In the beginning was Tiananmen

By Henry C K Liu

The People's Republic of China observed the 60th anniversary of its founding on October 1, 2009. Many unthinkingly confuse that date as the 60th anniversary of the Chinese socialist revolution. In fact, the protracted history of the Chinese socialist revolution started 90 years ago in 1919 on May 4, when 5,000 students from Peking University, as it still prefers to be known in English, and 12 other schools held a political demonstration in front of Tiananmen, the focal point of what is today known as Tiananmen Square.

The demonstration sparked what came to be known as the May Fourth Movement of 1919-21, an anti-imperialism movement rising out of patriotic reactions to China's then warlord government's dishonorable foreign relations that led to unjust treatment by Western powers at the Versailles Peace Conference. May Fourth was a political landmark that turned China towards the path of modern socialism through Marxist-Leninism.

Nationalism had fueled the Xinhai Revolution led by the Nationalist Party (Koumintang or KMT) under the leadership of Sun Yat-sen, which succeeded in overthrowing the three-century-old Qing Dynasty (1644-1912) in its final decrepit years by 1911 to establish the Republic of China. However, China after the 1911 Xinhai Revolution was a fragmented nation ruled by regional warlords preoccupied with internal power struggle. The weak central government at the time, known in history as the Beiyang regime (1912-28), was backed by the Beiyang Army commanded by Yuan Shikai, a warlord who had been a leading general in the former Qing army.

The Beiyang regime, preoccupied with consolidating its rule over other unruly independent regional warlords that had sprung up in a power vacuum as Qing rule disintegrated, not only did little to counter persistent and continuing Western imperialism in the new Republican China, it in fact made numerous additional concessions on Chinese sovereignty to imperialistic foreign governments in exchange for foreign financial and military support against rival regional warlords.

Yuan soon developed a delusion of monarchical grandeur, fanned by none other than his American political advisor, Frank J Goodnow, a constitutional expert sent to China by the Carnegie Endowment. Goodnow was later to become president of Johns Hopkins University. A political scientist of note, Goodnow published a book entitled: Principles of Constitutional Government, in which he concluded that Americans had long doubted the fitness of a democratic republic in China where a tradition of autocracy would make a constitutional monarchy a far more suitable institution than a democracy.

Mistaking Goodnow's views as a sign of US support, Yuan made a failed attempt to proclaim himself emperor of China on December 12, 1915. To secure foreign acceptance of his monarchial farce, Yuan accepted Japan's infamous Twenty-One Demands and signed an agreement with Russia to recognize its special interest in Outer Mongolia and with Britain on its special interests in Tibet.

In protest, Sun formed a Southern Government in Guangdong. The monarchial farce ended with the abolition of the three-month-old monarchy on March 22, 1916, after other leading warlords refused to recognize Yuan as emperor. A frustrated Yuan died on June 5, 1916, aged 56, officially from uremia, while some said suicide. Two months later, Goodnow's book received a positive review in the New York Times on August 13, 1916. After Yuan's death, vice president Li Yuanhong became president of the restored republic and Feng Guocheng became vice president. Both were warlords in the Beiyang clique.

As the Beiyang regime fell into chaos, an opening emerged for the restoration of the Qing monarchy, putting Pu Yi, the last emperor, on the restored throne on July 1, 1917. Twelve days later, Duan Qirui, a leading general under Yuan, entered Beijing with his troops and ended the Qing restoration. Re-establishing the republic once again, Duan assumed the premiership of the new government under President Li Yuanhong.

Prodded by the US, the Duan government declared war on Germany on August 14, 1917, without the approval of president Li or the new parliament. Under the pretext of financing China's war effort, Duan negotiated the secret Nishihara Loan of 145 million yen (the yen equaling half a US dollar at the exchange rate of the time). Thus fortified financially, Duan set out to destroy Sun's Southern Government. But Feng Guocheng, who had succeeded Li Yuanhong as president, preferred a peaceful negotiation with Sun. With the leadership of the Beiyang clique divided, Duan's military campaign failed to topple the Southern Government.

At the end of World War I, Japan as a victorious ally of the Triple Entente had taken Shantung, now known as Shandong, in China from defeated imperialist Germany, which had a 99-year lease for a naval base at the port of Qingdao since 1898, left over from unequal treaties with the Qing Dynasty that the 1911 bourgeois democratic revolution overthrew.

