China demonstrates that capitalism no longer needs democracy

[Hakluyt]

The China Path

China demonstrates that capitalism no longer needs democracy.

By Robert B. Reich
Web Exclusive: 01.09.06


You may remember when the world was divided between communism and capitalism, and when the Chinese were communists. The Chinese still call themselves communists, but now they’re also capitalists.

In fact, visit China today and you find the most dynamic capitalist nation in the world. In 2005, it had the distinction of being the world’s fastest-growing major economy.

China is the manufacturing hub of the globe. It’s is also moving quickly into the highest of high technologies. It already graduates more computer engineers every year than the United States.

Its cities are booming. There are more building cranes in use today in China than in all of the United States. China's super-highways are filled with modern cars. Its deep-water ports and airports are world class. Its research and development centers are state of the art. At the rate it’s growing, in three decades China will be the largest economy in the world.

Communist, as in communal? Are you kidding? The gap between China's rich and poor is turning into a chasm. China's innovators, investors, and captains of industry are richly rewarded. They live in luxury housing developments whose streets are lined with McMansions. They dine in fancy restaurants, and relax in five-star hotels and resorts. China's poor live in a different world. Mao Tse Tung would turn in his grave.

So where are the Chinese communists? They’re in government. The communist party is the only party there is. China doesn’t have freedom of speech or freedom of the press. It doesn’t tolerate dissent. Authorities can arrest and imprison people who threaten stability, as the party defines it. Any group that dares to protest is treated brutally. There are no civil liberties, no labor unions, no centers of political power outside the communist party.

China shows that when it comes to economics, the dividing line among the world’s nations is no longer between communism and capitalism. Capitalism has won hands down. The real dividing line is no longer economic. It’s political. And that divide is between democracy and authoritarianism. China is a capitalist economy with an authoritarian government.

For years, we’ve assumed that capitalism and democracy fit hand in glove. We took it as an article of faith that you can’t have one without the other. That’s why a key element of American policy toward China has been to encourage free trade, direct investment, and open markets. As China becomes more prosperous and integrated into the global market -- so American policy makers have thought -- China will also become more democratic.

Well, maybe we’ve been a bit naive. It’s true that democracy needs capitalism. Try to come up with the name of a single democracy in the world that doesn’t have a capitalist economy. For democracy to function there must be centers of power outside of government. Capitalism decentralizes economic power, and thereby provides the private ground in which democracy can take root.

But China shows that the reverse may not be true -- capitalism doesn’t need democracy. Capitalism’s wide diffusion of economic power offers enough incentive for investors to take risks with their money. But, as China shows, capitalism doesn’t necessarily provide enough protection for individuals to take risks with their opinions.

Robert B. Reich is co-founder of The American Prospect. A version of this column originally appeared on Marketplace.

© 2006 by The American Prospect, Inc.

http://www.prospect.org/web/page.ww?section=root&name=ViewWeb&articleId=10804section=root&name=ViewWeb&articleId=10804

[Ixtab]

China isn't capitalist. The core of its economy is owned in a socialist manner. If China is capitalist because of the existence of privatised elements in its economy, then Bismarck's Germany was Socialist because of state planning. Which is absurd.

[The Retard]

China is compitalist(communist + capitalist)

China's compitalists: Worst of both worlds
By Li Yong Yan

BEIJING - When communism mates with capitalism, the unlikely couple breeds a monster - a compitalist - inheriting the worst of both gene pools: ruthless power and unchecked greed.

Here is an illustrating example: A commercial real-estate developer takes an interest in a block of the city. He figures that by building a shopping mall on that lot, there will be a lot of money to be made. So he goes to the municipal government's equivalent of a zoning committee. Upon payment of the rent to use the land, the developer obtains permission to have his bulldozers roll into the site. Under the constitution, all land belongs to the people's government that is in a legitimate position to sell the use of the land.

Notice anything incomplete or missing from the transaction? A careful reader will immediately point out: "It can't be as simple as that. What about the buildings and the residents on the lot?"

