25 January, 2021

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Oligarchic-Capitalism & Party-State Structure: Same Or Different?

By Kumar David

Prof. Kumar David

Below the radar in Russia and China

Superficially they look similar. Both issued from Communist revolutions; polity and society still carry birthmarks of their separate but similar origins and arduous but different puberties. The most striking current similarity is a powerful new Tsar in Russia and a grand new Emperor in the Middle Kingdom. Of course, analogy with Tsarism and Chinese Empires is facetious, not a shred of the politico-economic fabric is the same as centuries ago, but the authoritarian totalitarianism of the two new masters is similar. Other similarities include scant regard for democratic and human rights, arbitrary misuse of judicial power, lock-down on press freedom, and people’s general fear of the state. Likeness notwithstanding, I will argue, after an initial descriptive account, that the social-economic architecture of the two states is different. To foretell whether the systems will converge to something akin decades from now, I leave to soothsayers.

In the economic domain, if you take a long view, both are doing well. China’s rise in the generation to date is described as the most spectacular transformation in history; a slowdown in the last three years notwithstanding – just a pause to catch its breath. The breakdown after the 1989-91 counter-revolution in Russia defies adjectives; starvation, decline in population, economic collapse, and drunkenness were frightening and omnipresent. The Putin period was a turnaround heralding stabilisation of society and economy. Russia’s inclusion in BRICS, a group of fast growing large economies – though the first and the last, Brazil and South Africa, have fallen off a cliff – and its advent as a potent political player in the Middle East and the Ukraine are remarkable. Its aviation, military and information technology are classy and the last named has been a game-changer in Donald Trump’s backyard and backside. To insert a corollary; Chinese technology too is striding on, though like Russia, not on par with America in avant-garde innovation.

It is richer in natural resources than any other country – the Soviet Union of course was even richer. Russia has 30% of the world’s natural resources including the largest gas, second largest coal and seventh largest oil deposits. It has valuable minerals; copper, lead, zinc, bauxite, diamonds, nickel and tin, mercury, gold and silver – mostly in Siberia and the Far East. But not as much is extracted as rich deposits elsewhere. Her vast forest and timber resources dwarf those of even Canada and Brazil by 60%. It is intrinsically a rich country whose citizens should enjoy a high standard of living.

China is resource starved compared to both Russia and the US and carries a population four times that of the US and nine times Russia’s. Its gross land area is the same as the US but arable acreage is much less. Since for two thousand years prior to 1800 India and China dominated world output (together about 60%), it would take a brave clairvoyant to prophesy the shape of the world economy at the end of this century, except that it will be a four-sided game – China, India, and the two new boys on the block, Russia and America. That’s enough star gazing; now for more prosaic stuff.

Oligarchic-Capitalism

The Russian economy was usurped by oligarchs who grabbed the nation’s assets when the Soviet Union collapsed. In the greatest robbery of material wealth in all history, upstarts under the guidance of the IMF and American economic gurus, grabbed coal and mineral mines, oil fields, factories and financial assets. Some Communist Party apparatchiks cement ownership of profitable banks, oil, natural gas and precious metals.

Fortunately, western raiders (companies and investors) were not able to appropriate much and those who did were seen off in a surge of Putin nationalism. The Russian economy is owned by oligarchs. An oligarch is a member of a small group of oil and coal mine robbers, industry grabbers and finance captains who became fabulously rich during the Yeltsin years – the 1990s. Organised crime was also a player in cementing this process. Bread-lines, population decline and devastation of society were the other side of this process. 

Putin’s ascent to power brought this mayhem to an end and the state regained control of production and trade of oil and gas. He detained rebellious oligarch Mikhail Khodorkovsky, nationalised his Yukos conglomerate, and brought the oligarchs to heel. There is symmetry with China in that the novo-riche, though filthy-rich, survive only by the grace and goodwill Party and/or President. There is no confusion whatever in China or Russia about where power lies.

China’s Provincial 2020 GDP compared with nearest other country
(Sources: HSBC, CEIC, IMF, CIA)

Interestingly, 70% of the Russian state budget is met directly or indirectly from gas and oil revenues. The private sector and non-mineral output fell to just 10% of GDP at one stage but there has been some recovery recently and 25% of GDP is now in its hands. Though inflation is running at 6% to 7% and GDP growth low (below 3% much of the time after 2008), real wages have been rising at 11% thanks to Putin’s social policy. I have collected data from many sources since official data blanks out a lot; finicky readers are invited do their own research.

Superficially, Russia’s macro-economy looks like China. The similarity stretches to counting billionaires! This time my data is from Wikipedia and more reliable. There are about 100 US$ billionaires in Russia. Alexey Mordashov said to be worth $18 billion is number one and Vladimir Lisin ($16 billion) number two. There are alleged to be seven others worth $10 billion or more. It’s not that different in China which has about 200 US$ billionaires. Wang Jianlin and Alibaba’s Jack Ma are numbers one and two; each worth about $30 billion. I am not quite sure, but there may be another 20+ worth $10 billion or more. For comparison there are 540 billionaires in the US and the top two, Bill Gates and Warren Buffet, are worth $85 and $75 billion, respectively, says Wikipedia.