At the outset of World War I, China had at first stayed neutral, while Japan joined the Allies and ousted Germany from Qingdao port in Shandong, and subsequently occupied most of the province. After the war, Japan sought to legalize its de factooccupation of Shandong.

In 1917, China entered World War I as an ally of Britain, France and Russia within the Allied Triple Entente, with the understanding that all German spheres of influence in Shandong would be returned to China after an Allies victory.

However, the Versailles Treaty of April 1919 awarded German rights in Shandong to Japan. The peace conference rejected China's request for the abolition of all foreign extra-territorial rights in China, for the annulment of the infamous Twenty-One Demands by Japan and for the return to China her sovereign rights in Shandong.

Secret treaties between Japan and Western imperialist powers to recognize Japan's Twenty-One Demands on China in exchange for Japanese support of Russian, French and British claims on other former German colonies assured great power support for Japan.

The coup de grace was a secret pact signed in September 1918 between Japan and the warlord Beiyang regime, in which the Duan government had accepted the terms of the Twenty-One Demands in exchange for a loan of 20 million yen from Japan as part of the Nishihara loan. China's representative at Versailles argued that the Twenty-One Demands were invalid because the Chinese parliament had never ratified them. Further, the Chinese delegation invoked the international law concept of rebus sic stantibus to nullify Japan's claim on Shandong. The concept states that when the objects of a treaty, or conditions under which it is concluded, no longer exist, the treaty becomes null and void.

In rebuttal, Japan divulged the 1918 secret treaty signed after China entered the war in which the Duan government of the Beiyang regime had "gladly agreed" to Japanese terms. The Western allies were bound by secret treaties to support Japan, leaving US president Woodrow Wilson as China's lone supporter.

The United States at first promoted Wilson's idealistic Fourteen Points, but was forced to abandon most of its anti-imperialist ideals due to firm resistance from Britain and France, the major imperialist powers at the time.

Many Chinese intellectuals felt betrayed by the Versailles Peace Conference as they had naively believed Wilson's ideals of universal justice and were expecting the US to forge a new world order of democracy and international justice after the war.

Two prominent Chinese intellectuals, Chen Duxiu and Li Dazhao, who participated in the May Fourth student demonstrations, soon came to the realization with others that Vladimir Lenin's conceptual linkage between capitalism and imperialism was vividly proved by unfolding events around the world and particularly in China. They came to the conclusion that to rid China of Western imperialism, China must oppose capitalism and adopt a socialist path of self regeneration. In 1921, Chen and Li co-founded of the Communist Party of China (CPC) in Shanghai, the center of Chinese capitalism.

Hobson on imperialism
The structural link between capitalism and imperialism was first observed by John Atkinson Hobson (1858-1940), an English economist, who wrote in 1902 an insightful analysis of the economic basis of imperialism. Hobson provided a humanist critique of neo-classical economics, rejecting exclusively materialistic definitions of value.

With Albert Frederick Mummery (1855-1895), the great British mountaineer who was killed in 1895 by an avalanche while reconnoitering the Rakhiot Face of Nanga Parbat, an 8,000-meter Himalayan peak, Hobson wrote The Physiology of Industry (1889), which argued that an industrial economy requires government intervention to maintain stability, and developed the theory of over-saving that was given an overflowing tribute by John Maynard Keynes three decades later.

The need for governmental intervention to stabilize an expanding national industrial economy became the rationale for political imperialism in advanced capitalist economies. On the other side of the coin, protectionism was a governmental counter-measure on the part of weak trading partners for resisting imperialist expansion of the dominant powers.

Historically, the processes of globalization have always been the result of active state policy and action, as opposed to the mere passive surrender of state sovereignty to market forces. Market forces cannot operate in a political vacuum. Markets are governed by man-made rules. Globalized markets require the acceptance by local political authorities of the established rules of the dominant economy. Currency monopoly and hegemony is the most fundamental trade restraint by one single dominant government. Today, the global market is dominated by dollar hegemony.

Friedrich List on economic nationalism
German economist Friedrich List, in his National System of Political Economy (1841), asserts that political economy as espoused in 19th century England, far from being a valid science universally, was merely British national opinion, suited only to English historical conditions. List's institutional school of economics asserts that the doctrine of free trade was devised to keep England rich and powerful at the expense of its trading partners and it must be fought with protective tariffs and other protective devises of economic nationalism by the weaker countries.

