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China’s future?
The Writing on the Wall: China and the West in the 21st Century
By Will Hutton
Published by Little Brown, 2007, £20
China is experiencing phenomenal economic growth
as it opens up to the capitalist system. Remarkably, this policy is
being driven by the Chinese Communist Party, in power since the
revolution of 1949. This raises many questions: on the nature of China’s
state and economy; on how long it can continue down this road; and to
what final destination. In the first of a series of articles Socialism
Today will carry under the heading, the China debate, PETER TAAFFE
reviews a new book which attempts to tackle these issues.
WILL HUTTON SETS out his stall on the second page of
the preface of his new book, when he writes: "The central argument in
this book is that if the next century is going to be Chinese, it will be
only because China embraces the economic and political pluralism of the
West in general and our Enlightenment institutions in particular
modified, of course, for the Chinese experience".
The ‘West’ is synonymous with capitalism and
‘Enlightenment institutions’ equals capitalist democracy. He further
states: "The current Chinese economic model is unsustainable, which will
have important implications for the capacity of the Communist Party to
run China as a single-party authoritarian state". Moreover, "simple
extrapolations of China’s continued growth at current levels for the
next 40 or 50 years are misleading".
Will Hutton, therefore, like a growing band of
strategists of capitalism, is concerned that China, rather than acting
as a massive blood transfusion for capitalism on a world scale, can turn
out to have the opposite effect. It can enormously compound the problems
of the system he defends and possibly act as a trigger for a systemic
crisis. This is why Hutton has engaged in a two-year project of close
observation and analysis of the development of China, culminating in
this book, which is forensic – though not exhaustive by any means – on
the process of capitalist restoration in China today.
Hutton describes, with an abundance of facts and
figures drawn from numerous sources, the extremely contradictory
character of the Chinese economy and state at this stage. Marxists have
also been and debating the issues raised by Hutton, for instance in the
ranks of the Committee for a Workers’ International (CWI), over the past
period. The "direction of travel", as the Financial Times writer Martin
Wolf has commented, is clear: it is in the direction of a full
capitalist economy.
However, as Hutton demonstrates, China has not
arrived at this situation yet. This arises from the fact that the
Chinese elite, ever since Deng Xiaoping,
has embraced the idea of restoring elements of capitalism to
China. The country has been engaged in an almost 30-year long process of
restoring capitalism. But the Chinese elite and state, both those with
ties to the former Maoist-Stalinist state and an increasingly capitalist
sector and state, have been at pains to avoid the ‘big bang’ return to
capitalism witnessed in Russia in the early 1990s and the dire
industrial and social consequences which flowed from this. In an attempt
to prevent the social upheavals that would flow from a capitalist ‘big
bang’, the Chinese regime has created a society torn by conflict and
contradictions. It now faces a different but no less daunting situation
than that which confronted the Russian elite in the early 1990s.
Hutton states that China "is neither a communist nor
a capitalist economy". (p8) He writes: "There has been no top-down ‘big
bang’ initiation of privatisation, price liberalisation and
democratisation as in Eastern Europe". (p95) At the same time, China has
been engaged in "phasing out planning with as few losers as possible".
(p97) Therefore, China is not a planned economy, even one
bureaucratically managed from the top by a Stalinist elite, like that
which resulted from the Chinese revolution of 1949.
Specific features
HUTTON, EVER SO politely and hesitatingly, separates
himself from the sweeping condemnation of those like Jung Chang and Jon
Halliday in their book, Mao: The Unknown Story, particularly when they
brush aside the achievements of the planned economy under the
Maoist-Stalinist elite. Hutton correctly states: "For the majority of
Chinese, the revolution of 1949 ranks alongside the world’s other great
revolutions". (p86) However, at the same time, the character of this
economy was not an exact copy of what had developed in Stalinist Russia.
