LENIN'S TOMB

Saturday, January 22, 2011

The global ruling class posted by Richard Seymour

The annual Merrill Lynch Cap Gemini World Wealth Report is a serious study of liquid, investable wealth held by the richest people on the planet: the High Net Worth Individuals who have at least $1m liquid wealth, and the Ultra High Net Worth Individuals who have at least $30m, both "excluding primary residence, collectibles, consumables, and consumer durables". As such it constitutes an invaluable starting point for understanding who the ruling class are, where they live and how they hold their wealth. This is from the 2010 wealth report (I'm afraid there doesn't appear to be a working online file):

The world’s population of high net worth individuals (HNWIs) grew 17.1% to 10.0 million in 2009, returning to levels last seen in 2007 despite the contraction in world gross domestic product (GDP). Global HNWI wealth similarly recovered, rising 18.9% to US$39.0 trillion, with HNWI wealth in Asia-Pacific and Latin America actually surpassing levels last seen at the end of 2007.

For the first time ever, the size of the HNWI population in Asia-Pacific was as large as that of Europe (at 3.0 million). This shift in the rankings occurred because HNWI gains in Europe, while sizeable, were far less than those in Asia-Pacific, where the region’s economies saw continued robust growth in both economic and market drivers of wealth.

The wealth of Asia-Pacific HNWIs stood at US$9.7 trillion by the end of 2009, up 30.9%, and above the US$9.5 trillion in wealth held by Europe’s HNWIs. Among Asia-Pacific markets, Hong Kong and India led the pack, rebounding from mammoth declines in their HNWI bases and wealth in 2008 amid an outsized resurgence in their stock markets.

The global HNWI population nevertheless remains highly concentrated. The U.S., Japan and Germany still accounted for 53.5% of the world’s HNWI population at the end of 2009, down only slightly from 54.0% in 2008. Australia became the tenth largest home to HNWIs, after overtaking Brazil, due to a considerable rebound.

After losing 24.0% in 2008, Ultra-HNWIs saw wealth rebound 21.5% in 2009. At the end of 2009, Ultra-HNWIs accounted for 35.5% of global HNWI wealth, up from 34.7%, while representing only 0.9% of the global HNWI population, the same as in 2008.

The total liquid wealth of the rich in 2009, at $39 trillion, was actually more than two-thirds of world GDP in the same year, almost triple the GDP of the US, and nearly ten times that of China. Another way of looking at it is that the increase in liquid assets from 2008 to 2009 held by the rich was about $6.5 trillion, more than 10% of total GDP in 2009. This was in a year in which world GDP actually shrank by 0.8%.

The distinction between "economic and market drivers of wealth" is very important, and very telling. Most of the new wealth held by the rich was, as you can see, not produced by economic growth, but by stock market capitalisation. In other words, market relations, sustained by state intervention, facilitated the transfer of wealth from the working class to the rich at a time when most of the world's economy was such that the direct exploitation of labour could not sustain high profit rates. That's what the bail-outs did; it's what they were intended to do. Another intended consequence is that there were not only more high net worth individuals, 10 million of them globally (0.014% of the world's population), but the 'ultras' did far better at increasing their share of liquid assets than mere millionaires - thus wealth became even more concentrated than it had been, among a mere 36,300 people, or 0.0005% of the population. The corollary of this has been, and will continue to be, a general decline in the living standards of the working class in most of the advanced capitalist economies: at the same time as the wealth of the richest grew, global unemployment rose by 14.4%.

The role of finance-capital in surplus-extraction varies considerably, of course - and here, China's contribution to the reproduction of the world's ruling class stands out. While financial bail-outs (temporarily) solved many of the problems of the rich in Europe and North America, growth driven by unprecedented spending commitments in China (and, to a lesser extent, India, whose stimulus actually began before the crisis) kept the rich from the Asia-Pacific region in dough, and contributed to the wealth of the US ruling class. This could happen partly because China's growth rates were, like those of many 'newly industrialising countries', already robust. This meant that China's per capita stimulus was greater than that of any other country, and as such accounted for 95% of economic growth in the first three quarters of 2009. But it was also in part because state ownership of the financial and banking sector in China has enabled the government to have more control over the coordination of its stimulus and its effects.

