of the city’s enterprises were operating at full capacity, while nearly a third of the entire workforce was unemployed.”
These unemployed workers had themselves contributed significantly to the communist victory. Rather than being the unwilling subjects of a new regime, the toppling of the Japanese and then the GMD had been actively pushed for by many workers. Throughout the 1930s, periodic strike waves had rolled through occupied territory, the result of both clandestine communist activity and of a wide-ranging, if disorganized, workers’ movement. After the Japanese transferred power to the GMD, the strikes only increased, “with more than 3 million workers taking part in strikes in 1947 alone.” Hearing of the communists’ land reform programs in the countryside and factory seizures in the north, many workers were inspired to action against the GMD in the hopes that the brutal management techniques, low wages and arrogant hierarchies with which they were familiar would be overturned through the direct takeover of the southern industries.
But while the Party concentrated on land reform in the countryside, the immediate task in the city became the revival of production. If they could not get the factories running again, there would be no way to modernize agriculture, leaving the peasantry to its historical cycle of population growth pockmarked by famine and mercantile expansion. More pressingly, there was the problem of the urban unemployed, who were themselves underfed and housed in abysmal conditions—with many urbanites literally living in the rubble left by twenty years of almost constant war. An outflow of population from rural war zones had both bloated the urban population and undercut the country’s capacity for food production.
The result was that the heavily populated cities were, in 1949, reliant on imports of consumer goods and food, and many residents were housed in informal slums. As the international blockade of the victorious communists began, the country was quickly starved of these necessary imports. If people in China were to rebuild their cities, they would need to produce their own concrete, steel, electricity, and, most importantly, grain to feed the workers at every stage of this process.
If, on the other hand, the cities were to be partially abandoned in favor of resettling the countryside in an attempt to build some sort of agrarian socialism, it was unclear how the war-torn country would escape immediate famine, a renewed expansion of commercial activity leading to another era of warlordism or its direct counterpart, foreign invasion—a threat that loomed large as the Americans began to occupy much of the territory that the Japanese had seized decades prior. Maybe more importantly, such an option would likely have led to the severing of freshly renewed ties with the USSR, one of China’s only sources for international aid and technical training, not to mention the largest military threat bordering China.
Nonetheless, attempts at agrarian forms of socialism were not without precedent, as anarchists, republicans and communists alike had advocated and even attempted to build such egalitarian rural projects in the past, particularly in the New Village, Rural Reconstruction and Village Cooperation movements of the early 20th century. Some, such as the Tolstoyan anarchist Liu Shipei, envisioned the end goal of any egalitarian project in China to be anti-modern in character, returning the country to its agrarian heritage. Many of the CCP’s earliest members had emerged from the anarchist movement and retained more than a little fidelity to decentralized models of development that mixed industrial and agricultural activity and thereby encouraged out-migration from urban cores.
Though this latter option may seem absurd, given the Party’s intellectual dedication to a truncated Marxism and some of the worst features of High Stalinism, it should be remembered how greatly the communist program had already diverged in the countryside from the Soviet path. The Chinese attachment to Stalinist practices, and especially the theoretical justifications for these practices, was more the product of an expedient pragmatism than any naïve belief in the infallibility of the Russian model. Readings of Chinese socialist history often unduly privilege the role of theory and ideology in the decisions of an era that was in fact marked by immense unevenness and continual, if failed, experimentation.
Here, however, we emphasize that a society’s basic material conditions and the objective limits posed by them are primary to any Marxist understanding of history. This isn’t to say that the ideological inheritance of the Chinese communists was irrelevant—we will see only how crippling it was—but simply to point out that the limits facing the Chinese communist project in the 20th century were not primarily limits of imagination. To return to the example above: Had there been strong material pull-factors offering people a better life in a peacetime countryside, it is likely that there would have been outward population pressure back into rural areas—not at all unprecedented in the history of the region’s cities—and the Party would have had to either somehow restrain or accommodate this tendency.
The preeminent fact, however, was that agrarian abundance was not forthcoming. The cities were in ruins. The industries of the Northeast were slightly more intact, run in this period by workers more or less directly. But the majority of these workers had never been allowed access to the higher-order technical skills needed for complex repairs, modernization or inter-factory coordination. On top of this, there was little to no infrastructure designed to bring the gains of this Northeastern heavy industry to the rest of the country. The railway system was severed in thousands of places, there were no national highways, and the Party had inherited little in the way of a merchant marine—with the US threatening to sink outbound Chinese ships regardless.
