Re: The rise of China and my own ahistoric forecasts

[Mark Jones <markjones011@xxxxxxxxxxxxx>]

At 24/07/2002 12:12, D OC wrote:
> Mark,
>
> What makes you think China is going to overtake the US? What evidence do you
> have on this. The gap in per capita terms was actually increasing until
> recently - as far as I remember.


Thanks for this. I agree except for a few caveats.

I don't think what will save China (if anything does) will be its socialist
residues (there's more socialism in everyday life in the US than in China,
I'd have thought, beginning with little things like the inherent socialism
within US citizens which leads them to drive consistently on the right side
of the road, which you don't see so much in allegedly more 'socialist'
places) but what can save China is its ability  to out-compete its trade
rivals. If the US now tries to export its way out of a slump, then the
world faces a vicious and desperate deflationary downward spiral, with all
the big capitalist states indulging in protectionism, militarism, currency
devaluations, and suffering profit crises, wage cuts and mass unemployment
and social unrest.

The winner will be the country or region which can screw its workers the
most, and that will surely be China on present form. China can devalue and
will do so in order to defend its export markets against renewed US
competition; this will deepen the chronic deflationary crises besetting
other Asian rivals including Japan, Korea, Singapore etc. But it will also
destroy US attempts to rebalance its economy and export its way out of
trouble. I take your point about the US benefiting from repatriated
superprofits from its informal colonies, maquiladoras etc, and from the
exercise of dollar seignorage. This is what happened in the similar crises
after 1973, when dollar debt got recycled and ended up as 3rd world debt;
the rise in oil prices hit the US less hard than anyone because oil was
still paid in dollars which the US only has to print; the effect of that
world crisis was skewed and it damaged most, the weakest, so-called
'developing' world: Latin America, Africa etc. It put paid to the whole
notion of development forever, which historically was a major blow for the
pretensions of capitalism as a world system capable of universally
benefiting the world's peoples, but nonetheless the subsequent transfer of
value from the poor states to the rich and above all to the US did help
float the US off the rocks and relaunch it during the Reagan and then
Clinton eras, and did give the US the final impetus it needed to destroy
the USSR. But the situation today is different in 2 ways, firstly the
peripheral states which the US so successfully plundered after the First
Oil Shock cannot be plundered again because, like Argentina, they are
already broke; and secondly the US had great difficulty last time in
ensuring that oil was still nominated and trade in the US dollar; this time
it may not succeed at all.

This is what the Bush hoo-hah about Iraq and now Iran is about: it's not
just that they need a foreign adventure to distract people upset by
recession at home; they need to make sure that any collapse in the value of
the dollar does not have the major and extremely adverse unintended
consequence of making people start buying and selling mid-east oil in the
euro, yen or yuan. You see how there is logic to what the Bushies are
doing. Only by cast-iron hegemony over the Persian Gulf and Arab states,
can they defend dollar hegemony in the face of dollar devaluation,
something the Bush adminsitration now appears to favour.

This would be a disaster for US imperialism and must be avoided at any
cost. The dollar may fall 30-50%  in the next 12 months. This is why it is
important to undergird US military hegemony in the mid-east. It is
weakness, not strength, which forces this option on them.

If the oil states like Saudi Arabia--now unwilling clients of the USA--
trade with China in the yuan and the EU with the Euro, than the US will
lose its hyperpower uniqueness. There will then be an interregnum or
transitional period before or if a new world hegemon can establish itself
against all rivals. I would like to argue that we are now deep into a
general crisis of capitalism in which the collapse of major states and the
rise of authentic revolutionary movements capable of seizing state power is
at least thinkable. But if we can see that, so can they, and this is why we
should be alive to the possibility that we may instead get some kind of new
global settlement which may acknowledge some at least of China's
pretensions, at least to regional hegemony, as the price of suppressing
some renewed and virulent form of Bolshevism. The background to events will
be general crisis, mass unemployment and depression in major capitalist
states, together with wide-scale warfare in the mid-east. Some or all of
these outcomes seem likely consequences of the present market meltdown and
a collapse of the dollar.

The only way the US can forestall Chinese bids for regional hegemony will
be to destroy its industry. My bet is that it's already too late for that.

>>China's emergence as an increasingly major global manufacturing and
trading nation undoubtedly poses a major challenge to Japan, as it does to
virtually every nation. The massive foreign investment (including from
Japan) pouring into China, with more likely to flow in the coming years, is
likely to transform the country more and more into the workshop of the world.
What distinguishes China from any precedent among developing and newly
industrialized countries is that it is assuming simultaneously a formidable
competitiveness right across the industrial spectrum -- from the very
bottom (toys, Christmas decorations, flip-flops, etc) all the way up to
high technology (semiconductors, sophisticated automotive parts and
components, etc). The Beijing and Shanghai regions are increasingly
attracting investment in advanced research.
<< [from JAPAN IN THE GLOBAL ERA By JEAN-PIERRE LEHMANN ]

http://www.japantimes.co.jp/cgi-bin/geted.pl5?eo20020701jl.htm

also this from the International Herald Tribune:

