China: The Frog & The Scorpion?

Chinapoor

 

Behind the political crisis that saw the recent fall of powerful Communist Party leader Bo Xiali is an internal battle over how to handle China's slowing economy and growing income disparity, while shifting from a cheap labor export driven model to one built around internal consumption. Since China is the second largest economy on the planet-and likely to become the first in the next 20 to 30 years-getting it wrong could have serious consequences, from Beijing to Brasilia, and from Washington to Mumbai.

China's current major economic challenges include a dangerous housing bubble, indebted local governments, and a widening wealth gap, problems replicated in most of the major economies in the world. Worldwide capitalism-despite China's self-description as "socialism with Chinese characteristics"-is in the most severe crisis since the great crash of the 1930s.

The question is: can any country make a system with serious built in flaws function for all its people? While capitalism was the first economic system to effectively harness the productive capacity of humanity, it is also characterized by periodic crises, vast inequities, and a self-destructive profit motive that lays waste to everything from culture to the environment.

Can capitalism be made to work without smashing up the landscape? China has already made enormous strides in using its version of the system to lift hundreds of millions of people out of poverty and create the most dynamic economy on the planet, no small accomplishment in an enormous country with more than a billion people. Over the past 30 years, China has gone from a poor, largely rural nation, to an economic juggernaut that has tripled urban income and increased life expectancy by six years.

But trying to make a system like capitalism work for all is a little like playing whack-a-mole.

For instance, China's overbuilding has produced tens of millions of empty apartments.  "If we blindly develop the housing market [a] bubble will emerge in the sector. When it bursts more than just the housing market will be affected, it will weigh on the Chinese economy," said China's Premier, Wen Jiabao. And, indeed, by controlling the banks-and thus credit and financing-real estate prices have recently fallen in most mainland cities.

But since 13 percent of China's Gross Domestic Product is residential construction, a sharp drop in building will produce unemployment at the very time that a new five-year plan (2011-2015) projects downshifting the economy from a 9 percent growth rate to 7.5 percent.

What worries China's leaders is that one of capitalism's engines of self-destruction-economic injustice and inequality-is increasing.  According to Li Shu, an economist at Beijing Normal University, from 1988 to 2007, the average income of the top 12 percent went from 10 times the bottom 10 percent, to 23 times the bottom 10 percent. According to the Financial Times, it is estimated that China's richest 1 percent control 40 to 60 percent of total household wealth.

Wealth disparity and economic injustice have fueled "incidents," ranging from industrial strikes to riots by farmers over inadequate compensation for confiscated land. Endemic local corruption feeds much of the anger.

The government is trying to address this issue by raising taxes on the wealthy, lowering them on the poor, and including more "poor" in a category that makes them eligible for subsidies. Wen said last year that China aims to "basically eradicate poverty by 2020." According to the United Nations, some 245 million Chinese still live in extreme poverty.

Beijing has also reined in the sale of land by local municipalities. But since the major way that cities and provinces generate money is through land sales, this has made it difficult for local areas to pay off their debts, maintain their infrastructures, and provide services.

Whack one mole, up pops another.

There is a growing willingness by the average Chinese citizen to confront problems like pollution, corruption, and even nuclear power. Part of the current debate in the Communist Party leadership is over how to respond to such increased political activity. Bo had a reputation as a "populist" and campaigned against economic injustice and corruption. But he was also opposed to revisiting the issue of Tiananmen Square, where in 1989 the People's Liberation Army fired on demonstrators.

Tiananmen has considerable relevance in the current situation, since the main demands of the demonstrators were not democracy but an end to corruption and high food prices. It is no accident that, when food prices began rising two years ago, the government moved to cut inflation from 6.5 percent to 3.2 percent this past February.

While the government generally responds to demonstrations with crackdowns, that policy has somewhat moderated over the past year. When farmers ran local leaders and Communist Party officials out of the town of Wutan, the provincial government sent in negotiators, not police. Anti-pollution protests forced authorities to shut down several factories. At the same time, the government has tightened its grip on the Internet, still arrests people at will, and is not shy about resorting to force.

