When the “modernisers” came to power in late 1978 they did so crucially because no other faction had a coherent strategy to offer. But the timing of their victory had much to do with another oppositional movement on the streets – the “Democracy Wall” movement.
This movement was founded by small groups of dissidents who came together after the 1976 riots, some of who had connections with older groups of former Red Guards. They aimed to find a mass base among the young people who had been sent down to the countryside in 1969-74, who from 1977 onwards had started to return illegally to the cities. By late 1978 there were an estimated 10,000 of them in Beijing alone, sleeping rough and living by begging, theft or prostitution.
The activists had no fully developed political analysis, and the differences between them were great, though rarely expressed openly. They built the movement around a set of general demands: for greater democracy, the release and rehabilitation of all those imprisoned during the Cultural Revolution, the sacking of those responsible for the suppression of the 1976 riots, and an end to censorship. Hence they unreservedly supported Deng Xiaoping in his fight against the remaining hard-line Maoists.
But while the activists supported Deng, they were not prepared to sit back and let him do it for them. From the beginning of 1978 a rash of wallposters appeared in Beijing and other cities putting their demands – demands which fitted neatly with the attack that the “modernisers” were then waging. It seems clear that the movement got at least tacit support from some members of the ruling class. But it is also clear that many of the activists saw their demands as only the first steps in a much wider transformation of Chinese society.
During the meeting of the top leadership which approved the “modernisers” rise to power, a change of line on the 1976 riots was announced. They were now to be seen as a positive demonstration of popular hatred of the “Gang of Four”. The numbers of wallposters had naturally multiplied during the meeting and, following this announcement, the movement began to gather openly in an area of west-central Beijing. The “Democracy Wall” at the centre of this area became an arena for non-stop debates on politics, art and culture.
The freedom to speak out without fear of arrest, the thirst for ideas and the need to tell the truth about the past ten years soon outgrew the medium of wall-posters. By the spring of 1979 dozens of hand-printed journals were circulating in and between every major city. As the agitation increased, the activists moved from debate to action. Demonstrations were organised to demand action from the state, particularly on the issue of those who had been sent to the countryside. As the authorities turned a deaf ear, the demonstrations grew larger and more militant, and spread from Beijing to other cities.
Deng Xiaoping’s reaction was to demand that the movement cease “causing disturbances” and restrict itself to discussing safer issues. In reply, Wei Jingsheng, editor of one of the movement’s leading journals, wrote: “Does Deng Xiaoping want democracy? No, he does not. He is unwilling to comprehend the misery of the common people. He describes the struggle for democratic rights ... as the actions of troublemakers who must be repressed. To resort to such measures to deal with people who criticise mistaken social policies and demand social development shows that the government is very afraid of this popular movement.” 
Two weeks later the government proved Wei right by arresting him, then arresting other members of the movement who went to demand his release. The repression increased through 1979, at first tempered by statements that the movement would be tolerated provided it operated within state-set limits. For Deng Xiaoping it had served its purpose, but he was unwilling to spoil his international image as a liberal by being openly heavy-handed too soon.
But the movement refused to go away, or do as it was told. At the start of 1980 all wallposters and unofficial journals were banned; the activists not only learned how to survive underground, but extended their organisation and influence. In September 1980 a meeting of representatives from more than 50 unofficial journals was held in Guangzhou. The following month saw two significant student demonstrations and, following the rise of Solidarity in Poland, sections of the movement turned to organising factory workers. By 1981 there were reports of unofficial trade unions in the cities of Shanghai, Wuhan and Xian. They were to be short-lived. A major purge had now started, which finally destroyed the movement in 1983.
The purge was announced as one against “hooliganism”, a catchall term covering anything from political opposition to street crime. Public executions and mass deportations of young workers increased steadily – by August 1983 there was an average of one execution a day in Beijing alone. No figure has ever been given for the national death toll, but it clearly ran well into the tens of thousands.
China’s new leaders could physically destroy the movement, but they could not eradicate the conditions of poverty and despair that had bred it. Nor could they do away with the divisions in their ranks that gave space for oppositionists to organise. The “Democracy Wall” movement had been able to grow because of the divisions inside the ruling class in 1978 between “modernisers” and Mao’s supporters. By 1981 similar divisions were opening up among the modernisers, as the contradictions in their economic policies began to come to the surface.
