Global Uncertainty and Chinese Capitalism

Towards a more integrated but conflict

prone world
by Kumar David-November 7, 2015, 8:57 pm

Class struggle and

economic difficulties have multiplied in the
developed world in the last seven years
(since autumn 2008) and the economic
downturn has spread to China whose
headlong rush to capitalism has been
thwarted by powerful internal impediments
(monopoly power in the hands of a
Communist sic! Party and the strength
and size of its working class and
peasantry). Chinas economy slowed down
precipitously in 2014-15. The Middle East
is a boiling cauldron of devils broth; sort
out the Iran nuclear imbroglio and IS
shatters the region into a dozen imploding
fragments! The Middle Eastern and North
African refugee flood into Europe (a rising
proportion are economic migrants) may
pass the three million mark before it
abates; it is already transforming the
social face of the continent and firing up its
political temperature.
A significant left turn in Europe (Syriza in
Greece, Corbyn in the UK, Podemos in
Spain, the Left Front in Portugal) has
jumped the Atlantic; social democrat
Bernie Sanders is doing half as well as Hilary Clinton in opinion polls;
conversely in Turkey the HD (Peoples Democratic) party suffered a
moderate setback in last Sundays elections. Aung San Suu Kyis crafty

silence on the genocide now being perpetrated on the Rohingyas is

shameful, but her National League for Democracy is likely to win today (8
November). Xenophobic Eastern Europe imposes more pain on already
anguished refugees while neo- fascism is on the rise in France, Denmark
and Austria. In America, the Tea Partys fruit cakes call the shots in
Congress and it is unlikely the Republicans will be defeated in the 2016
House of Representatives elections. A very variegated world indeed!
How this changing world will affect the nature of the still evolving state in
China is an open question and the theme of this piece. But first I need to
declare that I was one in a threesome debate with two comrades of yore
Shantha De Alwis and Gerard Rodrigo - on the character of this state. Our
political links go back to early 1970s, Vama Samasamajaya times though
I knew Gerard, an old Thomian, from short-pants days. My cousin Prem in
Sydney and KK Gunda of Telecoms fame, both Thomians, could regale you
with many a merry tale of Gerard that would split your sides, but that will
have to await a more cheery occasion.
In the late 1990s we debated the class nature of the post-Deng state.
Shantha insisted it was already capitalist (Stalinist and capitalist) while I
argued that it was an open question; a hypothesis I finalised in a long
paper ("Chinas Socialist Market Economy: Viable Concept or Oxymoron")
at the Hector Abhayavardhana Felicitation Symposium in year 2000.
(Proceedings edited by Rajan Philips and published by Marshal Fernandos
Ecumenical Institute for Study and Dialogue in 2001). Gerard was to the
right of both of us; his belief was that progressive and democratic
capitalism was the way to go in the foreseeable future. All three theses,
not in their original form but after refurbishing, still retain merit and you
will espy flashes of the three resuscitated in this essay.
Whither (not wither) China?
In so far as this essay goes I have no interest in applauding or denigrating
China, I am incognito; it is simply a scientific question. Is it a duck, a
mammal or an in-between platypus? Does it have the determining features
of a capitalist system, or is it a non-capitalist bureaucratic monstrosity like
the Soviet Union, or are its defining characteristics still indeterminate? The
essay strays beyond this abstraction only to the extent of inquiring: And
what will it be in a decade or two?

I should not regurgitate statistics as this is written for knowledgeable

readers but it is an easy way to get started. About 60% of Chinas value
added (GDP) is in the private sector including peasant agriculture, but
about 60% of assets are state owned leaving out land - technically all land
title is held by the people (state, nation etc) so one does not know on
which side of the balance sheet to count it. So I guess so far its a 1-1
draw. But then it has been pointed out that the burgeoning private sector
is the leading edge of growth, technical modernisation and exports. Pat
comes the counter argument that all basic sectors (extractive industries,
minerals and oil, electricity, rail, air and road transport) are state owned,
and equally important, Chinas great banks (now the biggest in the world
by asset valuation) are state controlled though they also raise cash in
international capital markets. It still looks like a tie two all but its still
only half-time.
If the state is but a proxy for an emerging capitalist class, then state
ownership does not count for much in deciding if China is non-capitalist.
The key then is the direction of social and political change. Inequality of
income, but not wealth, is marginally worse in China than the US; the
respective Gini Coefficients are 42% and 41% for income, but for wealth
55% in China and a whopping 80% in the USA. There are more $billionaires in China than in US, but not per capita, but American
billionaires are vastly more loaded. We often hear that the most well to do
1% in the US has more wealth than the lowest 90%, but even the richest
10% in China owns nothing like what the remaining 90% has (reliable
statistics are hard to come by). Since the Chinese state is a giant asset
owner, gathering a huge portion of national assets in its embrace, wealth
distribution is implicitly further flattened. I have spent time in both
countries, visible inequality is more repulsive in China than America
because of the absence of social welfare (not that the US is Scandinavia!)
and shoddy mass healthcare. Ostentation and degeneration of the parvenu
offspring of Chinas nouveau-riche flotsam is sordid. So now are we are at
a three-all draw between duck and mammal? Hooray for the platypus!
Is the state in China a proxy for a capitalist class destined to rule? The role
of the Communist Party (CCP) and dispersion of power between class
actors and between the centre and provincial and county level
governments make this assertion simplistic. It is the CCP and state that
drives the biggest and most expensive infrastructure construction
programme in human history. This is not akin to the accumulation and
expansion that accompanied the 1780-1840 Industrial Revolution in
Britain, or the birth of the behemoth of American capitalism in the second

