Notes on a terrific work in political economy. Extremely pertinent to our present.
“Suppose, in response to the current crisis of neoliberalism, global capitalism is restructured with a greater degree of state intervention and more equal distribution of income (is this not what much of the world’s intellectual Left is hoping for at the moment?), would it not be expected that in at most two or three decades, there would be a new global profitability crisis? What should the world’s working classes (and the intellectual Left) do then? Wait for another round of 30 years of neoliberalism to play itself out?”
Here Minqi succinctly captures the low-hanging demands of many political commentators, who, having devoted ever more explanatory leverage to neoliberalism, seem to have settled for modest targets in their political philosophy.
“These movements of dynamic balances have led to successive “systemic cycles”:the “long fifteenth-sixteenth century” (1350-1630) based on the collaboration of the Genoese business communities and the Spanish state; the “long seventeenth century” (1560-1790) based on Dutch hegemony; the “long nineteenth century” (1740-1930) based on British hegemony; and the “long twentieth century” (1870-?) based on American hegemony. In The Long Twentieth Century, Giovanni Arrighi argued that the expansion and the growing complexity of the capitalism world-economy had required the formation of “political structures endowed with ever-more extensive and complex organizational capabilities to control the social and political environment of capital accumulation on a worlds scale.””
“In the early nineteenth century, China was still the world’s largest territorial economy and China’s GDP accounted for one-third of the gross world product. Asia as a whole accounted for fully two-thirds of the gross world product. From the early nineteenth century to the mid-twentieth century, the rise of the West was matched by the decline of Asia. By 1950, China’s share in the world GDP fell to less than 5 percent. In the early nineteenth century, the gap in per capita GDP between China and the leading core states was about 2:1. By 1950, the gap widened to about 20:1 and China was reduced to being among the poorest populations in the world.”
Following China’s ‘Century of Humiliation’ – thrashing through imperial exploits, world war II, and it’s own civil war, China was reduced to a state of widespread poverty. It’s recovery to the present day, is one of the greatest feats of humankind - of all times.
“Between 1960 and 1980, China’s life expectancy at birth rose by 30.5 years. This was an improvement greater than the world average, every country group, and every selected country.”
“…. China had followed the classic Soviet strategy of “mercantilist semi-withdrawal” in the form of state ownership of the means of production and centralized economic planning, in effect, complete state monopoly over the domestic market.”
“The former capitalists received compensation from the government and served as managerial staff in the now state-owned enterprises.”
“It is clear that the Revolutionary China that existed in the period 1949-76 remained a part of the capitalist world-economy and was bound by the same basic laws of motion (“the law of value”) of the capitalist world-economy.”
Despite being based on a different socialisation model, market dynamics are unavoidable if integration with the remaining world is sought. Firms and enterprises must still compete in the same space, set prices, and exchange commodities with nations from capitalist countries, whom overwhelmingly dominated trade. In this way, the socialist states themselves are at the mercy of markets who’s law of value is likely in deep conflict with it’s own conceptions of value. How to rise, develop and embark on the paths of modernisation if one is constricted by the dominant forms. If prices are set at certain levels, either one engages and enters into relations, setting ones prices at competitive levels, levels predetermined by powerful players, or one refuses and thus withdraws from the capitalist world-economy. How could this make life possible? Socialist states preferring the flavor of refusal are here islands, isolated from the potentially uplifting benefits of such relations. Growth, development is on the agenda; people need housing, clean water, education, health and enjoyment. No doubt, a world of socialist states creates a vastly different environment, with laws of value who’s interaction requires explication and understanding - what could such a socialisation look like?
Quoting Vicente Navarro: “… contrary to prevalent belief, the level of health of a population is not primarily the result of medical interventions… There is no correlation between level of medical expenditures and level of health… the health of the population is the outcome of a whole set of social, economic, and political interventions, among which medical care plays a minor role… Thus health indicators are good indicators of social and economic development.”