In 1978 the “modernisers” launched an ambitious programme to transform the Chinese economy, which aimed at doubling industrial and agricultural production by the year 2000. There were two major components to the strategy. The first was the wholesale importing of industrial plant and technology, to overcome quickly Chinese technological backwardness. The second was a far-reaching restructuring of the internal economy, steadily to reduce state control over production and investment, and replace it with the influence of “market forces” in order to make the economy as a whole properly competitive.
Since the early 1980s the first component – industrial imports – has diminished in importance. The major reason for this was that the ruling class discovered on several occasions that they simply couldn’t afford all the new machinery they had contracted to buy. In 1979-80, 1983 and 1985 there were major cutbacks in purchases from abroad. Each round of cuts left a number of projects half-built and abandoned, and each meant that Western and Japanese capitalists became much more wary about such projects.
The major focus of attention has been the development of so-called “market socialism”. This has undoubtedly led to large increases in production, and to the highest rates of economic growth since 1949. Yet as the strategy has worked through, it has become clear that the ruling class have simply exchanged one set of insoluble economic problems for another.
Initially, the most impressive advances were recorded in agriculture. Under the “household responsibility” system, introduced in 1978 and now covering the whole country, the old communal fields were abolished. In their place each family gets a plot of land, on which they grow whatever they choose. They contract to deliver a fixed amount to the state in taxes – everything else produced is theirs to eat or sell on the free market.
The result was a spectacular increase in both production and productivity. Between 1978 and 1983 output increased by over 60 per cent, while average incomes more than doubled. And much of that increased income went into developing rural industries, which employed those who were left landless.
But the peasants have paid heavily for their gains. The state’s intention was that increased incomes would be invested in agricultural machinery, irrigation schemes, fertilisers and so on, thus reducing the amount the state needed to invest in agriculture. Yet the small size of most family plots makes such investment completely uneconomical. Less land is now machine-ploughed or sown that in 1978; and the use of irrigation and chemical fertilisers has also dropped.
In other words, the increases in output have come almost entirely from peasants working much harder than they used to – which means that the rates of growth of the early 1980s cannot be sustained. And the increasing amounts of land taken out of agricultural use for housing and industry means that if growth rates stagnate, output will soon drop.
The social costs have been even worse. Most villages now have no form of health insurance – the doctors have gone over to private enterprise – and the fall in educational standards has been staggering, as children are taken out of school to work the family plot. Between 1978 and 1983 secondary school enrolment in the countryside dropped from 46 per cent of school-age children to 30 per cent  – and of course enrolment figures are higher than the number who attend.
The status of women in the countryside has undergone an equally marked decline. Under the old system of working the fields collectively, even though women’s work was paid at only 80-90 per cent of the male rate, women had at least in theory an independent income (though in practice it was usually paid to the husband or eldest son). Now even the theory has gone. As one specialist on women in China puts it: “... the new economic arrangements in the countryside are returning women to their pre-Liberation position in relation to the means of production. Now instead of reporting to the team leader for job assignments ... a woman will be under the supervision of the male head of her household. He will decide when she works, what she does, and whether she can take time off.” 
Lastly, the new system has seen a vast increase in the gap between the well-off and the poor in the villages. Because it relies almost completely on harder work rather than increased investment, the areas that have prospered have been those that started out with favourable natural conditions and a relatively high level of investment. Parts of Zhejiang and Jiangsu provinces are now among the most prosperous areas of China, with standards of living far higher than in the cities. But in the poorer and more backward areas there has been little change. And while it is broadly true that in a poor area everyone is poor, the reverse does not hold. Even in the most successful areas, large pockets of poverty remain.
It is these inequalities that are the most worrying for the state – for they are the ones that can be seen by the people affected. Yet the response to this from the ruling class is a blunt one. As one senior minister argued: “Achieving common prosperity does not mean becoming well-off simultaneously or enjoying the same level of affluence. Historical lessons tell us that seeking equal prosperity for all at the same time will only engender egalitarianism and common poverty.” 
Yet the very success of the “responsibility system” has forced them to backtrack time and again from this attitude. Precisely because “market forces” have worked, food prices in the cities have been rising steadily since 1978 (by up to 20 per cent a year) leading to enormous pressure on wages. The ruling class were forced to grant large across-the-board wage increases simply to keep pace with inflation. And because most food is now sold on the free market, they can do little or nothing to control food price rises.
Further, the supply of grain (still the staple diet in China) has declined from its high point in 1984, again precisely because the strategy worked. Prices for other crops (particularly “industrial” crops such as cotton, tobacco and jute) being consistently higher than those paid for grain, peasants have been switching away from grain production. In 1985 the state was forced to introduce large subsidies for grain farmers, yet the following year the amount of land given over to grain dropped again in ten provinces. The problem can be solved only by eating even further into the state’s surplus and thus reducing the amount available for industrial investment – the exact opposite of what the agricultural reforms were supposed to achieve.