The very scale of the country (although the Soviet Union was bigger in
its landmass), the size of its population embracing one-fifth of
humankind, the remoteness of huge swathes of the country, with the
majority of the population peasants, historically put its stamp on the
character of Chinese society and the state form which existed at each
stage. This led to a huge element of decentralisation, which even the
Mao regime was not able to overcome. Moreover, Mao Zedong himself,
unlike Joseph Stalin and the bureaucracy in Russia, while he zigzagged
from centralisation to decentralisation, still always retained a large
element of decentralisation which was inevitable given the cultural
level and size of the country.
The contrast between Stalinist Russia and Mao’s
China was quite stark in some features of planning in the economy. For
instance, the prices of only 1,200 commodities were set centrally in
China while under the Russian plan 25 million prices were
bureaucratically governed from the centre. Moreover, control ‘from
below’, not by the working class or poor peasants but by regional or
localised bureaucracy, was quite pronounced under Mao. Hutton informs us
that in 1970 Chinese provinces managed most state-owned enterprises,
with central government running only 8% of industrial output. By 1975,
provincial and local governments were responsible for about 60% of all
state investment and for the greater part of the plan. Only key
commodities like coal, timber and cement were organised from the centre.
Hutton comments: "State-owned industries might have their inputs,
outputs and prices set by the plan, but a report by the World Bank
argues that 30,000 medium-sized and 150,000 small industrial
organisations were largely free of the plan". (p83)
These specific features of China did not cancel out
the character of the country under Mao and even Deng initially as a
planned economy, although with large elements of regional and local
control. Similar factors play a part in China today, which complicates
the task of understanding the precise stage at which the Chinese economy
is currently. But Hutton declares bluntly: "The Chinese economy and the
Chinese Communist Party are in an unstable halfway house – an economy
that is neither socialist nor properly capitalist, run by a party that
is neither revolutionary nor subject to the normal constitutional checks
and balances of even China’s own Confucian past, let alone the Asian or
Western present". (p117) He further states: "The real preoccupation of
the Chinese is shown in their unwillingness to privatise, to sell
majority control of state-owned enterprises to private investors on the
stock market, to reduce the party’s influence on the banking system".
(p97)
A considerable, purely capitalist sector has
undoubtedly developed through the medium of foreign investments with
nearly 90% directed towards the coastal provinces, particularly in the
south, and two thirds of it in manufacturing. Fifty-five percent of
China’s exports are made by foreigners and, generally, the more
high-tech the industry the more foreign capital plays a decisive role.
More than 80% of electronics and telecommunications exports are made by
foreigners, as are 70% of plastics and 60% of electrical goods. This
has, of course, resulted in China being dubbed as the ‘world’s workshop’
but, in reality, it is the mass assembler of goods manufactured
elsewhere, particularly in neighbouring Asian countries.
A consistent complaint is that the massive exports
from China – it could become the world’s leading manufacturing exporter
by 2010 – have the label ‘Made in China’ but not ‘Made by China’, in the
sense of native Chinese industry. This reliance on foreign direct
investment (FDI) for growth is much higher than many of the ‘tiger
economies’ in Asia in the period of their rapid development. This is one
reason why China has not managed as yet to develop a significant number
of international companies and ‘brands’, as the tigers and particularly
Japan did at an equivalent stage of their development. Of the top 250
‘competitive edge’ companies in the world, not one is Chinese. Of the
world’s top 100 brands in 2005-06, according to Business Week, it also
did not have one featured brand. And of the world’s top 300 companies
ranked by research and development expenditure, China only had one
company. One of the reasons for this, Hutton argues, is that while the
Chinese state has encouraged and presently still tolerates massive FDI,
because of the holding back of domestic Chinese capitalism – due to the
hesitation and ‘mixed’ character of the economy – China has become
increasingly part of a supply chain for other capitalist producers
rather than ‘a player in its own right’.
