China: Old Wounds Deng Xiaoping

The leader of 1 billion Chinese was joking, of course; he lost part of the hearing in one ear long before he launched the world’s most populous nation on an audacious effort to create what amounts almost to a new form of society. But, as might be expected from the diminutive (4 ft. 11 in.), steel-hard Deng, 81, it was a joke with a sharp point. If in his more solemn moments he still attempts to justify what he often calls his “second revolution” in the name of that patron saint of Communist revolution, Karl Marx, Deng is well aware that the system he is evolving in China either ignores or defies many of the precepts most cherished by traditional Marxists (especially those running the Soviet Union). In the Chinese spirit of balance between yin and yang, Deng’s second revolution is an attempt on a monumental scale to blend seemingly irreconcilable elements: state ownership and private property, central planning and competitive markets, political dictatorship and limited economic and cultural freedom. Indeed, it is almost, or so it often seems to skeptics in both the Western and Marxist worlds, an attempt to combine Communism and capitalism.

It is also a high-risk gamble. The elements may prove truly irreconcilable, and Deng’s bold experiments could dissolve into economic chaos. It is even possible that they could give way, though probably not until after his death, to at least a partial restoration of the ironfisted, xenophobic rule and extreme regimentation imposed on China by Deng’s predecessor Mao Tse-tung. But in 1985 Deng gave fresh evidence of his determination to push his reforms through to their conclusion, whatever that might be. Having essentially completed a transformation in the countryside, where 80% of China’s masses live, by freeing peasants to grow what they wish and to start private businesses, Deng concentrated on what may be the harder job of bringing change to China’s cities and requiring the managers of state-owned enterprises to behave like profit-hungry, innovative capitalists.

Whether this second stage of the second revolution can fulfill Deng’s dream of hauling China out of its still desperate backwardness into the 20th century by the time the century ends is anyone’s guess. It got off to a somewhat rocky start, and is encountering more opposition than the first, rural stage did. But if it should succeed, the transformation would have profound and enormous consequences throughout the world.

The Soviet Union, which has historically feared the Chinese masses on its southeastern border, would face a neighbor considerably strengthened by a triumphant heresy. Communists everywhere, notably in the Third World, would see an alternative to the failures of Soviet-style Marxism. Many of China’s neighbors in the Far East, including Taiwan and South Korea, would find that a political foe had been tamed into a trading partner, while an economic weakling had become a mighty competitor. Most important, perhaps, the U.S. and other Western countries would see the crusading faith that has made the Marxist third of the world an enemy converted into a system that the West could live with and in some respects, though certainly not all, applaud.

Already Deng has changed the daily lives of his nation’s citizens to a greater extent than any other world leader. Foreigners revisiting China after a lapse of only a few years can scarcely believe that they are in the same country: the free and well-stocked food markets, the neat little homes and humming village industries springing up throughout the countryside, the openness to foreign influences ranging from computer technology to rock music are like nothing they or their hosts have seen before. Neither is the willingness of intellectuals, like Deng impatient with ideology, to discuss how much of it can be dumped in the interest of still faster growth. It is primarily because his continuing reform of China and Marxism holds more promise for changing the course of history than anything else that occurred during 1985 that Deng Xiaoping is TIME’s Man of the Year.

To be sure, other personalities and events dominated the day-to-day headlines. After the deaths of three infirm leaders in four years, the Kremlin finally chose a chief, Mikhail Gorbachev, who at 54 is young enough to give the U.S.S.R. vigorous leadership for the rest of the century. Gorbachev moved quickly to consolidate his power, firing old-line bureaucrats by the score and wooing popular support by touring Soviet farms and factories in the manner of a handshaking, baby-kissing Western politician. He broke the long, frozen silence between the nuclear superpowers by agreeing to meet President Ronald Reagan in Geneva for the first Soviet-American summit in six years. Their November talks in front of a cozy fire moved none of the substantive issues closer to solution. On the paramount question of arms control, though both have proposed a 50% cut in offensive nuclear weapons, agreement is still being blocked primarily by Reagan’s insistence on continuing his Strategic Defense Initiative and Gorbachev’s vehement demand that it be abandoned. It was notable, however, that despite Gorbachev’s pre-summit threat that nothing else could be accomplished unless this demand was met, he chose to present himself as moderately satisfied with the summit and to continue the dialogue–leading most observers to award Reagan a summit “victory.”

Other long-festering dangers kept the world in turmoil. Terrorist murders and kidnapings became more brazen: the hijackings of TWA Flight 847 in June, an EgyptAir jetliner in November and the Italian cruise ship Achille Lauro in October were only the most spectacular incidents. Though governments did finally begin to fight back, their efforts illustrated the complexities and perils of antiterrorist action: the U.S. capture of the Achille Lauro hijackers strained relations with Egypt and Italy, while 60 passengers on the EgyptAir jet were dead after Egyptian commandos stormed the grounded plane in Malta. But in Argentina the elected civilian government of President Raúl Alfonsin sentenced to long prison terms five members of the former military junta who were convicted of practicing what might be called state terrorism: the kidnaping, torture and killing of innocent citizens.

