Louis Proyect: The Unrepentant Marxist

June 11, 2018

Is China Socialist?

Filed under: China,economics — louisproyect @ 9:04 pm

Donald Trump asking Xi Jinping for Karl Marx reading recommendations, especially anything on “spiritual pursuit”

Four days ago Michael Roberts posted an article titled “China workshop: challenging the misconceptions” that raised a number of interesting questions:

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?

The workshop invited Roberts and a number of Chinese economists to speak on these questions, all of whom—including Roberts—denied that China was capitalist. It was sponsored by the School of Oriental and African Studies at the University of London, universally referred to nowadays as SOAS ostensibly because of the stigma attached to a word like Oriental. In the first session, Professor Dic Lo, an economist at SOAS who was the moving force behind this gathering, spoke alongside one Zhu Andong,  who is the Vice Dean at the School of Marxism at Tsinghua University. School of Marxism? Jeez, if I had kids, that’s where I’d want to them to study.

Or maybe not.

Dic Lo chastised people like Martin Hart-Landsberg, Paul Burkett, David Harvey, and Minqi Li for describing China as “neoliberal capitalist”, where growth is based on the “Foxconn” model—you know, the immense factory that turns out electronic parts and that is so oppressive that there was an epidemic of suicides.

For his part, the Vice Dean of the School of Marxism concurred with Dic Lo and offered supporting evidence for the country’s anticapitalist bona fides–the official support for the study of Marxism in Chinese universities like his. Well, only last month Xi Jinping stated that Marxism is “totally correct” for China so who are we to question that? He told all party members at a big gathering celebrating the 200th anniversary of Marx’s birth to study his writings as a “way of life” and “spiritual pursuit”.

Ironically, the Vice Dean of the School of Marxism had a different take on Minqi Li at one time. In 2005, they co-authored a paper titled “Neoliberalism, Global Imbalances, and Stages of Capitalist Development” that described the U.S. and China as the two main engines of neoliberal growth. Could it be possible that such a paper might have reflected youthful radicalism that has been tamed through the inevitable process of a career path in the Chinese academy, even if the top roosts are emblazoned with the image of Karl Marx?

Dic Lo got in the face of those ultra-leftists like Martin Hart-Landsberg, throwing down the gauntlet:

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?”

Probably without realizing it, Lo answered his own question by asking us to “explain China’s phenomenal growth and success in taking over 850m people out of poverty.” It should be obvious that this phenomenal growth comes from the massive capitalist development along the southeastern coast in cities like Guangzhou (formerly known as Canton). By opening up such cities to foreign investment and drawing in people from the countryside through land privatization, the country became a showcase for capitalist modernization.

In fact, the country that was a counter-revolutionary dagger aimed at China enjoyed the same kind of “take-off”. I speak of Taiwan that was home to Chiang Kai-shek’s KMT that dreamt of overthrowing communism on the mainland. This chart should give you an idea of how dramatic the poverty reduction was.

It appeared in an article titled “Openness, Growth and Poverty: The Case of Taiwan” that appeared in the 2007 World Development journal. It makes one wonder whether, despite all the hostility between Taiwan and the mainland, that perhaps Deng Xiaoping consciously emulated its success. The article states:

Like many developing countries, poverty was widespread in Taiwan during the early postwar years. After the government decisively reoriented its development strategy from import substitution toward export promotion at the end of the 1950s, the exceptional economic growth has not only brought with it the well-known record of income distribution, but has also resulted in rapid poverty reduction. What Taiwan has experienced in the past four decades suggests that there is a close link between openness, economic growth and poverty reduction, and thus constitutes an ideal case for a country-specific study …

But does rapid capitalist growth, even when combined with generous social services as is the case in both China and Taiwan, serve as a benchmark for progress toward socialism? In China, there is lots of personal freedom. Unlike Iran, nobody gives a crap what clothes you wear or whether you walk down the street like a drunken sailor on shore leave. But like Iran, China will brook no challenge to the ruling party, which is closely tied to what Bernie Sanders calls the “billionaire class”. If workers want to press for higher wages and a relaxation of the killing pace at Foxconn, what happens? I recommend China Labor Bulletin to keep track of these encounters, especially the article titled “Swimming against the Tide: A short history of labour conflict in China and the government’s attempts to control it.” Among the findings:

Another report in 2009 by Hong Kong activist group Students and Scholars Against Corporate Misbehaviour (SACOM) showed that the 6,000 employees of the Tianyu Toy Company in Dongguan typically worked three hours overtime each day. During peak production times they worked four hours overtime a day and some workers complained they sometimes had to work through the night, with the longest continuous shift lasting 28 hours. Worse still, if the shift went past 9:30 pm, the company refused to pay overtime. And if employees refused to do overtime, they were fined 50 yuan. To prevent workers from walking out, the company held back a month and a half’s wages and, if workers resigned without their manager’s approval, they would lose one month’s wages.

