Will the coming meltdown of China mean the end of global capitalism? Let’s have a brief look at this question. The links at the end point to further reading for those with an interest in the subject.
It’s pretty common knowledge that the so-called Global Financial Crisis (GFC) was not some isolated crisis but a symptom of something fundamentally wrong with the global capitalist economy. In fact, if it were not for China’s rapid growth the GFC would have turned into a long recession. Now China is finally slowing down but who can say by how much? It is still a long way from a meltdown but it opens the door to a slump or a crash in the near future. The big question today is whether or not the global economy can recover from another big crash.
Economists on the Marxist Left, Neo-Classical Right and Keynesian Centre can all see a slump ahead but they disagree on the causes and the solutions. The Neo-classicals blame state interference preventing the market self-correcting by means of depression. “Socialism for the Rich” (QE, or printing money) after the GFC only postponed the inevitable deflation and depression ahead. Keynesians complain that the QE trillions went to Wall St instead of Main Street whereas policies like Sanders and Corbyn’s plans for “peoples’ QE” would avert another depression. Marxists argue that QE cannot stop a depression but for different reasons than the Neo-classicals. The Neo-classicals want to unleash a depression to smack working class wages down to slave levels, and eliminate the ‘social wage’ while Marxists argue that workers should refuse to pay for the capitalist crisis, rise up and overthrow the rotten system that only survives at the expense of the lives of working people.
To put this debate in perspective we need to take a deeper look at the history of capitalism. Crises are not new. Capitalism has a history of regular crises punctuating long upturns and downturns. They are akin to the economy breathing in and out. As the economy expands it reaches a point where it cannot grow without depressions that cut costs and increase productivity. Each depression cleared the road for a new expansion. Thus the crises of the 19th century fuelled a process of national capitalism which drove industrial revolution ahead. But by the turn of the 20th century national markets became fetters on growth and the more advanced economies began to colonise the backward countries to extract their wealth. By exporting capital to the colonies the ‘imperialist’ countries took advantage of cheap labour and raw materials. Crises were now less like regular breathing and more like the gasps of a dying animal. The downturns were driven by monopolies backed by powerful nation states to wage trade wars and World Wars to defeat and plunder their rivals and fuel an upturn.
Capitalism in the 20th century as a global system was no longer progressive. Instead of developing the economy by increasing labour productivity it was destroying wealth in depressions and wars. The capitalists were no longer entrepreneurs but parasites living off monopoly profits that were squandered on wars and speculation. The world economy virtually stagnated between 1914 and 1945. Far from Keynesian economics stimulating a post-war boom, the boom was possible only as the result of such massive destruction of the wealth by depressions and wars. Despite the price paid for the post-war boom it didn’t last long and crisis set in again in the 1960s.
While capitalism staggered from crises to wars in the 20th century the Soviet Union and then China demonstrated that there was an another way of organising society where economic development did not need to destroy wealth. They proved that by getting rid of the capitalists and planning the economy they could grow much more rapidly than capitalism. The superiority of planning over the market forced world capital to impose economic quarantines and a Cold War that ultimately forced Russia and China to return to the global capitalist market.
Here the story gets more interesting. The return of Russia and China to the capitalist world economy did not rescue it by opening up Eurasia to Western plunder. It proved that even the dreaded ‘communist’ regimes could retain their economic independence and resist Western domination. The ‘communist’ elite could convert itself into a new capitalist class and manage the switch to the market without becoming re-colonised by foreign powers. The result is that since 2000 both Russia and China have become rising imperialist powers that are now the main rivals to the US imperialist bloc.
The joke on the Neo-classicals is that the former ‘communist’ states have proven they are able to switch to state monopoly capitalism and apply a centralised Keynesian economics to moderate the anarchic effects of the global market. This is not good enough for the ideologues who preach ‘more-market’. They demand an end to corruption, regulation of markets, currency manipulation, off-book debts, fake statistics, cyber war, one-party dictatorship, etc., knowing that this would subordinate Chinese state monopoly capitalism to US state monopoly capitalism.