half of the 19th and first quarter of the 20th Centuries. The processes are
different; the economic laws, if you prefer an old-fashioned term, are
different. You can attempt to cite Bismarcks national unification,
protectionism and welfare programme, or the Meiji period (1868-1912) in
Japan, but their class bases were very different from China. The Junkers in
Prussia and Meiji (enlightened) restoration of the Emperor and the
oligarchy in Japan are not comparable to the CCP. Portrayal of the last 35
years as delivery of capitalism by a proxy midwife is frivolous; it fails to
explain the 70 million strong CCP or capture the complexity
and diversity of the processes sweeping across a 1.3 billion strong country. It is timely
that I repeat that this essay does not intend to eulogize or censure, only to depict
accurately.
President Xis anti-corruption campaign has netted 100,000 indictments
(Lankan readers note, I have not added three zeros) the vast majority are
politicians and officials. Party members have been prohibited from joining
golf clubs (where a lot of dicey deals are sealed) or indulging in
ostentatious banquets. There is a point to this Calvinism; overreach is
necessary to pull party and bureaucracy back from the appurtenances that
accompany graft. Its relevance to this essay is its political dimension;
these measures do not match a party that is an instrument of a
burgeoning capitalist class. There is more to it than that. I will not quarrel
with those who assert that China is not socialist; but to say it is, or is in
the process of becoming a capitalist state, at least in the way that we are
familiar with capitalism, is shooting from the hip.
Global impacts
The long recession that commenced in the banking and finance-capital
sectors in the US in Q3 2008, swept into Europe in 2010 and moved
further east to China in 2014-15. The US recovers briefly and then flops
again; Europe, except for the UK, is still very much in the doldrums; China
is in a bad way at this time of writing. I will not offer data about America
and Europe, readers are familiar with the predicament of these continents,
but a few words about the Chinese economic downturn are in order. It is
an all round downturn, GDP growth has plummeted from double digit
figures a few years ago to just over 6% in 2015 (maybe lower next year),
imports and exports are severely down, the Shanghai stock-market
buckled and was rescued by the state, the Yuan is falling and the threat of
deflation is peeping through cracks in the edifice. Tumult in American and
European capitalism is creating pangs in China and this in turn generates
paroxysms of contraction in mineral and raw material exporting countries.

Export and currency difficulties for Europe (Germany) and for the dollar
are a consequence. Its a mutually reinforcing descent.
The response of the CCP is mixed, it attempts to inject liquidity, rescue the
stock-market, and lower interest rates the usual tricks of the Fed and
ECB. But there is also pressure to withdraw deep into the vast indoors,
enhance consumption of the population (millions more dwelling units,
thousands more schools, investment on environment), turn resources
away from the capitalist sector towards localised projects, and enhance
military spending. This dichotomy of responses signals the strength the
platypus hypothesis. Not only China, this is also the parallel story of
Vietnam, tomorrow of Cuba and afterwards possibly Venezuela and Nepal.
Forecasting the consequences of the global political dimension, that is
radicalisation in the West, tension in flashpoints such as the South China
Sea and sour relations with Japan, is too much for one essay.
Radicalisation, whether leftist, ultra-nationalist or fascistic, elsewhere will
not ignite mass responses in China; such events will have much more
impact within the Party. China already has over 100,000 "mass incidents"
(protest marches and clashes with the authorities) a year in response to
local grievances, thats a different ball-game immune to Occupy-This-orThat activists and European election outcomes. But these events affect the
political elite and factions in the Party. Ideology retains its influence and
thats another reason why the leadership is cautious.
Posted by Thavam