Much has been made of the regime's policy of driving up wages. In fact, what has happened is that China's stimulus enabled an increase in the total amount of surplus value, both by increasing the total employment of labour and by increasing the productivity of labour. Productivity growth has offset wage growth, thus allowing an increase in working class wages and living standards to take place, while continuing the long term strend for wages to decrease as a share of GDP [pdf]. The result is that the top 0.4% of the population controls 70% of the country's wealth. Chinese growth has actually depended on wages sliding as a share of national wealth, and the world capitalist system would be a lot worse off if that hadn't continued to happen. Indeed, according to a World Bank economist, China's stimulus alone contributed 1% to world growth in 2010 - an extraordinary figure. Its GDP by purchasing power parity is already larger than the US by some calculations. China's growth is enabling its ruling class to dramatically increase its demand for luxury goods, accounting for 49% of luxury market growth as the rich spoil themselves with the usual array of jets, mansions, and yachts. But it has also substantially paid for US growth, through direct investment and sovereign debt purchases.

The role of China's working class, the largest in the world by far, in the reproduction of the world's ruling class has, of course, been steadily growing since 1978. The interesting question now is whether this can continue. The World Wealth Report expects future growth to be led by the Asia-Pacific region, "excluding Japan" - despite the latter's substantial stimulus. This obviously means the rich expect China to continue to drive growth and thus profitability. During the last thirty years, China's growth rates have been significantly ahead of its record following the 1949 revolution, and more than double the world average. Its share of world manufacturing rose from 2 to 18%, picking up the slack as manufacturing jobs were lost in Europe and the US. Its expansion fuelled a regional growth surge, eg allowing Japanese capital to increase profits by outsourcing to Chinese labour, and was a significant driver of world growth since 1982.

But the Chinese economy is accumulating tremendous spare capacity as a result of its stimulus package, adding to a global problem and endangering its future ability to produce sustainable growth. It has constantly had to counteract overheating, and may have to substantially reign in growth just when the rest of the world's economies are doing exactly the same, thus undermining its ability to lead a new phase of capitalist growth. The tendencies toward over-accumulation and declining profitability are already evident. Despite the hype about wage increases, real wages are already so low (manufacturing workers in China get less than 5% of the average in the US) that they can't go much lower. Even if they could, the effect may be to contribute to global deflation, thus harming the economies on which China depends for its export markets. China may thus be closer to the end of a long-term wave of growth than the beginning - that growth having been predicated on a now expired global wave of neoliberal expansion based on 'primitive accumulation' and the subsequent record expansion of the country's working class.

Whether and however the ruling class succeeds in overcoming the present barriers to further accumulation, it's hard to see future waves of growth proceeding in this self-same way. Instead, for the foreseeable future, it looks like there will be heightened competition over a diminishing share of surplus value. And Obama has just announced that America's approach in this will be a revamped 'open doors' policy, advised by a new panel headed by the chief executive of General Electric. This will basically involve coercing other economies into accepting US exports at whatever cost to the national or regional economy being thus prised open. It probably presages a new wave of aggression in the global south, especially where popular movements succeed in establishing governments that are interested in independent development based on some concessions for the working class. One would also expect things like this to happen more often, as white supremacy in its various forms is a well-established praxis for weakening the bargaining power of labour and breaking the political threat from the Left. And, especially in a period like this, when growth is thin on the ground and profits have to be wrested through acts of accumulation-by-dispossession, that is how the ruling class makes its money.

Labels: american ruling class, capitalism, china, exploitation, profits, ruling class, the rate of exploitation

Sunday, July 25, 2010

Monopoly Capital Blocks Rational Policy of Wage-led Growth posted by Yoshie

What lesson might the working classes of the global North take from what's happening in China? Canadian journalist Paul Jay spells it out in plain English.

Paul Jay: So we've been talking about macroeconomic policy, the G-20, austerity. And there was one little line in the G-20 document I thought was interesting, and it's sort of buried in amongst everything. It said countries could facilitate wages going up proportional to productivity, which is rather interesting, 'cause it's the only time I've ever heard it even mentioned by these guys. There's quite a big section about how wages need to go up in China. There they understand the need for increasing demand. And we've heard President Obama say, we can't be the consumer engine of the world anymore, you guys have to do it, looking at China. And they talk about increasing the social safety net in China. They even talk about allowing strike struggles in China so wages can go up, but they sure don't talk about it when it comes to their own places. . . . So the problem is -- and this is where it becomes a political problem. I mean, it's not that difficult to sit down and kind of envision a rational solution to all of this -- you just can't pass it anywhere. The way that the politics is controlled and the small gang of people that actually own the commanding heights of the economy, starting with the banks, they don't allow any of this to actually get passed, so you get to an impasse. You can talk rational visions, but you can't execute on it.