China’s 2017 GDP is estimated at $11.8 trillion and Russia’s at $1.56 trillion. Per capita nominal GDP:  China $8550 and Russia $10,800; PPP figures are about double this in both cases. Sri Lanka’s per capita nominal GDP is a shade below $5000.

Party-State Architecture

The appellation State-Capitalism is misleading when applied to China. It denotes Capitalism as the principal noun with an adjectival status conferred on the State. In truth, in China, the Party-State leads and capitalism and the capitalist class are subordinate. Chinese economic architecture has six cardinal features that do not denote socialism, but not capitalism either.

  • Management and decision making dominated by the Party-State
  • Power monopolised by the Party which dictates to Central and Provincial governments.
  • Basic factors land, banks, finance, energy, mining and large industry, state owned.
  • Village land de-facto peasant owned, but nominally administered by county/village entities.
  • A dynamic, technically vibrant, capitalist sector driving growth and dominating exports.
  • Rich and super-rich classes devouring economic riches but wanting of political power.

Russia’s socio-economic architecture does not fit this description. Putin and Xi Jinping’s power, the preponderance of the state in the economy, and billionaire counting games aside, the absence of a CPC-like entity underscores that they belong to different species. The CPC is an 80-million-member web that penetrates and determines every pore of society; there is no foreseeable prospect of anything like that in Russia.

Published by Marylou Strickland

Hence, the superficial similarities outlined in previous paragraphs notwithstanding, I opine that the socio-economic architecture of China and Russia are different; the former a non-capitalist genus, the latter a variant of capitalism. Capitalist states can be dictatorships or democracies, non-capitalist ones may be authoritarian or relatively free; that’s beside the point. What one admires or abhors is a matter of sentiment; socio-economic structure (Marx called it “mode of production”) a matter of theory and precision; never mix the twain.

Still, it must be conceded that proof of the pudding is in the eating; will Russia and China, one day, converge to like-systems or will they not? I cannot see China turning into a state of the type we habitually call capitalist; that is, extracting and reinvesting surplus value at the discretion of a property-owning class which also holds the reigns of finance capital, and runs foreign affairs and directs global investments like the New Silk Road. Such a transformation would require a counter-revolution as in the USSR in 1989-91. There is nothing like it on the horizon. The Chinese Party-State looks rock solid; of course, frills, trimmings and substantive features will evolve. Recall the momentous changes in China in the last generation while the sway of the Party-State remained secure!

I am less sure whether Russia will evolve into a conventional type of capitalist state – leaving aside entirely the question of democracy. It may not; it may go chasing other rainbows. In both cases post-Xi, post-Putin succession talk has political observers agog. But in truth, in China, whether Xi gets another chance to play top-dog after 2022 matters little to the structure of the state. What does it matter if it’s Xi, Yi, or Zi? The Yangtze will still pour into the East China Sea.

In Russia things are dicier. Post-Putin directions are harder to foresee; Putin’s victory for a second second-term in the March 2018 elections is of course certain. After that whether his successors are like-minded will matter because the Russian apple-cart is less stable. Another cohort of Qutin, Rutin or like-minded zombies will cement an unorthodox state-system in Russia alongside China and less formidable Vietnam, Ethiopia, the Central Asian Republics, Cuba and god-willing, a democratic version in Sri Lanka. The government has made a sharp turn to economic neo-liberalism in the new budget. The left has no place in this government apart from the effort to enact a hopefully half-decent new constitution – if it ever materialises!

Reference: Relevant and interesting essays can be found in a trilingual volume released by the Communist Party (Sri Lanka) on 7 November 2017 celebrating the centenary of the October Revolution: Oktober Viplavaya Idiriyatama edited by Michael Fernando, Premadasa Dissanayake and Wilfred Jayasinghe.

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Latest comments

  • 0
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    George Bernard Shaw is long dead. but he had said that one day, america would speak Russian. there after russia would speak chinese. So,even in those days, there were symptoms or evidence to forecast what would be happening now.

    • 1
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      Jim softy

      Did George Bernard Shaw say anything about Sinhala/Buddhist tribals?

  • 2
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    It is amazing you have mentioned Sri Lanka here. Because of the central bank daylight robbery, Sri lanka’s growth is 0% this year. Foreign Investors have withdrawn their investment and because of that investment went down by 50%. Ranil is saying Sri lanka is going to explode economically. but he cannot stop the importing of simple things such as onion, chillie, potato, rice etc. He himself is involved in making all the state banks and financial institutions bleed with big holes. he can not jail thieves all of whom are around him.
    How do they make it grow when the Bank robber is the PM himself and he is the one who is making it bleed heavily.
    Just talk something sensible.

