From Chapter 8 of Ernest Mandel's The Formation of the Economic Thought of Karl Marx: 1843 to Capital.
8. The Asiatic Mode of Production and the Historical Pre-Conditions for the Rise of Capital
....one must carefully distinguish what Marx and Engels meant by this expression, the distortion that it subsequently suffered at the hands of some of Marx’s disciples and some of his opponents, and the way it is used today by historians and sociologists inspired by Marxism. For this purpose, a brief review of the origin of the idea in the thought of Marx and Engels seems useful.
Without wishing to go back to the origin of the expression “Oriental despotism,” which dates from the seventeenth century, or to Montesquieu, who made extensive use of it,13 it is likely that Marx and Engels worked out their theory of the Asiatic mode of production under the influence of three currents of thought: first, economists like John Stuart Mill and Richard Jones, whom Marx had studied or was studying in 1853, and who employed similar expressions;14 then, accounts of travels, memoirs, and monographs devoted to Eastern countries, which Marx and Engels read at about this time;15 finally, special studies they made of village communities in other parts of the world which led them to recognize the importance of this type of community in the countries of the East.16
All of these studies were at bottom by-products of a constant and minute analysis Marx and Engels were making of Britain’s foreign trade and economic situation. The markets of the East were increasingly important as outlets for British industry. The expansion of British exports was causing profound upheavals in Oriental society—the Taiping rebellion in China and the Sepoy mutiny in India were reactions, directly or indirectly, to this disintegrating influence. Fascinated by revolutions, whether they occurred in the West or in the East, Marx and Engels set themselves to study the structure of the societies that were being shaken. This was how they came to formulate the working hypothesis of an Asiatic mode of production.
The fundamental characteristics of this mode of production were set out exhaustively enough in the three letters of June 1853 already mentioned, and in four articles published in the New York Daily Tribune. They can be summarized thus:
(1) What is above all characteristic of the Asiatic mode of production is the absence of private ownership of land.17
(2) As a result, the village community retains an essential cohesive force which has withstood the bloodiest of conquests through the ages.18
(3) This internal cohesion of the ancient village community is further increased by the close union of agriculture and craft industry that exists in it.19
(4) For geographical and climatic reasons, however, the prosperity of agriculture in these regions requires impressive hydraulic works: “Artificial irrigation is here the first condition of agriculture.”20 This irrigation requires nearly everywhere a central authority to regulate it and to undertake large-scale works.21
(5) For this reason, the state succeeds in concentrating the greater part of the social surplus product in its own hands, which causes the appearance of social strata maintained by this surplus and constituting the dominant power in society (whence the expression “Oriental despotism”). The “internal logic” of a society of this kind works in favor of a very great degree of stability in basic production relations.
We find all these characteristics mentioned in the Grundrisse, including the importance of hydraulic works.22 At the same time, however, we find a number of additional ideas which enable us to define more exactly what Marx and Engels meant by the Asiatic mode of production.
In the first place, the quite accidental and secondary development of the towns in Eastern countries, and their strict subordination to the heads of state or their satraps, are stressed several times.23 This meant that production remained almost exclusively production of use values.24 Now, it is the development of the production of exchange values in the towns that makes possible preparation for the predominance of capital. When the power of money becomes predominant in non-industrial societies, it leads to the domination of the country over the town.25 In other words, the distinctive structure of the Asiatic mode of production—the subordination of the towns both to agriculture and to the central authority26—implied that capital could not fully develop. That meant not stagnation of the productive forces (which cannot be proved in a case like that of China) but retarded development, which in the end proved fatal to the nations based on this mode of production.27
The dissolving effect which the development of trade and a money economy had on the Asiatic mode of production is shown in numerous examples from the history of ancient Mesopotamia, China, and India. The Hungarian sinologist Ferenc Tökei uses, for China, the expression “pre-capitalist development.” It is undeniable that under the Ming dynasty China experienced—like India at the height of the Mogul period—an expansion of luxury production and private trade that brought the country to the threshold of manufacturing and commercial capitalism.28 But it is the peculiar structure of the Asiatic mode of production that enables us to explain why this threshold was not crossed.