The lesson given by Jay is a Kaleckian one, one of the most important lessons, especially today, as we struggle against the drive to austerity in the North. First of all, make clear what obstacle needs to be removed if the rational alternative is to be implemented.

To that Kaleckian lesson, however, we want to add a Gorzian one, especially in the United States: take productivity gains more in the form of gains in disposable time than in the form of more consumption. That's our socialist ticket out of crisis, economic and environmental.

Minimum transitional demands: retirement at 50 with full benefits; free education and social wages for students (all the way up to doctoral degrees for those who want them); paid parental leaves (six years for each new child); two months of paid vacations per year at minimum; indefinite unemployment benefits (to last till the ruling classes come up with worthy jobs at worthy wages for the unemployed).

Labels: austerity, capitalism, china, class, keynesianism, marxism, ruling class, socialism, time, working class

Friday, July 23, 2010

The class struggle in China posted by Richard Seymour

If the militant strike wave in China has succeeded in doing one thing, it is to have frightened the Chinese ruling class sufficiently that it is declaring its intention to tackle the shocking increase in inequality in the country (while avoiding measures that might increase the political clout and bargaining power of labour):

The People’s Daily recognizes the severity of this potentially explosive problem. According to the article, China’s Gini Coefficient, which is an index that measures inequality, clocks in at 0.47 – very close to the 0.5 marker, which often signals risk of instability. It also mentions that from 1997 to 2007 labour remuneration as a percentage of GDP went from 53.4 per cent to 39.74 per cent. Workers weren’t the only ones to lose ground. People living in rural areas have also fallen behind their urban countrymen. In 1978 urban per capita income was 2.78 times higher than rural income. By 2009 that gap had widened to 3.33. Also, in cities, the richest 10 per cent controlled 45 per cent of the wealth, while the poorest 10 per cent only had 1.4 per cent.

The paper also outlines the main ways the government intends to tackle the problem. Implementing a wages increase mechanism, perfecting the minimum wage system, and ensuring wages are paid in a timely manner are all main priorities. The collective consultation system will be promoted. Farmers salaries will be increased. The social insurance system will be improved to cover those in the cities and countryside.

Although the article outlines other plans to create a more progressive tax system, the focus of redistributive efforts seems to be on the points mentioned above, and conspicuous by its absence, is the role of collective bargaining and reform of the ACFTU. Ironically, even the ACFTU sees the need for reform in order for collective consultation and collective contracts to play a major part in the government’s efforts to more equitably redistribute wealth. On 9 July 2010 the ACFTU announced that collective contracts would be a key ingredient in improving workers rights. In the China Daily, Li Shouzhen, spokesperson from the ACFTU noted that collective contracts will be promoted and but that, “…legislation will be needed first to make it mandatory for enterprises to set up such a mechanism, which is still lacking at most small and medium-sized enterprises…. if we made it mandatory (having employers sign collective contracts with their employees) and stepped up punishment for violators, I think workers would be placed in a much stronger position”.

That a powerful, organised labour movement might come out of the current struggles over the distribution of the social product, and even produce a space for a labour-based political opposition, is undoubtedly a more threatening prospect than temporary remuneration concessions. The lessons in organisation and tactics that workers can learn from pick up from such militancy are the greater danger than a temporary redistribution of wealth to prevent militant outbreaks. These strikes are not only winning much of the time, and winning big when they do, they are showing workers how to deal with both employers and the state, facing down police repression as well as employers' economic power. This is why, in addition to the government's commitments (which it can certainly afford with 10.3% growth) local governments are increasing the minimum wage to forestall strikes. As the world system shifts to a more obviously multipolar one, with US hegemony in slow but perceptible decline, the outcome of the struggles of the emerging Chinese labour movement will be increasingly important for the international working class as a whole. Solidarity with the Chinese working class is in the interests of workers in Britain, but I should say that learning from the Chinese working class as it experiments with ways to deal with far more difficult struggles than we face, is also paramount.

