The Chinese Alternative to Capitalist Crisis

So far China has managed to survive the post-2008 economic recession remarkably well.

State control of the banks and public ownership of land, energy, communications, construction, transport, steel and of many hi-tech enterprises has enabled strategic state investment in infrastructure which has maintained growth at 9 and 10 per cent a year.

The country’s transport system has been transformed.
Massive motorways have been driven across the country from east to west, with 39,000 miles of expressways opened in the past decade and 6,000 last year alone.

A high-speed rail network has been created which effortlessly (and safely) transported the west European communist delegation across a country the size of a continent.

Metro and tram systems are currently under construction in 15 cities.

Major energy projects have reduced China’s reliance on fossil fuels and it was the state subsidies for installing photovoltaic panels that created much of the market for the Xinyu plant now producing a quarter of the world’s total.

However, it is clear that this particular response to external recession has run its course.

The scale of infrastructure construction is placing too much pressure on resources and has caused high levels of inflation.

In Beijing, a property bubble has inflated the price of housing way beyond the reach of many young workers.

So how will China cope with a second bout of global recession affecting those countries on which it relies for the bulk of its exports?

There is some uncertainty on this front.

But the general consensus among Chinese party and state officials was that the only solution would be to increase internal consumption and to do so particularly by raising the purchasing power of poorer households – through wider state provision of pensions, wider access to free medical services, better-funded rural education and subsidised low-cost housing for rent.

Indeed, during the second week that the west European delegation was in China, as economic news from outside worsened, the governing State Council began announcing timetables for the implementation of such policies.

Greater economic security, it is hoped, will give households the confidence to spend and absorb the consumer goods that export markets could no longer take.

For the delegation of communists from Italy, Greece, Portugal, Spain, Germany, France and Britain, this represented a very unfamiliar use of state power.

So how far can China be considered socialist?

The Chinese Communist Party describes its developmental model as one based on a socialist market economy, in a society in which the Communist Party – as the vanguard of the working class – holds state power.

But it stresses that so far the country is only in the primary stage of building socialism.

Since the policy of “reform and opening up” was adopted in 1978, China has sought to use external capitalist investment and technology to transform its productive capacity.

Given its then very limited economic resources, the policy was to concentrate them in two or three coastal provinces, in key state-owned companies and in the hands of a private entrepreneurial sector.

The objective was to develop China’s capacity to bargain on relatively more equal terms with external capital, thereby avoiding the semi-colonial subjection experienced elsewhere in the Third World.

The economic effectiveness of this policy can hardly be contested.

Through joint public-private enterprises and the provision of highly trained and mobile university graduates, China has secured “technological transfer” on a large scale from Western corporations.

But what of the private sector and its impact on the wider character of Chinese society?

Here, not all is precisely as it seems.

Private capital in China does not operate as elsewhere in the capitalist world.

Credit is largely controlled by the state.

So is land and sectoral economic development.

Some of the biggest Chinese private companies have been developed by party cadres acting as party cadres.

Every firm, Chinese or foreign, with more than 100 employees is required to recognise a trade union and provide facilities for a Communist Party branch.

China’s communists attach immense importance to the process of party building, particularly in the private sector.

The head of party organisation in one province spoke of the need to move beyond the position where, in too many plants, these party branches remained “battling fortresses.”

The aim is to advance to more harmonious relations in which workers’ rights are fully respected and full consultation takes place on issues such as investment policy.

For European communist delegates, questions remained about the relative role of the trade unions and the party, and about China’s ability to move easily to more sustainable growth, to provide employment for its growing army of university graduates and to harness, without wider social damage, the dynamics of the private sector.

Yet the delegation left China in no doubt that the country’s example is one that needs to be studied in depth by the left.

The Chinese communists remain as sharply realistic in applying Marxism in China as those who founded their party 90 years ago.

John Foster is international secretary of the Communist Party of Britain

Morning Star, September 21, 2011

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