If neoliberalism is crumbling, what will follow?

The biggest problem with the future is that you can’t know what it will be. When Ronald Reagan was elected United States president in 1980, we did not at the time realize a new era of capitalism had begun; that the ascension of Reagan in the U.S. and Margaret Thatcher in Britain a year earlier definitively brought the end of the Keynesian period. Less than a decade earlier Richard Nixon had said, “We’re all Keynesians now.”

The very election of Reagan was a shock — I truly thought that United Statesians would at the last moment recoil at the thought of an extremist who endlessly spouted lies and nonsense getting into the White House. Perhaps I simply overestimated the general public but the 1970s did introduce considerable economic uncertainty, enough for people to vote for a bad actor who told them what they wanted to hear.

And so neoliberalism was born, although the term wasn’t yet in use; back then we usually referred to “Reaganism” and “Thatcherism.” Their policies didn’t go away when their terms in office were up. A new, more vicious era was firmly upon the world. I can’t help but think about the parallels with the past four years. A bad reality television host and con man told United Statesians what they wanted to hear and despite his obvious mendacity, enough bought it so that another candidate who I was sure couldn’t possibly be elected was elevated into the White House.

A garment factory (photo by Fahad Faisal)

One parallel perhaps begets another. The 1970s stagnation of Keynesianism brought something much worse, the neoliberal era of capitalism, alas a much more representative specimen of the global economic system — Keynesianism was an outlier and a product of intense activism that forced significant concessions out of capitalists. Let’s not romanticize the Keynesian era — the benefits to working people were confined to White men with steady jobs and in the U.S. there was plenty of political repression to go around. Not to mention that capitalist exploitation of working people continued unabated; there simply were some extra crumbs given out.

Back to today: Given the crumbing economy, with its low-paid, precarious jobs, unsustainable and onerous student and consumer debt and inability to tackle global warming as features of a global race to the bottom, the ability of industrialists and financiers to keep neoliberalism going is increasingly in question. So if the start of the 1980s was the dawn of a new economic era, will the start of the 2020s be the dawn of another new era? And, if so, of what?

What’s old becomes new again

Post-Industrial Revolution capitalism can be roughly divided into three eras. First, the era of laissez faire, which came under strong pressure in the Great Depression and was ultimately followed by the Keynesianism of the mid-20th century. Laissez faire is an ideology that opposes government interference in economic affairs beyond the minimum necessary for the maintenance of property rights. (That ideology lives on — neoliberal godfather Milton Friedman insisted that the only proper role of government is to enforce contracts and provide for military defense.) The onset of the Great Depression served to discredit laissez faire, opening the space for alternative theories.

Keynesianism, simply put, is the belief that capitalism is unstable and requires government intervention in the economy when private enterprise is unable or unwilling to spend enough to lift it out of a slump. Mid-20th century Keynesianism depended on an industrial base and market expansion. A repeat of history isn’t possible because the industrial base of the advanced capitalist countries has been hollowed out, transferred to low-wage developing countries, and there is almost no place remaining to which capitalism can expand. Because profits were high and there were many new markets to conquer — and because they were fearful of having their system swept away by the dramatic rise in social organizing — capitalists tolerated wage gains after World War II.

Ship-breaking in Chittagong, Bangladesh (photo by Naquib Hossain)

As Keynesianism broke down over the course of the 1970s — or more accurately, as capitalists no long tolerated paying better wages and conceding better working conditions in the face of declining profits in a world of more intensive competition on an international level — industrialists and financiers brought on the era of neoliberalism in an effort to boost profitability. There were no effective counter-forces: The movements of the 1960s had vanished. Reagan and Thatcher were products, not the causes, of the new era. It took time to understand that. And when “the end of history” was proclaimed upon the crumbling of the Soviet Union, the process of smashing working people’s ability to defend themselves was only accelerated.

And here we are today. With ever fewer jobs that provide a living wage, housing and education costs rising far faster than inflation or wages, the ability of capital to effortlessly move production to wherever wages and regulations are the lowest, and a political system wholly captured by the biggest industrialists and financiers, it is no surprise that anger is rising around the world. Neoliberalism has reached its logical conclusion.

So what follows neoliberalism? And how much longer can capitalism survive?

There won’t be any return to Keynesianism, even if it were possible for that to be the cure to what ails the world. The specific circumstances of the mid-20th century no longer exist. We do not have to stretch our imaginations to know what the world’s corporate masters would be willing to do to keep themselves in power and money. Suspending constitutions and implementing outright fascism is possible if industrialists and financiers see no other alternative to keep their party going if conditions deteriorate to the point that large numbers of people begin to withdraw their consent to the formal-democratic version of corporate rule.

The future is unwritten

But even that would a temporary fix. You can’t have infinite growth on a finite planet, nor can you destroy the environment without limit. A collapse in civilization induced by unchecked capitalism is very unlikely to happen suddenly; without a global mass movement intervening, modern industrial civilization is likely to slowly fall apart over decades and thus capitalism, in this scenario, would also linger for decades. Whatever follows in the rubble left behind would not likely be pleasant; much would depend on the ability of our descendants to organize a cooperative economy in an era of scarcity and defeat the inevitable attempts at imposing dictatorial regimes that would offer simplistic solutions to complicated problems.

