Marx Is Long Dead But China's Leaders Love Marxism More Than Ever

Karl Marx died 128 years ago today. Marxism, however, is flourishing, aided by a seemingly resurgent China.

Hu Jintao, the Chinese supremo, has been pushing his campaign—encapsulated by the phrase “Sinicizing and popularizing Marxism”—throughout society. So it should come as no surprise that, in recent days, Beijing has been ordering Marxist indoctrination for reporters, the prestigious Central Party School is actively encouraging “the building of a ruling party study model of Marxism,” and Marx’s Das Kapital is being brought to the stage as a musical.

It may be difficult to sing the definition of the labor theory of value, but it’s not hard to see that China is no longer “capitalism at full speed,” as Bill Gates once told us. What’s going on here?

First, China of the Communist Party was never capitalist, despite what Gates and other over-the-top optimists would have us believe. They have always interpreted Deng Xiaoping’s “socialism with Chinese characteristics” as denoting capitalism, but that was wrong. Deng was at most willing to permit a portion of the Chinese economy to become relatively unregulated, and that was merely a tactic to help the dominant state economy work more efficiently by sending what economists call “price signals” to Beijing’s own government-owned enterprises.

Second, Hu Jintao has seen Marxism as a means of giving the Communist Party a sustainable basis of legitimacy during a time of increasing social turmoil. That’s why “Red culture,” which evokes the country’s Maoist era, is becoming the dominant theme of politics. Need proof? The country’s version of “American Idol” is the “Daily Red Song Show,” a competition featuring communist propaganda ditties. Beijing now celebrates the horrific Cultural Revolution on the printed page, on stage, and in the karaoke lounge.

Third, Chinese leaders are becoming more assertive as their country goes from poor and weak to rich and strong. “China is emerging from decades of reticence,” as Italian journalist Francesco Sisci noted at the end of 2009. Officials think the global downturn exposed the weakness of global capitalism and showed that the West in general and the United States in particular were in terminal decline. So they have been more willing to push their Marxist-tinged rhetoric of “scientific development” and promote their brand of socialism.

The return to Marxist words is more than a rhetorical flourish, unfortunately. Hu and his premier, Wen Jiabao, have steered the Chinese economy back to the past. They have ditched Deng Xiaoping’s policies often expressed in the simple phrase "gaige kaifang"—reform and opening up—as they embraced a new economic paradigm of closing the country down. The pair has, since their elevation in late 2002, pursued two broad initiatives.

First, they have sought to renationalize the economy. In the second half of the last decade, Beijing began to use national-level instrumentalities, such as the National Social Security Fund and China Investment Corporation, to buy shares of partially privatized state enterprises and banks. The inevitable effect of this maneuver was to increase the percentage of the state’s ownership of “the means of production,” to borrow a phrase Marx would be familiar with.

Renationalization especially gained momentum after the announcement of the State Council’s $586 billion stimulus plan in November 2008. In 2009, the first full year of the plan, Beijing poured, either directly or indirectly through state banks, about $1.1 trillion into the then-$4.3 trillion economy.

Inevitably, Beijing’s program resulted in a bigger state sector and a smaller private one: about 95 percent of 2009’s growth has been attributable to investment, almost all of it from state sources. The state’s stimulus plan favored large state enterprises over small and medium-sized private firms, and state financial institutions diverted credit to state-sponsored infrastructure. As they say in Beijing, “the Party is now the economy.” Stimulus, somewhat reduced in 2010, continued to build up the already-dominant state sector.

Second, Hu and Wen have been keeping foreign competitors at bay by issuing a flurry of laws, rules, and administrative orders. At the end of 2007, for instance, Gates’s Microsoft was not permitted to buy a stake in Sichuan Changhong Electric, a television manufacturer. Since then, Beijing has turned down a series of proposed acquisitions of local enterprises by foreign companies.

The Chinese government claims there has been no change in its attitude, yet it’s undeniable that once Beijing worked hard to attract foreign capital and now it is reversing three decades of policy. The perception is that foreigners have captured “excessive” market shares and own too much technology. There is also a fear of an over reliance on foreign direct investment.

And Chinese ambitions are bigger these days. Beijing is attempting to build “national champions” and wants 50 of the world’s 500 largest companies to be Chinese within this decade. The Chinese also see the potential of their expanding market, and they want to keep it for themselves. That, among other factors, is motivating Hu Jintao’s “indigenous innovation product accreditation” program that has sparked so much controversy and almost universal opposition from foreign business, which does not want to be forced to give up technology to Chinese companies.

The problem for Chinese leaders is that further reform would erode the theoretical underpinning of the one-party state. In English, the name of the country’s leading political organization is the “Communist Party of China.” The Chinese rendering of the name—the one the Chinese people see every day—is the “Party of Public Assets.” So privatization is at a dead end: if there are no more public assets, there would be no need for the Party. The name signals that, in word and in deed, China will remain Marxist as long as the current political system survives.

When Party ideologues say “We must bolster the ideological defense line through self-consciously drawing a demarcation between Marxism and anti-Marxism” and Chinese leaders nod their heads in agreement, we know that Beijing’s political elite is now embracing the past.

Marx is dead. Marxism, however, is very much alive.

Gordon G. Chang is the author of “The Coming Collapse of China.” He writes weekly columns at Forbes.com. and The Daily. Follow him on Twitter @GordonGChang.