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Atlantic Council and Rhodium Group announce research partnership on China’s economic trajectory

RIGHT WING TALK SHOP

Press Release
ChinaEconomy & Business

Container barge passing by in Shanghai, China. Increasingly, the center of gravity of the global trade and financial system is shifting East, toward China, and South.

Source: Markus Winkler for Unsplash

Multi-year partnership to produce unique insights on China’s economy and implications for Biden Administration policymaking; Rhodium partner Daniel Rosen to be named as Atlantic Council Senior Fellow

WASHINGTON, DC – March 9, 2021

– The Atlantic Council’s GeoEconomics Center and Rhodium Group today announced a multi-year partnership dedicated to understanding China’s economy.

The flagship project of the partnership will be a data visualization toolset for analyzing China’s economic trajectory. Building on Rhodium Group’s extensive past work tracking China’s policy choices, the first release is scheduled for June 2021, followed by quarterly updates. The project – titled Pathfinder: Anticipating China’s Economic Future – will examine China’s economic direction in six key areas: three external (trade, direct investment, and portfolio investment) and three internal (market competition, financial system, and innovation).

This regularly updated compendium of novel indicators will anchor a new publication series that helps inform the Biden Administration’s economic approach to China, complementing the GeoEconomics Center’s current China Economic Spotlight.

Josh Lipsky, Director of the Atlantic Council’s GeoEconomics Center said, “We are proud to partner with Rhodium Group to shed light on the defining economic challenge of this generation – how to grapple with China’s power. The Atlantic Council’s growing body of work on China is designed to inform smart policymaking, and the crucial missing link in Washington and beyond is a full understanding of how China’s economy truly operates.”

We are proud to partner with Rhodium Group to shed light on the defining economic challenge of this generation – how to grapple with China’s power.
Josh Lipsky, Director of the Atlantic Council’s GeoEconomics Center

Launched in 2020, the Atlantic Council’s GeoEconomics Center is organized around three pillars: the Future of Capitalism, the Future of Money, and the Economic Statecraft Initiative. The Center prides itself on impactful data visualization projects and has a proven track record of internationally recognized work. In the past several months, the Center produced major reports on the rise of central bank digital currencies, the dramatic changes in global monetary policy, and the shifting use of sanctions worldwide.

Addressing the goals of the project, Rhodium Group Founding Partner Daniel Rosen asks,

  “Is China’s economy diverging so fundamentally from market principles that the only appropriate response is decoupling? Leaders lack a sound analytical framework for approaching this crucial question. If they over- or under-react it will have severe consequences. By fairly gauging the aspects of China’s economic system that matter most we will provide that framework.”

Rhodium Group is recognized for pathbreaking, objective analyses of what makes China’s economy tick and its implications for the United States and other market economy nations, businesses, and workers.

To integrate the work of the two organizations, Rosen will also serve as a Senior Fellow within the Atlantic Council’s GeoEconomics Center. He brings three decades of experience tracking China’s economic evolution.

For media inquiries, please contact press@atlanticcouncil.org

China is not heading toward a market economy, often due to its own policies, report concludes

China ‘is clearly not what was envisioned’ when it was admitted into the World Trade Organization in 2001, Atlantic Council and Rhodium Group find

The nation has back-pedalled from its stated economic objectives, and the US and other market economies must protect themselves when dealing with it

Jodi Xu Klein

Published: 12:01pm, 5 Oct, 2021

Shipping containers from China are unloaded at the Port of Los Angeles in California. A new report concludes that the country is not on a track to becoming a market economy. Photo: AFP

China has fallen short of meeting its stated reform goals and is not on track to become a market economy, a report assessing China’s development has concluded.

As a result, the United States and other market economies must develop commercial rules to protect their systems better when they deal with China until it becomes a more open economy, according to the report, China Pathfinder, published by the Atlantic Council and Rhodium Group on Tuesday.

The report found that while the last decade saw some progress, China’s back-pedalling from a more open economy, which began in 2016, was particularly prominent in the past year when Beijing began to crack down on private firms in the technology and education sectors and pursued a growth strategy intended to make China less reliant on the outside world.

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ALL TOGETHER NOW; 

CHINA IS A STATE CAPITALIST REGIME, WITH ELECTRICITY!

LET'S CONFIRM THIS WITH THE LENNINIST TROTSKYISTS

Lenin and State Capitalism: Debunking a Persistent Myth

Posted on April 2, 2017 by Bolshevik

Something I have run up against repeatedly over years of discussing Marxist politics in person and online is the myth that Lenin mistakenly believed socialism to be a form of capitalism. One piece of “evidence” for this claim is a quote drawn from Lenin’s “The Impending Catastrophe and How to Combat It.” In the section titled “Can We Go Forward If We Fear to Advance Toward Socialism?” Lenin argued, “For socialism is merely the next step forward from state-capitalist monopoly. Or, in other words, socialism is merely state-capitalist monopoly which is made to serve the interests of the whole people and has to that extent ceased to be capitalist monopoly” (emphasis in original).

To critics of Bolshevism, this snippet represents a damning indictment of how far Lenin departed from Marx’s understanding of socialism. The social-democratic SPGB, one the groups who frequently employ the quote to dismiss Lenin’s politics, has claimed that “Lenin knew that he was introducing a new definition of socialism here which was not to be found in Marx.” Alongside the SPGB are a large number of anarchist or “libertarian communist” websites that have latched onto the quote as indicative of Lenin’s purportedly nefarious political designs. “Lenin was clear what kind of economy he was aiming for,” claims one anarchist brochure, “a state capitalist one.” Another anarchist site buries the quote deep within a pile of other quotes supposedly revealing a direct line of development from Lenin to Stalin.

The problem with such claims is that they fail to understand what Lenin meant by “state capitalism,” and how it differed from the “state capitalism” that they claim existed under the planning framework that was constructed during the First Five Year Plan. For Lenin, state capitalism still had profit-making capitalists (and some firms under joint ownership). It operated primarily through lease concessions to foreign industrialists, made by the proletarian state, to improve or generate investment in a particular industry. It tried to encourage bourgeois co-operatives among petty producers, and was geared toward checking the worst excesses of capitalist management and enterprise by enforcing “controls” in the interests of the working class. The system was quite different than the one that prevailed from the early 1930s onward in the Soviet Union.

Even if we set aside all outside knowledge of what Lenin did or did not mean by the term, the quote in question does not say anything even remotely similar to what its cherry-pickers have claimed it does. A close textual reading makes it clear that Lenin definitely saw a link between state-capitalist monopoly and socialism (otherwise, why even bring them up in the same sentence?). But the relationship is not one of strict equation between the two, for if it were, Lenin would not have identified socialism as “the next step forward from” capitalism.  Instead, Lenin thought that the relationship was one of sharing a specific feature: the existence of “monopoly.” In contrast to “state-capitalist monopoly,” though, socialist monopoly would be “made to serve the interests of the whole people” and would no longer be “capitalist monopoly.” Far from being a revision of Marxism, Lenin’s remarks are consistent with what any Marxist would support. After all, if a governing body under socialism did not have a “monopoly” or ultimate authority over all the means of production, that by definition would point to the continued existence of private property in the means of production. And what Marxist would argue for that?

