The China Bears, meanwhile (represented ably by Peter Zeihan, whose work I have reviewed here, here and here), think China is approaching a precipice beyond which lies disastrous decline. Mr. Zeihan, for example, thinks the country is unstable as a unitary state.
Lynn Henderson (who often writes for Socialist Viewpoint) sent an Open Letter to Dave Gilbert, kindly including me on the copy list. The full text of the letter is posted at Louis Proyect's site, here. Despite its length, it is cogent, well-written, and very much worth the read.
Mr. Henderson did not title his piece. Mr. Proyect headlines it as Trump, Russia vs China and China Industrialization. Fair enough, but I'd prefer another: China's Threat to American Capitalist Hegemony. That reveals him as a China Bull, and further, he subscribes to the common corollary: that the United States is in secular decline (a view shared by Mr. Friedman).
Mr. Henderson tells a history of Chinese-American relations that doesn't make much sense to me. The 1949 revolution threw the imperialists out of China, but then in 1980 Deng Xiaoping invited them back in as foreign direct investment*. My take is that China wasted 30 years murdering tens of millions of its own people before they finally got their economic act together. Somehow Mr. Henderson sees the "revolution" as an advantage.
He attributes too much credit to Nixon and Kissinger--figures who were bit players in the whole drama. The real stars were people like Malcom McLean and Sam Walton. The former "invented" the shipping container, reducing the cost of freight transport by 90%--a technology that came to full fruition by 1970. The latter (who in 1970 owned a few stores in NW Arkansas) took advantage of that savings, along with cheap labor availability in China, to build the world's largest retail chain.
Mr. Henderson gets that last point. A key paragraph is this.
In return 400 million Chinese were pulled out of poverty and became part of the global middle class. They used the proceeds of their labor to buy grain (there's no more starvation in China), airplanes (jumbo jets fly hourly schedules between Shanghai and Beijing), and the construction of superhighways and bullet trains (Tom Friedman's favorite toys), among many other things.
Though somehow Mr. Henderson thinks this is a problem.
Mr. Henderson buttresses his argument with one big factual error. He claims that because production increased in China, US industrial production has been declining.
Mr. Henderson did not title his piece. Mr. Proyect headlines it as Trump, Russia vs China and China Industrialization. Fair enough, but I'd prefer another: China's Threat to American Capitalist Hegemony. That reveals him as a China Bull, and further, he subscribes to the common corollary: that the United States is in secular decline (a view shared by Mr. Friedman).
Mr. Henderson tells a history of Chinese-American relations that doesn't make much sense to me. The 1949 revolution threw the imperialists out of China, but then in 1980 Deng Xiaoping invited them back in as foreign direct investment*. My take is that China wasted 30 years murdering tens of millions of its own people before they finally got their economic act together. Somehow Mr. Henderson sees the "revolution" as an advantage.
He attributes too much credit to Nixon and Kissinger--figures who were bit players in the whole drama. The real stars were people like Malcom McLean and Sam Walton. The former "invented" the shipping container, reducing the cost of freight transport by 90%--a technology that came to full fruition by 1970. The latter (who in 1970 owned a few stores in NW Arkansas) took advantage of that savings, along with cheap labor availability in China, to build the world's largest retail chain.
Mr. Henderson gets that last point. A key paragraph is this.
Handed down from the pre-revolutionary past, the new China possessed a gigantic peasantry numbering in the hundreds of millions accustomed to a very low standard of living and hard manual labor. This peasantry served as the source for an industrial proletariat willing to put up with a much higher rate of surplus value than the workers of North—and even Latin—America, Western Europe or modern Japan. Huge amounts of foreign investment, especially U.S. investment flowed into China. What the United States—or rather the United States capitalists—wanted most of all from China was the lion’s share of the surplus value produced by the Chinese working class. Russian workers produce very little surplus value compared to what the U.S. capitalists could appropriate from Chinese workers in the form of profit, interest and dividends.Let's ignore the unnecessary term "surplus value" and acknowledge that trade with China was hugely profitable--for both Americans and Chinese. We got everything from toys to hand tools to smartphones at sharply reduced prices. Indeed, though Mr. Henderson credits Paul Volcker with ending inflation, it's just as likely that cheap imports from China did the trick. China, initially through Walmart, dramatically raised the standard of living of every American, especially poorer ones.