Meanwhile the Keynesians are seething with envy because this state monopoly regime is what they want in the US and EU to end financial speculation and invest capital into the real economy. As Michael Roberts argues, the end of the post-war boom has already taught us that a Corbyn-type ‘peoples QE’ or more correctly the ‘multiplier’, will not make capitalists switch from parasitic speculation to invest in production unless they are sure of making a profit. More money chasing fewer goods leads to “stagflation”. If more proof is wanted, Japan has stagnated for most of the post war period as a result of such policies.
What is this ‘root cause’ behind the China slowdown? How best to explain this? For Michael Roberts neither the Neo-Classical or Keynesian approach can explain the rise and fall of China. “The Marxist model of rising productivity through investment and innovation to replace labour and the accompanying contradiction with the dominant law of value in the world economy provides the best explanation of where China has come from and where it is going.” (Roberts, China: A Weird Beast).
On the Marxist model, China’s real GDP depends on production of value by its working class. But this is subject to exploiting labour sufficiently to make a profit. When workers resist, profits fall, production slows down or stagnates, and excess money that leaves production enters speculation in existing commodities causing price inflation and money devaluation. So while crises begin with falling profits they usually blow up when asset bubbles burst.
Rather than printing money that leads to stagflation, the capitalist solution to the crisis must be depression –the devaluing of existing capital, machines, raw materials and wages, to the point where investment in production is profitable again. But depression comes up against the resistance of the workers that produce the raw materials in China’s trading partners including NZ, as well as Chinese workers producing finished products. The more-market solution is a declaration of open class war inside China and in all its trading partners. The Marxist response is to say “bring it on” to workers in all these countries. The workers united will never be defeated!
Meanwhile, the growing antagonism between Russia/China bloc and the US bloc sparked by trade and finance sanctions on Russia has escalated the rivalry between the blocs and ramped up economic and military confrontations. Russia may spark the crash by defaulting on its debt to its Western creditors before a China meltdown can happen. The proxy wars in Ukraine and Syria may blow up into regional wars. Whatever the timing of such events, there is nothing that can prevent the China slowdown becoming a meltdown sooner or later. Whenever it happens a new global crash will pose the question: is this the last crash before human extinction?
http://redrave.blogspot.co.nz/2015/09/is-china-meltdown-end-of-capitalism_16.html
https://thenextrecession.wordpress.com/2015/10/18/debt-demand-and-depression/
https://thenextrecession.wordpress.com/2015/09/17/china-a-weird-beast/
Comrade Dave Brownz is a NZ socialist blogger asking hard questions of global capitalism.
As David Harvey points out, capitalism doesn’t solve its problems, it moves them around. Even if China does crash, there are less developed regions to plunder. China and India still have plenty of ‘growth’ to go – and with that will come copious amounts of suffering and pollution.
How we stop this behemoth we call capitalism, I have no idea. Money, profits and industry can be moved around too easily today. International workers movements is the solution, but to implement worker’s power in place like China and India is near impossible – too much excess labour. As soon as the workers rise up the jobs will shift to other places around the world.
Makes me think of the “Internationale”.
A very interesting blog David but I’m left wondering what the fuck we do about it. I’ve always prefered the Marxist model over the others but trying to implement it at present is like… well how do you do it?
The stash of gold that is capitalism is a bit like Smaug’s treasure and followers of J R R Tolkien will know what the release of that gold cost Middle Earth…
Good article, Dave, which helps to explain and clarify an often confusing situation for many. It shows how QE (Quantitative Easing) even if attempted for the benefit of the working class, won’t solve the problems capitalism causes; and that we urgently need a revolution to create a completely different economic system.
Good article, Dave, which helps to explain an often confusing situation . It shows how QE (Quantitative Easing) even if attempted for the benefit of the working class, won’t solve the problems capitalism causes; and that we urgently need a revolution to create a completely different economic system.
Thanks for the comments comrades.
“What the fuck do we do about it?”
And in particular what can Chinese workers do about it?
There are about a billion Chinese workers. And at least a billion workers in China’s trading partners. Organised and united they would be unstoppable.
The usual method of fighting closures and sackings is that of occupations and workers control of industry.