But we honestly do not need to delve into this rather monastic kind of exegesis, because Lenin, in his aptly named pamphlet “‘Left-wing’ Childishness,” discussed at length how he envisioned state capitalism functioning in the process of transitioning to socialism. Conveniently, it even contains a clear explanation of what he meant in the aforementioned quote:

“No one, I think, in studying the question of the economic system of Russia, has denied its transitional character. Nor, I think, has any Communist denied that the term Socialist Soviet Republic implies the determination of Soviet power to achieve the transition to socialism, and not that the new economic system is recognised as a socialist order.

But what does the word ‘transition’ mean? Does it not mean, as applied to an economy, that the present system contains elements, particles, fragments of both capitalism and socialism? Everyone will admit that it does. But not all who admit this take the trouble to consider what elements actually constitute the various socio-economic structures that exist in Russia at the present time. And this is the crux of the question.

Let us enumerate these elements:

1) patriarchal, i.e., to a considerable extent natural, peasant farming;

2) small commodity production (this includes the majority of those peasants who sell their grain);

3) private capitalism;

4) state capitalism;

5) socialism.

Russia is so vast and so varied that all these different types of socio-economic structures are intermingled. This is what constitutes the specific features of the situation.

… 

At present, petty-bourgeois capitalism prevails in Russia, and it is one and the same road that leads from it to both large-scale state capitalism and to socialism, through one and the same intermediary station called ‘national accounting and control of production and distribution.’ Those who fail to understand this are committing an unpardonable mistake in economics. Either they do not know the facts of life, do not see what actually exists and are unable to look the truth in the face, or they confine themselves to abstractly comparing ‘capitalism’ with ‘socialism’ and fail to study the concrete forms and stages of the transition that is taking place in our country. Let it be said in parenthesis that this is the very theoretical mistake which misled the best people in the Novaya Zhizn and Vperyod camp. The worst and the mediocre of these, owing to their stupidity and spinelessness, tag along behind the bourgeoisie, of whom they stand in awe. The best of them have failed to understand that it was not without reason that the teachers of socialism spoke of a whole period of transition from capitalism to socialism and emphasised the ‘prolonged birth pangs’ of the new society. And this new society is again an abstraction which can come into being only by passing through a series of varied, imperfect concrete attempts to create this or that socialist state.

It is because Russia cannot advance from the economic situation now existing here without traversing the ground which is common to state capitalism and to socialism (national accounting and control) that the attempt to frighten others as well as themselves with ‘evolution towards state capitalism’ (Kommunist No. 1, p. 8, col. 1) is utter theoretical nonsense. This is letting one’s thoughts wander away from the true road of ‘evolution,’ and failing to understand what this road is. In practice, it is equivalent to pulling us back to small proprietary capitalism.

In order to convince the reader that this is not the first time I have given this ‘high’ appreciation of state capitalism and that I gave it before the Bolsheviks seized power I take the liberty of quoting the following passage from my pamphlet The Impending Catastrophe and How to Combat It, written in September 1917.

‘. . . Try to substitute for the Junker-capitalist state, for the landowner-capitalist state, a revolutionary-democratic state, i.e., a state which in a revolutionary way abolishes all privileges and does not fear to introduce the fullest democracy in a revolutionary way. You will find that, given a really revolutionary-democratic state, state-monopoly capitalism inevitably and unavoidably implies a step, and more than one step, towards socialism!

‘. . . For socialism is merely the next step forward from state-capitalist monopoly.

‘. . . State-monopoly capitalism is a complete material preparation for socialism, the threshold of socialism, a rung on the ladder of history between which and the rung called socialism there are no intermediate rungs’ (pages 27 and 28).”

Lenin himself, then, is clear regarding what he meant by the quote. In a country where what Lenin called “patriarchal” production and “small commodity production” were pervasive, he envisioned “state capitalism” as a means of integrating small, isolated producers into a larger system of “national accounting and control of production and distribution.” It is in that sense, not in the sense of state bureaucrats operating as a new capitalist class, that Lenin understood state capitalism to be an important economic advance in the transition to socialism, which was viewed as something quite distinct (see numbers 4 and 5 in the quote). The idea that this stage could be skipped over, with petty producers being directly integrated into a smoothly operating planning apparatus, is utopian. Admittedly not any more utopian than the idea that workers have no need for their own state in the aftermath of a socialist revolution, or the idea that one can understand Lenin’s highly specific, contextually bound programmatic statements without having done any significant investigation into his political biography or even the history of the Russia circa 1918-1928. So, if nothing else, at least Lenin’s critics are consistent.

Certainly there are debatable criticisms that can be made of Lenin’s politics at various junctures of his life. But whatever the criticism, it should be an informed one, not the kind of dishonest distortions that have accumulated around out-of-context quotes. Such tactics do no credit to those deploying them, and short-circuit the process of intellectual and political development that must occur if socialist revolution is ever to be anything more than utopian moralizing.

State Capitalism and Development in East Asia since 1945




Owen Miller (ed)

Brill, Leiden, 2023. 283 pp., 133€ hb
ISBN 978-90-04-25190-8

Reviewed by Erwan Moysan

About the reviewer
Erwan Moysan is a PhD student at Cardiff University currently working on Marxist critiques of the More


State Capitalism and Development in East Asia since 1945 is a book with chapters by authors from the United Kingdom, South Korea and Germany, with backgrounds in economics, politics and history, edited by Owen Miller. It analyses the development of East Asia, encompassing China, Taiwan, both Koreas and Japan. It does so through the lens of the Marxist theory of state capitalism understood broadly as the theory that holds that ‘the state is always an integral part of the capitalist system: capital accumulation cannot occur without the state and the capitalist state cannot exist without capitalism’ (4-5). The degree of state involvement can vary from country to country, with at one end of the spectrum states that avoid direct involvement in business and at the other states acting as collective capitalists. Except for the opening and closing chapters, each chapter is dedicated to an East Asian country.

Owen Miller and Gareth Dale introduce the book’s theoretical framework, subscribing to Tony Cliff’s theory of state capitalism. Cliff viewed the Soviet Union as one big firm, although rather than competing internationally with exchange values, he saw the USSR as competing with use-values through the arms race. While Miller and Dale recognise that there are other theories of state capitalism, they declare Cliff’s theory ‘the most detailed analysis of state capitalism in the Soviet Union’ (6). This is debatable. For example, Cliff, like many theorists of state capitalism, viewed Soviet state capitalism as more advanced than Western capitalism. By contrast, there were other authors in the same time period, like Amadeo Bordiga, who saw Soviet capitalism as inferior to that of the West. The contributors to this book themselves see state capitalism as the form of capitalism the Soviet Union and East Asia adopted in order to ‘catch-up’ to the most advanced capitalist economies. Cliff’s followers have largely reworked his theory, not in the least in this very book by spreading the theory to East Asia, and this is to their credit. But it also makes their affirmation all the more bizarre. Authors throughout the book refer to Cliff’s theory, but it is not always clear whether they are referring to Cliff’s view or that of his successors.

