Petras essays in english

January 2000

China and the World

James Petras



Introduction

The major imperialist countries and their principle ideological apologists have invented a new political language and introduced new concepts to disguise the nature and the operation of their pursuit of global domination. Unfortunately, many writers on the left have accepted the new terminology and worst have echoed its claims. These apologists have argued that "globalization" has made the nation-state outmoded, created an interdependent world linked together by stateless multi-national corporations. According to this "theory", the process of "globalization" is irreversible and inevitable and therefore nation-states can only seek to fit into the "global' market. According to this view Marxist ideas of anti- imperialism and class struggle are outmoded, the only choice is to become "competitive" in the world market. These ideas are propagated from Wall Street to Tokyo to London and are central to the thinking of the current Chinese leadership. The first part of this paper, will argue that the concept of imperialism is much more relevant to understanding the international political economy; that the U.S. has emerged as the dominant world imperialist country; and that U.S. imperial dominance represents a major strategic threat to independent Chinese development.

The second part of the paper will outline the four major challenges facing China and the negative consequences of following the current strategy of insertion in the "global economy".

Part three will discuss the two paths of development available to China - the neo-liberal road followed by Latin America or the road of Socialist renewal.

Re-emergence of U.S. Imperialism as Dominant Imperial Power

In the 1970s and 1980s much was written on the decline of the U.S. and the rise of the Japanese and German economies. Some writers even wrote of the "Asian Century" - meaning the shift in the world economy to an Asian centered axis. The dominant thinking was that the world was divided into three blocs a European centered, German controlled bloc; an Asian bloc dominated by Japan; and a U.S. controlled Western hemisphere.

The collapse of the Asian economies and the expansion of U.S. controlled NATO have undermined these theories. The theory of the "decline of the U.S." is being replaced by the ascendancy of the U.S. as the dominant and aggressive world power. This is based on an analysis of economic, political and military realities.

U.S. as Dominant Economic Power

The 1990s have witnessed the resurgence of the U.S. as the world's dominant economic power, accompanied by a new surge of military interventions, offensive aerial attacks and unilateral politico-military actions. This resurgence of U.S. imperialism after two decades of relative decline is accompanied by the eclipse of Japan and Germany as centers of competition. Washington and Wall Street are increasingly major forces in both Asia and Europe.

The dominance of U.S. imperialism puts the lie to the principle arguments of "globalization", "world system" and related reactionary doctrines. The principle agents of the international movements of capital and commodities are multi-national corporations and banks. A recent study, The Myth of the Global Corporation demonstrates that in over 80% of the multinationals the major decisions regarding research, development and investments are made in the "home" headquarters. Of the 20% of the enterprises that make decisions overseas, most of them are recently acquired subsidiaries of multi-nationals (MNCs). In other words the multi- nationals are based in the imperial countries even as they operate world- wide. More important, the headquarters in the imperial countries work with their imperial state to hammer out mutually beneficial policies at the expense of their rivals and Third World countries. The fundamental economic consequences are that the headquarters of the MNC control and accumulate profits, interest and royalty payments.

An examination of the 500 leading corporations compiled by the Financial Times (January 27, 1999) demonstrates the ascendancy of the U.S. imperial power. Of the top 500 corporations, 244 or 48% are U.S. owned, 173 or 35% are European, and only 58 or 12% are Asian (46 are Japanese). It is ridiculous to continue to speak of "globalization" when the owners and directors of the majority of the corporations and banks controlling international flows of capital are U.S. Globalization in these circumstances is the ideology that obfuscates the real structure of power and domination.

The concentration and centralization of capital - the growth of mega mergers - is managed by key financial and investment institutions. Among merger and acquisitive advisors worldwide, I I of the top 15 financial advisory firms are U.S. owned and based. Perhaps the most revealing aspects of U.S. dominance is found in the unprecedented concentration of profits in the hands of U.S. - MNC's: in 1990 U.S. MNC's received 36% of the world's profits, in 1997 US MNC's increased their percentage to 44% of world's profits.