Technology is not likely to solve all our future problems for ourselves. The Star Trek universe, where decades of nuclear war is followed by the era of plenty for all (how else could Earth and the Federation afford all those starships?) isn’t realistic. Months, never mind decades, of nuclear war would be enough to reduce humanity to a primitive state, assuming humans even survived the wars. And the uses of technology are based on the relations of power. Technology today could be used to reduce the workday and reduce drudge work, for example, but instead it is used to intensify work and surveil employees. Because we live in a drastically unequal society, technology is a tool of those who possess power and capital instead of a being the liberating tool it could be in a better world.

Although we can’t know what the expiration date of capitalism will be, it is likely to be sometime in the current century. If we are in the beginning stages of the end of neoliberalism, that does not mean we are in the beginning stages of the end of capitalism. Given capitalism’s ability to absorb dissent and its elasticity, it is quite conceivable that some new form of capitalism could replace neoliberalism. Given a powerful enough movement coordinating on an international basis, a new version of capitalism could be something better, temporarily. Such a movement aiming at reforms within capitalism would eventually be disappointed — once movements stand down, the hard-won reforms begin to be taken away. An international movement for a better world has no choice but to work toward abolishing capitalism and instituting a system of economic democracy.

The rise of right-wing authoritarians with aspirations to become fascist dictators — people such as Donald Trump, Jair Bolsonaro, Recep Tayyip Erdoğan and Viktor Orbán — does not have to be a harbinger of the future as were Reagan and Thatcher. With enough people around the world organizing, it won’t be.

The world was once run by monarchs who sat on thrones due to divine will — God selected one family to rule in perpetuity. Most of the world’s people once believed that. Today, it would be laughable to promote such an idea. Not long ago in human history, millions of people were held in slavery — a human being could be owned by another human being and have no rights whatsoever. People believed that not only were certain people inferior and properly enslaved but that the economy would collapse without slavery. Today, not even the most vulgar racist would suggest such a thing in public.

Capitalism is not the end of history. It is nothing more than one more system of repression, one more system of organization. It is no more permanent than slavery, feudalism, absolute monarchy or any other system of the past. If this were not so, there would not be so much frenetic activity put into convincing us that “there is no alternative.” We’ll be deciding the next system in the coming years. If we don’t, it’ll be decided for us.

Capitalism’s triumph: Labor rights violated in every country on Earth

In what country are labor rights fully respected? The sad answer is: none.

Labor rights are routinely violated around the world, and the trend is only getting worse. The International Trade Union Confederation has again issued its annual Global Rights Index and the result is no better than in past years. It’s worse. For example, the number of countries that exclude workers from the right to establish or join a union increased from 92 in 2018 to 107 in 2019. Even in Europe, the region with the (relatively) best conditions for working people, half the countries exclude at least some groups of workers from freely associating by allowing “non-standard” forms of work such as zero-hour contracts, temp work or misclassifying people working through online platforms as “self-employed.”

Corporations ever on the lookout for ways to extract more from their workforce and, with government complicity, continue to press down. The Confederation, in its report, said:

Worldwide, new technology has allowed employers to use various mechanisms to avoid paying minimum entitlements and exclude workers from labour laws. Recent technological leaps in the ways that work can be allocated and accessed has resulted in increased incidences of workers being denied rights under the guise of flexibility and as platform workers. Decent work is being affected and rights are being denied by companies avoiding rules and regulations. … More and more governments are complicit in facilitating labour exploitation or allowing the rule of law to be avoided because workers are forced to work in the informal sector of the economy.”

Rapid advances in technology, because they are controlled by corporations and repressive governments, are enabling continuing deterioration in working conditions. Not only does technology enable production to be moved to locations with ever lower wages and regulations, but it enables the weakening labor protections in new “high tech” wrapping.

In its report, the International Trade Union Confederation ranks countries from one to five, with one the least repressive and five the most. Only 12 countries — Austria, Denmark, Finland, Germany, Iceland, Ireland, Italy, the Netherlands, Norway, Slovakia, Sweden and Uruguay — are ranked as one. These are countries that are merely “sporadic” violators of rights. So there are no countries on Earth that do not violate labor rights. (There are several countries not given a rating, shown in gray in the map below.)

The International Trade Union Confederation labor rights rankings

Interestingly, the two countries most prone to wagging fingers at the rest of the world, Britain and the United States, once again fared poorly. Britain was ranked as a three, representing a country that has “regular violations of rights.” The U.S. was rated as a four, among countries determined to condone “systematic violations of rights.” There is nothing new here; the U.S. has consistently been scored as a four in these reports over the years. As recently as 2017, Britain was also ranked as a four.

In a country rated as a four, “The government and/or companies are engaged in serious efforts to crush the collective voice of workers putting fundamental rights under threat.”

So much for the so-called land of freedom.