Labels: capitalism, china, labour, maoism, neoliberalism, stalinism, state capitalism, trade unions, working class

Friday, June 11, 2010

Chinese working class kicks back posted by Richard Seymour

The Chinese working class is on the move: there is a wave of strikes taking place across China, and they're winning. Workers at Honda have won a 30% pay increase in the latest strike affecting that company, while workers at FoxConn have reportedly been offered a 100% increase in 'basic pay' (with strings attached) after strikes and a string of employee suicides. The strike at FoxConn is particularly auspicious since that company has so far demonstrated considerable success in maintaining a divided, weakened, timid workforce. Across the country, a series of hard-fought strikes have pitted workers against the usual double act of management and cops (strikes are effectively legal, but the Chinese police force is hardly more pacific than the LAPD, and management frequently beat insubordinate workers) resulting in injuries but also some signal successes. The analysis of the China Labour Bulletin suggests two factors here:

1) As ever, the militancy of these workers is driven by hyperintensive rates of exploitation. In recent decades, much of the surplus value accumulated by capital in China has been the result of unpaid labour, accumulated wage arrears that are never paid off. Otherwise, wages are so low that workers have to perform dozens of extra hours of overtime per month in order simply to live.

2) Most of the strikes involve smaller groups of workers, in the thousands rather than the hundreds of thousands. The absence of independent union organisation and the surveillance capacities of capital mean that workers find it very difficult to organise on a very large scale, which takes time, coordination and an apparatus of communication that those workers as yet lack. But two or three thousand workers in a single factory can much more feasibly halt production.

We have seen waves of strikes and direct action in China before but, Charlie Hore argues, these were mostly of a defensive character. Recent strikes have been offensive. The FT reports:

In fact, China has witnessed considerable industrial unrest in recent decades, much of it localised and attracting little publicity. The causes have tended to be unpaid wages or Dickensian working conditions. While the organisers of such strikes have often got into trouble, in many cases the authorities have taken a relatively relaxed attitude, provided the disputes remained small and non-violent, seeing them as a way of blowing off steam.
Mr Gilholm and other analysts, however, said the Honda strikes were a new development because they focused on wages rather than perceived abuses, meaning even well-run factories could become vulnerable to labour disputes.
“It is a new form of strike – a very symbolic event,” said Liu Cheng, a professor at Shanghai Normal University and an outside adviser in the drafting of the 2008 labour law. After wages had been held down for long periods, he said, “finally there is this explosion. It is because of workers’ growing awareness of labour rights, and more talk and debate about the subject.”

In the strike at the Honda plant in Foshan, notably, workers formed an organisation separately from the official union, with independently elected delegates to represent them vs management. They have also been using new technologies (which the Chinese working class has, after all, manufactured in bulk) to coordinate their actions. The success of those workers has inspired a series of similar actions within Honda, with workers in other plants demanding parity with Foshan. There is another factor that improves labour's bargaining power, and that is the labour shortages that have occurred in many areas as the Chinese government has battled recession by investing heavily in infrastructural projects. To attract workers, some cities have had to raise their minimum wage,which has led to workers in other cities demanding the same. These advantages are temporary - a sudden economic reversal could put workers on the back foot again. But they could produce a movement that will irreversibly alter the status of the Chinese working class.

The threat to capital, the Chinese state and the stock markets, is that a model of de facto independent trade unionism will start to be taken up and replicated among other Chinese workers, and will result in an increasing share of production going to the working class. More generally, it poses a potential long-term political threat to what has been one of the most advantageous states for capitalist investment and development in the world. The ability to appropriate basically free labour, to super-exploit migrant workers moving from the villages to the coastal slums, to accumulate some of the fattest profits in the world, has always depended on containing the expanding working class. For example, the migrant worker economy in China works much the same way as it does elsewhere. Millions of workers flee impoverished rural lives, where a basic safety net is being taken away, many of them relying on false identification papers to get a job. Once they've got a job, they often end up as part of a live-in work-force, sleeping in dormitories, eating collectively. They are a cheap labour force, producing for an export market. If they acquire political and economic rights - increase their class power in other words - their susceptibility to this kind of exploitation is greatly diminished. Foreign investors in the coastal 'boom' areas may, business papers warn, be frightened away by a period of industrial unrest. Since the CCP is not going to restore some mythical Maoist golden age, it will either have to break the strikes with repression, or find ways to accomodate the workers politically, offer some reforms without substantially threatening profits. Or it may lose control in the long run.

Labels: 'communism', 'socialism', capitalism, china, inequality, maoism, neoliberalism, poverty, ruling class, stalinism, working class

Tuesday, October 27, 2009

Crisis and recovery: myths about China posted by Richard Seymour

Guest post by redbedhead

ARE WE IN A RECOVERY? Well, there’s certainly lots of talk of “green shoots” and the head of the IMF said on Saturday that “just now we see the beginning of the end of the crisis, predicting that the world will return to growth this year and by next year global growth will be around 3 percent. Is it true? Any talk of global recovery needs to start by looking at two key places – China and the USA. The two countries are locked together in an unwilling but interdependent dance from which neither can escape. The USA is China’s largest trading partner with 21 percent of China’s exports going to the US and almost eight percent of its imports coming from there. In the US, China is now the USA’s number 1 trading partner, representing up to 19 percent of total trade vs Canada’s 14.5 percent. Until last year Canada was the biggest trading partner.

