By Kumar David –

Prof. Kumar David

Class struggle and economic difficulties have multiplied in the developed world in the last seven years (since autumn 2008) and the economic downturn has spread to China whose headlong rush to capitalism has been thwarted by powerful internal impediments (monopoly power in the hands of a Communist – sic! – Party and the strength and size of its working class and peasantry). China’s economy slowed down precipitously in 2014-15. The Middle East is a boiling cauldron of devil’s broth; sort out the Iran nuclear imbroglio and IS shatters the region into a dozen imploding fragments! The Middle Eastern and North African refugee flood into Europe (a rising proportion are economic migrants) may pass the three million mark before it abates; it is already transforming the social face of the continent and firing up its political temperature.

A significant left turn in Europe (Syriza in Greece, Corbyn in the UK, Podemos in Spain, the Left Front in Portugal) has jumped the Atlantic; social democrat Bernie Sanders is doing half as well as Hilary Clinton in opinion polls; conversely in Turkey the HD (People’s Democratic) party suffered a moderate setback in last Sunday’s elections. Aung San Suu Kyi’s crafty silence on the genocide now being perpetrated on the Rohingyas is shameful, but her National League for Democracy is likely to win today (8 November). Xenophobic Eastern Europe imposes more pain on already anguished refugees while neo- fascism is on the rise in France, Denmark and Austria. In America, the Tea Party’s fruit cakes call the shots in Congress and it is unlikely the Republicans will be defeated in the 2016 House of Representatives elections. A very variegated world indeed!

How this changing world will affect the nature of the still evolving state in China is an open question and the theme of this piece. But first I need to declare that I was one in a threesome debate with two comrades of yore – Shantha De Alwis and Gerard Rodrigo – on the character of this state. Our political links go back to early 1970s, Vama Samasamajaya times – though I knew Gerard, an old Thomian, from short-pants days. My cousin Prem in Sydney and KK Gunda of Telecoms fame, both Thomians, could regale you with many a merry tale of Gerard that would split your sides, but that will have to await a more cheery occasion.

In the late 1990s we debated the class nature of the post-Deng state. Shantha insisted it was already capitalist (Stalinist and capitalist) while I argued that it was an open question; a hypothesis I finalised in a long paper (“China’s Socialist Market Economy: Viable Concept or Oxymoron”) at the Hector Abhayavardhana Felicitation Symposium in year 2000. (Proceedings edited by Rajan Philips and published by Marshal Fernando’s Ecumenical Institute for Study and Dialogue in 2001). Gerard was to the ‘right’ of both of us; his belief was that progressive and democratic capitalism was the way to go in the foreseeable future. All three theses, not in their original form but after refurbishing, still retain merit and you will espy flashes of the three resuscitated in this essay.

Whither (not wither) China?

In so far as this essay goes I have no interest in applauding or denigrating China, I am incognito; it is simply a ‘scientific’ question. Is it a duck, a mammal or an in-between platypus? Does it have the determining features of a capitalist system, or is it a non-capitalist bureaucratic monstrosity like the Soviet Union, or are its defining characteristics still indeterminate? The essay strays beyond this abstraction only to the extent of inquiring: ‘And what will it be in a decade or two?’

I should not regurgitate statistics as this is written for knowledgeable readers but it is an easy way to get started. About 60% of China’s value added (GDP) is in the private sector including peasant agriculture, but about 60% of assets are state owned leaving out land – technically all land title is held by the people (state, nation etc) so one does not know on which side of the balance sheet to count it. So I guess so far it’s a 1-1 draw. But then it has been pointed out that the burgeoning private sector is the leading edge of growth, technical modernisation and exports. Pat comes the counter argument that all basic sectors (extractive industries, minerals and oil, electricity, rail, air and road transport) are state owned, and equally important, China’s great banks (now the biggest in the world by asset valuation) are state controlled though they also raise cash in international capital markets. It still looks like a tie – two all – but it’s still only half-time.