This brings to memory the foundation text on inequality and health indicates, “The Spirit Level by Richard Wilkinson and Kate Pickett”.
“However, the historical tendency indicated that a growing proportion of the bureaucratic and technocratic elites tended to become, and some former revolutionaries tended to degenerate into, selfish careerists who were only interested in the expansion of individual wealth and power. Once these selfish careerists had become the majority in the elites and managed to consolidate their material privileges and power, then a new exploiter class in the form of privileged bureaucrats, privileged technocrats, and bureaucratic capitalists, alienated from the worker and peasants, would have emerged.”
“Most Chinese intellectuals in the 1980s were from families that had been capitalists or landlords before the Revolution. Their resentments against the Revolution (especially the Cultural Revolution) were strong and they often did not hide their contempt and hatred of ordinary workers and peasants… All of these wer behind the intellectuals’ call for “freedom and democracy.” In effect, the Chinese urban middle class was demanding a bigger share of the power as China moved towards capitalism. Some intellectuals explicitly called for “neo-authoritarianism”, citing Japan, Taiwan, Singapore, and South Korea as models, that is, they advocated a capitalist model that would be repressive towards the working class but could secure “property rights” for capitalists and “civil liberty” for intellectuals.”
“After 1992, the Chinese ruling elites were ready to undertake mass privatization. Tens of millions of state-sector workers were laid off. Those that retained employment were deprived of their traditional socialist rights, such as job security, medical insurance, access to housing, and guaranteed pensions. In the meantime, privatization in the rural areas has destroyed the rural public health care and education systems, which had been very effective during the Maoist era in meeting the rural population’s basic needs. Hundreds of millions of peasants migrated to the cities, finding work under sweatshop conditions. The defeat of the urban working class and the creation of a massive surplus labor force laid down the foundation of China’s capitalist boom. By the early 2000s, China had become the world’s “workshop,” the center of the world’s export manufacture. China’s economic rise has important global implications. First, China’s deeper incorporation into the capitalist world-economy has massively increased the size of the global reserve army of cheap labor force. In some industries, this allows capitalists in the core states to directly lower their wages and other costs by relocating capital to China. But more important is the “threat effect.” That is, capitalists in the core states force core-state workers to accept lower wages and worse working conditions by threatening to move their factories of office to cheap labor areas such as China, without actual movement of physical capital.”
Alan Greenspan’s “traumatized worker”…
“After years of rapid world economic growth, global excess production capacity is being depleted, while there has been growing upwards pressure on energy and commodities prices.”
“The US’s general government balance moved swiftly from a surplus of 1.4 percent of GFP to a deficit of 4.6 percent of GFP between 2000 [Clinton term] and 2003 [Bush term], or an expansionary swing of 6 percent of GDP. The Federal Reserve cut the short-term interest rate by 5.5 percentage points and kept real interest rates below or near zero for years. The resultant massive increase in money supply helped to stabilize the stock market but it soon led to a much bigger housing bubble, which in turn led to a new round of debt-financed consumption boom.”
In terms of near zero interest rates, this is a chillingly similar scenario to that which has transpired in Australia during the recent debt-heavy housing boom. Australia’s household debt-to-gdp ratio is at a shocking figure of ~130%. A short history of Doom.
“With stagnant real incomes and wages, the expansion of the US private consumption has been financed largely by household borrowings [credit]…. US household debt has soared from about 60 percent of GFP in the early 1990s to about 100 percent of GFP today, and under the current trend could rise to 120 percent of GDP by 2010.”
“In recent years, health care, education, and housing costs have surged, known to the Chinese working people as the “new three mountains,” (the old “three mountains” referred to the pre-Revolution forces of oppression: imperialism, feudalism, and bureaucratic capitalism)…”
“China’s huge reserve army of cheap labor has been a major factor in undermining the bargaining power of the global working classes. However, capitalist development has been transforming China’s own social structure and a large proletarianized working class is emerging in China.”
