Thursday, March 29, 2012

The Struggle in China: Capitalist Crisis Versus Planning

The struggle in China: Capitalist crisis versus planning

By Fred Goldstein
Published Mar 27, 2012 11:42 PM

The following is Part 2 of a series on the leadership struggle in China.

As contradictions mount in the global capitalist economy, they are reflected in China. The factional struggle in the Chinese leadership can only be understood as a struggle over which way to go forward and how to contain and resolve the mounting economic and social contradictions arising out of capitalist development.

The Chinese economy has been growing on a dual basis. First, it is based on centrally planned guidance designed to develop the productive forces and the material foundations for a society encompassing 1.3 billion people. However, since the victory of Deng Xiaoping and the “capitalist road” faction in 1978, planning has been increasingly based on the central government fostering and attempting to manage capitalism and the capitalist market as the means for national development.

The central government, through control of interest rates, credit, taxation and vast state-owned enterprises, both guides the economy toward broad economic and social goals and fosters capitalist development. The latter means class exploitation, inequality and corruption. The present political struggle is over which side of this contradiction to strengthen.

This complex subject will be discussed at length in subsequent articles. But suffice it to say that the so-called “reform” groupings in China — with the enthusiastic support of world imperialism and global finance capital — want to move away from state intervention, planning and central guidance and go further toward turning the fate of China over to the capitalist market, both internally and externally.

In our last article we covered the fact that Bo Xilai was summarily ousted from his post as Chinese Communist Party Secretary of Chongqing. This was a blow against the growing forces in the CCP and throughout China who want to combine the use of the capitalist market with social and economic planning and state intervention in order to deal with growing inequality and who emphasize the needs of the masses. In Bo’s case, this economic orientation was combined with a popular attempt to revive Maoist culture and socialist values.

In China today, the concept of planned guidance of the broad direction of the economy and its various sectors is a drastic modification from the direct economic planning initiated after the triumph of the great Chinese Revolution in 1949. At the same time, it is an attempt to retain the planning principle as the fundamental framework guiding the overall development of the Chinese economy.

Consider just some of the goals and objectives outlined by the 12th Five Year Plan for 2011-2015, and the antagonism between planning and the anarchy of the capitalist market becomes utterly transparent. This plan was developed beginning in October 2010 and was approved by the National People’s Congress in March 2011.

The government is planning to devote 4 trillion renminbi ($158.7 billion) to the development of seven Strategic Emerging Industries: biotechnology, new energy, high-end manufacturing equipment, energy conservation and environmental protection, clean-energy vehicles and next-generation internet technology. (APCO worldwide, Dec. 10, 2010)

An article in the March 4, 2011, New York Times detailed the plan’s goals, including:

* A 19.1 percent cut in the amount of energy used per unit of economic growth and a rapid expansion of the service economy.

* Building a national nanotechnology research center, 50 engineering centers, 32 national engineering laboratories and 56 other labs focusing on technologies like digital television and high-speed internet.

* Laying 621,000 miles of new fiber-optic cable and adding 35 million new broadband ports for a total of 223 million.

* A cap on total energy use, especially limiting the burning of coal.

* The development of well-equipped statistical and monitoring systems to gauge greenhouse gas emissions.

* Accelerated construction of sewage treatment plants, the retrofitting of coal-fired power plants with pollution controls, and the continuation of a pilot project to develop low-carbon cities.

In the previous period the state had opened 3,100 miles of new railroads and 74,600 miles of highways, completed 230,000 sports and fitness projects for rural residents, and built or renovated 891 hospitals and 1,228 health clinics.

In the realm of social welfare, the broad goals are to increase consumption from 35 percent of the gross domestic product to between 50 percent and 55 percent by increasing minimum wages, health care services and social welfare payments of various kinds.

Of course, it goes without saying that under a genuinely socialist government, workers would have their fundamental economic rights guaranteed as political rights. But those rights were largely overturned by the reforms that developed in China after 1978. Instead, in the environment of the capitalist market — with its mountains of corruption of government and party officials — the welfare of the workers and peasants has to be built up slowly and painfully through an uphill battle, which happens only through the intervention of the state. (More on this in future articles.)

