China maintains its capitalist course

The Western corporate media have been fixated on Chinese President Xi Jinping’s hold on power, speculating on if he will follow the Communist Party’s tradition of leaders stepping down after two five-year terms. The larger story, however, is that there appears there will be no change in course, at least for now, for China.

Perhaps the fixation on President Xi is due to the corporate media’s tendency to focus on personalities over issues, or perhaps because it could be presumed in advance that China would not become a poster child for the International Monetary Fund or World Bank. To be fair, Chinese institutions have strongly emphasized President Xi’s leadership, continually referring to him as the “core” of the party’s central committee and celebrating that “Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era” has been enshrined in the party constitution.

The way in which “Xi Jinping Thought” has been enshrined, however, indicates that the party and state leader is stressing continuity with his predecessors. The resolution by the 19th Chinese Communist Party Congress adopting the report of the outgoing central committee said this in the first paragraph:

“The Congress holds high the banner of socialism with Chinese characteristics and is guided by Marxism-Leninism, Mao Zedong Thought, Deng Xiaoping Theory, the Theory of Three Represents, the Scientific Outlook on Development, and Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era.”

Forbidden City, Beijing (photo by Adamantios)

Looking past the ritualistic style, what is noteworthy about the above paragraph is that every Chinese leader is mentioned. The “Scientific Outlook on Development” is the product of President Xi’s predecessor, Hu Jintao, who declared that China must end its reliance on cheap labor and invest more in science and technology. The “Theory of Three Represents,” laid down by former President Hu’s predecessor, Jiang Jemin, declares that the party should represent the most advanced productive forces, the most advanced culture and the broadest layers of the people. That is an assertion that the interests of different classes are not in conflict and that the party can harmoniously represent all classes simultaneously.

On the surface, that lineup of leaders seems unremarkable, but it represents a change from four years ago, when the party did not formally mention the “Scientific Outlook on Development” and attached the adjective “important” to the “Three Represents.” Combined with the announcement four years ago that the party declared “the role of the market” in China to be “decisive,” a switch from “basic,” this was a strong indication that China would further its integration into the world capitalist system, albeit on its own terms.

A continuing commitment to the capitalist road

The lines laid down by presidents Jiang and Hu, following the turn toward capitalism by Deng Xiaoping, would seem quite contradictory to “Mao Zedong Thought” or, for that matter, Marxism-Leninism. What can be reasonably inferred here is that the party will continue to use Mao as one source of its authority. That all post-revolutionary rulers are included in the list of enshrined theories, with none elevated above any other, indicates that the party is stressing continuity.

If there are to be any significant changes, particularly to economic policy, they are unlikely to be revealed before next autumn, when the third plenum of the new central committee will likely be held. Third plenums, generally held about a year after a congress, are often the occasions for major announcements, as was the case in 2013, when the above switch to making the market “decisive” was announced. (A plenum is a meeting of the entire central committee, generally scheduled at precise intervals.)

Also noteworthy in the congress’ resolution of October 24 was an acknowledgment that the party has to give greater priority to consumer interests and the environment:

“[T]he Congress forms the major political judgments that socialism with Chinese characteristics has entered a new era and the principal contradiction in Chinese society has evolved into one between unbalanced and inadequate development and the people’s ever-growing needs for a better life.”

The party, despite the heavy stress on “Xi Jinping Thought,” also sought to dampen hopes that the growth in living standards would be rapid:

“The Congress elaborates on the Party’s historic mission in the new era and establishes the historical position of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era. It sets forth the basic policy for upholding and developing socialism with Chinese characteristics in the new era, and establishes the goal of securing a decisive victory in building a moderately prosperous society in all respects and then embarking on a journey to fully build a modern socialist China.”

The resolution, which repeatedly referred to the goal of a “moderately prosperous society,” also stressed the party will firmly hold onto its leading role, uphold the unity of China and strengthen its military. As to the direction in which the party intends to lead, the list of goals in the resolution give a strong hint. Among the listed goals are “pursue supply-side structural reform as our main task” and “endeavor to develop an economy with more effective market mechanisms.”

