CHINAS ECONOMY 55 serve either capitalism or socialism. Commodity production can, according to them, stimulate and enliven the existing productive forces, provide all the products needed by China's huge population and thus enrich and consolidate the material basis of the socialist system. I may once again hark back to the preface that Lenin himself wrote in July 1907 to the Second Edition of his Development of Capitalism in Russia. He said that a genuine capitalist revolution requires smashing the feudalist features of agricultural economy. Of course, there is another way in which feudalism might be replaced by capitalism. That is through "the internal metamorphosis of feudalist landlord economy". But there "the entire agrarian system for long retains feudalist features". On the other hand, where the landlord economy is destroyed by revolution, "the basis of the final transition to capitalism is the free development of small peasant farming, which receives a tremendous impetus as a result of expropriation of landlords' Estates in the interest of the peasantry." But, "the more completely the vestiges of serfdom are destroyed the more rapidly does the disintegration of the peasantry proceed." Such disintegration leads, as has already been said, to small peasant farming, impetus to commodity production and, therefore, "the establishment of the most favourable conditions for the further accom plishment by the working class of its real and fundamental tasks of socialist reorganization." The Chinese Communist Party appears to have thought that, unless they proceed through the path of small peasant economy and commodity production, it may not be possible for them to do away with the feudal path anc* abolish what they call "the backward subsistence style of production" i because as has been said by another present day Chinese economist, "tW socialist system cannot be consolidated on the basis of a subsistence economy." The Contract-Responsibility System For this purpose, they introduced the contract responsibility system, This system functions in two ways* (1) Many households sign contracts with the collective for a certain area of farm land, forests, orchard, fish ponds, pasture land, for a processing workshop, with the basic means of production remaining under pubfic ownership. The households are asked to hand over part of their products and income to the collective, while the collective economic organisations control and guide their activities. The households that enter into such contracts are called contracted households. The contracted households are considered part of the collective economy. They are taken to be a form of management of the collective economy and are of a socialist nature. (2) Some households, however, manage business of, say, poultry farming, pig raising, transport business or trading on their own without the colle-tive providing the basic means of production. They are called self-managing households. They are the owners of their means of production as well as of what they produce. This is certainly independent private peasant economy