[A Marxist Historian]

Originally Posted by islandmilitia

The CPC does not "direct" the Chinese economy, and nor does Adam Smith for that matter, the Chinese economy is determined by the world economy of which it is a part. That is true of all economies to some extent because it is impossible to identify or even conceptualize a capitalist economy that is isolated from other capitalist societies for any extended period of time, but it is especially true of the Chinese economy because the entire Chinese accumulation model for the last twenty if not thirty years has been based around export production and foreign direct investment. The nature of that growth model has been entirely predicated on low wage rates and poor working conditions, in order to attract foreign investment, and the result has been that China now has incredibly low levels of consumption as a proportion of GDP, compared to other major economies, and even other underdeveloped countries like India. The Chinese economy has been left vulnerable to external falls in demand without having sufficient domestic space to reconfigure the economy towards greater reliance on domestic consumption, and it is precisely falls in external demand that you have been seeing over the course of the economic crisis up to the present, due to the collapse of the housing market in the United States and the other manifestations of the crisis in the West. It was against those background conditions that the government launched its bailout over 2008-9, which was focused around massive domestic investment, and is now running out of steam, whilst having intensified a whole set of contradictions, as I explained above.

That China continues to experience positive and relatively high growth rates compared to countries like the US is indicative not of the Chinese economy being a different mode of production, but of the fact that crises develop in uneven and complex ways - you see exactly the same phenomenon in Latin America and Africa because the economies of those regions have been boosted by Chinese demand for their raw materials, including over the past few years where the Chinese bailout has utilized the raw materials of those regions in order to construct housing and transport infrastructure, for example. Now that the bailout is effectively coming to a close, and now that there is no major source of demand within China for the raw materials of the periphery, you are seeing the first signs of the crisis spreading throughout the regions that were hitherto relatively unaffected, because of how much other countries have depended on Chinese demand (see this, for example, as well as this analytical argument from Ha-Joon Chang). The slowing of growth in the periphery due to falling demand in China is also further evidence of how the world economy is an integrated unit from which no single national economy can escape, especially during a capitalist crisis.

Indeed, all capitalist economies are directed by the market in particular and the world market in general, that was exactly my point about Adam Smith's invisible hand. But the Chinese economy is not, ultimately, capitalist.

If it were, and if it were really totally foreign investment and export driven as islandmil imagines, then it would have been hit, if anything, harder by the recent world economic crisis than other countries. Which is exactly what all the state caps were predicting in 2008. They were dead wrong, a small piece of experimental evidence that the "state cap" analysis is wrong.

From the standpoint of an American consumer shopping at Wal-Mart, the Chinese economy surely must be capitalist, as everything he buys there is made in China, for a profit.

From the standpoint of the Chinese, it's not. The export sector is indeed mostly private capitalist, but the state sector is not, the "commanding heights" of the economy are in the hands of the state, and the state is directed by the CCP not the Chinese bourgeoisie, a class that does not run the Chinese state and has a relationship with it sometimes almost as uneasy as that of the Chinese working class. The CCP state is exactly as described by Trotsky with respect to the USSR, a Bonapartist affair balancing between classes, subordinate to world imperialism but ultimately dependent on the Chinese working class and peasantry for its legitimacy, so ultimately an extremely corrupt and deformed workers state.

So the Chinese response to the world economic crisis was to--shift investment to the state sector. And tolerate a pretty dramatic rise in wages, under the impact of class struggle, and make other concessions to the working class and peasantry. Almost inconceivable in any capitalist country in the middle of a world economic crisis like this one.

Other Third World countries did benefit temporarily from the huge worldwide economic collapse in the imperialist centers, Europe and Japan and the USA. After all, stuff has to be produced somewhere. But that is all very fragile and crisis ridden, especially in India, where you have a (relatively) small bourgeoisie getting much richer while the popular masses sink further into extreme misery and much of the countryside is wracked by peasant and minority nationality revolts. Almost the opposite of what has gone on in China, where you have had a remarkable increase in the popular standard of living right in the middle of all this.

I don't know where you got that stuff about the Chinese working class standard of living being less than the Indian. The exact reverse is true. Perhaps your stats include the upper classes, whose income levels in India are approaching Western levels. In India, half of all children suffer malnutrition! Last stats I saw, the average income level of the average worker or peasant in China these days is twice that in India.

In China, the fundamental crisis is political not economic. Both the working class and the bourgeoisie is rising in power and the peasantry is getting very uppity. The bureaucracy is visibly scared of being ground to pieces in between and coming unstuck, as the recent Politburo purge demonstrates, and therefore is trying to crack down, not too successfully.

Exactly the dynamics one would expect in a deformed workers state starting to come unstuck, and not at all what one sees in a capitalist country.

Economic crisis in the export sector could indeed set off a political explosion, but it would just serve as a trigger. The superior economic performance of China to capitalist countries is a repetition, despite all the differences, of the widely acknowledged economic superiority of the USSR under Stalin to capitalist countries during the Great Depression.

-M.H.-