On one hand, Cliff’s successors not only recognise that labour-power taking the form of a commodity is a core feature of capitalism, but they go further than most theorists of state capitalism and recognise that competition between capitals is also a core feature, especially international competition. While some theorists, such as Paresh Chattopadhyay, acknowledge the significance of competition, nevertheless, they often confine themselves methodologically within the framework of the nation. What distinguishes the authors of the book from state capitalism theorists that also recognise the importance of competition is that they insist that the law of value does ‘not apply strictly to market-mediated competition, with socially necessary labour expenditure determined a posteriori, after goods have exchanged and sales numbers and prices have signalled the degree to which labour time expended was in fact socially necessary’ (12). Micheal Haynes, in the book’s closing chapter, also suggests that there can be value without market exchange, commenting that ‘the fetishism of commodity fetishism’ is the ‘Marxist version of the conventional obsession with markets’ (237). Both chapters try to justify this position by noting that capitalists anticipate in the realm of production on the basis of past circulation. On this basis, they abruptly leap to the conclusion that the law of value thus also applies to state-mediated competition, notably arms production, because it is based in a similar moment of anticipation, with the moment of realisation being war. In short, they affirm that market competition is not the only form of capitalist competition. This is unconvincing. The market cannot be abstracted away from Marx’s critique. Value being the exchangeability of the product of labour, the notion of a law of value without the market is nonsensical. As the book itself notes, if the anticipation is wrong, the punishment can be severe. Which undermines their entire point. Potential value is not value. It only becomes so through the ‘test’ of market exchange. The position is all the stranger given the authors must be aware that it is not necessary to affirm it in order to speak of state capitalism or imperialism.

Regardless, Miller and Dale do an excellent job of catching anyone unfamiliar with state capitalism up. The state is not only understood through its fundamental roles within capitalism – imposing a social order between capitals and between capital and labour, establishing general conditions of production and representing national capital on the world stage – but also historically. The capitalist state has always been involved in capital accumulation. While the degree of this involvement varies according to country, all are subject to the capitalist dynamics identified in Capital. Miller and Dale identify the premises of state capitalist theory in Marx and Engels, notably in Capital, Anti-Duhring and their criticisms of Ferdinand Lassalle and Adolf Wagner. They also summarise quite well the analysis of the degeneration of the Russian Revolution at the origin of the theory. A good summary of Japan’s state-directed development is also given.

Kim Ha-young takes us through the trajectory of North Korean state capitalism, from growing faster than South Korea in the first decades of its existence to the crisis of the 1990s. After describing how the Soviet occupation dissolved the working-class organisations that emerged from the liberation of Noth Korea from Japan in 1945, she depicts the firm labour discipline that was introduced. These policies, such as labour passports, severely punishing absenteeism, differential wages and piece rates, were identical to those employed under Stalin in the Soviet Union in the 1930s. And much like in the Soviet Union, workers struggled against these measures and were able to work around them, due to the advantage labour shortage gave them. Indeed, in both countries rapid growth was achieved through the transfer of labour from agriculture to industry. However, this sort of growth cannot last. North Korea’s extensive growth prioritising heavy industry over consumer goods and agriculture eventually reached a limit. There was an attempt to grow the consumer goods industry, which could have incentivised labour, but with the 1973 global crisis among other factors North Korea found itself isolated and unable to pivot. Today, on the surface the state maintains the appearance of an omnipotent state capitalism, while simmering below ‘is a vigorous market system of private trading companies and even manufacturers, usually disguising themselves as state enterprises’ (43).

Perhaps the highlight of the book is Kim Young-uk’s chapter on Mao’s China. It demonstrates, with a wealth of empirical material, that China pursued a policy of flexibilisation of labour, for both permanent and temporary workers, that primitive accumulation of capital took place and that even though China’s participation in international exchange was limited at the time – because bureaucrats were constantly comparing Chinese labour to Western labour by using international monetary values – international competition was nonetheless ‘nearly always the decisive factor in how and where living and dead labour was put to use within China’ (143). To support this latter point, they note, quoting Isaak Rubin, that ‘in capitalism, before producers compare labour through money in the actual process of exchange, they have already equalised their products with a determined quantity of money’ in consciousness (142). However, in regard to the theoretical problem outlined earlier, it should be noted that Rubin clarifies in that same passage that ‘the equalisation must still be realised in the actual act of exchange’ (Rubin 1973: 70). In any case, this does not change the fact that international competition shaped the Chinese economy in this indirect way.

The book’s goal is to expand state capitalism theory from being specific to so-called ‘socialist’ countries as part of a broader understanding of the relationship between state and capital. State capitalism should indeed move away from being a narrow concept but the other pitfall of stretching the concept needs to be avoided too. For example, it is hard to see how the South Korean state defending ‘severe exploitation’ (164) is specifically state capitalism as opposed to capitalism as usual. Regardless, Jeong Seongjin’s chapter on South Korea illustrates one of the book’s biggest strengths, namely an understanding that each country’s development is not isolated, but is part of the world capitalist system. In the post-World War II, US permanent arms economy, military expenditure counteracted, for a time, the tendency of the rate of profit to fall. The high growth rates without crises of post-war Japan and West Germany were possible only because of the US-driven permanent arms economy, notably via the Korean War. Similarly, although South Korea’s state capitalist development started in the 1950s, it really took off with the Vietnam War. US dollars, compensating South Korean cooperation in the Vietnam War, financed an export-oriented industrialisation, establishing a triangular trade pattern in which Korea imported means of production from Japan and exported most of its products to the US.

Tobias ten Brink offers a description of China’s 21st century state-permeated capitalism. While the last decade is not covered, he shows that the Chinese state today is not a monolith but is in competition with itself, notably since the decentralisation of the 1980s. The complex relations between state, party, bureaucrats, domestic capitalists and foreign capitalists are also detailed. Notably, he shows that the dichotomy between private and state property is not useful when analysing Chinese firms.

Throughout the book, developmental state theory is criticised, with state capitalism theory demonstrated to be superior. Lee Jeong-goo’s chapter is dedicated to criticising developmental state theory on its own grounds and shows that the theory not taking into account class and exploitation is the source of its weakness. Developmental state theorists fail to understand the state as a class institution and instead see it as neutral or autonomous. Thus, they fail to understand, for example, how the Chinese state acts as a collective capitalist.

Finally, Micheal Haynes notes that the error equating socialism to state property reduces capitalism to private property, whereas the distinction is alien to Marxists. Moreover, there is a grey zone between the private and state sectors. He describes state capitalism as a ‘catch-up’ economy based on technological emulation and the movement of labour from countryside to towns. Success is not guaranteed, as seen with North Korea. A core feature of such economies, like the Soviet economy, is their difficulty with technological innovation. He shows that while Japan and South Korea have caught up, China still has a way to go and is less technologically innovative than sometimes believed. Haynes argues that the development of East Asia is an example of uneven development, with its growth stifling development in other regions, such as Sub-Saharan Africa. The capitalist system is one of global competition.