  • 0
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    Thanks a lot Kumar. Russia and China and Qatar should be invited to Develop Lanka’s Liquid Natural Gas fields and let the Euro-American energy lobbies go to hell with India’s Cairn.

    However, the Single Biggest obstacle to Foreign Investment (FDI) in Sri Lanka is Corruption, but IMF is silent on the billions taken overseas and promoting more looting in the name of liberalization and privatization which will be a disaster if CORRUPTION is not dealt with first. Sri lanka will lose all her assets which will be sold to US hedge funds via the Budget and Vision 2025 which was drafted by US Economic Hitmen to counter China in Lanka.
    Fact is neither Chinese or US “Aid” is good because both proliferate corruption, but at least China leaves something behind, whereas US hedge funds asset strip SOEs.

    The Vision 2025 of Bond Scam Ranil’s office pretends that it is land, labour and transport costs and SOE that are the reason for Lack of FDI.
    They miss-diagnose the problem of the Lack of FDI in Lanka deliberately. Millennium Challenge Corporation (MCC) that wrote Vision 2025 in order to privatize and take over Land and transport sectors via US Hedge Funds like Texas Pacific Group for Sri Lankan Airlines, Avant Guard for Shipping and Ports etc . Land Bank for oligarchs to access State Lands in Lanka, via “Public Prvate Partnerships.

    PPPs are a code word for Privatization of SOEs after they have been run into the ground with Debt and asset stripped by corrupt local politicians as happened with Sri Lankan and now is happening with Highwayas.

  • 0
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    It is darken fact that our country think -tank politically is weak an ideologically, but while out of updated of Marxist ideas has not yet reached that level what history expected from us.
    What we want in 21st century Marxist played to be to shifted new global politics that by role play of socialist International. But we are lagging behind that vision?

    Read that 20th 1956 CPSU congress report that put forward by Nikita Kurashive was shifting Socialist USSR into State Capitalism-country. In learn lessons from historical experiences of USSR that CPSU which PRC of CPC in 19th Congress 2017 October by Xi General Sectary has that laid down New set of policies of future vision of Socialist PRC. The Chinese Socialist revolution has posed unidentified problems of after collapses of CPSU -USSR 1991.

    The US led monopoly Imperialism that new innovation of technology has radical shifted by swiftly Global Economy to new level . Unipolar market economy of US has liberalized of capital market by Wall Street has given free hand move Capital in that of any nook and corner of Globe. The decision was lay on the consent has been granted to Hedging Funds and Investment Banks capital that in and out flow of Capital by safety and security been assured US military strengthen .
    US has an invaded many oil and gas resources countries that during Elder BUSH period since 1991.Most of West Asian resources has been come under the Exon- Mobil of Oil giants by Rex Trillton .was ex-CEO at that time Giant private empire?

    This experiences has been challenge by CPC and PRC in unique one. During 1980tees an open market and new Market Economy was introduce by PRC and CPC which had new reform policies of release productive forces challenge to Chinese Communist at that time. …..1990?

  • 1
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    Dr. David,

    India’s dollar billionaires number in the 100+ as well. The country is sustaining a 7% growth rate. In North America, an Indian as young as 13 has recently earned a $1.25 million salary package annually at Google, and has emerged as a leader in AI. Read about Tanmay Bakshi. With such prodigious talent, by 2030, India is rightly projected to have the world’s third largest GDP in the world, behind US and China. Russia won’t be in the top 10th. By Purchasing Power Parity, already China is 1st, US is second, India is 3rd, and Russia is 6th.

    So communists and leftists in Sri Lanka should stop talking about drifters like Lenin and Mao who made false promises in murdering millions in their ‘revolutions,’ and instead look at building up talent with integrity, as in China and India. Despite all the corruption and other afflictions, they have been able to produce a talented workforce on a large scale.

    Asians will need to come up with a better economic system founded on rationality, integrity and the common good, which will adopt some aspects of the Western model, but should not simply imitate Western Capitalism or Communism. Both have failed, resulting in the relative decline of the West and Russia; their foundational falsehoods have been exposed by their own experiments.

  • 0
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    We are so blessed the American Based professor is such a great fighter for the proletariat and espouses his communist and socialist Electrical Engineering ideology everywhere. He is ready to go to North Korea and leave his lucrative Faculty job now. In DPRK he will also preach to the soldiers there malnourished and infected with tape worms how great socialism and marxism is. After that, he will go to Cuba for retirement and denounce his salary which was around $102,281.00 at FLorida Atlantic University. THESE ARE OPEN records for TRANSPARENCY. It is great to preach with such a comfortable salary.

    • 0
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      You have the author mixed up with someone else at FAU. The author was dean of engineering at a major university in Honk Kong and then retired in Colombo.

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