The economic crises has benefitted U.S. business to an unprecedented degree. Over $50 billion has been directed at buying up enterprises in South Korea previously owned by Korean citizens. The crises is not "world- wide" - it is an imperialist induced crises that undermines Asian competitors and opens the door to the re-conquest of Asia by Euro-American capital. The economic expansion and dominance of the U.S. has been accompanied by a new virulent phase of international military aggression largely to defend U.S. economic dominance and to isolate or destroy real or potential opponents. Economic dominance means a more aggressive and uncontested U.S. imperialism.

Unilateral Military intervention and the Expansion of Hegemony

U.S. pursuit of world economic domination requires that it pursue the role of world policeman. This is manifested in a whole series of military actions that have taken place throughout the 1990s. Analyzed separately, they can be trivialized into particularistic conditions. Taken together these military actions describe a concerted and cumulative drive to impose hegemony throughout a far-flung empire. The most spectacular instance of the projection of imperialist power is found in the bombing of countries as apparently distant and disconnected as Iraq, Somalia, Afghanistan and Serbia. What these countries have in common is neither ideology nor common social programs. But all of them are to some extent independent of U.S. hegemony. The bombings are justified by the U.S. in each case by citing particular issues (human rights, anti-terrorism, etc.). None of these justifications have any basis for offensive military attacks. The bombings are part of Washington's efforts to extend its hegemony in North Africa, Balkans, the Middle East and Southern Asia. The result would be an imperial corridor that would extend from the Baltic States through Central Europe across the Middle East (and North Africa) to Southern Asia, surrounding Russia and China. This is the strategic imperial goal that has been obscured by the general rhetoric of "globalization" and the particularistic focus around Kosovo or Iraq.

The second indicator of the growth of U.S. politico-military hegemony is found in Europe. The principle vehicle for U.S. power is NATO. And in 1999, Washington inducted 3 new members; Hungary, Poland, Czechoslovakia, expanding NATO to the borders of Russia and increasing its influence in Europe via the new client states. In addition, Washington has recruited 23 NATO "peace associates" countries on the fringe of NATO but possible new candidates to serve the U.S. (Rumania, Bulgaria, the Baltic states, etc.). NATO expansion means the projection of U.S. power: Eastern Europe is now effectively under U.S. military command.

Thirdly, the U.S. under Clinton's top "counter-terrorism" director Richard Clark has developed a new so-called "pre-emptive offensive action" doctrine which involves the CIA and other intelligence agencies in organizing "disruptive operations." In the first 6 months of 1999 alone, "disruption operations" took place in 10 countries. In places like Kosovo, Tibet and elsewhere, elites of ethnic minorities are financed to engage in protests for "self-determination" thus creating "victims," a phoney "humanitarian" crises and Euro-U.S. intervention. Likewise, religious cults are organized as potential points of conflict and subversion and later defended by the U.S. against religious persecution. "Pre-emptive offensive" is simply another form of imperial intervention to destablize countries opposing U.S. hegemony by creating internal conditions for external aggression.

Fourthly, U.S. world hegemony is pursued in the international forums and institutions. A particular target is the United Nations. The U.S. successfully imposed its messenger Koffi Annam as the Secretary General. Annam in an unprecedented act went to the annual big business conference at Davos, Switzerland and declared his allegiance to the U.S. doctrine of free trade. More importantly he was compliant in the U.S. control and manipulation of the U.N. in the organization of the weapons inspection team surveying Iraqi installations. With Annam's compliance, Richard Butler - a virulent pro-U.S. apologist and close collaborator of the CIA - was appointed chair of UNSCOM. It was subsequently revealed that Butler's provocative behavior and reports were tailored to U.S. military strategy - his colleagues on UNSCOM (better known as UNSCAM) were CIA operatives collecting intelligence on strategic Iraqi targets for U.S. military attacks and covert assassination attempts.

