The Academic Directions for the Modernization of Marxian Political Economy and the Academic Principles of Promoting the

Modernization of Chinese Economics

Enfu Cheng and Xiaoqin Ding

Enfu Cheng, Professor and President of the Academy of Marxism, Chinese Academy of Social Sciences (CASS), director of the Center of Economic and Social Development of CASS, Chairman of the World Association for Political Economy (WAPE), Editor-in-Chief of the World Review of Political Economy and the International Critical Thought. Xiaoqin Ding, Associate Professor at Shanghai University of Finance and Economics, Research Associate at Harvard University Asia Center, Secretary General of the World Association of Political Economy (WAPE), and Managing Editor of the World Review of Political Economy and the Journal of Economics of Shanghai School. Email: wape2006@gmail.com

Abstract: This article holds that the consistent development and innovation of the modernization of Marxian political economy in China should take the directions of internationalization, application, mathematicization, and schoolization. Different from the formulations of westernization or internationalization of Chinese economics, this article also holds that the orientation for the development of Chinese economics should be how to achieve the modernization or modern reshaping of Chinese Marxian economics. Its basic way of thinking and academic principle can be summarized as Marxian economics as the base, western economics for reference, Chinese economics as the root, world conditions as a mirror, national conditions as the basis, and synthesis innovation, that is, insisting on Marxian economics being the guide and foundation for modern Chinese economics, and ensuring the innovation for the

modernization of Chinese economics proceeding along a scientific track from beginning to the end. It is necessary to handle properly the relations between the three major knowledge systems of Marxian economics, western economics and Chinese economics and practice, constantly make modern independent syntheses and innovations in the field of Chinese economics, and build up a modern economic system with Chinese characteristics and Chinese style. Key words: Marxian political economy, internationalization, application, mathematicization, schoolization, Chinese economics, western economics

I. Four Academic Directions for the Modernization of Political Economy

The modernization of Chinese economics and political economy should follow the academic principles of Marxism as the guidance, western scholarship as tools, Chinese traditional learning as the roots, world conditions as references, Chinas conditions as guidelines, and toward innovations through a synthesis. The modernization of political economy should continuously innovate along the four directions of further more internationalization, application oriented, mathematically oriented and consolidation into schools.

1. The Internationalization of Political Economy

Marxist political economy has been an internationalized body of learning ever since its birth. Nonetheless, as state socialist countries appeared and the cold war emerged, political economy had traveled down to different paths in the East and West camps, and in each different countries and became increasingly isolated from each other. China, since its reform and opening, has given more and more attention to Marxist political economy research in other countries, and has translated and introduced plenty of research and literatures; however, up to this day, the flow has been in one direction, and we remain within the initial stage of Chinese political economists learning from foreign political economy. As the Chinese miracle of economic growth persists, and the advantage

of Chinese economic model becomes apparent, especially as shown in the excellent performance of Chinas economy in the aftermath of western financial meltdown and economic crisis, the theoretical development of political economy in China has been increasingly the focus of intellectual attention internationally. The trend toward internationalization of political economy at this time is the increase in reciprocal communication. On the one hand, Chinas stature on the world scene is getting bigger, and Chinese research in Marxist political economy is getting more international influences; On the other hand, the financial and economic crisis has resulted in a worldwide re-emphasis of Marxism in the aftermath of the collapse of Soviet block regimes. Marxs critique of capitalist market economy as outlined in Das Capital has been acknowledged even by western political elites. A large number of western Marxist economists, including David Kotz, David Laibman, James Craven, Jean-Claude Delaunay and Makoto Itoh, have focused on the reality of contemporary world economy with the help of the basic principles of Marxist political economy, and discussed a range of theoretical and policy issues of world capitalism and socialist market economy, and have provided the Chinese economists precious intellectual resources and food for thought for their theoretical innovation. As Chinas involvement in the world economy further deepens, the research of Chinese Marxist political economy will continue to focus on the development of China itself, and gradually expand its international vision as well, in order to actively participate in the academic discussion and debate on global political economy and leftist economics. This will facilitate the introduction of Marxist economics and its Chinese theoretical adaptation to other countries in a more objective and accurate way, and help China in resisting the unwanted pressure western developed countries imposed upon herself, defending the economic interests and rights which China is entitled to; it will also promote a just and orderly development of the world economy. This will also facilitate the exchange of ideas of Chinas political economy with increased discursive power, with the world community of Marxist economics on a equal footing. This will help China in its discussion and debate with the Western mainstream economics, and strengthen its influence over the whole international intellectual community. The internationalization of political economy is being carried out in earnest. In the last six years, the annual conference of World Association of Political Economy, which is recommended

by scholars from all over the world and headed by Chinese political economists, was held in China, Japan, France and US. In 2010, World Political Economy Review, an international quarterly journal in English was created; since 2009, an award for distinguished work of twentyfirst century modern political economy was given out each year; beginning in 2011, a world Marxist economics annual award is initiated, and important works and papers will be translated into Chinese and western languages. Also in 2011, Chinese Academy of Social Sciences supported the setting up of International Critical Thought, an international quarterly journal in English, with 50 internationally renowned scholars from more than thirty countries as members of its editorial board. These world class associations, journals, translations and awards in political economy greatly promote the internationalization of Chinese political economy, and the sinicization of foreign political economy, and present an increasingly significant influence in various countries.

2. The Trend toward Application of Political Economy

Theories are intended to serve social practices and applications, and this is truer for economic theories, with the aim of promoting the wealth of nations, and solving problems in the process of social and economic development in China and elsewhere. Theories of modern political economy should be applied and expanded in much greater scale to disciplines on sectors of economy, applied economy and special issue economics. Recent trends in the west indicate a wider application of Western economic theories as they develop. For example, the basic concepts, theories, principles and methods of analysis have all saturated the studies of finance, trade and industrial economy, demonstrating the leading role of theoretical economics to applied economics. This point should be contemplated upon by Marxist economists. Nonetheless, in the aftermath of western financial and economic crisis, with intensified conflict within Western developed countries, among these countries, and between these countries and the developing countries intensified, the batch of applied economic fields that found on the theoretical basis of Western economics, including international finance, international trade, development economics, have shown to be limited day by day; they need to be reformulated with the help of scientific economic foundation theory. Many questions, such as regarding to the realities of financial derivatives, i.e.,

if they are efficient tools to reduce financial risks and promote economic development, or, in contrary, are tools for the international financial monopolies to augment financial risks in looting the people all over the world, need to be systematically answered according to relevant applied fields in economics, as reformulated by Marxist political economic principles. Marxist economics can be divided into two parts, namely, theoretical Marxist economics, with political economy as its substance, and applied Marxist economics. It can be said that classical Marxist economics already contains analysis of applied economics which modern scholars compartmentalized. Marx theorized about and applied to money, price, wage, companies, circulation, distribution, industries, finances, exchange rate, credit, and crisis; it was the political economys theoretical application toward the concretes and the sectors par excellence. Even though Marx and his conclusions was limited by the length of his work, and by historical circumstances, his work still provides potential ground for deep investigation and scientific expansion, so that its essence can be used in the guidance of applied and inter-discipline economics. Take the example of supply-demand relations, which is referred to by many applied and inter-discipline economics. Marx had revealed the substance of capitalist economy, which is the private pursuit of surplus value; Marx also proved that a capitalist market economy will necessarily result in relative over production, and thus the imbalance of supply and demand. The rate at which the capitalist makes the value of his capital expand is the greater, the greater the difference between his supply and his demand, i.e., the greater the excess of the commodity-value he supplies over the commodity-value he demands. His aim is not to equalize his supply and demand, but to make the inequality between them, the excess of his supply over his demand, as great as possible. (Marx, Capital, Vol. II) Thus, compared to the equilibrium analysis of supply and demand by the western economics, Marxist political economy is able to provide the real scientific methodology and theoretical guidance to various applied economic fields. Similar to economic imperialism in western academic, i.e., using western economic thinking and analytical method in research and explanation of problems in other social science fields, the trend toward application of political economy also include those to other disciplines, even though for quite different reasons from that of economic imperialism. Many of political economys analytical method and principles on labor, wealth, value, property rights, capital,

resource, costs, benefits, economic interests, proportional development, economic regulation mechanism and economic globalization, can largely be borrowed and applied to other social science disciplines. It is exactly due to the revelation by political economy of the regularities and mechanisms of economic movement in modern societies, and due to the fact that economic system is connected to the political, cultural and social systems, and they all exhibit certain common features, political economy appear to be penetrating and heuristic to other related disciplines; this point is especially important with regard to economic sociology, economic philosophy, economic ethics, economic psychology, economic anthropology, neo-political economy, demography, international political economy, and international relations. There are various ways to promote the trend of political economy toward application. Two major points are in order: first, more effort need to be devoted to undergraduate and graduate textbooks. Right now, the Marxism Institute of Chinese Academy of Social Sciences is organizing research institutes and universities all over the country in an effort to re-write 150 or so textbooks on theoretical economics, applied economics, inter-discipline economics and other related disciplines, in order to overcome the colonization of Chinas economic disciplines, sometimes eulogized as the internationalization of Chinese economics. The aim is to correct a serious bias in the field, and to establish a holistic system of Marxist economic science, with a true Zeitgeist, worldwide practice and scientific innovation. A two-way exchange and internationalization with China as the subjectivity will be achieved. An innovative feature of this collection of textbooks is the wide use of the latest research results of Marxist political economy and its application in both east and west in creative compilation, embodying the best research of modern Marxist economics in both China and world, and adapted to the need of teaching and research of Marxist economics. Second, we need to give more importance to research conferences in the applied and other related fields organized by prominent Marxist political economists. The government, the academia and concerned people from all walks of life coming together in discussion economic issues is quite a productive format. In recent years, the Marxism Institute of Chinese Academy of Social Sciences has organized, along with Center for Economic and Social Development Research and a dozen universities, the China Economic and Social Think Tank Summit Forum, in which methods and theoretical spirits of Marxist economics was applied, and important hot button current issues were

discussed in an innovative way. Among the topics discussed and recommendations presented are, new population strategy of controlling first and reduction later, new strategy of old age care with administration, government agencies and enterprises in coordination, new opening strategy of altering export oriented economic development model, and new housing strategy of relying mainly on public renting, attracting wide pubic attention and contributing significantly policy wise and in terms of public dissemination.