This book was many years in the making and, overall, successfully draws from state capitalism theory to show how the narrowing relation between state and capital is behind East Asia’s development.

21 February 2024

ReferencesIsaak Rubin 1973 Essays on Marx’s Theory of Value (Montreal: Black Rose Books).


URL: https://marxandphilosophy.org.uk/reviews/21391_state-capitalism-and-development-in-east-asia-since-1945-by-owen-miller-ed-reviewed-by-erwan-moysan/

Lenin's State Monopoly Capitalism

_{Meyerhold's production of The Bathhouse by Mayakovsky, March 16 1930}

"The methods of Taylorism may be applied to the work of the actor in the same way as they are to any other form of work with the aim of maximum productivity."

_{Vsevolod Emilevich Meyerhold, 1922}

In my post on Battleship Potemkin I posted about the Kronstadt sailors revolt of 1921. At the 10th Party Congress of the Bolshevik Party Lenin declared; "Enough Opposition", and the Red Army crossed the ice and attacked the revolting sailors.

At the Tenth Congress, as the Kronstadt soviet was being crushed by arms and buried under a barrage of slander, Lenin attacked the radical-left bureaucrats who had formed a “Workers’ Opposition” faction with the following ultimatum, the logic of which Stalin would later extend to an absolute division of the world: “You can stand here with us, or against us out there with a gun in your hand, but not within some opposition. . . . We’ve had enough opposition.”

Ironically their demands were then used by Lenin to create his New Economic Program.

"Our poverty and ruin are so great that we cannot at a single stroke create full socialist production" Lenin

Lenin came before the Congress in March 1921 and proposed the NEP. The NEP was in essence a capitalist free market. The NEP stated that requisitioning of food and agricultural surpluses, a doctrine of War Communism, must be ended. Instead, the government would tax the peasants on a fixed percentage of their production. Trotsky had already proposed a similar policy, but it was rejected by his fellow colleagues, including Lenin. Basically, this promoted a free agricultural market in Russia.

Lenin's N.E.P.

The Bolshevik revolutionary takeover in October 1917 was followed by over two years of civil war in Russia between the new Communist regime (with its Red Army) and its enemies--the conservative military officers commanding the so-called White armies. The struggle saw much brutality and excesses on both sides with the peasants suffering most from extortionate demands of food supplies and recruits by both sides. The repressive and dictatorial methods of the Bolshevik government had so alienated the mass of peasants and industrial working class elements that the erstwhile most loyal supporters of the regime, the sailors at the Kronstadt naval base, rebelled in March 1921 (see ob19.doc) to the great embarrassment of senior Bolsheviks. Though the rebellion was mercilessly crushed, the regime was forced to moderate its ruthless impulses. The New Economic Policy (NEP) was the result, a small concession to the capitalist and free market instincts of peasant and petty bourgeois alike. Moreover, victory in the civil war was assured by this stage, thus allowing a relaxation of the coercive methods symbolized by the War Communism of the previous two to three years.

The New Economic Policy (NEP), introduced by Lenin at the Tenth Party Congress in March 1921, represented a major departure from the party's previous approach to running the country. During the civil war, the Soviet state had assumed responsibility for acquiring and redistributing grain and other foodstuffs from the countryside, administering both small- and large-scale industry, and a myriad of other economic activities. Subsequently dubbed (by Lenin) "War Communism," this approach actually was extended in the course of 1920, even after the defeat of the last of the Whites. Many have claimed that War Communism reflected a "great leap forward" mentality among the Bolsheviks, but desperation to overcome shortages of all kinds, and particularly food, seems a more likely motive. In any case, in the context of continuing urban depopulation, strikes by disgruntled workers, peasant unrest, and open rebellion among the soldiers and sailors stationed on Kronstadt Island, Lenin resolved to reverse direction.

Lenin's economic model was like Trotsky's transitional program. It was the creation of state capitalism to create the conditions for monopoly capitalism to occur in Russia. His socialism as he liked to call it was state capitalism with electrification, and just a dash of Taylorism.

“Communism is the Power of Soviets plus the electrification of the whole country!”

In fact Lenin was a Taylorist and recognized that modern capitalism required fordist production which is what is currently occurring in China. It's failure in the Soviet Union of the seventies and eighties, was due to its use for military production rather than for consumer goods. In other words Reagan did bankrupt the Soviet Union by creating a competition between the U.S. Military Industrial Complex and its Soviet counterpart. The result was not just the collapse of the Soviet Union, but its collapse into a basket case economy. It did not have the production models required for consumer goods required for a market economy.

In terms of its impact on world politics, Lenin's State and Revolution was probably his most important work. This was derived from the theoretical analysis contained in his earlier work, Imperialism, the Highest Stage of Capitalism (1916). Lenin's theory of imperialism demonstrated to his satisfaction that the whole administrative structure of “socialism” had been developed during the epoch of finance or monopoly capitalism. Under the impact of the First World War, so the argument ran, capitalism had been transformed into state-monopoly capitalism. On that basis, Lenin claimed, the democratisation of state-monopoly capitalism was socialism. As Lenin pointed out in The Impending Catastrophe and How to Combat It (1917):

“For socialism is merely the next step forward from state-capitalist monopoly. Or, in other words, socialism is merely state-capitalist monopoly which is made to serve the interests of the whole people and has to that extent ceased to be capitalist monopoly” (original emphasis, www.marxists.org/archive/lenin/works/1917/ichtci/11.htm).

Lenin’s perspective may be briefly expressed in the following words: The belated Russian bourgeoisie is incapable of leading its own revolution to the end! The complete victory of the revolution through the medium of the “democratic dictatorship of the proletariat and the peasantry” will purge the country of medievalism, invest the development of Russian capitalism with American tempos, strengthen the proletariat in the city and country, and open up broad possibilities for the struggle for socialism. On the other hand, the victory of the Russian revolution will provide a mighty impulse for the socialist revolution in the West, and the latter will not only shield Russia from the dangers of [feudal-monarchical] restoration but also permit the Russian proletariat to reach the conquest of power in a comparatively short historical interval.

