Some reflections on the experience of Shanghai capitalists after 1949 prompted by the ‘Notice to Merchants and Intellectuals’ that Mao issued after taking Changting in 1929.
Stuart Schram, ed., Mao’s Road to Power, vol. 3: From the Jinggangshan to the Establishment of the Jiangxi Soviets, July 1927-December 1930
Yao Wenyuan, “On the Social Basis of the Lin Piao Anti-Party Clique” (for heavenly horses reference)
David Apter and Tony Saich, Revolutionary Discourse in Mao’s Republic
Lynn White, Policies of Chaos: The Organizational Causes of Violence in China’s Cultural Revolution
David Barbosa, “Rong Yiren, a Chinese Billionaire, Dies at 89”
Some names from this episode:
Wu Zhongyi, Shanghai capitalist
Rong Yiren, Shanghai capitalist
Welcome to episode 112 of the People’s History of Ideas Podcast.
In our last episode, we discussed some of the first things that Mao Zedong and Zhu De did when they took over Changting. We wrapped up by discussing this document that Mao Zedong wrote, his “Notice to Merchants and Intellectuals,” which was a kind of appeal to some of the better off people in Changting who were not outright major exploiters of the peasants and workers to come over to the side of the revolution on the basis of the sort of democratic and capitalist society that the Communists wanted to achieve as part of the democratic revolution. I want to begin this episode by picking up where we left off and spend some time considering this question of how Mao was appealing to these more privileged classes.
If you need a refresher, we read the whole document last episode, and it may help to listen to the document again. However, if you don’t want to do that right now, here are some of the slogans that Mao ended the document with, and which I think are not exactly what most people think about when they think about Mao Zedong’s politics. The slogans go:
So, we’ve discussed in some prior episodes, especially those on the Sixth Party Congress, how the Communists conceived of their revolution as first going through a democratic phase before eventually entering a socialist phase. And Mao’s appeal here to the merchants and intellectuals of Changting tactfully omits any reference to a future, higher stage of the revolution during which the Communist Party would no longer protect the freedom of trade of small and medium sized capitalists who did not oppose the revolution, even though of course this eventual socialist transformation of society was something that he was working towards.
For me, and perhaps for some of you listeners, Mao’s appeal to the merchants and intellectuals raises questions about how Mao saw the revolutionary process ultimately unfolding in relation to these more privileged social groups. Was Mao just manipulating them in order to leverage their support for the revolution, or at least to keep them from actively opposing it? Did he see these people as playing a role in the revolutionary process and helping to transform both society and themselves at the same time? Was it maybe a little of both, or something else entirely?
In this document right here, it’s not really clear to me. Definitely, the threats (both somewhat veiled and explicit) that Mao issues in this document highlight the urgent need to get the cooperation of these small but influential sections of local society, and that this cooperation was needed right away on whatever terms were possible.
But there are other practices and documents that we can reference, and which may give us some insight into how Mao’s thinking about the relationship of these social groups to the revolutionary process developed over the course of the revolution. I want to just focus on these small merchants and the national bourgeoisie here, because the issue of intellectuals is a whole other one and a lot more complicated, because intellectuals are going to be needed to play a lot of key roles in the revolutionary process, and Mao is going to, over time, figure out a way to mobilize and utilize intellectuals for the Party’s ends while also setting some hard limits on the ways in which intellectuals can kind of fly off and do their own thing and trip out like heavenly horses flying above the terrain of the actual people’s struggle that they are supposed to be contributing to but actually at times losing sight of it. The whole rectification campaign that will go on in Yan’an in the early 1940s is going to be a key moment for the revolution in that regard. Here, in this document, we can see him threatening the intellectuals (while also offering them jobs, however, which is something that I don’t think most people trying to make a living as intellectuals in the United States today could have missed). Anyways, those threats are not really characteristic of his more common appeals for the participation of intellectuals in the revolutionary movement. Maybe, again, the threats here reflect the urgency of the situation of getting cooperation from people with some literacy and basic administrative skills after taking over the city.
Anyways, back to our main focus here, the small and medium-sized capitalists of Changting. What sort of thinking informed Mao’s friendlier-than-one-might-expect policy toward them, and just how serious was the idea of winning them over to the revolutionary cause by uniting with their anti-feudal and anti-imperialist economic interests?
The first thing that comes to mind as a possible concrete reference for cooperation between a communist party and small capitalists in order to meet the interests of both in rebuilding a national economy is the New Economic Policy of the Soviet Union, which had just recently been terminated in 1928 with the start of the first Five Year Plan, which involved much greater state control of the economy as the USSR began a process of rapid industrialization. And while the NEP in the Soviet Union was not conceived of as a stage of dual capitalist and democratic development on the way to socialism, and so was in its conception really not the same thing as the democratic revolution that the Communist Party was promoting in China, in practice it was the only concrete example of something similar to what the Chinese Communists were proposing for China. That is, a period of capitalist development under the rule of a Communist Party.