3. The Trend toward Mathematics for Political Economy

An emphasis on mathematical analysis, or necessary quantitative analysis on the basis of qualitative analysis, has been a fine tradition of Marxist political economy. Capital is a classic, as Marx was the one among the classical political economic systems who use the mathematical tool the most. The calculation Marx did was mainly as supplementary explanation for the qualitative discussion; his qualitative discussion combines synchronic and diachronic analysis; the related calculation is hard to achieve for even todays mathematical skills. Marx himself once said: in order to analyze crisis, I for many times would like to calculate the ascendance and descending of the regular curves, and would like to find out with the mathematical method the regularities of crisis, which, till this day I still think, with sufficient empirical data, is possible to achieve. Marx gave due importance to mathematical method in economic research; nonetheless he did not fetishize mathematics; he always put the use of mathematical method in its proper context, namely, a guidance by materialistic dialectics, and depending on scientific abstraction, logic and historical method as the basis of analysis. Moreover, Marx also regard it as a necessity that research in pure mathematics need to be examined with economic analysis, in order to make sure that it does not deviate from regularities of economic phenomenon. By adhering to these principles, the trend toward mathematics of Marxist economic theory is able to enhance its explanatory power and scientific rigor. In contrast, modern western economics uses a great many mathematical tools; however, due to its error or deviation from realities by its presumptions, the results of relying on mathematics do not help its scientific rigor or preciseness. For example, in the simultaneous equations of

econometrics model of Western macroeconomics, one of the equations needs to be set up according to the principle of equilibrium between total supply and totally demand. The solution of this mathematical model is bound to deviate from the reality of over production, thus renders itself useless in finding problems of economic operation, and incapable of predicting economic crisis. Further more, the degree of complexity of a mathematical model does not automatically confer a similar degree of scientific rigor. For example, many western macroeconomic researchers, in pursuit of scientific rigor, tend to develop complicated big models with over hundred equations and similar number of variables, while ignoring the errors in measurement, which increase significantly with the number of equations and variables, and turn into huge errors, rendering the model useless beyond the paper, and with little scientific values for understanding or application. There can be two possible attitudes with regard to the trend toward mathematics in political economy. The first, is to stick to the methodology and principles of materialistic dialectics and historical materialism, while giving due importance to mathematics as an analytical tool. Mathematical analysis need to be combined with the presumption and theoretical basis of modern Marxist political economy; Principles of Marxist political economy need to be addressed, discussed and developed, in order to compensate for the deficiency of quantitative and normative analysis. It is not self-evident here that mathematical analysis should be as complicated as possible; the optimal degree is decided by necessity of theoretical analysis and possibility. The second attitude is to blindly integrate with western mainstream economics, with an undue emphasis on mathematical formality and even an abuse of mathematical tools. Analyses for the sake of mathematics, but not vice versa, is the wrong way. Some even adopt the mistaken assumptions and premises of western economics, in order to use mathematics the way western economics does. This will violate the very purpose of using mathematics in economics in the first place, resulting in wrong conclusions. Modern western mainstream economics would like to depart with simplistic or unrealistic assumptions when studying economic issues, and tries to build a fixed analytical model of theoretical assumption logical deduction empirical testing, which is regarded as the only scientific research paradigm, in exclusion of a multiplicity of other research method and narratives; they even go to the extreme of regarding the Wealth of Nations by Adam Smith and The Capital by Marx as works of economic philosophy, instead of those of

economy, exhibiting a typical modern dogmatism. The former attitude should be the one adopted by Chinas economic scholars, while the latter should be avoided at all cost. It need to be pointed out that Western economics fails to sufficiently apply mathematical tools. Marx once made this sarcastic comment on Ricardo: Apart from bourgeois society, the only social system with which Ricardo was acquainted seems to have been the parallelograms of Mr. Owen.. Similarly, making the first order derivative of the so-called profit function zero is the only way a western economist knows how to solve the profit maximization problem. However, on one hand, this is not the only solution to profit maximization; on the other hand, considering the presence of risks, capitalists do not always pursuit profit maximization in the short run. Apparently, a political economy got rid of the limitations of western economics can be far better off by using more mathematical methods in a more reasonable way. For models studied in economics, besides those of literary description and graphic presentation, mathematical model is an important way of expression and analysis. The trend toward mathematical use in political economy will promote Chinas economics in the following ways: (1) Latest modern mathematics achievement can be applied to support logical analysis, abstract analysis and qualitative analysis, so that a more complete discussion of Marxist economic theory is possible, such as that on the problem of value transformation, labor productivity and changes in the quantity of values. (2) Mathematical tools can be used in the more scientific summary, organization of analysis of empirical data of economic development of modern societies, while presenting supporting evidence for governments and enterprises to make economic decisions in matters of labor pay and demographic analysis. (3) With the Marxist methodology as the analytical basis, modern market phenomenon can be explained with the help of mathematics, thus facilitating the comparison of Marxist economic theory and western economic theory, and helping people in their theoretical sophistication, on matters such as the real productivity of SOEs. (4) Theories can by made more rigorous and sharp, and easier to communicate, thus enhancing the academic explanatory power and persuasive power of Marxist economics, such as those on the general law of falling profits. In sum, the trend toward mathematics for political economy will help to make up the deficiency of present political economy, greatly facilitate its theoretical renewal and innovation, thus embodying the Zeitgeist of

Chinese economics.

4. The Trend toward Diversification into Schools in Political Economy

Cihai, the Chinese wordpedia explains a school as a faction in an academic field formed due to particular relationship of master and disciples. This is a definition based on the traditional master and disciple patterns. In a broader sense, a school can also refer to an academic group that focuses a particular area, country, nation, civilization, society or a particular question. This kind of academic groups can be called schools. In the western economic field, we have schools that named after places, such as the Chicago school, the Austrian school, the Cambridge school, etc., and we also have schools that are formed around certain concepts or themes, such as the agrarian school, the monetary school, property rights school, etc.. Still, we have schools named after certain important theoretical pioneers, such as the Keynesian school, and the post-Keynesian schools. The formation and development of the above three kinds of different schools, besides those that are antagonistic to Marxist economics, are largely related to the class stratification and division of interest in the capitalist countries. For example, some schools mainly defends the interest of the big landowners, while others those of the petit-bourgeois; while some schools come to defend the interest of the industrial bourgeois class, others those of the financial bourgeois; while some schools advocate economic reformism of the bourgeois, others are in defense of the interest of the monopoly bourgeois, and so on and so fourth. As the positions of those classes and sections of class rise or decline, the schools in defense of them also rise and decline accordingly. In contrast to the formation and development of bourgeois economic schools, the trend toward diversification into schools for Chinas political economy is not due to the interest of different sections of the working class, as all schools should stand on the side of the working class and the masses. They should also follow the methodology and theoretical spirit of Marxist economics, and should do their best in commanding and understanding the real economic situations, engaging the method, theory and application of Marxist political economy in depth. Due to different opinions, or being unable to follow through the above three requirements, different schools will be formed. In fact, as research in Marxist political economy deepens, the trend toward diversification

into schools in political economy will be a major direction of change in the future. This is true due to the following reasons: Marxs discovery of the historical materialist view had transformed the old philosophy which resulted in the formation of materialistic dialectics, an event that for the first time open the door to understanding the law of human historical development; Marxism is so vast and sophisticated, covering economics, political science, sociology and many other disciplines, with many cross disciplinary contents; it is not sufficient that only a few individuals engage in the study of Marxism and its application to the disciplines; the emergence of schools is inevitable. An important sign for academic freedom and a thriving, high quality intellectual life is the diversification into schools. The benefit can be manifold. The first derives from the fact that focusing on special topic, instead of superficial allusion, helps the emergence of unique characteristics of research results, and facilitates long term intellectual accumulation. The second is the encouragement of debates between schools, leading to sharpened sensitivities and more energy in the lineage of thoughts. The third is that the growth of schools will consolidate different groups and help them to join force. In the political economy circle of Japan, the labor-agriculture school, the Uno School, the neo-classical Marxist economic school, and the evolutionary school all have significant influences. At the present, several schools, each with different amount of influences, has already emerged in Chinas political economy circle. An example is the neoMarxist economic synthesizing school (or sea school). Some may think that the formation of a school is a simple job; on the contrary, diversification into schools set a higher bar for scholars, especially for leaders of the schools. In order to be defensible, a school needs to be differentiated from other scholars in terms of scientific values of economic method, theory and policy research. However, a school should not go to the extreme with regard to a method, a theory or a policy, as the case in the Western mainstream schools may be, in which extremism masquerading as schools has an unhealthy effect on the academic. For example, the property rights school over emphasizes property rights, while the monetary school over emphasizes monetary policy, and the supply school over emphasizes supply. These are signs of lacking dialectic and systematic thinking, and of lacking of understanding of likely changes in certain conditions in degree of importance for different factors. Additionally, schools are not closed factions, as their thoughts and members are dynamic and open. The birth and development of Marxist political economy has been by virtue of

interactions, criticisms and counter-criticisms The trend toward diversification into schools for modern political economy should not take the path of factionalization and extremism; on the contrary, it should promote liberation of thought, giving and taking, and routine academic criticism, resulting in a situation of debate that follows the academic norms.