Lenin unambiguously endorsed the view that the proletariat should use markets to prepare underdeveloped countries for socialism. It is common knowledge that his New Economic Policy used market mechanisms to stimulate economic recovery after the devastation of the Russian Civil War, but some do not realize that Lenin saw markets as more than just an expedient. He actually viewed market mechanisms as necessary for moving underdeveloped countries toward socialism. Lenin recognized that the economies of underdeveloped, agrarian countries in transition to socialism combine subsistence farming, small commodity production, private capitalism, state capitalism, and socialism, with small commodity production in the dominant role (1965, 330–31). These societies contain many more peasants than proletarians, and because peasants favor the petty-bourgeois mode of production, they tend to side with the bourgeoisie against the proletariat. It is tempting to argue that this situation calls for an immediate transition to socialism, in order to force the peasantry to cooperate with the proletariat in defeating the bourgeoisie. But Lenin did not believe this. He argued that the attempt to push agrarian countries directly into socialism, that is, to eliminate markets before the build up of the productive forces had converted peasant agriculture and small commodity production into modern, large-scale industries, was a mistake that would actually hamper economic development and thwart socialist construction. The solution he proposed was for the proletarian state to use capitalism, i.e., commodity production, free markets, and concessions with foreign capitalists, to promote the growth of the productive forces, and to eliminate the conflict of interest between peasants and industrial workers by converting agriculture into a large-scale industry and the peasants into proletarians (1965, 330–33, 341–47).

LENIN'S SOCIALISM

The starting point must be Lenin's conception of 'socialism': When a big enterprise assumes gigantic proportions, and, on the basis of an exact computation of mass data, organises according to plan the supply of raw materials to the extent of two-thirds, or three fourths, of all that is necessary for tens of millions of people; when raw materials are transported in a systematic and organised manner to the most suitable places of production, sometimes situated hundreds of thousands of miles from each other; when a single centre directs all the consecutive stages of processing the materials right up to the manufacture of numerous varieties of finished articles; when the products are distributed according to a single plan among tens of millions of customers.

....then it becomes evident that we have socialisation of production, and not mere 'interlocking'; that private economic and private property relations constitute a shell which no longer fits its contents, a shell which must inevitably decay if its removal is artificially delayed, a shell which may remain in a state of decay for a fairly long period ...but which will inevitably be removed Lenin, Collected Works, Vol.22, page 303.

SOCIALISM?

This is an important passage of Lenin's. What he is describing here is the economic set-up which he thought typical of both advanced monopoly capitalism and socialism. Socialism was, for Lenin, planned capitalism with the private ownership removed.

Capitalism has created an accounting apparatus in the shape of the banks, syndicates, postal service, consumers' societies, and office employees unions. Without the big banks socialism would be impossible.

The big banks are the state apparatus which we need to bring about socialism, and which we take ready made from capitalism; our task is merely to lop off what characteristically mutilates this excellent apparatus, to make it even bigger, even more democratic, even more comprehensive. Quantity will be transformed into quality.

A single state bank, the biggest of the big, with branches in every rural district, in every factory, will constitute as much as nine-tenths of the socialist apparatus. This will be country-wide book-keeping, country-wide accounting of the production and distribution of goods, this will be, so to speak, something in the nature of the skeleton of socialist society. Lenin, Ibid, Vol.26 page 106.

HEY PRESTO!

This passage contains some amazing statements. The banks have become nine-tenths of the socialist apparatus. All we need to do is unify them, make this single bank bigger, and Hey Presto, you now have your basic socialist apparatus.

Quantity is to be transformed into quality. In other words, as the bank gets bigger and more powerful it changes from an instrument of oppression into one of liberation. We are further told that the bank will be made even more democratic. Not made democratic as we might expect but made more so. This means that the banks, as they exist under capitalism, are in some way democratic. No doubt this is something that workers in Bank of Ireland and AIB have been unaware of.

For Lenin it was not only the banks which could be transformed into a means for salvation. Socialism is merely the next step forward from state capitalist monopoly. Or, in other words, socialism is merely state capitalist monopoly which is made to serve the interests of the whole people and has to that extent ceased to be capitalist monopoly Lenin, Ibid, Vol. 25 page 358.

State capitalism is a complete material preparation for socialism, the threshold of socialism, a rung on the ladder of history between which and the rung called socialism there are no immediate rungs. Lenin, Ibid, Vol. 24 page 259.

BUILDING CAPITALISM

This too is important. History is compared to a ladder that has to be climbed. Each step is a preparation for the next one. After state capitalism there was only one way forward - socialism. But it was equally true that until capitalism had created the necessary framework, socialism was impossible. Lenin and the Bolshevik leadership saw their task as the building of a state capitalist apparatus.

...state capitalism would be a step forward as compared with the present state of affairs in our Soviet Republic. If in approximately six months time state capitalism became established in our Republic, this would be a great success and a sure guarantee that within a year socialism will have gained a permanently firm hold and will become invincible in our country Lenin, Ibid, Vol. 27 page 294.

While the revolution in Germany is still slow in coming forth, our task is to study the state capitalism of the Germans, to spare no effort in copying it and not shrink from adopting dictatorial methods to hasten the copying of it Lenin, Ibid, Vol. 27 page 340.

Socialism or State Capitalism?

So what did the Bolsheviks aim to create in Russia? Lenin was clear, state capitalism. He argued this before and after the Bolsheviks seized power. For example, in 1917, he argued that "given a really revolutionary-democratic state, state-monopoly capitalism inevitably and unavoidably implies a step, and more than one step, towards socialism!" He stressed that "socialism is merely the next step forward from state-capitalist monopoly . . . socialism is merely state-capitalist monopoly which is made to serve the interests of the whole people and has to that extent ceased to be capitalist monopoly."³

The Bolshevik road to "socialism" ran through the terrain of state capitalism and, in fact, simply built upon its institutionalised means of allocating recourses and structuring industry. As Lenin put it, "the modern state possesses an apparatus which has extremely close connections with the banks and syndicates, an apparatus which performs an enormous amount of accounting and registration work . . . This apparatus must not, and should not, be smashed. It must be wrestled from the control of the capitalists," it "must be subordinated to the proletarian Soviets" and "it must be expanded, made more comprehensive, and nation-wide." This meant that the Bolsheviks would "not invent the organisational form of work, but take it ready-made from capitalism" and "borrow the best models furnished by the advanced countries."⁴

Once in power, Lenin implemented this vision of socialism being built upon the institutions created by monopoly capitalism. This was not gone accidentally or because no alternative existed. As one historian notes: "On three occasions in the first months of Soviet power, the [factory] committees leaders sought to bring their model [of workers' self-management of the economy] into being. At each point the party leadership overruled them. The Bolshevik alternative was to vest both managerial and control powers in organs of the state which were subordinate to the central authorities, and formed by them."⁵

Rather than base socialist reconstruction on working class self-organisation from below, the Bolsheviks started "to build, from the top, its 'unified administration'" based on central bodies created by the Tsarist government in 1915 and 1916.⁶ The institutional framework of capitalism would be utilised as the principal (almost exclusive) instruments of "socialist" transformation. "Without big banks Socialism would be impossible," argued Lenin, as they "are the 'state apparatus' which we need to bring about socialism, and which we take ready made from capitalism; our task here is merely to lop off what capitalistically mutilates this excellent apparatus, to make it even bigger, even more democratic, even more comprehensive. A single State Bank, the biggest of the big . . .will constitute as much as nine-tenths of the socialist apparatus. This will be country-wide book-keeping, country-wide accounting of the production and distribution of goods." While this is "not fully a state apparatus under capitalism," it "will be so with us, under socialism." For Lenin, building socialism was easy. This "nine-tenths of the socialist apparatus" would be created "at one stroke, by a single decree." ⁷

Lenin' State Monopoly Capitalism is the model being used by the former state capitalist regimes in Asia like China and Viet Nam. They are full filing Lenin's dictum. And ironically in China's case they have become a new Imperialist power.