There was no such progress in other familiar trouble spots. South Africa was torn by unremitting violence as blacks demanded abolition of apartheid and whites were willing to accept only gradual change. Guerrilla wars in Central America raged unchecked, and the so-called peace process in the Middle East made no discernible headway. Nature joined politics in contributing to human misery as earthquakes in Mexico City, a volcano eruption in Colombia and a cyclone in Bangladesh claimed tens of thousands of victims. In the U.S., Reagan became the first President to confer the full powers of his office voluntarily on his Vice President, George Bush, though only for eight hours, while surgeons removed a cancerous growth from Reagan’s colon. The President recovered quickly and apparently completely, but apart from the summit his political momentum seemed to wane. Reagan’s success in pushing a tax-reform bill through the House at year’s end demonstrated that he is hardly a lame duck yet. Nonetheless, whether he can win a final bill at all close to his desires–or indeed any bill–is one of the major questions of 1986. Spy scandals, headed by the exposure of the Walker-family espionage ring, proliferated as rarely, if ever, before. The scare of the year was medical: the spread of AIDS touched off public anxiety and hysteria far beyond anything warranted by the facts, though the facts were surely grim enough. Of 15,775 people who had caught the disease, 8,122 were known to have died.

Of all these turbulent and momentous events and phenomena, however, only the ascension of Gorbachev to the Soviet leadership could eventually rival for long-range importance to the world the sweeping changes Deng is pushing through in China. But for all the panache he displayed on taking power and all the headlines and television time he and Reagan commanded at the summit, Gorbachev’s impact on history by year’s end was still far more potential than actual. The freshness and vigor of his personal style far outweighed the importance of any changes he had made in Soviet foreign or domestic policy. Indeed, though Gorbachev, like Deng, has made pepping up his country’s economy and improving the material lives of its citizens his top priority, the caution of Gorbachev’s opening moves only highlights by contrast the far more radical and fundamental nature of the reforms Deng has already carried out in China. Says Richard Holbrooke, who was U.S. Assistant Secretary of State for East Asian Affairs when Washington restored full diplomatic relations with China in 1979: “There is no other leader in the world who is doing anything even remotely in Deng’s league.”

Gorbachev, Deng and the heads of almost every Marxist country face the same fundamental problem. In a 1984 interview with the Italian Communist daily L’Unità , Hu Yaobang, General Secretary of the Chinese Communist Party, phrased it this way: “Since the October Revolution [of 1917, which enthroned Soviet Marxism], more than 60 years have passed. How is it that many socialist countries have not been able to overtake capitalist ones in terms of development? What was it that did not work?”

That something has failed, and failed badly, is no longer seriously disputed, even by many Marxist experts. Before Deng, the failure was more starkly obvious in China. The average peasant or city worker was little better off, if at all, when Mao died in 1976 than he or she had been in the 1950s. But even the Soviet Union has long since had to forget Nikita Khrushchev’s hollow boast that it would inevitably “bury” the U.S. by surpassing the American standard of living. Quite the opposite: the U.S.S.R.’s economic growth rate has slipped to about half the pace of the 1960s, and its citizens still have to stand in long lines for such minor amenities of life as toilet paper and detergent powder. On the most basic level, Moscow must import huge tonnages of grain from the capitalist world to keep the Soviet populace properly fed.

Gorbachev has been unsparing in his criticisms of Soviet economic performance. “You squander countless resources in every industry,” he told party workers in Leningrad last May. But so far he has been unwilling to modify in any essential way the system of centralized state control of every aspect of economic life fashioned by Joseph Stalin; he has been trying only to make it work better. While promising to “restructure” the economy, Gorbachev pointedly avoids using the word reform, apparently because it implies a more drastic change than any he is ready to contemplate.

In practice, Gorbachev’s program so far consists largely of public scolding of inefficient industry managers and incessant calls for “discipline” and “imaginative, honest and conscientious work from every individual, from worker to minister.” His most striking measure to improve productivity has been to crack down on alcoholism by restricting production and consumption of vodka and other spirits.

Gorbachev is extending experiments to give selected industrial and farm managers slightly greater freedom in pricing and production decisions. His closest economic adviser, Abel Aganbegyan, has called for a reallocation of investments to modernize factories rather than build new ones and to improve the quality of products. But this rechanneling is to be carried out by the central planners. So, as Gorbachev suggested in his August interview with TIME, his program rather contradictorily appears to call for a loosening of state control in some areas and a tightening in others–at the same time.

Deng, shortly after emerging from his third period of disgrace and returning to power in 1978, faced squarely the heretical thought that the system of state control was itself the problem. He set about to replace it with a hybrid not quite like anything seen before. The Chinese system is still so new that it does not have an agreed name. Outside analysts often call it “market socialism,” and some Chinese speak of creating a “commodity economy.” Deng’s formulation is a rather uninspiring “socialism with Chinese characteristics.” But then Deng, a thoroughgoing pragmatist, has never been much for labels. His most celebrated saying is a homely metaphor to the effect that it does not matter whether a cat is black or white so long as it catches mice.