II. The Academic Principle of Promoting the Modernization of the Chinese Economy

Different from the formulations of Westernization or internationalization of Chinese economics, this article holds that the orientation for the development of Chinese economics should be how to achieve the modernization or modern reshaping of Chinese Marxist economics. Its basic way of thinking and academic principle can be summarized as Marxist economics as the base, Western economics for application, Chinese economics as the root, world conditions as a mirror, national conditions as the basis, and synthesis innovation, that is, insisting on Marxist economics being the guide and foundation for modern Chinese economics, and ensuring the innovation for the modernization of Chinese economics proceeding along a scientific track from beginning to the end. While upholding the unity of the base and application of Marxist economics, we should make full use of the conceptual data of modern Western economics, and choose, improve and assimilate all the valuable elements of scientific thinking. We should also attach importance to the pioneering and rational thinking elements among Chinese ancient and modern economic thoughts, and use them as important sources and a foundation for Chinese economics. In conjunction with economic practice under the new historical conditions, we should become familiar with international conditions and national conditions, get to know new conditions and discover new laws. It is necessary to handle properly the relations between the three major knowledge systems of Marxist economics, Western economics and Chinese economics and practice, constantly make modern independent syntheses and innovations in the field of Chinese economics, and build up a modern economic system with Chinese characteristics and Chinese style.

0. The Question Raised

In early 1994 Cheng Enfu made a general analysis of the development stages and future of Chinese economics in his article 21st Century: Rebuilding Chinese Economics1, evoking a chain of responses. Whither does Chinese Economics?2 has been a hot topic among economic theoreticians. Later, the topic was raised again by some scholars in the form of how to promote the internationalization of Chinese economics while promoting the localization of modern economics.3 Guided by the above-mentioned question, theoreticians have come up with such theories as localization of Western economics, sinicization of Western economics, Chinese economics must be Westernized or internationalized, Economics must follow Western practices, Western economics is modern economics and constructional economics, Marxist economics is critical economics or destructive economics, Western economics is the scientific foundation for the development of the market economy, Political economy is an ideology, not a science, It is the orientation for reform for Marxist economics to be replaced by Western economics, Internationalization of Chinese economics must be first preceded by non-Marxist returned overseas scholars taking the leading positions in colleges and schools organizationally. This is open to discussion. From the angle of scientific innovation, raising questions is the guide. However, the question itself must reflect the inherent contradiction of the objective fact and its requirement for development. From the reaction of the subject of thought to an objective thing, if a question raised reflects only the superficial contradiction of a fact, or only the contradiction shown by the false appearance of a thing, it can only produce a misleading effect on peoples thinking. Only a question which reflects the inherent contradiction of an objective fact and its requirement for development can truly lead people to correctly know the nature and presentation of the thing, thereby attaining the goal of correctly remolding the thing and achieving its subjective value. Since the new democratic revolution, which belonged to the preparation stage of socialism, was completed in 1956, China has been in the primary stage of a socialist society, and has gradually developed a socialist culture with Chinese characteristics, including economics, under the guidance of Marxism. Chinese economics should become an important theory that

scientifically reveals the laws of the operation and development of the Chinese economy at the present time, must meet the challenge of the present international economic environment to the Chinese socialist economy, and must meet the requirement for the development of economic science in the primary stage of socialism in China. Therefore, the correct question to be raised for the development trend of Chinese economics is absolutely not a question of how to follow the practice of modern Western economics or of localizing Western economics, but should be a question of how to promote the modernization of Chinese economics along a scientific track under the guidance of historical materialism. Furthermore, it is a question of how the teaching and studying of economics in China meet the requirement for the scientific development of the modern socialist market economy and economic globalization tending to socialism, and achieve the modernization and concretization of Marxist economics in China. The problem and the means of solution arise simultaneously.4Analysis of the question of how to promote the modernization of Chinese economics involves many aspects. We hold that so far as the basic policy and principle for the settlement (maybe applicable to the whole of the social sciences), it can be summarized as Marxist economics as the base, Western economics for application, Chinese economics as the root, world conditions as a mirror, national conditions as the foundation, and synthesis innovation. The wordings Marxist economics as the base and Western economics for application used here reflect the expression Chinese learning as the base and Western learning for application advocated by Zhang Zhidong, a Westernization Movement bureaucrat in the late Qing Dynasty.5 Following is the detailed elaboration of our views on the above principles for study and discussion among theoreticians.

1. Marxist Economics as the Base

Marxist learning refers to Chinese and foreign Marxist knowledge systems. On the Academic Principle of Promoting the Modernization of the Chinese Economy Marxist economics here refers to Chinese and foreign Marxist economic knowledge systems. It is Chinese and foreign Marxist economic thought with an extremely rich content formed under the guidance of historical materialism and materialist dialectics, including Capital, written by Karl

Marx, since mid-19th century, and the economic methods and theories it has inherited, enriched and developed. The word base had the implications of fundamental, inherent in the language of ancient Chinese philosophers.6 It stresses that the modernization of Chinese economics must follow Marxist economics as the base, and that Marxist economics will always be the base and guide for modern Chinese economics; That is to say that in the direction of the study of the modernization of Chinese economics we must never vacillate in adhering to the guidance of historical materialism and materialist dialectics and advance along the road of Marxist theory.7 In content, we must never waver in regarding the basic category and scientific principles of the Marxist economic knowledge system as the subject, and make developments and innovations in the new historical conditions. In handling the relations of the multiple Chinese and foreign economic thoughts, we must always adhere to the guiding position of Marxist economics. Marxist economics as the base is the fundamental principle that must be stressed in the modernization of Chinese economics. If we deviate from this principle it will be difficult to continue innovations in theory, and the modernization of Chinese economics will deviate from the scientific track. We must be fully aware that the modernization of Chinese economics is not at all a simple concept of time and space development, but a scientific process of that development. Only by persisting in Marxist economics as the base can we ensure that innovation in the modernization of Chinese economics always advances along a scientific track. Just as in any other fields of study, there are scientific economics and unscientific economics. Scientific economics must be a teaching that can shed light on the inherent and external mechanics and the laws of development and change in economic reality, and profoundly expound the superficial economic phenomena from their essential causes. It must be a teaching that can make a clear distinction between the true and false economic phenomena, and therefore a science that can guide people to adhere to the objective laws in their economic practice and promote the development of the social formation of the economy in accordance with its inherent laws. As the real object of economic study is inseparably linked to the material benefits of the people, only by discarding the limited perspective of working for the interests of individuals and groups and taking an objective and just stand can it be possible to reflect the objective economic reality truthfully and to make economics a science. It is obvious that only economics that takes the

stand of the working class has the possibility of fairness and selflessness. And only by adhering to the basic thoughts of historical materialism is it possible to reveal the truth of economic reality. Since man had economic thoughts, Marxist economics and post-Marxist economics are the only economics that can integrate the scientific thinking of historical materialism with the fair and selfless stand. This is why the modernization of Chinese economics must follow the principle of Marxist economics as the base. While stressing Marxist economics as the base, it is necessary to correct the mistaken ideas about Marxist economics that have prevailed in recent years. (1) One treatise regards Marxist economics as a school of theory mentioned in the same breath with the schools of Western economics. This view is naive and immature or has a sectarian bias. In fact, Marxist economics is the general term for the scientific economic ideology named after Karl Marx, who made pioneering contributions. It is a product of time and practice, and a rich fruit of the longtime development of the ideology of economic science. As the scientific thinking of man, if there had been no one like Marx it would have grown and developed through someone else in different degrees sooner or later. As Engels noted, While Marx discovered the materialist conception of history, Thierry, Mignet, Guizot, and all the English historians up to 1850 are the proof that it was being striven for, and the discovery of the same conception by Morgan proves that the time was ripe for it and that indeed it had to be discovered.8 It can thus be seen that Marxist economics with historical materialism and materialist dialectics as the basic methodology not only belongs to the working class, but also to whole mankind. When economic practice and cognitive ability have enabled mankind to reflect the objective laws of the modern and contemporary economic movement, Marxist economics will surely emerge and be further enriched and developed with the continuation of the social and economic practice of mankind. From the point of view of the economic ideological system, it should be said that the modernization of scientific economics refers to the modernization of Marxist economics. Unscientific economics will certainly also adopt certain modern forms and contents or modernization in the new historical conditions, but the modern types in form and the objectivity cannot explain that the whole knowledge system of economics has achieved a scientific character in modern historical conditions. For example, the mathematical positivist forms of Western