In the port cities, many enterprises had been severely damaged, but their owners and managers had often not fled with the retreating Nationalists. This “urban bourgeoisie, whose members possessed the literacy, technical knowledge, and business experience vital to urban production,” were the CCP’s “chief urban political rival.” The smaller average size of the port city enterprises also meant that the local elite were not at all a class of even consistency, with small owners, administrators and technical experts distributed along a complex, decentralized hierarchy of production. Some were little more than skilled workers, while others had been influential gang-bosses aspiring toward their own dockside fiefdom. A much smaller segment were unambiguously domestic capitalists, often retaining access to restricted streams of credit from the West. The repair of factories, mobilization of worker networks and day-to-day running of production was entirely dependent on the technical and managerial skills spread across this hierarchy.
The restructuring of the economy was coordinated by three main actors. First, there was the military, “which sent representatives (who were also Party members) to individual factories where they claimed the authority of the new government.” But these military representatives were not particularly familiar with industrial production and, therefore, had to rely on the hierarchy of technicians and administrators already in place. Secondly, there was the urban wing of the CCP itself, many members of which were skilled workers. Nonetheless, the Party’s urban wing was small and accustomed to operating within a rigid command hierarchy necessitated by secrecy. Whereas the rural Party’s experience mediating between simultaneous social conflicts and administering large swaths of production had made it a flexible and adaptable organization, the urban Party’s experience had been far more limited.
Finally, there were “the skilled, literate workers who, with the blessings of the Communist Party, were quickly promoted to positions of leadership in the factories by the trade unions.” But these workers were sparse, due to widespread illiteracy among both urban residents and the majority of CCP cadre: “In Shanghai alone […] the illiteracy rate for all employees, including clerks and white-collar workers, was estimated at 46 percent.” Meanwhile, “among blue-collar factory workers, this figure was much higher, probably near the 80 percent figure for industrial personnel in the whole country.” By contrast, “in 1949 almost all of the students in Chinese universities and higher level technical schools were from the urban middle and upper middle classes.” And these students were no longer simply elites educated in the Confucian classics. Instead, “well over half (63 percent) of the members of this group who were university and technical school graduates in 1949 had majored in subjects that were essential for industrialization.”
The Party’s response was to launch a recruitment drive, hoping to bolster its ranks with loyal intellectuals and skilled technicians. The risk of careerism and corruption was clearly noted, but these were considered necessary evils that could later be uprooted. Meanwhile, new unions were formed alongside the new Party organs, intended to simultaneously rationalize production and provide workers with some oversight over the new, less trustworthy Party recruits. At first, the Party had attempted to weed out former gang-bosses, GMD-union thugs and secret society members from its restructured industrial system, but this proved to be nearly impossible and the attempt only further stalled the recuperation of industry. Local cadre were instructed to open recruitment in the new unions, hoping that workers’ own political perceptiveness combined with state-sponsored reform campaigns would be sufficient to prevent these lower-tier elites from regaining power.
Higher up the chain, however, the Party’s policy was conciliatory. There was a need not only to retain the technical knowledge of mid- and lower-level elites, but also to acquire new fixed capital investments in order to rebuild and expand industrial production. With the economic blockade restricting the import of fixed capital and access to international lending, only the remaining urban bourgeoisie had the type of connections necessary to acquire the key imports and credit necessary for rebuilding.
The result was a managerial system that, in certain ways, greatly resembled that of the port cities prior to the war: “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.” One key difference was the widespread presence of the Party, but its numbers were still small. Though recruitment had expanded, “by 1953 only 20 percent or so of managerial and technical personnel was made up of urban Communist Party members, promoted workers” or directors and trade-union officials appointed directly by the Party. Meanwhile, strikes had risen to an all-time high and many capitalists had responded by simply closing any of their factories that still functioned, firing the workers and waiting to see whether they should take what they could and flee.