Nineteenth-century American statesman Henry Clay's "American system" was a nationalist system of political economy. Economic nationalism was a necessary policy for the US in the 1850s. US neo-imperialism in the post World War II period disingenuously promotes neo-liberal free-trade against economic nationalism labeled as protectionism to keep the US rich and powerful at the expense of its trading partners.

Before the October Revolution of 1917, many national liberation movements in European colonies and semi-colonies around the world were influenced by List's economic nationalism. The 1911 Xinhai Revolution led by Sun was heavily influenced by Abraham Lincoln's political ideas of government of the people, by the people and for the people, and the economic nationalism of List until after the October Revolution in Russia when Sun realized that the Soviet socialist, anti-imperialist model was the correct mode for national revival of China.

Imperialism and iron law of wages
Hobson's magnum opus, Imperialism (1902), argues that imperialistic expansion is driven not by state hubris, known in US history as "Manifest Destiny", but by an innate quest for new markets and investment opportunities overseas for excess capital formed by over-saving at home for the benefit of the home state.

Over-saving during the industrial age came from David Ricardo's theory of the iron law of wages, according to which wages were kept perpetually at subsistence levels as a result of uneven market power between capital and labor. Today, job outsourcing that returns goods as low-price imports contributes to the iron law of wages in the global economy, including the US domestic economy. (See Organization of Labor Exporting Countries, Asia Times Online, February 2006).

Dollar hegemony
In the 1970s, dollar hegemony emerged as a geopolitically constructed peculiarity through which critical commodities, the most notable being oil, are denominated in fiat US dollars, not backed by gold or other species since US president Richard Nixon took the US dollar off gold in 1971.

The recycling of petro-dollars into other dollar assets is the price the US has extracted from oil-producing countries for US tolerance of the oil-exporting cartel since 1973. After that, everyone accepts dollars because dollars can buy oil, and every economy needs oil.

Dollar hegemony separates the trade value of every currency from structural connection to the productivity of the issuing economy to link it directly to the size of dollar reserves held by the issuing central bank. Dollar hegemony enables the US to own circuitously but essentially the entire global economy by requiring its wealth to be denominated in fiat dollars that the US can print at will with little in the way of monetary penalties.

World trade is now a game in which the US produces fiat dollars of uncertain exchange value and zero intrinsic value, and the rest of the world produces goods and services that fiat dollars can buy at "market prices" quoted in dollars.

Such market prices are no longer based on mark-ups over production costs set by socio-economic conditions in the producing countries. They are kept artificially low to compensate for the effect of overcapacity in the global economy created by a combination of overinvestment and weak demand due to low wages in every economy.

Such low market prices in turn push further down already low wages to further cut cost in an unending race to the bottom. The higher the production volume above market demand, the lower the unit market price of a product must go in order to increase sales volume to keep revenue from falling. Lower market prices require lower production costs which in turn push wages lower. Lower wages in turn further reduce demand. To prevent loss of revenue from falling prices, producers must produce at still higher volume, thus further lowering market prices and wages in a downward spiral.

Export economies are forced to compete for market share in the global market by lowering both domestic wages and the exchange rate of their currencies. Lower exchange rates push up the market price of imported commodities which must be compensated for by even lower wages. The adverse effects of dollar hegemony on wages apply not only to the emerging export economies but also to the importing US economy. Workers all over the world are oppressed victims of dollar hegemony, which turns the labor theory of value up-side-down. (See Dollar Hegemony, Asia Times Online, April 2002.)

Lenin's theory: imperialism as
advanced stage of capitalism

Hobson's 1902 analysis of the phenology (life cycles study) of capitalism was drawn upon by Lenin 14 years later to formulate a theory of imperialism as an advanced stage of capitalism: "Imperialism is capitalism at that stage of development at which the dominance of monopolies and finance capitalism is established; in which the export of capital has acquired pronounced importance; in which the division of the world among the international trusts has begun, in which the division of all territories of the globe among the biggest capitalist powers has been completed." (Vladimir Ilyich Lenin, 1870-1924, Imperialism, the Highest Stage of Capitalism, Chapter 7-1916).