economics seem very modern, but they have not discarded outdated notions from Western economists, such as Adam Smiths Self-Interest of Economic Man, Isaacs Value of Three Elements, and Alfred Marshalls Equilibrium Methodology, and the core zone content of its category is still very biased and unscientific, and has even not reached David Ricardos ideological depth9. Only the modernization of Marxist economics permeated with historical materialism and materialist dialectics is the modernization of scientific economics. It should be understood that Marxist economics is a school of thought (Engels once used the phrase Marxist school of thought), but at the same time it is the relatively most correct school, and therefore it can become the guiding theory and policy basis for Chinese and foreign economic practices. (2) One treatise says that Marxs purpose in writing Capital was revolution, but Chinas present task is construction, and therefore Marxs economics for revolution is to be updated to economics for construction, stressing that the task of the capitalist part of the political economy is criticism only, and that of the socialist part is construction. According to this view, the implication of the modernization of Chinese economics is that of constructing economics for construction. This is a paradoxical statement, which can give people a false impression that the economics initiated by Marx is now outdated and that there is no method, content or task for criticizing the socialist part of the political economy. In fact, such a statement distorts the scientific purpose of the argument for Marxist economicsrevealing the objective economic laws of the social development of mankind, with emphasis on expounding the laws and operational mechanism of the capitalist market economy. It must be noted that the basic idea of historical materialism is to treat the social movement as a process of natural history.10 Marx made it very clear that it is the ultimate aim of this work, to lay bare the economic law of motion of modern society11 As for Chinas scientific economic system, whether during the new democratic revolution and construction period or the period of the socialist revolution, or that of reform and construction, the purpose of presenting ones argument is to reveal the objective economic laws. If this purpose is achieved, it can serve the economic construction in the revolutionary base areas and liberated areas and the winning of victory in the whole economic and political revolution in the early period, and it can help to reveal the chronic malady of the modern capitalist market economy and serve the successful development of socialist

economic construction with Chinese characteristics in the present period. Only by making clear the scientific purpose of economics can we follow the principle of unity between seeking truth from facts and emancipating the mind to overcome the one-sided and ossified thinking of opposing criticism and construction to each other, dialectically merge the scientific critique of Chinese and foreign erroneous economic theories and practices with the construction of correct economic theories and practices, and then consciously integrate the modernization of Chinese economics with a scientific attitude, prevent modernization limited to the pursuit of its superficial form and falling into the set patterns of excessive mathematics of Western mainstream economics and formalist learning. In any complete knowledge and practice with steady improvement there can be no construction without destruction. There is both construction and destruction, there is construction in destruction, and there is destruction in construction. Economics can never deviate from this dialectical way of thinking. (3) Another treatise says that to put emphasis on the guiding position of Marxism is merely for ideological reasons, and that economics with ideology is not academic learning. Such a statement entirely ignores the fact that Marxist economics is the only scientific ideological system that history has ever produced. At the same time, it also gives the impression that the scientific nature of economics and its ideology are opposed to each other. In fact, the essence of the object of study in a branch of learning is determined by the relations of peoples material interests, and all kinds of theoretical economics unavoidably represent the interests of a given group (a class or stratum in a class society), and unavoidably is either a system of academic learning or a theoretical belief and economic ideology manifested as the unity of academic learning and ideology. Neither Marxist economics nor Western economics can be an exception. The ideological nature of Marxist economics is manifested in the fact that it represents and safeguards the economic interests of the working class and the majority of the people, and thus becomes the economic theory for the emancipation of the whole humanity, and has the distinctive features of the unity of academic character, scientific character, ideological character, class character and practice. Therefore, Marxist economics openly proclaims that it represents the interests of the working class, and this exactly manifests its scientific nature. Western economics obviously represents the interests of the bourgeoisie and can only use the rose-colored glasses of the self-interest of economic man to

unilaterally analyze complicated economic relations, but they make every effort to cover up their ideological nature, and use the so-called non-ideological nature of economics to brag about their academic nature or scientific nature, covering up their unscientific nature. This merely shows the scientific deficiency of Western economics. (4) Besides, some treatises infer that a market economy has been developed in the West for two to three centuries, and is already very mature, as is Western economics in its analysis of the market economy. They therefore believe that the study of economics in the economically developed countries must be advanced. This is a misconception. It is obviously wrong to use the development of the productive forces and the development of the natural sciences to determine whether a social science is advanced or not. The mainstream economics in the developed capitalist countries serves the interest groups of the monopoly bourgeoisie. Its extreme self-interest and hegemonism make it impossible for such economics to make an objective analysis of the problems involved. Their seemingly abstruse mathematical forms often use the science of mathematical logic to cover or replace the deficiency in their analysis of economic logic. Chinese and foreign economists have written a large number of critical works.12 Compared with the socialist economic systems in different countries, the numerous cyclic economic crises since the 19th and 20th centuries and the present financial crises in the West have repeatedly verified the relatively backwardness and low efficiency of the capitalist market economic system, and are evidence thatWestern economics that has defended and given counsel to this system cannot be advanced. Only economics which is permeated with the scientific ideological methods of historical materialism stands on the side of the working class, works for the welfare of the majority of mankind and encourages the socialist relations of production and economic system to meet the general trend of economic socialization and globalization can have a scientific character and advanced nature. In the sense of pursuing the scientific nature of economics, it can be said that the more we adhere to Marxist economics as the base, the more we can promote the modernization of Chinese economics. The more we deviate from Marxist economics as the base, and the more we follow modern Western economics, the more difficult it is to achieve the scientific modernization of Chinese economics, and the more possible it is for Chinese economics to sink to the sad

position of anacademic colony and a pawn for modern bourgeois economics. This calls for high alertness on our part.

2. Western Economics for Use

When we stress Marxist economics as the base we mean it is not suitable to use Western economics as the base. Western economics refers to the knowledge system in the West apart from Marxism. Western economics here refers to the economic knowledge system other than Marxist economics, mainly Western economics that expounds on the Western mainstream economic thought. Western economics has been very clearly defined in the implications of the branches of learning since the founding of New China in 1949. It is not a geographical concept, but a concept with a social and class nature. It is the general term for bourgeois economics, not including Marxist economics in the Western capitalist countries. The modern bourgeois economics is called modern Western economics for short. We should fully recognize the unscientific character of modern Western economics or Western mainstream economics. As a whole, they still keep the unscientific inherent characteristics of the bourgeois economics Marx revealed in his time. They are mainly: (1) Superficiality (namely vulgarity). For example, the study of the relations between the total supply and total demand of the market economy mainly stops in the field of circulation, uses psychological factors to explain the effective demand, fails to see that the in-depth problems in the relations between market supply and demand are class relations in substance and the relations of production and relations of distribution determined by the ownership of the means of production. (2) Subjectivity. For example, the sole use of the self-interest of economic man hypothesis to explain and deduce the complicated economic movements of the whole microeconomy and macro-economy. (3) One-sidedness. For example, following the Smith doctrine formed after losing the value of constant capital (in essence, losing the Ic part of the value of the products in Category I which produces the means of production) because of Smiths failure to understand the duality of labor, and the difference and link between capital circulation and general commodity circulation, analyzing macroeconomic movements only on the basis of the exchange

flow between enterprises and residents, and treating savings equal to investment as the basic conditions for the macro-economic balance, it, as a result, cannot make clear the way to value compensation and compensation in kind in the course of reproduction by the industrial sectors, and cannot solve the problem of adjustment of the industrial structure in the movement of social production.(4) Hypocrisy and defensiveness. For example, it holds that the capitalist mode of production l the private ownership of the means of production is superior, only improvement is needed for the capitalist mode of distribution, thus defending the antagonistic basic contradiction of the capitalist economy, and advocating the myth of private property rights, market fundamentalism, socialism being the road to slavery, etc. Therefore, as a whole, modern Western economics is not a scientific economic ideological system. The view of regarding modern Western economics as modern economics and advocating localization of modern economics, and the view that Chinese economics has a way out only when it follows Western economics, are tantamount to pushing Chinese economics as a whole into the unscientific old path. However, when we say we cant use Western economics as the base, we do not mean that we dont want Western economics for application. When we say Western economics for application, we do not mean for application in the sense of Western economics as the base but making use of it or drawing on its experience through sublimation on the premise of Marxist economics as the base. According to the general implication of base and application in ancient Chinese philosophy, base is most fundamental and inherent and application is an expression and product of base.13 Comparing Marxist economics and Western economics from the point of view of the identity of base and application, it can be seen that there is a fundamental distinction between the basic ideologies of historical materialism and historical idealism in the concept of the base, and a basic distinction between the basic views of labor value and element value. Correspondingly, there are also differences between the application of the two, or the form of expression and the way of producing effect. For example, in its theoretical structure Western economics is divided into two theoretical aspects of microeconomics and macroeconomics, lacking organic connections in between, while Marxist political economy rises from abstract to concrete, and is an organic theoretical system that reproduces social and economic formations under given historical conditions (a system of three processes -direct production

