The public is suffering from Geneva fatigue and an overabundance of this disputation; the Sri Lankan regime suffered a humiliating defeat and international isolation, worse than the 24-15-8 voting communicates; good. Now it’s an opportunity to switch to a different topic, an important one in the light of shifting global relations.
For 20 years I have been arguing a twin thesis, most fully in "China’s Socialist Market Economy: Viable Concept or Oxymoron" (Hector Abhayavardhana Felicitation Symposium; Ecumenical Institute, Colombo, 2001). Part 1 of the thesis held that China, post-Deng, is not, or at least not yet, a capitalist state; part 2 that the outcome would eventually be decided by global forces. The first point is now well established and not disputed even by dim-witted bourgeois historians and economists eager to prove the end of history or the inevitability of capitalism. Even the Economist magazine, mouthpiece of global capitalism perched at the high table of the class, concedes in its 21 January 2012 issue in an 18 page special report on State Capitalism (mostly devoted to China), that China is neither a capitalist state nor likely to become one. It describes China as state-capitalist, which is wide of the mark, as I will explain anon. The Economist, unsurprisingly, is weak on the theory of state and class; however, data and presentation make this is an excellent special report.
What I had to leave ambiguous in the 1990s, and the first seven years of this century, was future prospects. Most people interpreted my ambiguity to mean that since capitalism was globally strong and dominated the world so thoroughly, eventually it would compel China to transform in its own image. Suddenly all that changed. Post the 2007-08 collapse and the beginning of the New Depression, the question asked is not whether China will follow in the steps of moribund capitalism, but to what degree countries in the developing world would adopt the ‘Chinese model’. Therefore the second part of the thesis has been answered thus: The impact of global capitalism is no longer likely to make China capitalist, conversely, globalisation itself is now an altered process; China and the other BRICS economies will influence the world in their particular ways.
Why not state-capitalist?
State-capitalism is not new; in the early USA the state was the engine that initiated the take-off of American capitalism; Bismarck’s Prussian Junker state did the same for Germany. Between the wars, Mussolini’s corporatist state and Nazi Germany commandeered absolute power over the capitalist class, which owned and operated the levers of financial and industrial institutions, in a role of subordinate political power. Economists use dirigisme, derived from the French verb diriger, to steer or to directed, to describe post-war early-Japan, and later, Singapore, South Korea and to a lesser extent Taiwan, where the state took a lead in shaping the contours of capitalist development. In all of these cases, however, though not at the helm of state power, industrialists, financers, investors and entrepreneurs, in short a modern bourgeoisie, stood just half a step behind. These are all variations on the theme of state-capitalism and exemplify this theoretical construct. (The odd nationalisation of public goods services - electricity, railways, water – is not to be confused with state-capitalism).
The point is that China does not fit this model; it does not exemplify economic, class, political and power relations of this nature and it does not match the dynamics and evolution of this type of state. The nature of the state in China (and Vietnam, and soon in Cuba) is easy to write down in a few sentences or a paragraph, it’s just that a common descriptor term such as socialist, capitalist or state-capitalist has not evolved; well that’s a problem for the political philologist, not the political analyst. The defining noun in state-capitalism is capitalism, state is a qualifying adjective; hence it would be taxonomically incorrect to use it for China, which is not a specific variant of a capitalist model. So its protagonists can still claim that their crowded hour of glorious life is worth an age without a name!
A political outline of state and economy in China
In a few words: The Chinese production economy, in terms of capitalisation, is dominated by the state sector (80%) with a significant private sector, composed of capitalists in the proper sense of the word, plus small production enterprises, retail outlets, and the township and village making up the rest. The state sector produces only about a third of GDP output, the capitalist sector even less, but the small and informal enterprises, which don’t add up to much in capitalisation, produce some 50% of output. Not unusual in a country at this stage of development. The financial economy, only banking in the case of China, is entirely in the hands of the state. Furthermore, provincial governments are powerful players in the industrial, infrastructure and residential construction economies.
