Striking Contrast Between Two Different Economic Systems
Striking Contrast Between Two Different Economic Systems
Striking Contrast Between Two Different Economic Systems
Striking Contrast Between Two Different Economic Systems
by Hsia Li-chih
Source: Peking Review, No. 48, November 29. 1974
AN economic crisis characterized by slump, inflation and sharply rising unemployment is now pounding away at the entire capitalist world. The two superpowers, in particular, are having a very hard time. This is one manifestation of the prevailing international situation: great disorder under heaven, or, as a Chinese verse goes, "The wind sweeping through the tower heralds a rising storm in the mountains.”
Contrary to the decline of imperialism and social-imperialism plagued by inescapable crises, there is a scene of growing prosperity in our country where production and construction are in full swing and the financial and monetary front is being more and more consolidated. The Renminbi, the Chinese currency, long stable in value, is one of the few exceptionally stable currencies in the world.
The glaring contrast between the two different monetary systems discussed in this article throws light on the incomparable superiority of the socialist economic system over the capitalist one.
Long-Term Stability of Chinese Finance And Currency
A currency's stability or instability is mainly indicated by whether or not its purchasing power can remain steady over a long period.
For the last two decades and more, the Renminbi's purchasing power has kept at the same level with no fluctuation whatsoever. All along prices of the daily necessities, such as grain, cotton cloth, salt and coal, have not fluctuated. While remaining stable, prices of a number of manufactured goods in daily use have gradually fallen. China is a developing country and the people's living standards at present are still not high. But because China has completed in the main the socialist transformation of the ownership system and because it has firmly adhered to the socialist road and continually repudiated the capitalist tendencies, the value of the Renminbi has long remained fixed and the people are ensured a stable livelihood which gets better and better as production develops. The steady rise in urban and rural people's savings deposits provides one proof.
At the same time, the stability of the value of the currency also serves to help promote the exchange of industrial and agricultural products at equal values and broaden connections between city and the countryside, thus consolidating the worker-peasant alliance economically. Internationally, the Renminbi, enjoys ever growing prestige. Neither devalued nor revalued, the Renminbi has remained stable in value in spite of foreign currency fluctuations. To date, more than 60 countries and regions are using it for reckoning and settling accounts in trade and other economic transactions with China. This plays an important role in persisting in the principle of equality and mutual benefit, developing foreign trade and expanding China's economic contacts with foreign countries, and also fending off interference by capitalism's monetary and financial crises.
Frequent Eruption of Financial and Monetary Crises in Imperialist Countries
With the deepening of the economic crisis, soaring prices, currency depreciation and monetary inflation, financial and monetary crises have broken out one after another in the imperialist countries.
For more than 20 years following the end of World War II, the United States, the reputed "dollar empire," has suffered a sustained development of monetary inflation; there has been a continuous dip in the dollar's purchasing power and a steady upturn in market prices. In more recent years, the situation there has further deteriorated. Compared with 1967, the U.S. consumer goods price index in the first half of this year was up 47.1 per cent. Under the strong impact of the financial and monetary crises, the United States was forced to announce, first in 1971 and again in 1973. the devaluation of the dollar whose prestige has been sinking fast. Lately, the price of gold In terms of the dollar quoted on the world free market is four times the official price. The so-called "dollar empire" has fallen.
Soviet social-imperialism has not fared any better in its financial and monetary affairs. Commodity shortages are acute, black market trafficking is rampant, prices soar and the ruble's purchasing power keeps plummeting. Statistics show that retail prices of 69 principal consumer goods sold in state commercial enterprises in 1970 were about 20 per cent higher than in 1963. Free market retail prices are still higher, by several times in some cases. The foreign exchange value of the Soviet ruble was devalued 55 per cent in 1861 when It was converted into the new ruble. The value of the ruble in fact started dwindling a long time ago.
Inevitable Result of Imperialist Policy
The capitalist world's current financial and monetary crisis is a reflection of its deepening political and economic crises: it is also the inevitable result of the two superpowers' bid for world hegemony, overseas expansion and shifting the burden of crisis on to others, as well as of the policy of plunder and aggression they push.
To alleviate and extricate itself from the economic crisis, U.S. imperialism has for a long time been increasing government expenditures and military outlays, blindly stimulating production and creating a false boom at home. Externally, it has been boosting military .spending abroad, stepping up exports of capital and scrambling for raw materials, and markets. The aftermath has been runaway inflation, increasingly large financial deficits and unfavourable balances of payments for years running. Eighteen of the 20-odd years between 1949 and 1973 saw the United States in the red with an aggregate deficit amounting to more than J50.000 million dollars; 21 of these years saw an unfavourable balance of payments — an aggregate total of over R8.000 million dollars. To meet the financial deficit, the United States has resorted to higher taxation, the sale of bonds and 'he wanton issuing of banknotes. All this has caused debts to pile up and prices to soar.