The developer has already taken that issue into account. In fact, he is so thorough that he already submitted a plan to the government on how to dispose of the existing buildings, and residents, as well. Now the developer plasters a big notice on the walls of those buildings, informing the owners and rent-payers that the land under their feet will be put to another use by government order. Yes, they will receive a compensation fixed by the government. But no, the rate is non-negotiable. And they must vacate by end of next month, or face eviction.

Tough luck if your house happens to be located on the lot. But what's that you say, the compensation is hardly enough to afford your family a new roof? The land may be owned by the state, but the hut was built by your grandfather and you were never approached by either the government or the developer about the deal? Talk to the bulldozers.

First your water mains are shut. Then your power is cut. If you are still determined to hold your fort, you will be dragged out forcibly and the bulldozers will begin to tear down the walls in front of your eyes. You'll call the police. And they will tell you over the phone that it sounds like a commercial contract out of bounds to the police. "What contract? I never agreed to any contract with anybody about my house." Then you realize that you are protesting to a dead phone. So you will go to the court that on a good day will tell you that the eviction is perfectly legal and lawful. There is no case. "Look, the developer has all the correct papers to level your house. He has proper authorization from the government," the court official will explain to you kindly. "And the government is perfectly within its rights to do what it wishes with its own land, right?"

Sure enough, just behind the charging bulldozers, a cluster of court clerks stand by, their expression solemn and important. The thing is, they are on the opposite side, there to enforce the eviction should you dare obstruct "justice".

So you are thrown into the street, on your own, all alone against the government and the developer, both of whom do everything strictly by the law. This one-two punch is exactly what has happened across China, and it has driven some desperate people to take extreme measures. On August 22, Wong Biao, a resident in Nanjing, the capital city of Jiangsu province, returned from yet another futile attempt to talk with the local government only to find his house leveled to a pile of ruins. That was too much for the usually meek man. He set himself on fire. Less than a month later, on September 15, Zhu Zhangliang traveled all the way from his hometown in Anhui province to Beijing. Standing in Tiananmen Square, he poured gasoline on himself and lit a match. For the same reason.

What is so wrong about these sad episodes? On one hand, the government leases out the use of the land on purely commercial terms. Different locations have different prices. Nobody is coerced into the deals. On the other hand, the state uses its enormous power to force the deal down the throat of affected residents who never have a say in the process. Everybody has to obey. The compensation rate is whatever the government says it is. Even the developer's notice reads like a royal edict, "You must leave by 18th of October." The ownership of the land and the property on it is separate, and the state's rights override and ignore personal ones. Those in charge make sure you respect their ownership over the land your house sits upon. But then they never recognize you have a right to your own property, meager as may be.

In the past, when China practiced socialism to the letter and spirit, there was no such thing as commercial development. Every project was undertaken by the government, for the government and of the government. Every eviction notice was signed by the government that wished to build an airport or pave a road under your window. Now private and commercial real estate developments are cropping up like mushrooms all over the country. The government is raking in the land rent by the billions. To keep up the revenue, all avenues of negotiated settlements and legal remedies are closed to the "aboriginals" who are never invited into the conference room.

That is communism at its worst and capitalism at its ugliest. They combine to profit from each other's expertise at the expense of social justice. The abuse is not limited to the property market. Another chilling example is in the way workers' rights are trampled.

We all know that in their bid for power, China's communists loved to instigate and organize union strikes against "cold-hearted" capitalists. Mao Zedong told his followers, "It is right to rebel," when he was championing the "working class".

As soon as the communists took power, however, they removed the "right to go on strike" from the constitution. It is illegal to picket a factory because when communism took over all enterprises were nationalized and became state-owned. There was no other kind of ownership. Theoretically, therefore, you couldn't even protest against yourself. Fine and dandy. But then, things began to change. The very capitalists that were driven out are now eagerly courted. Foreign investments once regarded as imperialist aggression are now warmly received. As a result, ownership structure changed, too. There are now hundreds of thousands of wholly owned foreign factories operating in China. One would think that the communist government would surely follow its tradition by encouraging the Chinese workers in those mills to organize trade unions and allow them to go on strike in case capitalists from Japan, Korea and America revert back to their exploitative and inhuman nature.