Whether or not the government achieves the precise goals set out is not the issue. The point is that such sweeping social and economic goals could not possibly be handed over to profit-driven capitalists and the anarchy of the commodity market. The bosses would seek the highest rate of profit. They would never voluntarily raise wages, improve working conditions, build hospitals, clinics, rural fitness centers or anything that did not bring a profit.

China’s response to 2008-09 world capitalist crisis

To grasp the seriousness of the proposals to further limit planning and intervention by the state, it is only necessary to consider what happened during the world capitalist financial and economic crisis of 2008 and 2009, when the global crisis of capitalist overproduction and the financial collapse invaded China.

More than 20 million workers lost their jobs, mainly in manufacturing and predominantly in coastal provinces such as Guangdong, where special economic zones had been set up so imperialist corporations, companies from Taiwan, Hong Kong and South Korea, and other exploiters could take advantage of low-wage migrant labor flooding in from the rural interior.

During this period production of world capitalism dropped more than it had in 70 years. Tens of millions of workers worldwide were thrown onto unemployment lines. Most of them are still there. Bankruptcy followed bankruptcy, and the capitalist system has still not recovered.

What happened in China? When the crisis hit, China’s central planners went into motion. Plans drafted as far back as 2003 to go into effect in future years were pushed forward and implemented.

Nicholas Lardy, a bourgeois China expert from the prestigious Peterson Institute for International Economics, describes how consumption in China actually grew during the crisis of 2008-09, wages went up, and the government created enough jobs to compensate for the layoffs caused by the global crisis:

“In a year in which GDP expansion [in China] was the slowest in almost a decade, how could consumption growth in 2009 have been so strong in relative terms? How could this happen at a time when employment in export-oriented industries was collapsing, with a survey conducted by the Ministry of Agriculture reporting the loss of 20 million jobs in export manufacturing centers along the southeast coast, notably in Guangdong Province? The relatively strong growth of consumption in 2009 is explained by several factors. First, the boom in investment, particularly in construction activities, appears to have generated additional employment sufficient to offset a very large portion of the job losses in the export sector. For the year as a whole the Chinese economy created 11.02 million jobs in urban areas, very nearly matching the 11.13 million urban jobs created in 2008.

“Second, while the growth of employment slowed slightly, wages continued to rise. In nominal terms wages in the formal sector rose 12 percent, a few percentage points below the average of the previous five years (National Bureau of Statistics of China 2010f, 131). In real terms the increase was almost 13 percent. Third, the government continued its programs of increasing payments to those drawing pensions and raising transfer payments to China's lowest-income residents. Monthly pension payments for enterprise retirees increased by RMB120, or 10 percent, in January 2009, substantially more than the 5.9 percent increase in consumer prices in 2008. This raised the total payments to retirees by about RMB75 billion. The Ministry of Civil Affairs raised transfer payments to about 70 million of China's lowest-income citizens by a third, for an increase of RMB20 billion in 2009 (Ministry of Civil Affairs 2010).” (“Sustaining China's Economic Growth after the Global Financial Crisis,” Kindle Locations 664-666, Peterson Institute for International Economics)

The Ministry of Railroads introduced eight specific plans, to be completed in 2020, to be implemented in the crisis. The World Bank called it “perhaps the biggest single planned program of passenger rail investment there has ever been in one country.” In addition, ultra-high-voltage grid projects were undertaken, among other advances.

The lesson is that while the anarchy of production of world capitalism invaded China, the rational and meticulously developed plans drawn up for social use overcame the anarchy of the capitalist market. This not only protected the masses from a protracted, massive unemployment crisis, but it actually continued the process of raising the standard of living during a time when hundreds of millions of workers throughout the entire capitalist world were left helpless and traumatized by the crisis of capitalist overproduction.

In Marxist terms the principle of planning, established by the Chinese socialist revolution of 1949 — even though it has been watered down to the practice of “guidance” — overcame what Marx called the law of labor value, the very law that governs the operation of capitalism itself. The Chinese leaders were compelled, and had the capability, to use rational planning based on satisfying human need to overcome the disaster brought about by their own policy of relying on the world capitalist market.

To be continued.

Goldstein is the author of “Low-Wage Capitalism” (2008) and “Capitalism at a Dead End” (2012) published by World View Forum. Both books as well as his articles and speeches can be found at

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