When we explained about the economic crisis that happened in 1967 and 1968
we presented data to show that
fiscal investments from the government had decreased
so there was no room to create new jobs for the young people in cities
So there were a large number of jobless youths being sent to the countryside
The crisis had badly hurt the citizens
with a lot of families being split up
Family members were sent to different provinces, into different villages
I just told you about myself
about my family’s six members who were sent to six different places
It meant at that time
a lot of families had to bear the cost of the big economic crisis
The people paid a large amount of human costs
into solving the problem of having zero capital investment
yet must maintain the industrialization process
Further, the people had to endure the crises and pay the cost while out of jobs
When people followed the policy and went to the countryside
the crisis in cities was then able to have a soft landing
So when we talk about the third crisis in China
we say it was similar to the second crisis
The soft landing of the crisis was made possible by the people
not by whatever we are familiar with in terms of modern concepts
Also, the soft landing was made possible by the rural
the agricultural society, not by cities
not by any so-called modern measures or clever policies
That was in Mao’s time
It was the second time that they had solved the crisis this way
We also need to know that
most of the crises had somehow arisen from economic problems
that had been transformed into political issues
and becoming political problems
In any country
no matter what the ‘-ism’
capitalism, socialism
when facing the challenge of an economic crisis
the economic problems would always transform into political problems
If you do research on different countries
you will find similar phenomena
That means it is a kind of rule, a kind of regularity
So, I am saying that this is a general rule
economic crisis transforming into political crisis
Here, you can see that it's 1967 in Shanghai, a mega city
It was during the Cultural Revolution
which was joined by the working class, the citizens
and also the people's army
They had set up a new form of government management
the Shanghai people's commune
That was a big ceremony for setting up the Shanghai people's commune
It means they were trying to totally change the bureaucratic government structure
That was a political reform
Because of the economic crisis
almost the entire traditional management
originally duplicated from the Soviet Union
and set up in China as a kind of political superstructure
could hardly face the challenge of the economic crisis
Did the government have any measures
No way
This time
when they were facing the challenge of the economic crisis
they found that the government had almost no ability to deal with the crisis
hence the Cultural Revolution
A lot of people cannot understand the Cultural Revolution
First, the theoretical thinking is that under the proletarian governance
the revolution need to keep going
That is from Leninism
Yet how was it to be implemented it in China
At that time
China declared itself to be a socialist country
So when they indicated that they had a class struggle
where was the capitalist class
The landlord class had already gone down
and there was already a socialist system
Was the cadre the capitalist class or was it the bureaucracy
was that the capitalist class
People were quite skeptical
Yet if you accept what I gave you as an explanation just now
you may understand that when China re-emphasized the class struggle back then
the whole world was unstable
Social chaos was found everywhere
The imperialist countries had directly used military force
to suppress the developing countries’ struggles
There were many bad things happening in the world
So at that time
China re-emphasized class struggle and joined the worldwide revolution
That was a very common
very popular attitude
If you had lived through that time in 1960s
you can more easily understand
why China emphasized the class struggle
why China used those slogans, the so-called political propaganda
to mobilize the lower classes
and the whole people into a concentrated labor force
to be invested into industrial construction
That was how China had maintained industrialization in the 1960s
I have also mentioned that
the Chinese political leaders had reformed the army
The army was the critical sector of the whole political superstructure
So after the army had been changed, reformed
they then changed the rural people’s communes also
and then the factories
It means that the whole economic infrastructure had been changed
Finally they tried to change the most critical part
which is the government
and also the cultural arena and the education arena
The education system, the cultural system
and the government system
these three systems had still remained in the Soviet style
and not yet re-embedded into Chinese society
to form Chinese style socialism
So that was a contradiction
That’s why
there was a so-called further revolution in the name of Cultural Revolution
given that this time it was initiated in the cultural sector and education sector
So, first the cultural system and education system
then supposedly the Cultural Revolution
would ultimately change completely the government’s ruling system
When they had finished all the infrastructure reforms economically
it meant they had changed the entire base
so now they were going to upgrade
to change the management system
That was the situation at that time
So in 1966
when they started the Cultural Revolution
there was certainly a very serious contradiction
Also, with the universities and governments in big turmoil
due to the Cultural Revolution
the ability to manage had declined
It could not be applied to stop the crisis
The crisis happened one year later
In 1966 the Cultural Revolution started
In 1967, the fiscal deficit became more serious
So they had to deal with two problems
one was the Cultural Revolution
which had reduced the ability of the government management