Economic juggernaut: China is passing U.S. as Asian power
Jane Perlez The New York Times Saturday, June 29, 2002
JAKARTA From South Korea to Indonesia, China is rapidly strengthening its
economic presence across Asia, gobbling up foreign investment and chipping
away at the United States' position as the region's economic engine.
As it buys up goods, parts and raw materials from its neighbors as never
before, China has accompanied its new heft with diplomatic efforts to
assure them that it wants to offer cooperation, not competition. Many have
rushed to China's embrace and are nimbly shifting their economic
alliances, particularly as the United States makes its way through only a
tentative economic recovery. "For all these countries in Asia, China is
such a large force, the only rational response is to figure out how to
work with it," said Nicholas Lardy of the Brookings Institution. "It can't
be stopped." The United States remains an essential trading partner for
Asian countries but is becoming somewhat less important in the face of
China's rise, analysts say.
http://www.iht.com/articles/62944.html


As you say the US economy has been growing per capita more than China in
some recent years and when the US grows at 3% that's more aggregate growth
than when the much smaller Chinese economy grows at 8%.  However, the US
figures for recent years on both growth and productivity may be revised.
There are big questions about the 'real' value of the dollar, and even
bigger ones about the real size of the Chinese economy. According to Morgan
Stanley's Stephen Roach:

>>with India and China having sharply undervalued
currencies relative to their respective PPPs, there is a dramatic
disparity between their PPP- and dollar-based GDPs. On a PPP
basis, these two economies collectively account for fully 66% of
developing Asia's GDP and 17% of world GDP. That's more than
twice Japan's 7% share and slightly in excess of Euroland's 16%
weight (but a bit shy of the 20% of the broader European Union).
By contrast, the two countries account for only 5.3% of
dollar-based nominal GDP at current exchange rates. In other
words, their PPP weights are about three times their
current-dollar weights in the global GDP.<<

[cit. A-List 18 June 2002]

US industrial production has about doubled since 1974, whereas the UK for
example has stagnated. The US has hardly been deindustrialised. But
China  has broken free of dependency and is becoming a stand-alone
industrial and r&d power in its own right, with a broad-based industrial
economy as big or bigger than that of the US in absolute (not per capita
terms). It's the *trend* which is decisive. Maybe China's attempt to
reverse history's earlier verdict in favour of the West will fail, but
surely it's clear that there is a titanic battle going on, and one *form*
of that battle is the economic rivalry which produces the insidious and
persisting deflationary crises which now dog the world economy. Intense and
unremitting capitalist competition causes these deflationary waves, and
what lies back of that is the class struggle between workers and
capitalists, struggle around production and within the labour-process above
all. It was this struggle which first drove US bosses to de-invest at home
and seek cheaper and more pliant workforces to exploit in for eg China. The
struggle for supremacy will be evidenced by a general slump and a collapse
in the US economy in particular, will be clear evidence that the US is
losing the battle with its main  rivals, which means China and, as Michael
Keaney points out, Euroland.

A general depression is a major challenge to US global hegemony. The fall
in the Dow is a disaster for the ruling class.

Here's a quote from the London Observer on what motivates US policy in the
mid-east:

>>Washington wants to 'discourage' the 'advanced industrial nations from
challenging our leadership', while maintaining a military dominance capable
of 'deterring potential competitors from even aspiring to a larger regional
or global role'.
The quotes don't come from a babbling conspiracy theorist but from the
Pentagon's Defense Planning Guidance, which set out American strategy after
the collapse of the Soviet Union. A draft was leaked to the New York Times
in 1992. Pentagon bureaucrats were appalled because, in their marvellous
jargon, it hadn't been 'scrubbed'. What they mean was candid language for
private consumption hadn't been swabbed away and replaced with a coating of
euphemisms, carefully constituted to avoid any phrase which might stick in
the reader's mind. The leak explained the thinking of a part of the
Washington establishment with brutal clarity. If America didn't 'stabilise'
- to use a verb which seems particularly inapt at the moment - the Middle
East, Europe, Japan and China, which have a far greater dependence on Gulf
oil, would move in and protect their interests. Although their
interventions wouldn't necessarily bother America, in the long term they
would grow into powers which would challenge its authority.
Walter Russell Mead, a foreign-policy analyst at the Council on Foreign
Relations in New York, explained the doctrine. 'We do not get that large a
percentage of our oil from the Middle East... And one of the reasons that
we are sort of assuming this role of policeman of the Middle East has more
to do with making Japan and some other countries feel that their oil flow
is assured... so that they don't then feel more need to create a great
power, armed forces, and security doctrine, and you don't start getting a
lot of great powers with conflicting interests sending their militaries all
over the world.'
America's friends are potential enemies. They must be in a state of
dependence and seek solutions to their problems in Washington.
<<

[[Nick Cohen, London Observer, Sunday April 7, 2002]]


On China's internal contradictions, John Gulick responded to my original
posting in somewhat similar vein to you on the A-List as folllows:

>>I have been knocking around Harbin and Vladivostok for the last few
months, which is why (among other reasons) your
thesis grabs my fancy. I will not offer any consummate theses here, just
kibbitzing in an amateurish way.
You write:
Or will China collapse when the sources of growth (easily identifiable and
not the result of magic) fade and underlying demographic, ecological,
resource and interethnic strains start to tell, possibly destroying the
unitary Chinese socio-economic space just as the USSR was destroyed by its
failure in global competition?
I comment:
I have not read any thorough reports on this nor thought about it
systematically,
but I can't help but believe that Chinese WTO accession will drive scores
of NE
Chinese grain (especially corn) farmers off the land. Either their crop
prices will be undercut by imports from the white settler capitalist states
(especially the U.S.), or they will have to decisively improve input-output
yields. Perhaps there are two viable methods of increasing agricultural
"efficiency" in NE China.
One is to convert to vegetable, fruit, and other crops which feature a higher
income-to-acreage ratio. This will stem the tide of
countryside-to-town-and-city migration, but given the regional climate I'm
not sure it can be implemented on a significant scale. The other is to
stick with the grains and go the John Deere route (or the Chinese capital
goods version of it). This will obviously be rural labor-displacing.
Dumping more pesticides and fertilizers on the fields to raise short- or
medium-range yield ratios will not do the trick; most farmers (even those
still deploying the motive power of beasts of burden) have hit the
treadmill with the petroleum-derived stuff. Maybe segueing into the sphere
of biotech offers some hope, but without a truly independent R & D
capacity, the PRC will be coughing up huge royalties under the WTO's
intellectual property rights scheme. (Maybe not a problem given the PRC's
favorable merchandise trade balance, and the fact that
cagey state officials are very clever at promising to abide by WTO rules
and regs, and dodging them at every turn. Only naive academics where I
teach and Chinese state televsion news broadcasters believe that conforming
to the letter of WTO principles sans any realpolitik is a winning
proposition -- certainly, behind closed doors, party-state bureaucrats
don't.) And taking a hit on the revenue side but staying in the
agricultural game is hardly an option either. Peasant income has been flat
for many years running (even Zhu Ronji admits this) and frustrated peasants
would just as soon try their hand at anything else than face incomes
dipping to bare subsistence level -- even if it means laying conglomerate
brick sidewalks in the cities for a pittance (with half the wages ripped
off by the labor recruiter), or living in shipping containers and selling
counterfeit leather shoes made in South China to Russians at border town
markets.
In a nutshell, the great transformation has only begun. Town and city
demand for
skilled and unskilled workers will have to rise at a 7 percent per annum
clip to
absorb the enlarged floating population, according to the (as always,
overly sunny) CCP forecasts. The TVE sector has lost its vigor. Sooner or
later, the debt-riddled state banks will have to write off their bad loans
to the SOE's which are antiquated by world market standards (and, despite
the long-delayed and growing wave of SOE bankruptcies and downsizings in
the past couple of years there are still plenty of those to go around). And
there is a scissors problem of sorts to retaining the fervent pace of FDI
inflows. Labor-absorbing FDI will come if it can hook into regional and
global sourcing and marketing networks, but the external world appears a
bit capital-starved and demand-weary for now. If I'm not mistaken the party
bosses and financial ministers have been toying with the idea of another
1994-style devaluation to make the PRC a more attractive regional and
global supply chain platform, but that will obviously have a deflationary
impact
on the external world.
Maybe my optic is too short-run. Or maybe an objectice crisis will not
morph into a subjective crisis, as Mark notes. Stirrings among laid-off SOE
workers have not amounted to much because there is not horizontal contact
among them, and perhaps the same would follow for spatially fragmented and
organizationally weak lumpens,
like so many potatoes in a sack. The reason I raise the issue of the coming
tide
of human displacement from the Chinese countryside at all is geopolitical:
here in NE China, one migration outlet is the Russian Far East (RFE). When
the border was virtually uncontrolled in the years immediately following
the Soviet collapse,
anti-Chinese political demagoguery was sky high in the RFE. The border is
much more controlled now, but the looming plight of NE Chinese grain
farmers augurs a repeat of the early 1990's. In my estimation, this matters
because potential condominium in the distant future between the PRC and the
U.S. depends partially on Russo-American relations in the near future. If
Chinese migration-induced instability in the Russian Far East ruins the
natural resources tango between Putin and the West, then the chances of the
the PRC and the U.S. jointly managing a hegemonic transition is reduced by
some factor. How large that factor is, I don't know. But as Mark well
knows, a great transformation in a country with a rural population the size
of China's, one attempted at such a late moment in world-historical time
(with competitive c/v ratios being what they are, not to mention the
resource and pollution constraints), is an unprecedented grand experiment,
a whole new animal.<< [from the A-List today]

Finally, I agree absolutely when you say:


> Besides, I have a feeling that things are going to get interesting from a
> revolutionary perspective

Mark
sorry for going on too long.




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