Although “supply-side” in this context certainly is not meant in precisely the same way that “supply-side” was meant during the Reagan administration in the United States, is not without content, either. The Chinese business magazine Caixin, in a commentary about the congress, had this to say:

“The report said that ‘in resource allocation, the market plays the decisive role and the government plays its role better.’ This line shows unwavering determination to move toward market reform. But we should remain vigilant about how, under China’s current system, in terms of specific administration, the government plays a decisive role, while the market is in a subordinate role. Supply-side reform needs to accomplish five tasks — cutting overcapacity, lowering inventory, deleveraging, lowering costs, and improving economic weak spots. ‘Government failure’ cannot be entirely absolved in causing these problems.”

Party acknowledges “unbalanced and inadequate development”

So, again, more capitalism for the Chinese Communist Party despite its insistence that “socialism” is its guiding ideology. A commentary by the official Chinese press agency, Xinhua, offered these passages:

“The genesis of China’s development miracle is socialism, not other ‘-isms.’ The country succeeds not by rigidly copying the original ideas of scientific socialism, but by adapting it to China’s reality. Xi Jinping’s thought will be China’s signature ideology and the new communism. … China is now strong enough, willing, and able to contribute more for mankind. The new world order cannot be just dominated by capitalism and the West, and the time will come for a change.”

The reality is that China is ever more integrated into the world capitalist system, and has built its economy on being the world’s sweatshop — rendering it highly dependent on exports, particularly to the West. The party would like to follow the path of Japan, which started out making cheap consumer products before moving up the value chain to become a producer of high-end electronics and other technological products. Traveling such a path is a necessity if the party is to fulfill its goal of raising Chinese living standards and making China an undisputed global power.

Shanghai (photo by dawvon)

The reference to the “principal contradiction” of China being “between unbalanced and inadequate development and the people’s ever-growing needs for a better life” is an acknowledgment that China has made insufficient progress. A few numbers will illustrate that.

Household consumption in China remains far below the level of advanced capitalist countries. According to World Bank data, household consumption accounted for 37 percent of China’s gross domestic product in 2015, barely improved from 36 percent in 2007. (Household consumption is all the things that people buy for personal use from toothbrushes to automobiles.) To put that number in perspective, household consumption was as high as 71 percent during the Mao era and above 50 percent as recently as the early 1980s. In comparison, household consumption in advanced capitalist countries tends to be between 58 and 72 percent of GDP.

China’s rapid growth has been overly dependent on investment, and given the overcapacity of many Chinese basic industries and the rash of ghost cities constructed, the ability to continue driving growth through investment is questionable. Here again, data from 2015 is the latest available, when investment accounted for 45 percent of Chinese GDP, down only slightly from a high of 48 percent in 2011. To put that in perspective, the world average is 24 percent.

Wages rising but are still very low

Concurrent with the over-reliance on investment is an ongoing real estate bubble and increasing debt. For the period 2007 to 2014, only four countries saw their debt increase faster than China. A 2016 Financial Times report said that more than 60 percent of Chinese bank loans were directly or indirectly tied to real estate. That any downturn or stagnation remains well into the future is demonstrated in a sudden and pronounced drop in the Shanghai stock market in 2015, ending a stock bubble, not having much of a dampening effect on the economy. Nonetheless, a stock-market bubble is no panacea for low wages or a shredded social safety net.

And wages remain low in China, despite the gains of recent years. The minimum wage in Shanghai, the highest in China, more than doubled from 2010 to 2016, but was still the equivalent of US$327 per month. The minimum wage in most major cities is US$239 and in poorer provinces can lower still. These increases, the product of labor struggle, may be coming to an end for the near future, however, reports the China Labour Bulletin:

“Current central government policy was clearly stated by Vice Minister for Human Relations and Social Security, Xin Changxing, in July 2016 when he said that because: ‘Our advantage in labour costs is no longer as clear-cut as before; we should ease the frequency and scale of wage increases so as to preserve our competitive advantage.’ ”

Garment manufacturers are relocating to Bangladesh, Cambodia and Vietnam, where wages are even lower. The Bulletin reports that Chinese minimum wages (which are set locally) should be between 40 and 60 percent of the local average wage, but in most cities it is less than 30 percent. The gap between low-paid workers and those earning the average wage has been growing, nor are overtime rules enforced.

