China is different - but why?

Michael Roberts's latest blog is entitled "Which way for China - part one", and has some interesting ideas to offer. He discusses the following concerns of "mainstream economics":

"Mainstream economics is confused about which way the Chinese economy is going.  Some media and economists reckon Chinese growth is slowing fast from its double-digit pace seen in the last few years and indeed is heading towards a crisis or slump brought on by ‘over-investment’, a reversal of a credit-fuelled property bubble and a spiralling of hidden bad debts in the banking system. On the other hand, some economists reckon that economic growth may be slowing, but the Chinese authorities will be able to engineer a ‘soft landing’ through the easing of credit and financing of the writing-off of debt from cash reserves built up over past years. 

"Behind this debate on the immediate future also lies a debate on whether China can continue to grow fast through investment in industry, infrastructure and more exports or will need to switch to a consumer-led economy that imports more and supplies goods to a ‘rising middle-class’ like advanced capitalist economies supposedly do.  Mainstream economics reckons that this cannot be done without developing a more ‘market-based’ economy i.e. capitalism, because the ‘complexity’ of a consumer society can only work under capitalism and not under ‘heavy-handed’ central planning of government and state industries."

http://thenextrecession.wordpress.com/2012/03/19/which-way-for-china-part-one

I made the following comment:

Yup. China is different. But why?

Given the usual total failure of "mainstream economists" to understand anything, even in the world imperialist system, we can dismiss their explanations as ravings when it comes to general economic principles and long-term economic prospects. So what else is there?

If China was capitalist, it would have stalled and crashed long ago. But if it's not capitalist, what is it?

For my money the answer is more historical and political than economic as such. But an economic inkling can be found in Eugene Preobrazhensky's mid-20s book "The New Economics", which dealt with a similarly contradictory political-economic contradiction - the nascent Soviet Union. He describes the setup as "proto-socialist" and the process involved as "primitive socialist accumulation".

Historically I think we're witnessing the long overdue transition of the world mode of production from capitalism to socialism. This can only be understood in an orthodox Marxist perspective (ie grounded in the analysis of the capitalist system in Capital, based on the Law of Value). Marx views the general development of the forces of production as irreversible, and often enough describes capitalism with a fully formed credit system as having developed as far as it could while still remaining capitalist. Social production had grown so much that private appropriation was nothing but a straitjacket preventing further development, in terms of principle. In other words "capitalism pregnant with socialism", or capitalism negating itself. And Lenin rubbed this in by entitling his book Imperialism - the *ultimate* stage of capitalism. Not so much the "highest so far", but the ultimate ie final.

Which is where the political aspect comes in.

The Soviet example showed that the transformation of the capitalist mode of production into a socialist mode of production doesn't happen peacefully, does happen country by country, and is dependent on conscious political action. It also shows (as is made explicit in Preobrazhensky's book) that there is a long road to travel from a non-capitalist (ie workers) state in one or a number of countries to what we can call a viable socialist state (ie one forming part of a world economy dominated by socialist relations of production.

The USSR also showed that the predictions of mainstream bourgeois economists regarding imminent  collapse were totally wrong. Despite the appalling political regime the system survived for seven decades, having started from next to nothing.

Well, China was able to start its proto-socialist career after three decades of an economically expanding workers state in the USSR, and together with many new non-capitalist states and anti-imperialist states. So we can assume that both historically and economically it has been much less vulnerable than Russia. It had a flying start.

Which brings me to what might be the greatest problem facing us today when it comes to understanding and explaining exactly what makes China tick. One Country, Two Systems. That is, how capitalist is China fundamentally?

How would you approach this problem, Mike?

---

'Waistline' commented on this, just the way a good blog discussion should take place!

"To shift to a comment from one reader concerning their interpretation of Marx, I would suggest a very different interpretation of Marx. It was stated:

“Marx views the general development of the forces of production as irreversible, and often enough describes capitalism with a fully formed credit system as having developed as far as it could while still remaining capitalist. Social production had grown so much that private appropriation was nothing but a straitjacket preventing further development, in terms of principle.”

"Marx speaks of a fetter on production rather than the halting of further expansion and development. In my view “capitalism cannot be pregnant with socialism.” While productive force accumulation is irreversible, this primarily applies to means of production. That is to say society cannot be de-evolved back into manufacturing with the impact of the long history of the industrial revolution somehow being negated. Manufacture as a configuration of means of production evolved from handicraft and these world no longer exist for society to go back to. Negation and sublation do not operate backwards as a law system. In this sense of means of production development, Marx spoke of people never relinquishing what they have won.

"Rather than speak of “social production” in conflict with private appropriation, let’s speak of the quantitative growth of industrial means of production in unity and conflict (contradiction) with their bourgeois – capitalist – integuments. Exactly what production beyond the stage of primitive communism is not inherently social or “social production?”