Think again. Independent unions still are banned. Strikes remain illegal. The capitalists are now the protected species because Beijing can't afford to see foreign investments dry up. Nor does the government want the workers in state-owned enterprises to demand the "equal rights". It would be too much of an irony if an electrician working for a foreign employer had more protection than his counterpart in a socialist factory. Another fear factor is that independent unions just may grow too powerful - a la Poland during the late 1980s and early 1990s - for Beijing's comfort.

Therein lies the root of the social injustice highlighted by the act of self immolation in Tiananmen Square. That is how those residents find themselves on the short end of the property deal, oppressed by the state and exploited by the capitalists all at once, left and right, literally and figuratively.

[raven]

China isn't capitalist. The core of its economy is owned in a socialist manner. If China is capitalist because of the existence of privatised elements in its economy, then Bismarck's Germany was Socialist because of state planning. Which is absurd.
Exactly. Also didn't the Soviet Union have private sectors in their economy as well?

[Leif]

China demonstrates that capitalism no longer needs democracy.

Capitalism has, at various points in history, thrown away all democratic liberties to protect the private property of the wealthy elites. When the legal and democratic gains of socialists proved to be increasingly dangerous to the capitalist system in Europe, numerous times the conservatives proved willing to abandon democratic liberty and uphold their regimes by force. The most notable examples are Germany and Italy during the early twentieth century.

China isn't capitalist. The core of its economy is owned in a socialist manner.

China has an urban population of about 20 percent, i.e. 260 million. As of today, I estimate (based on the figure of 50 million in 2003) that there are 60 to 70 million Chinese employed in the private sector. That is approximately 1/5 of the entire urban population. That is a significant part of their industrial economy, I would say. The number of Chinese employed in the private sector increased 600% from 1992 to 2003. Do you have any evidence to back up this claim that China is still socialist? Any facts to show they are not moving towards a free-enterprise system?

[Ixtab]

... there are 60 to 70 million Chinese employed in the private sector.Out of a population of over 1,300 million people. A small piece of the economy, actually. Thanks for proving my point.
We had a dsiscussion on this at MarxismOnline,

"The leadership of the PRC is using this tiny fraction of the population and economy to generate disproportional growth rates in order to allow the economy to expand at such a rate that they can outpace the United States in the next two decades. This is part of China's long term strategic plan, just as outspending the Soviet Union was part of America's long term strategic plan. Its a tactic for ending American hegemony, a means to an end that could not be otherwise achieved."
-Tragic

I wholeheartedly agree. "Pure" socialism cannot exist in a country with a dearth of natural resources. To avoid stagnation it must trade with the capitalist countries. Only Russia, the U.S., and Brazil are capable of building "pure" Socialism in one country. Socialism is more likely to be successful in several socialistic countries cooperating with one another than single countries pursuing autonomous socialistic development.

But the Soviet Union is gone, and neither the U.S. nor Brazil is Socialist. China must fill the void as a strategic competitor with the U.S., and China doesn't have the vast resources of the former Soviet Union. It cannot grow fast enough on its own. It needs foreign capital. Most of its national economy, however, is still and shall continue to be owned in a socialistic manner. When the country surpasses the US the privately owned industry shall be expropriated.

The number of Chinese employed in the private sector increased 600% from 1992 to 2003.Accompanied by a great increase in the standard of living and material wealth.

[Excorcism]

On top of that, it's mainly the eastern economic zones and Beijing that are labeled as "economic zones" meaning they are given capitalistic freedoms. THe western farmers aren't so lucky and are actually revolting against the government because they aren't given any government aid or help.

[Leif]

Out of a population of over 1,300 million people. A small piece of the economy, actually.

This means nothing considering only 20% of the Chinese population lives in urban areas. Out of 260 million Chinese, over about 65million are in the private sector. That means that 1/5 of Chinese industry is privatized. The rate at which this has been increasing is tremendous (600% in 11 years.)

