by Michael Roberts
The recent workshop on China organised by the China Workshop (poster and programme_05062018)
in London asked all the questions, even if it did not resolve them.
What are the reasons for China’s phenomenal growth in the last 40 years
and can it last? What is the nature of the Chinese economy: is it
capitalist or not? What explains under Xi the new emphasis on studying
Marxism in China’s universities? Is China’s export and investment
expansion abroad imperialist or not? How will the trade war between the
US and China pan out?
In the opening session, Dr Dic Lo, Reader in Economics at SOAS,
London University and Zhu Andong, Vice Dean at the School of Marxism at
Tsinghua University, Beijing (representing a delegation from various
Chinese universities) were at pains to argue that China is
misrepresented in the so-called West and not just through mainstream
capitalist views but also from the left.
All the talk from the left, said Lo, was about political repression,
labour exploitation, inequality or Chinese ‘imperialism’. But then how
to explain China’s phenomenal growth and success in taking over 850m
people out of poverty (as defined by the World Bank) and reaching
national output second only to the US. China doubles real living
standards every 13 years. It now takes the US and Europe 50 years and
Japan even longer. Is this just fake or illusory and if not, how can
this ‘capitalist’ and ‘imperialist’ economy have bucked the trend, when
the record of all other capitalist economies (advanced or ‘emerging’)
can show no such success? “How can it be possible, in our
times, for a late-developing nation to move up the world
political-economic hierarchy to become imperialist? Can anyone on the
left answer this question?”
Dic Lo criticised the majority view of left political economists that
China could be characterised as “neoliberal capitalist”, the so-called
“Foxconn Model” of labour exploitation. This view was pioneered by
Martin Hart-Landsberg and Paul Burkett, made most influential by David
Harvey, most systematic by Minqi Li; and politically correct by Pun
Ngai. But were they right?
Zhu Andong also critiqued what he considered was this Western view.
In contrast, far from a Marxist critique disappearing in China, there
was growing official support for the study of Marxism in Chinese
universities, both in special departments and even increasingly in
economics departments, which up to recently had been dominated by
mainstream neoclassical economics influenced by Western universities.
In my contribution, I also referred to the dominance of mainstream
economic analyses on the nature of China – and such theories also still
appeared in China’s own financial institutions like the People’s Bank of
China. A recent striking example is Wang Zhenying,
director-general of the research and statistics department at the
PBoC’s Shanghai head office and vice chairman of the Shanghai Financial
Studies Association. For Wang, Marx has had his day in the theoretical
limelight (ie 19th century) and for that matter so had Keynes (20th
century). The recent global financial crisis needs a new theory for the
21st century. And this apparently was the behavourial economics of
‘uncertainty’, not Marx.
I argued that there are really three models of development that could
explain China’s growth miracle and whether it would last. I deal these
in detail in my paper on China for the Leeds IIPPE conference in 2015.
So please consult that for a fuller account than this post can
provide. https://thenextrecession.files.wordpress.com/2015/09/china-paper-july-2015.pdf
There is the mainstream neoclassical view that: China went through a
primitive industrial expansion using its ‘comparative advantage’ of
cheap and plentiful labour and investment in heavy industry.
But now
China had reached the ‘Lewis point’ (named after the left economist of
the 1950s, Arthur Lewis). Put simply, this is the point at which a
developing country stops being able to achieve rapid growth relatively
easily, by simply taking rural workers doing unproductive farm labour
and putting them to work in factories and cities instead. But once this
‘reserve army of labour’ is exhausted, urban wages rise, incomes reach a
certain level and a middle-class emerges. China is now in a
‘middle-income’ trap like many other emerging economies, from which it
cannot escape and become an advanced economy, unless it gets rid of
state enterprises and heavy industry and orients towards the consumer
and services.
This view is nonsense for several reasons – not least because
comparative advantage theory is bogus and unrealistic – after all, China
has grown exponentially not just because of cheap labour but also
because of massive productive investment promoted and controlled by the
state sector. Actually, as a result of that investment expansion,
consumption spending is also growing very fast. Would a switch to
capitalist companies serving a middle-class consumer be better?
The second model is the Keynesian. This recognises that China’s
success has been due to massive investment in productive capital, not
just the use of cheap labour. Infrastructure investment directed and
controlled by the state was behind the ability of the Chinese economy to
avoid the worst effects of global financial crash and the Great
Recession where every other economy suffered. But what the Keynesian
model fails to recognise is that China cannot escape the law of value
and imbalances and inequalities that value creation through trade and
the growing market economy generates.
The Marxist analysis starts from the basic premise that human social
organisation aims to raise the productivity of labour to the point that
sufficient abundance will make it possible for toil and poverty to be
eliminated. But the drive for higher productivity in capitalism comes
into conflict with capital’s requirement for profitability.