The Party developed a two-pronged recovery policy. First, it signed onto the Sino-Soviet Friendship, Alliance and Mutual Assistance Treaty in early 1950, giving the Russians certain privileges in Manchuria and securing a $300 million loan for the rebuilding of industry. This was considered unambiguously necessary: “the Soviets provided a relatively strong and absolutely vital international ally” given the US embargo and military blockade of the eastern seaboard and the complete absence of any overland routes between China and other industrial nations. Of equal importance, perhaps, was the patronage of the world’s only nuclear power outside the US in an era when General MacArthur was reported to be threatening China and Korea with nuclear attacks. Soon after the treaty was signed, the USSR began sending the first wave of technicians into China—particularly to the Northeast—tasked with getting production up and running again as well as training a new generation of Chinese engineers.
The second component of the recovery plan was the “coexistence policy” laid out in the “Common Programme.” Formulated in late 1949, the program was solidified in the years of war and political consolidation that followed. It aimed to complete the “bourgeois revolution” in the cities, utilizing the elements of capitalism “that are beneficial and not harmful to the national economy.” In other words, to “control, not to eliminate, capitalism.” What this meant was effectively the appeasement of the remaining urban capitalists, who would be gradually bought out of their own industries by the state in exchange for offering their technical expertise to the project of industrial recovery and development.
The size of the private sector in this period was significant. Though it composed only 55.8% of the gross output value of industry as a whole, private production was some 85% of total retail sales—making it central to the circulation of goods. At the same time the Party sought to cultivate and utilize the productivity of the private sector, however, it also sought to contain its volatility: “communist policy in this stage was to fight against speculative activity on the one hand, while at the same time aiding the development of normal private business.” The Shanghai stock exchange was closed and all government funds were concentrated in the state banks. This slowed production, causing the closure of private banks and “one out of every ten commercial establishments.”
The Party responded with a massive stimulus, with the state placing orders at guaranteed prices for privately produced goods and giving special wholesale price differentials to large commercial enterprises in order to encourage the flow of goods across the domestic market. The outbreak of the Korean War secured this relationship, as the demand for military supplies skyrocketed. Business was so good that “many leading industrialists, who had previously withdrawn their capital from China, now gained confidence in Communist policy and returned,” bringing with them new capital and technical staff.
Of the revenues generated by the new industrial boom in the port cities, the state took an increasingly large share in the form of taxes, which would soon be used as the basis for new waves of state-led industrialization. The growth in the private sector in this period was robust enough to reignite fears about an uncontrollable continuation of the transition to capitalism already underway, in which commercial energies would overspill the Party’s attempts to control them. Therefore, after land reform was complete and the banking system fully nationalized, the state began to restrict private industry with the launching of the “Five Anti-” campaign in January 1952, which attempted to unleash pent-up worker rage against their employers in a way that would facilitate the beginning of industrial nationalization.
Many urban workers had felt disappointed or betrayed by the continuation of capitalism in the port cities, and the early 1950s saw a slow increase in industrial agitation. The new state responded to this dissatisfaction in several ways. First, concessions were given to many workers. Wages increased and most urbanites’ livelihoods were significantly improved—not necessarily a difficult task, since peace alone was an improvement on two decades of war and occupation. Second, new mass organizations were created, including new unions and a national Labor Board, in an attempt to provide less economically disruptive means to solve workplace grievances. Though these new organizations often proved clunky and unresponsive, they were still initially seen as an important tool for the reorganization of industry and for the devolution of more power to workers.
Finally, when wages and other concessions could no longer be increased and the new unions risked sparking another explosive seizure of power by the workers, the Party responded with the “Democratic Reform Movement,” followed by the Three- and Five-Anti movements, intended to begin the reform of industry and scour the new industrial system for traces of corruption and infiltration by old gang-bosses, secret society members and Nationalist sympathizers seeking to restore the power they had lost by becoming incorporated into the developing Party-state.
At the height of the Five-Anti campaign, “millions of workers and employees were mobilized to denounce their employers [and] one result of the many public denunciations of capitalists was the great increase in suicides of businessmen.” This was essentially an extension of land-reform methods to the cities, conceding to worker anger and at the same time providing windfall profits to the new state, which seized over US $1.7 billion in the form of fines on private enterprises for having engaged in “various illegal transactions.” This also meant that the working capital of private enterprises dropped accordingly until “private enterprises were largely reduced to empty shells.”