It is clear the possibility of major political upheaval worries the current leadership and explains why Premier Wen recently called up the furies of the past. The current economic growth is "unbalanced and unsustainable" he said. "Without successful political structural reform, it is impossible for us to fully institute economic structural reform and the gain we made in this area may be lost," and said that "such a historical tragedy as the Cultural Revolution may happen again."

Changing course in a country like China is akin to turning an aircraft carrier: start a long time in advance and give yourself plenty of sea room. If China is to shift its economy in the direction of its potentially huge home market, it will have to improve the lives of its citizens. Wages have gone up between 15 and 20 percent over the past two years and are scheduled to rise another 15 percent.

But social services will also have to be improved. Health care, once free, has become a major burden for many Chinese, a problem the government will have to address.

There are some in the Chinese government whose definition of "reform" is ending government involvement in the economy and shifting to a wide-open free market system. It is not clear that the bulk of China's people would support such a move. All they have to do is look around them to the see the wreckage such an economic model inflicts in other parts of the world.

Can capitalism work without all the collateral damage? Karl Marx, the system's great critic, thought it could not. Can China figure out a way to overcome's system's flaws, or is this the tale of the frog and the scorpion?

The scorpion asked the frog to ferry it across a river, but the frog feared the scorpion would sting him. The scorpion protested: "If I sting you, than I die as well." So the frog put the scorpion on his back and began to swim. When he reached mid-stream, the scorpion stung him. The dying frog asked "Why?" and the scorpion replied, "Because it is my nature."

Can China swim the scorpion across the river and avoid the sting? Stay tuned.

This article originally appeared in Dispatches from the Edge.

Photo: (Trey Menefee/CC)

 

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  • First I think there is good value to Conn's article, although think not taking China's position that it is building "socialism with cChinese characteristics" seriously is a bit unbalanced. Any underdeveloped country under socialist, or working class, or genuinely popular leadership, that seeks to rapidly industrialize and modernize MUST take the necessary objective foundations of capitalism and socialism into account,realistically, and soberly -- not just from some dogmatic standpoint.

    Second, I will not cease taking serious issue with the formulations found in Greg Rose's comment and some others, which I am quite certain would not be received as either "sensitive" or "comradely", or even seriously, by Deng Chou Peng or his successors. "Facts, Facts, Facts, Not Dogma" is Deng's famous phrase with which I concur wholeheartedly in debates about socialist development.

    For example:

    "However, I do think that serious arguments can be made that Deng Xiaoping's "Socialism with Chinese characteristics" verges on a Menshevik/revisionist insistence that the capitalist stage of development has to be recapitulated before the building of genuine socialism can proceed. "

    Please provide a reference and source for the "Menshevik/revisionist" position on "the capitalist stage of development [that] has to be recapitulated" and verify that this phrase has any relevance whatsoever to the concrete industrialization challenges of Chinese development. Absent that, this sentence means nothing to me.

    "I also have grave reservations about the degree to which China has adopted market mechanisms with very little regulatory supervision and the potential for the reintroduction of real class distinctions and antagonisms in China."

    How is it possible NOT to have classes and class distinctions at the level of economic and social development obtaining in China??? To suppose otherwise is indulging in complete historical and economic fantasy, not materialism, and gives rise to more grave reservations about the "Marxism-Leninism" being offered here, than it does about Chinese socialism. A socialist revolution even in advanced capitalist countries, like the US (!!), will involve mixed economies for MANY years, even generations. The point of the class struggle for this entire era is -- who is most fit to lead society in an advanced direction toward fulfilling the working class -- and popular --- goal, and ideal, of "from each according to his/her ability, to each according to their work" -- including the most rapid development of those abilities, and the most rapid amelioration of alienated labor. As always, progress has objective and subjective components -- but objective is primary!


    "I think that these issues need to be discussed -- there has to be genuine debate on a question as important as the way in which the dictatorship of the proletariat resolves issues of economic development in a country with a largely feudal agricultural economy at the time of the seizure of state power..."