This is significant for a few reasons. First, because exports are still key to China’s growth, with its balance of payments surplus accounting for 10 percent of China’s GDP. In real terms that means that China sells $300 billion per year more than it buys on the world market. It is a key component of China’s growth rates, which have hovered around the 10 percent mark. Having such a high balance of payments surplus has meant that China can invest heavily in growing its economy. It’s rate of investment is a whopping 43 percent of GDP, compared to about 16.5 percent in the United States and 23.1 percent in the EU. But it’s also meant that China can buy up American debt – it holds close to $800 billion in US debt – in a process of debt cycling that helped fund the 2003-2007 boom. It was as though the US borrowed money from China to pay for stuff that it was buying from China. And China lent money to the US that it had made by selling the US goods from its factories. Right wing historian Niall Ferguson labeled this cycle “Chimerica”. What was really happening, of course, was that by continuing to buy up US government securities they simultaneously kept US interest rates low – thus helping to fund the consumer debt boom – and also kept the US dollar high, making Chinese exports cheap.

It was a virtuous cycle until the bubble got too big. It is now in the process of becoming a negatively reinforcing cycle: the collapse in US imports is driving down China’s trade surplus, and the massive quantity of US debt is driving down the US dollar, which is making it less attractive as a reserve currency and threatens to push up US interest rates. The Chinese have stated on a number of occasions that they are concerned by US debt levels, levels that they were happy with in the past when it meant the sales of Chinese goods. In March, Premier Wen Jiabao made some very bald statements at the end of the closing of China’s legislative session:

“We have made a huge amount of loans to the United States. Of course we are concerned about the safety of our assets. To be honest, I'm a little bit worried... I would like to call on the United States to honor its words, stay a credible nation and ensure the safety of Chinese assets.”

But the Chinese can do little more than express concern. They know that ending the present round of massive stimulus spending in either country would be a disaster, since it is all that is propping up the anemic growth in the US and accounts for perhaps half of the growth in China. At a joint two-day conference between China and the US in July, China made the ritual noises about getting the deficit under control but then re-emphasized that now is not the time to stop deficit spending to stimulate the economy. As Peterson Institute economist, Ted Truman, put it:

“They don't want the U.S. economy to collapse because they are highly dependent on the U.S. economy in terms of economic activity and ... because they have a lot of their financial eggs in this basket.”

The result of the present crisis and the interdependent negative effect it has had on China and the US is leading to a number of processes. China is desperately trying to avoid a slowdown in growth. Anything below about 8 percent will cause a rise in unemployment and, it is feared, a growth in unrest – already in good supply. But with China pumping cash both directly through state investment and indirectly through a rapid expansion of lending – at 34 percent, or four times the rate of GDP growth – there is a serious danger of both an asset bubble and massive over capacity as plant comes online with insufficient global markets to absorb the increase in supply. With US retail sales stagnant and GDP in the European Union expected to shrink this year by four percent, the only hope for China beyond government stimulus that is expected to end after 2010 is to develop domestic consumption.

Recent statistics, for instance showing a 16.5 percent growth in retail sales and a whopping 34 percent growth in auto sales, seem to suggest that this is happening. However, these stats are largely for foreign consumption and for the central state paymasters of regional bureaucrats. In other words they are, at best, manipulated and are often outright fabrications. But even where there has been a growth in domestic demand, much of it either includes increased government expenditure or one-off incentives as part of the government stimulus package. The real problem is that rather than rising, household consumption in China is falling – from 47 percent in 2000 to around 30 percent today, a massive decline. What this suggests is that in the medium term shifting China’s economic priorities to develop domestic demand looks like an unlikely proposition for a number of reasons laid out in an article by Michael Pettis in Nouriel Roubini’s Global Economic Monitor. As he notes there are a number of structural and policy limitations to the growth of Chinese consumption:

“• An undervalued currency, which reduces real household wages by raising the cost of imports while subsidizing producers in the tradable goods sector.

“• Excessively low interest rates, which force households, who are mostly depositors, to subsidize the borrowing costs of borrowers, who are mostly manufacturers and include very few households, service industry companies or other net consumers.