Lenin: 1917/ichtci: Can We Go Forward If We Fear To Advance ...

Everybody talks about imperialism. But imperialism is merely monopoly capitalism.

That capitalism in Russia has also become monopoly capitalism is sufficiently attested by the examples of the Produgol, the Prodamet, the Sugar Syndicate, etc. This Sugar Syndicate is an object-lesson in the way monopoly capitalism develops into state-monopoly capitalism.

And what is the state? It is an organisation of the ruling class — in Germany, for instance, of the Junkers and capitalists. And therefore what the German Plekhanovs (Scheidemann, Lensch, and others) call "war-time socialism" is in fact war-time state-monopoly capitalism, or, to put it more simply and clearly, war-time penal servitude for the workers and war-time protection for capitalist profits.

Now try to substitute for the Junker-capitalist state, for the landowner-capitalist state, a revolutionary-democratic state, i.e., a state which in a revolutionary way abolishes all privileges and does not fear to introduce the fullest democracy in a revolutionary way. You will find that, given a really revolutionary-democratic state, state- monopoly capitalism inevitably and unavoidably implies a step, and more than one step, towards socialism!

For if a huge capitalist undertaking becomes a monopoly, it means that it serves the whole nation. If it has become a state monopoly, it means that the state (i.e., the armed organisation of the population, the workers and peasants above all, provided there is revolutionary democracy) directs the whole undertaking. In whose interest?

Either in the interest of the landowners and capitalists, in which case we have not a revolutionary-democratic, but a reactionary-bureaucratic state, an imperialist republic.

Or in the interest of revolutionary democracy—and then it is a step towards socialism.

For socialism is merely the next step forward from state-capitalist monopoly. Or, in other words, socialism is merely state-capitalist monopoly which is made to serve the interests of the whole people and has to that extent ceased to be capitalist monopoly.

To apply the Lenin's theory on state capitalism in the renovation cause of Vietnam 10:18 28-07-2005

Role of the State in applying the theories of State capitalism in Vietnam 16:05 09-05-2005

From a review of Lenin's ideas and concepts of State capitalism and State capitalist economy as seen from Vietnamese perspective, the paper reaffirms an indispensable role of the State in the present development of market economy.

The new Economic Policy of V.I. Lenin with the use of state capitalism in our country nowadays 10:21 28-07-2005

The awareness of the socialist-oriented market economy in Vietnam 12:43 04-07-2006

Realizing the market economy under socialist regulation in Vietnam is a major content in the economic model in the transitional period toward socialism. The article analyzes and elaborates the theorical and practical sides of the socialist regulated market economy, through which to make the following conclusions. 1. In the context of globalization and international economic integration today. The model of the socialist regulated market economy which has been pursued since the IX National Party Congress is a correct policy both theoretically and practically. 2. However if we regarded the model of the socialist regulated market economy as Vietnam's creative policy, it would lead us to fall into subjective thinking. 3. Through theory and practice the author of this article concludes that. a. According to Marxist doctrine the view that socialism emerged after capitalism still remains scientific b. Human elements in socialism contradicts with those in the previous societies; as a result if the criteria that were applied to solve social problems of socialist society to be imposed on the period of market economy being in existence, it would naturally stand in the way of the development of market economy. c. The key for Vietnam at present is how to solve the relations between growth and development, in other words economic growth should go along with social development d. Vietnam's economy should be broken just into two sectors, namely, state run and private run. It should not be divided into 6 sectors as presently applied. e. The role of the private owned sector i!1 the national economy should be appreciated.

Even the right wing occasionally gets it right but for the wrong reasons. In this case another red scare, red baiting, reds under the bed, commies out to get us, article reveals;

In his "Report to the Fourth Congress of the Communist International," Lenin explained the basis for NEP. He said that Russia needed capitalism before it could have socialism. The form of capitalism Lenin advocated was called "state capitalism." As early as 1918 Lenin had stated, "State capitalism would be a step forward as compared with the present state of affairs."

By 1922, when Lenin delivered his report, state capitalism was still the order of the day. "This sounds very strange," admitted Lenin, "and perhaps even absurd." Russia was unready for socialism and lacked the strength to create communism. In his report Lenin said that socialism in Russia had been adopted "perhaps too hastily."

Does this mean Lenin, like the Chinese and Russian leaders after him, had abandoned the ultimate communist goal?

"I repeat," said Lenin in his 1922 report, "it seems very strange to everyone that a nonsocialist element should be ... regarded superior to socialism in a republic which declares itself as socialist republic. But the fact will become clear if you recall that ... the economic system of Russia [is backward]."

This exact formulation could be applied to communist China. In fact, this is the line that the Chinese Communist Party has adopted for itself. And what Mr. Lee Kuan Yew of Singapore has mistaken for China's commercial objectives, are actually communist objectives. Talk of a future war with America is not simply a question of Taiwan. China's leaders look ahead to a day when a socialist civilization will be possible -- thanks to what Lenin called "state capitalism."

The purpose of state capitalism, as it exists in today's China and Lenin's Russia, is to pave the way for socialism. "The state capitalism that we have introduced in our country is of a special kind," noted Lenin. "It does not correspond to the usual conception of state capitalism. We hold all the key positions."

Lenin emphasized that all land in Russia belonged to the state. "This is very important," said Lenin, "although our opponents think it of no importance at all."

This is a revealing statement. Politicians like Lee Kuan Yew seem to be clueless. China is a communist country that practices state capitalism. China is following the Leninist path. "We have already succeeded in making the peasantry content and in reviving both industry and trade," boasted Lenin. Furthermore, the communist form of state capitalism not only owns the land which the peasants use, but "our proletarian state owns ... all the vital branches of industry."

The market economists of all political stripes fail to understand that State Monpoly Capitalism results from the fact that all capital must create monopoly. There is no free market, there is a market and it is dominated by monopolies, or oligopolies. These can be owned privately or by the state it matters little since both are forms of capitalism. The neo-con political scientists, divorcing themselves as they do from economics, decry capitalist models that are not based upon their American model.

In this they fail to understand the historical development political economy of the 20th Century which was Fordism and Capitalist Monopoly. The later requires state intervention as the American Military Industrial Complex and the development of capitalism in South Korea shows. Something that Lenin reading Marx understood.

In practical life we find not only competition, monopoly and the antagonism between them, but also the synthesis of the two, which is not a formula, but a movement. Monopoly produces competition, competition produces monopoly. Monopolists are made from competition; competitors become monopolists. If the monopolists restrict their mutual competition by means of partial associations, competition increases among the workers; and the more the mass of the proletarians grows as against the monopolists of one nation, the more desperate competition becomes between the monopolists of different nations. The synthesis is of such a character that monopoly can only maintain itself by continually entering into the struggle of competition.
Karl Marx
The Poverty of Philosophy
Chapter Two: The Metaphysics of Political Economy

See:

40 Years Later; The Society of the Spectacle

China: The Truimph of State Capitalism

State Capitalism By Any Other Name

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Neo-Liberal State Capitalism In Asia

Reading the Right from the Left.