Naturally, this kind of super-exploitation produces investment capital that can continue to build new factories that act as a magnet for the rural poor. When a peasant who earns about $100 per year loses his land due to modern day primitive accumulation, he could get a job at Tianyu Toy Company making $100 per month. Is this dramatic increase in wealth a step on the road to socialism?

Dic Lo’s articles are mostly written in non-Marxist journals and are meant to refute his neoliberal adversaries, who—compared to him—would accelerate the economic practices so that they would be line with those that prevail in India or Russia today. Basically, he is arguing from the standpoint of what used to be called a “mixed economy”.

You have to go back to Historical Materialism in 2001 for the one article he submitted to a Marxist journal, in this instance a special issue on the Asian financial crisis that began in Thailand in 1997. You can find an article in the same issue by the notorious ultra-leftist Paul Burkett titled “Crisis and Recovery in East Asia: The Limits of Capitalist Development”.

Lo’s article is titled “China After East Asian Developmentalism” and is much less technical that those written by him for a-list economics journals. In contrast to the smoking rubble of Thailand, Indonesia et al, China was barely impacted in the early 2000s. While he acknowledges that China shared some of the same “marketization” features as the Asian Tigers, it was protected from the financial superstorm by policies unique to China. Neither, however, have much to do with socialism.

The first was plain vanilla Keynsianism:

The East Asian financial and economic crisis, in conjunction with the steadily slowing down of economic growth in the domestic front, prompted the Chinese state leadership to adopt four major categories of anti-crisis policies from early 1998. The first was a range of welfare-state policies, which included raising the benefits for the retired and the unemployed, raising the pay of public-sector employees, and lengthening the paid holidays of workers. All these were aimed at reversing the trend of stagnant consumption expansion. The second category encompassed several Keynesian-type fiscal packages for expanding investment demand. These packages were financed by debt issuing on unprecedented scales. The third category encompassed policy measures to revitalise the state sector.

The revitalized state sector was embodied in the State-Owned Enterprises (SOEs) that for Michael Roberts, Dic Lo and all the other speakers at the SOAS workshop see as constituting the all-important socialist sector.

Let’s take a look at one of these socialistic SOE’s, the Anbang Insurance Group that attracted a lot of publicity this year for its bid to invest millions of dollars in a building owned by Jared Kushner. The largest shareholders are state-owned car maker Shanghai Automotive Industries Corp and Sinopec, a state-owned oil company Sinopec.

Of course, trying to figure out who exactly “owns” Anbang is not easy. Like many huge Chinese firms, they make discovery difficult as an American trade union found out when pressing charges against it for unfair labor practices as the Times reported in September 2016.

The Anbang shareholders in the Pingyang County area hold their stakes through a byzantine collection of holding companies. But according to dozens of interviews and a review of thousands of pages of Anbang filings by The New York Times, many of them have something in common: They are family members and acquaintances of Wu Xiaohui, Anbang’s chairman, a native of the county who married into the family of Deng Xiaoping, China’s paramount leader in the 1980s and ’90s.

You remember who Deng Xiaoping was, right? He was Mao Zedong’s successor who took “the capitalist road” in the first place. I guess his friends and relatives were quite happy with the NEP-type reforms since it put them in the position of buying the Waldorf Astoria and coming close to bailing out Trump’s son-in-law who will hopefully be arrested this week.

As should be obvious at this point, “state ownership” is a convenient fiction in China, especially since anybody can buy shares in such companies, including Western investors. For example, Roberts is impressed with the fact that the state-owned China General Nuclear Power Corp has begun to incorporate Western technologies, However, it is traded publicly on the Hong Kong Stock Exchange, as is the case with the largest Chinese SOE’s, and thus no different from any other capitalist firm. In the final analysis, it is the class character of those who own the means of production that determines their social role. While the number of shares available to outside investors has been relatively small, “reforms” enacted in 2015 to transform SOE’s into mixed enterprises will likely increase their numbers as indicated by the transformation of the second largest mobile carrier.

Unlike China today, Soviet Russia never had a stock exchange. The children of Soviet bureaucrats could never look forward to inheriting their daddy’s holdings like Donald Trump did from his father. That is true state ownership.