"It is characteristic of capitalism in general that the ownership of capital is separated from the application of capital to production, that money capital is separated from industrial or productive capital, and that the rentier who lives entirely on income obtained from money capital is separated from the entrepreneur and from all who are directly concerned in the management of capital. Imperialism, or the domination of finance capital, is that highest stage of capitalism in which this separation reaches vast proportions. The supremacy of finance capital over all other forms of capital means the predominance of the rentier and of the financial oligarchy; it means that a small number of financially 'powerful' states stand out among all the rest. The extent to which this process is going on may be judged from the statistics on emissions, ie, the issue of all kinds of securities." (Lenin's Imperialism, Chapter III: Finance Capital and the Financial Oligarchy.)

Lenin was also influenced by Rosa Luxemburg, who three years earlier had written her major work: The Accumulation of Capital: A Contribution to an Economic Explanation of Imperialism (Die Akkumulation des Kapitals: Ein Beitrag zur akonomischen Erklarung des Imperialismus, 1913). Luxemburg, together with Karl Liebknecht, founding leaders of the Spartacist League (Spartakusbund), a radical Marxist revolutionary movement that later renamed itself the Communist Party of Germany (Kommunistische Partei Deutschlands, or KPD), was murdered on January 15, 1919, four months before the May Fourth demonstrations in China, by members of the Freikorps, rightwing militarists who were the forerunners of the Nazi Sturmabteilung (SA) led by Ernst Rohm.

The congenital association between capitalism and imperialism requires practically all truly anti-imperialist movements the world over to be also anti-capitalist. To this day, most nationalist capitalists in emerging economies are unwitting neo-compradors for super imperialism. Neo-liberalism, in its attempts to breakdown all national boundaries to facilitate global trade denominated in fiat dollars, is the ideology of super imperialism. (See Super Capitalism, Super Imperialism, Asia Times Online, October 12, 13, 2007.)

Chinese exposure to Marxism
Chinese intellectuals first became aware of Marxism around 1905, 57 years after the 1848 publication of the Communist Manifesto and 38 years after the first publication of Das Kapital: Kritik der politischen Okonomie in 1867, when a small Chinese newspaper named Min-Bao (People's Journal) published a biography of Marx, 22 years after Marx's death in 1883.

Three years later, in 1908, an anarchist journal by the name of Tien-yi Bao (Journal of Natural Justice) founded a year earlier, published a Chinese translation from the Japanese translation of Friedrich Engels' 1888 English edition of Introduction to the Communist Manifesto, and the first chapter of the Manifesto itself. But only in 1916, three years before the May Fourth Demonstrations, did Lenin make the insightful connection between imperialism and capitalism.

Although incipient recognition of Marx and Engels as the founders of scientific socialism had been acknowledged, the influence of Marxism on Chinese intellectuals remained sporadic until the 1919 May Fourth Movement when the success of the Bolshevik October Revolution dramatized the revolutionary possibility of a socialist ideology seizing the power of the state. At Versailles, Western democracy lost all credibility in China as a progressive force against imperialism.

Lenin's views about imperialism being the highest stage of capitalism enabled socialism to present itself as a promising revolutionary theory to the Chinese intelligentsia for combating both Chinese feudalism and Western imperialism. On a state level, the new communist government of the Soviet Union twice, in 1918 and 1919, unilaterally renounced all special rights and privileges of Tsarist imperialism in China, notwithstanding a fragmented China nominally headed by a central government too weak to reverse the encroachment of Western imperialism.

Lenin's insight of the linkage of capitalism and imperialism gave Chinese intellectuals an understanding of capitalism as the pugnacious root cause of foreign imperialistic domination of China. More importantly, Lenin's insight inadvertently gave Chinese revolutionaries a central place in the universal struggle towards a new world order. By 1918, Peking University had become a vibrant center of socialist revolutionary thoughts.

Li Dazhao, head librarian at the Peking University library at the time of the 1919 May Fourth demonstrations, had learned from the October Revolution of 1917 that anti-imperialism as a political movement required the existence of a communist party in China. But while Li was a nationalist and socialist revolutionary who saw the peasantry as the fountainhead of socialist revolution in China, he was temporarily distracted by Kropotkin's communist anarchism as promoted in China by Li Shi-zeng, which denied the importance of the role of the state in guiding socialist revolution before the stage of the "withering away of the state".