The animating spirit of Deng’s reforms has been to liberate the productive energies of the individual, a daring concept not just for a Marxist but for a Chinese (the concept of individualism has a negative connotation in Chinese society). He began, appropriately, with agriculture, which had been collectivized by Mao to a degree extreme even for the Communist world. The land was worked by communes that grew what the state directed and turned over all food produced to the state for distribution. Pay was based on a system of “work points” that bore little relation to production: a peasant would accumulate a certain number of work points for planting rice seedlings, for example, but he or she would fare no better if the eventual crop was large than if it was small.

Deng’s reforms abolished the communes and replaced them with a contract system. Though the state continues to own all land, it leases plots, mostly to individual families. Rent is paid by delivery of a set quantity of rice, wheat or whatever to the state at a fixed price. But once that obligation is met, families can grow anything else they wish and sell it in free markets for whatever price they can get (though the state does set limits on how much some prices can fluctuate).

Most of the first leases were for two or three years, but they are now being extended, usually for 15 years and as long as 30 years on grazing land. Under a 1985 law the leases can be inherited. Peasants own their draft animals, and those who prosper can buy machinery; ownership of tractors has burgeoned from 90,000 to 290,000 in the past two years. Though the state retains the power to cancel a peasant family’s lease and award it to someone else, that power is rarely exercised. Farm families are increasingly regarding the good earth as theirs and using it about the way they would if they owned it outright.

Farmers are allowed, indeed encouraged, to build privately owned houses on their state-owned land. Roads all over rural China have been narrowed by piles of bricks dumped along the shoulders to be picked up by peasants who are erecting homes or even paying others to do it for them. Compared with the days of Mao, when many peasants were required to live in dormitories and eat in communal mess halls, the change in life-style alone is almost revolutionary.

The results have been phenomenal. Freed to prosper by hard work, Chinese farmers have increased food production around 8% in each year since 1978, about 2½ times the rate in the preceding 26 years. Variety has increased along with quantity; besides rice and wheat, the Chinese are growing and eating more poultry and pork (China has the world’s largest pig population, though many are scrawny beasts quite unlike the corn-fattened hogs of Iowa or Nebraska). The biggest payoff of all: Vaclav Smil, a Canadian geographer, calculates that in China, “today’s diets appear to supply, on the average, enough energy and protein for normal growth and healthy life.” In a country that has been racked by periodic famines throughout four millenniums of recorded history, the average citizen has, finally, enough to eat.

Private enterprise began as a kind of offshoot of the agricultural reforms. Mao’s “people’s communes,” for all their faults, at least guaranteed everyone in the rural economy a job of sorts. Deng and his lieutenants feared that breaking up the communes would cause masses of jobless peasants to descend on the cities, where there might be no work for them either. So beginning in the late 1970s, individual farmers and village collectives were permitted to start sideline businesses and keep any profits.

The first enterprises were connected with farming: a group of peasants would set up a roadside market to sell their crops and perhaps buy a truck to haul their own produce as well as, for a fee, food grown by other peasants. But private entrepreneurs and village collectives have now expanded to all kinds of other businesses–inns, restaurants, stores, tailor shops, beauty parlors and light manufacturing like assembly of TV sets–often in competition with government-owned businesses. Some entrepreneurs have even opened services in major cities to recruit maids and other household help for busy urban families. Businessmen can hire workers privately, a practice that conventional Marxists regard as inherently exploitative. Legally, no private entrepreneur is supposed to employ more than 15 hired hands, but local Communist Party officials often ignore that limit.

However, private and collective enterprises, though they are growing rapidly, are still a relatively minor force. At last count, 10.6 million registered private businesses with sales of $8 billion employed 15 million workers, or 4.5% of China’s nonfarm work force. Roughly 1.7 million collectives employ an additional 100 million workers; in several provinces they have become the dominant form of business. Nationwide, though, more than 85,000 state-owned enterprises account for a heavy majority of jobs and four-fifths of China’s industrial output. Until very recently they operated under a system that Mao had copied from Stalin: ministries in Peking assigned all raw materials and dictated all investments, told every factory manager what and how much to produce and where to sell it and at what price, set wages and assigned jobs, took all profits and subsidized any losses. As late as 1984, one factory manager in Shanghai says, he had a discretionary fund of only $33 that he could spend without getting permission.

Early on, Deng’s government began revising this system too. In 1979 it halted a Stalin-style Five-Year Plan that emphasized heavy industry, like steel mills, and redirected much investment into consumer goods: refrigerators, washing machines, TV sets. Some of the controls have been progressively loosened. In 1982 Peking stopped dictating all garment styles and freed the city’s factories to adopt their own designs. Result: though perhaps 80% of any randomly assorted crowd are still dressed in baggy Mao suits, there is a generous sprinkling of blue jeans, Western-style business suits and coats, skirts and knee-high leather boots.