The report’s rankings are as follows:

  • 1. Sporadic violations of rights: 12 countries as noted above (green on map above).
  • 2. Repeated violations of rights: 24 countries including France, Japan and New Zealand (yellow on map).
  • 3. Regular violations of rights: 26 countries including Australia, Canada and Spain (light orange on map).
  • 4. Systematic violations of rights: 39 countries including Argentina, Chile and Mexico (dark orange on map).
  • 5. No guarantee of rights: 34 countries including Brazil, China, Greece and India (red on map).
  • 5+ No guarantee of rights due to breakdown of the rule of law: 9 countries including Libya and Syria (dark red on map).

The Confederation, which describes itself as a coalition of “national trade union centres” encompassing 331 affiliated organizations in 163 countries and territories, determines its ratings by checking adherence to a list of 97 standards derived from International Labour Organization conventions. “The methodology is grounded in standards of fundamental rights at work, in particular the right to freedom of association, the right to collective bargaining and the right to strike,” the Confederation wrote in its report.

During the six years that the Confederation has issued its yearly reports, conditions have steadily deteriorated. Since the initial report in 2014, every region of the world has seen scores worsen. Summarizing this trend, the report says:

“In 2019, strikes have been severely restricted or banned in 123 out of 145 countries. In a significant number of these countries, industrial actions were brutally repressed by the authorities and workers exercising their right to strike often faced criminal prosecution and summary dismissals. Three regions — Africa, the Americas and [Middle East/North Africa] — all had an increase in the number of countries that violated the right to strike from last year.”

And thus it is no surprise that inequality is rising around the world, unemployment is endemic and far higher than official government statistics would have us believe and corporate tax dodging facilitated by government policies is widespread. The world’s working people continue to be on the losing side of one of the most one-sided wars in human history.

If you incentivize pollution, you incentive death

The cost of pollution in human lives is often abstract due to the long-term nature of such deaths. The cost, however, is quite concrete: A new report estimates that 4.1 million people died as a result of ambient air pollution in 2016. And that’s a conservative estimate.

Globally, only five causes of death took a higher toll. (High blood pressure and smoking were the leading causes.)

That sobering report was issued this month by teams of researchers at the Health Effects Institute and the Institute for Health Metrics and Evaluation. Their report, State of Global Air 2018, sought to analyze worldwide air pollution exposures and health impacts; data for 2016 is used because that is the most recent data available. The report states:

“Worldwide exposure to PM2.5 contributed to 4.1 million deaths from heart disease and stroke, lung cancer, chronic lung disease, and respiratory infections in 2016. PM2.5 was responsible for a substantially larger number of attributable deaths than other more well-known risk factors (such as alcohol use, physical inactivity, or high sodium intake) and for an equivalent number of attributable deaths as high cholesterol and high body mass index. Ozone, another important component of outdoor air pollution, whose levels are on the rise around the world, contributed to 234,000 [additional] deaths from chronic lung disease.”

“PM2.5” refers to particulate matter less than or equal to 2.5 micrometers in aerodynamic diameter. Because particle pollution can travel deep into the lungs and cause or aggravate heart and lung diseases, there are numerous health hazards associated with it, including reduced lung function, development of respiratory diseases in children, aggravation of existing lung diseases and premature death of people with lung diseases, according to a U.S. Environmental Protection Agency overview that the Trump administration appears to not have gotten around to censoring. Sources include incomplete combustion, automobile emissions, dust and industrial activity.

Smog in Kuala Lumpur, Malaysia (photo by Hafiz Noor Shams)

This pollution is a global problem — the State of Global Air 2018 report notes that 95 percent of the world’s population lives in areas exceeding World Health Organization guidelines for healthy air, and almost 60% live in areas that do not meet even the WHO’s least-stringent air quality target. That widespread pollution adds up. The report states that “In 2016, long-term exposure to ambient PM2.5 contributed to 4.1 million deaths and to a loss of 106 million [disability-adjusted life-years], making PM 2.5 exposure responsible for 7.5% of all global deaths and 4.4% of all global DALYs.” (The term “DALY” refers to losses of healthy life and are calculated as the sum of the years of life lost from a premature death and the years lived with disability.)

Different countries have different source characteristics. In China, for example, industrial coal, transportation and residential biomass burning are the major sources of deaths attributable to air pollution, accounting for more than 400,000 deaths. In India, residential biomass burning is by far the single biggest culprit, responsible for an estimated 268,000 deaths. China has recently begun to slowly reverse an earlier rise in air-pollution deaths, but these remain on the increase in India. The report estimates that India could avoid up to 1.2 million deaths in 2050 through instituting more aggressive measures rather than simply keeping current practices in place.

Further costs of pollution

The actual global total of 4.1 million might actually be an under-estimate. The report says its calculation does not include causes of death and disability for which evidence for a causal relationship with exposure to ambient PM2.5 is growing, such as the development of asthma in children, low birth weight and pre-term birth, type 2 diabetes and neurological disorders.