If the problems of agriculture have been ones of stagnation, those of industry have been too rapid growth. Since the early 1980s many factory managers have been given the right to keep their profits and to reinvest them as they see fit. The result has been an impressive and steadily rising rate of industrial growth. Between 1983 and 1985 the increase in output was equivalent to the total output of South Korea in those years.
But the rate of growth ran far ahead of that which the state plan had allowed for, leading to major shortages in energy, transport and raw materials (and hence enormous waste). The balance of payments deficit soared as imports grew consistently faster than exports. By 1985 the industrial growth rate was 18 per cent – while the current Five-Year Plan had budgeted for only 8 per cent. The ruling class cracked down, reimposing many of the controls on factory managers that they had earlier lifted, and demanding more realistic rates of growth. While this worked for a few months, the 1986 figures showed that both growth and investment were running well above the planned levels – and the problem has remained ever since.
The fundamental reason for this is that the central state has lost control over the army of lower-level officials who run the economy day-to-day. Budgeted state investment is now less than half of all investment. The local managers and officials who control the majority of investment make decisions on the basis of their own particular (and conflicting) interests, rather than on the basis of those of the ruling class as a whole.
This contradiction finds its sharpest expression in the area known as “economic crime” – illegal business practices. A minority of these are cases of sheer personal greed, such as the electricity company manager who cut off the local theatre for refusing him free tickets, or the gas company manager who ran a private supply off the company mains. The vast majority, however, are simply creative applications of the “market socialism” strategy – the primacy of the profit motive taken to its logical conclusion. If the rate of return on illegally importing colour TVs is higher than on producing radios (and it is), then managers who think they can get away with it will do so, irrespective of technicalities such as the law (or the “national interest”). The logic is impeccable. Yet it is a logic the central state must fight if it is to retain its control over the economy.
As the problem reached epidemic proportions in the early 1980s, the ruling class attacked it with a series of highly-publicised executions. Factory managers were frightened off – but they were also frightened off any innovations lest these turn out to be “economic crimes”. And as soon as the campaign eased off, the problem quickly returned. Further crackdowns have periodically followed. Yet they cannot remove the problem, only keep the lid on it for a time. For though the ruling class cannot trust the local bureaucracy any more, it can even less afford to alienate it. The changes needed to make Chinese industry competitive with the world economy – crucially, raising productivity and lowering labour costs – can only be carried out by those officials.
That process of change will be an immensely costly one for the Chinese working class. At present about 20 per cent of factories operate at a loss. Because of disguised unemployment, practically every factory is “overmanned” by world standards. To raise productivity and profit to the levels required will call for sackings on a mass scale. One estimate of this was given in 1986 by the Minister of Labour, who said that “15 million people will become surplus labour at state-owned enterprises during the next five years.”  This is roughly one-sixth of the urban working class.
The ruling-class offensive goes much further than mass sackings, however. They aim fundamentally to change working conditions by abolishing the guarantee of jobs for life and instituting “contract responsibility”, where pay will be tied directly to output and unproductive workers can be sacked. All welfare benefits currently paid to workers by their factories (which are worth more than the average annual wage) are to be abolished, as are state subsidies on food prices and housing costs. It is “standing on their own two feet” with a vengeance.
But the gap between theory and practice is large. Though all these ideas have been around since the early 1980s, the ruling class has moved very cautiously indeed, only too well aware of the dangers involved. But they are also conscious of the dangers of playing for time – the climate in the world economy, in which they have to compete, is getting nastier. The longer they delay their attacks, the further behind the competition they will fall, and consequently the more comprehensive the attacks will have to be.
It is because of all these unintended results of the “modernisation” strategy that a deep split has opened up inside the ranks of the “modernisers” since 1981. At stake is a fundamental argument about the nature, pace and direction of the whole strategy. But this is not a split between two clear and well-defined opposing sets of principles; it is rather a reflection of the basic dilemma facing the ruling class.
For the “conservatives”, as Deng Xiaoping’s opponents have come to be called, the pace of economic development must reflect China’s backwardness, with the state focussing on key areas to develop; the speed of growth must be such that the ruling class retains its control over the direction and development of the economy. For their power rests ultimately on that control – if they lose it, what remains of their power?