While successful in restraining the workers from a direct seizure of power and in crippling the influence of private capital, these programs led to a dip in production as workers and union cadre were constantly mobilized in attacks against their employers and enterprises were stripped of their working capital countrywide. The Five-Anti movement, at its height, “cause[d] a number of enterprises to cease operations and interfered with production in many others” while also setting a dangerous precedent of giving workers power over their managers and enterprise owners. Fearing economic stagnation and renewed demands for a seizure of enterprises by workers, the Party began rolling back the reform movement.
At the same time, it reoriented the economy around the state, creating an entire commercial infrastructure to replace the curtailed markets of the private sector. This period saw a massive increase in the number of state corporations and retail stores. “By the end of 1952, there were over 30,000 state-stores throughout the country, or 4.7 times that of 1950.” The Party fused the rural supply and marketing co-operatives with new urban consumers’ co-operatives, state-stores and other co-ops into a single “socialist commercial network,” tripling the total retail sales controlled by state commerce and increasing the sales of co-operative commerce five-fold between 1950 and 1952. The effect was as pronounced in retail as it was in wholesale trade, with the influence of co-ops and state-owned enterprises tripling in each sector. Foreign trade, meanwhile, was almost entirely handed over to the state, which, by 1952, controlled 93% of all international commerce.
In all of this it’s important to remember that the gains of the early ‘50s were widely accepted. Despite disappointment and agitation, most workers limited their attacks to the enterprise level. There were few true strike-waves in these years and the Party retained the trust of a vast majority of the population. The Five-Anti campaign in 1952 is “generally regarded as the high point of the influence of both workers and unions in private industry,” since workers’ direct control of their own enterprises increased alongside comparable increases in wages, social welfare and general livelihoods. Per capita food consumption in the cities hit a peak between 1952 and 1955, with 241 kg of grain consumed per person per year in 1952 and 242 kg in 1953. These numbers dropped off slowly for the rest of the 1950s, then catastrophically during the Great Leap Forward (1958-1960; hereafter GLF), after which per capita food consumption would not rise above 240 kg again until 1986.
The era of “New Democracy,” then, was not primarily caused by, or even significantly defined by, the mechanical ideology that the Party leadership used to justify it. It was a pragmatic response to several simultaneous material limits in the communist project, in which collaboration with remaining capitalists was seen (correctly or not) as necessary. Meanwhile concessions were made to workers in exchange for their limited endorsement of the policy—concessions that included workers’ own involvement in the expulsion (and often suicide) of many of their employers.
This period of urban industrial development, paired with the land reform era in the countryside, can therefore be seen as the momentary continuation of the transition to capitalism that had been abandoned and restarted several times over in the country’s recent history. The Party understood it as such, designating this period as the completion of the “bourgeois revolution” in the port cities. This gave the phenomenon a neat fit within the determinist mythology of High Stalinism, but this fit was simply the use of available theoretical resources to justify pragmatic action as it was underway. Theoretical fidelity to Stalinism was, if anything, the result rather than the cause of the industrial trends seen in the immediate years following the end of the civil war.
Nations to State
The first few years after 1949 were also a period in which the Party was allowed time to experiment with its own forms of industrial administration and prepare for the halting of the capitalist transition, the expropriation of the urban elites and the implementation of a nationwide educational system open to people regardless of class background. The Northeast had fallen under the control of the revolutionaries early on and much of its industrial structure was transferred directly to management by workers (followed by Soviet technicians) paired with ownership by the state. It was, therefore, one of the first regions in which experiments with non-capitalist forms of production were initiated.
At the same time, Manchuria was the name for a problem of geography. Industrial goods had to not only be produced—something that worker self-management was certainly capable of—but also distributed countrywide to reconstruct war-ravaged cities, build housing for millions of slum-dwelling urbanites, and modernize agriculture. The electrical system had to be extended to the rest of the country, railroads and highways had to be constructed, and schools and medical facilities had to be built, staffed and stocked nationwide.
The Party and the military were the only two nationwide organizations still in existence after the completion of the Civil War. This meant that they were the only available means of coordination, distribution and day-to-day facilitation of production. These problems would ultimately lead to the complete fusion of the Party and the state over the course of the socialist era. But this was by no means the only possible outcome. In fact, the path of least resistance seemed to point in a very different direction. Historically, holders of power in previous dynasties had found it much easier to govern at a distance. For a region as large and diverse as mainland East Asia, this strategy proved for millennia to be both cheaper and more effective than its alternatives. Former dynasties had overseen military activity, cultivated the upper tiers of the bureaucracy and ensured the construction of large-scale infrastructural projects, but, beyond this, the reach of the state rarely extended all the way down.