"The leadership of the PRC is using this tiny fraction of the population and economy to generate disproportional growth rates in order to allow the economy to expand at such a rate that they can outpace the United States in the next two decades. This is part of China's long term strategic plan, just as outspending the Soviet Union was part of America's long term strategic plan. Its a tactic for ending American hegemony, a means to an end that could not be otherwise achieved."
-Tragic

If China truly wanted to end American hegemony, they would stop shipping us billions of consumer commodities. Yes, there must be billions of these items in the United States as every individual in America likely owns multiple items all originating in China.

Imagine if these items suddenly stopped arriving. Millions of jobs involved in shipping and transportation would be lost. The electronics industry would nearly disappear entirely after a month of such an embargo. The American economy would implode.

[Ixtab]

. . . over about 65million are in the private sector. That means that 1/5 of Chinese industry is privatized."But this simple statistical figure," writes Workers Vanguard, "obscures the strategic centrality of state-owned industry. The private . . . sector consists for the most part of factories producing light manufactures by labor-intensive methods. Heavy industry, the high-tech sectors, modern armaments production are overwhelmingly concentrated in state-owned enterprises. It is these enterprises that have enabled China to put a man in space. Far more importantly, it is state-owned industry that has enabled China to build an arsenal of nuclear weapons . . ."

At its core, the Chinese economy is both planned and collectively owned. The major industries are all owned by the State, the financial system, the exchange rate and the like are all controlled by the State. It is only that core of China's economy, not the private sector, that has allowed China to drive itself through the economic instability that has ruined every capitalist state in the region.

[Sulla the Dictator]

Give them time. Wait for the Chinese government to offend its new middle class and developing economic elites and you'll see the rotten facade crumble.

[A. Radek]

Capitalism never needed 'democracy', and in fact doesn't promote it. The Chinese state owns quite a bit of those 'private' companies and joint ventures with multinationals, in many cases the majority interest.

Lenin brought western capitalists into partnership with many Soviet industries. Armand Hammer ring a bell? Henry Ford? So did Stalin. Thre is no 'contradiction' with Marxists supporting state capitalism, or even 'free enterprise'. If you've ever read the Marxist theories, they state clearly the phases economies need to pass through to develop true 'communism', and 'capitalism' is one of those.

There is no contradiction between being a capitalist and a Marxist; Fredrick Engels was an industrialist and wealthy, yet is one of the major promoters of Marx's theories. Malcom Forbes and other 'capitalists' preferred Marxist accountants and financial advisors. Xerox was headed by a Marxist for many years. It's all a matter of what stage a Marxist thinks the economy is currently in. Lenin tried to take shortcuts, and had to back off from that disaster and turned to international businessmen to save his revolution. Capitalists could care less about your ideology,as long as the deal is lucrative, hence they have no problem with Hitler or Stalin either one, nor any dictator or oppressive state. 'Democracy' is a major hindrance, not a pillar, of Capitalism.

The U.S. government carries the big enterprises of it's own nation, banks, industries, etc., and also carries the major costs of research, and training of employees as well. It is also the primary catalyst in Red China as well. As for the number of 'computer science graduates', it doesn't matter how many they graduate, there is only work for a finite number of them, just as in the U.S. job market.

John D. Rockefeller himself said 'competition is a sin' becuase it was wasteful and redundant, and pronounced 'the age of the individual businessman is dead, and we now live in the age of the large enterprise'. This was over a hundred years ago.

Some people just don't get it; 'War' is ultimately a money game, and the Red Chinese are going for it as the way to sink the U.S. as a world power, and the money elite in this country are more than willing to help them sink us and the rest of the West as a nation, because every billionare has 3 or four children who want to be even bigger billionares, and we instill an unlimited capacity for greed in the entire nation from cradle to grave, the 'reality' that only being rich is what matters, no matter how you get it.

If you think the Chinese are suddenly going to become our 'friends' just because they get rich, then I have some magic beans you'd be interested in buying ...

[Ahknaton]

Out of a population of over 1,300 million people. A small piece of the economy, actually. Thanks for proving my point.As a percentage of the population the group may be small but as a percentage of GDP Chinese private industry is quite significant. I'll see if I can find some figures.

Edit: Private industry accounts for more than 30% of China's GDP and is growing:

http://english.people.com.cn/200204/07/eng20020407_93626.shtml

Chinese Private Economy Seeking Wider Development Space

The Chinese private sector, which makes up more than 30 percent of the country's gross domestic product (GDP), is seeking wider development space in the national economy.

