Marxists, unlike reformists, consider that, at its core, the state is composed of “special bodies of armed men” that exercise a monopoly of force in defense of definite property forms—as Lenin explained in The State and Revolution. Capitalism can no more be restored in a workers’ state through the quantitative extension of market relations than it can be eliminated in a bourgeois state through a gradual expansion of the public sector into banking or manufacturing.
Most accounts of “capitalist restoration” in China are based on the apparent dominance of market relations in the economy. Even the leading organs of imperialist finance capital, which are normally acutely sensitive to questions of property rights, regularly refer to China as “capitalist,” albeit with a modifier of some sort. The 20 September 2008 Economist, for example, speaks of “state-led” and “oligarchic” capitalism in both Russia and China. Elsewhere China’s economy has been described as “authoritarian capitalism,” “bureaucratic capitalism” and “developmental capitalism.”
One of the more plausible “Trotskyist” attempts to explain how the CCP supposedly presided over a seamless reintroduction of capitalism appeared in the December 2007/January 2008 edition of Socialism Today, published by the Committee for a Workers’ International (CWI). In a statement entitled, “China’s capitalist counter-revolution,” Vincent Kolo, representing a minority viewpoint within the CWI, argued that the Chinese Stalinists have carried out a full capitalist restoration. The article asserts that a “brutal social counter-revolution of the last two decades…has seen the former Maoist-Stalinist bureaucracy, like its counterparts in the Soviet Union and Eastern Europe, abandon central planning and shift to a capitalist position.”
Kolo paints a vivid picture of the devastating effect of CCP “reforms” on the provision of education and health, which were previously guaranteed through rural collectives or urban state-owned enterprises (SOEs), but which are no longer affordable for many. He claims that China is more integrated into the global capitalist system than Russia or other former Soviet states in terms of trade and penetration of foreign capital. Chinese companies, he observes, are infamous for union-busting, corruption, environmental destruction and unsafe working conditions. While admitting that China’s banks, which he considers “as parasitic as any in the capitalist world,” are tightly controlled by the state, he argues that this is not particularly unusual in Asia. He concedes that in China land formally remains state property, but claims that successive “reforms” have effectively privatized its usage and amount to a “counter-revolution on the land.”
Kolo points to the fact that employment in the SOEs and collectives fell by half in the last decade as a result of waves of corporate “reforms,” mergers and downsizing, management buyouts and public stock listings. Today, three-quarters of the urban workforce is employed outside the public sector. While conceding that the SOEs account for the majority of fixed investment, Kolo argues that, as they are supposed to turn a profit, the state sector amounts to a “lever for developing the capitalist economy, providing a framework of essential industries such as energy and communications, plus targeted investments in certain advanced technological sectors after the Japanese and Korean models.”
There is no question that the SOEs have been reduced in size and pressured to become profitable. It is also true that the workers in the state enterprises, who could be considered to constitute the bedrock of pro-socialist sentiment within the Chinese proletariat, have been forced on the defensive. Yet a close examination of the evolution of China’s economic “reforms” and their intersection with recent factionalism within the CCP shows that the Chinese state has not undergone a qualitative transformation. It remains a deformed workers’ state.
Market ‘Reforms’ & CCP Control
The Chinese Stalinists introduced market “reforms” in 1978 without any intention of incubating an indigenous capitalist class or undermining the SOEs. On the contrary, they hoped that the spur of market competition would make state firms more efficient, boost exports, modernize production technique and thereby accelerate China’s transformation into a “superpower”—which had been Mao’s goal all along. But as we have pointed out previously (see 1917 No. 14 and No. 26), the logic of the market cannot be harmoniously melded with a system characterized by state ownership and central planning. Capitalist markets impose discipline on workers and managers through the “law of value”—when labor power becomes too expensive, it is shed; when firms cannot compete, they go bankrupt. The “efficiencies” of the capitalist market derive from the commodification of both labor power and the means of production.