It was precisely this phenomenon of local quasi-statelessness that had made anarchism seem, early on, to be the “most promising revolutionary path,” since it “corresponded most closely to the actuality of social existence.” Previous states, though technically enormous in terms of geography and population, were in most ways only minimally connected to the places and people under their domain:
The vast majority of the population, after all, lived their lives with next to no relationship with the state, whose functionaries almost never reached the village level, and whose levies and regulations were for the most part administered by members of the local elite, with ties to their communities that were many and varied. Peoples’ lives were marked by various forms of community and solidarity—self-help, religious, ceremonial, clan-based, labor-cycle, and market-network related—and these forms of solidarity had made many communities capable of resistance and mobilization in the face of external threats, including imperial authoritarian overreach.
Many anarchists had hoped to strengthen these local forms of resistance into an egalitarian revolutionary movement aimed at expanding the potentials of statelessness already present in Chinese village culture. These attempts, however, were systematic failures. Several of the most prominent anarchists in China, including Li Shizeng, Wu Zhihui, Zhang Ji and Zhang Jingjiang, ultimately joined and had leading roles within the Nationalist Party, sitting on its central committee and forming close relationships with Chiang Kai-Shek and other members of the GMD’s right-wing. Those that retained their belief in an egalitarian and essentially communist revolution, faced with the failures of anarchism, flocked to the newly-founded CCP.
The failures of the early 20th-century anarchist movement and the long history of quasi-stateless forms of exploitation led many of these young radicals to adopt strategies aimed instead at breaking the dynastic heritage through the construction of a strong state. Unlike the imperial state’s hands-off approach to local government, however, the new state would extend all the way down to the common people, who would become its basic constituents. This state would thereby become increasingly transparent and porous, its activities visible and accessible at the local level. Anarchist ideals were marginally preserved in this vision, which would see local self-organization incorporated into the basic functioning of a new form of government. The populist category of “the people” would be made concrete via its immediate fusion with this administrative apparatus, making the state itself communal.
At the same time, the USSR was taken as an emblematic, if deeply flawed, example of a non-capitalist system that had been capable of surviving in relative isolation, warding off both military invasion and economic embargo. The bureaucracy and brutality that accompanied internal changes of power within the USSR were by no means invisible to the Chinese communists—many had, after all, pleaded with the Comintern to support them in breaking ties with the Nationalists in the 1920s, only to have their pleas first rejected and then horribly vindicated, as they were forced to watch their friends and loved ones be systematically slaughtered. Nonetheless, the USSR was the only worldly example of a modern society that was also substantially non-capitalist. Maybe more importantly, it was also the only industrial nation with which China shared an accessible overland border. This made it both a military threat and basically the only option for international aid to assist development. This relationship would become increasingly important as the US instituted its embargo of the Chinese seaboard.
Questions of the construction of a national economy and an accompanying national state were also one of the few places where the theoretical and empirical resources at hand did have an earnestly distorting effect on the Party’s strategy. Growing out of the material failure of anarchist and liberal projects, the only alternative revolutionary path was increasingly seen as entailing the construction of a national economy that would act as an early beachhead in the global communist revolution. But the connection between the national development project and the subsequent global revolution was dim at best. Though a strategy began to form around the construction of a new Chinese national polity, no strategy was immediately forthcoming for how an embattled and embargoed China might assist in the spread of global revolution.
There were plenty of material factors hemming in decisions during this period. The Chinese population was underfed, under-armed, and had been surrounded by nearly constant war for an entire generation. A continuation of that war to liberate more territory beyond pre-existing national borders was not immediately feasible. The Korean War was, in fact, a test of this capacity, as the Chinese came to the aid of the Koreans and fought the US military to a standstill. Though China’s half-starving army of illiterate peasants was able to hold off the most advanced military in the world, the risks of the military endeavor were enormous and its outcome basically precluded further international expansion.
On top of this, the CCP had itself been reformatted by its years in the Chinese countryside. Previously, the leading minds of the Party, such as Chen Duxiu and Wang Ming, had been unambiguously internationalist, and had leveled critiques against rising nationalist trends within the Party itself. Many of the Party’s rank-and-file were, in this period, laborers and trade unionists in the port cities, their everyday lives marked by cosmopolitan contact with workers, technicians and revolutionaries of various leanings from all over the world—but especially Europe and the colonies of Southeast Asia.