Finally and equally important, Washington is developing an offensive military capability to threaten China through the Pentagon's proposal to create a so-called "missile shield" encircling China and targeting its principle defense centers. Missile encirclement s combined with a propaganda effort focusing on "human rights violation," and nuclear spy activity to justify the effort to impose hegemony in countries surrounding China. The re-emergence of U.S. global dominance and the aggressive military posture forms the framework for understanding the future of China. The reactionary ideologues inside and outside of China who talk vaguely about "globalization" instead of concretely about imperialism are opening China to mortal dangers - the danger of falling under U.S. hegemony, of opening China to military attack and of provoking a catastrophic economic crises.

China in the Context of Resurgent Imperialisms

The current Chinese political and economic elites are pushing hard toward "greater integration into the world capitalist marketplace as a mechanism for economic development." As we discussed above, integration into "global markets" particularly via the World Trade Organization (WTO) means greater subordination to the U.S. Even today 40% of "China's exports to the U.S. are conducted by U.S. MNCs. The basic starting point then is to call into question the language and concepts as well as the substantive meaning of terms like "world market', "globalization" and replace them with more precise concepts and concrete realities of power: the "integration" of a less developed China with a more developed U.S. spells subordination, penetration, disruption and crises. The current strategy of the Chinese elite confronts four distinct challenges that will deeply affect the trajectory of Mr. Zhu's policy and the social classes, economic enterprises and political institutions promoting it.

Four Challenges to Chinese Elite Strategy

The resurgence of U.S. imperialism and its aggressive economic, military and political projection of power will increasingly impose unfavorable conditions of trade and diplomacy on the Chinese regime. In particular, even defenders of U.S. imperialism admit that "China's benefits from (WTO) membership are more distant." U.S. MNC win gain access to China's strategic financial sector, agricultural market and high tech consumers. In effect, the U.S. will gain strategic advantages and lose little in the way of market shares. The reason Zhu is willing to sacrifice China's economic future by joining WTO is political: to accelerate China's transition to capitalism and to consolidate Mr. Zhu's position in the Chinese elite by securing the support of overseas Chinese capital and U.S. banks and corporations.

In the face of growing U.S. aggression world-wide, Zhu and the Chinese elite play the role of compradores opening the door to accommodate U.S. demands, in order to secure U.S.European support. The policy of the current Chinese elite fails to prepare China for a period of intensified pressures, competition and conflict. That is the first challenge.

The second challenge to the Chinese elites development strategy is the decline and collapse of Asian capitalism, the demise of the state capitalist model and the re-subordination of Asia to U.S.-European imperialism. East and Southeast Asia are passing through a vast historic transition. For thirty years the state was able to promote productive investments, protect local markets and negotiate entry of Asian products into the U.S. and European markets. This was possible because of the Cold War and the Euro-American fear of Communism. With the end of Communism, Washington saw the Asian countries as competitors and a lucrative region to reconquer. Through international financial institutions (IFI) and local free market collaborators, the U.S. secured the deregulation of the Southeast Asian economies. The result was a major financial and productive crises, During the crises IFI policies led to Euro-American buyouts of Asian firms via privatization and long term stagnation. China's special relations with Asia were shattered. It's competitive advantages declined. Its Asian markets dried up. Competition not cooperation intensified. Pressure via the Euro-American NINC's in Asia for entry into China intensify. China swims in a sea of Asian free markets, clients of Euro- American control. The depression of the Japanese economy leads to the decline of a counter-weight to the U.S. in Asia. The possibility of the emergence of an independent Asian bloc is weakened. Capital linkages in Asia now involve links with regimes tied to neo-liberalism. For China's elites relying on export strategies the challenge of trade decline and overseas market constraints are very serious problems.