"A different reading of Marx is possible. The bourgeois mode of commodity production – capitalism – enters its final irresolvable crisis NOT ON THE BASIS OF ITS LAW SYSTEM IMMANENT TO IT. Capital is birthed in contradiction expressed as the primary classes of its productive relations; bourgeois and proletariat. Something else other than the basic classes constituting the mode of production causes capitalism to enter into antagonism. That something else is new means of production, the electronic revolution or as a new generation is starting to describe things; the robot economy. Max “Preface to a Contribution” can be read different than the understanding of previous generations of communist.

"This debate about what constitutes “the limit” of the bourgeois mode of commodity production is old. I believe the solution to the question is that qualitatively new means of production creates a new social organization of labor and brings the old system and classes connected to the old system to antagonism.

"At any rate, I look forward to reading more of this.

"Waistline

and I responded:

Hi Waistline, I should perhaps have written the "socialization" of production rather than "social" production - I thought I covered that by writing that it had grown too much to be developed any further under capitalism. Except maybe in so far as a fully developed baby could keep growing in the womb for months or years after nine months gestation. But this growth is not exactly "development". Everything necessary for a viable child is ready. Capitalist expansion is cannibalistic once a certain stage of development has been reached. Once this ultimate stage is reached - and tendency of the rate of profit to fall gives us a good barometer of this - then there is too much capital for the capitalist system to handle. For the rate of profit to rise, huge amounts of capital need to be rendered unproductive (incapable of producing surplus value). Hence war, the extreme growth of military spending (the ultimate capitalist luxury good), and the obscene expansion of unproductive sectors of the economy (lawyers, advertising, and a myriad other sterile ways of divvying up surplus value), and at the same time the appropriators of surplus value (unpaid labour) need to become fewer and fewer so the profit isn't diluted more than necessary. The contradictions are obvious.
Marx was quite clear about the antagonisms leading to the passing of one mode of production into another, including capitalism into socialism -  they are *all* the product of class struggle. Relations between living people, not between dead things (ie not technology). To claim that new means of production bring about the final crisis of capitalism is a) to ignore the fact that human labour power is a means of production, and b) to fall into the trap of commodity fetishism attributing human qualities (living drives and aspirations) to dead things. Commodity fetishism is one of the most fundamental concepts in Marx, it is crucial to understanding his whole analysis of the capitalist mode of production.
For Marx capitalism was pregnant with socialism in his own time, as is perfectly clear from Capital III -- not only pregnant but overdue. In the 1860s. Lenin just expresses Marx's conclusions with respect to the even more cataclysmic political and economic world of his day. One of Stalin's most appalling theoretical mistakes was to trumpet that Marx only wrote about free competition capitalism. He didn't.
Anyhow, if we don't get clarify the human relationships involved in the Chinese situation, ie the character of the class struggle taking place there, and the relationship between the economic system in China and the rest of the world, we'll be as confused by it as the mainstream economists, and make a very poor job of trying to change things for the benefit of living labour rather than dead capital.
Which is why I'm looking forward to what Mike has to say on this subject.

---

Commenter 'hydeparkspeakers' took the discussion forward with the two following contributions:

First a couple of minor issues.

The NPC is (nominally) the decision making body of ‘the people’ not the leadership, the leadership is vested in the Party hierarchy not in government institutions.
I think the exponential growth rate has to be seen in a longer-term context than the last decade. Why this is important? There are very few countries that have ‘caught up’ and modernized since the 1945, and of those no other country has achieved such a long period of such rapid growth as China has over 30 years. Its developmental growth is in a league of its own in a world-historical sense.

The World Bank, under the influence of Justin Yifu Lin, claims that sustained long term growth is primarily due to the exploitation of comparative advantage, (low cost labour -low capital intensity -export driven growth) backed by strategic support from the state to create the infrastructure to assist the private sector.

The reduction in target GDP for 2012 is not a reaction any newly changed conditions, but corresponds with the reduced GDP targets outlined in the 12th Five Year Plan (FYP) adopted by the NPC in March 2011.

The land sales are not all to private developers, state owned entities buy land off each other, there are various levels of state control over public land assets and a turf war between state owned entities characterizes the root of the land sales system. Only part of this is confrontation between the township and village, the lowest level of the state land hierarchy.
The economic impulse derived from the private purchase of apartments is replaced by state construction of low cost rental apartments in the 12th FYP. Local governments often rent out or sell land use rights (leases) that they acquire at below market rates (at agricultural land-use prices) to attract investment. They themselves also invest in creating the infrastructure for the investors to encourage growth, as meeting targets set by the FYP are the critera for ‘success’ or ‘failure’ of officials.

The infrastructure growth in China, is however, very much a state driven urbanization strategy, it has been compared to the Great Leap Forward, but one that is more or less matched by capacity, unlike its predecessor. Now the question is, will Chinese urbanisation continue to produce a significant growth impetus?

A second and connected question is, can the emulation of infrastructure, development and urbanisation models in the interior of China produce the same dynamics of growth as they have in Eastern China?

It seems to me that the private sector, and foreign capital is following the designs of the state planning system, which at the driving seat of economic growth, having all the key levers of the economy in its hands.

***

The motive forces driving the system determine its systemic characterisation. Any number of circumstances can produce rapid growth, but the specifics of Chinese growth are unique and extraordinary and certainly force the question of its systemic dynamics to the fore.