A distinctive feature is that the state is firmly in the hands of the CPC while the capitalist class, though filthy rich and swimming in opulence, has no political power and is excluded from the party. Power rests with functionaries, some are corrupt and enrich themselves; most however are communist ideologues and several are first-rate case studies in Stalinist dogma. Writing off all CPC functionaries as greedy self-seeking bureaucrats pigging themselves at the state enterprise table is far too simplistic. The new educated professional middle class also finds representation in the party; many of my mainland PhD graduates went back to positions in the state, slotted into the party and into the new middle class. Finally, since the CPC is 60 million strong the grassroots voices of the rural mass and the working class must be finding some resonances. This nexus accounts for the ideological factions and fractions; the Chinese leaders are control freaks, coming down hard on real or imagined dissent, hence last months panic about coup rumours circulating on social networks.
These party and state entities are different by a legion from the repositories of state power that I described previously as typical of state-capitalism; the exclusion of the big bourgeoisie from the citadels of power, meaning PB, CC and inner sanctums of the party, is crucial. This is a very different beast; its drive of the economy is leading in quite a different direction. The most striking difference is the control and international role of giant Chinese state owned enterprises. The three largest Chinese banks by market capitalisation (ICBC, China Construction Bank, Bank of China) are in the world’s largest five or six – positions shift as capitalisation changes with stock price. Three Chinese state owned companies (Sinopec, China National Petroleum, State Grid) are among the ten largest in the world by revenue. China’s two sovereign wealth funds control over $ 1 trillion between them, far more than any other country.
One can go on and on and though size matters, it is not the point. There are three crucial considerations; the enterprises are run at arms length by professionals not by ministries, they are quoted on international stock markets and soak up global capital making them joint ventures between the Chinese state and international investors, and thirdly enterprises in energy and minerals sectors are going out and buying up the world. The first and second are not unknown, the third, on this scale is quite astounding. This is not state-capitalism in the known sense where the state promotes and consolidates capitalism until it is steady on its feet, nor is it the way ordinary state-owned corporations behave. This is a new ball game played by a communist state through a mighty economic engine hitched to it. This state is not going to timidly mutate to capitalism, there is no capitalist class even remotely capable of acquiring it; it is going to call the shots, in its own right, for a long time more irrespective of whether social philologists and political taxonomists come up with a term or not!
Models for the developing world
Is this the new model for the developing world? I think not, except in the case of Cuba where monopoly of power in a one party state is already entrenched (conceivably also Nepal, in the unlikely event the communists can grab and hold state power). For the model to work the power equation, more explicitly class relations as described previously, is a sine qua non. In a country like India, with a strong democratic and plural tradition and a kaleidoscope of linguistic, ethnic and religious cross currents, I cannot imagine what kind of social upheaval could possibly give birth to a party-state relationship as we have in China.
What about Venezuela, Bolivia and conceivably Brazil which voted radical governments into power through democratic mechanisms? Imposing the Chinese model on these countries is an uphill task. Consolidation of the social reorganisation and economic democratisation achieved in the Chavez period, even when governments change in the future, is more feasible by and within democratic means. When the Venezuelan opposition comes to power, as it will one day in the proximate or longer future, as inevitable in a democracy, it cannot turn the clock back or eradicate these changes. Public opposition will halt it – heck, we are unable to abolish even a thoroughly misused samurdhi system! Hence I opine that the Chinese model, lock stock and barrel, will not catch on in countries that have tasted a plenitude of democracy. Borrowing ideas selectively is another matter; have 300 million people been pulled out of poverty ever before anywhere in human history?
Are there exceptions to my expectations? Well yes, those developing nations, mainly in Africa and the Middle East that do not fit this narrative of long familiarity with democracy. But then there’s another catch – where’s the party? My take is that the more conventional version of state-capitalism, incorporating lessons from the Chinese model, is the more likely way most countries in the third world will go in the first half of this century, though there will be a few copycats of China.