Although ownership data is difficult to come by, you can read an article co-authored by Curtis J. Milhaupt and Wentong Zheng titled “Beyond Ownership: State Capitalism and the Chinese Firm” on the Columbia University Law School website. It hones in on Ping An, another insurance company. The largest block of shares is owned by HSBC Ltd., a multinational bank that originated in Hong Kong even though most shares are owned by other SOE’s. In 2016, Mexican families sued the bank for money-laundering the drug proceeds of the Sinaloa Cartel that had killed members of their families, just the sort of outfit you’d want to help overcome the law of value, as Roberts put it.

Milhaupt and Zheng refer to the “blurred boundaries” between private and state-owned firms in China, as I have tried to establish. To get an idea of how tangled things can get, this is how they describe ZTE, China’s second-largest telecom:

According to the website of ZTE Holdings, it is one of the “national key SOEs” designated by the State Council. The third shareholder of ZTE Holdings, Zhongxing WXT (also known as Zhongxingweixiantong), is a private firm owned by a group of individuals, of whom the founder, Hou Weigui, holds the largest percentage (18%). According to the website of ZTE Holdings, it was the first firm in China to adopt a “state owned, privately managed” model in 1993. Under this so-called “ZTE model,” the majority state shareholders contractually authorize the minority private shareholders to assume sole responsibility for managing the firm, subject only to the requirement that the state shareholders be guaranteed a minimum rate of return. Under the ZTE model, therefore, a firm is an SOE from the standpoint of ownership, but a POE [privately owned] from the standpoint of management.

ZTE? Doesn’t that ring a bell?

Trump hammered it with sanctions Trump after it was discovered that they were selling their smartphones to Iran and North Korea. But lately Trump seems to be in a forgiving mood. First it was Jack Johnson, now it is ZTE.

All ZTE had to do was pay a $1 billion fine and let bygones be bygones. Those of good faith might think there was a quid pro quo since the Chinese government approved Ivanka Trump’s application for five trademark applications related to her fashion and homeware business just days before forgiving ZTE.

At the same time, according to Vanity Fair, the theme park developer MNC Lido City has partnered with the Trump Organization to land $500 million in Chinese government loans, with another $500 million from government banks. The Trump Organization will take in almost $3.7 million in licensing and consulting payments from Lido, along with another project in Bali. The company will also earn management fees, and be “eligible for additional unspecified incentives.” You see, this is not graft since Donald Trump turned over the reins of managing the Trump Organization Donny Jr. and Eric, but chose not to divest himself financially from the company.

This is how the capitalist state operates in China and the USA. Even Donald Trump understands that Xi Jinping’s Marxism is a con. After Xi tightened his control of the state in the same fashion as Modi, Erdogan, Assad and all these other scumbags, Trump mused: “He’s now president for life. President for life. No, he’s great. And look, he was able to do that. I think it’s great. Maybe we’ll have to give that a shot some day.”

 

12 Comments »

  1. You didn’t mention Michael Hudson who was also at that conference with David Harvey; he said they were the only two economists who spoke over the two days.

    Comment by nickweechblog — June 12, 2018 @ 8:54 am

  2. At least I don’t recall Michael Roberts ever describing China as “socialist.” Presumably, coming out of the Ted Grant wing of Trotskyism, he thinks it’s still a “deformed workers’ state.”

    On this issue I take my cues from Richard Smith and Nancy Holmstrom: China is a sort of “a hybrid tripartite mode of production – part state-owned, part foreign-invested private-state joint venture export sector, part domestic capitalist.”

    See: http://newpol.org/content/developing-marxs-mode-production-theory

    Smith’s book on China comes out late this year. We’re all going to have to read it, I think.

    Comment by jschulman — June 12, 2018 @ 2:25 pm

  3. Actually, I only described Roberts’s position as one of denying that China is capitalist. The Chinese speakers were certainly more inclined to that position even if they are cagey about being pinned down. The title of the article is a reference to the questions posed at the beginning of Roberts’s post.

    Comment by louisproyect — June 12, 2018 @ 2:41 pm

  4. Yes, it’s hybrid. But it’s all capitalist. For Marx, the class nature of a society is determined not by the size of the state sector versus the private sector but by which class extracts surplus labor from the producing class. The key relation that determines the class nature of society is not how the members of the ruling class relate to one another (market, state plan or whatever) but how they relate to the main producers, the proletariat. The state and the social structure can take many different forms (“infinite variations and gradations in appearance,” in Marx’s words), but all will be capitalist as long as the surplus labor is extracted through wage labor – which means that the surplus product takes the form of surplus value extracted from the proletariat. And China has the largest proletariat on earth, which is not only exploited but super-exploited by both imperialist and Chinese capitalists (state and private). Its hybrid state/private form (what Roberts elsewhere terms a “weird beast”) is just one of capitalism’s infinite variations in appearance.