In think the systemic critera used by the Hungarian theorist Janos Kornai are useful, (regardless of his own view of China, or of Marxism and socialism).

1. What ownership form dominates the commanding heights?
2. Is the coordination system dominated by bureaucratic plan or markets?
3. Is the political regime hostile or friendly to capitalism?

If you study the details I think you will find that:

1. The commanding heights are overwhelmingly in state hands .

2. Factor prices are state determined and the planning system drives the economic dynamic. The five year plan drives the economy, not market forces, and the state economy is mobilised wholesale to attain state objectives.

3. The structure of power systematically favours bureaucratic forces over private forces; repressing private finance, indigenous private enterprise, imposing arbritary taxes, expropriations, and so on, as well as repressing any organised capitalist political opposition.

Although it is true that this is probably the most capitalist tolerant and friendly ‘planned economy’ in history- at present -the state and political regime is not in the hands or the pay of capital.

----

  

I added the following comment giving quotes from Capital to corroborate what I wrote in reply to 'Waistline' about Marx being 'perfectly clear about capitalism being pregnant with socialism':

I think the following quotes from a single short chapter of Capital III (Ch 27 ‘The role of credit in capitalist production’) are necessary to relate this discussion on China to Marx’s historical socio-economic perspective, ie to historical materialism. This chapter is practically ignored in discussions among Marxists, reformist or revolutionary, academic or political. It is however possibly the single most important chapter in III, and the most explosive, as it shows just how far behind Marx we still lag after 150 years – he wrote this before 1867 – and how overripe he considered capitalism to be for the transition to socialism, or as he called it the associated mode of production. Only Lenin in “Imperialism” and Trotsky in “The Revolution Betrayed” have this perspective at the core of their work.

Capital III, Ch 27 The role of credit in capitalist production:

III. Formation of stock companies. Thereby:

2) The capital, which in itself rests on a social mode of production and presupposes a social concentration of means of production and labour-power, is here directly endowed with the form of social capital (capital of directly associated individuals) as distinct from private capital, and its undertakings assume the form of social undertakings as distinct from private undertakings. It is the abolition of capital as private property within the framework of capitalist production itself.

3) [… ] In stock companies the function [of management and administration] is divorced from capital ownership, hence also labour is entirely divorced from ownership of means of production and surplus-labour. This result of the ultimate development of capitalist production is a necessary transitional phase towards the reconversion of capital into the property of producers, although no longer as the private property of the individual producers, but rather as the property of associated producers, as outright social property. On the other hand, the stock company is a transition toward the conversion of all functions in the reproduction process which still remain linked with capitalist property, into mere functions of associated producers, into social functions.

[… ] This is the abolition of the capitalist mode of production within the capitalist mode of production itself, and hence a self-dissolving contradiction, which prima facie represents a mere phase of transition to a new form of production.

IV. Aside from the stock-company business, which represents the abolition of capitalist private industry on the basis of the capitalist system itself and destroys private industry as it expands and invades new spheres of production, credit offers to the individual capitalist; or to one who is regarded a capitalist, absolute control within certain limits over the capital and property of others, and thereby over the labour of others.[3] The control over social capital, not the individual capital of his own, gives him control of social labour. […C]entralisation of capital, […] expropriation on the most enormous scale. Expropriation extends here from the direct producers to the smaller and the medium-sized capitalists themselves. It is the point of departure for the capitalist mode of production; its accomplishment is the goal of this production. In the last instance, it aims at the expropriation of the means of production from all individuals. With the development of social production the means of production cease to be means of private production and products of private production, and can thereafter be only means of production in the hands of associated producers, i.e., the latter’s social property, much as they are their social products.

[…] The co-operative factories of the labourers themselves […] show how a new mode of production naturally grows out of an old one, when the development of the material forces of production and of the corresponding forms of social production have reached a particular stage. […] The capitalist stock companies, as much as the co-operative factories, should be considered as transitional forms from the capitalist mode of production to the associated one, with the only distinction that the antagonism is resolved negatively in the one and positively in the other.

So far we have considered the development of the credit system — and the implicit latent abolition of capitalist property — […]

[…] the credit system accelerates the material development of the productive forces and the establishment of the world-market. It is the historical mission of the capitalist system of production to raise these material foundations of the new mode of production to a certain degree of perfection. At the same time credit accelerates the violent eruptions of this contradiction — crises — and thereby the elements of disintegration of the old mode of production.

The two characteristics immanent in the credit system are, on the one hand, […] to reduce more and more the number of the few who exploit the social wealth; on the other hand, to constitute the form of transition to a new mode of production.

In response to Waistline I wrote: “For Marx capitalism was pregnant with socialism in his own time, as is perfectly clear from Capital III — not only pregnant but overdue.” As the quotes show, this is a gross understatement. He is not just ‘perfectly clear’, but he hammers the point home. Bang, bang, bang, bang. Count the number of times he uses the term ‘mode of production’. And note his explicit location of it in the context of transition from an old, worn-out mode of production — capitalism — to a new and superior mode of production of associated producers.