Planning in a workers’ state, by contrast, subordinates the law of value to conscious economic coordination. Evgeny Preobrazhensky, the leading economist of the Left Opposition in the 1920s, noted in The New Economics that two laws with diametrically opposed tendencies operate during the transitional period between capitalism and socialism. The first he identified as the “law of socialist accumulation,” and the second, the law of value. If the law of value is not overridden when it conflicts with consciously determined priorities, the planning mechanism will be negated—i.e., scarce investment resources will be directed by considerations of profit maximization rather than social utility.
Throughout the 1980s, Beijing’s economic policy oscillated—with bouts of “reform” alternating with periods of retrenchment—as the negative consequences of reliance on market indicators became too pronounced. The brutal suppression of the Tiananmen demonstrations in 1989 was followed by a period of infighting within the CCP leadership between “conservatives” and pro-market elements headed by Deng. The victory of Deng’s faction in 1992 produced an uninterrupted wave of dramatic “reform,” many of the consequences of which are cited as evidence of China’s capitalist transformation.
The market reforms have resulted in large-scale appropriations of state property by both legal and illegal means. This has produced many of the phenomena that could be expected to accompany a social counterrevolution, including endemic corruption, environmental degradation, mass layoffs and the shredding of the social safety net. Yet, while clearly indicative of the direction in which China is headed, these developments do not signify that capitalism has been restored.
An important factor that must be considered is the extent of privatization in the economy. China’s agricultural sector remains extremely socially and politically significant because some 700 million people—roughly half the population—still work the land. Some leftists mistakenly view Deng’s decollectivization of agriculture as de facto privatization. In fact, land remains state property, and this has insulated many poor peasant families from the full impact of the vagaries of the market. While conditions vary widely between regions, it is common for township governments to redistribute land-use rights, regardless of leases, in order to maintain rough parity in holdings. Legal prohibitions on farm households using their land for non-agricultural purposes have limited speculation and capitalist appropriation. Restrictions on land use have proved to be a lifeline for the millions of migrant laborers now returning to their home villages in the interior after being laid off by the export industries of China’s east coast (China Leadership Monitor, Winter 2009).
Legal formalities have not prevented some local governments from selling peasant land to industrial and commercial interests—nearly half of the 90,000 “mass incidents” in China last year were sparked by such seizures. The Western bourgeois press has gleefully reported how some desperate peasants have embraced privatization in an attempt to protect their land tenure from illegal seizures. Pro-privatization sentiment certainly exists, but it is by no means universal. In 2008, several hundred angry farmers in Longzhuaoshu, a village near Beijing, erected a large banner that read: “Collectively Owned Land Should Not Be Used For Commercial Purposes” to protest the paltry compensation they were given for the conversion of their farmland to non-agricultural use (Toronto Star, 15 November 2008). For three days they blocked trucks, bulldozers and steam shovels. They were eventually dispersed by hired goons and local police, but their willingness to resist this social parasitism points to the importance that the land question is likely to have in future political and social struggles.
China’s entry into the World Trade Organization (WTO) in 2001 potentially threatened the livelihood of peasant farmers unable to compete against the large-scale, mechanized production of imperialist agribusiness. While meeting some WTO obligations with lower tariffs and import quotas, Beijing has thus far shielded small agricultural producers to avoid bankrupting millions of poor peasant households. The CCP’s “new socialist countryside” program, which eliminated tuition fees for primary and secondary schools, reduced agricultural taxes, expanded infrastructure investments and increased funding for social services, has also eased conditions for many rural families.
In the industrial sector, the SOEs underwent dramatic changes a decade ago when some 30 million workers were laid off, and tens of thousands of small and medium-sized enterprises were privatized or “corporatized” through issuing shares and entering into joint ventures (see 1917 No. 26). These measures were pushed through by the CCP’s Zhu Rongji/Jiang Zemin leadership as a form of “shock therapy” in preparation for China’s entry into the WTO. Their intention was to force the largest SOEs to become internationally competitive while retaining state ownership. In fact, the SOEs survived, regardless of their profitability, as a result of state control of the banking system.