By no means does the State of Global Air 2018 report exhaust the literature of the toll of pollution. A United Nations study, Towards a Pollution-Free Planet (an advanced copy of which was posted in December 2017), cites the World Health Organization estimate that 12.6 million people died from environmental causes in 2012, or almost one-quarter of the world’s deaths that year. The cost of pollution is enormous, not only in lives shortened but in economic costs. The UN study says:

“In 2013, the global welfare costs associated with air pollution were estimated at some $5.11 trillion. The welfare costs from mortality relating to outdoor air pollution were estimated at $3 trillion; for indoor air pollution the figure was $2 trillion. … With regard to human health, the welfare cost of mortality from unsafe water is considerable in many developing countries. In 2004, losses stemming from inadequate water and sanitation services in developing countries were estimated at $260 billion per year – the equivalent of 10 per cent of gross domestic product (GDP) for some poor countries.”

Although deaths from pollution are much higher in developing countries, the total is significant in the advanced capitalist countries. Earlier studies, for example, estimated 200,000 premature deaths in the United States annually and 29,000 per year in Britain.

Alberta oil sands (photo by Eryn Rickard)

What is often missed in these sorts of reports is the externalization of costs. Industrial activity by large corporations is responsible for a significant amount of deadly pollution — but those corporate entities don’t bear the costs of that pollution. Rather, the costs are externalized onto society, leaving the profits to be grabbed by a handful of executives and speculators while the rest of the world must absorb the costs.

These economic costs are not insignificant. One corporate report, not intended for the public’s eyes, estimates that external costs total US$7.3 trillion per year, with greenhouse-gas emissions accounting for more than one-third of that total. The report, “Natural Capital at Risk–The Top 100 Externalities of Business,” finds that coal-fired power in East Asia and North America alone account for $770 billion per year in damage from the impacts of greenhouse-gas emissions and air pollution. These social costs exceeded the value of these sectors’ production value. Those two were among the top three sources of damages, along with South American cattle ranching, estimated to cost $350 billion.

It’s awful for us but great for profits

Getting closer to assessing responsibility, a separate United Nations report found that the world’s 3,000 biggest corporations cause $2.2 trillion of environmental damage in 2008. That total represents one-third of those corporations’ profits. This report appears never to have been released, although The Guardian was able to report briefly on its contents in February 2010. The true environmental cost, however, might have been yet higher, The Guardian reported:

“The biggest single impact on the $2.2tn estimate, accounting for more than half of the total, was emissions of greenhouse gases blamed for climate change. Other major ‘costs’ were local air pollution such as particulates, and the damage caused by the over-use and pollution of freshwater.”

All the more absurd then, that fossil fuels are subsidized to enormous extents — $5.6 trillion per year. That, unfortunately, is not a misprint. That total comes from calculating not only the huge direct government subsidies and tax breaks provided to fossil-fuel companies, but the cost of environmental damages borne by the public rather than the corporations themselves. The subsidized cost of air pollution and global warming combined account for two-thirds of the $5.6 trillion total, according to the researchers who prepared the working paper, “How Large Are Global Energy Subsidies?.”

Although some of these reports, by implication, hint at the corporate responsibility for these massive costs, none dare to address the system that encourages such waste, instead offering boilerplate advice that humanity pollute less. The State of Global Air 2018 report discussed above, for example, concludes with a recommendation that “decision-makers” should be engaged in “identifying and taking action to control the major sources that contribute to them” and see to it that less coal is burned. The United Nations report Towards a Pollution-Free Planet, also discussed above, suggests a “framework for action” that is “founded on strong science to ensure that burdens and negative effects are not simply shifted from one area to another.”

There is nothing wrong with such suggestions, but if the source of the problem is never mentioned, how is a solution to be found? The massive environmental problems the Earth faces are not some deus ex machina or a natural variable such as ocean tides. They have concrete sources, rooted in the global economic system. Capitalism requires constant growth for which all incentives are for planned obsolescence, more growth, more industry and more pollution. That pollution in turn is mostly the result of activity by large corporations that are unaccountable and thus able to foist the costs of their activities onto society.

Once again, it is impossible to have infinite growth on a finite planet. The current global rate of consumption is 1.7 Earths for the provision of resources and the absorption of waste. It is impossible to indefinitely consume more than can be replenished, nor can rational and sustainable consumption and resource-use patterns be maintained in a system in which prices, taxation and incentives are so badly out of alignment with the environment. Our future ability to prosper can only be based on a steady-state economy that provides for need rather that private wealth accumulation, an impossibility under a system based on relentless competition.

Imagine having so much money you can spend it on Instagram “influencers”

That so much money concentrates at the top that capitalists can’t find useful outlets for it, and that capitalism produces huge amounts of junk we don’t need or want, was reinforced for me upon reading a New York Times article on what apparently has become a war against Instagram bots.

You can’t make this up, can you? So much capital is thrown into marketing that huge sums of money are thrown at Internet “influencers” who apparently are “influencers” because they have large numbers of followers on Instagram. The problem here, from the marketers’ perspective, is that large numbers of those followers are fake. They’re bots created to inflate the size of followings.

