[Marxism] Exaggerating Chinese economic power

Fri Aug 1 16:04:23 MDT 2008

After S. Artesian said that s/he would reply to me 'off-list', "Marvin Gandall" <marvgandall at videotron.ca> complained:

"Aww, too bad. I was looking forward to Artesian's reply to the issues Tucker raised. Reminds me when I was a negotiator, and the employer guy, looking a bit discomfited, would come over to me and ask whether we could discuss his response "privately" out of earshot of the teams. Naturally, we'd refuse since we didn't do secret meetings."

Well, as a former trade union negotiator myself, and though this and other experiences having acquired some ability to assess moral character, I can assure you that S. Artesian's reasons for wishing to continue the debate 'in camera' were honest ones which bear no comparison to the nefarious tactics of capitalist employers!

But anyway, S. Artesian has graciously consented to the request that the 'off-list' exchange should be posted to this list. So-

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S. Artesian to Noah Tucker:

1.  To your modest point that China's industrial growth is important, real, significant-- there is no disagreement.

    2.  Disagreement is regarding exaggeration of that growth.  That exaggeration takes, IMO, 2 forms: a) China will in the near, far future overtake the US and will replace/equal it as the cornerstone, lynchpin, single most powerful entity etc etc in the capitalist world; b) China's growth will proceed without drastic interruption, without significant contraction, without unleashing tremendous class conflict.  Indeed China's uninterrupted growth and march to the top will suppress, resolve, those contradictions.

    a) I belive is unrealistic precisely because of b) being impossible  -- wait a minute better not use impossible-- highly, highly improbable.  And if b occurs, we truly need to say good-bye to Marxism as a valid analysis of international capitalism.

    Now as to your other points:  1.  I disagree that wage-rate increases in Japan and Korea triggered the economic contractions in those countries:

    a. Japan's growth was stopped due to declining rates of profits, which were triggered in overproduction particularly of "hard" commodities like steel; underlying and "floating" the usually low profit margins of Japanese industry was continuous appreciation in real estate and real estate assets.  With the signing of the Plaza Accords, the US led slowdown, and recession, taking place 1989, 1991, the asset base began to depreciate.  What investment Japanese industry did undertake, it undertook outside its borders, being particularly active in Pacific Asia, including the NIEs.   

    b. Korea did experience significant wage-rate increases of about 60% between 1992-1996.  However, if I read the OECD statistics correctly,  labor-share of national income and industry operating costs increased only modestly by about 2.5% during that same period.

    The crisis that shook Korea in the 1996-1997-1998 period, and spread to Mexico, Brazil, and the former SU, was foretold in a decline in the rate of return on investment throughout the capitalist world, led by the US.  Before the crisis broke there were clear indications of overproduction in the semi-conductor industry; electronics assembly; copper, steel, cement, autos.

    This crisis did not strike Korea alone , but also Thailand, Taiwan, Malaysia, the Philippines (which hardly has near-western wage-rates), and as previously stated, Mexico and  Brazil.

    After initial resistance ( Greeenspan's deaf ear to Thailand's pleas at the start) the US strove mightily to contain the damage, protect Brazil and Mexico, but not Russia where the fires of free-plague capitalism were encouraged as a way to get Russia's productive capabilities out of the world market mix.

    And the reinflations, after a fashion, worked, taking us into the further overproduction, as registered most clearly in the telecom, data processing, sectors.

    What Korea, and Japan, among other were able to do to "restore" and stabilize their economies was to alter the relations between the MOP and labor,  by shutting down some MOP, losing ownership of others, but IMO, most importantly, by reducing labor's share, transferring the burden down the economy. 

    Now this is why I think your other point about access to markets, technology, capital-- countries can have that as long as profitability is sufficient in the suppliers of that technology, that capital, and with the markets realizing that profitability quickly enough.  But that's simply saying that when times are good, times are good.  The point I think we need to make, as China, Brazil, integrate more and more into the world markets, the access to capital and technology will depend on the existing profitability of production in the advanced capitalist countries. 

    And that dependence will trigger severe repercussions in China's domestic economy and will exacerbate the problems that exist between city and countryside, and most importantly, property relations and productivity in agriculture.

    Those are the points I am trying to make clear.

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Noah Tucker to S. Artesian:

There's much in your email with which I agree; in particular, that any capitalist economy is prone to economic crisis. I would go further & perhaps you will agree with me also on this- any national economy, whatever its internal relations of production, is prone to economic crisis, because it is inseparably part of the global economy which- at present & unfortunately for the next many years- is a global capitalist, & imperialist dominated, economy.

Our main analytical difference seems to be on the importance of wage levels as a factor in economic development. My view is that this is far from being the only factor; but, within global capitalism, it is a hugely important factor.

For a consideration of the complexities of the issue, I'd ask you to read:

http://21stcenturysocialism.com/article/the_dynamic_dinosaurs_01391.html

The main focus of the article is on the issue of national and international state actions and economic growth, and in doing so it looks at the role of global wage imbalances and the issue of technology transfer- as key aspects of imperialist domination and state policies. Singapore, the ROK and Taiwan are the main examples considered in the article.

For my analysis of Chinese economic growth from 1949 onwards, I request that you read:

http://21stcenturysocialism.com/article/how_china_rises_01546.html

Now, specifically to the matter of wage levels, and to greatly simplify:-

Firstly, you cannot deny that there is a huge difference in the average level of wages between the developed capitalist countries (the G7 et al) and the Third World.

Secondly, you cannot deny that the wages paid to the workers constitute a very large proportion of the costs of production.

Goods which are produced cheaper, ie by lower paid workers, clearly have a competitive advantage on the world market, & will therefore allow the enterprises which produce these cheap goods to expand.

This, of course, abstracts from the very pertinent factors of technology and access to markets. The productivity of the worker depends on whether he/she is using modern production equipment or less advanced equipment (including infrastucture), the training / skill of the worker, & so on. In general, the workers in the Third World use less advanced equipment etc. Also, access to markets is dependent on a world trade system which is controlled by the rich countries.

In the cases of, eg, Singapore, the ROK and Taiwan, for reasons which can be understood in the context of the Cold War- these countries were allowed to import modern production technology & were given access to the home markets of the rich capitalist countries.

Similar concessions were made to China from the late 1970s onwards.

You say: "I disagree that wage-rate increases in Japan and Korea triggered the economic contractions in those countries" and you cite the Japanese real estate bubble, global overproduction of steel etc etc . I am with you 100% on the relevance of all of these factors. Also- there is the matter of US policy, not to allow Japan to usurp the USA as economic leader- no doubt you have read Peter Gowan's 'The Global Gamble'.

Nevertheless. For example, Japan in 1980. Wages in that country had drawn equal to those in the USA and Western Europe. How could it have overtaken the EU & the US in per-capita material production? Only by using, in its productive sectors, a higher level of industrial technology than the North Americans and the West Europeans. This was not, and is not, possible. Technological advancement is an international process, in which the USA (for reasons which are quite explicable & should be given serious consideration by the left) is able to stay at the frontier in a wide range of sectors.

And for this reason among others, I do agree with you that the USA will not at any time soon be replaced as the "the cornerstone, lynchpin, single most powerful entity" etc.

However. As we concur, China's growth is important, real & significant. And unlike Japan and the EU, China is not under US political hegemony.

Noah