So, it’s hard to imagine that the NEP wasn’t on some level a reference point for Mao. The NEP itself lasted from 1921 to 1928, so it wouldn’t be a huge leap to assume that Mao and other Chinese Communist leaders at this time envisioned a period of at least seven years during which the national bourgeoisie would be accommodated economically and, somewhat, politically. This is just an assumption though; I don’t have any direct quotes from Mao about this. But we do know that at the time, and really up until the late 1950s, Mao and other Chinese Communist leaders consistently referenced events in the Soviet Union and made mental models which paralleled Soviet developments for their thinking about their own experience in China (despite the wildly different way the Chinese Revolution played out), because after all the USSR was the only concrete model which they could make refence to. So, I don’t think this is a wild assumption for what might have been going through Mao’s mind in 1929 in Changting when appealing to the national bourgeois elements there.
Over the next 20 years, between the seizure of Changting in 1929 and the victory of the revolution in 1949, the Communist Party is going to experiment with several different approaches to this problem of how to deal with the small and medium-sized capitalists. The policies will be most accommodating of capitalists during the war of resistance against Japan, from 1937 to 1945, when the Communists and the Guomindang will be (at least formally, if not always in actual practice) allied with each other again. At that time, the Communists’ policy will formally accept anyone who opposes Japan as an ally. In practice, that will mean that in the Communist base area where their capital of Yan’an was, there will even be landlords who opposed Japan serving as elected representatives in the base area government. On the other hand, there are going to be moments where we are going to see the Communist Party more-or-less label anyone not from a proletarian or poor peasant background as a likely enemy of the revolution. We will see some of that in the not-so-distant future in this podcast when we get into the early 1930s.
But, whatever the policy fluctuations between 1929 and 1949, after reading this appeal that Mao wrote to the Changting merchants, I thought it would be interesting to consider what actually did happen with the national bourgeoisie after 1949. So, let’s look at what the situation was with the national bourgeoisie in Shanghai starting in 1949, and see how things developed, just to get a sense of how the ideas that Mao put forward in this appeal from 1929 actually looked when put into concrete practice in 1949.
The attitude of Shanghai’s business leaders toward the Communist seizure of power in 1949 was much friendlier than I think that most listeners will assume. During the first period of Guomindang rule in Shanghai from 1927 until the Japanese takeover in 1937, the Nationalists treated the local capitalists as something of a readily taxable treasure chest, even resorting to kidnapping the children of wealthy businessmen in order to extort protection money. (Quick side note, in case you forgot, the Guomindang are the Nationalists, so I’ll be using the terms interchangeably.) As we discussed back in episode 49, Chiang Kai-shek had made an alliance with the Green Gang when he took Shanghai and began slaughtering Communists and trade unionists more broadly. These gangster alliances were central to Guomindang rule in Shanghai, and so Chiang tended to see the more legitimate businessmen of Shanghai more as potential rival sources of authority than as the social base of support for his regime.
What this meant was that all through that initial decade of Nationalist rule, the Chinese capitalists of Shanghai were exploited and kept down by the Guomindang government. When Mao Zedong wrote about the ways in which comprador bureaucrat capital (and the political representatives of the compradors, in other words, the local capitalists who represented foreign interests in China), so when Mao wrote about how the compradors oppressed and kept down those capitalists without major ties to foreign capital, this way in which the Guomindang corruptly and violently milked Shanghai’s capitalists for personal gain was a concrete expression of that.
Then, after the Japanese surrender in 1945 the Guomindang was back in charge of Shanghai until 1949. The Guomindang’s policies caused inflation to skyrocket, but then the government forced many capitalists to sell to the state at low, fixed prices, essentially forcing the local capitalists to produce at a loss for an incredibly corrupt and inefficient regime. Things were so bad that some major capitalists fled to Hong Kong and then came back when the Communists took over. For example, Wu Zhongyi, one the owners of Shanghai’s biggest textile company, the Xinshen Textile Company, was jailed by both the Japanese and the Guomindang during the 1940s, and fled to Hong Kong in 1948, and then welcomed the Communist victory in 1949 and returned to take up a post of honor along with the majority-share owner of the company, Rong Yiren. Rong Yiren’s story is very unique, and I’ll say a little bit about him in a minute because it’s a very interesting quick life story to share. But I bring up the examples of Wu and Rong now just to illustrate that for many of Shanghai’s capitalists, they were very willing to welcome the Communists because of how bad the Nationalists had been to them.