Although I couldn’t read this business-section article without laughing at the absurdity of this, it did also nicely illustrate the tremendous amount of waste in capitalist production. You’ve got to have a lot of capital lying around to afford spending on buying posts on Instagram. There is good money in this, it seems, for those who succeed at positioning themselves as “brands” as opposed to, say, human beings.

Because every space is a canvas for advertising

In one example, the Times article quoted an “influencer” who “said that she charged about $1,200 for a branded post. She added that she knew people with two million followers who charge $40,000 per post.”

With a straight face, the Times article casually referred to companies that exist to “connect brands with influencers” and discussed other companies that exist to ferret out Instagram accounts with high numbers of bots among their followers. The article said: “The interest in such firms reflects how easy it is to fake popularity on platforms like Instagram, where bots seem to run unchecked even on accounts where people have not paid for them.”

Apparently, Instagram’s response to this “problem” is to reduce access to its data. That prompted this reaction from another “influencer” in the article: “It will be unfair until Instagram really just cleans out the bots and the lurkers.”

Altogether now: Awwwwww.

Your intrepid blogger does his best to maintain his revolutionary optimism, but reading articles like this does sometimes make me despair for the future. I know such people are a small slice of overall humanity, but, still, there are large numbers of such people who hopelessly swallow capitalist ideology. What if the vast sums of money thrown around in marketing campaigns instead went to more useful functions, such as affordable housing, clean water, environmental cleanups and repairs to our crumbling infrastructure, to point out only a few needs. The investment needed to modernize and maintain school facilities is estimated to be at least $270 billion, a fraction of what is spent on marketing.

We are talking about huge sums of money here: Estimates of the money spent on marketing in the United States per year range from $460 billion to $1.07 trillion. (The former estimate is from the book Marketing by Charles W. Lamb, Joseph F. Hair Jr., and Carl McDaniel and the latter estimate is from the Metrics 2.0: Business & Market Intelligence web site.)

Such numbers provide an expensive hint that too much stuff that don’t fill a need is produced. The size of the marketing and advertising industries wouldn’t be so gigantic otherwise. Production under capitalism is for private profit, not to meet human needs. To achieve those profits, vast efforts must be made to induce spending.

The latest Internet scandal, the harvesting of data from 50 million Facebook users by the secretive company Cambridge Analytica, can be seen in this light. The immediate scandal is that Cambridge Analytica, a company created by extreme Right hedge-fund billionaire Robert Mercer and former Trump consigliere Steve Bannon, sought to manipulate elections in furtherance of their fascistic ideology. But there are plenty of multi-national corporations who would dearly love to get their hands on such troves of data. Whose to say some haven’t already? We don’t know.

Perhaps enough of these episodes will induce some naïve technology fetishists to re-examine their thinking. Why should corporate spying be more tolerated than government spying? An ex-son-in-law of a friend, prompted by being asked what he does for a living, actually saw himself as providing a necessary service when he explained how he works for a technology company to tailor advertising to the profile of a user, complaining that non-tailored advertising “would be a waste” — for the recipient of the advertising!

Those who work to create a better world sure have a lot of work to do.

China can’t save capitalism from environmental destruction

A year ago at the World Economic Forum, China’s president, Xi Jinping, won plaudits from Davos elites for his commitment to open trade. Of course, because China’s economy is heavily dependent on exports, so-called “free trade” is in its interest, so President Xi’s stand was no surprise.

What has drawn less attention are President Xi’s statements on the environment, something the elites of capitalism find rather less convenient. This past October, at the 19th Chinese Communist Party Congress, for example, he delivered this statement: “Man and nature form a community of life; we, as human beings, must respect nature, follow its ways, and protect it. Only by observing the laws of nature can mankind avoid costly blunders in its exploitation. Any harm we inflict on nature will eventually return to haunt us. This is a reality we have to face.” He set a goal of “restor[ing] the serenity, harmony, and beauty of nature” and elevated the environmental-protection agency to the level of a ministry.

Given China’s huge contribution to global warming and the heavy pollution it suffers from, such statements are welcome. But does this truly mean that China will now become a country that puts the environment first and, perhaps, save capitalism from its excesses? That is very unlikely, given Beijing’s integration into the world capitalist system and the dynamics of capitalism, in which all incentives are for more growth — a system that requires growth.

Air Pollution in Hong Kong (photo by Yym1997)

In addition to the basic laws of capitalism, an interesting paper by Richard Smith, an economic historian who frequently writes on the impossibility of “green capitalism,” argues that the nature of China’s system is a further barrier to any turn toward environmental primacy. In his paper, “China’s drivers and planetary ecological collapse,” Dr. Smith argues that despite the power that President Xi has seemingly gathered into his hands, changing the country’s economic incentives are far beyond his capability. Dr. Smith writes:

“Xi Jinping cannot lead the fight against global warming because he runs a political-economic system characterised by systemic growth drivers — the need to maximise growth beyond any market rationality, the need to maximise employment, and the need to maximise consumerism — which are, if anything, even more powerful and even more eco-suicidal than those of ‘normal’ capitalism in the West, but which Xi is powerless to alter. These drivers are responsible for China’s irrational ‘blind growth,’ ‘blind production’ and out-of-control pollution, what Xi himself describes as ‘meaningless development at the cost of the environment.’ ” [pages 4-5]