The third challenge to the Chinese elite's development strategy is internal: the growing economic stagnation, bankruptcy of financial institutions as well as the growing indebtedness of factories. This has led to a growing mass of unemployment - upward of 20 million in the cities, close to 200 million in the country (counting disguised unemployed). The capitalist policies of opening up the economy, the shift toward enterprise profitability, and the unregulated growth of speculative capital has been exacerbated by widespread corruption. The regime's response to stagnation has been to falsify growth data. In 1998 the announced 7% growth when energy usage increased only 2-3%. The regime has increased state spending on public works (Keynesian pump priming) but public investment has not the jobs to keep up with massive unemployment caused by large scale firings from state factories. State intervention has been undermined by capitalist reorganization of the economy. Experts expect that China's economy will continue to stagnate and unemployment to increase for the foreseeable future. The injection of State spending will only affect a fraction of workers and only for a short time. The underlying reality of capitalist relations and reorganization will lead to the creation of a large reserve army of unemployed workers concentrated in big cities and factory towns. The regime's pursuit of capitalist restructuring will result in greater reliance on military and police repression - particularly as the social net is virtually non-existent. Moreover, millions of workers in State factories threatened with bankruptcy because of lack of State funds have not been paid and public demonstrations and riots have increased in frequency. The transition to capitalism is undermining the last threads linking workers to the Communist Party regime.

The fourth challenge is related to the previous one. The economic crises is likely to lead to mass popular unrest. Popular rebellion is a direct result of the integration - through subordination into the world market (read=U.S. imperialist system). The privatization policies lead to lay-offs, higher prices of public utilities for consumers and the end of subsidies for social services and food. Dependence on export markets has led to a vulnerable economy subject to external fluctuations (Asian crises) and political constraints (U.S. trading rules). The attempt to conform to Euro-U.S. dictates of "market performance" has led to plant closings, the pillage of public resources and massive financial frauds.

The result is widespread, daily protests in hundreds of locales, demanding redress of local grievances. As yet the protests are sporadic, locally based and focused on immediate grievances. Yet the injustice is deeply felt and pervasive, particularly among workers and peasants who previously benefitted from secure employment, guaranteed social services and subsidized food. A major political threat to the regime looms over the horizon if these local struggles are unified, and if the local grievances are transformed into systemic challenges to the dominant strategy of "integration into the world market."

What is clear is that these challenges have long term, large scale consequences for China, both at the international and domestic political economy.

Consequences of the New Challenges

The most serious consequence of the Zhu strategy of "integration" is the re-colonization of China. Essentially, the entry into the WTO and the harsh conditions with which China will have to comply, spell the end of financial controls and a new phase of China's relations with Euro-U.S. imperialism. One can project a four phase process of re-colonization should China continue on its present economic course: enticement, entrapment, crises and re-colonization.

China is deeply implicated in phase one

  Enticement

The imperial enticement strategy involves large-scale loans and easy financing to create bonds with Western financial institutions and capitalist financial rules; easy market access to facilitate exports and direct foreign investment to exploit labor to sell back to Euro-U.S. markets. Through these policies, a major foreign investment foothold is established and significant investment ties are established within China with local business elites. Technological exchanges preempt autonomous local high tech innovation. The enticement phase creates the structural ties and molds the Chinese state and social structure toward "market thinking" as well as creating personal linkages at the highest levels.

   Entrapment

Having made the commitment to the "market", especially the "world market", Chinese elites have become addicted to dependency on export markets. Local markets and production for internal demand declines as workers and peasants are downsized and displaced. Easy credit leads to the accumulation of debts and corrupt, speculative practices that open the door to external bank supervision and sudden threats to withdraw loans - leaving enterprises and banks on the verge of bankruptcy. The opening to the outside becomes increasingly conditional on accepting overseas regulations and oversight. China begins to lose control over strategic levers of economic policy. As the regime becomes more transparently a vehicle the foreign and rich local investors it loses all popular socialist credibility - it loses legitimacy.

   Crises

With a foreign market and credit squeeze pressing on the productive and financial sector, desperate state measures are introduced to ameliorate the worsening social crises. Stagnation dependence and instability form a vicious circle threatening internal fragmentation of society and external absorption of the economy. China's burgeoning socio-economic crises confronts two paths for the future: the neo-liberal path of Latin America or the path of Socialist renewal.