The main problem we face is how to overcome the disorganisation an disunity in the working class so it can act as a revolutionary force.
The international ruling classes whatever their differences are organised and united against a proletariat divided by nationalism, religion, other divisions, and held back by reformist politics from acting as a revolutionary force.
But there is no question that around the world workers are fighting back spontaneously only to be isolated and picked off.
Workers need to organise and unite internationally to realise their power.
The Russian Revolution proves the possibility of revolution but also its limits if workers are not united internationally. As did the failure of the Italian and German revolutions in 1919.
The Chinese Revolution has important consequences for the class struggle in China today.
I’ll take these points up in another post.
“What the fuck do we do about it?”
Keep writing and talking is a start…capitalism is showing cracks in it the way it hasn’t for decades.
I know I often get down about the chance of change, but overcoming capitalism, or even altering it to the point that it is unrecognisable from today’s version, is possible.
This talk by Joseph Choonara called ‘What do we mean by class in the 21st century’ opened my eyes. I disagree with a lot of what he says, but he makes a strong case for viewing neoliberalism as not too different from 19th Century capitalism.
https://www.youtube.com/watch?v=kokPPH0YZ6g
As an aside on the issue of Marxist revolutions – specifically that in the former USSR – I wonder if the concentration of political power in one party (Communist Party) is, in itself detrimental to any ground-roots uprising. The abuse of power seems intrinsic to human nature, whether it be elected dictatorships under FPP, or One Party states. The result is the same.
I’ve often wondered how a marxist system could be more democratic with entrenched real Parliamentary over-sight into the political system of a government
I think pre-communist-collapse Poland offers a clue. The People’s Republic of Poland actually had a pluralistic (though mostly in name only, I suspect) political system. (Ref: https://en.wikipedia.org/wiki/Front_of_National_Unity)
Just as Western democracies have a multiplicity of political parties – most of which adhere to a capitalistic system, with minor-only variations – a marxist democracy could (?) have a number of different socialist parties. Such a system would adhere to a marxist constitution, with minor-only variations.
(If it’s good enough for the West to expect all political parties to adhere to the capitalist status quo…)
So there might be a range of socialist parties to choose from, and Parliament as a whole, would have oversight of whichever socialist party was in government.
I have no idea if it would work in reality. It’s one of those ideas that appeals in principle, but, like capitalism, once put in practice the nastier side of human nature soon emerges.
China’s economic success is looked at by those who see China’s leadership as brilliant.
But the decisions and policies that work during the boost phase of growth – what we may call the era of low-hanging fruit –do not necessarily work in the next phase, where growth has matured and all the costs that are ignored in the boost phase must now be addressed and paid.
China’s economy, environment and foreign policy, it seems the leadership is making it up as they go along, with the one overriding goal being to maintain the domestic political control of the Communist Party.
China’s leadership has pursued policies that expanded the shadow banking system and conventional banking system into a $28 trillion debt bubble. This explosive expansion of credit has fueled a real estate bubble of monumental proportions, and a $10 trillion stock market bubble that is now bursting (as all bubbles eventually do, despite claims that “this time it’s different”).
Rather than being brilliant, this is a disaster, as bubbles don’t dissipate without profound sytemic consequences.
“I’ve often wondered how a marxist system could be more democratic with entrenched real Parliamentary over-sight into the political system of a government.”
I think it’s important to remember that USSR was a totalitarian form of Communism that was just as determined to ‘progress’ as much as capitalist states. This is different from what Marx wrote about. And it is very different to what neo-Marxists and post-Marxists talk of today.
Put simply, I see the USSR as being fundamentally in tune with capitalism – the focus on material growth and progress. Small c communism is vastly different and that’s why I’m happy calling myself a communist – it is capitalists who need to answer for Stalin because capitalism continues the same goals – the ‘project of modernity’.
An interesting interview with Yanis Varoufakis about libertarian Marxism (I hate the word libertarian, but I do find resonance with what Varoufakis describes here).
http://novaramedia.com/2015/10/interview-yanis-varoufakis/
I tend to concur, Fatty…
I forgot who said the USSR and the USA are coterminous.