“• A large spread between the deposit rate and the lending rate, which forces households to pay for the recapitalization of banks suffering from non-performing loans made to large manufacturers and state-owned enterprises.

“• Sluggish wage growth, perhaps caused in part by restrictions on the ability of workers to organize, which directly subsidizes employers at the cost of households.

“• Unraveling social safety nets and weak environmental restrictions, which effectively allow corporations to pass on the social cost to workers and households.

“• Other direct manufacturing subsidies, including controlled land and energy prices, which are also indirectly paid for by households

“By transferring wealth from households to boost the profitability of producers, China’s ability to grow consumption in line with growth in the nation’s GDP was severely hampered.”

While Pettis hits the producerist nail on the head, he fails to mention the contradictions that prevent the Chinese state from truly shifting towards a consumerist model. As I discussed above, the Chinese state is deadly terrified of a rise in unemployment and believe that an eight percent growth rate is necessary to absorb migration from the countryside to the cities. Shifting economic priorities towards developing domestic consumption necessarily means reducing the very high rate of investment and providing an increase in wages, social services, etc. For instance it was reported at the end of October that investment accounted for nearly 88 percent of GDP growth. Cutting back investment and redirecting that money to consumption would, at least in the short term, lead to a substantial increase in unemployment. However, the export-led model has its own drawbacks, not least of which is that the Chinese economy is vulnerable to drops in external demand. And the Chinese state can’t provide any direct stimulus to counteract such a pullback. The result of that vulnerability has been made clear in the present recession.

“Between January and September, China's exports fell by 21.3 percent compared with the same period in 2008. The country's total trade with the European Union dropped 19.4 percent while trade with the US and Japan declined 15.8 percent and 20 percent respectively, according to the General Administration of Customs.”

There is also great pressure from the Americans – and others - for China to increase domestic consumption because the USA can’t continue forever to be the repository for Chinese exports. The American ruling class is increasingly nervous about Chinese control of the US debt, which implies a vulnerability to Chinese pressure of US policy. That means that there must be reversal in US indebtedness – and thus an increase in exports and saving. Barbara Hackman Franklin, Bush Sr.’s former Director of Commerce, summarized the viewpoint recently, stating that:

"The US must increase savings and be less consumption-led and that China must become more consumption oriented and less dependent on exports”

But, if anything, China is doing the opposite. Its policy of pegging the Yuan to the US dollar means that as the dollar has declined to more normal pre-crisis levels, China’s currency has also declined. This is, in effect, a devaluation that hinders the US, desperate to overcome its trade deficits, from doing so. As Paul Krugman noted in the New York Times on October 23:

“By pursuing a weak-currency policy, China is siphoning some of… [the already deeply depressed] demand away from other nations, which is hurting growth almost everywhere.”

Yet, in the face of this policy the US administration is, if anything, becoming more conservative in confronting China on its currency. Back in January during hearings on his nomination as Treasury Secretary, Tim Geithner accused China of currency manipulation – a very big accusation that would have meant (if it was sustained after his confirmation) that the US would have to take action against China including, possibly, sanctions. But by October 15 the Treasury Dept under Geithner was singing a different tune in its report to Congress, saying that, while China’s currency was undervalued, it was not being manipulated. Krugman’s response was, “they’re kidding, right?”

But the Obama Administration is not kidding and for very good reasons. If China were to start selling it’s US dollar reserves in a big way it would lead to a much more dramatic decline in the dollar. That would put serious
upward pressure on interest rates as the US government found it more difficult to raise funds in bond markets. While a lower dollar would make US exports more attractive, the combination of higher interests rates and higher import costs – particularly energy – would choke off the feeble recovery and likely lead to stagflation. It would also prick the asset-bubble that is the New York stock market, awash in bailout cash, further depressing the economy. So, expect explicit discussion of currency manipulation to remain taboo. And while the Chinese aren’t happy about all their dollar holdings being worth less every day as the US dollar slides, they aren’t unhappy about their currency devaluing along with it, making their exports cheaper. However, doing nothing – which seems to be the better part of both countries’ present strategy – has a price. For China, it means a continuing decline in the buying power of the Chinese consumer as the cost of imports rise from everywhere but the US. This will make China further dependent upon exports to keep the economy growing, which will also make it vulnerable to factors beyond its borders and thus beyond its control. And as it buys less and sells more it not only has the effect of slowing growth elsewhere, thus undermining its market, it raises the possibility of protectionism. In its trade with the European Union, China had a trade surplus of €170 billion in 2008. The US, by contrast, had a trade deficit of €80 billion. It will be more politically palatable for recession-bound Europe to accept a decline in trade surplus than to see its deficit with China increase. One wonders if America’s weak dollar strategy isn’t, in part, to get Europe to put pressure on China to revalue its currency.