Free Trade Zones are the newest formation of state capitalism. Of course the contradiction here is that they pose as a form of free trade. When in fact the difference between them and state enterprizes is simply a matter of ownership. Name change really. Of course there are concrete structural differences to. But for all intents and purposes both are forms of state capitalism.

Whether they are called new economic zones; in Canada's Maritimes (dominated by call centres rather than the traditional use of these zones for manufacturing), Maquiadoras in the Caribean, Latin and South America, or Special Enterprize Zones zones in Asia and Aftica or economic reconstruction Zones in American inner cities, they remain a market distortion.

In India they are finding that the creation of these Special Enterprize Zones (SEZ) distort the market place. And since they are implemented as one of the tools of neo-liberalism to free the market of state control it is another contradiction of real existing captialism, rather than the text book capitalism of the Austrian or Chicago schools. Such text book capitalism showed its failure in the melt down of the Russian economy after its failed attempts to privatize with the collapse of the Soviet Union in 1989.


Attack on Indias economic zone plan

Since the passing of the Special Economic Zones Act in February, hundreds of businesses have rushed to take advantage of generous tax breaks, causing consternation in the finance ministry, the central bank and even the International Monetary Fund.

Special economic zones have been established in several countries, most notably in China, where they attracted the foreign investment and know-how that were central to the modernisation programme launched in 1978. However, critics claim SEZs attract investment only by offering distortionary incentives rather than by building underlying competitiveness and can delay real economy-wide reform

But economists believe the proposed SEZs are unlikely to help Indian manufacturers achieve scale efficiencies, since 133 of the 267 are less than 1 square kilometre in area. The average size is just 4.2 sq km.

“Mega-sized SEZs are the ideal solution,” said Chetan Ahya of Morgan Stanley. “We believe that in today’s highly competitive globalised world, the concept of small-sized SEZs is completely outdated.”

In a continuation of a long-running turf war with the commerce ministry, finance ministry officials said the scheme was providing unnecessary tax breaks to real estate development that would have taken place regardless of whether there was a SEZ scheme in place.

It remains the function of the state to create these zones, through cheap land, tax and regulation breaks, in particular labour laws, health and safety regulations, etc. In other words it is not about trade or even production but cheap manufacturing of goods, which can only be brought about by an attack on labours wages and benefits, which eat into surplus value (profit). When the neo-liberals call for de-regulation, ending red tape, etc. it is always the labour laws they focus on or laws that impact on workers. A couple examples from the Financial Times online should suffice to make the point.

UK in secret deal with Italy on China trade

Britain has just enough EU member states ready to support its exemption from the working time directive – seen as a vital part of Britain’s flexible labour market – but the coalition is flaky.But the proposed deal has hit a hitch: Italy has so far refused to give Britain the written assurances it wants on working hours. Communists and socialists in Mr Prodi’s coalition believe the UK’s working time “opt out” exploits workers and gives Britain an unfair advantage over countries where the 48-hour limit applies.



Another shift in ownership from an autarkic form of state capitalism to a monopoly state capitalism like India's (their so called Democratic State Capitalism) is currently occuring in China as part of its economic reforms. That is the creation of capitalist law, specifically bankruptcy law.

China state firms win stay of execution

The move, aimed at cushioning the social impact on employees of financially strained state companies, will slow the disposal of bad loans held by state banks and distressed debt companies and perhaps also reduce buyout opportunities for foreigners.

The bankrupcty law, passed in August after more than a decade of debate, is seen as crucial stage in China’s reforms as it enables creditors and investors to weed out underperforming companies by filing for bankruptcy to recover at least part of their funds.

However, the law, which is due to come into effect in June 2007, will not apply to 2,116 state-owned enterprises considered at financial risk by the Chinese authorities until at least the end of 2008.

In an interview with the Financial Times, Professor Li Shuguang, one of the authors of the new law, said that for those companies, employees’ health and wage claims would still take precedence over creditors’ claims, an arrangement that had so far slowed restructuring in some sectors.

Estimates of the claims by state employees range from hundreds to thousands of billions of renminbi, China’s currency.

In other words before the capitalist risks their investment, the public has alread invested more than the private capitalist ever would. Any change in the regulations of the state, do not minimize the state, they simply make it more open to the influence of monopoly capital for its own interest.

Private equity firms’ and foreign multinationals’ efforts to buy and restructure state companies would also suffer a setback.

Professor Li, who hosted a seminar for Wall Street analysts and investors at New York’s China Institute in September, said it was “the most important law in China’s development of a market economy”.

“It shows the central government’s commitment to introducing a market economy and to use the legal system to deal with the issues arising from a market economy. That would have been unthinkable 10 or even five years ago.”

Actually the most important development of the Chinese economy in its transition to monopoly corporate state capitalism from the autarkic variety was the opening up of the banking system to foreign investment and the development of a stock exchange.

The later was further enhanced by China's take over of Hong Kong one of the biggest market exchanges in the world. While the PR was that this was the end of British colonial rule over the island and the end of the age old battle between China and Britain which began during the opium wars, Hong Kong's value was its investment and banking window onto the monopoly capitalist world.

A major portion of the foreign investment in China consists of Chinese private capital
recycled through Hong Kong. The importance of Hong Kong for the growth of nonstate
enterprises in China lies in its efficient financial markets and legal system.
A Proposal to Privatize Chinese Enterprises and End Financial Repression
Cato Journal -Volume 26 Number 2, Spring/Summer 2006

This new bankruptcy law however is a major and significant change for enabling foreign captial to buy and operate state enterprizes, not create new ones with their own capital. In other words a Public Private Partnership (P3) the keystone of the neo-liberal economic reforms in this period of globalization.

Foreign Direct Investment, FDI in China is not being invested in new enterprize zones nor in the developing private sector. Rather it is focused on Partnerships in existing State Enterprizes or SOE's as they are called. This means that Western corporate monopolies financial and manufacturing, are partnering with existing state enterprizes awaiting the day they can buy them at fire sale prices.

The market reforms in China, as they have been applied elsewhere, once again shows the textbook liberaltarian idealists of the Von Mise institute and the neo-liberals at the CATO institute overlook the key determinant of the capitalist market that is the labour theory of value.

For them labour is reduced to an input value not unlike raw materials and technology. It is a form of variable capital investment. More importantly for this form of liberal economics, cost, price and consumption rule. Yet in reality, by their own admission labour value is the key to capital creation. Even in China during this transisition from the autarky of State Capitalism to a privatized state capitalism.

The key here is that the two components of liberalization are P3's in State industries and the transfer of the responsibility of social benefits to the State.
What makes private industry competitive is its ability to keep wages and benefits low even more than a cheap tax regime. The lattter is gravy.