It’s a good question, and one to which their opponents have no simple answer. They point instead to the primary need to compete in the world market. Years of centralised state control under Mao left China falling behind. Only a greater measure of decentralisation and “market socialism” can give the economy the dynamism it needs to compete. Losing a degree of control over the pace of economic growth is an unfortunate side-effect; but the alternative is far worse.
The first group are saying, in effect, that the Chinese economy must learn to walk before it can run, in order to retain its balance. To which the second group reply that the demands of international competition dictate that the economy must learn to run before it can walk, even if this means falling over a lot. The argument cannot be decided one way or the other, because both groups are right in pointing to the material constraints on their actions. The contradiction between the capacities of the Chinese economy and the demands placed on it by world competition is irreconcilable.
The years since 1982 have thus seen the emphasis in economic policy shift from decentralisation to planning and back again, according to whether the priority is to reassert control or to stimulate growth. Such chopping and changing has further added to the instability of the economy. As the ruling class’s control over the pace of growth has weakened, and the choices to be made become harder, so the splits have become far deeper.
In late 1985 they surfaced publicly. Deng Xiaoping was publicly attacked by veteran economist Chen Yun for his handling of the economy, the rampant corruption among lower officials, the widespread disaffection among young workers, and Japan’s growing economic power over China.
As had so often happened before, the public appearance of divisions among the ruling class provided an opening for opposition from below. September 1985 saw thousands of students take to the streets in Beijing, Wuhan and Chengdu, against Japanese domination of the economy; and four months later students from Xinjiang held the first-ever protest against Chinese nuclear weapons testing. The campuses had been in a state of agitation since the summer of 1984, with several protests against living conditions being held in major cities, but the 1985 marches broke new ground in directly addressing political questions.
The split inside the ruling class was quickly patched up, and the space for protests disappeared. But as the economy failed to respond to efforts to bring it under state control, the argument flared up again the following year. This time the protest movement that arose in response to the divisions was both far larger and more explicitly aimed at the ruling class – and it widened out far beyond its original student base.
Initially the marches were tame affairs, seemingly aimed at supporting Deng Xiaoping against the “conservatives”, and calling simply for changes in the conduct of local elections. But in the conditions of China today, any call for democracy is potentially explosive. By the time the protests reached Shanghai, in the middle of December 1986, they had grown enormously in scope. Workers joined the protests in large numbers – one told the Financial Times correspondent that he was there because “his bosses got all the benefits from economic reform while he got nothing”. For five days the centre of Shanghai was blocked by crowds of up to 70,000 people.
Similar protests took place in another fifteen cities, though nowhere on the scale of Shanghai. And in Beijing, a week-long series of marches not only defied government bans on demonstrating, but forced the release of 25 students arrested for taking part in the marches.
The ruling class were badly shaken, and for several weeks were visibly split over the attitude they should take to the movement. But as the protests died down, the “conservative” faction seemed to have scored a major victory. They forced the resignation of the CCP general secretary, Deng Xiaoping’s right-hand man since 1978, and launched a campaign against “bourgeois liberalisation” which attacked the very limited opening up of cultural and academic freedom of the previous two years. The authority of the state was to be reasserted against any challenge to the ruling-class monopoly of ideas.
More important, the protests meant that a number of the attacks on workers’ living standards planned for 1987 had to be postponed, for fear that workers would follow the example set by the students. The pendulum had now swung back towards greater state control over both society and the economy. Up to the Tibetan riots of October 1987, the conservatives seemed to be in a position to block further social change.
But whichever faction may eventually gain the ascendancy, the attacks on the working class will sooner or later come to the top of their agenda. There can be no guarantee that when they do come workers will fight back – but the longer the attacks are delayed the greater the likelihood becomes.
The history of previous opposition movements has shown that while the state has been able to contain and to crush them, their ideas and aspirations have survived in memory to become inspirations for the next round of struggle. There is now in China a serious tradition of street battles and protests against the state – and since the Cultural Revolution workers have always been a part of those battles. If that tradition spreads into the working class as a whole, then the ruling class will face a far tougher fight than any they have so far encountered.
18. Quoted in Gregor Benton, Wild lilies, poisonous weeds (London 1982) p.47.
19. World Bank, China: Long-term development issues and options (Baltimore 1985) p.30.
20. Margery Wolf, The revolution postponed (London 1987) pp.268-9.
21. Beijing Review, 10 February 1986, centrefold, p.XI.
22. Xinhua News Agency Daily Bulletin, Beijing, 7 May 1986.
Last updated on 25.3.2001