At the same time, leaders like Chen and Wang were obstinate dogmatists, over-attached to the decisions of the Russian-dominated Comintern, blind to the failings of the USSR, firm believers in the universality of its path to revolution, dismissive of the pre-existing, large-scale social conflicts of the Chinese countryside, and dedicated to the most mechanical and naively optimistic Marxism. The result was that their attempts at urban insurrection failed, their willing subordination to the Comintern resulted in an unpopular and ultimately disastrous alliance with the Nationalists, and the first incarnation of the Party was essentially destroyed.
An ancillary result of this, however, was that the Party’s leading internationalists were discredited, demoted and replaced by figures whose strategy envisioned a much more primary role for the project of national development relative to international expansion of the communist revolution. This is not to say that Mao or others were purely interested in Chinese national development or that they had no international strategy. But, whereas the old CCP was formed in an era of international revolution when the overturning of regimes in the heart of Europe still seemed plausible, the new CCP emerged into a world crushed under the heel of reactionary empires, in which the most hopeful revolutionary movements had been dismembered and the militaries of the imperial countries were bloated with war.
The nationalist leanings of the new CCP cannot, however, be purely reduced to the theoretical or strategic inclinations of its leadership. Mass support for the Party’s hegemony of the communist project transformed the project itself. Based among an illiterate, largely land-bound peasantry speaking often incommunicable “dialects,” there was no inherently cosmopolitan or global vantage innate to the Party’s new base of support. At the same time, no ancient, distinctively “Chinese” culture or political entity extended back into the murky depths of history. The egalitarian project was understood as the linking together, for once, of regionally distinct, disparate nations into an equitable political entity of greater scale and interconnection than most people had ever experienced in their everyday life. The next stage of this—global expansion—would have seemed only a distant possibility, entirely dependent on the former.
In addition to this, it must be remembered that the CCP’s strategy of state construction was popular not so much out of some supposed cultural attachment to a strong state, but precisely because of the Party’s promised reinvention of the functions of the newly extended state. Again, the Chinese peasantry had, traditionally, lived a quasi-stateless life marked by various forms of community and solidarity. But the quasi-statelessness of the village was in reality more an amalgamation of micro-states, and each form of community and solidarity (familial, religious, commercial) was in fact the designation of territories controlled by overlapping micro-monarchs (patriarch, priest, merchant).
This balkanized confederacy of minor regimes was in some ways linked upward to the de jure bureaucracy of the governing dynasty. Local thugs associated with particular clans might gather taxes from villagers, taking a cut for themselves before delivering the rest to higher-order governors. Similarly, priests or gentry trained in Confucian scholarship might act to quell dissent against the larger regime. But for the most part, everyday life saw little contact with the state as such, while regular contact with these micro-states was not understood as contact with a state at all, but was instead rendered in terms of ceremony, tradition, Confucian self-governance, etc.
After the anarchist attempts to utilize indigenous forms of solidarity and community failed, both communists and republicans turned to the strong state as an alternative. But, whereas the Nationalists, in practice, emphasized the state’s disciplinary force against the populace, the communists emphasized both its redistributive power and its capacity for coordination. The state to be constructed was not just one that extended all the way down, but one that, when rooted to the local, would also connect that locality to the general social wealth. The creation of China was, therefore, an economic project. It was this promise, above and beyond any nationalist mythology, that amassed support for the CCP’s program among the country’s peasant majority.
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 Jean-Laurent Rosenthal and R. Bin Wong (Before and Beyond Divergence: The Politics of Economic Change in China and Europe. Harvard University Press, 2011, p. 101) argue that this was because warfare in Europe pushed this type of production into protected urban areas, whereas in China, warfare was more sporadic over the last millennium. Only in the long run did this benefit Europe, setting it on a different, capital-intensive path much earlier. We use Rosenthal and Wong here not for their grand Europe-China comparison, but to provide a long-term view of the relationship between production and the rural-urban split in China.
 Ibid. pp. 101 and 110. They argue that, in general, labor is cheaper in the countryside than in the city, and for capital the reverse is true. European warfare drove more capital-intensive production into the city. For a more peaceful China, the calculus was different, and handicrafts remained more rural because of the cheaper cost of labor (106-7).