If the state is but a proxy for an emerging capitalist class, then state ownership does not count for much in deciding if China is non-capitalist. The key then is the direction of social and political change. Inequality of income, but not wealth, is marginally worse in China than the US; the respective Gini Coefficients are 42% and 41% for income, but for wealth 55% in China and a whopping 80% in the USA. There are more $-billionaires in China than in US, but not per capita, but American billionaires are vastly more loaded. We often hear that the most well to do 1% in the US has more wealth than the lowest 90%, but even the richest 10% in China owns nothing like what the remaining 90% has (reliable statistics are hard to come by). Since the Chinese state is a giant asset owner, gathering a huge portion of national assets in its embrace, wealth distribution is implicitly further flattened. I have spent time in both countries, visible inequality is more repulsive in China than America because of the absence of social welfare (not that the US is Scandinavia!) and shoddy mass healthcare. Ostentation and degeneration of the parvenu offspring of China’s nouveau-riche flotsam is sordid. So now are we are at a three-all draw between duck and mammal? Hooray for the platypus!

Is the state in China a proxy for a capitalist class destined to rule? The role of the Communist Party (CCP) and dispersion of power between class actors and between the centre and provincial and county level governments make is assertion simplistic. It is the CCP and state that drives the biggest and most expensive infrastructure construction programme in human history. This is not akin to the accumulation and expansion that accompanied the 1780-1840 Industrial Revolution in Britain, or the birth of the behemoth of American capitalism in the second half of the 19-th and first quarter of the 20-th Centuries. The processes are different; the economic laws, if you prefer an old-fashioned term, are different. You can attempt to cite Bismarck’s national unification, protectionism and welfare programme, or the Meiji period (1868-1912) in Japan, but their class bases were very different from China. The Junkers in Prussia and Meiji (enlightened) restoration of the Emperor and the oligarchy in Japan are not comparable to the CCP. Portrayal of the last 35 years as delivery of capitalism by a proxy midwife is frivolous; it fails to explain the 70 million strong CCP or capture the complexity and diversity of the processes sweeping across a 1.3 billion strong country. It is timely that I repeat that this essay does not intend to eulogize or censure, only to depict accurately.

President Xi’s anti-corruption campaign has netted 100,000 indictments (Lankan readers note, I have not added three zeros) the vast majority are politicians and officials. Party members have been prohibited from joining golf clubs (where a lot of dicey deals are sealed) or indulging in ostentatious banquets. There is a point to this Calvinism; overreach is necessary to pull party and bureaucracy back from the appurtenances that accompany graft. Its relevance to this essay is its political dimension; these measures do not match a party that is an instrument of a burgeoning capitalist class. There is more to it than that. I will not quarrel with those who assert that China is not socialist; but to say it is, or is in the process of becoming a capitalist state, at least in the way that we are familiar with capitalism, is shooting from the hip.

Global impacts

The long recession that commenced in the banking and finance-capital sectors in the US in Q3 2008, swept into Europe in 2010 and moved further east to China in 2014-15. The US recovers briefly and then flops again; Europe, except for the UK, is still very much in the doldrums; China is in a bad way at this time of writing. I will not offer data about America and Europe, readers are familiar with the predicament of these continents, but a few words about the Chinese economic downturn are in order. It is an all round downturn, GDP growth has plummeted from double digit figures a few years ago to just over 6% in 2015 (maybe lower next year), imports and exports are severely down, the Shanghai stock-market buckled and was rescued by the state, the Yuan is falling and the threat of deflation is peeping through cracks in the edifice. Tumult in American and European capitalism is creating pangs in China and this in turn generates paroxysms of contraction in mineral and raw material exporting countries. Export and currency difficulties for Europe (Germany) and for the dollar are a consequence. It’s a mutually reinforcing descent.

The response of the CCP is mixed, it attempts to inject liquidity, rescue the stock-market, and lower interest rates – the usual tricks of the Fed and ECB. But there is also pressure to withdraw deep into the vast indoors, enhance consumption of the population (millions more dwelling units, thousands more schools, investment on environment), turn resources away from the capitalist sector towards localised projects, and enhance military spending. This dichotomy of responses signals the strength the platypus hypothesis. Not only China, this is also the parallel story of Vietnam, tomorrow of Cuba and afterwards possibly Venezuela and Nepal.

Forecasting the consequences of the global political dimension, that is radicalisation in the West, tension in flashpoints such as the South China Sea and sour relations with Japan, is too much for one essay. Radicalisation, whether leftist, ultra-nationalist or fascistic, elsewhere will not ignite mass responses in China; such events will have much more impact within the Party. China already has over 100,000 “mass incidents” (protest marches and clashes with the authorities) a year in response to local grievances, that’s a different ball-game immune to Occupy-This-or-That activists and European election outcomes. But these events affect the political elite and factions in the Party. Ideology retains its influence and that’s another reason why the leadership is cautious.