Three factors drive Chinese growth, Dr. Smith writes: import-substitution industrialization (the need to compete successfully as a national economy against the U.S. and other leading capitalist countries); employment generation (the main reason for Chinese authorities to not allow companies to go out of business); and consumerism. In his paper, he argues that, for all the market reforms introduced in recent decades, China’s state-owned enterprises don’t operate by the rules of the market. He writes:

“For all the market reforms since 1978, the government has not allowed a single major SOE to fail and go bankrupt, no matter how inefficient, no matter how indebted, because those industries serve a different purpose. They do not exist just to make money. They exist to fulfil the wishes of China’s Communist Party rulers, especially as they contribute to import substitution and national industrialisation.” [page 6]

Tens of millions laid off from state enterprises

Ensuring social stability is unarguably a goal of Chinese leaders, but Dr. Smith appears to under-estimate the extent of ordinary capitalist behavior of Chinese state-owned enterprises (SOEs). A 2006 paper published by the China Labour Bulletin, “Swimming Against the Tide,” notes not only the continuing consolidation of SOEs, but the resulting mass loss of jobs resulting from those restructurings. The report says:

“In the late 1990s, however, the government massively intensified the restructuring of SOEs. This process disenfranchised and marginalized tens of millions of workers, while at the same time creating a new class of powerful capitalists with close and highly influential links to local government. Crucially, at this time, the central government seemed to abandon any thoughts of additional remedial measures and basically gave local government officials and SOE managers free rein to carve up the state’s assets between them.

From 1995 to 2002, SOEs cumulatively laid off as many as 30 million workers. … Meanwhile, SOE managers used their power and connections with local governments to work behind the scenes to secure enterprise assets at ridiculously low prices, elevating themselves from being mere managers to actual owners of the enterprise. According to one survey, over 20 percent of the private enterprises created in the first half of 2006 emerged from the restructuring of state-owned and collective enterprises.”

Beijing (photo by ahenobarbus)

Minqi Li, in his book, The Rise of China and the Demise of the Capitalist World Economy, in examining the development of the Chinese economy, pulled no punches in describing the lack of concern for working people:

“Throughout the 1990s, most of the state and collective-owned enterprises were privatized. Tens of millions of workers were laid off. The urban working class was deprived of their remaining socialist rights. Moreover, the dismantling of the rural collective economy and basic public services had forced hundreds of millions of peasants into the cities where they became ‘migrant workers,’ that is, an enormous, cheap labor force that would work for transnational corporations and Chinese capitalists for the lowest possible wages under the most demanding conditions. The massive influx of foreign capital contributed to a huge export boom.” [pages 64-65]

By July 2017, SOEs accounted for just 16 per cent of China’s jobs and less than a third of industrial output, according to an HSBC report.

Capitalist dynamics are firmly in place in China’s economy, a development that will only intensify, given the Communist Party leadership switching the role of the market from “basic” to “decisive” in 2013 at a key Central Committee plenum, and the continuity with this course that was laid down by the party at the October 2017 party congress, again stressing the “decisive role” of the market.

Waste, planned obsolescence add to consumerism

Nonetheless, Dr. Smith is correct is noting that there is more state guidance of the economy than in ordinary capitalist economies. China is by far the biggest consumer of industrial raw materials, a function of the country’s frenzied pace of investment. Wastefulness extends to consumer items as well, he writes. Planned obsolescence is out of control. Because of the incentives to produce beyond any rational demand, unnecessary infrastructure, to the point of “ghost cities,” is built; buildings are demolished after a couple of decades; and large appliances, such as refrigerators, are designed to break down within only a few years to spur more consumption.

He argues that the introduction of market reforms has amplified, instead of reducing, tendencies in the old bureaucratic economy toward redundant investment. Provincial and local officials seek to build their own industrial bases, which discourages cooperation and efficiency. Although the Communist Party can remove millions of people to clear the path for construction projects, it can’t enforce dictates on the environment or excess development. There are too many interests, according to Dr. Smith:

“[M]inisterial officials, provincial governors, local officials, and SOE bosses mostly need not worry. Why is that? How is it that a highly centralised neo-totalitarian police state cannot force its own subordinate officials to obey its own orders, laws, rules, and regulations? This is a most interesting question. The answer, I suggest, is to be found in the collective nature of China’s ruling class. Beijing can’t systematically enforce its writ against resistance from below because it can’t systematically fire subordinates for insubordination: they’re not just employees, as in capitalism. They’re Communist Party members, members of the same ruling class as the leaders in Beijing.