The May Fourth Movement marked a turn by anti-imperialist Chinese intellectuals towards revolutionary Marxism. The success of the Bolshevik Revolution in Russia was a major factor in forming the views of Li Dazhao on the revolutionary role of the state. Li initiated the Peking Socialist Youth Corps in 1920 and in July 1921 co-founded the Communist Party of China (CPC) with Chen Duxiu, who had been exposed to socialist ideas in Japan, as a political institution with the secular program to seize power of the state to carry out socialist revolution in China. A revolutionary state is the rationale for a one-party government, provided that the ruling party represents the interest of the people. Li was a mentor to Mao Zedong, who openly acknowledged having been influenced by Li's ideas.

However, at the direction of the Third International (Comintern) in Moscow, Li and Chen and other Chinese Communist Party members joined the Nationalist Party (KMT) as individuals. Li was even elected to the KMT Central Executive Committee in 1924. When the Chinese civil war started after the death of KMT leader Sun Yat-sen on March 12, 1925, and the subsequent assassination five months later, on August 20, of Liao Zhongkai, leftist KMT leader and heir to Sun, Li was captured together with 19 other communists during a right-wing KMT raid on the Soviet embassy in Beijing. All were executed on the orders of the warlord Zhang Zuolin on April 28, 1927.

The debate on socialist internationalism
The first edition of Stalin's Problems of Leninism, which appeared n April 1924, seven years after the October Revolution of 1917, asks: "Is it possible to attain the final victory of socialism in one country, without the combined efforts of the proletarians of several advanced countries?" The answer was: "No, it is not. The efforts of one country are enough for the overthrow of the bourgeoisie. This is what the history of our revolution tells us. For the final victory of socialism, for the organization of socialist production, the efforts of one country, especially a peasant country like ours, are not enough. For this we must have the efforts of the proletariat of several advanced countries."

The strategic key words on socialist internationalism are "final victory", which cannot be achieved with just "socialism in one country", and the phrase "the proletariat of several advanced countries". But "final" implies not immediate but in the future, even the distant future. And international communism was focused not on the whole world, but on "the proletariat of several advance countries" where evolutionary conditions were considered as ripe. It was not focused on the peasantry still living under agricultural feudal societies outside of Europe or the oppressed people of imperialist colonies and semi-colonies.

To both Lenin and Stalin, the path to liberation in the colonies of the Western empire was to strengthen the only socialist country in the world and to weaken capitalism at the core to end its final stage of imperialism. In theory, the liberated workers of the West would in turn liberate the oppressed peasants in the colonies and semi-colonies.

Unfortunately, events failed to support theory. There was no worker uprising in the advanced economies. In fact, unionism in the advanced economies turned anti-communist. Liberation cannot be delivered by others. Each oppressed group must struggle for self liberation through internal political consciousness.
Both Lenin and Stalin failed to recognize the inherently powerful but latent revolutionary potential of the peasants of the pre-industrial colonies and semi-colonies of the Western empires, which had to wait until the emergence of Mao Zedong in China to force the world to acknowledge this truth in history. Mao, in placing his faith in the revolutionary potential of the Chinese peasantry, redefined the term "proletariat" to mean those deprived of property, a property-less class, away from the European idea of the proletariat as the class of urban industrial workers.

The October Revolution of 1917 was launched on the slogan "All Power to the Soviets", through which the minority Bolsheviks won political leadership in the soviets, which were workers councils that constituted the power behind the new socialist state. Bourgeois liberal democracy was not an objective of the October Revolution, but rather a target for elimination in order to establish the dictatorship of the proletariat in the context of socialist revolution through class struggle.

This was because in feudal Russia in 1917, the proletariat as a dominant class was an abstraction yet to be created as a reality by industrialization. The proletariat in its infancy, small in number, could not possibly command a majority under universal suffrage in a feudal agricultural society. Therefore dictatorship of a minority proletariat is the only revolutionary path towards socialism.

In pre-industrial societies, liberal representative democracy is by definition reactionary in the absence of a dominant working class. Lenin considered the revolution in Russia as a fortuitous beginning of an emerging socialist world order that required and justified a dictatorship of the proletariat to sustain revolutionary progress.