    Comment by Walter Daum — June 12, 2018 @ 3:56 pm

  5. Walter — my understanding is that a significant part of China’s state sector doesn’t operate along the lines of the law of value. It’s still, as workers said in the USSR, “we pretend to work and they pretend to pay us.” It’s not all statified capitalism. (Neither was the USSR, but that’s another story.)

    Comment by jschulman — June 12, 2018 @ 9:50 pm

  6. @5
    My reading of Marx is that the law of value will indeed be operative under socialism, i.e., under a state organized and controlled by workers and their organizations and parties. It’s just that the surplus value produced will go back toward taking care of the workers, and not pocketed by the capitalist classes in order to further concentrate wealth at the top. That’s why in the Manifesto, Marx & Engels specify that under socialism (i.e., in the transition to communism) certain portion of value produced will have to be set aside for the education and health of the workers, as well as for other social needs.

    If I remember correctly, Marx’s slogan for the period of socialism (not the ‘higher stage of communism) was: From each according to ability, to each according to deed/labor! (NOT “to each according to need.”)

    I am of course open to being corrected if I am making wrong assumptions.

    Comment by Reza — June 12, 2018 @ 10:19 pm

  7. To JSchulman:
    The law of value doesn’t even normally operate in a pure, unrestricted form. There’s always monopoly/oligopoly, tariffs, corruption, lack of information, barriers to the free movement of labor, etc. The “pretend to work/pretend to pay” formula under Stalinism is an extreme version. And did it survive Deng’s reforms, which ended the iron rice bowl that exemplified Maoist “socialism”? In any case, if the state sector is so inefficient at producing a surplus, it’s not what defines the class nature of the state – that’s determined by which class exploits the main producers.

    Today the super-exploitation of hundreds of millions of Chinese workers, migrants from the countryside without rights to health care, education for the kids and decent housing in the cities where they work means that they’re unable to reproduce working-class labor-power – another extreme violation of the law of value, but as Marx might add in the spirit of the law of value itself. That’s where surplus-value is produced.

    Since the main producing class is wage laborers, then the exploiting class is capitalist in one form or another. That’s what makes it possible for it to transform the form without overthrowing the ruling class. Otherwise you run into the problem of the class nature of the state changing without a revolution or counterrevolution, and the Marxist theory of the state is forgotten.

    Comment by Walter Daum — June 14, 2018 @ 12:00 am

  8. From Critique of the Gotha Programme, Part I (Marx is talking here about the first phase of communism, or socialism, the transition phase):

    “What we have to deal with here is a communist society, not as it has developed on its own foundations, but, on the contrary, just as it emerges from capitalist society; which is thus in every respect, economically, morally, and intellectually, still stamped with the birthmarks of the old society from whose womb it emerges. Accordingly, the individual producer receives back from society – after the deductions have been made – exactly what he gives to it. What he has given to it is his individual quantum of labor. For example, the social working day consists of the sum of the individual hours of work; the individual labor time of the individual producer is the part of the social working day contributed by him, his share in it. He receives a certificate from society that he has furnished such-and-such an amount of labor (after deducting his labor for the common funds); and with this certificate, he draws from the social stock of means of consumption as much as the same amount of labor cost. The same amount of labor which he has given to society in one form, he receives back in another.

    “Here, obviously, the same principle prevails as that which regulates the exchange of commodities, as far as this is exchange of equal values. Content and form are changed, because under the altered circumstances no one can give anything except his labor, and because, on the other hand, nothing can pass to the ownership of individuals, except individual means of consumption. But as far as the distribution of the latter among the individual producers is concerned, the same principle prevails as in the exchange of commodity equivalents: a given amount of labor in one form is exchanged for an equal amount of labor in another form.

    “Hence, equal right here is still in principle bourgeois right — although principle and practice are no longer at loggerheads, while the exchange of equivalents in commodity exchange exists only on the average and not in the individual case.”

    [Full text at: https://www.marxists.org/archive/marx/works/1875/gotha/ch01.htm%5D

    Comment by Reza — June 14, 2018 @ 11:48 pm

  9. To Reza:
    I agree, and I think Marx does too, that the law of value will still operate under a state organized and run by the working class. At least at first, but value then “withers away” along with the state.