If you’re head of a ministry or an SOE, especially a big ‘national champion’ SOE that Beijing wants to forge into a world-beating industrial competitor, then Beijing is willing to overlook your pollution. … China’s coal and oil ministries and its giant SOEs are very powerful and profitable, with millions of party bureaucrats and employees. Heads of large SOEs have ministerial rank. Of the 120 SOEs directly managed by the central government, fully fifty-four heads of those firms enjoy ministerial rank. They like things the way they are and they intend to keep them that way.” [page 16]

China’s de-centralized administration leaves each province striving to achieve as high a measure of self-sufficiency as possible. This includes energy, meaning that energy is produced for local consumption, and not necessarily in an economically rational manner:

“In 2015, China spent a record $102 billion on wind, solar, geothermal, and other low- or no-carbon renewable energy. Yet in 2016 wind turbines produced just 4 percent of China’s electricity generation, and solar barely reached 1 percent. By comparison, the US invested just $44 billion in 2015 but in 2016 wind produced 6.9 percent of its electric generation — nearly double China’s production with less than half the investment. The reason China produces so little renewable energy despite all the investment is that so much of its renewable energy is ‘curtailed’ (wasted). Nationally, the government concedes that about 21 percent of wind energy is curtailed, as much as 40 percent in some provinces and even more than 60 percent in Xinjiang (ironically, the province with the most installed wind power).” [page 22]

Enough housing for half the world’s population

That investment will continue at a breakneck pace is exemplified by news that when all the plans for new housing are added up, there will be enough housing in China for 3.4 billion people by 2030, which an article reporting this in Shanghaist dryly notes “seems a tad excessive.” The source of this overdevelopment, Shanghaist reports, is “more than 3,500 county-level new urban areas planned by local governments.”

Just one project, the Xiongan New Area, will cover an area three times the size of New York City, The Guardian reports. This planned city, near Beijing, set off a real estate frenzy so intense that it was said to create gridlock on roads leading to the area, and land prices were reported to have doubled in hours after the government announced its plans. And of course Chinese investment is not limited to within its borders. People’s Daily Online estimates that as of 2016, approximately 30,000 Chinese companies had invested $1.2 trillion in China’s “One Belt, One Road” infrastructure initiative.

People’s Grand Hall in Chongqing (photo by Chen Hualin)

Private profit, and all the problems that revolve around that, has become the driving force of the Chinese economy. Timothy Kerswell and Jake Lin, in their recent Socialism and Democracy article, “Capitalism Denied with Chinese Characteristics,” noted that SOEs operate like like private firms and are controlled by “a handful of wealthy businessmen and executives, who mostly are the [party] princelings and their families.” By the early 21st century, they wrote:

“Urban China had gone from a highly protected ‘iron rice bowl’ system that guaranteed state workers’ permanent jobs, cradle-to-grave benefits — and a relatively high degree of equality — to a market-determined contract-based employment system at its core, and massive informal and unprotected sectors at its periphery.” [page 45]

Land speculation on the part of local governments is rapidly paving over farmlands, another contributor to global warming. Land sold to commercial interests can be 40 times higher than what is paid to farmers, Dr. Kerswell and Dr. Lin write:

“In many respects, urbanization in China can be understood as the process of local government driving farmers into buildings while grabbing their land. The pseudo-collective-ownership of rural land has also increasingly become a front for rural cadres’ rampant corruption and cronyism in pursuit of personal interest in the process of transferring use rights. From 2005, surveys have indicated a steady increase in the number of forced land requisitions, and about 4 million farmers were losing their land annually.” [page 39]

Incentives for more investment, more global warming

This is not a system that is going to give priority to the environment. And because so much of China’s sweatshop-based economy is built on assembling parts made elsewhere into final products — first the parts are shipped from around the world and then the final product is sent elsewhere as well — the transport inherent in these global production chains hugely contributes to pollution and global warming. So however much we might quibble with Dr. Smith’s characterization of SOEs, he is quite correct that all incentives are for China’s contribution to global warming to continue to increase and thus Beijing can not contribute to reversing global warming and future environmental collapse.

There is no substitute to consuming less. Dr. Smith concludes his paper with these lines:

“[T]he only way to effectively meet the climate emergency we face is with an emergency shutdown of useless, superfluous, unnecessary and harmful industrial production around the world, but most particularly in China and the United States, the biggest polluters. … If the Chinese don’t organise a rationally managed retrenchment and shutdown of unsustainable industries, Mother Nature is going to shut those industries down for them and in a much less pleasant manner. There’s no way around this very inconvenient truth: Making too much staff has to stop.” [page 27]

Not that Beijing should be asked to shoulder all blame. Western multi-national corporations willingly moved their production to China, greatly adding to global warming. Nor should Western capital’s role in facilitating Chinese projects be soft-pedaled. The World Bank provided loans for the Three Gorges Dam project that displaced 1.3 million people, and Canadian, French, German, Swiss, Swedish and Brazilian capital were also necessary to build the dam.

It’s hard to avoid the argument that the Western peoples were allowed to enjoy highly consumptive lifestyles, and it would be unfair to force lower living standards on those in the global East or South. That is a reasonable argument. But we only have one Earth, and humanity is consuming resources far beyond sustainability — at the rate of 1.6 Earths. If the entire world consumed at the rate that the U.S. does, we’d need four Earths. (Kuwait is tops in this category, with a ratio of 5.1 Earths, followed by Australia at 4.8.)