The Bulletin concludes its report on Chinese working conditions in sobering terms:

“A superficial look at China’s major cities seems to show a reasonably affluent society: young, hard-working middle class families, determined to make a better life for themselves. Look beneath the surface however and you soon realize that the goods, services and lifestyle products that these middle class families aspire to are all produced, marketed, and delivered to their homes by an army of over-worked and under-paid working class labourers.”

Socialism or sweatshops?

If socialism is defined as a system of political and economic democracy in which industry and agriculture are brought under popular control so that production is oriented toward human, community and social need rather than private accumulation of capital, and all human beings have a say in decisions that affect their lives and communities, integration into the world capitalist system on the basis of low-paid sweatshop labor allowing massive profits for foreign multi-national corporations is not socialism, whether or not with “Chinese characteristics.”

Western corporations, led by Wal-Mart, are responsible for production being moved to China. China did not “take” anybody’s job; it became the favored destination of the transfer of production by taking advantage of capital’s relentless desire to relocate to locations with the lowest wages and most permissive regulations. Japan and South Korea were able to move up the value chain, develop industry and become new members of the Global North. China’s intention is to do this, but it is by no means certain that there is room for it to do so.

China, because of its size, is able to extract concessions from foreign capital and assert more control than other developing countries, and thus is in the unique position of entering the capitalist system on its own terms. But the market has its own “logic,” one that no country is able to escape.

There is considerable speculation that Chinese leaders are playing a long game, using the capitalist system to develop with the intention of later nationalizing and moving again to a socialist system. A healthy skepticism toward such scenarios is more than warranted. Wealth is being accumulated. The power the concentration of capital inevitably builds, and the commonality of interests of capital across borders, are not something that can removed via a decree.

However much China’s leadership might believe it can control and harness the market, there are always interests at stake. Capitalist markets are nothing more than the aggregate interests of the largest industrialists and financiers, and, in the absence of sustained, organized resistance, those interests are decisive, with all the attendant exploitation.

The rapid minting of billionaires in China, the party’s welcoming of those with wealth, and the wealth acquired by those related to party officials, means that the material interests of the Chinese Communist Party is more capitalism.

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14 comments on “China maintains its capitalist course

  1. It’s my understanding that the Chinese central government has decided to shut down several manufacturing cities – allegedly to tackle air pollution – which is forcing millions of people out of work and forcing them to return to their villages. The true reason I think is the lovely bulge of exploitable younger workers who work for close to nothing has passed. Multinationals (and some Chinese entrepreneurs) and busy moving their factories to Vietnam and other southeast Asian countries with a larger youth work force. One of the unintended consequences of the one child policy.

    • I had not heard reports that entire cities may be shut down, but it is true that wages were extremely low for a long period of time (until beginning to rise in recent years) in large part due to the massive amount of exploitable labor from peasants pushed off the land.

      Not even China has a limitless supply of surplus labor, and it is faced with overcapacity that must be shut.

  2. Prole Center says:

    I wouldn’t put China anywhere near the same level as capitalist countries of the West, but I think there is much to be desired when it comes to “socialism with Chinese characteristics.” China has lifted over 700 million people out of poverty over the last 20 years or so, which is an impressive and laudable accomplishment, but I think despite perhaps the best intentions (or not) China has painted itself into a corner by flirting with capitalism to such a degree.

    Roland Boer, of the blog “Stalin’s Moustache,” is a big cheerleader for China and its peculiar style of socialism. He makes some good points, but I’m not entirely persuaded. For those who are interested in hearing the other side of the story you can find his blog here:

    https://stalinsmoustache.org/

    • There is no question that China is a unique case, and that analyzing its development is highly difficult. The plethora of opinions as to what type of economy China has attests to that difficulty.

      Adding to the difficulty of understanding is that the Chinese Communist Party is so opaque. None of us can really know what the intentions of the party leadership truly are in terms of a long-term commitment to socialism, capitalism or some attempted hybrid. Perhaps they themselves are not sure where this will lead. Perhaps they are following Deng Xiaoping’s famous maxim that “It does not matter what color the cat is, as long as it catches mice” — that is, development without regard to how it is done. I imagine it will be many years before we know.