    I am not familiar enough with Chinese Party literature to know if the expression "dictatorship of the proletariat" is still in current use. If it is, or if it is indeed accurate to describe the Chinese Party's composition as primarily "proletarian" or its social leadership as a "dictatorship" that denies franchise to non proletarian, including bourgeois, classes, I predict that rising standards of living in China will dispose or overthrow it in due course. The Chinese leadership has been very skilled in containing many diverse social trends within a single party. I would not be surprised if the equivalent of a multi-party system exists WITHIN the CPC already. Single parties over time become something besides a political party when merged with the state.

    Regardless, the term is simply not valid in the era of democratic struggle in the US and most countries, AND SHOULD BE DISCARDED. It is not even valid in the theoretical sense Marx developed and defined it in the Gotha Program as the ONLY path to working class progress against capitalism. Lenin re-defined and re-formulated it in debates with Kautsky and others, but only under the conditions of a putrid autocracy, a failed state, and only AFTER the failure of the 1905 revolution blocked the path of democratic revolution.

    But that path is NOT blocked yet here or in most democratic capitalist societies. Our own country had two dictatorships -- one under WAshington, and another under Lincoln, neither in the service of proletarian, but both in the service of revolutionary-democratic transformations. One denied franchise to Tories, the other to the Confederacy. Both were short-lived -- a matter of pride to most Americans.

    Plus, I don't see how the abuses of dictatorship associated with the Stalin regime does not alone give rise to righteous indignation at its admiring use by anyone who claims to have made the American working class way of life, and its profound democratic values, highest aspirations and traditions, his or her own way of life, aspirations and values -- the only true trademark of a Communist, in my view.

    Posted by John Case, 04/10/2012 5:04pm (2 years ago)

  • I was somewhat put off by the casual simplifications the article entailed, particularly the bald assumption that capitalism has been restored in China. However, I do think that serious arguments can be made that Deng Xiaoping's "Socialism with Chinese characteristics" verges on a Menshevik/revisionist insistence that the capitalist stage of development has to be recapitulated before the building of genuine socialism can proceed. I also have grave reservations about the degree to which China has adopted market mechanisms with very little regulatory supervision and the potential for the reintroduction of real class distinctions and antagonisms in China. I think that these issues need to be discussed -- there has to be genuine debate on a question as important as the way in which the dictatorship of the proletariat resolves issues of economic development in a country with a largely feudal agricultural economy at the time of the seizure of state power -- but they need to be discussed in a sensitive, comradedly way which recognises that these are difficult questions about which committed Marxist-Leninists can disagree rather than simply asserting that capitalism has been restored in China.

    Posted by Gregory Rose, 04/10/2012 11:46am (2 years ago)

  • The comments are really on, but there is one new thing the Peoples Republic of China needs to do, and that is to Re-tool the industrial revolution to the renewables such as wind, tidal, and solar power which transforms to electricity and is more power than all the fossil fuels. No more blackouts. This non-pollution soluition is given freely in natures kinder laws and provides work for all and forever more. Viva socialist liberation. End pollution wars, not endless wars for more and more pollution. You yet have a world to win!!

    Posted by Hans B., 04/10/2012 2:32am (2 years ago)

  • The inequality among people is increasing and this results injustice. The only solution is the removal of the fake Communist leaders of the Chinese Communist Party.

    Posted by Anup Sadi, 04/09/2012 1:12pm (2 years ago)

  • Hallinan's article was very informative. But is it being too simple to say that the only solution for China is to empower the working class?

    Workers need strong, democratic unions that are both patriotic and have an internationalist outlook. In China, that would sure help get the scorpion off the frog's back.

    Perhaps the biggest thing we can do in the United States to help Chinese workers, is to fight for our own right to organize. We need to build strong, democratic unions in the United States, too.

    That would help shift the balance of power away from the extreme Right. A stronger peace movement would divert money from the military budget to rebuilding our own country. Rebuilding our own country would also reduce the pressure on China. Win-win.



    Posted by Beatrice Lumpkin, 04/08/2012 10:22am (2 years ago)

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