process, circulation process and total process of production, or a system of five processes the above plus national economic process and international economic process14). However, if the different concepts of base and application between Marxist economics and Western economics is made absolute, thinking that Marxist economics as the base cannot draw on or make use of Western economics is a metaphysical error of taking an isolated attitude towards Marxist economics and Western economics. This is not even as good an analysis as that of Zhang Zhidong in modern China. While we persist in the identity of Marxist economics and its base and application, it is necessary to put forward Western economics for application (This is identical to the spirit of making foreign things serve China put forward by Mao Zedong. This means drawing on and making use of Western economics in a critical way, and it is not application in the sense of identity of base and application). This is because in the view of historical materialism, modern bourgeois economics which takes the mainstream place in the West, as an ideology is, after all, nothing else than the material world reflected by the human mind, and translated into forms of thought.15 Though due to the hindrance of idealist methodology, it is impossible to reveal the law of the movement and development of developed or underdeveloped capitalist economies in an overall, profound and practical way, we can, through analysis, more or less find many economic facts and rational elements under modern historical conditions from its one-sided, superficial and distorted theoretical content. Marxists can still find enlightenment and bring forth new comprehensive theories from its one-sided analysis, bring forth new and substantial theories from its superficial analysis, and arrive at a new, correct theory from its distorted analysis. As the production and economic management levels need to be constantly improved, we should not take the childish attitude of total ignorance towards the Western economic knowledge system, for it contains many kinds of information about social and economic formations with highly developed forces of production. It should also be noted that although modern Western economics is not a scientific theoretical system as a whole, this does not mean that it has no scientific elements. Of the different schools of Western economics, some described the roles played by the social division of labor and market competition mechanism in promoting the development of the productive forces; some admitted

that unemployment and crises were unavoidable in capitalist society; some created the method to analyze, regulate and predict the overall macro-economic operational volume; some revealed certain laws of industrial development and economic growth; some made general studies of the enterprise management system from different angles; and others developed the science of economic policy. All this more and less reflects the objective conditions of the social, market and capitalist market economies, and the course of the human search for truth, and sets forth many economic categories that can be adapted for use or used directly. This is an important theoretical source and ideas for our persistence in and development of Marxist economics. Karl Marx offered a scientific attitude for us as regards Western economics. He used economic ideas from the history of bourgeois economic ideology which must be of some significance to the history of science, that it is the more or less adequate theoretical expression of the economic situation of its time16 as one of the ideological sources for writing Capital. While Karl Marx criticized the unscientific character and defensiveness of bourgeois economics in a thoroughgoing way, his attitude towards economic categories and scientific tenets with some rationality put forward by bourgeois economists is that he used the method of analysis of historical materialism to conduct a revolution in the technical terms,17 transform through analysis, and make full use of them. For example, for the value category widely used in bourgeois economics, he gave it the scientific implication of the coagulation of abstraction of human labor through the analysis of materialist dialectics. It was the expositions of Pierre Le Pesant Sieur de Boisguillebert of France that inspired Karl Marx to put forward his proposition that the implication of the social necessary labor time that determines value is the labor time that conforms to the proportion of social reproduction;18 as for the categories of fixed capital and circulating capital, he revealed, with scientific sight of the duality of labor, that their difference in form lies in the difference between value circulation and value turnover, thus drawing a clear distinction between the two in a scientific way. As another example, after studying physiocrat Francois Quesnays economic tables and Smiths ideological passages about social reproduction expressed unconsciously in his studies of fixed capital and circulating capital, Karl Marx revealed that the study of social reproduction must proceed from gross social product, make clear the relations of exchange between the two major categories of the production of means of production and the production of

means of subsistence, and make clear how to form a rational composition of the constituents of the product value of the whole society, so that the elements of the social product achieve both value compensation and compensation in kind through the medium of money circulation, thereby forming the scientific principle of social reproduction.19 In this way, a number of categories and principles of bourgeois economics were included in the scientific system of Marxist economics with brand-new implications after his revolutionary criticism and innovation. There is no doubt that we must also adhere to the principle of Western economics for application, make full use of the ideological materials of modern Western economics, learn to screen, improve and absorb all valuable scientific parts of this ideology and merge them into the modern Marxist economic system with Chinese characteristics. In this sense, the modernization of Chinese economics must follow the policy of two-way exchanges with foreign economics by bringing in and going out. In particular, we must see that some forefront ideas of foreign economics are exactly as stated in Marxist economic theory, such as system analysis. It can be said that Marxist economics can show its scientific strength even more in its response to the impact of various ideologies. It is necessary to note that Western economics for application must not be mixed up with the prevailing argument that Marxist economics has no application value, and only Western economics can be used to solve the practical problems of the market economy. It should be admitted that under the past planned product economic system and in the traditional political economic paradigms formed under this system, there often existed an attitude of dogmatism or ossified thinking toward Marxist economics. For example, Capital was understood to be a work that covers all economic practices, but Marx stressed that Capital expounded mainly on the law of general economic movement, and that the concrete forms and means such as national economic behavior, foreign trade, world market and the actual motion of market competition and the concrete form and method of credit system were not included in his plan for writing Capital. These relatively concrete forms of capitalist production can be explained only after understanding the general nature of capital; such explanation is not included in the plan for this book, but perhaps can be part of the contents in the continuation to this book,20 he said. Because of the above-mentioned serious misunderstanding of Marxist economics, Chinese Marxist

economic theory made very slow progress in the field of applied economics. Some applied economists directly copied Western applied economics for teaching and study, with the misconception that only Western economics has application value. For the same reason, Chinese economics did not take enough time and pains to apply Marxist economics, and was far from being able to meet the requirements for socialist economic practice with Chinese characteristics. However, this does not mean that the application of Western economics should be infused into the base of Marxist economics in an unprincipled manner. We have stressed above that the base of Marxist economics has its own application. The correct attitude is that we must work hard to finish the task Marx did not live to finish. In the new historical conditions of the socialist market economy and economic globalization it is necessary to make clear a number of modern concrete economic forms on the basis of making clear the general nature of capital, and create modern applied Marxist economics, such as Marxist finance, Marxist science of trade, Marxist science of public finance, etc. We should pay special attention to modern Western applied economics, strive to assimilate the useful parts of Western economics, and at the same time speed up the development of Marxist theoretical and applied economics. Western economics for application must serve the enrichment and development of the base of Marxist economics. This is also an inherent requirement for the modernization of Chinese economics.

3. Chinese Economics as the Root

Chinese learning in the broad sense refers to the Chinese knowledge system of ancient and modern social sciences and natural sciences, and in the narrow sense refers only to the Chinese knowledge system of ancient and modern social sciences or that of ancient and modern natural sciences. Chinese learning dealt with in this article refers to the economic ideology of the Chinese ancient and modern knowledge system. Chinese economics as the root means that we should attach importance to the essence of Chinese ancient and modern economic ideology, and take it as the foundation for the process of the modernization of Chinese economics. Mao Zedong stressed the need to make the past serve the present when he said, We should sum up our history from

Confucius to Sun Yat-sen and take over this valuable legacy.21 This has an ideological value that cannot be underestimated in the formation of the modern Chinese economic system with Chinese characteristics, manner and styles. In the view of historical materialism, the different economic ideologies developed in China throughout history were reflections of economic facts in multiple ways in the given periods. What they reflected directly, indirectly or even in a distorted way, not only included economic factors universally existing in all countries under the same historical conditions, but also Chinas special national conditions and cultural factors. The economic ideologies generated by these special factors belong to the root of Chinese economics. At the same time, to use a biological metaphor, the traditional economic factors belong to the genes of Chinese economic forms. As long as China exists as a nation, these genes will exist. In the course of the modernization of Chinese economics, when importance is attached to Chinas special national conditions, historical traditional factors and their economic ideologies, it will help to develop modern Marxist economics with Chinese characteristics. It goes without saying that it is impossible for the ancient and modern economic ideologies to reach the height of the ideology of historical materialism. Of the economic thinkers as the subject of knowledge, except for a few who represented the interests of the revolutionary peasants, most took the stand of the ruling classes or exploiting classes to observe and analyze economic problems. Their understanding of the economic forms of their time could not but be superficial and one-sided to a certain degree. Some of them reflected economic reality in a distorted way. Therefore, when we advocate Chinese economics as the root we do not say that we can develop Chinese economics in a simple way and without distinguishing between right and wrong, but favor eliminating the feudal dregs and assimilating the essence of the fine Chinese tradition in a scientific way. Chinese ancient and modern economic theories included many scientific aspects which are very instructive to contemporary people. For example, we can find get rich through labor,22 cut down spending, take good care of the people, and mobilize the common people in the slack season, 23 to govern a country, the first thing is to make its people rich,24 and frugality leads to prosperity, and loose living and idleness lead to decline and fall,25 etc. These economic ideas