  3. Heiko Khoo says:

    The entire crux of your argument revolves around this sentence.
    “There is considerable speculation that Chinese leaders are playing a long game, using the capitalist system to develop with the intention of later nationalizing and moving again to a socialist system. ”
    I think one word you use expresses what is wrong with your argument – moving “again” to socialism.
    And you expand on your “socialism” concept as one based on mass democracy, but without a material foundation. In other words, yours is a pre-Marxist concept of socialism. (I am not judging you for holding such a view). Your socialism has no material prerequisites. Jesus Christ could have established socialism 2017 years ago, if only the people would have taken over the means of production and administered them democratically.
    For all the flaws of China’s Marxist theory it does not rely on such utopian socialist ideas. Rather it states that China is at the first stage of socialism – an argument I do not agree with – because a Marxist theory of socialism is predicated on an average productivity of labour at, or around the level of advanced capitalism. Thus the dilemmas confronting all states that called themselves socialism in the 20th century. How to catch up?
    China in 1978 had a per capita urban living space of just 3 sq meters – it now has 30 sq meters. Your argument means that democratically administering a room of 3 sq meters was socialism. When did this socialist democracy exist? In the Cultural Revolution? From this standpoint the Chinese theory is actually closer to Marxism than the one you are espousing.

    • One significant problem with your argument with me, Heiko, is that the sentence you are dissecting (“There is considerable speculation that Chinese leaders are playing a long game, using the capitalist system to develop with the intention of later nationalizing and moving again to a socialist system“) is not my argument. Quite the contrary, my intent there was to debunk an argument I often hear but I find to be wishful thinking and not based on material reallities.

      Nor, I have to say, have you grasped the essence of any argument I have made. Socialism in fact means a high level of development, the transcending of capitalist social and economic relations, and an economy in which working people have democratic control over the means of production, which I did say and have said innumerable times in this blog and elsewhere, including in my book (It’s Not Over: Learning From the Socialist Experiment), for many years. The problem is quite the opposite of how you state it — all too many Marxists proclaim as socialist any country where the means of production are in state hands, and forget the democratic side of the equation.

      So we have to acknowledge that no country has ever been properly labeled “socialist.” China is not an exception. There have only been countries that were/are somewhere in a transitional state from capitalism to socialism. The Marxist historian Isaac Deutscher termed the Soviet Union and those countries modeled on it “post-capitalist” and I have adopted that terminology. Again, I discuss this at length in my book.

      All this requires an industrial base. There could be no socialism (or, for that matter, fascism) 2,000 years ago because productive forces were nowhere near adequate. Feudal countries that underwent revolutions intending to establish socialism, such as Russia and China, had the double challenge of building industrial bases before they could even think seriously about how to implement socialism (and do so while fending off a hostile capitalist world intent on destroying them). Stalin’s declaration that socialism was achieved in the Soviet Union in the 1930s was based on the creation of industry and the ending of capitalist relations, but in fact what the Soviet Union had achieved was the creation of a basis for further advancement toward socialism. Tragically, the Soviet Union was unable to make that advancement.

      Mao, incidentally, did not make ideological pronouncements that China had achieved socialism although his policies were intended to create industry and he did attempt to bring the masses into political action through the Cultural Revolution. The CR instead unleashed chaos and economic dislocation, but we ought to acknowledge the intent even when critiquing a misadventure.

    • Michael is an interesting character; we both spoke at a Left Forum panel sponsored by Zero Books last summer. I have been reading his blog for years, and had already read what he had to say. I was surprised he focused on Xi’s status as leader of the party to the degree that corporate media outlets have done. There is no question that Xi is a strong leader, but China remains a country ruled by a party carrying out specific policies surely reached by consensus, even if those policies can be opaque.

      When he does get to discussing the nature of China, he writes:

      “China is not capitalist. Commodity production for profit, based on spontaneous market relations, governs capitalism. The rate of profit determines its investment cycles and generates periodic economic crises. This does not apply in China. In China, public ownership of the means of production and state planning remain dominant and the Communist party’s power base is rooted in public ownership. So China’s economic rise has been achieved without the capitalist mode of production being dominant.”