It’s important to remember that in no way did masses of people in Shanghai contribute to the victory of the Communist revolution, so when the Communists entered the city in 1949, they came as a rural, conquering peasant army entering China’s largest and, at least from an economic perspective, most important city. When the People’s Liberation Army entered the city, they came in trucks decorated with red flowers and large portraits of Mao Zedong and Zhu De. But, unlike their practice in some other places, they decided not to include portraits of Stalin, out of sensitivity to how the local business community might react (who, after all, they were going to badly need to have cooperate with them if they wanted to keep the city functioning while they figured out how to run the city).
It would be some years before the Communists were in a position to put trusted personnel in charge of either the city government or the various factories and other business enterprises in Shanghai. As a result, of the employees in the municipal bureaucracy who were Guomindang members, 49,000 of them, 95%, were kept on. Even the acting mayor who had been appointed by the Guomindang a few days in advance of the Communist takeover and who had been working as the Guomindang head of public works for the city was kept on to help run the city and later even became a deputy mayor.
If there was a lot of continuity in personnel and functioning for the local government, this was even more the case with the economic enterprises in the city. The Communists set up a Military Control Commission when they took over Shanghai, but initially all they could do was to send inspectors around to try and make sure that things were in order in the various enterprises in the city. Any quick effort to expropriate and run the city’s enterprises overnight would have quickly led to an economic collapse, since they simply didn’t have the people to run the city. Early reports on how the Communist inspectors functioned in Shanghai reveal that many of the questions that they went around asking amounted to an extended process of just getting to know how things worked. It’s important to remember that many of these people were former poor peasants who had been educated during their time with the revolution, having gone from being illiterate through having received some formal education at one of the many educational institutions set up by the Communists to train cadres during the war. These were very capable and intelligent people for the most part who had gone much further in life than would ever have been possible for most of them were it not for the revolution, but concretely there was a lot to learn about how to run one of the largest urban economies in the world, and nothing in these cadres’ prior experience had prepared them to take on this task. So, there was a massive learning process going on.
Because Shanghai had been dependent on foreign trade, the embargo by the United States and its allies caused an initial depression after the seizure of power. However, as the Korean War got underway, the local economy revived as Shanghai businesses began contributing to the war effort. As part of revitalizing trade, the Communists really encouraged entrepreneurs to create new firms. The main way in which the state intervened in the economy in 1950 was that the capitalists were called upon to join labor-capital consultative committees in order to reach an agreement between workers’ leaders, capitalist managers, and soldier-monitors who were sent to the meetings representing the Military Control Commission on what wage and salary cuts would look like until the economic crisis was overcome. It was declared that the economic situation in 1950 was too precarious and therefore class struggle was for the moment determined to be ‘impracticable.’
In 1951 and 1952 there were some contradictory trends. On the one hand, in the name of developing the economy, a very relaxed attitude was taken toward capitalists in Shanghai in general. Lynn White, who did a lot of detailed and fascinating research on relations between labor, capital, and the Communist Party in Shanghai, gives the example of a businessman who had not been previously wealthy, and who got a large loan from the People’s Bank, which is China’s central bank, to set up a publishing business. He was totally in charge of the company, hired temporary workers instead of union laborers at low pay and fired them at will. By 1956, when the firm was nationalized along with the rest of the economy, the capital had been multiplied a hundredfold. And he did all this without breaking any laws.
On the other hand, by the end of 1951 a campaign was getting underway called the Five-anti Campaign. This was a political campaign against economic corruption, specifically targeting five economic crimes: bribery, tax evasion, stealing state property, cheating on contracts, and theft of economic secrets. During struggle meetings (held outside of work hours so as not to disrupt business), workers were called upon to denounce these crimes in the enterprises that they worked at. Because some degree of tax evasion was extremely common, there were few enterprises that were totally guiltless in the Five-anti campaign. The way this campaign was carried out specifically took the form of harnessing worker resentment against capitalists in struggle meetings, which could potentially turn violent.
This method of carrying out the campaign reflected the fact that the Communist government still did not have the capacity to systematically go through the books of the various companies and review them on its own (in fact, systematic registering of business establishments in Shanghai did not begin until December 1952). But even if the Communists did have the organizational capacity to carry out the campaign in a totally bureaucratic fashion, they might not have, because part of the point of mass campaigns like this (which characterized the Mao years), was to mobilize the masses and to exercise ‘proletarian dictatorship’ over people with bad class labels, in this case capitalists. It goes back to the idea of recognizing that all governments are a form of class dictatorship, and while in bourgeois democracy there is formal equality, all proletarians know that in fact a certain ‘bourgeois dictatorship’ (a kind of low-level reign of terror) exists in their neighborhoods and workplaces, in the form of police violence, schools that are more like day-jails, and the constant threat of losing a job and becoming homeless (for those not already in that position). In the case of mass campaigns like the 5-anti Campaign, there was a conscious reversal of the ‘reign of terror’ of bourgeois society, but much more targeted and consciously articulated by the state than what normally occurs in capitalist democracies.