 Neoliberalism or Socialist Renewal

For the current elite led by Mr. Zhu the development strategy to overcome the crises is to deepen the opening to the world market. This is the view of Washington and European elites and the IFIs, and the MNCs. They argue that "pain" to the people is temporary and the result will be a more competitive, profitable and productive China.

Recent history of countries in Southeast Asia and Latin America which have taken the neoliberal path however, teaches us other lessons. Greater economic openings among less developed countries leads to greater vulnerability and volatility, more regressive income policies, the end of the social net, and greater proness to economic collapse as in Mexico, Brazil, Venezuela, Indonesia etc. Greater openness to imperialism (not "globalization") means foreign takeovers of industry, loss of technological capacity and massive unemployment and underemployment - especially of state employees, workers, and peasants as is the case in Latin America.

In following neoliberal policies, the experiences of Latin America would lead to the following outcome in China.

China's economic elites would be come the junior partners of giant Euro-American MNCs. A few billionaires would link up to the international circuits and determine China's policies.

A strata of academics, consultants and professionals linked to the MNCs and Chinese Big Business clans would rationalize the new path as "modernity" and become part of the new upper middle class. A sector of sub-contracted local producers organizing highly exploitative enterprises would also profit based on low wages and sales in overseas markets.

In opposition to these classes, the deepening class polarization and regional fragmentation between export enclaves linked overseas on the one side and the vast regions of the interior on the other will accentuate. This is likely to promote vertical and horizontal social cleavages, regional and class conflicts. The loss of the strategic heights of the economy via privatization, external penetration, foreign takeover, and indirectly via debt leveraging is likely to provoke a movement of nationalist re-affirmations and revive anti-imperialist sentiments that fuse social and national demands in a multi-class movement (impoverished peasants, unemployed state factory workers, etc.)...

De-regulation of the economy win spark greater flows of speculative capital and generate new financial crises. The politico-social integration of the Chinese elites with foreign capital will further distance them from the mass of the Chinese people, necessitating the increasing use of the military as a repressive "cohesive" force. The closer the elite is to the MNC's the further it is from the Chinese people.

Socialist Renewal

The renewal of socialist development requires courage, new ideas and recognition of the specificities of the Chinese society and economy. The key is the courage to systematically reject the premises, language and concepts of globalization and neo-liberal ideology. The key to renewal is based on starting from the basic idea that the new strategy must be based on development from below and directed to the domestic economy. This involves a period of transition which must take drastic socialist shock policies to undermine the current elite structure and reverse the regressive allocation of income, investment and ownership. Shocks must include fixed prices on basic commodities, freezing bank accounts and investment of the wealthy classes, appropriation of profits, seizure of the commanding heights of the economy. These policies will likely provoke crises and panic among the elite, investment boycotts and protests form abroad. But they are essential to avoid de-capitalization and to provide the key instruments for socialist development.

 Socialist shock policies should be followed by a worker designed structural adjustment policy (SAP) where property is re-socialized, rural cooperatives are reintroduced, income and credit is redistributed, illicit wealth is confiscated and the State withdraws public guarantees from private sector borrowers. "Adjustments" in income form above to below, from private to public, from overseas creditors to low income debtors should create the fundamental foundations for the socialization of the economy based on decentralized democratic planning. Planned economy form below requires open debates and the formation of independent social organizations based on the "popular classes", including women, ecologists, minorities, as well as peasants, workers, young people and academics.

Once the fundamental structures are in place and the regime is consolidated, selective openings of the economy in spheres of competitive advantages should be encouraged. National defense based on internal preparedness and international solidarity linking anti-imperialist, socialist and democratic movements becomes part of the new foreign policy. Future integration via international solidarity with popular movements replaces today's integration via subordination to the imperial dominated "world market".