      So we have still another perspective on China. In Michael’s case, he appears to be resting his analysis on his tendency to heavily weight the rate of profit, to the point of discounting most any other factor. Although I believe that he does a good and necessary service in stressing the rate of profit, which tends to be given too little weight, it can be distorting to go too far in the other direction.

      It is true that the Chinese state has a larger stake in the economy that other states through its massive state-owned enterprises, including banks, but around 80 percent of the Chinese economy is in private hands, and the rise of Chinese industry can hardly be discussed without the massive transfer of production to China from outside the country, production largely owned by capitalists producing for other capitalists and doing so under the compulsion of capitalist competition.

  4. dmorista says:

    An interesting and thoughtful article. I followed the link to “Not so fast: The contradictions in China’s capitalist rise” and read it as well.

    There is certainly not “room”, at least in environmental terms, for China (and India, Pakistan, Brazil, and other “developing” countries) to achieve something even remotely resembling the U.S. lifestyle, as experienced during the first 30 years after WW 2, the so-called “Golden Age of Capitalism”. Several environmental writers have pointed out that, if all the poor people in the world managed to attain some sort of middle class lifestyle, it would require an extra 4 or 5 planets to supply the resources and detoxify the wastes. And that is despite the fact that, the efficiency of production, the use of resources, and the output of pollution for consumer goods, has fallen greatly per unit manufactured.

    As concerns “hegemony”, we have seen a succession of “core states” more or less dominate global affairs, since the breakout of Europeans from their “homelands” in NW Eurasia 500 years ago. The biggest single effect of that “breakout” was to allow Europeans to largely displace the indigenous people in three “new” continents, i.e. N and S America and Australasia. The complexity and power of these societies grew over time, and many social theorists still argue over exactly when capitalism actually emerged. Of course, the planet still had newly exploitable hinterlands, where capitalist operations could find new opportunities for exploitation and profit.

    The U.S. had the advantage of developing its capitalist socioeconomic system, with an internal hinterland right at hand to exploit. The common people even managed to secure a significant portion of the loot, as the indigenous people were removed, and the expanding society implemented a modified form of enclosure (the most blatant example of this was the occupation of the Oklahoma Territory that was entirely encircled by land-hungry settlers). The Native Americans were removed from the ongoing enclosures, and the land and resources thus obtained were seized by settlers and corporate interests. The settlers were eventually disciplined, and nearly totally incorporated into a capitalist market agricultural system, that was very unfavorable to their interests. Most of he descendants of those settlers eventually migrated to the growing industrial cities, to be ruthlessly exploited there as an industrial proletariat.

    The U.S. displaced the British Empire as the new hegemonic power, in a multi decadal process that included the two world wars, the three great peasant revolutions (Mexico, Russia, and China), the rise of European Fascism, and the New Deal reforms in the U.S. Joshua Goldstein proposed a useful distinction between “Strong” and “Weak” hegemony (in “Long Cycles: Prosperity and War in the Modern Age”, Yale U. Press, 1988). The period from 1945 – 1975 qualifies as the American period of strong hegemony, and from 1975 – more or less the present appears to be the period of American weak hegemony. Giovanni Arrighi proposed that the American defeat in the SE Asian Wars was the “Signal Event”, marking the decline of U.S. Hegemony, while the Afghan and Iraq wars from 2001/2003 – the present, represents the “Terminal Event” (Hegemony Unravelling 1, New Left Review 32, March-April 2005). The many low-intensity wars, waged against the peasants and workers in the developing countries; the economic pecking order fights, among the developed countries; and massive flows of people, seeking to escape socioeconomic and political chaos and look for opportunity, are one of the hallmarks of a weak hegemonic period.

