Skip to content

Red Flag Manuscript: The Rationale for State Control of the National Economic Lifeline

[Editor’s Note: Ever since the onset of the global financial crisis began at the end of 2007, articles advocating Marxism and state control of the economy have mushroomed in China’s official media. The crisis offers the Chinese Communist Party’s theorists an opportunity to prove the “inevitable failure” of capitalism and to legitimize China’s socialist or Marxist control of the national economy. The following is a translation of excerpts from an article in Red Flag Manuscript, a core publication of the Central Committee of the CCP, “The International Financial Crisis Provides the Rationale for State Control of the National Economic Lifeline.”] [1]

Private Monopolistic Capital Controls the Economic Lifeline; Essentially, the U.S. Government Serves Private Monopolistic Capital

“Important sectors in the U.S. economy, such as finance, information, automobile manufacture, airplane manufacture, real estate, energy, and retail industries, are highly monopolized. In most sectors, more than 50% of the market is concentrated in 3-5 large private companies. Since the 1980s, the U.S. has seen an industrial ‘hollowness.’ Manufacturing industries have gradually withered. The financial industry that represents the virtual economy has become the core and has penetrated into every corner of the U.S. economy.”

“The U.S. government essentially serves private monopolistic capital. The economic freedom that the U.S. advocates is in fact the freedom of capitalists to pursue profit by any means. Neo-liberalism believes that, as long as property rights are clearly defined, a firm’s profit maximization will result in the maximum social welfare. Therefore, there is no need for the U.S. government to regulate microeconomic entities. Ever since the 1980s, neo-liberalism has been the mainstream idea in the U.S., U.K., and other Western countries. ‘The least regulation is the best regulation’ has become the basic concept that governments have followed. Influenced by neo-liberalism, the government released a series of laws to relax the regulation of the financial industry. … Thus, after the outbreak of the “subprime mortgage crisis,” Americans found it difficult to find any regulatory authority to undertake responsibility. In fact, the fundamental reason that regulations malfunctioned was not that any agency was unwilling to fulfill its responsibility. It was that the U.S. government, which represents the interests of private monopolistic capital, had loosened the regulations under the influence of neo-liberalism.”

Private Monopolistic Capital’s Control of the National Economy Results in Extreme Unfairness

“Private monopolistic capital has deepened the unfairness between developed countries and developing countries. Private monopolistic capital in developed countries deepens the international division of labor through economic globalization and extends the exploitation to developing countries. After the onset of the financial crisis, the dramatic fluctuation in world economics broke the industrial chain of the international division of labor. Vast developing countries have to suffer from the consequences of the market shrinking, growth slowing down, and unemployment increasing. They even have to pay the bill for the greedy and fraudulent practices of American private monopolistic capital by buying the American government’s debt, and being exposed to the depreciation of the foreign exchange reserve in U.S. dollars. More ridiculously, the developing countries’ industrial structure, established by monopolistic capital, quite often becomes the target of the developed country’s criticism. For example, developing countries have been accused of lack of protection at the work place, too much carbon emissions in production, and export dumping practices. Since the financial crisis began, these accusations, which are excuses for their trade protectionism and political threats, have became more intense.”

The Rationale for State Control of the National Economic Lifeline

“The state owned economy, which is an important component of an economy with public ownership, is the important economic foundation of the socialist system. It is an important force that leads, promotes and adjusts economic and social development. It is also the important guarantee to realize the fundamental interests and common enrichment of the general public. Only when the state controls the economic lifeline can the superiority of socialism be exhibited.”

Strengthen the Control of State Ownership of the National Economy

“Through the advance of reform and development of state-owned enterprises, our state-owned enterprises have established a relatively comprehensive modern enterprise system. It not only has absorbed the merits of the Western style management, but also has its unique political superiority. For example, it has established the investor system that specializes in supervising state-owned assets. It has strengthened the role of the Party organizations as the political core of the enterprise. It has established the all-employee representative conference system.”

“History is so similar: 80 years ago, when classical liberalism dominated the Western economic theories and the ‘invisible hand’ was highly praised, the world’s most serious economic crisis broke out throughout the capitalistic world. 80 years later, when the liberal ideology re-gained mainstream status as a new theory, and was touted to all the countries in the world as the ‘consensus,’ the world economy has encountered a financial crisis that happens once every one hundred years. This financial crisis declared the failure of neo-liberalism in practice. It also showed us that we have to be firm to stay on the path of socialism with Chinese characteristics, so as to realize the renaissance of the nation of China.”

[1] Qiushi Journal, March 26, 2010