    The question is, however, is that state what is meant by socialism? The word has been differently interpreted. For Lenin socialism meant the lower stage of communism, and he recognized that the US“S”R was socialist in intent but not yet in reality. For some others, socialism is another word for the transitional workers’ state. The danger is to confuse the two, for that allows the claim that the extreme inequality and oppression that pseudo-socialist societies have exhibited is inherent in socialism, and that there is no need for working-class power.

    The quotation above from Marx’s Gotha Critique is about the lower stage of communism which has just emerged from capitalist society – not the workers’ state, which corresponds to the revolutionary transformation from one society to the next, and in which the law of value still operates if in an attenuated way.

    Of course, reading Marx on both socialism and the workers’ state, it is hard to see how China can be made to fit into either stage.

    Comment by Walter Daum — June 15, 2018 @ 5:01 pm

  10. Walter, I agree. In that same text, Marx states that it is only in the higher stage of communism that, along with the disappearance of division of manual and intellectual labor and the state, the basic conditions for the disappearance of bourgeois rights will also come about, at which point we can have “to each according to need.”

    As for China, I lived and worked in Beijng for over a year, and saw the worst of extreme capitalism mixed with one-party state dictatorship. You could see migrant workers who’d tie themselves to the gates of a hospital so as to receive some healthcare. Or, you’d see construction workers (mostly migrant workers from the countryside) who’d sleep in half-built luxury high rises they were building due to lack of accommodations for workers. Those who did have dormitory-style accommodations, would sleep in buildings that were just four walls and a tin roof, would sleep on bunk beds with one-inch thick mattresses. Meanwhile, the country has the largest number of billionaires, and a Gini index that’s worse than Burundi and Cambodia (according to: https://en.wikipedia.org/wiki/List_of_countries_by_income_equality).

    Not sure how China can be classified as socialist, in any meaning of the term.

    Comment by Reza — June 15, 2018 @ 6:02 pm

  11. But all societies ‘extract’ value from the people producing it. Let’s not kid ourselves. EVEN in a commune state, it’s not about value, it’s about profits. I fall into the “China is capitalist” view. The advantages of the previous incarnations of ‘workers states’ were massive planning and production for use value and not for profit. I actually believe that China represents the first true State Capitalist state in existence (a la Cliff).

    On the SOEs. Yes, this is often given as the reason there is “socialism” in China. It is true that the % of SOEs rises and falls and whole sectors are unilaterally expropriated and turned into SOEs (coal is the best known example of this). I think Louis is heading toward the real point: almost all SOEs are really public-private enterprises. They are now ALL run by “Boards of Directors” selected by the State and the stockholders with their Chairs often MBAs from major American universities. They have a *fiduciary* responsibility to protect their stock holder though corporate law in the PRC is in the zygote state of development. SOEs are run more like SOEs in western countries than in socialist ones. EDF in France is an example and the major nationalized basic industry in the UK before Thatcher was run the same way. Prices along the lines for production to sale are often negotiated but often enough driven by the market. How is that at all socialist?

    But the State is THE major player. This is where I might disagree with some of the writers here. The arrests on corruption charges of hundreds of millionaires and billionaires are profound. The State’s role is, IMO, in the kind of pre-Imperialist “nationalist” stage of development where manufacturing capital (State and private) is held in dominance where banking capital (as opposed to Finance Capital) is subordinate to the former. Anything that could even appear to run counter to the development of the *physical* economic development of the nation is squashed or gelded in one way or another. Even the ongoing speculation in real estate is *planned* for national development.

    Speaking of speculation, it is not what drives the state capitalism of the Chinese State. It is the development of *their* productive forces, not speculation. Few people, even Michael Roberts, seems to pick up on this. Real Imperialist state (China..”faux-Imperialism”?) would it is paper, not commodities, that drives the economy. M-M-M yes? Not happening yet, in China. This needs to be incorporated into the understanding of the massive planning that goes into China’s entire political economy, both domestically and internationally. We should have more discussions about this.

    David

    Comment by davidwalters66 — June 15, 2018 @ 7:31 pm

  12. One more thing: on point that the state-owned China General Nuclear Power Corp has begun to incorporate Western technologies. How is this relevant to the class character of the state? Even a workers state would incorporate western technology. The one area I pay a LOT of attention to is China’s massive build out of their nuclear energy infrastructure which mirrors their equally massive build out of energy in general. Everyone negotiates (or steals) tech from other countries. Even Chinese nuclear development *before* Deng incorporated French nuclear methodologies in their development. It is basically an irrelevant fact so I’m surprised Roberts bring this up in his blogs.

    Comment by davidwalters66 — June 15, 2018 @ 7:43 pm


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