    It also is instructive to note, that a process of Capitalist Globalization similar to the current one, took place during the British Empire’s period of Weak Hegemony. The main beneficiaries of that period were the U.S., Germany, and Japan. In the wake of the U.S.’ assumption of global leadership there were three rounds of economic development in the lesser countries. The first, shortly after WW 2 was the period of the “Marshall Plan” and other rebuilding efforts (after all the U.S. industrial plant needed customers). Much of Western Europe and Japan were the main places that carved out profitable niches in the U.S.-led system. The places that took advantage of these opportunities were mostly advanced capitalist societies, rebuilding themselves to recover from the devastation of the war. Many basic industries in the U.S. were savaged, but the growth of new industries and the migration of economic power to the “Sunbelt” more than compensated for the negative effects.

    The next round, was largely associated with the onset of Weak American Hegemony though it began in the 1960s, was marked by the rise of S. Korea, Taiwan, Singapore, and Hong Kong. These places moved into the status of advanced capitalist states that took strong positions in the emerging high-tech industries of the day. The negative effects became more obvious in the U.S., as the old core industrial areas in the NE quadrant of the visibly began their decline into chaos and poverty. European societies also began to suffer from deindustrialization problems.

    Finally the third round of the process took place, with China gaining the largest benefits. But India, Indonesia, Malaysia, Mexico, Brazil and other places also moved up the developmental ladder, albeit unevenly and with large parts, in fact, majorities of their populations left out.

    By 2007-2008 China had finished building out the basic domestic 21st century infrastructure of an advanced capitalist state. The many resource extraction societies fell into crisis as commodity prices fell and demand plummeted. The, by now nearly entirely finance capital dominated, ruling classes of the U.S. and Europe increased their speculation and swindle activities. The resultant economic crisis in the West allowed this parasitic class to loot their populaces, immiserating and making many of them homeless, and demanding bailouts and payoffs from the public treasuries.

    The Chinese ruling class, as found in the dominant political party (so inaccurately and ironically named the Chinese Communist Party) finally figured out that the West could not absorb their surpluses forever. They took a few years to decide on a course of action, but the One Belt One Road program of massive investments in infrastructural elements, primarily to be built in Eurasia to a lesser extent in Africa, was their decision. This has the virtue of not requiring the defeat of the coastal elites, but rather adds a major new economic dynamic that will keep the Chinese business interests, mddle classes, and working class occupied. All this requires that the various societies accede to the terms of the development agreements and overcome whatever fear they have of Chinese domination. It also does not address the environmental constraints, though the Chinese are moving aggressively into many areas of “sustainable” technologies.

    The military questions are also significant. It is worth noting that the U.S. ruling class, while spending immense amounts of money on its military, does not get a very good level of bang for their buck anymore. Numerous weapons projects from the F-35, to the V-22 Osprey, to the latest nuclear aircraft carrier, and the Elmo Zumwalt class of destroyers have inherent technological flaws. China’s growing scientific and technological expertise is leading to many opportunities. Just to name one, in combination with Austrian scientists they have developed photon based communications technologies that, when deployed, will be immune to surveillance or interference, The big crisis point looks to be. some 10 – 20 years off

    • And thank you for such an interesting and thoughtful analysis.

      U.S. hegemony is in decline, but I suspect its toppling from the perch of global capitalism remains well into the future. There isn’t yet a challenger capable of replacing the U.S. — Europe is buffeted by nationalism that retards European capital’s project of tightening central control and China’s economy and military are too small and will be for some time to come.

      But as the world has watched the financial center move from Venice to Amsterdam to London to New York, in more unified countries possessing ever greater ability to project power across greater portions of the globe, it is inevitable that the U.S. will one day be surpassed, likely gradually as the U.S. supplanted Britain over the first half of the 20th century.

      The “big crisis point” may or may not be 10 to 20 years from now, but it will come, most likely in a form unanticipated. Or, alternatively, capitalism will slowly disintegrate over the course of the 21st century without something better to replace it, in which case the future doesn’t look promising.