 Ibid. p. 111.
 Jacob Eyferth, Eating Rice from Bamboo Roots: The Social History of a Community of Handicraft Papermakers in Rural Sichuan, 1920-2000. Harvard University Press, 2009; Jeremy Brown, City Versus Countryside in Mao’s China: Negotiating the Divide. Cambridge University Press, 2012.
 Kathy Le Mons Walker, Chinese Modernity and the Peasant Path: Semicolonialism in the Northern Yangzi Delta. Stanford University Press, 1999, pp. 37-39.
 Ibid. p. 41-7.
 Philip Richardson, Economic Change in China, c. 1800-1950. Cambridge University Press, 1999, p. 69.
 Walker 1999, p. 10; Philip Huang, The Peasant Family and Rural Development in the Yangzi Delta, 1350-1988. Stanford University Press, 1990, p. 60.
 Huang (1990), p. 105.
 Timothy Brook, The Confusions of Pleasure: Commerce and Culture in Ming China. University of California Press, 1998, p. 199.
 Huang 1990.
 See Richardson 1999, p. 26; Rosenthal and Wong 2011, chp. 4.
 Ho-fung Hung, “Agricultural Revolution and Elite Reproduction in Qing China: The Transition to Capitalism Debate Revisited,” American Sociological Review 73(4), August 2009, pp. 569-588.
 Richardson, 1999, chp. 6; Daniel Little, Understanding Peasant China: Case Studies in the Philosophy of Social Science. Yale University Press, 1989, chp. 4.
 Formal subsumption is a moment in which a pre-existing labor process is brought within the capitalist market but the labor process is not yet transformed. The example from the text points to a moment in which Chinese agriculture is subsumed within the global capitalist market via the domestic market system, but the way people work is not significantly transformed in the process. What does change is the prices that farmers and merchant receive for the agricultural products that they are selling, even if they still produce them in the same way.
 Richardson 1999, p. 73.
 Mark Selden, The Political Economy of Chinese Socialism. M.E. Sharpe, 1988, p. 159.
 Richardson 1999, pp. 26-27. These figures are rough estimates. Some have argued that growth rates up until the 1937 Japanese invasion were higher, but those figures have been heavily criticized (see Richardson 1999 for discussion).
 Margherita Zanasi, Saving the Nation: Economic Modernity in Republican China. University of Chicago Press, 2006.
 Nicholas R. Lardy, Agriculture in China’s Modern Economic Development. Cambridge University Press, 1983, p. 12.
 For a review of the role of the communists in Shanghai’s labor movement, see: Patricia Stranahan (1994). “The Shanghai Labor Movement, 1927–1931”. East Asian Working Paper Series on Language
and Politics in Modern China.
 Zhongguo gongchangdang lishi, 1919-1949 (History of the Chinese Communist Party, 1919-1949), Beijing: Renmin chubanshe, 1991, vol. 1, p. 216.
 C.F. Remer, Foreign Investments in China. New York, MacMillan, 1933. p. 76.
 Chu-Yuan Cheng, Communist China’s Economy, 1949-1962: Structural Changes and Crisis. Seton Hall Univeristy Press, 1963. p. 4
 Ibid. p. 4-5. For more detail, see Cheng’s own citation [not transliterated into pinyin]: Wu, Chiang, “Certain Characteristics in the Economic Developments of China’s Capitalism,” Ching-chi Yen-chiu (Economic Research), Vol 1., No. 5 (Peking: December 1955) p. 64.
 Ibid. p.5
 For detail on how this took shape in port cities of the time, see: Linda Cooke Johnson, “Shanghai: An Emerging Jiangnan Port, 1638-1840,” in Linda Coooke Johnson, ed., Cities of Jiangnan in Late Imperial China. Albany State University of New York Press, 1933. pp. 171-4.
For details on the textile industry, see: Feuerwerker, “Handicraft and Manufactured Cotton Textiles 1971-1910,” Journal of Economic History, 30:2, 1970, pp. 371-5.
For details on Chen Jitang’s industrialization campaign in Guangzhou, see Alfred H. Y. Lin, “Warlord, Social Welfare and Philanthropy: The Case of Guangzhou under Chen Jitang, 1929-1936,” Modern China, 30:2, April 2004, pp.151-198
For an overview, see Giovani Arrighi, Adam Smith in Beijing. New York, Verso. pp. 336-344.