Leninists work for the acceleration of socio-economic dialectics by the violent overthrow of capitalism, which itself had been the violent slayer of feudalism. Evolutionary Marxists, such as social democrats, believe in scientific dialectic materialism which predicts the inevitability of the replacement of capitalism by socialism as a natural outcome of capitalism's internal contradiction.

But the evolutionary process requires the emergence of capitalism as a natural outcome of feudalism's internal contradiction. Marx saw the process of evolution toward socialism as taking place in the most advanced segment of the world, in capitalistic societies of industrialized Western Europe, where the ruling bourgeoisie had replaced the aristocracy as a result of the French Revolution. The Russian Revolution showed that geopolitical conditions had opened up opportunities for revolutions in pre-industrialized nations and it was in these pre-industrial societies that radical revolution was needed to bring about socialism by short-circuiting the long evolutionary process from feudalism to capitalism to socialism.

In Germany, the most industrialized country in the second half of the 19th century, social democrat icons such as Karl Kautsky and Eduard Bernstein, titans of Marxist exegesis, favored gradual, non-violent and parliamentary processes to effectuate inevitable dialectic evolution towards socialism because of the existence in Germany of a large working class. These Marxists subscribed to the doctrine of evolutionary Marxism which renders revolution unnecessary as socialism would arrive naturally from capitalism as an evolutionary process of dialectic materialism.

At the other end of the spectrum were radical revolutionaries such as Luxemburg and Liebknecht, leaders of the Spartacists, founded in the summer of 1915 when they withdrew from the German Social-Democrat Party (SDP) because of SDP support for Germany's participation in World War I. The Spartacists staged an abortive coup to overthrow the young social democratic government in Germany. For communists, revolution is necessary in order to short circuit the long stage of capitalism during which the evolutionary process can be halted by unionism and the introduction of a mixed economy. This is particularly true for pre-industrial feudal societies.

The call by radical Leninists for worldwide coalition of the browbeaten proletariat majority in the industrial societies in the West, who were still deprived of political power beyond the dialectical process, and the agitating proletariat minority in the agricultural societies in whose name radical Leninists had gained state power in Russia, was most threatening to the rulers of the capitalist order in the advanced imperialist countries.

Reaction to this threat gave rise to insidious anti-communism in the imperialist West to prevent the arrival of socialism in the strongholds of industrial capitalism ahead of its evolutionary schedule. In the advanced economies, state-sponsored capitalist propaganda was conditioning workers into an active anti-communist force through industrial unionism and the addictive appeal of individualistic bourgeois freedom to neutralize collective working class solidarity.

Still, all Marxists share the belief that the structural antagonism between a capitalist bourgeoisie class and a proletariat class in advanced economies was a necessary precondition for creating socialism. It required the resolution of the contradiction between the efficient productivity of capitalism and the economic dysfunctionality of the maldistribution of wealth inherent in capitalism. The good of capitalism is its efficiency in creating wealth; the bad is that the way wealth is created in capitalism requires wealth to go to the wrong places, to those who need it least, namely the rich rather than the poor who need it most. Also, awareness was increasing that capital in the modern financial system comes from the pension funds of workers.

Wealth is good
Wealth is good; it is the maldistribution of it that is bad. The internal contradiction of capitalism is that it creates wealth by widening the gap between rich and poor. Wealth disparity is a polluting socio-economic by-product of capitalism. While capital cannot create wealth without labor, the proletariat in advanced economies, oppressed by a pro-capital legal-political regime, never managed to gain control of ownership of the means of production financed by their own wealth.

Thus workers remained silent, docile victims of exploitation by capitalists using workers' own money. Apologists for capitalism then create the myth of capital being needed to create employment, ignoring the fact that it is the saved income from employed workers that creates capital.

The global financial crisis that began in 2007 is a living demonstration of the self-destruction potential of finance capitalism when not supported by full employment and high wages, which then force needed consumption to be financed by debt. The current financial crisis of unsustainable debt has ignited populist socio-political changes in all countries.

These populist changes will transform the existing socio-economic world order, even though it is too early to predict what the new world order will be like. Suffice to observe that changes in government toward progressive populism are now taking place in every nation.

Next: Lessons of other revolutions

Henry C K Liu is chairman of a New York-based private investment group. His website is at