Lu Guanqiu, ranked No. 7 among the top magnates in the mainland of China by Forbes magazine, recently submitted a motion to the Fifth Session of the Ninth National People's Congress (NPC), asking it to give full play to the role of the private sector in creating jobs in the macro-economy.

Lu, an NPC deputy, comes from east China's Zhejiang Province, which has the most developed private economy in China. In the year 2000, about 6.8 percent of China's GDP came from the province, which has only 3.7 percent of the total national population.

Over the past 30 years, Lu Guanqiu has developed an agricultural machinery factory into a modern enterprise with total assets of six billion yuan (about 723 million US dollars), employing more than 10,000 workers.

Lu suggested that the government make preferential policies to encourage the private industry to create more jobs.

China's private economy has developed from the position of playing a minor role to being one of the major components of the socialist market economy.

It is estimated that the share of the private sector in China's GDP has reached 33 percent, a little lower than the 37 percent of the state-owned economy. The other 30 percent comes from agriculture, the collective economy and the foreign-invested sector.

The development of the Chinese private economy started in the early 1980s, and it grew at an annual speed of 20 percent, much faster than the growth rate of the national economy's 9.5 percent over the past two decades.

Xie Taijian, president of the Federation of Industry and Commerce of south China's Guangdong Province, said that private enterprises have achieved great success because they are market- oriented and have a flexible operation mechanism.

Xie is running a computer company which, currently affiliated to the Science and Technology Department of Guangdong, is turning itself into a stock company. Xie said that he hopes to introduce private capital into his firm and develop it into the flagship of the computer industry.

Last October, Beijing canceled the regulations limiting the development of private enterprises, and giving them equal treatment with state-owned and collective enterprises in the fields of market access, land use, bank loans, taxation, and import and export.

Problems getting bank loans have been a bottleneck for the development of private enterprises.

He Xiaoming, a researcher at the Office for Economic Restructuring under the State Council, said that controls should be loosened to help medium- and small-sized enterprises and private firms get bank credit more easily.

An analysis made by Canada's Toronto-Dominion Bank Financial Group points out that China's ongoing reform of its economic structure and rapid urbanization will increase the private sector' s contribution to the country's long-term economic growth.

Statistics show that the number of registered private enterprises had reached 1.76 million by 2000, and their total registered capital topped 1.33 trillion yuan. In addition, more than 20 million workers were employed by private enterprises.

Some of the most outstanding owners of private enterprises such as Lu Guanqiu, Wang Wenjing, Shen Aiqin and Nan Cunhui, are deputies to the NPC, China's top legislature.

Meanwhile, the All-China Federation of Industry and Commerce has submitted a proposal to the national session of the Chinese People's Political Consultative Conference (CPPCC) Ninth National Committee, demanding judicial protection for private enterprises.

Li Peng, chairman of the Standing Committee of the NPC, said in his work report that China will accelerate the drafting of the property law this year.

In addition to their economic contribution, private enterprises are playing a more important role in social development. Chint Group Corporation, a producer of electrical equipment in Zhejiang Province, earmarks 10 million yuan every year to buy social and endowment insurance for its employees.

Nan Cunhui, chairman of the board of Chint Group, said that it is beneficial to the enterprises to promote social insurance, and the development of enterprises should be combined with the needs of the country.

The Chinese government has noticed the importance of private enterprises in the reemployment of workers laid off by state-owned enterprises.

Chinese Premier Zhu Rongji pointed out in his government work report this year that China should encourage and support the healthy development of the private economy.

A new research report on China's social strata made by some scholars at the Chinese Academy of Social Sciences says that private property will play the same role as state-owned property in forming the economic foundation and the overall national strength of socialist society.

Zhang Dejiang, secretary of the Zhejiang Provincial Committee of the Communist Party of China, said that the contribution of the private sector in pushing forward the rapid economic growth of the province can not be overlooked.

Analysts say that the mode of development of Zhejiang's economy will offer a new inspiration for the further development of China' s economy as a whole.