Soviet social-imperialism too has been flung into an impasse out of which it can find no way. It runs economic affairs in a capitalist manner with a vengeance -—going after high profits and blindly carrying out production — and the national economy has been thrown out of balance. It is feverishly engaged in arms expansion and war preparation and greatly increasing military outlays. According to data available, Soviet revisionism's actual military expenditures have already reached somewhere between 60.000 and 70,000 million dollars annually. These expenditures take up a greater share of the total national income and gross national product than do U.S. military expenditures. Because its strength is not enough to realize its wild ambitions, it has to postpone the repayment of internal debts while begging for foreign loans. By 1971, the public internal debt incurred by Soviet revisionism had reached 28,400 million rubles and the repayment of economic bonds worth 25,800 million rubles, which have fallen due, is deferred until after 1974, to be paid back in instalments over a period of 20 years. According to incomplete statistics, external debt incurred between 1964 and April 1974 amounted 'in the aggregate to 8.500 million dollars. This self-styled "developed socialist country" has now degenerated to the point of begging in order to live.
Two Hegemonic Powers Face Worldwide Opposition In Shifting Crisis On To Others
In an effort to shift the burden of crisis on to others, each of the two hegemonic powers, the United States arid the Soviet Union, seeks to place the developing countries in Asia, Africa and Latin America under its own control, while at the same time bullying the developed countries that are not their match in strength. To exploit and plunder the developing countries, they do their utmost to hike prices of manufactured goods and force down prices of agricultural produce and raw materials on international markets. As international merchants of death, they sell arms and ammunition in a big way to reap fabulous profits. They practise hegemonism in international financial and monetary affairs. To try to control the economies of the member states of its so-called "'community," one of the two superpowers turns the ruble into an "international currency'' by arbitrarily making the "ruble transferable within the CMEA." The other superpower exports huge amounts of dollars to offset its balance of payments deficits, allowing the dollar to stir up trouble without restraint in the international financial market and thus aggravating the financial and monetary crisis in the capitalist world. What both superpowers have been doing has aroused the developing countries to fight against hegemonism, international exploitation and plunder. They have also provoked strong dissatisfaction and resistance from other developed countries. This in turn deepens the political and economic crises of the two superpowers.
Unavoidable imperialist Economic Crisis
As early as 20 years ago, Chairman Mao had already foreseen the inevitability of the economic crisis of U.S. imperialism. He said: "The economic power of U.S. imperialism, which grew during World II, is confronted with unstable and daily shrinking domestic and foreign markets. The further shrinking of these markets will cause economic crises to break out." ("The Present Situation and Our Tasks," Selected Works of Mao Tsetung, Vol. IV, p. 172, Foreign Languages Press, Peking, 1961.) This thesis of Chairman Mao's is of great significance as a guide to our analysis of the political and economic crisis of the present-day capitalist world, especially the two superpowers. .
In imperialist and social-imperialist countries, the means of production is in the hands of the monopoly capitalist class and its representatives who, to seize maximum profits, blindly develop production and invariably do all they can to keep the working people's living standards at the lowest level possible. The home market shrinks day by day accordingly. At the same time, the rise of the developing countries in Asia, Africa, Latin America and other regions after World War II greatly narrows down imperialism's international markets. In the imperialist countries the sharpening contradiction between the development of production and the unstable and daily shrinking markets both at home and abroad has reached the point where frequent economic crises as well as financial and monetary crises inevitably descend upon them. The results are further impoverishment of the masses of working people at home, increased unemployment, surging tides of strikes and ever more acute class contradictions. Outside their countries, time and again their policies of plunder and aggression fail; the scramble for raw materials' and markets among the imperialist countries in general and between the two superpowers in particular is further intensified, so much so that they are faced with increasingly strong resistance-from the developing countries; Economic crisis is an incurable disease of the imperialist and social-imperialist countries, and an inevitable consequence of the growing contradiction between socialized production and capitalist ownership of the means of production. As Frederick Engels pointed out: "The collision becomes inevitable, and as this cannot produce any real solution so long as it does not break in pieces the capitalist mode of production, the collisions become periodic." (Anti-Duhring.) This is an objective law independent of man's will.
Socialist China Eliminated Inflation Long Ago
Neither economic crises nor financial and monetary crisis ever exist in a socialist country under the dictatorship of the proletariat.
Thanks to the fundamental victory won in the socialist transformation of the ownership of the means of production, socialist public ownership in our country has replaced capitalist private ownership. The working class and other labouring people are the masters of the country and of the means of production. The economic basis for the exploitation of man by man thus has been eliminated. Production in our country is for the purpose of meeting the needs of society as a whole. The guiding principle for the development of socialist production in our country is "to develop the economy and ensure supplies," as put forward by Chairman Mao. ("Economic and Financial Problems in the Anti-Japanese War," Selected Works of Mao Tsetung, Vol. Ill, p. Ill, Foreign Languages Press, Peking, 1967.)
All this provides the conditions for social production in a planned and proportionate way. In financial and monetary affairs, China long ago uprooted the virus of inflation left over by the old society and established an independent, unified and stable socialist monetary system. Over the last 20 years and more, the Renminbi has stood the test in the war to resist U.S. aggression and aid Korea, in the three successive years of serious natural disasters and in the continual disturbance and sabotage by both internal and external class enemies. The Renminbi has been able to withstand the numerous storms and to remain stable at all times. This fully demonstrates the great vitality of the socialist monetary system in China and reflects the unrivalled superiority of her socialist system.