Now Deng and his lieutenants think the time has come to take a much longer step toward a full-fledged market system. Under a plan that went into effect in late 1984, state industry is also run under a contract system. Central planners still set broad production goals, but they directly assign only a portion of raw materials and distribute at fixed prices only a set quota of a factory’s output. Managers otherwise are allowed and even required to line up their own suppliers, decide for themselves what to make beyond the goods that must be sold to the state and find buyers for the merchandise at prices that can fluctuate. They pay a 55% corporate income tax and keep the rest of their profits to use for reinvestment, bonuses and social welfare such as housing, medical care and recreation. Most investment capital is still supplied by state-owned banks. But managers have to compete for loans, and pay interest of 5% (up from 1% as recently as the late 1970s).

The avowed goal is to replace “administrative planning”–that is, direct orders on what and how much to produce–with a looser system of “guidance planning.” Central planning, explains Huan Xiang, director general of Peking’s Center for International Studies, “seriously hampered the initiative and creativity of enterprises and workers and to a great extent emasculated what would otherwise have been a vigorous economy. The more centralized, the more rigid; the more rigid, the lazier the people; the lazier the people, the poorer they are.” Managers now are supposed to hustle in response to the same signals–interest rates, market demand, prices, profit–that guide Western businessmen. And just as the state will no longer take all profits, it will eventually stop subsidizing losses. Deng’s planners bluntly assert that they are prepared to let inefficient state enterprises go bust.

This ambitious scheme has got off to a somewhat stumbling and chaotic start. State bankers at the end of 1984 overused their new authority and went on such a wild lending spree that the People’s Bank of China, the country’s central bank, had to tell them to stop. Factory bosses, in contrast, widely complain that they are still waiting for confirmation from local party and government officials that they can begin exercising the new freedoms they supposedly were granted at the start of 1985. For the first time, Deng is proposing to crimp seriously the powers and privileges of tens of thousands of national, provincial and local party bosses who are accustomed to exerting life-and-death authority over the economy. Ominously but not surprisingly, many seem to be dragging their feet, if not blocking the reforms outright.

Some popular opposition is developing. To give the nascent market system a chance to work, Peking abolished some subsidies for food, clothing and utility production and gradually freed some industrial prices. One result was a whiff of that old capitalist evil, inflation: in some cities, food prices jumped 35% in early 1985. The blow was softened by a continuation of wage increases begun immediately after Mao’s death. Nonetheless the price boosts stirred widespread grumbling, particularly among older Chinese who retain bitter memories of the hyper-inflation that preceded the Communist takeover in 1949.

Actually the price reforms have much further to go. China at the moment has a two-tier system of state-set and market prices, sometimes on the same goods. Vice Premier Li Peng estimates that Peking still fixes prices on 70% of the products sold by state industries. There are other reminders of the heavy presence of the state. At Zhongshan University in Canton, 30% of the graduates are assigned to their first jobs by the State Labor Ministry in Peking. The remaining 70% are placed by university authorities after consultation with state industries and agencies; the graduates’ wishes are considered but do not always prevail. That is a marked improvement over a few years ago when the state made all assignments, but it underscores an important point: whatever the Chinese system might be called, it is a long way from anything that could be termed capitalism.

But it is at least a system that can cooperate with real, full-blown capitalism to a greater degree than any other in the Communist world. In the centuries-old Chinese debate between those who are eager to learn from the more modern world outside and those who shun it, Mao came down completely on the side of xenophobia and cut China off almost totally from foreign goods, money and culture. Deng has opened the country to imports of everything from machinery to the ubiquitous tape recorders and portable stereos. He has proclaimed an “open-door policy” toward foreign investment–unperturbed by the reminiscences the phrase evokes of an era early in the century when foreigners enjoyed extra-territorial privileges bitterly resented by many Chinese.

The door certainly is not that far open yet; Deng’s policy might be better described as an air lock through which China lets in carefully selected foreign investments. Still, more than 2,000 foreign businesses had put some money into China by the end of 1984. Most were owned by the overseas Chinese, who have prospered throughout Asia, but the total includes 70 U.S., 67 Japanese and 42 British, West German or French companies. A burgeoning trend is toward ventures jointly owned by Chinese state enterprises and foreign firms; 687 were registered in the first half of 1985 alone, or almost as many as in all of 1984. Peking has even allowed 94 factories wholly owned by foreigners to be built. They include 3M China Ltd., a fully owned subsidiary of Minnesota Mining and Manufacturing Corp., which has set up a factory near Shanghai to make insulation tapes and other products.

The stated reason is to speed China’s modernization by welcoming foreign capital, technology and management methods. To that end, China has set up four “special economic zones” where foreign investors get unusual privileges to import raw materials and semifinished goods and, to a certain degree, hire workers. But many other foreign investments are simply introducing the Chinese to some amenities, real or alleged, of life elsewhere: fast food, Coca-Cola, Pierre Cardin fashion shows, golf courses, amusement parks, even a Peking branch of Paris’ famed Maxim’s restaurant.