and the other side was the need to deal with the crisis economically
That was a contradiction
The leader
especially Chairman Mao himself
had the urgent need to find a way to manage
That was why he approved the Shanghai people's commune
There was also the experience of san jie he
which was the integration of working class, cadres and intellectuals
having those three groups come together to form a leadership group
It was a successful model
not only in agriculture but also in the factories, in the industries
So this time they also tried to rebuild regulations and rules
by means of the tripartite group
I’ll make several important points with this slide here
In 1963, the government bureaucratic system had devised the third five-year plan
wanting to gain full modernization
It was a similar model as the Soviet Union
I’ll just give you a second
to think about the third five-year plan that they made in 1963
if they wanted to work on modernization
they would need to have more capital
meaning that they would need to re-establish relationship with the Soviet Union
Even until now
there’s still much argument over this
Should China have delinked with the Soviet Union in the late 1950s
If not
there would have been Soviet investments continuously coming into China
and there would not be a big disaster
They could set up an alliance with the Soviet Union
and the world would still be in two parts now
The socialist alliance would still be there
There are so many arguments
so many hypotheses
They imagine what would have happened
if such kind of relationship had been maintained
Yet there’s no room for hypothesis in historical studies
In actual practice there was delinking
However, a lot of cadres were educated in the Soviet Union
similar to nowadays where many high-level cadres are educated in the United States
The Soviet-trained cadres came back to be ministers or even vice premiers
They had learned the Soviet model
and would use that model
They had learned those rules
and would use those rules to manage the Chinese economy
So, in the early 1960s even when they’re fully aware that
they had no capital
that five-year plan was still drawn up
wanting to continue with the 1950s Soviet-style construction
That was a contradiction between investments for third front construction
and for the third five-year plan construction
The third five-year plan had given a very clear picture
they were trying to realize full modernization
Any modernization would need large capital investments
but they had no capital
So what it meant exactly was that
no matter what they had believed
they could not implement the third five-year plan
Then in 1964
when the central party committee changed the focus
from the third five-year plan to the third-front construction
it meant even if there had been a little room for investment
it would need to be put into preparations for a world war
in case the imperialist countries were to attack
So that was at that time this contradiction
And this contradiction had turned into the 1966 Cultural Revolution
I’ll stop for a second to give you room to think about this one
I don't want to give you very detailed explanations
but I’ll just roughly talk about it
The Cultural Revolution was stopped, or was postponed anyway
by the economic crisis
Here, in 1966 China had announced they had no more foreign debts
that China had paid back all the capital investments from the Soviet Union
Yet paying back the debts
and paying for the third-front construction
had made the budget burden increasingly heavy
and the deficit more and more serious
I just mentioned, with the slide
to show that their investment ability had declined to minus 30%
which meant no ability at all
That was why
they had mobilized the jobless urban youths to the countryside
this was a very important factor
Who was the main force in the Cultural Revolution
The young people
When the young people were mobilized to the countryside
there would be no one to join the cultural revolution
So since 1968 to 1969
with more than 17 million educated youths
I mean young students, sent to the countryside
there's almost no one joining the cultural revolution
Given that the cultural revolution
had started in the education system and cultural system
then when they sent those people to the countryside
there was nobody left to be the main force
to keep the cultural revolution on
So I need to mention this point
Here, it’s in Tianjin
These were young people in the train and their family and classmates
coming to say goodbye
So that was Tianjin
with many thousands of people going to the countryside
And here, it was in northeast China
They lived in very difficult conditions in these shelters
and they worked very hard
They were wearing uniform
which meant they would be receiving a little salary
It was a so-called state farm, or military farm
with sub-military organizations
It meant they could still have a little salary
Most people
if they went to the countryside in village brigades
they would have no salary
They could only have labor credits
I was at that time in a village
and I only had labor credits
At the end of the year
according to how many labor credits I had earned
I would have food and a little bit of cash
So there were different treatments
In those times
the urban youths would like to go to the state farms
The state farms had sustained a lot of educated youths
That’s how it was in the countryside
With such kind of measures
the cultural revolution had stopped in the years 1968 to 1969
because the young people had been sent to the countryside or state farms
So there was no ten-year cultural revolution
Based on documents
a lot of people believe that
there was a ten-year disaster caused by the cultural revolution
But indeed, the cultural revolution was ended by the economic crisis
It was not what
mentally you think
or what subjectively you believe
or what documentary you write
That was just how it appeared
You need to at least understand what the rule is
what the economic rule is
We gave our explanation
and we’ll go to the final conclusion