 See: Stephen Andors, China’s Industrial Revolution: Politics, Planning and Management, 1949 to the Present. Pantheon Books, NY. 1977. pp.32-33.
 Ibid. p.33
 Fei-ling Davis, Primitive Revolutionaries of China: A Study of Secret Societies of the late Nineteenth Century. University Press of Hawaii, Honolulu. 1971. pp 171-172.
 Andors 1977, p.34
 Chang Liu, Peasants and Revolution in Rural China. Routledge, 2007.
 Ibid. p. 47.
 Ibid. p. 98; Alexander F. Day, “A Century of Rural Self-Governance Reforms:
Reimagining Rural Chinese Society in the Post-Taxation Era,” The Journal of Peasant Study 40(6), 2013, p. 937.
 Li Fangchun, “Class, Power and the Contradictions of Chinese Revolutionary Modernity: Interpreting Land Reform in Northern China 1946-48,” PhD Thesis, University of California, Los Angeles, 2008, p. 3.
 “Cadre” here translates the Chinese term “ganbu,” which designates party and state functionaries. The term can be used in the singular or plural. Though often unclear for English-language readers, the translation has become standard throughout the literature, so we use it throughout to maintain consistency with our sources.
 Carl Riskin, China’s Political Economy: The Quest for Development Since 1949. Oxford University Press, 1987, p. 50.
 Victor Lippit (Land Reform and Economic Development in China: A Study of Institutional Change and Development Finance. Routledge, 1975) sees the facilitation of industrialization as the main benefit of the CCP’s rural policies.
 See Cheng, pp.6-7.
For the exact numbers, see: Ibid. p.8.
 David Tucker, “Labor Policy and the Construction Industry in Manchukuo: Systems of Recruitment, Management, and Control” in Paul H. Kratoska, Ed., Asian Labor in the Wartime Japanese Empire. ME Sharpe, Inc. , 2005, p.28.
 The similarity to China’s current system of rural migrant labor based on hukou classification is notable.
 Tucker, p. 28.
 Ibid. p.29
 Ibid. p.36
 Ibid. pp.31-32
 Ibid. p. 49-50
 Jairus Banaji, Theory as History. Haymarket, Chicago IL, 2010, p.62
 Cheng, pp.8-9.
 Dieter Heinzig, The Soviet Union and Communist China, 1945-1950: The Arduous Road to the Alliance. East Gate, New York City, NY. 1998. p.101
 Andors 1977, p.45
 Andors 1977, p.44
 See Table 1 in Cheng, p. 14
 Cheng, p.14.
 Ellen Meiksins Wood, The Origin of Capitalism: A Longer View. New York, Verso, 2002. p.13
 Ibid. p.15
 Jackie Sheehan, Chinese Workers: A New History. London, Routledge, 1998. P.17
 Ibid. p.18
 Ibid. p.15
 Ibid. p.16
 See Andors, 1977, pp.44-45 for an overview of these problems.
 A review of the literature on Manchuria in wartime shows that there was great fear among many Chinese communists that the Russians would simply seize Manchuria and possibly the entire Korean peninsula for themselves after pushing out the Japanese.
 See Arif Dirlik, Anarchism in the Chinese Revolution. University of California Press, 1991. pp100-109.
 Andors, 1977, p.45
 ibid, p.48
 Ibid, p.49
 See Sheehan, pp.25-26.
 Andors 1977, p.49
 The phrase comes from Mao’s principles of New Democracy, quoted in Maurice Meisner, Mao’s China and After: A History of the People’s Republic. The Free Press, New York, 1977. p.59
 Cheng, pp.65-66
 Ibid. pp.66-67
 See Sheehan, pp.23-34.
 Cheng, p.67
 Ibid. p.68
 Sheehan p.42
 Cheng, p.68
 Sheehan, p.42.
 Mark Selden, The Political Economy of Chinese Development. M.E. Sharpe, New York, 1993. p.21, Table 1.3
 Christopher Connery, “The Margins and the Center: For a New History of the Cultural Revolution.” Viewpoint Magazine. Issue 4: The State. September 28, 2014.
 Again, see Dirlik, 1993 for an overview, particularly Chapter 7. Also see: Peter Zarrow, Anarchism and Chinese Political Culture. Columbia University, New York, 1990.