There has been a reaction. Chinese Communist purists blame foreign influences for such trends as a revival of pornography and prostitution. University students have staged several demonstrations in downtown Peking and other major cities. While ostensibly aimed at Japan’s commercial presence, or, as was the case last week, at China’s nuclear testing program, the demonstrations seemed to be directed more broadly at Deng’s reforms because of the corruption and nepotism that have accompanied them.

Deng admitted recently that showcase projects like the Special Economic Zones have yet to prove their value. On the whole, though, he remains committed to welcoming foreign goods and capital. “There are those who say we should not open our windows, because open windows let in flies and other insects,” he remarked in October. “They want the windows to stay closed, so we all expire from lack of air. But we say, ‘Open the windows, breathe the fresh air and at the same time fight the flies and insects.'”

Politically and culturally, that fight has waxed and waned. China is still a one-party dictatorship and Deng has no intention of letting it become anything else. Rights taken for granted in the U.S., such as freedom of speech and assembly, are strictly controlled; some limited freedom of religion has been granted. Even so, a revised constitution adopted in 1982 marked a step toward making China a society governed by law rather than the whim of party officials.

In other ways, too, the dictatorship is less oppressive. Deng has permitted a popular press to spring up. Hundreds of new publications have appeared all over China; they cannot criticize policy, but they print lurid exposés of prostitution, pornography, corruption and black-marketeering by party officials (indeed, they sometimes seem to report little else). Culturally, Deng in 1983 permitted officials to start a crackdown on writers and artists, in the guise of a campaign against “spiritual pollution,” probably as a gesture toward conservatives concerned that the pace of change was too rapid. But Deng speedily announced that the campaign had gone too far and called it off, leaving citizens and party officials alike in a quandary over just what is permitted and what is not.

One example is Jin Ping Mei (The Golden Lotus), a highly erotic literary classic from the Ming Dynasty (A.D. 1368-1644). Mao would let it be seen only by party officials of ministerial rank or higher. Wei Junyi, head of the People’s Literature Press, prepared an expurgated edition for somewhat wider distribution, put it off during the campaign against spiritual pollution, and finally let it be printed in 1985 for distribution to writers and scholars, who snapped up 10,000 copies immediately at $6.65 per copy.

In foreign policy, the motto under Deng seems to be: try to get along with everyone so that the nation’s energies can be concentrated on economic development. China has cautiously resumed trade and cultural exchanges with the Soviet Union. Peking has spared little effort in trying to convince the non-Communist nations of Asia that it intends to be a peaceful neighbor. It stopped aid to Communist rebels in Thailand in the late 1970s, and today disavows any idea of helping those in Malaysia, Indonesia or the Philippines. The only guerrillas China is aiding today are those battling the Soviet army in Afghanistan and the Soviet-backed Vietnamese occupiers of Kampuchea.

The most striking achievement of this don’t-rock-any-boats policy is a deal signed with Britain a year ago under which Peking in 1997 will assume sovereignty over Hong Kong on a pledge to maintain Hong Kong’s wide-open, laissez-faire capitalist system for at least 50 years after that. Peking is now touting an even more lenient version of this “one nation, two systems” approach as a model for a reunification deal with Taiwan, which it once threatened to take by force. Peking proposes to let Taiwan retain not only a capitalist economy but independent armed forces. Taiwan so far is not buying. Eager for more trade and investment, Deng is trying to make China a partner in the non-Communist world economic system. In 1986 Peking expects to apply for full membership in the General Agreement on Tariffs and Trade, the 90-nation organization that monitors world-trade rules.

As striking as the transformation of China into a power dedicated to stability has been, it is economic rather than foreign policy that will determine Deng’s place in history. He has staked everything on the success of his economic reforms, arguing that whatever their theoretical justification or lack of it, they will work. And so far they generally do.

True, China is still a poor country by any measure. Deng’s goal is to lift per capita income to $800 by the year 2000. That would compare with a 1980 level of $300 and would be sufficient to admit China to the ranks of middle-income countries. But as recently as 1982, average incomes in China were about equal to those in poverty-ridden Haiti. Travelers in Sichuan province note that many peasants still use wheelbarrows with wooden wheels and iron rims and till the fields with wooden plows–this in a country where museums display iron plows from the Han dynasty 2,000 years ago.

But life is getting better, fast, for many Chinese. Industrial production has leaped along with food output. Early in 1985 it was increasing at an annual rate of 23%, a pace Deng and his planners judged too rapid. They ordered a slowdown to avoid shortages and worsening inflation. In Mao’s days, Chinese consumers dreamed of buying the “three bigs”: a bicycle, a wristwatch and a sewing machine. Now the three bigs are a refrigerator, a washing machine and a TV set. “Imagine,” says a Western diplomat. “Some people living in the heart of Guizhou province now see the evening news, with film from Beirut and New York. Three years ago, they did not know anybody lived on the other side of the nearest hill.”

In Yunnan province, Liang Weifeng got a state bank loan of $965 to buy a two-wheel tractor; he earned enough hauling firewood, bricks and grain for his neighbors to pay off the loan in eight months. Liang now clears about $1,660 a year from his business, which his wife Su Yongchang supplements with about $230 earned by raising rice and vegetables on a plot of a bit less than an acre. Su claims to know little about Deng or politics: “I only know that the policies now are good, so that we can get rich.”