make it clear that labor creates wealth, and enriching the people makes a country strong. They advocate taking care of the labor force, cherishing labor time, upholding frugality, and opposing waste. The records in Chinese ancient books about pre-planned state economic activities (Guanzis state planning ideas, for example), closing mountains and prohibiting hunting and closing lakes and prohibiting fishing had overall distribution of the productive forces and efforts to seek sustained economic development, and can be said to be the precursors of the modern ideas about state adjustment and control, and sustained development. These ideas reflect the general requirements of human social and economic movements, and have long-standing ideological value. By studying ancient and modern Chinese economic theories we can particularly discover some scientific ideas embodying Chinas special national conditions. For example, Chao Cuo of early Han Dynasty proposed immigration to strengthen the frontier regions in order to reinforce the defense forces in the frontier areas in the north. He changed the practice of using political power to force immigration for the same purpose in the Qin Dynasty, and instead used economic means to encourage people to migrate to the frontier areas. All enlisted freemen were given titles of low-ranking officials, and their family members were relieved of labor service. Housing and implements were provided so that the migrants had shelters for living and tools for work when they arrived. Though his proposal was not put into effect, his idea of combining peoples peaceful life and frontier defense was carefully planned and therefore praiseworthy.26 His economic idea of migration to strengthen the frontier regions was obviously determined by the fact of Chinas vast inland frontier area, and therefore has real significance even today some 2,000 years later. Since the founding of New China in 1949, the important policy decision of sending troops to frontier areas for reclamation and defense made by Mao Zedong and the Party central committee and the great exploits and achievements made by the Production and Construction Corps of the Chinese Peoples Liberation Army in Xinjiang can be said to be a modern innovation in Chinas special traditional economic ideology, and have distinctive Chinese characteristics. Such a measure cannot be found in Western development economics. If our thinking had stuck to the development strategy of urbanization as found in the Western economic textbooks, we would not have thought of the successful policy of sending troops to frontier areas for reclamation and

defense. As another example, China has a vast territory, and large or small natural disasters are hardly avoidable in its different regions every year. Therefore few thinkers in the past did not deal with the problem of disasters and famines. Dong Wei of the Southern Song Dynasty wrote a book entitled, Sending Relief to Famine Areas to Help People, evaluating the different measures to help famine sufferers taken by his predecessors, and proposing policy measures to help famine victims in a systematic way.27 These policy measures dealt with the question of how to handle the relations between bumper harvest years and lean years, between cities and villages, between the government and the common people, between famine areas and non-famine areas, and between sending relief and relying on markets, thus providing valuable ideological data for helping famine victims in modern times. In the course of its economic modernization, China still needs to keep fighting natural calamities. The study of the economic ideas of sending relief to help famine victims and fighting poverty will surely enrich modern Chinese economics. The study of traditional and modern Chinese economic ideas also helps to enhance the national confidence in promoting the modernization of Chinese economics, and rectifying the sense of academic inferiority and the mentality of worshipping things foreign shown towards Western economics in talking about economic modernization. History has shown that many outstanding economic ideas have emerged in China in both ancient and modern times. For example, during the Hundred Flowers era of the Spring and Autumn and Warring States period the book Guanzi, written by disciples of Guan Zhong, a statesman of that time, made a systematic description of economic management. Its content deals with economic philosophy, relations between economics and politics, and relations between wealth and labor, as well as the economic categories of distribution, consumption, trade, finance, market, money and price. Muzi, a great thinker of that time, summed up the meanings of the Chinese character (advantage, benefit, profit, gain) as material wealth, and raised the idea of mutual interest, which was close to Adam Smiths idea on the same subject. Fan Li proposed what may have been the worlds first theory of economic cycles28; and there were also long-term arguments and discussions on the population problem. All these ideas can be well compared with the contributions made by ancient Western thinkers to the intellectual heritage of mankind. So far as progressive economic ideas in modern times are concerned, Hong Xiuquans Land

System in the Kingdom of Heavenly Peace and New Theory of Political Advisors reflected the economic thinking and policy proposals of utopian socialism and industrial and commercial capitalism. Kang Youwei, although a politically royalist reformist, used in his book The Great Commonwealth the language and wisdom of Chinese economics to express socialist economic thinking. This was the most imaginative utopian socialist work in a Chinese style, and was enough to list him among the worlds great utopian socialist thinkers. In a sense, he was an expounder of Chinese economics, and therefore was allied to Marxist economics. The economic thinking that reflected the requirement of the new capitalist relations of production was by no means purely imported from the West; Chinese-style national capitalist thinking of opposing imperialism and feudalism and supporting agriculture and industry, represented by Sun Yat-sen, and the petty bourgeois economic ideas of equal distribution of land ownership and control of private big capital also contain the elements of Marxist economics and the trace of source for building the primary stage of socialism with state-owned economy as the leading factor and controlling force and public ownership as the main body. Obviously, in the course of promoting the modernization of economics with Chinese characteristics and Chinese style, if Chinese economics as the root is neglected, and the Westernization and internationalization of economics are extolled to promote an ideological copy and academic piracy of Western economics, the consequence can only be that more and more economists will become theoretical porters who forget the history of economic ideology and the economic history of their own country, and lack national spirit and capacity for academic innovation. In recent years, this tendency has spread. At present, many schools of higher learning neglect Chinese economic history and the Chinese history of economic ideology, together with an acute shortage of relevant teachers. It is high time we paid more attention to this.

4. World Conditions as a Mirror and National Conditions as the Basis

The three great knowledge systems of Marxist learning, Western learning and Chinese learning all belong to the category of academic achievements, ideological data and sources of theory. The exposition of Marxist learning as the base, Western learning for application and

Chinese learning as the root is nothing more than orientation for the role and value of the three great knowledge systems in the course of promoting the modernization of Chinese economics. However, we should remember that the three knowledge systems are all ideologies. In the final analysis, they are all economic facts reflected in the human brain. We stress Marxist learning as the base because Marxist learning is more scientific and has more truth as compared with Western learning and Chinese learning. That is to say, Marxist economics objectively reflects the movement and development of the social form of economy under given historical conditions, and provides a scientific method for further exploring the changing objective economic conditions and law of development in the new historical conditions. However, we can never hold that the modernization of Chinese economics can be completed as long as we continue to deal with the available ideological data. We conscientiously study the extant documents of economic thinking of our predecessors and colleagues for the purpose of inheriting the existing wisdom and acquiring the highest scientific thinking ability at the present stage of human development. To promote the modernization of Chinese economics in an all-round and profound way we must get into close contact with Chinese and foreign economic practices. Linking modern Chinese and foreign economic practices is a link of vital importance in promoting the modernization of Chinese economics. To promote the modernization of Chinese economics, we have to combining theory with practice, which means to follow the law of knowledge of discover the truth through practice, and to verify and develop the truth through practice.29 As scientific truth in the economic field, modern Marxist economics is not innate in the brains of specialists, nor can it be provided spontaneously by practice. It can only come from the conscious use of science by the human brain, and by making scientific generalizations and correctly reflecting economic facts. Only through the indispensable process of social and economic practice can it be possible to proceed from superficial economic phenomena to the inner substance of the economy, thereby discovering the economic law and inherent economic mechanism, and reproducing them in theoretical form. The Marxist method of study is not outdated. Marx said, The latter [inquiry] has to appropriate the material in detail, to analyze its different forms of development, to trace out their inner connection. Only after this work is done, can the actual movement be adequately described.30

Chen Yun, a modern economic leader of the older generation who led the financial and economic work of our country and made remarkable contributions, said, Do not rely only on leaders, nor only on books or documents, but rely only on facts, and exchange, compare and repeat.31 This is also the principle and style of study in combining theory with practice that we should follow. As the economy is being continuously socialized and globalized today, we must take a world outlook toward Chinese and foreign economic practice on a worldwide scale, and use world conditions as a mirror and national conditions as the basis so that we know ourselves as well as others in order to promote the modernization of Chinese economics in a scientific way. (1) World conditions as a mirror. World conditions has many and profound implications. From the economic angle, it refers to the history, present conditions and trends of the economy of different countries and the whole world economy. The whys and wherefores of the world economic conditions and their positive and negative experiences and lessons are an important source of practice that cannot be neglected to the modernization of Chinese economics. Take the development of the US economy since the 1990s for example. We find two factors in its development: One, the productive forces, information and economic globalization promoted by high technology; and the corresponding adjustment of the economic relations, economic system and policies. They are general factors. The others are special factors, such as the disintegration of the former Soviet Union, the relative weakening of the Eastern European countries and the collapse of Comecon (Council for Mutual Economic Assistance), which enabled the United States to earn huge profits from resources, markets, technologies, personnel and munitions. Its special position of hegemony in the world economy, including in the spheres of finance and banking, has made the United States a safer place for trade and investment, a country with the biggest trade deficit and biggest net inflow of capital, and through the issuance of the dollar in large amounts, various hedge funds and control of the international economic organizations, it has taken the leading position in making and pushing through the international economic order and rules as well as protective measures specially beneficial to the United States. In this way it has taken a large amount of the wealth of other countries in legal and illegal ways, and objectively promoted its economic growth. We not only cannot copy the experience of the second factors, but must keep high vigilance against it. In fact, after the United States adopted the neoliberal economic policy its