The zigzags of the Chinese state are themselves
determined by the fear of the governing elite that the already gathering
mass discontent at the effects of a movement towards capitalism will
result in the floodgates being burst open and the possibility of
revolution developing. This itself determines the contradictory
character of what Hutton correctly calls the process of a "transition to
capitalism". On the one hand, he explains that "there are some six
million owners of private firms in China; about two thirds are former
state officials". (p137) Then again, Hutton points to the fact that the
regime of Jiang Zemin, the forerunner of Hu Jintao, the current leader,
ruled in 1998 that the PLA (People’s Liberation Army) which had been one
of the leaders in developing production resources to help growth –
running coal mines, airlines, telecommunications companies and hotels –
was ordered to "divest itself of its businesses". (p125)
It is interesting that the reason given for this by
Jiang was that "the military must no longer be in business… otherwise,
this tool of proletarian dictatorship will collapse, and the socialist
state power will change colour". (p125) Terms like "proletarian
dictatorship" and "socialist state" are misnomers, do not accurately
describe China, but Jiang’s comments do indicate, nevertheless, that
even the present Chinese state – not just the economy – has a ‘mixed
character’, with big remnants of the Maoist-Stalinist regime. This
presents a challenge to Marxists in determining the character of the
state at this stage.
The character of the state
FROM KARL MARX himself, scientific socialists have
argued against reformists that the state in some way stands above
classes, is ‘neutral’ and is capable of playing an ‘independent’ role
from the ‘economically dominant’ class in society. This basic position
retains all its force, particularly in societies like Britain and the
advanced industrial countries where class divisions are starkly revealed
and the state is clearly the instrument of the ruling class, the
capitalists. The top echelons of this state – the civil service, army,
police, etc – are drawn from the ranks of the ruling class or the upper
layers of the middle class and are trained and schooled in the
traditions and methods of the dominant class’s rule.
However, Marx also developed the idea of the
‘Bonapartist’ state which, while it ultimately represents the dominant
class in society, can, under certain conditions – for instance, where
there is a class deadlock – play a relatively ‘independent’ role, only
defending the dominant class ultimately and not without sometimes
striking blows against the class it ostensibly ‘represents’. Moreover,
in societies less economically developed, particularly in conditions of
extreme cultural backwardness, this Bonapartist character of the state
can, at least for a period, play a mediating role, sometimes appearing
‘neutral’ in arbitrating between the classes and only coming down on one
side, sometimes after a considerable historical period, when one of the
contending economic forces and classes or groups it represents is
clearly in the ascendancy.
Many of the states in the neo-colonial world in the
1960s and 1970s possessed some of these features. A number of them
carried through significant nationalisation of industry, sometimes
taking over the majority of industry – Libya, Algeria and others – and
yet the states in these societies were not characterised by Marxists as
‘workers’ states’, even of the ‘deformed’ character described by Leon
Trotsky in his analysis of Stalinism. Torn by contradictions, which
threatened to consume these societies in virtual perpetual civil war,
particularly with the withdrawal of direct military rule by imperialism,
the state did play the role of mediator and occupied a certain ‘neutral’
position in developing ‘the nation’ for a certain historical period.
The present Chinese state shows some of these
features today. Not just the Chinese economy but the Chinese state
itself is of a ‘mixed character’, with significant remnants of the
Maoist state machine retaining an important influence. This is entirely
different to the state machine which ushered from the ‘big bang’ in
Russia in the early 1990s, when the remnants of the pro-Stalinist
bureaucracy were completely cleared out and the untrammelled rule of the
ex-bureaucrats who had gone over lock, stock and barrel to capitalism
ruled the roost, and have done since. Vladimir Putin came from the ranks
of the KGB secret police (Komitet Gosudarstvennoy Bezopasnosti –
Committee for State Security) but the former KGB state machine, which is
an important base for him, reconstituted as the FSB, is rooted firmly in
present-day Russian capitalism.
This, however, has not stopped this representative
of Russian gangster capitalism from striking a blow at sections of the
new Russian bourgeoisie – witness the attacks on former oligarchs like
Mikhail Khodorkovsky – in the ‘interests’ of the Russian state and the
‘future of Russia’. Putin has been prepared to take significant ‘state
capitalist’ measures. These have nothing in common with the ideas of
‘state capitalism’ of the SWP in Britain, but of those of Friedrich
Engels’s ‘étatism’, the capitalist state stepping in to take over some
sectors. Nor do they represent a harkening back to a planned economy.