      • dmorista says:

        Basically my thesis in this discourse is this, (trodding the slippery road of historical analogy): I compare the rise of the U.S. to global hegemony, powered by significant twin engines of growth provided by the development and exploitation of the “internal hinterland” and the early domination and extraction of resources from the Caribbean, Mexico and Central America, and northern South America: to the Chinese situation where the ruling leadership wants to implement the OBOR plan that, if successful, will provide China with an “external hinterland” in Eurasia that can be developed and exploited, this is in addition to Chinese economic operations in Africa that are focused on resource extraction, perhaps minus the sorts of covert political machinations the U.S. used in its operations in the nearby colonial areas, and certainly much less heavy handed than European colonialism was. OBOR is not a philanthropic or charitable initiative, the physical infrastructural elements they want to build will be, at least in part, paid for by the societies that will “benefit” from their construction. The Chinese, certainly flush with cash, will lend money for these projects, and predictably, the terms will be harsher than cash on the barrelhead arrangements would be.

        In the 1920s American capitalists were criticized by leftists and liberals who pointed out, that if wages went up, the working class could actually afford to buy the products they worked to produce. The response instead was the introduction of installment purchasing; China has already introduced similar programs. Like in the U.S. in the 1920s, it has spurred the economy, but not by anything like enough to allow China to advance to a consumer-driven economically mature society. A mass middle class (including blue collar and production workers) did not really arrive in the U.S. until the New Deal reforms, and the highest level of labor mobilization in U.S. history. The New Deal programs of social welfare helped ameliorate the worst suffering from the Great Depression, but it took the massive industrial production for WW 2, combined with the reduction in suppression of union organizing to start the “Golden Age”, when even a blue collar man could earn enough to support a family with some comfort and security. The U.S. ruling class was extremely worried about the return of men from the war fronts; would a new depression spur them on to radical activities, that would begin where the working class left off in the 1930s, namely massive social unrest and potential revolution. Relatively high levels of unionization (albeit with major purges of leftist leadership) and high wages, the FHA mortgages and suburban development with the Interstate Highway system, the GI Bill for educational benefits, along with other initiatives channeled most Americans into work and family concerns. It will require a rebellion of the dispossed masses of China to implement some sort of analogous reform of capitalism there. This would be an unbelievably massive undertaking, the numbers of people involved are about 10 times the number in the U.S. in the 1940s and 1950s, there are many other places with more billions of people who want a share of the good life as well. And, of course, the Chinese already built a physical infrastructure bigger and more comprehensive than what the U.S. built, and did it in less than half the time. Any major ongoing economic stimulus, that could serve to propel the Chinese into a transformation like the New Deal / Post War prosperity epoch, will have to come from the OBOR program, or something like it.

        As for a major “unanticipated” event or development, there are quite a few potential candidates. If the pro-Zionist faction of the U.S. imperial apparatus succeeds in getting the U.S. to attack Iran (in what would have to be a combined Air Force – Navy operation, with relatively minor input by commando and proxy ground forces) that could develop into yet another ruinous war for the U.S.; in which China and Russia could supply Iran with weapons like they did in Vietnam, draining the U.S. and likely leading to internal strife and repression. Many analysts write about the role of the dollar as the world’s reserve currency and how that serves U.S. hegemonic and imperialist interests. China is busy building the financial institutions needed to undercut that status and is well on the way to doing just that; I have read several allusions to a “Suez Moment” in which the rising hegemon disciplines the fading hegemon, those ideas are certainly thought provoking. As for other candidates for new hegemon, to paraphrase F. Scott Fitzgerald, “there are no second acts in hegemonic global events”; Europe and Russia are out, there are some inherent sociological reasons why extremely powerful societies don’t take the stage a second time (at least until after a period measured centuries, not decades). India is still too chaotic and has, in fact, a lower per capita GDP and even worse poverty than China, Brazil is much smaller in power and heft than China. I will freely admit I was fooled by the ascendancy of Japan in the 1980s and thought they would push the U.S. aside, so that should say something about my powers of prophesy.

        You got right to the heart of the matter when you posed the question, peripherally in this article, and directly in the other article, with the idea “is there room for China to move up in the global capitalist hierarchy”. This article addressed the question specifically in the statement “ …. China did not take’ anybody’s job; it became the favored destination of the transfer of production by taking advantage of capital’s relentless desire to relocate to locations with the lowest wages and most permissive regulations. Japan and South Korea were able to move up the value chain, develop industry and become new members of the Global North. China’s intention is to do this, but it is by no means certain that there is room for it to do so.” All observations that are certainy valid and very pertinent to our future lives on this planet.