Consciously or unconsciously, she is echoing a line of argument often voiced by Deng and his supporters. In the name of economic growth, they are quite deliberately fostering a growing inequality of incomes. Says Deng: “Some people will become prosperous first, and then others will become prosperous later.” But since honoring and emulating the rich goes against the Marxist grain, Deng and his allies have developed an elaborate justification: there is nothing wrong with wealth so long as it is earned by one’s own labor rather than by the exploitation of the labor of others, which Marx condemned. Or, in the words of a onetime slogan that Writer Orville Schell turned into the title of a book, “To Get Rich Is Glorious.”

Such heretical thoughts are heard often enough these days to raise an insistent question: Can the system they are erecting still be called Marxist? It is far more than a matter of semantics. Marxism has demonstrated dramatic power to shake the world, and thus any debate as to what it does and does not consist of is of paramount importance.

The question, however, is far from easy to answer. Since Marx died in 1883, his admirers have written innumerable explanations of his work. They have frequently, and often fanatically, denounced one another as revisionists or worse. But Bertell Ollman, a professor at New York University and an avowed Marxist, observes that “Marx had very little to say of a concrete nature about socialism,” the transitional society that would follow the revolution Marx preached. (In strict Marxist terminology, “Communism” is the ideal stateless society to be reached as an ultimate goal.) The only way to get a definitive opinion on the features of Marxist socialism, says Harry Harding, senior fellow at the Brookings Institution, would be “to bring Karl back to speak for himself.”

The version of Marxist thought that eventually won out, because it achieved power, was Marxism-Leninism, after V.I. Lenin, the leader of the Bolshevik Revolution. According to Lenin, Marx’s call for a “dictatorship of the proletariat” meant that a tightly organized Communist Party was to be the exclusive dominating force in transforming society. Among the millions attracted by this prescription were two young Chinese, named Mao Tse-tung and Deng Xiaoping, who saw in it a way to change their country from a weak, backward state pushed around by foreign powers to a mighty modern nation. Deng has remained a model Leninist in the sense of countenancing no challenge to the Communist Party’s role in leading society, even when portions of the party balk at carrying out his reforms.

In matters of economic organization, however, even Lenin was a backslider of sorts. In 1921, when his “war Communism” stirred dangerously strong opposition, he shifted to the New Economic Policy, which sounds almost like a preview of Deng’s reforms. Under the N.E.P., the new Soviet state owned and operated only what Lenin called the “commanding heights” of the economy, that is, the basic industries. Peasants could grow and sell privately what they wished after paying a tax in produce to the state; small-scale private enterprise was permitted; foreign capital was invited in.

But while Deng intends his reforms to be permanent, Lenin viewed the N.E.P. as a strategic retreat. Stalin put an end to it and launched the Soviet Union on a nearly total collectivization of agriculture and nationalization of industry. Stalin’s system became the dominant version of Marxism, if only because the U.S.S.R. for decades was the sole significant officially Marxist state and remains its most powerful one.

One of Mao’s main contributions to Marxist theory was to stress the role of the peasants, rather than the industrial workers exalted by Marx. Another was the doctrine of perpetual revolution, which reached chaotic extremes during the Great Proletarian Cultural Revolution that began in 1966. Party bureaucrats and intellectuals were banished to factories and into the countryside to “learn from the people” by working with their hands, and teenage Red Guards rampaged through China assaulting supposed “bourgeois rightists.” One was Deng, who was paraded through Peking with a dunce cap on his head and mocked as a “capitalist roader.”

He is not exactly that, but to the extent that he bothers with ideology, which is not very far, he certainly tends to a minimalist definition of Marxism. As Deng told TIME: “In carrying on socialism, I think we should uphold two things. First, public ownership should always play a dominant role in our economy. Second, we should try to avoid [class] polarization and we should always keep to the road of common prosperity.” Beyond that, he implies, pretty much anything goes if it “will lead China to development.”

Chinese intellectuals are engaged in a spirited debate about just what can be accommodated under a Marxism stripped to its barest essentials. The sale of stock in a business? Yes, says one theoretician, as long as the shares are bought by employees, or possibly their neighbors if an enterprise happens to be a collective (a few of which have in fact sold shares). An exchange on which employees and neighbors could trade the shares among themselves? “That is under study.” A social scientist specializing in Marxist ideology goes so far as to suggest that since Marxism-Leninism purports to be a science, even nonparty people should have the right to re-examine it. Says he: “Science belongs to everybody.”

At the minimum, the spirit of Deng’s course is very different from that of classic Marxism. While Marx can be read as allowing the market to coexist with socialism for a while, he regarded the market as an exploitative device that would eventually disappear. It seems doubtful that he would have approved any attempt to revive it after it had disappeared. Most of all, Deng’s version of Marxism lacks the crusading zeal of the classic variety. Marx preached his revolution as history’s final showdown between the forces of light and those of darkness. It strains the imagination to conjecture what he might have thought of a second revolution that seeks, in Deng’s words, “to adopt useful things [from] the capitalist system.”