The renationalisation of some strategic industries, particularly in the
energy sector, which were stolen from the Russian people in the early
1990s, is aimed at strengthening Russian capitalism and the bourgeois
gang around Putin.
Confucian confusion?
THE CHINESE STATE, because of its halfway house
position and therefore with a large state sector, reaches into society
and the economy in a much more ‘controlled’ and pervasive fashion than
even Putin’s Russia. Hutton points out: "Since 1998 the party has tried
simultaneously to remodel, rationalise and streamline the state. The
purpose is only partly to save money. In the main, the party wants to
equip the state with structures better suited to regulate and monitor
those parts of China’s economy, which it no longer directly owns or
plans. The giant Soviet ministries, each responsible for an industry,
have been abolished and their functions divided". (p134) However,
"ownership and direction are now delivered by the State-owned Assets
Supervision and Administration Commission (SASAC), and a new network of
generic regulatory agencies has been created to superintend areas such
as environmental protection, intellectual property rights and workplace
safety". (p134)
It is not an accident that Confucian ideas, combined
with Chinese nationalism, are used by the Chinese state as an
ideological underpinning, given the collapse of ‘socialist ideology’ as
the country moves towards capitalism. But the elite’s fear of what will
result from this means that Chinese society is reflected in ambiguities
and contradictions: "Despite budgetary discipline and the more
streamlined state structures, the Chinese political system remains
haunted by the ambiguities of communism becoming a post-revolutionary
party running a post-revolutionary society and an economy in transition
to a form of capitalism". (p135) The harkening back to the Confucian
system is shown in the appointment of state and particularly regional
bureaucrats. In the pre-Maoist imperial era, senior officials were not
allowed to govern their own town or province, and were regularly rotated
out of office after a maximum of ten years. This has now been restored.
Under both Jiang and Hu there has been a recentralisation of power
because previous decentralisations were taken ‘too far’. It meant that
at one stage only 8% of the total tax take of the state went to central
government.
These contradictions in the state are mirrored in
the economy, as we have commented earlier. There is much dispute as to
the exact percentage of the economy in the hands of the state or the
private sector. This partly arises from the lack of internationally
accepted accounting practices and statistics by the Chinese themselves.
Nevertheless, Hutton is probably right when, basing himself on a number
of authoritative studies, he concludes: "In collaboration with China’s
National Bureau of Statistics, the OECD carefully analysed the 2003
survey of 180,000 industrial firms with turnovers in excess of five
million renminbi ($600,000), which together make up 35% of Chinese GDP.
Of these, 47.7% were state-owned or collectively controlled, only 13.3%
were unambiguously private and 12% were foreign-owned companies. The
OECD generously identifies the balance of 27% as privately controlled.
For example, it counts legal person shares as non-state and de facto
private, although this is factually and legally incorrect, and it
interprets majority control by foreign investors of most joint ventures
as meaning that the private sector controls the venture, although this
too is unrealistic. Two thirds of new foreign direct investment is now
done as a wholly-owned foreign enterprise (WOFE) because foreign
investors are not prepared to have a contractual relationship with a
minority Chinese partner who provides little of the capital but exerts
de facto, and frequently counterproductive, control. It is doubtful that
more than one third of the 27% the OECD deems as privately controlled
would stand up to such a definition under scrutiny. More probably, about
two thirds of China’s largest 180,000 enterprises are de facto
state-controlled. This conclusion is broadly in line with the results of
the study by the World Bank of listed companies cited above". (pp146-7)
He further adds the telling comment: "China’s
approach to private ownership means that attempting to assess how much
of China is public and how much private is a fool’s errand because it
cannot capture how the party is trying to develop Leninist corporatism".