        Perhaps, I had my antennae raised by the Chinese/American plans for; the constructing new port facilities on the Pacific Coast of Mexico; assuming control and expansion of trucking and rail connections from those ports to the U.S.; and implementing the “Smart Port” initiative to build a national distribution center, and Mexican and American Customs stations in the Kansas City area. This all began, on the American end, in 1998 with a study commissioned by 3 KC area business and regional booster organizations. The Chinese planned to build 12 new container ports (Hutchison Whampoa ended up building 2) The Americans undertook the job of upgrading rail connections and of getting the final permission to allow Mexican trucking companies to operate freely to move the freight to the KC area (the Kansas City Southern Railway bought all the Mexican tracks and rail companies that connected the mid-Pacific coast with the U.S., but neither major upgrades of tracks, nor consolidation of trucking and free access for Mexican trucks to operate in the U.S., was ever implemented). KC area business people bought up a large parcel land west of the urbanized area in Lenexa, KS to build the “Smart Port” (it was minimally built out, but the giant facility to control most of the entry and distribution of Chinese manufactured goods did not materialize). While there was some ruling class griping about rail bottlenecks interfering with moving Chinese manufactured goods from the West Coast ports, to deliver them for sale in the various retailing operations in the main population centers; the real reason was to try to undercut the militant longshoreman unions, particularly in Oakland, Long Beach, and Seattle, and to further put pressure on American truckers pushing their wages yet lower.

        As it happens, I live about ½ from the main railroad line, that would have been a major part of this whole setup. There was some controversy over the fact that the cargo containers, whether they arrived by truck or rail, would not be inspected by Mexican Customs, or American Customs for that matter, until they arrived in Lenexa. Despite the hoopla and hysteria generated by the 9-11 events, that was not what eventually ended the most ambitious variant of the Smart Port plan. The 2007-2008 economic crisis, and the definitive end of the prospect of selling endlessly growing amounts of China’s industrial produce to the battered consumer classes of the West, is what ended it. China had run up against the very “lack of room” that you have pointed out. The Chinese capitalist elites had pushed the Japanese/S.Korean/Taiwanese/Singaporean model of export-led development as far as it would carry them, in the global economic conditions of the early 21st Century. Clearly it would be optimal, for the plans of the political leadership that wants to establish China as a major/dominant world society, if China could further develop its “internal markets”, and establish a “consumer society”. That would open up new opportunities for the Chinese capitalist class, and mollify the workers and middle classes with more gadgets, better housing, affordable education and healthcare, and so on. Major transformations of socioeconomic and political realities are not simple events and involve all classes and their factions in a huge society like China. I am no Sinologist and rely on articles and books by people like Minqi Li, and Hung Ho-fung, whose “New Left Review” article “America’s Head Servant?: The PRC’s dilemma in the Global Crisis” I read a few years ago. You address these and other issues in this excellent blog. Expect to hear from me again.

        • I will looking forward to hearing from you again. And as to predictions about Japan in the 1980s, you had plenty of company.

          I believe you have hit the target squarely in your assessment of “One Belt, One Road.” China has heretofore used exploitation of its own rural population and the limits of that are being reached. Thus the need to find external areas to exploit, in the manner of Europeans and the U.S. in their imperial heydays, even if through different methodologies.

          Your speculation of the effects of a possible U.S. attack on Iran is interesting; if such an attack happens the scenario you lay out is the most likely outcome. I suspect Pentagon planners know this, and will continue to attempt to restrain Trump and his nationalist supporters. But it is not necessarily fruitful to expect rationality from U.S. foreign policy. Such an outcome would accelerate U.S. decline, and inevitably be to China’s benefit.

          In the absence of any such shock, I will continue to argue that China’s displacement of the U.S. is farther off than commonly thought. On a per capita basis, China’s economy is still about one-fourth of that of the U.S. and the renminbi is still not fully convertible. That its military is still small next to the U.S. is also a factor, but ameliorating that is just what you pointed out, namely that China will be using financial means to tie up its hinterlands and will rely less on military and other covert adventures than prior hegemons. Interesting times lie ahead …

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