Oddly, though, the guardians of Marxist purity in Moscow are not making anything like the case against Deng that might be expected. In private, they fear that China will be come an even greater military threat if the reforms succeed. But in public, Soviet journals have noted China’s economic progress and expressed only mild doctrinal qualms. The Soviets must avoid name calling if they want to continue smoothing political relations with Peking. Also, suggests an Asian diplomat in Moscow, they “may want to keep their options open in case they decide, five years from now, that they want to try some of these things themselves. They will not be inviting capitalists into special economic zones, perhaps, but they might be interested in a ‘managed’ market system.”

Soviet officials scoff at the idea that there is anything the highly industrialized U.S.S.R. could learn from agrarian China. But they have at least been inquisitive about Deng’s reforms, and by some indications more impressed than they like to admit. Dwayne Andreas, chairman of Archer Daniels Midland Co. (a giant U.S. corporation dealing in farm produce) and a frequent visitor to China, journeyed to Moscow in 1984 and had a two-hour private talk with Gorbachev, who was then still in charge of Soviet agriculture. “He was very curious about what I told him concerning the reforms,” Andreas recalls. “He particularly wanted to hear how China’s joint-venture system with foreign companies worked.”

Long range, though, the prospect of China’s creating a modern society by following a heretical brand of Marxism constitutes a deadly ideological danger to the Soviets. They are having enough trouble as it is getting their allies, not to mention Communist movements that have not yet come to power, to follow their leadership. China’s example can only encourage such countries as Yugoslavia and Hungary to continue their efforts to blend market elements into state-dictated economies, and lead out-of-power Marxist parties to think they do not have to copy the Soviet line either.

Italian Communist leaders have praised the Chinese for asking the right questions about why Soviet-style Marxism has failed economically, and a highly sympathetic account of the Chinese reforms appeared in East Germany’s official newspaper Neues Deutschland. Svetozar Stojanovic, a Yugoslav social scientist now serving as a visiting scholar in the U.S., goes so far as to say that “in the eyes of many people, the Chinese have become the new vanguard in the Communist world.” More surprising still are the views of Silviu Brucan, professor of sociology at the University of Bucharest in Rumania, a nation formally allied with Moscow in the Warsaw Pact. Writing in the American magazine World Policy Journal, Brucan opines that if China succeeds in building a modern economy “the Kremlin will then be confronted with a dramatic choice: to cling to the old ways and rely more and more on military power to exert its influence, or to take the bull by the horns and proceed with a radical change in both economic policy and global strategy. The issue of leadership in the Communist movement will depend on that choice.”

Brucan, in common with Western analysts, also believes that successful Chinese modernization “is bound to acquire a tremendous following, particularly in the Third World.” Many African and Asian leaders are committed to Marxism as the leading anticolonial ideology but suspicious of the Soviet version. Marxists in Africa talk about an “African socialism” that seems to embrace just about anything that can be accommodated with a one-party state. China’s example seems likely to encourage them to believe that they can develop their economies and remain theoretically Marxist without following the U.S.S.R.

In Asia, however, there are two complicating factors. Some countries, notably Indonesia, fear that a strong, modern China may eventually try to reduce them to a kind of political vassalage. A much more immediate consideration: China is already becoming a powerful economic competitor for such industrializing Pacific Rim countries as Taiwan, Thailand, Singapore and South Korea. Rising agricultural output has enabled China to become a net exporter of grain. Exports of other goods as diverse as toys and oil are increasing too. Low wages enable China to compete on price with any of the developing countries. And China can offer its trading partners in the industrialized world the lure of access to a potentially gigantic market.

Nonetheless, it is very much in the U.S. interest to do everything it can to encourage Deng’s reforms by opening its own markets to China’s exports and smoothing China’s entrance into the free-world trading system. That will not be easy, in view of protectionist pressures in all industrialized nations, including the U.S. A glaring example of what not to do is the Jenkins bill, named for Georgia’s Congressman Edgar L. Jenkins. The bill, which calls for restrictions on textile imports from China and other Asian nations, passed both houses of Congress, but Reagan killed it with a veto.

All calculations of China’s potential role in the world, however, rest on two critical assumptions: that Deng’s reforms will be continued and broadened, and that they will yield the promised payoff in a relatively short period. Unhappily, neither is at all certain.

There is no reason to doubt Deng’s own commitment. “This is the only road China can take,” he told TIME. “Other roads would only lead to poverty and backwardness.” At a Communist Party conference in September, Deng and his allies succeeded in getting supporters of the reforms promoted to many high- and mid-level positions in the government and the party. Deng, says a Western analyst, “has prepared not only his own succession but the succession below that as well.”