China has allowed both private industry and its own state enterprizes to transfer their responsibility for wages and benefits to the state. Ironically the state has no infrastructure for the delivery of unemployment insurance, health care, welfare or social assistance, pensions etc. because these orginally had been the responsibility of the State enterprises.

With Dengs capitalist reformation the result was an uneven playing field. Free Trade Zones and private companies were allowed to exploit the vast labor market with low wages and no benefits. While the state enterprizes were expected to carry on with higher wages and benefits.

This produced the false impression that private enterprize and Free Trade Zone businesses are more productive than state owned enterprizes. They are not more productive, they are more profitable because they keep more of the surplus value of their labour due to lower wages and no benefits.

The sources of the Chinese economic miracle are well known. The
rise in rural incomes, with the adoption of the household responsibility
system (the shift away from collectivized farming) and the bonus
from the demographic transition with a fall in the dependency ratio
(the ratio of children and the old to workers), led to a marked rise in
savings rates.

A monumental unintended consequence of the decollectivization
of agriculture was the initiation of a boom in small-scale,
nonfarm rural enterprises, which began with Deng Xiaoping’s injunction
that it was virtuous to be rich. Local party officials took this to
heart, becoming directors and managers of township and village enterprises
(TVEs).

With the rise in farm incomes, the pent-up demand for manufactured
goods and housing was met by the TVEs, which were run as
profit-making capitalist enterprises, even though they were collectively
owned. They provided the local authorities with “extrabudgetary
revenues” and gave officials legal opportunities to become
rich.

Unlike SOEs, the TVEs did not carry any welfare responsibilities
and were free to hire and fire the abundant local labor. With Deng’s
creation of the Special Economic Zones in China’s southern rim in
the early 1980s, the TVEs—and later individually owned private
firms—became the spearhead of a Dickensian capitalism.

These nonstate enterprises have made China into the processing
center for manufactured goods in the world. Success has occurred by
using cheap labor in the Chinese countryside along with foreign technology,
and relying on self-financing from household savings and
enterprise profits, along with foreign capital from the Chinese diaspora
and a myriad of multinationals, and engaging in fierce locational
competition promoted by local municipal authorities.
This labor intensive industrialization is now spreading inland along
the Yangtze (The Economist 2004: 13).

These spin-offs from the decollectivization of agriculture were
aided by the massive buildup of infrastructure by the state.

Labor intensive export industries were further helped by domestic price
reforms and by one of the largest unilateral liberalizations of foreign
trade in history.

The rapid export-led industrialization in the private sector is based
on processing imported components with domestic and foreign
capital and technology, and cheap domestic labor.

In the pre-reform period (before 1978) China’s development strategy
provided only limited urban employment opportunities. Consequently,
the government assigned several workers to the same job,
leading to a large labor redundancy in the SOEs. As these industrial
workers only received a low wage to cover current consumption, the
government also had to cover their pension, health, housing, and
other social expenditures from the SOE revenues, which were mandated
to be remitted to the government.

In the reform period, the SOEs have been responsible not merely for wages but also for these “social” benefits, which has imposed a “social burden” on them that is absent in their non-SOE cousins. This burden has grown in the reform
period as wages and benefits paid by the SOEs have grown by 16 percent per annum between 1978 and 1996, while their output grew by 7.6 percent per annum (see Lin 2004).

A Proposal to Privatize Chinese Enterprises and End Financial Repression
Cato Journal -Volume 26 Number 2, Spring/Summer 2006

The new bankruptcy law as well as reforms to State owned companies, the ability to layoff and fire workers, reductions in wages and benefits, and a shift of the responsibility for these to the State, are being implemented in China. The profitability of SOE's is reduced because of the surplus value absorbed by labour.
Again it is not investment, nor techology nor the bueracracy that is the source of profit it is labour. In the case of the newly privatized corporations if the costs were the same they would actually be making less profit for Chinese investors as the techology and marketing aspects of these companies are in the hands of their foreign investors.

The fact is that both the private sector and the state owned enterprizes are kept afloat by the Chinese people by low wages and the banks investing their savings in these companies.

The key to the historic development of capitalism was the privatization of agriculture. The end of the commons and the creation of the encroachment acts. Historic capitalism developed in England before its advent anywhere else in the world. Because of the privatization of agricultural production. This has occured in China with the Deng reforms, privatization of land is the modern equivalent of the English encroachment acts, thus creating a capitalist economy regardless of the politics of the State.

The state can call itself anything it wants, communist, socialist, democratic, republican, blah, blah. The political ideology of the state is is irrelevant to capitalism as a system. Capitalism created the state in its image, for the centralized accumulation of capital. Its political forms regardless of the propaganda of the left and right, are neccasary for the primitive accumulation of capital. If a state is authoritarian at first, as the state was prior to the advent of capitalism, then it will be liberalized as it creates its own bourgoise, the private owners of wealth. Which accounts for the development of the national state in the 19th century and its further development in the 20th.

As long as the state functions to provide private land and labour for those with inherited wealth, then the economic system is capitalism. In the case of China instead of inheriting land, labour and wealth from ones aristocratic and fuedal status and holdings, the inheritance came from ones position in the Communist Party of China.

China’s task of moving from the plan to the market was much easier than that of the other
socialist transition economies of Russia and Eastern Europe because of differences in their
initial conditions. Russia and Eastern Europe had about 90 percent of their labor force in
industrial SOEs, while most of China’s labor force (80 percent ) was in agriculture. For
Russia and Eastern Europe the only route to a market economy was a “big bang” to
dismantle SOEs, which resulted in short-term losses in output and employment. In contrast,
China, by replacing its rural communes with the household responsibility system, all
but in name restored privately run and owned family farms. This Chinese rural “big bang”
led to a rise in output and allowed China time for gradual reform of its inefficient stateowned
industrial enterprises.

A Proposal to Privatize Chinese Enterprises and End Financial Repression
Cato Journal -Volume 26 Number 2, Spring/Summer 2006

China's advantage over India as stated at the begining of this article, is a matter of land. Both countries have labour capacity, manufacturing base, but it is land capacity that restricts India's ability to compete with China for manufacturing. Which is why India's techonolgical development has been centred, like our own in the Maritimes, around call centres, and the outsourcing of IT and software development, as well as phamaceuticals. Such tertiary businesses do not need large amounts of land, and with cheap labour can provide for high rates of profit.

India is the world's fastest wealth creator
So, where is the growth going to come from? The answer is infotech (IT), pharma and textiles. With more wealth, the investment pattern too is expected to change from predominantly cash deposits (which constitute over 60% of the AUM in India, China and Korea) to equities and more sophisticated instruments.

China is becoming like its neighbours , Korea and Japan, a market driven state capitalist economy. India is developing as primary resource based manufacturing economy; steel and developer of tertiary industries in its fordist economy.

The neo-liberal shaping of state capitalism in both China and India into market states relies soley on its devaluation of labour, not tax or land incetives.

See

China

India

Marx

Capitalism

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