If the end of the Cold War is like jumping out a building. Russia jumped from the first floor. And the U.S jumped from the 30th floor.
Russia’s economy was a basket case when Putin got it. But they still payed there debts, in ten years I believe.
The U.S. Actually paying there 18 trillion on the other hand is a rediculous proposition. Even more rediculous is Trump is the only guy ever that could pay it off.
Frank I don’t agree that the problem is the abuse of power nor a universal human nature. Neither is consistent with Marxism as a science of capitalist society.
It is not an abuse of power resulting from human nature but the deliberate use of class power to reproduce and maintain the rule of capital.
For Marx human nature is determined by the historical social relations in existence. Human needs are met only within the bounds of these social relations whether it be lineage, slave, tributary, feudal, capitalist, or socialist/communist societies.
The capitalists get their power from their capital dominating labour by dispossessing it of the means of subsistence and forcing it to produce more value than the value of its labour power. Hence surplus value and profit. The development of capitalism including is crises etc follow from this.
The state acts for the ruling class to reproduce that unequal social relation between capital and labour.
The state appears to be class neutral but this is derived from the ideology that value is not a property of labour, but rather of commodities owned by individuals who are equal in the market and hence equal as citizens in bourgeois democracy. Thus the individual is a fetishized bourgeois subject specific to capitalist social relations.
All capitalist governments, one party, two party Republics, PR whatever, rule on behalf of capital whether or not they attempt to reform it.
But we don’t need to just state our positions we have to defend them.
The evidence is clear. Lets take one of the most progressive capitalist governments, even more than Syriza.
In 1919 the German ‘socialist’ Government the SPD set up the Weimar Republic in a bloc with the German capitalists and their right wing mercenaries using the military to smash the workers revolution and kill their leaders. Every SD government since including the NZ Labour Party has served the state by tying workers to parliament.
The Russian revolution succeeded because the Bolshevik party based itself on the workers and soldiers formed into soviets. The Bolsheviks did not substitute itself for soviet democracy. Rather the soviets took power only because they were led by a party that understood the bourgeoisie had to be overthrown.
Without that Marxist party and its program the workers would have have been defeated by the Kerensky government in league with the Tsarist General Kornilov in August 1917. Kornilov’s coup failed because most of his forces came over to the side of the revolution. This was workers’ democracy in practice as opposed to bourgeois democracy hand in glove with Tsarist reaction. The October Revolution as a result was almost bloodless.
That soviet government then resisted all the attempts by capitalist governments left, right and centre, to invade and defeat the revolution.
The revolution survived but in a terrible state. Because the European revolution was betrayed by Social Democracy the revolution was isolated and began to degenerate. It wasnt a matter of the wrong party or personality, but sheer economics. Separated from the European working class it could not overcome economic scarcity as a precondition for socialism. The democratic plan was subverted by a new bureaucracy that policed the distribution of labour and of goods.
Whatever we call Soviet Russia, it was not capitalism because prices were by a bureaucratic plan and not the market. The bureaucracy posing as managers of state property disenfranchised the workers, and only succeeded in restoring the capitalist market in 1990.
Since these events capitalism has proven again and again that it cannot escape its crises without more depressions and wars which today are inseparable from ecological destruction. The worlds workers will not hang about debating human nature or parliament once it becomes clear that the only way out for humanity and nature is socialist revolution.
Without energy nothing happens.
Central banks can print as much digital money as they like but they cannot print the easily-extracted oil that allowed current economic arrangements to be established and allowed present economic arrangements to persist.
Burning fossil fuel destroys the climate stability that allowed present economic arrangements to be established and allowed them to persist.
Establishing arrangements dependent on non-renewable resource is, by definition, unsustainable. And is insane.
Destroying crucial life-support systems is, by definition, unsustainable. And is insane.
That which is unsustainable cannot be sustained. Therefore, some time in the near future (by 2020), the entire system will go kaput.
However, since the dominant culture is one of denial of reality, no attempt will be made to transition to sane arrangements and NZ society will be driven straight ‘off the cliff’, just like every other industrial society.