By looking at come of the contradictions faced by the Chinese economy, it begins to look less unassailable than the media is prone to represent it. And it is less the case that China is obstinately refusing to revalue the renminbi than that China has grown itself into a corner, so to speak. With asset-prices rising and the risk of a housing bubble on one side, along with a major crisis of overproduction looming on the other, China must navigate between the rocks of multiple economic dangers and the charybdis of urban and rural revolt that could destabilize the carefully built edifice of Chinese capitalism. It's not hyperbolic to say that the future of the world will be dramatically affected by whatever happens there.

Labels: capitalism, china, depression, obama, recession, us economy, wall street

Monday, October 13, 2008

Multinational Investors' Vote of Confidence in Ultra-imperialism posted by Yoshie

Check out multinational investors' major vote of confidence in ultra-imperialism today: John Willman, "Markets Cheer Bank Bail-outs" (Financial Times, 13 October 2008); Ralph Atkins, "European Banks Offer Unlimited Dollar Funding" (Financial Times, 13 October 2008); "Full Text: US Treasury Tarp Plans" (Financial Times, 13 October 2008); Louise Story and Andrew Ross Sorkin, "Morgan Agrees to Revise Terms of Mitsubishi Deal" (New York Times, 13 October 2008); "Gulf Shares Surge as UAE and Qatar Act (Financial Times, 12 October 2008); and Robin Wigglesworth and Simeon Kerr, "UAE Leads Drive to Stem Crisis" (Financial Times, 13 October 2008).

It's true that, if China, Japan, Germany, Saudi Arabia, and the United States functioned as one politically (if not legally) coherent establishment, Americans would be back in the black:

Global Balance of Payments ($bn, 2007)

SOURCE: Martin Wolf, "Asia's Revenge," Financial Times, 9 October 2008, p. 9.

That's the level at which the ruling classes have built their post-WW2 hegemony (cf. Kees van der Pijl, The Making of an Atlantic Ruling Class; Gavan McCormack, Client State: Japan in the American Embrace; etc.).

Therefore, a radical shift in global class relations could come only if there were a radical shift in any one of the aforementioned countries, but these are the very ones where the Left has the least chance in the world.

Is China, though, a weak or strong link in this chain of empire (to which Latin socialists, Islamists from the Hindu Kush to the Persian Gulf to the Horn of Africa to the Niger Delta, Maoists in Nepal and India, the national security interests of Russia, etc. have provided a partial material -- if ideologically incoherent -- counterweight)?

Update

"[T]he needs of our economy require that our financial institutions not take this new capital to hoard it, but to deploy it" ("Text: Henry Paulson Remarks Tuesday," 15 October 2008).

"Investors are recognizing that the financial crisis is not the fundamental problem. It has merely amplified economic ailments that are now intensifying: vanishing paychecks, falling home prices and diminished spending. And there is no relief in sight" (Peter S. Goodman, "Markets Suffer as Investors Weigh Relentless Trouble," New York Times, 16 October 2008).

Labels: british capitalism, capitalism, china, class, debt, germany, imperialism, japan, Saudi Arabia

Friday, May 16, 2008

Politics of Disasters posted by Yoshie

A cyclone devastates Burma's Irrawaddy Delta, and an earthquake strikes China's Sichuan Province, and the empire smells blood, itching to send "aid at the point of a gun," urging the United Nations to invoke the "responsibility to protect": "France's foreign minister, Bernard Kouchner, has spoken of the possibility of an armed humanitarian intervention, and there is an increasing degree of chatter about the possibility of an American-led invasion of the Irrawaddy River Delta."¹ Why such an unseemly display of arms? Because a natural disaster can turn into a legitimation crisis, giving foreign powers a shot at regime change.