economy seems to have grown considerably, but even if it has high technology, a high-profit munitions industry and economic hegemony, the growth rate of the US economy is not rapid, and there have been economic recessions. In recent years it has suffered the subprime crisis, a financial crisis that has affected the whole globe. It can be seen from this that the US experience and lessons cannot be simply copied. In addition, neoliberalism favors uncontrolled markets and advocates the myths of private property rights, opposes the establishment of a new international economic order and national welfare, but favors individual welfare and polarization. Pursued in the United States, Britain and other developed countries, neoliberalism was once the prevailing global economic trend of thought. However, taking a panoramic view of the practice of economic globalization in accordance with this trend of thought in the past ten years, we can clearly see that it was ten years of retrogression in the Soviet Union and Eastern Europe, ten years of losses in Latin America, ten years of crawling in Japan and ten years of slow growth in the United States and Europe. The 49 most underdeveloped countries (also called the fourth world) recognized by the United Nations have not grown rich through privatization and the economic globalization led by the developed capitalist countries, and some of them have even become poorer. In recent years Latin American countries have tilted towards socialism one after another. This shows that the stage of globalization led by neoliberalism is approaching its end, and economic globalization will finally move toward the stage of socialism. With the above-described world conditions as a mirror, Chinese economics cannot simply copy the theory of modern Western economics, which is pleasant to the eye but of little use, the US experience of economic development and neoliberal economic policies.32 (2) National conditions as the basis. To create scientific modern economics with Chinese characteristics and Chinese style we can only act on the basis of the national conditions consisting of the social formation, cultural tradition and natural environment determined by the level of the productive forces, including the provincial conditions, city conditions, county conditions and the difference between town and country. The present social and economic practices of the Chinese people have unfolded under such conditions, and only the economic practice of the broad masses of the people is vivid and profound, and makes it possible to show the diversity and multiple-level

character of the national economic conditions. Therefore, only by relying on the economic practice of the public can we ensure the national conditions as the basis. This is the principal realistic source of making scientific innovation in the course of the modernization of Chinese economics. In the past 30 years of reform and opening-up, the most important economic practice of the public is extremely rich, and is worth scientific abstraction and summing-up. So far as the economic system and strategic connotation of the Chinese model or Beijing consensus are concerned, we can abstract them into the theory of five structures, namely, first, multiple property rights structure with public ownership as the main body; second, multiple distribution structure with labor as the main body; third, multiple market structure with the state as the leading factor; fourth, multiple opening structure with self-reliance as the leading factor; and fifth, multiple strategic structure with scientific development as the leading factor. The difficulty here, both in theory and in practice, is to make efforts to achieve the effective combination of socialist public ownership and the market economy. We must fully realize that a number of state-owned large enterprises and enterprise groups with strength, vitality and competitiveness have emerged in Chinese cities, and in Chinese rural areas there are also a number of model examples of achievement of common prosperity within a framework of socialist public ownership, such as Nanjie and Liuzhuang villages in Henan Province, and the Huaxi and Changjiang villages in Jiangsu Province. From their practical experience, we can discover the new law and new mechanism of the effective combination of market economy and public ownership, which has no parallel in history. Only by drawing nourishment from these socialist economic innovations and practical experience with creativeness can we properly promote the modernization of Chinese Marxist economics.

5. Synthesis Innovation

All that is described above Marxist economics as the base, Western economics for application, Chinese economics as the root, world conditions as a mirror and national conditions as the basis must, in the end, be implemented and put into effect in a form of synthesis innovation in the course of the modernization of Chinese economics. From the philosophical angle, synthesis innovation in the modernization of economics is

the process in which mans thinking makes full use of the ideological data, reflecting the real movement and development trends of the economy in a practical way in conjunction with social practice in modern historical conditions, and develops a scientific economic theory. Historical materialist methodology holds that to reflect reality in a practical way the thinking must have as much as possible of all kinds of historical and present economic data, and make efforts to discover their inherent connections by using materialist dialectics (the reflection of the general dialectics of the movement of objective things in the human brain), and make an objective, all-round and indepth analysis. All-round and in-depth revelation of the movement of economic reality and the law of development is a process of synthesis. Analysis and synthesis are a unity of opposites, and continuously run through the process of reflection and being reflected between thinking and reality. Without analysis, synthesis is impossible. Without corresponding continuous synthesis in the process of continuous analysis, it is impossible to make an in-depth analysis and overall synthesis. If analysis and synthesis are gradually to approach the truth, they must be made on the basis of developing social practice. Therefore, in the view of historical materialism, synthesis innovation in the course of the modernization of Chinese economics is a process of making an analysis and synthesis of economic practice in ancient and modern times, in China and elsewhere, of the economic facts and ideological data provided in the three major knowledge systems of Marxist economics, Western economics and Chinese economics. Synthesis innovation means positive assimilation and correct handling of the mutual relations among the three major knowledge systems and the relations between analysis and synthesis, and verification in practice. It can thus be seen that synthesis innovation in the process of the modernization of Chinese economics is a process in which truth-seeking economists give play to their subjective initiative under the guidance of historical materialism. In this process, Marxist economics as the basis, Western economics for application and Chinese economics as the root should be the basic academic principle for giving correct play to subjective initiative. This is to say, it is necessary to use Chinese and foreign Marxist scientific economic theories as the main body or the leading factor, the knowledge and rational elements of non-Marxist economics in the West for application and the historical materials of both ancient and modern economic thought as the ideological source and foundation to achieve a substantial synthesis innovation and surpass our predecessors

in theory. It should be seen that the modernization of Chinese economics along the scientific track will not be smooth sailing. Because Marxist economics and Western economics, as theoretical economic systems, inevitably represent the economic interests of given classes in substance, the opposition between these economic interests is unavoidably demonstrated through the personification of the theory, namely, in the exchange of academic learning and ideological games between the economists who persist in Marxist economics as the foundation and those who persist in Western economics as the foundation. Karl Marx noted, The peculiar nature of the material it [Political Economy] deals with, summons as foes into the field of battle the most violent, mean and malignant passions of the human breast, the Furies of private interest.33 This has been confirmed in both the Chinese and foreign histories of the development of economic thinking. Therefore, the modernization of Chinese economics is not simply general persistence in Marxist economics as the foundation and developing or discarding Western economics and Chinese economics in academic learning, but unavoidably contains interaction and confrontation of ideas among the complicated ideologies. Truth-seeking economists should be fully and mentally prepared for this, and adopt an active attitude. This is because truth can defeat falsehood only through personification, and truth-seeking economists should try to become the personified truth, and take the initiative in defending the truth and consciously and persistently fighting for the truth endlessly. To persist in synthesis innovation in the sphere of Marxist economics as the foundation, we, apart from coping with the contention with Western academic thoughts and ideologies in the field of economics, must make efforts to correct the errors in the mode of thinking among Chinese and foreign scholars. For example, a widespread error at present is the argument that we should copy the economic system of whichever country has a strong economy. Another is that the market economy system has only one fixed model, and we can indiscriminately copy the Western economic paradigm with no national character, no stage character, no class character and no ideological character, regardless of the social regulations of the nature of the ownership of the market economy system and its national type. Under the influence of the metaphysical way of looking at things one-sidedly, absolutely and mechanically, the past blind worship of the Soviet

paradigm of economics is again manifested in the inclination toward the US paradigm, but it is clear that modern Western economics represented by the United States has been caught in a paradigmatic crisis, and is unable to extricate itself. The disintegration of modern Western economics into different schools partly shows that it has not completely and really developed a common paradigm for the economic system, core and mode. It is true that relative to the traditional political economy under the planned product economic system, Western economics has broadened the peoples field of vision with the modern notion of the market, and the study methods of actual evidence analysis, quantitative analysis and marginal analysis, and has indeed brought some new ideas and new methods to Chinese economics. However, modernization with emphasis on the economic theoretical form cannot show the scientific nature of the theoretical content, and blind worship of certain formalistic methods and theories of modern Western economics can only lead modernization of the overall economics of China and the world astray. Many mainstream economists in Western countries have also become aware of this. John Maynard Keynes, Wassily Leontiev, Ronald Coase and Joseph Eugene Stiglitz, as well as many leftist radical economists have all criticized such economics for pursuing formalism in different degrees.34 Therefore, Chinese scholars should be particularly aware of such erroneous thinking. The purpose of the synthesis innovation of the modernization of Chinese economics is to develop Chinas modern Marxist economics with Chinese characteristics, Chinese style and Chinese spirit. This needs the cultivation of the aspiration and method of making innovations independently. We should, in the light of Chinese and foreign practices, eschew the imitation of foreign economics, and embrace theoretical innovation, and constantly increase the consciousness of cultural awareness and theoretical awareness. This means overtaking in two aspects, firstly, overtaking classical Marxist-Leninist economics in the concrete sense, and secondly, overtaking present-day Western economics in the sense of scientific paradigm. The embodiment of two practices is necessary: the practice of the market economy in the West and East and the practice of socialism with Chinese characteristics. In addition, this involves the manifestation of the two innovations in conventional developments of economics and paradigmatic revolution. This will be a postmodern economics that scientifically reflects economic modernity, and at the same time also a post-Marx new economic synthesis. In other words, under the guidance of historical