In 2003, SOEs accounted for some 70 percent of total fixed assets and 30 percent of non-agricultural production. The state sector remains dominant in most strategic industries, including heavy machinery, steel, petroleum, non-ferrous metals, electricity, telecommunications and transportation. In recent years, the privatization of larger SOEs has virtually ceased. Only a tenth of insolvent SOEs filed for bankruptcy in 2007 and 2008; the rest were prevented from doing so by local officials concerned about losing access to government resources (Economist, 13 December 2008).
The size of the state sector distinguishes China from its capitalist neighbors, including the so-called “tigers.” Singapore’s SOEs account for about ten percent of GDP, South Korea’s five percent and Taiwan’s half that (UBS Investment Research, “How to Think About China”). The dimensions of the state sector, combined with land ownership, means that, despite the inroads of private property, the Chinese economy is still predominantly collectivized. Zhiwu Chen, a Yale economist, notes:
“Despite privatization, there are roughly 119,000 state-owned enterprises today, with a book value of about $4-trillion. State-owned land is valued at more than $7-trillion. Combined, these state-owned assets total almost three-quarters of China’s national productive wealth.
“With the state owning so much, most of the gains in asset values experienced over the past 30 years have gone into the government’s coffers. When most households own no productive assets, they cannot share any of the asset appreciation or property income. For most citizens, wages are the only source of income.”
—Globe and Mail [Toronto], 26 November 2008
Of course, a deformed workers’ state cannot be identified solely by the extent of state ownership. There are indeed many cases where capitalist states have resorted to extensive nationalizations in response to major crises or to prop up enterprises in strategic sectors that are unable to compete successfully on the market. Various semi-colonial states have also nationalized oil and other natural resources in order to boost revenues and increase autonomy from imperialist predators. None of these are “anti-capitalist” acts, but rather attempts to strengthen the position of the bourgeoisie as a whole.
Fitzgibbon was viewed by certain layers within the defence establishment as tainted by his longstanding friendship with Helen Liu, a wealthy ethnic Chinese Australian businesswoman who migrated from China and has alleged connections to both serving and former senior Chinese government officials.
Controversy engulfed Fitzgibbon in late March, when two newspapers reported that Defence sources had claimed that a wing of military intelligence had conducted a secret investigation into the minister’s relations with Liu, on the grounds they represented a “possible security risk”.
Officials allegedly provided documentary evidence to their superiors that Liu had made substantial donations to both the Labor Party’s and Fitzgibbon’s election campaigns, and that the minister had accepted gifts and rented a house from Liu in Canberra.
As is so often the case when the media suggests impropriety on the part of a bourgeois politician, evidence soon emerged to substantiate the claims. Within days, Fitzgibbon admitted he had neglected to disclose to the parliament that Liu had paid for trips he made to China in 2002 and 2005.
The conservative Liberal Party opposition demanded the minister’s resignation for breaches of the ministerial code of conduct. More significantly, the opposition portrayed Fitzgibbon’s ties with Liu as symptomatic of a questionable and even suspicious relationship that the Labor government was developing with Beijing. Opposition leader Malcolm Turnbull labelled Prime Minister Kevin Rudd a “roving ambassador for the People’s Republic of China”, due to his suggestion that China should play a more prominent role in the International Monetary Fund.
In March, Rudd stood by his minister and rejected calls that he be dismissed. Fitzgibbon survived to unveil, on May 2, the government’s Defence White Paper, which outlined a significant military expansion. The document was predicated on an assessment that there could be a “major war” in the Asia-Pacific in the next 20 years, involving Australian forces fighting alongside the US against potential enemies such as China. Far from indicating any shift away from the US alliance or turn toward closer relations with Beijing, the document was described by one military analyst as the “victory of the China hawks within defence”. (See: “Australian government announces military build-up as strategic dilemma intensifies”)
Nevertheless, the campaign against Fitzgibbon continued with renewed vigour. On May 30, unnamed “associates” of Helen Liu told the Melbourne Age that Chinese government agents had asked them to “cultivate a relationship” with Joel Fitzgibbon and his father—who was, at the time, a member of parliament—when the two men travelled to China in 1993. Liu’s friendship with the Fitzgibbon family dates from that visit.