Such consumption is quite impossible in the long run. Those living in the advanced capitalist countries are going to have to consume much less. Yet that is impossible in a global economic system that requires growth, and will not provide jobs for those dependent on polluting industries. Industrializing the solar system, even if that proves possible, would only delay the inevitable. We can have a sustainable future with production geared toward human need, or we can continue to produce for private profit until we find out the hard way that you can’t eat money.

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, it 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 be 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.

No country on Earth fully safeguards labor rights

There is no country on Earth in which violations of labor rights do not occur. The best rating is for those which are merely “irregular violators of rights,” and only 12 countries managed that.

The International Trade Union Confederation, in its annual Global Rights Index report on the state of labor around the world, has once again provided sobering news. Sixty percent of countries exclude whole categories of workers from labor law, the ITUC report says, indicative that “corporate interests are being put ahead of the interests of working people in the global economy.” The ITUC’s general secretary, Sharan Burrow, said:

“Denying workers protection under labour laws creates a hidden workforce, where governments and companies refuse to take responsibility, especially for migrant workers, domestic workers and those on short term contracts. In too many countries, fundamental democratic rights are being undermined by corporate interests.”

Among the key findings of the report:

  • More than three-quarters of countries deny some or all workers their right to strike.
  • More than three-quarters of countries deny some or all workers collective bargaining,
  • Eighty-four countries exclude groups of workers from labor law.
  • The number of countries in which workers are exposed to physical violence and threats increased to 59 countries from 52 a year earlier.
  • Unionists were murdered in 11 countries, including Bangladesh, Brazil, Colombia, Guatemala, Honduras, Italy, Mauritania, Mexico, Peru, the Philippines and Venezuela.

International labor standards

To assess the state of global labor, the International Trade Union Confederation, “a confederation” of national trade unions, sends questionnaires to its affiliates in 161 countries and territories representing 176 million workers, with the intention of covering as many aspects of the right to freedom of association, the right to collective bargaining and the right to strike as possible. The information collected is then used to assess whether a given country meets standards set by the International Labour Organization.

These standards are examined by answering “yes” or “no” to 97 indicators arranged in five categories: Fundamental civil liberties; the right to establish or join unions; trade union activities; the right to collective bargaining; and the right to strike. The reason for a binary “yes” or “no” rather than a gradated scale is because “this method reduces the normative subjectivity of the analyst who carries out the coding,” the ITUC said. Further, because each of the 97 indicators is based on “universally binding obligations,” companies and government are required to meet them in full.

When the ITUC first carried out this survey, in 2014, the highest score attained was 43, meaning that no country had even half of its questions answered with a “yes.” In other words, every country in the world flunked.

For the 2017 report, the ITUC did not indicate the range of country scores, but followed its previous format of grouping countries into five tiers. The top tier, in which countries merely “irregular violate” labor rights, consists of 12 countries, which are marked in green on the map below. Eleven are found in Europe, and one in Latin America, Uruguay. (Yellow represents the second tier, followed by progressively darker shades of orange and red, the worst violators.)

ITUC map of labor rights. Green represents the highest-ranking countries; red the lowest.

The rankings are as follows:

  • 1. Irregular violations of rights: 12 countries including France, Germany and Sweden.
  • 2. Repeated violations of rights: 21 countries including Canada, New Zealand and South Africa.
  • 3. Regular violations of rights: 26 countries including Australia and Chile.
  • 4. Systematic violations of rights: 34 countries including Brazil, Britain and the United States.
  • 5. No guarantee of rights: 35 countries including India, Mexico and the Philippines.
  • 5+ No guarantee of rights due to breakdown of the rule of law: 11 countries including Burundi, Palestine and Syria.

U.S., Britain systematic violators of labor rights

The United States was also rated a “four” in 2014, while Britain has slipped from being ranked a “three” then. Once again, that means the U.S. and U.K. commit “systematic violations” of labor rights — so much for those governments’ endless attempts to assert moral authority over the rest of the world. The Trump and May governments are not likely to improve upon these rankings. In regards to U.S. deficiencies, the ITUC report says:

“Far from consulting with unions regarding labour law and policy, some states and U.S. politicians have taken deliberate steps to roll back workers’ collective bargaining rights. … The National Labour Relations Act (NLRA) and judicial decisions interpreting the law prohibit workers from engaging in sitdown strikes, partial strikes and secondary boycotts, and impose other restrictions on organisational or recognitional strikes.”

Embarrassingly for a country governed by a party calling itself a “Coalition of the Radical Left,” Greece is among the countries with a ranking of “five.” This ranking is due to harsh restrictions on collective bargaining that were implemented beginning in 2010 through several laws on orders of the “troika” — the European Commission, European Central Bank and the International Monetary Fund — which led to “a significant erosion” of labor rights.

Ironically, the Eurogroup president, Jeroen Dijsselbloem, says that collective bargaining is a “best practice” of the European Union, but the EU continues to block any attempt by the Syriza government to restore labor protections. A proposed law to re-establish collective bargaining was not submitted to the Greek parliament because of troika disapproval.

A sobering reminder of what capitalism offers working people: A race to the bottom and more exploitation. Surely, the world can do better.