In return 400 million Chinese were pulled out of poverty and became part of the global middle class. They used the proceeds of their labor to buy grain (there's no more starvation in China), airplanes (jumbo jets fly hourly schedules between Shanghai and Beijing), and the construction of superhighways and bullet trains (Tom Friedman's favorite toys), among many other things.
Though somehow Mr. Henderson thinks this is a problem.
The problem from the viewpoint of the U.S. capitalist class and its political representatives—the Party of Order of both Democrats and Republicans and the emerging Trump America First gang—is that the U.S. capitalists in squeezing huge amounts of surplus value out of the Chinese have been forced to develop China’s productive forces at the same time.Mysteriously, he thinks we'd be better off if China remained poor. Just how are those poor, starving Chinese supposed to buy grain, airplanes, and everything else from the USA? They have to sell something to us first--as I said in a previous post, it's all about trade. The USA can't trade with countries that have nothing to sell. Fortunately for all of us, Sam Walton enabled China to sell lots of stuff to Americans.
Mr. Henderson buttresses his argument with one big factual error. He claims that because production increased in China, US industrial production has been declining.
In order to make the empire last for even 70 years—a very short period historically—the U.S. had to give up much of its domestic industrial production.But this is manifestly not true--US industrial production has more than doubled since 1980! Don't believe me? Then listen to that Marxist economist of (deserved) renown, Kim Moody (my review here):
The problem with trade-based explanations [for the decline in manufacturing employment--ed] is that manufacturing output hadn’t shown a decline, but had grown in real terms by 131% from 1982 to 2007 just before the Great Recession reduced output. At an annual average of 5% this is only slightly less than the 6% annual growth of the 1960s.So both China and the USA were successful from 1980 through 2010. But the world moves on; this is how Mr. Henderson sees the future.
China on the other hand, as the world’s most rapidly expanding manufacturing power, is now its strongest proponent for globalization, “free trade”, open markets and multinational trade agreements. Under China’s “One Belt, One Road” initiative, which is aimed at creating a modern version of the Silk Road, a network of trading routes from China to Africa and Europe, it has launched a massive economic outreach dwarfing even the Marshall Plan of U.S. imperialism following WWII.Let's take this apart.
- China is not "the world's most rapidly expanding manufacturing power." The United States is, by far. Robots and AI have reduced the value of low-wage labor, and sharply increased the advantage of cheap electricity. Thanks to fracking, the US has by a good margin among the cheapest electricity prices of any country in the world.
- OBOR ain't gonna work--see my previous post. The only advantage is it gives China a back door to Persian Gulf oil. Though shipping oil over the top of the world won't be cheap.
- Yes--China is a strong proponent of globalization and free trade, for obvious reasons. But see my reviews of Peter Zeihan's books for more about that.
I tend to be a China Bear, though not as pessimistic as Mr. Zeihan. Here are some of the important problems China faces.
- Chinese population growth is slowing, and the size of its labor force is actually shrinking. Since labor force growth is the biggest component in overall economic growth, this will severely limit the Chinese economy going forward.
- The economy is too big to be primarily export-oriented. Global markets simply can't absorb all that stuff. Exports will have to decline as a fraction of GDP.
- China is dependent on foreign oil, which will put it at a significant disadvantage to the US.
- Increasing personal consumption--and therefore income--is absolutely crucial to sustain the economy. That means Chinese citizens have to get a lot richer, which means productivity has to increase--dramatically. I'm not sure they can do that.
- China has a huge debt burden, which is a drag on future growth.
So I think the best case scenario for China is growth at global rates, i.e., around 2%. Personally, I'm skeptical if they can sustain that. Then it becomes an issue of whether or not the country remains politically stable.
*Not sure I buy the "foreign investment" argument. I don't believe the US ever ran a trade surplus with China, which means net foreign investment must have flowed toward the US, not toward China.
Further Reading:
*Not sure I buy the "foreign investment" argument. I don't believe the US ever ran a trade surplus with China, which means net foreign investment must have flowed toward the US, not toward China.
Further Reading:
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