(p147) Hutton frequently resorts to this phrase ‘Leninist corporatism’
to describe the Chinese regime. It is a contradiction in terms. Lenin
had nothing in common with ‘corporatism’, of a capitalist state
intervening in the workings of capitalism without in any way infringing
the system. Lenin based himself upon the overthrow of capitalism through
the self-activity and democracy of the workers’ movement. He established
with the Bolsheviks and Trotsky the most democratic state in history,
with the election of officials, the right of recall, workers’ and
peasants’ councils, after the overthrow of tsarism and capitalism in
October 1917.
However, Hutton is correct when he describes the
"party-state" as being at the centre of a "spider’s web" of control.
Political direction is exercised by the state and the party, with those
industries it considers strategic – telecommunications, energy,
transport, iron, steel and metal production, automobiles, etc. In order
to build an international presence it is encouraging the creation of 57
business groups as strategic pillars of the Chinese economy. Hutton says
that, in a sense, this is the "Chinese version of the South Korean
chaebol or the Japanese keiretsu. Each group has its own house bank. The
two largest groups are in petrochemicals (Donglian and Qilu
Petrochemical Groups), and the third largest is steel (Baosteel)".
(p147) But this is not an exact copy of South Korea or Japan. The
chaebol quite clearly originated from capitalism and were and are
controlled by family groups, which is not yet the case in China. The
party is prepared to loosen control in ‘less strategic’ sectors or
enterprises, "but the shareholder and accounting structure is such that
at any time the party can regain control if it is necessary". (p148)
Even in privately owned multinationals, such as
Huawei, "emerging as a fast-growing manufacturer of wireless equipment
and software with a strong commitment to R&D", the company is "not free
from the long arm of the party-state. It operates with a $10 billion
line of credit from the China Development Bank; has close links with the
Red Army; and, to win business in China’s protected telecoms markets, it
is reported to have given controlling shares to the provincial telecoms
companies with which it trades. But without transparency, nobody knows
where de facto control resides". (p153)
No-win situation
HUTTON IS A strong advocate of capitalism, although
rejecting some aspects of neoliberal barbarism, and a firm opponent of
‘utopian’ communism or socialism. He wants to sweep away all the
‘ambiguities’ of present-day China and engage in ‘Enlightened’
capitalist democracy. However, the very ‘halfway house’ economy and
state is itself a product of the fear of the Chinese elite for what
would happen if the control of the state was swept away and untrammelled
capitalism became the norm throughout China. Once the state began to
demolish the ‘iron rice bowl’ of the Maoist regime and introduce
elements of capitalism, the ‘surplus’ population, both in the state
sector and the closed-down sections of the economy, and from the rural
areas, would have to be absorbed into a growing industry in order to
prevent a social explosion. According to Hutton, China has to create 24
million jobs each year in order to avoid this scenario (almost
equivalent to the combined population of Belgium and the Netherlands).
Moreover, the attempt of US imperialism in
particular to force on China a significant appreciation of the value of
the renminbi could seriously undermine this growth rate. The capitalist
consensus is that the Chinese currency is ‘undervalued’ against the
dollar by anything from 15% to 40%. If the Chinese authorities allow a
revaluation to the top figure of 40% it would mean a rise in the value
of the renminbi compared to the dollar and China would lose a massive
proportion of the $1 trillion reserves, largely in dollar assets, it
presently holds. This would be the equivalent of a loss of 3.5% of
China’s gross domestic product. At the same time, Chinese agricultural
prices, which are now keyed to world market prices, would fall from an
already low level if the renminbi was to rise. This would hit rural
incomes and would have a disastrous effect on the agricultural areas.
This in turn would accelerate the already intense pace of the movement
of the rural population to the cities.