Here. We have talked about linking and delinking
Linking with what
Linking with the imperialist countries, or capitalist countries
Yet no matter what kind of linking you make
the key issue is that you would put capital in the center
You would develop a model which is a capital-centric model
And the government's policy will be a pro-capital policy
Pro-capital
means that the government has become a corporation or a company
So the central government
when they are pro-capital, the role they play would be de-politicized
It's not easy to understand
how the country, the state, would become depoliticized
But it's very clear that if the government sets up pro-capital policies
it means the government is the capital and the government is a company
The government is no longer a government
and that means the government is depoliticized
The state would become a big state capitalism
That is the resource of state capitalism
having the whole government set up capital as the center
Since for most of the newly independent countries
the first challenge is an extreme shortage of capital
if they want to set up modernization
and learn from the colonial master countries
they must have the capital
Given that they don’t have the capital
they would need to get capital from outside
that is to have capital investment from outside
Then they are controlled by outside
That is capital-centric developmentalism
Developmentalism means the need to place capital at the center
and the government to become pro-capital
And then capital would set the price for labor
That means the labor resources would be capitalized by the capital at the center
So, what is centralization
what is decentralization?
People believe that liberalism is decentralization
so when capital has the central role
it means there is a need to decentralize the capital
But can they do it?
No way
Therefore when labor becomes a kind of commercialized labor
and labor price is marketized by capital
it means capital has capitalized the labor resource and would take the interest
that is maintained by the capital
Furthermore, capital can also capitalize natural resources
So the labor resource is capitalized
and the cost is transferred to society
And when natural resources are capitalized by capital
the environmental costs are given to nature, to the earth
That is why there are so many environmental costs
so many social costs, for which nobody takes care of
It is because capital has capitalized the natural resources and the labor resources
When we talk about the Chinese experience
we need to know that before the 1960s
when they’re still relinked with foreign capital
they had to set up the capital-centric system
The state had to follow foreign capital
They set up the state superstructure and political superstructure
all in foreign style
A specific foreign capital would make a specific foreign institution
Institutions were the derivative of the style of capital
That’s what this model is about
And because of this model
because labor was capitalized by capital
labor could only have a low salary for their survival
meaning that labor had no surplus
That in turn meant no saving
therefore no financial systems for investments
That is the situation in Latin American countries and African countries
Laborers only have small pay for their families to survive
That means they have no surplus therefore no savings
and no savings means no investments
No saving and no investment mean there is no banking system
I remember one time I had a dialogue with a Latin American scholar
He talked a lot about how to set up their banks
I said
Where is your savings?
In Africa also, do you have savings?
If you have no savings
how can you set up the banks?
A bank is where you take the savings to do investments
and make some interest
That is a bank
a traditional bank, not a modern bank
If you modernize your bank
you would need to be doing a lot of speculations
That is another thing
But even with a traditional bank
you don't have the ability to set it up
And then you talk a lot about the financial system
about how to set up independence
That’s textbook thinking, not reality
The reality is that you should first make the change
changing all the colonized sectors and the monolithic economy system
If the economic resources are controlled by a transnational company
you cannot set up any financial system
not even a budget system
So the first thing is to change that
That is the key issue, the core
Moving on, that’s the local government
also becoming corporatism
And that’s the industrial capital taking the resources
for benefit of the central capital
And then the technical sectors, the training arena
and the education arenas also all become part of the capital
for capitalizing labor resources
Then there will be no comprehensive education
Education will function
only as a means of turning the social resource into social capital
turning the labor resource into labor capital
The laborer is originally a human being with diverse characteristics
but the education system would use standardized textbooks
to strip the person of natural characteristics
to make the person into part of a standardized labor force
That is the so-called education system and training system
It's not for human beings but for the capital center
And they do it in the name of the market
The market always creates a large amount of negative externality
That is this model
This model produces a lot of externality
It can give large revenues to financialization
and financialization can create liquidity
With dissimilation and exclusions
the capital center is upgraded to financialization
But they put all the related costs to another circle
which is labor’s social cost
and the ecological costs and the resource costs
even industrial costs when they upgrade
So when we put these two cycles together
we want to have people understand that if they set up a linked system
if they rely on foreign capital
there'll be no way out
When we talk about the 1960s in China
the point was the big change of putting labor at the center
What is new Political Economics
the new theories?