[N]othing terrifies a repressive regime quite like a natural disaster. Authoritarian states rule by fear and by projecting an aura of total control. When they suddenly seem short-staffed, absent or disorganized, their subjects can become dangerously emboldened. It's something to keep in mind as two of the most repressive regimes on the planet -- China and Burma -- struggle to respond to devastating disasters: the Sichuan earthquake and Cyclone Nargis. In both cases, the disasters have exposed grave political weaknesses within the regimes -- and both crises have the potential to ignite levels of public rage that would be difficult to control.²

A regime's failure to respond promptly and effectively to suffering caused by a natural disaster, the failure that the opposition can exploit, can indeed become a factor in its downfall. Such was the case with the Shah's regime and the earthquake of 1978 that wiped out Tabas and damaged forty other villages in Iran.

Michel Foucault reported in Corriere della sera on 28 September 1978:

Who will rebuild Tabas today? Who will rebuild Iran after the earthquake of Friday, September 8 [Black Friday, when the army massacred hundreds of protesters in Djaleh Square of Tehran], right under the treads of the tanks? The fragile political edifice has not yet fallen to the ground, but it is irreparably cracked from top to bottom.

In the torrid heat, under the only palm trees still standing, the last survivors of Tabas work away at the rubble. The dead are still stretching their arms to hold up walls that no longer exist. Men, their faces turned toward the ground, curse the Shah. The bulldozers have arrived, accompanied by the empress; she was ill received. However, mullahs rush in from the entire region; and young people in Tehran go discreetly from one friendly house to another, collecting funds before leaving for Tabas. "Help your brothers, but nothing through the government, nothing for it," is the call that Ayatollah Khomeini has just issued from exile in Iraq.³

Neither Islamic nor Marxist nor liberal revolutionaries of Iran, however, called upon the West to claim its "right to protect" and send its armies to save them from the Shah. They overthrew the Shah's regime on their own, and Iran's Islamic Revolution has grown into a republic that can survive natural disasters, such as the earthquake of 2003 that destroyed Bam, killing more than 20,000 and injuring many more.

One of the casualties of the Bam earthquake was an American man, Tobb Dell'Oro, who was vacationing with his fiancée Adele Freedman in the city. Freedman, who credits the "kindness of the Iranian people" for her survival,⁴ became the subject of an important documentary film, Bam 6.6: Humanity Has No Borders (Dir. Jahangir Golestan-Parast, 2007), which shows Iranians' solicitude for her wellbeing and gracious hospitality to her parents who initially thought Iran would be a terrible place for Jewish Americans like them to visit but have changed their minds about the Iranian people.

The Bam earthquake also moved many of the normally fractious Iranian diaspora, as well as the populace of Iran, to solidarity, holding benefits and raising funds for their countrymen and women in need back home.

Artists did their part, too. Mohammad Reza Shajarian, the finest musician in Iran, held a concert
همنوا با بم [In Harmony with Bam] with Hossein Alizadeh, Kayhan Kalhor, and Homayoun Shajarian in remembrance of the victims of the earthquake.

Iran's Islamic government, by the way, did not reject international, including American, offers of assistance -- unlike the Bush White House who didn't let Cuba or Iran help Americans after Hurricane Katrina -- and welcomed international NGOs as well, even though well-intentioned outsiders can create as many hindrances as aids they bring:

In a recent lessons-learned meeting on the Bam earthquake in Iran, a polite and respectful colleague from the Iranian Ministry of Health related his frustration at international NGO coordination in the early days of the emergency. He said that, at the same time as he was desperately trying to set up field hospitals and bury the dead, representatives from over 100 international NGOs had individually requested meetings with him. He appreciated their help, he said, but some organisations wanted to ask him about the siting of rural clinics when he was still trying to arrange emergency medical evacuations. Was there no way, he asked, that these agencies could organise themselves better in the early days of a disaster?⁵

But Iran's government, even under President Khatami, would not have accepted international relief if it had been imposed upon it by a show of force.

1 Robert D. Kaplan, "Aid at the Point of a Gun," New York Times, 14 May 2008.

2 Naomi Klein, "Regime-Quakes in Burma and China," The Nation, 15 May 2008.

3 Michel Foucault, "The Army -- When the Earth Quakes," in Janet Afary and Kevin B. Anderson, Foucault and the Iranian Revolution: Gender and the Seductions of Islamism, U of Chicago P, 2005, p. 190. An endnote omitted from the quotation and replaced by a parenthetical editorial clarification.

4 Corey Kilgannon, "For One Earthquake Survivor, Joy Is Tempered by Sorrow," New York Times, 10 January 2004.

5 Jenty Wood, "Improving NGO Coordination: Lessons from the Bam Earthquake," Humanitarian Practice Network, 2003.

Labels: burma, china, film review, humanitarian intervention, imperial ideology, imperialism, iran, love music hate racism