An additional complication is that the ability of
the rest of the world – particularly the US – to absorb the huge export
growth of China is coming to an end. Protectionism, in any case, is
likely to grow apace in the US, given the burgeoning trade deficit of
$700 billion, $200 billion of which is accounted for by China. Hutton’s
thesis is that every year China postpones a decision to limit its
accumulation of foreign exchange reserves means that, when a revaluation
comes, it will suffer an even greater loss while, at the same time, a
deceleration of growth will inevitably expose the weakness in the
banking sector, with massive unperforming loans. Hutton contends that
China is in a "no-win situation: float [the renminbi] and accept a
deceleration of growth, or don’t float and accept a deceleration of
growth, if not immediately then eventually". China, in effect, faces the
same dilemma as "Japan experienced as a result of banking weakness in
the 1990s". (p166)
Triggering revolt
THERE ARE MANY other interesting aspects of Hutton’s
analysis on the economy but the main political conclusion to be drawn
from this book is that China is heading for an almighty social bust-up,
in effect a revolution. One of the themes is that a new ‘Tiananmen’
(similar to the revolutionary explosion of 1989) is on the cards.
Hutton’s means of avoiding this are, as we have explained earlier,
‘Enlightenment values’. However, the very remedy which he suggests could
be the trigger for opening the floodgates of revolution in China.
‘Reform’ from the top has, in history, often acted as the impetus for
‘uncontrolled’ mass movements. This is not only possible but likely in
the case of China. The right to strike, democratic elections, a free
press, would not be the ‘shock absorbers’ that Hutton maintains.
Under a long-established advanced capitalism,
capitalist democracy can act as a lightning conductor for channelling
the opposition of the masses into safe channels. That is not the case in
China nor is it similar to the situation of the early 1990s in Russia.
Then, after the travails of Stalinism, the illusion that Russia could
enjoy West German or American living standards rapidly took hold. In
answer to this, CWI supporters in Eastern Europe and Russia said: ‘Yes,
via Bangladesh’. This prognosis was entirely correct and, if anything,
underestimated what transpired as large parts of the former USSR and
Eastern Europe have reverted to a position worse than Bangladesh in some
respects. But the Chinese masses have had almost three decades of
capitalism and, moreover, of the most brutal, despicable variety.
Skilled workers’ wages in Guangdong and the other capitalist sectors are
one tenth of those, on average, in the advanced capitalist world, and
for unskilled workers something like one thirtieth!
The ground has been ploughed by the 87,000 ‘mass
incidents’ in one year, big protests by the Chinese workers and poor
rural masses. They will accept a fighting democratic programme. Because
of the contradiction between the state and private sector, the programme
for this struggle will, of necessity, assume a combined character. The
present ‘halfway house’ state combines some of the worst features of
Stalinism and capitalism. It must be completely dismantled; it is
incapable of ‘reform’. In the state sector, Chinese workers will demand
workers’ control and management, the formulation of a democratic plan
drawn up by committees of workers and the poor rural masses, including
the reintegration through renationalisation of viable sections of state
industries which have been closed down. In the private sector, including
in foreign-owned factories, the working class will demand
nationalisation under democratic control and the integration of all
industries into a democratic workers’ plan of production in the economy
and society in China. This is the most ‘enlightened’ policy for the
Chinese masses.
In its day, the ‘Enlightenment’ in Western Europe
played an enormously progressive role in the struggle against feudalism.
Many of the ideas of the Enlightenment philosophers were an idealisation
of the interests of the rising bourgeoisie. The working class, also in
its rise, inscribed on its banner democratic rights. The experience
under capitalism of the last 200 years, however, is that democracy on a
capitalist basis is truncated, hampered and sometimes fatally undermined
unless the economic and social basis of society is changed. The irony of
China today is that the elimination of landlordism and capitalism gave
enormous advantages to China – Hutton admits that, as a result of this,
China has a "first-rate infrastructure" – which the capitalists are now
attempting to utilise, both in China and worldwide, to give a new lease
of life to their system.
Nothing but misery for the many and untold riches
for the few are possible on the basis of a resurgence of Chinese
capitalism. On the other hand, a new Chinese revolution, albeit with a
confused consciousness of the masses to begin with, after the dark age
of Stalinism and now the brutalities of 30 years of the attempt to
reintroduce capitalism, will be grandiose in its scope and effects on
the world. The CWI will follow the struggles of the Chinese masses and
assist them in every way in order to achieve a victory in this, one of
the decisive sections of the world working class.
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