When these claims failed to gain political traction, another ministerial infraction came to light. On June 2, Fitzgibbon admitted in parliament that he had failed to disclose that a $450 hotel bill had been paid on his behalf in June 2008 by NIB—the health insurance corporation that employs his brother, Mark Fitzgibbon, as a senior executive. Such admissions generally mean that the information has already been leaked to the opposition or the media, and is about to be exposed.
Fitzgibbon’s relations with his brother ultimately provided the trigger for his downfall. Twice last year, Mark Fitzgibbon met with Major General Paul Alexander, commander of the military’s health services, to lobby for defence contracts on behalf of NIB. Alan Griffin and Warren Snowden, the junior ministers for Veterans Affairs and Defence Personnel respectively, also took part.
Fitzgibbon has claimed that he was aware of NIB’s commercial interest in his department and that he had no input into considerations of his brother’s company’s bids. His staff, however, inexplicably organised for the discussions to take place in his offices and, according to Fitzgibbon, did not inform him of this fact. Fitzgibbon therefore told a lie when he asserted, on the public record, that his office had played no role in the meetings.
The manner in which this was made public was a transparent political setup aimed at forcing Fitzgibbon’s resignation. On June 2, the day before a Senate estimates committee was scheduled to take testimony from General Alexander, an anonymous letter providing details of the NIB meetings in Fitzgibbons’s office was delivered to the opposition’s Shadow Minister of Defence, Senator David Johnston. According to journalist Mark Dodd of the Australian, parliamentary security staff described the individual who delivered the information as a “familiar face”.
In the Senate hearing, Johnston asked leading questions of Alexander, who disclosed, under oath, that Fitzgibbon had not told the truth regarding his office’s involvement in the meetings. The following day, Fitzgibbon received a visit from Labor factional heavyweight John Faulkner. One hour later, he handed to Prime Minister Kevin Rudd his resignation letter and the next day, on June 5, Faulkner was named the new defence minister.
Fitzgibbon has made a number of claims since his ousting. There were “two or three Judases in my midst and they had the drip on me,” he declared, insisting that the accusations against him “could only have been developed by people working closely with me”. He also alleged that it was possible “people working within Defence were collaborating with others as a means of bringing me down”.
Fitzgibbon continues to refuse to name names, only threatening to take legal action against “individuals” and “media outlets”. The clear implication is that figures within Defence and the military, abetted by the media, have consciously conspired to remove him.
Fitzgibbon has repeatedly suggested that the motive was his demand that the Defence department find $1 billion a year in internal savings, in order to free up greater resources for hardware purchases and the financing of military deployments in Afghanistan and the South Pacific. This does not seem credible, as the cost-cutting is Rudd government policy and will continue to be implemented now that Faulkner heads the ministry.
What is entirely credible is that a powerful layer of Defence Department bureaucrats and military commanders view themselves as self-appointed guardians of Australia’s alignment with the United States and have decided that there will be no toleration of even the hint of Chinese influence over government decisions. For such elements, even a minor indiscretion can provide sufficient ammunition to remove a “suspect” politician from Defence.
The Australian media has, in the main, chosen to remain silent on the issues behind the Fitzgibbon saga—namely, conflicts within foreign policy circles over the implications of the decline of the US and the rise of Chinese geopolitical influence in Asia. The Australian ruling elite cannot escape the consequences of these strategic shifts. As tensions inevitably escalate between the US and China, it will be forced to choose between its historic postwar ally and its major trading and investment partner.