Why Has the Renminbi Long Remained Stable?
The Renminbi's long-term stability derives mainly-from the fact that the state possesses a large stock of commodities which is put on the market at stabilized prices. This is a peculiar feature distinguishing the socialist from the capitalist economic system. Money serves as a universal equivalent of commodities; "The circulation of money is merely a manifestation of the metamorphosis of commodities." (Karl Marx: A Critique of the Political Economy.) The value of the currency can be kept stable when the .socialist economy develops, with goods in ample supply and the state possessing a large stock of commodities and always putting them on the market at stabilized prices. Since the founding of New China, the Chinese people, guided by Chairman Mao's revolutionary line, have held fast to the principle of "developing the economy and ensuring supplies." This leads to steady development in agricultural production, a substantial growth of both light and heavy industrial production, and a large increase of consumer goods on sale in the market. State purchase of commodities and total retail sales in 1973 increased more than sevenfold compared with the early years of liberation. The state is keeping a growing stock of commodities. The commercial departments at the end of last June had in stock nearly twice as much goods as in June 1965. To date, every single yuan in circulation in our country is backed by commodities worth several yuan. This enables the currency in circulation to be commensurate with the supply of commodities, thus ensuring a long-standing stability of the value of the Renminbi.
Another important condition for the Renminbi maintaining long-term stability is to work out a state budget under the socialist system, a budget which is steady and sound and in which revenue and expenditure are balanced. In the early days of the People's Republic, Chairman Mao already had pointed out that "the balance of revenue and expenditure and the stabilization of prices should also be consolidated." ("Fight for a Fundamental Turn for the Better in the Financial and Economic Situation," China Wins Economic Battles, p. 7, Foreign languages Press. Peking, 1950.) Whether a balance between revenue and expenditure can be brought about or not has a direct bearing on the issuance of the currency and the stability of its value. "The issuing of notes by the state bank is based primarily on the needs of economic development." ("Our Economic Policy," Selected Works of Mao Tsetung. Vol. 1, pp.-144-45, Foreign Languages Press, Peking, 1967.)
In the course of socialist construction in China, the principle of balancing revenue and expenditure has all along been adhered to, and it is impermissible to increase the fiscal outlay by issuing more notes. The implementation of the state budget generally results in a favourable balance with a slight surplus so that the state's reserves is continually reinforced. In special circumstances, like natural calamities, the revenue and expenditure balance is ensured by increasing production and practising economy, tapping the state's reserves, making adjustments in a planned way and using what has been set aside in the bumper years for the lean years. Our country never relies on getting loans to solve the problem, still less on the issuing of more banknotes. Today, China is one of the few countries with neither internal nor external debts. Thanks to the consolidated and balanced fiscal position, currency in circulation is limited to a scale just enough 1o meet the development of-production and the enlarged circulation of commodities. The kind of monetary inflation that occurs in capitalist society as a result of issuing notes indiscriminately can never happen in our country.
The long-term stability of the Renminbi is also due to the state's centralized and unified control of the Issuing of notes through adjusting, in a planned way, the amounts of money put into circulation and to be called in. Issued by the slate bank in a unified way and subject to its centralized control, the Renminbi is the only currency in circulation in China. Money put into circulation by the bank flows back mainly though supplying commodities in a planned way. The amount of wages paid by the state, the quantity of farm and side-line produce purchased by the state, the amount of money to be put into circulation and the corresponding quantity of merchandise to he supplied — all these are arranged annually by the state according to plan. This makes it possible for the currency to be released and called back through planned channels and so ensures the normal circulation of the currency. When a temporary, partial imbalance takes place in an unexpected situation in the course of implementing the plan, the state is free to make adjustments through planning in order to reach a new balance. This is the superiority of the socialist planned economy.
The Line Decides Everything
"The correctness or incorrectness of the ideological Bad political line decides everything." The long-term stability of the Renminbi is, in the last analysis, a fruit of Chairman Mao's proletarian revolutionary line triumphing over the revisionist line of Liu Shao-chi and Lin Piao. Babbling that "it is all right to have budgetary deficits" and "to issue more banknotes," Liu Shao-chi and Lin Piao and their gang tried to justify their reactionary stand for currency depreciation and monetary inflation. Their vain attempt was to open up a breach on the financial and monetary front — the chief link in the entire national economy — to undermine the socialist economy, subvert the proletarian dictatorship and restore capitalism. With Chairman Mao's revolutionary line pointing out the way, these sabotaging activities were rebuffed in time and failed to succeed. The two bourgeois headquarters of Liu Shao-chi and I.in Piao have been demolished by the Great Proletarian Cultural Revolution and their criminal schemes for capitalist restoration smashed. The present movement to criticize Lin Piao and Confucius is being broadened and deepened in a sustained way. Socialist construction in China is about to enter a new phase of development. The socialist economic system in China, the financial and monetary system included, is becoming daily more consolidated in the struggle between the two lines. Prospects are infinitely bright.
(A slightly abridged translation of an article in "Hongqi," No, 11, 1974, Subheads are ours.)
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