Pretty good account there Dave,
“The result is that since 2000 both Russia and China have become rising imperialist powers that are now the main rivals to the US imperialist bloc.”
I see that UK is cuddling up to China and welcomed the president with a Banquet and invited China to invest in UK so yes Russia & China are the new force alright.
US is a spent force just desperately trying to hold onto first place and loosing like a bully in the school playground.
All my years as a kiwi working in Canada taught me that Canadians had never trusted the big neighbour to their south any more than Russia to their north and now I can see why.
US will turn on anyone who threatens their position and this is dangerous.
The US during then past tried to invade Canada too we recall.
I think Keynes was right to suggest a bank whore
Now how very interesting…
Very interesting indeed…
In that with all these swirling ideologies …there is no doubt the alternative economic bloc provided by the BRIC nations. How far they are tied into or autonomous from , the western capitalist model is difficult to say…
I would say they are still interrelated… not independent but interdependent…
HOWEVER !!!!
No matter how you cut it there is oil and vast amounts of raw mineral content in the Dead Sea…
Israel is till the forward outpost for the USA and its strategic hold in the middle east and its oil fields…
Russia sees Syria as a strategic zone to protect…the USA has been busy fomenting instability in that region and Putin has called that bluff.
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Now…. an interesting scenario is what the Bible demonstrates in the book of Revelations.
In it, we see that GOG ..or Magog…which is the word for Russia – the ‘ Bear ‘ from the North…comes down to the plains of Amegiddo with its tanks and is destroyed…
( Napoleon once said that the plains of Armegiddo would be the perfect place for all the worlds armies to have the final war )…
But that is a precursor …it is not the battle of Armegeddon… however it describes a limited thermo nuclear war in the effects it has on the combatants …the flesh and eyes and tongues melting due to the extreme heat…
A vast army from the east wearing red breastplates on things that look like ‘lions’ shooting fire and brimstone out of their mouths – tanks – comes from the east… the number of that army is 6 million.
China announced a standing reserve army of 6 million during the 1960’s…
That army wipes out a third of humankind as it travels east…it is then that the final battle takes place…it is the splitting of the Mount of Olives that circumvents total annihilation…
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And that’s interesting because that was exactly the scenario worked out by NATO computers quite some time ago.
The difference only being that NATO didn’t use archaic language to describe a tank- which didn’t exist 2000 years ago.
And with the collapse of the Soviet Union …it was difficult to see… but with the rise of neo liberalism , the development of the BRIC country’s…and the strategic importance of the middle east and Israel today we can see now how tensions could easily be played out – particularly if war alleviated domestic tensions occurring in both Russia and China…
Think it strange?…if you do a google earth satellite scan over the old Silk Road you will see that road leading from China in Tibet – right through to the plains of Armigeddo and the Golan Heights.
China has made class A roads up to the borders of India capable of carrying heavy tanks.
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So what does this show?…it shows increasing economic tensions and embargoes… domestic internal strife challenging Russia’s and China’s govt’s, an ever dictatorial centralized western govt , – and one which finally antagonizes those eastern and BRIC aligned nations to take direct action in the middle east.
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So no matter which scenario you choose of the above – we can see how economically … the way this place is heading seems to be moving towards a conclusion – particularly as Marxist , Neo Classical and Keynesian economic theory are all antagonistic towards one another.
And if people want to be in denial that economics has nothing to do with wars and the balance of power, internal /domestic and foreign policy making and geopolitical relations … well then , – there’s not a lot that can be done to convince them otherwise.
Wild Katipo
On the centrality of Eurasia, and the position of the BRICS, here’s a critique of Escobar’s excellent coverage of the Silk Road etc, which however does not see that the rise of Russia and China as part of the problem.
It also talks of a workers solution.
http://redrave.blogspot.co.nz/2015/07/for-workers-socialist-federation-of.html
Interesting….myself…I tend to see Putin in a more favorable light despite bad press from the west currently.
But it is difficult to see further on down the line just what sequence of events and twists and turns may eventuate…like the global credit crunch , – and I wouldn’t put it past the west to antagonize either Russia or China judging by its current lunacy at some future date.
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