Only one leading commentator, the Sydney Morning Herald’s Peter Hartcher, has hinted that it is this underlying dilemma that lies at the heart of the affair. In a column on June 13, Hartcher posed the unanswered questions: “Had Fitzgibbon been compromised by the Chinese government”? Alternatively, Hartcher asked, “was Fitzgibbon the first victim of a new kind of McCarthyism where any official was immediately under suspicion if he had connections with ethnic Chinese people, Australian citizens or not”?
Whether either of these scenarios is the case, or a variant somewhere between, Fitzgibbon’s resignation signals that opposed interests within the ruling elite are giving rise to ever sharper political conflicts over which foreign policy direction should ultimately be taken.
Current prices are already placing an enormous burden on poor and working class people throughout the world. However, Diouf further warned that prices could soar once again to the highs recorded between 2007 and 2008 due to the lack of credit currently available to farmers, which has affected their production and expansion capabilities.
During 2007-2008 the price of corn rose 31 percent, rice 74 percent, soybeans 87 percent and wheat 130 percent. The inability of masses of people to afford basic food necessities under these conditions led to global unrest, with food riots breaking out in no less than 30 countries.
The FAO has documented at length a number of the ongoing emergencies in food security. In the most recent update on food emergencies from February, the FAO reports that 32 countries around the world are in a state of immediate crisis and food insecurity, requiring external assistance. The FAO has placed particular emphasis on the Gaza Strip, devastated by recent Israeli aggression, as well as Kenya, Somalia and Zimbabwe, where "the food security situation is precarious following drought-reduced crops, civil disturbance and/or economic crisis."
The report notes, "More than 18 million people face serious food insecurity due either to conflict, unrest, or adverse weather or a combined effect" in Eastern Africa. In Kenya, the FAO reports, millions are faced with food insecurity, and the government "has declared a state of National Disaster and indicated that about 10 million people are highly food insecure including 3.2 million drought-affected people."
"In Eritrea, [in Northeastern Africa]," the report states, "cereal prices remain high affecting the food security of large sections of the population" while across its Western border in southern Sudan, "despite an overall improvement in the supply of cereals, inadequate transport and marketing systems will prevent any significant movements from surplus to deficit areas."
A report released by the International Trade Union Federation in March titled A Recipe for Hunger: How the World is Failing on Food, attempts to paint a broader picture of the crisis while echoing predictions made by Diouf and the FAO: "In Africa the poorest are hit the hardest. 160 million people are trying to survive on an income of less than half a dollar a day. Most of those households are net buyers of food, not producers. The result is that soaring food prices hit household budgets of the poor in the developing countries. An impact felt instantly because an average of 50 to 70 percent of their budget is spent on food, leaving no room for a well-balanced, highly nutritional diet."
The report goes on to say that "not since the 1970s and the international oil crisis have food prices across the globe been this elevated. ... The shock of high prices began already in 2006, and agricultural commodity prices continued to rise until mid-2008. Medium-term projections from FAO indicate that food prices in 2009 may fall but will still remain well above their pre-2004 level in the coming years."
Having made a number of dire predictions regarding world hunger, Diouf's proposed solution for confronting the crisis is to appeal to the leaders of the G20 countries for funds. "The first and foremost important element," says Diouf, "is the need to invest in agricultural production, and this would require $30 billion a year."
The proposed solution to the problem presented by Diouf, the FAO and similar agencies entrusted with the monitoring of food emergencies, doesn't approach the heart of the problem. If $30 billion per year or more is required to save agricultural production from a state of crisis, one must ask, under whose control and in whose interests those investments are to be made To leave the food supplies and their distribution to the world's population in the hands of the G20 leaders and the ruling elites of the nation states they represent, only leads the food crisis into continued chaos.
The already vulnerable and anarchic state of worldwide food production was exploded by the credit crisis and the rampant speculation in food commodities that came as credit bubbles burst, but the root cause of widespread food insecurity is not the current crisis but the very nature of the capitalist system itself, from which the crisis has emerged.