Increasingly, the issue for China is whether the capitalist sector of
the economy will eventually override the planned public sector, so that
profitability will dominate over productivity and crises will appear,
leading to stagnation not expansion.
In my view, that point has not yet been reached in China. The state
sector and public investment through one-party dictatorship still
control investment, employment and production decisions in China – the
private capitalist sector, although growing, is still subject to that
control. See my post here.
Now this is a minority view among Marxian economists, let alone
mainstream economics. Most consider that China is capitalist just like
any other capitalist economy, if with a bit more state intervention.
Indeed, it is even imperialist in the Marxist sense. But, as I have
shown in previous posts, 102 big conglomerates contributed 60 per cent
of China’s outbound investments by the end of 2016. State-owned
enterprises including China General Nuclear Power Corp and China National Nuclear Corp have
assimilated Western technologies—sometimes with cooperation and
sometimes not—and are now engaged in projects in Argentina, Kenya,
Pakistan and the UK. And the great ‘one belt, one road’ project for
central Asia is not aimed to make profit. It is all to expand China’s
economic influence globally and extract natural and other technological
resources for the domestic economy.
This also lends the lie to the common idea among some Marxist
economists that China’s export of capital to invest in projects abroad
is the product of the need to absorb ‘surplus capital’ at home,
similar to the export of capital by the capitalist economies before
1914 that Lenin presented as key feature of imperialism. China is not
investing abroad through its state companies because of ‘excess capital’
or even because the rate of profit in state and capitalist enterprises
has been falling.
Indeed, the real issue ahead is the battle for trade and investment
globally between China and the US. The US is out to curb and control
China’s ability to expand domestically and globally as an economic
power. At the workshop, Jude Woodward, author of The US vs China: Asia’s new cold war?, outlined
the desperate measures that the US is taking to try to isolate China,
block its economic progress and surround it militarily. But this policy
is failing. Trump may have launched his tariff hikes, but what really
worries the Americans is China’s progress in technology. China, under
Xi, aims not just to be the manufacturing centre of the global economy
but also to take
a lead in innovation and technology that will rival that of the US and
other advanced capitalist economies within a generation.
There was a theoretical debate at the workshop about whether China
was heading towards capitalism (if not already there) or towards
socialism (in a gradual way). Marx’s view of socialism and communism
was cited (from Marx’s famous Critique of Gotha Programme)
with different interpretations. For me, I reckon Marx’s view of
socialism and/or communism starts from two realistic premises; 1) that
communism as a society of super-abundance where toil, exploitation and
class struggle have been eliminated to free the individual, is
technically possible now – especially with the 21st technology of AI,
robots, internet etc; and 2) socialism and/or any transition to
communism cannot even start until the capitalist mode of production is
no longer dominant globally and instead workers’ power and planned
democratically-run (not dictatorships) economies dominate. That means
China on its own cannot move (even gradually) to socialism (even as the
first stage towards communism) unless the dominant power of imperialism
is ended in the so-called West. Remember China may be the second-largest
economy in the world in dollar terms but its labour productivity is
less than one-third of the US.
China has succeeded in transforming its economy and society since the
revolution of 1949 by the removal of capitalist and imperialist power
and through state control of the commanding heights of industry and
agriculture. And it is now succeeding in applying new technology to
take it forward as a modern urbanised society in this century. But at
the same time, the law of value and capitalism operates within the
country. Indeed, the capitalist sector in the economy is growing; there
are many more Chinese billionaires and inequality of income and wealth
has risen; while Chinese labour struggles against exploitation in the
workplaces. And the law of value exerts its destructive influence also
through international, trade, multi-national companies and capital flows
– it was no accident that when China last year relaxed its capital
controls on the advice of neoliberal elements in the monetary
institutions that the economy suffered serious capital flight.
There is a (permanent) struggle going on within the political elite
in China over which way to go – towards the Western capitalist model; or
to sustain “socialism with Chinese characteristics”. After the
experience of the Great Recession and the ensuing Long Depression in the
West, the pro-capitalist factions have been partially discredited for
now. President for Life Xi now looks to promote ‘Marxism’ and says
state control (through party control) is here to stay. But the only
real way to guarantee China’s progress, to reduce the growing
inequalities and to avoid the risk of a swing to capitalism in the
future will be to establish working class control over Chinese political
and economic institutions and adopt an internationalist policy a la
Marx. That is something that Xi and the current political elite will
not do.
If you have opinions about the subject matter of posts on this blog please share them. Do you have a story about how the system affects you at work school or home, or just in general? This is a place to share it.
Thursday, June 7, 2018
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