But that same party conference provided a striking indication of the depth of the opposition Deng faces in the form of a speech by Chen Yun, 80, a Politburo member who likens the economy to a bird that must be kept in a cage. “A planned economy must remain as our primary goal; a market economy can only be a supplementary measure for temporary adjustment,” said Chen. More generally, he complained that “everything for money is the decadent capitalist idea which has gradually prevailed in our party and society.” Even if that point of view should eventually win out, a return to full-fledged Maoism seems most unlikely. The sufferings of party officials and intellectuals during the Cultural Revolution, the economic stagnation under Mao and the rapid growth achieved during the first stage of Deng’s policy all argue against it, even to Chen and other conservatives. On the whole they approve of Deng’s rural reforms.

Yet it is possible to foresee a crackdown after Deng passes. Support for greater central control of the economy could come from party officials fearful of losing control and from ordinary citizens envious of the new rich class. The Chinese press already reports many stories about this “red-eyed disease,” like one about a peasant woman who poisoned all the ducks of a prosperous neighboring farmer.

The deciding factor undoubtedly will be the further success, or lack of it, of the reforms. Deng’s formula for overcoming opposition is a simple one: leave the critics alone and let them see for themselves that the system works and that they would be better off if they went along. “We will let practice dissipate their worries and misgivings,” he says.

But success cannot be taken for granted either. Along with growth, the reforms have produced some “evil winds,” as the Chinese call them. The most ominous is an upsurge in bribery, black-marketeering and other forms of corruption. Chen Yun reported that in the past year alone party and government officials or their children have started 20,000 private businesses, “a considerable number of which collaborate with lawbreakers and unscrupulous foreign businessmen” to get rich in ways that are decidedly not glorious. Among the crimes he accused them of were peddling counterfeit medicine and “the sale of obscene videotapes.” It is widely estimated that about half the managers of state-owned enterprises pursue profit by cheating on corporate income taxes. The most sensational scandal involved a ring of party and government officials on Hainan Island who sold $1.5 billion of goods illegally imported through Hong Kong, including Mercedes limousines and color TV sets, before they were caught. It is at least possible that conservatives can muster support for the idea that the only way to stamp out corruption is to cut back on modernization.

The reforms could fail in other ways too. Industry managers have never been trained in the complex skills needed to make a market economy work. Indiana University’s Hans Thorelli, who served as a visiting professor of marketing in Shanghai and Dalian in the early 1980s, recalls being asked in all earnestness by his students, “What is a salesman?” There is always the threat, too, that population growth will swallow up any production increases.

A deeper question is whether Deng can bring himself, and lower officials, to free the market enough for it to work properly. Werner Gerich, 66, a West German manager who was hired to run a state-owned diesel-engine plant in Wuhan, found his factory, like many others in China, heavily overstaffed. “If I fired 700 people [out of a total of 2,140], we could make the same number of engines with better quality because we would have money,” he says. But he quit in despair because party officials would not let him make that and other changes he considered essential. Mao’s tradition of “the iron rice bowl”–that is, lifetime employment–dies hard.

One top economic official in Shanghai gives this reason for retaining at least some production quotas: “Of course we cannot give each factory the right to decide what to produce. What would happen if all of our garment factories produced blue jeans and none produced coats?” The capitalist answer would be that a free price system would prevent that. The price of jeans would plummet, and the price of coats would soar; many jeansmakers would, so to speak, lose their shirts and be happy to switch to turning out coats. But Deng and his planners seem unwilling to let prices fluctuate freely enough to guide investment decisions in that manner.

The deepest dilemma is whether China can achieve even the relatively free economy Deng is trying to create without undermining Leninist control of politics and society. There are many Chinese, not all Chen Yun types, who doubt that, in the long run, economic freedom can exist without greater political liberty. They are already debating what course the nation will take if they are proved right.

One Chinese social scientist states the dilemma pithily. Says he: “If the party does not continue the reforms, the economic situation will get worse. But if the reforms continue, the party itself will lose power” to newly rich peasants and newly independent factory managers. His conclusion is that the party will cut back on, if not reverse, the reforms rather than let that happen. But Zhao Fusan, a senior scholar at the Chinese Academy of Social Sciences, states flatly that “the process of economic reforms will naturally bring about a process of democratization, the setting up of checks and balances in political life and the rule of law.” If so, and if the Chinese are willing to reinterpret Lenin as well as Marx, the potential consequences for both the Communist and non-Communist worlds would be truly staggering.

That may be too much to hope for, at least anytime soon. The history of China in the 20th century has been one of repeated upheavals, of which Deng’s own career is a prime example. But there is at least a chance that Deng will bequeath to his nation an economic system working well enough that his successors will not want to reverse it, and thus that China will also gain a measure of the political stability it has so long and so disastrously lacked. If so, the inventive energies of the Chinese, which gave the world tea, paper, movable type, gunpowder and the first functioning bureaucracy, would be freed to carve out a unique role for the nation. China would enter the modern world on its own terms rather than on any dictated by Western capitalists, Soviet Marxists or anyone else. And Man of the Year Deng Xiaoping would expand what he alone among world leaders already seems to possess: a secure place in the history books to be written in the next century. –By George J. Church. Reported by David Aikman/Washington, Richard Hornik/Peking and James O. Jackson/Moscow