When you want to innovatively apply traditional Marxism
the key theory for that is Political Economics
What is that theory?
Our innovative theory
based on analysis of the 1960s’ third crisis in China
was that in the 1960s China had changed the center
originally capital was there
but from the ’60s on labor was there
If you put labor in the center for the reform
you could make labor the shareholders
That was a further reform
In the 1960s they didn't have that
but they had the labor center
Then, being labor-centric
they could make the whole country the center
and the state was politicized
That is, re-emphasizing class struggle
joining in the worldwide revolution
And the state became highly politicized
They had made the institution
They had an institutional reform
that changed from being capital-centric to labor-centric
That was a big institutional reform
Then they could socialize the entire government
They could socialize governance
integrating the three groups into one governing group
Then governance of the factories
governance of the social arenas, governance of rural society
all were done by that tripartite group
laborers, technicians and managers
It had been a successful experience even back
even back in the time of Second World War in Yan’an
At that time Yan’an was a revolutionary area
They had used the tripartite group
to handle the governance of the locals in the villages
Historically speaking
it’s a successful model for governance socialization
And given that they had used it widely
mixing the technician and the education groups
it meant there was mass education
It was a mass technical training given by the people
because there were that many local experience people
and local technicians deployed on local growth
But don’t forget, now that they’re labor-centered
they could change the whole education system and training system
and internalize all the resources
They could have the resources, the environment, the institutional costs all internalized
Originally that cost was transferred to the environment, to natural resources
But with the people
the labor center, they could make the transformation
Then there would be positive externalities
And then they could have a socialized and ecological civilization
By such kind of labor center
they also could have the socialization of local services
That's very easy to understand
In the 1960s and ’70s, even the early ’80s
people didn’t need to worry about the kids
When they came back from school or from kindergarten
nobody would kidnap them
because the neighbors would care about the kids
And also there was no need to worry about the older generation
The whole society would care for the young and the old
And people could just go to work
Back then there was a period of three decades
during which all public goods were socialized
and all public services were socialized
That is the lowest cost system
You don't need to set up a bureaucracy
that involves many different sectors or have to pay very high cost
or to set up many so-called laws and regulations
that would limit services to the people
I recall that when we talked about that
kind of systems, institutions, governance and services
the local people could very easily understand it
but those from overseas found it not so easy to understand
In the beginning of 1980s
when China was just opening up to the west
the Americans had sent delegations to China
They were organized by the scholars of social issues
I mean they were sociologists
They came to China
There were also law school professors and economists
They had organized the social science delegation to come to China
They said
You have no law
I said
Laws have too much high cost
But without laws how can you manage your country?
We rely on people’s self-consciousness
We were talking inside a building
Outside the window it was Chang’an Street
the long street in front of Tiananmen Square
Many bicycles
thousands of bicycles were passing by
back then at the beginning of the 1980s
They said
If these bicycles collided
how would you deal with the problem?
We said
The cyclists would say dou si pi xiu
to each other then move on
That was, they would repeat that saying from Maoism
to fight selfishness and denounce revisionism
and then they would go back home
Nothing else would happen
They didn’t need to go to court
Then the American social scientist asked
what about if some people get hurt?
We said
Ok, we have social care in every unit
They can just go back and then go to the medical service
and it would be looked after
That means if you socialize the public services
you don't need to have many of the other high-cost institutions
That was what these western social scientists could not understand
about the 1970s and 1960s in China
about what had happened
There are many people saying
Maybe it is not good for human rights, for the democracy system
because they have that kind of ideology
and they would use that kind of standard
when they make their comments, that whatever China has
it's simply bad, simply negative
When we talk about the labor center
we can understand the entire system
That is why we need to give more explanations about the 1960s
because there is almost no historical study of the 1960s overseas
They just use the traditional Cold War ideology
to describe what happened in the 1960s in China
Going forward, we need to collect more materials to deepen our study
I will finish here, on the third economic crisis in China in the 1960s
Thank you