“All social systems that are based on the exploitation of the great majority are confronted with the question: how can the unified rebellion of the exploited majority be prevented? Without an effective solution to this problem, it is unlikely that any exploitative system can survive for long. Historically, the problem has been “resolved” by dividing the majority into “a larger lower stratum and a smaller middle stratum.” The middle stratum is both exploiter and exploited. By providing the middle stratum with access to a portion of the surplus product, the ruling elites buy off the potential political leadership of the exploited majority… within each state, the working population is to be divided between a great majority and a relatively privileged “middle class” or “labor aristocracy”.”
“The 1980s and 1990s were “lost decades” for the historical well-to-do semi-peripheral states. From 1980 to 2000, Latin America saw its income index (as a ratio of the world average per capita GDP) fall from 129 to 95, and Middle East and North Africa saw its income index fall from 75 to 64. The eastern European index collapsed from 129 in 1989 to 82 in 2000.”
Taking Argentina as an example, the repeated ‘free market openings’ and ‘privatization efforts’ failed to hoist the nation from its debt peonage, rather, worsening the situation over the course of decades. Each failed round of austerity and debt restructuring was followed by another round of crisis, who’s remedy was the prescription of yet another round of the same medication – a cynical and demented situation for millions of workers. One had to begin wondering whom this US-IMF approach was actually aiding?
“According to one report, about two million high and middle-ranking, current and retired Chinese government officials and their relatives own about 70 percent of the total private wealth (savings, stocks, bonds, houses and foreign exchanges) in China.”
An approximation which urgently needs to be followed up on.
“For the capitalist world-economy, the problem of China lies with its huge size. China has a labor force that is larger than the total labor force in all of the core states, or that in the entire historical well-to-do semi-periphery. As China competes with the well-to-do semi-peripheral states in a wide range of global commodity chains, the competition eventually would lead to the convergence between China and the historical well-to-do semi-peripheral states in profit rates and wage rates. The convergence may take place in an upward or a downward manner.”
“A continent size state of bloc of states is probably the largest possible political unit that can be accommodated in the capitalist world-economy without undermining the necessary condition of inter-state competition. It seems that the capitalist world-economy, through successive expansions, has reached one of its historical limits. Its volume and density have by now grown to the point that it cannot be effectively regulated by any political unit that is smaller than a continent sized state and as its volume and density keep growing, the effective regulation of the system would probably require some unit that is significantly larger than a continent-size unit. On the other hand, any political unit that is significantly larger than continent sized state could be politically overwhelming in that it would in effect end inter-state competition and remove a necessary condition for an economic system based on the endless accumulation of capital. To the extend this dilemma cannot be resolved within the historical framework of the existing world-system, we are approaching the moment of demise of the capitalist world-economy.”
“In finance, the interest rate represents the growth rate of debt. Thus, if the real interest rate is higher than the economic growth rate, then the debt:income ratio trends to rise indefinitely, imposing ever greater burden on the debtors. This tendency, if not checked, would lead to widespread bankruptcies of households, business, and governments, ending with a general economic collapse. Indeed, the surge in the US’s real interest rate immediately led to the debt crisis throughout Latin America, Africa, and eastern Europe.”
Contrary to the notion that these countries entered crises under the so called ‘weight of their own contradictions and endless political repressions’.. a mysterious and unserious line of thought.
“This understanding of systemic processes is consistent with the historical materialist argument that all social systems are historical. It follows that capitalism is a historically specific social system that is appropriate only under certain historical conditions and must give way to a new social system as the underlying historical conditions change.”
“… for China and India to have any chance to rise to the status of a hegemonic power, they will have to exploit the rest of the world’s resources on a massive scale. This will immediately bring them into conflict with North America and Western Europe that have so far benefited from consuming resources at levels much higher than not only the world average but also their own bio-capacities. But the world as a whole has already overshot its ecological limit, and it can hardly survive the “rise of China” or the “rise of India” in such a manner.”