materialism, we should persist in Marxist economics as the guidance or main body in the world perspective to achieve an all-round systematic scientific synthesis on the basis of the continued disintegration and partial synthesis of present-day foreign economics. Included are analysis of and drawing on the experience from foreign Marxist economic theories, Western leftist radical economic theories, new and old Keynesian economic theories (Their theoretical position and role as a whole are equivalent to the bourgeois classical economics identified by Karl Marx. The theoretical position and role of the new liberalist economics as a whole are equivalent to the bourgeois vulgar economics identified by Karl Marx, but this does not mean that there is nothing to be assimilated from them), Paul R. Krugmans international economic theory, development economics and comparative economics, as well as the economic theories in developing countries, including the Core and Periphery Theory. It is necessary to positively assimilate the useful methods from the philosophy, aesthetics, psychology, law, politics, systems theories, biology and mathematics of the present times.35 In the process of this synthesis innovation, Chinese Marxist economists should establish close and good relations of interaction with Marxist economic researchers of academic and political circles in other countries (ruling or non-ruling communist parties). At the same time, it is necessary to follow the law of development of academic learning, firmly adhere to the policy of letting a hundred flowers blossom and a hundred schools of thought contend, permit and encourage the development of different schools of economic thought within the Marxist ideological system, deepen theoretical study in an atmosphere of lively academic contention, and explore and construct a good mechanism of interaction of Chinese and foreign academic Marxism and political Marxism. This will surely be beneficial to the modernization of Chinese and global economics. At present, Chinese economics is developing quickly under the encouragement of the reform and opening-up policies, and the academic strategy of going out. A large number of old, middleaged and young economists in our country are making positive efforts to promote the modernization of Chinese Marxist economics in conjunction with the practice of building a socialist economy with Chinese characteristics and economic globalization. So far, five major emphases have emerged in the development of Chinese economics: emphasis on theoretical and

policy discussions of major economic problems in line with the scientific development concept, emphasis on transcendent development of economic principles, emphasis on mathematical expression and analysis of the theory of political economy, emphasis on the use of modern Marxist political economy to guide the innovation of applied economics, and emphasis on the interaction with and drawing on the experience of foreign Marxist economics.36 The emergence of these emphases is an expression of the great vitality and sustained innovative strength of Marxist economics, and also a reflection of the inherent requirement of Chinese socialist modernization. We firmly believe that adherence to the basic way of thinking and academic principles of Marxist economics as the base, Western economics for application, Chinese economics as the root, world conditions as a mirror, national conditions as the basis, and synthesis innovation will ensure a broader road for the modernization of Chinese economics, and will make due contributions to the scientific development of a socialist economy with Chinese characteristics and the world economy.

Notes 1. Cheng Enfu: 21st Century: Rebuilding Chinese Economics, Social Science Journal, April 7, 1994. 2. Yu Guangyuan and Dong Fureng: Whither Chinese Economics?, Beijing, Econoic Science Publishing House, Beijing, 1997. 3. Hong Shuishen: Chinese Economics Teaching and Study Must Be Internationalized and Huang Shaoan: Take the Road of Combining Internationalization and Localization, published in Theory Weekly under the Guangming Daily on September 4, 2007. 4. 5. Karl Marx: Das Kapital, Vol. 1, Beijing, Peoples Publishing House, 1975, p.106 On the concept of base and application, Zhang Zhidong was often mentioned about his proposition of Chinese learning as the base and Western learning for application in his article Exhorting the People to Study Hard, 1898. The word application he said broke through the Western technologies defined by preceding Westernization Movement bureaucrats, namely machinery and natural science, and included part of the Western political arts, that is, introducing some Western modes in the sphere of schools, taxation, armaments, law and trade. However, the Chinese learning as the base he advocated meant

using the Confucian code of ethics of the three cardinal guides (ruler guides subject, father guides son, and husband guides wife), and five constant virtues (benevolence, righteousness, propriety, wisdom and fidelity) as the unalterable fundamental principles for the running of the country. The so-called Western learning for application was mainly a means to preserve the rule of the feudal imperial power and the landlord class, and it was reformism in essence. However, this does not hinder our use of the concept base and application from the language point of view. We can fully give a brand-new modern scientific implication to base and application. 6. Ci Hai or Collection of Words, Words Volume (Vol. 1), Shanghai Dictionary and Reference Publishing House, 2003, p. 200. 7. Lets remember Lenins advice: The sole conclusion to be drawn from the opinion of the Marxists that Marx's theory is an objective truth is that by following the path of Marxist theory we shall draw closer and closer to objective truth (without ever exhausting it); but by following any other path we shall arrive at nothing but confusion and lies. Selected Works of V.I. Lenin, Vol 2, Peoples Publishing House, 1995, pp.103-104. 8. Selected Works of Karl Marx and Friedrich Engels, Vol. 4, Beijing, Peoples Publishing House, 1995, p.733. 9. David Ricardo made an analysis of the contradiction between wage and profit, which penetrated from the field of circulation into the field of production, and to a large degree saw the class contradiction manifested in surplus value. The analysis of the new liberalist system stopped at the field of circulation, and denied the value of labor and class contradiction. See Han Ganqiang: On the System Interpretation of Historical Idealism, carried in the Eleven Noted Professors Criticiing Zhang Wuchang, edited by Cheng Enfu and Huang Yuncheng, China Economy Publishing House, Beijing, 2003, p. 180-206. 10. Karl Marx: Capital, Vol 1, Beijing, Peoples Publishing House, 2004, p.10. 11. Karl Marx: Capital, Vol 1, Beijing, Peoples Publishing House, 2004, p.10. 12. Yu Bin: Critique of Micro-economics, China Economics Publishing House, Beijing, 2004. 13. Ci Hai or Collection of Words, Words Volume (Vol. 1), Shanghai Dictionary and Reference Publishing House, Shanghai, 2003, p. 200. 14. Karl Marx: Capital, Vol 3 is a system of three processes, and the system of five processes

in the Modern Political Economy edited by Cheng Enfu. See the 2000 edition and 2007 edition published by the Shanghai Financial and Economic Publishing House 15. Karl Marx: Capital, Vol. 1, Beijing, Peoples Publishing House, 1975, p.24. 16. Karl Marx: Capital, Vol 1, Beijing : Peoples Publishing House, 1975, p.32. 17. Karl Marx: Capital, Vol 1, Beijing : Peoples Publishing House, 1975, p.34. 18. Chen Qiren: Study of the Development of the World Economy, Shanghai: Shanghai Peoples Publishing House, 2002, p. 410. 19. Karl Marx: Capital, Vol 2, Beijing : Peoples Publishing House, 1975, p.398-399, p. 404-410. 20. Collected Works of Karl Marx and Friedrich Engels, Vol 25, Beijing: Peoples Publishing House, 1974, p.127. 21. Selected Works of Mao Zedong, Vol. 2, Beijing, Peoples Publishing House,1991, p. 533-534. 22. Quoted from Grand Dai Des Rite King Wu Ascends the Throne Happiness and High Rank Repeatedly Inscribed; Hu Jichuang: A Brief History of Chinese Economic Ideas, China Social Science Publishing House, Beijing, 1981, p.2 23. Quoted from The Analects of Confucius Study; Hu Jichuan: A Brief History of Chinese Economic Ideas, China Social Science Publishing House, Beijing, 1981, p.47 24. Quoted from Guanzi Govern the Country; Zhou Bodi: Draft of Chinese History of Financial Ideas, Fujian Peoples Publishing House, Fuzhou, 1984, p.2 25. Quoted from Muzis Interlinear Notes Explanations for Faults; Zhou Bodi: Draft of Chinese History of Financial Ideas, Fujian Peoples Publishing House, Fuzhou, 1984, p.104 26. Hu Jichuang: The Concise History of Chinese Economic Ideas, Beijing: China Social Science Publishing House, 1981, p. 192-193. 27. Hu Jichuang: The Concise History of Chinese Economic Ideas, Beijing: China Social Science Publishing House, 1981, p. 361-363. 28. See Hu Jichuang: The Concise History of Chinese Economic Ideas, China Social Science Publishing House, Beijing, 1981, p. 27-31. 29. Selected Works of Mao Zedong, Vol. 1, Beijing: Peoples Publishing House, 1991, p.296. 30. Collected Works of Karl Marx and Friedrich Engels, Vol. 44, Beijing: Peoples Publishing House, 2001, p.21-22. 31. Selected Writings of Chen Yun, Vol. 3, Beijing, Peoples Publishing House, 1995, p. 371. 32. Cheng Enfu: The Opening Address of the President of the World Political Economy

Society, Shanghai Style Economics, edited by Cheng Enfu and Gu Hailiang, Volume 14, Shanghai Financial and Economic University Press, Shanghai, p.3. 33. Karl Marx: Capital, Vol. 1, Beijing, Peoples Publishing House, 1975, p.12. 34. Cheng Enfu: Paradigmatic Revolution and Conventional Theoretic Development Disintegration and Synthesis, Guangming Daily, Jan. 20, 2004. 35. Cheng Enfu: Paradigmatic Revolution and Conventional Theoretic Development Disintegration and Synthesis, Guangming Daily, Jan. 20, 2004. 36. Cheng Enfu: Modernization of the Economics and Its Five Postures, Theoretic Front of Schools of Higher Learning, 3rd issue, 2008.