So, at the beginning of the 1950s, there was this dual situation where on the one hand, capitalists in Shanghai were given a lot of leeway in exploiting workers and the state lent capital relatively freely to businessmen in order to develop the economy, but there was also the beginning of mobilizing workers against capitalists and the creation of a kind of nervousness on the part of many capitalists about where this all was going.
In the wake of the 5-anti Campaign, the Communist Party had developed a cohort of worker-activist cadres whose task was to check up on the capitalist managers of companies. And periodically over the next few years, random checks were carried out on many firms, with most being found to have been engaged in tax evasion and leading to the managers officially labeled as ‘traitorous merchants.’ These labels that got attached to people were extremely important in China, with different legal status and opportunities or disadvantages corresponding to different labels, and these labels were also extremely important during the mass campaigns that punctuated the Mao years. So people labeled as ‘traitorous merchants’ weren’t just going to be punished for tax evasion during, say, the big random check that the Tax Bureau carried out in September 1953; they and their families would also most likely be targeted during the 1957 anti-rightist campaign and during the Cultural Revolution.
Over the course of 1954 and 1955, the state began to exercise more economic controls over the enterprises. It began with nationalizing particular bottlenecks to exercise control over supply (in this case beginning with salt, lumber, grain, and cooking oil). This was much simpler than trying to seize all of the businesses that needed these commodities, and facilitated the state coming to grips with how distribution throughout the economy worked. And from this point forward, it carried on subjecting the economy to further controls, while also carrying out more check ups on the capitalists (many of whom apparently just could not avoid the temptation to evade taxes) and training communist workers in party schools with the goal of having them be able to take over managing production. This culminated in the 1956 Transition to Socialism, when the economy was nationalized, and the capitalists were expropriated (with compensation). So there was this seven years period of transition between liberation and nationalization (the same amount of time as the New Economic Policy in the Soviet Union, which I don’t think was a coincidence, but that’s a whole other argument which I don’t have space for here about the mental modeling on the Soviet experience that the Chinese leadership did, and just how mechanical that modeling could be).
As I promised earlier, I wanted to give you the concrete example of probably the most exceptional of the Shanghai capitalists, Rong Yiren. Now, this guy is very unique, as you will see, so he’s not representative of the experience of those capitalists who decided to stick it out in the People’s Republic after 1949. But his experience is suggestive of how space was made for members of the national bourgeoisie to support the People’s Republic, and also to make their own mark on how events unfolded after 1949.
As I mentioned earlier, he was the majority owner of the Xinshen Textile Company at the time of liberation and decided to stay and work with the new Communist government. He also came into possession of numerous other enterprises that his family had owned and which he took over when most of his relatives fled the country to Hong Kong or Taiwan. He stayed in Shanghai both because of his negative experiences with the Guomindang and out of nationalistic motivations. During the Korean War his companies made major donations to the war effort, and he was lauded by Mao for being a patriotic capitalist. In 1956, at the time of the Transition to Socialism, his companies were nationalized, with the state taking a 50% share in companies, which left him both with partial ownership as a continued source of income in addition to being given about $6 million dollars in compensation for the expropriated businesses. He became deputy mayor of Shanghai in 1957 and then went to Beijing in 1959 where he served as vice-minister of the textile industry until the Cultural Revolution in 1966.
Initially during the Cultural Revolution he was targeted and beaten by Red Guards, and made to work as a janitor for a time. After a time, however, Zhou Enlai arranged for Rong to move back into his mansion and to have Red Guards from the Ministry of Textiles who were loyal to Rong assigned to guard Rong’s mansion, where he spent the rest of the Cultural Revolution gardening. After Deng Xiaoping came to power, Rong Yiren played an important role in helping to draft Deng’s economic reforms and in bringing the first major wave of western investment into China as chairman of the new China International Trust Investment Corporation. When he died in 2005 he was assumed to be the richest man in China, with a net worth over a billion dollars.
So, like I said, Rong was far from representative of the experience of most capitalists who stayed on in the People’s Republic, but his experience is suggestive of the way in which those capitalists were able to leave their mark on post-1949 China, and of the difficulty involved in changing old social structures and class relations.
OK, as I wrap up here, I hope that this quick overview of the Shanghai experience of the new democratic transformation of the economy and the transition to socialism from 1949 to 1956 gives a little more depth of meaning to Mao’s “Notice to Merchants and Intellectuals” from 1929 in Changting, and can help us to more concretely get a sense of what the democratic revolution that the Communists said that they were fighting for would actually look like when it came to pass. Next episode, we’ll be back in 1929.