Wednesday, 22 February 2012

Cowboy Capitalism with Chinese Characteristics, Part 1: The Big Picture

The end of the cold war and in particular, the effects of the global financial crisis, has led to a convergence of interests between the Chinese Communist Party (CCP) and the US, the world’s declining hyper-power. It suits both the neo-conservatives in Washington and authoritarian leaders in Beijing to represent the new China as an economic powerhouse. US foreign policy hawks portray China as a threat to the prevailing hegemony justifying military spending and protectionism while the CCP domestically celebrates itself as the only way to prosperity (see the slogan: 只有共产党才能建设好新中国; “Only with the communist party, can we build a new, great China”). Since the onset of Deng Xiaoping’s reforms in 1978, China has indeed enjoyed spectacular double-digit economic growth figures. The glitz and glamour image of the ‘new’ China exemplified by Shanghai’s pudong skyline is mesmerising for foreign investors and travellers alike. As important as these images and representations are in recreating an attraction towards the new China or what Joseph Nye called China’s ‘soft power’, there is indeed a lot more happening behind these images and on the streets of China’s ever-expanding cities let alone the hugely impoverished countryside.

The World Bank’s 2011 data tell us average global income (GNI per capita) is just over 9,000 US dollars. According to the same stats, income in China ranks at 121 of 215 in the world at $4,260. This does not diminish the impressive growth China has enjoyed over the last 40 years but it does put it in context; average income in Kazakhstan is $7,440. With economic growth, China has become one of the most unequal countries in the world- ranking at 36, ahead of the US at 44th and the UK at 92nd. This should make us take a step back and ask who are the 99%? The neoliberal, capitalist United States is actually more egalitarian than the supposedly socialist China and indeed enjoys an average income of more than 10 times that of the purported threat to its global hegemony. The World Bank celebrates its own achievements and the seemingly inevitable logic of the ‘free-market’ by claiming 200 million have been pulled out of poverty across the globe since the 1980s. Chinese people constitute the majority of these yet all is not what it seems. These figures are extrapolated from a handful of booming eastern and southern coastal cities, which are not representative of China as a whole and which present an even greater problem considering the level of inequality across the nation.

The Oxford Poverty and Human Development Initiative produced a spectacularly detailed set of statistics on multi-dimensional poverty (eg income, education, health, etc) which breaks down different types and levels of poverty across different regions within nations. China is one of the only countries in the world which did not submit regional figures, so we can’t even adequately capture regional inequality in China in ways which we can for supposedly “failed states” in Sub-Saharan Africa such as Liberia, Sierra Leone, and Democratic Republic of Congo. We know that regional inequality is a huge problem and that since the 1990s it has grown. For example, the GDP per capita of Yunnan province is about 10-15% of that of Shanghai, the image of Chinese modernity. We also know that when the World Bank revised its definition of poverty upwards to an underwhelming $1.25 a day, the number of people living in “extreme poverty” in China jumped from 130 million people to 207 million, about a sixth of the total population. This means one sixth of the population of China are neither sharing in the statistically pleasing double digit growth nor the mesmerising hi-tech appearance of the new China. Despite double-digit national growth throughout the 1990s, Shanghai as one of the fastest growing regions saw no relative income growth and the poorest lost income in absolute terms (see Huang, Yasheng (2008) Capitalism with Chinese Characteristics, Cambridge: Cambridge University Press).

The global financial crisis of 2008 laid bare the lack of regulation of capitalism had opened the most vulnerable in society to the vagaries of financial markets despite their lack of participation in them. In the UK, David Cameron calls for a “responsible capitalism and in the US, Barrack Obama was initially lauded by many for his goals of extending access to healthcare to all. ‘Responsibility’ to others and the pursuit of self-interest above all else under capitalism may be oxymoronic. However, the political need to attempt to reconcile them in public discourse at least indicates a broader accountability to a wider range of social interests. In China, Deng Xiaoping’s mantra, “to get rich is glorious”, sums up the attitudes of Chinese youth today who see communism as a kitsch yet backward social irrelevance and money as a cure to all ills. Of course, the great leap forward in which 30 million people died of famine, the chaos of the Cultural Revolution, and the gloominess of communist uniformity remain as reminders of the failures of anything but the pursuit of wealth in the self-imagination of contemporary Chinese youth. The cyclical crises of capitalism throughout twentieth century Europe and the US offer very different storehouses of imagination to that of China. Today, the Chinese government, official media, and popular discourse frequently refer to the global financial crisis as the “western financial crisis”. It is often explained it in cultural terms as a failure of “westerners” to save money and pay off their own mortgages in contrast to the Asian traditions of savings and austerity.

What is less said in popular media, both in China and abroad, is that the housing market in China today bears many of the hallmarks of the economic conditions which led to the sub-prime mortgage crisis in the US, which ultimately triggered the global financial crisis. The IMF has warned of the economic crash that could result from soft loans with little hope of return, unregulated lending, concentrated housing ownership, and rising property prices. Like the US at the turn of the 21st century, this resembles capitalism at its most irresponsible and most unstable. The difference is China has even less of a social safety net than the US, let alone Europe; going to school and visiting a hospital almost universally require payment up front. Those in the most financially vulnerable positions can expect to pay for any crisis as they have in the US and Europe through tax-funded bailouts for failing financial institutions and increasingly squeezed funding for social services upon which the poorest rely. Those raised on the dogma of the pursuit of wealth are unlikely to be willing to give much of it up when push comes to shove. Given the poorest in China are considerably worse off than the poorest in the US or Europe and already lack access to basic social services, any major economic downturn would not just threaten their means of home-ownership but would jeopardize the means of subsistence for millions of people.

Yasheng Huang’s Capitalism with Chinese Characteristics effectively shows us that both the growth of income for the poorest and private access to credit enjoyed during the 1980s has been reversed since the 1990s. The system has now re-directed tax incentives, subsidies, and favourable terms of credit away from small private enterprise and towards large-scale foreign direct investment and businesses closely aligned or partly owned by government. This is reflected in news headlines of large-scale corruption and corporate land-grabs converting farms and poorer housing areas into property developments with little compensation and no hope of being affordable. The result has been stagnation in incomes in rural areas, a decrease in spending on social services, and growth in illiteracy (30 million more people between 2000 and 2005) since the 1990s. China appears to be maintaining the authoritarian political apparatus of ‘communism’ whilst promoting the business interests of large-scale state-owned enterprises. This is becoming the worst of both worlds as freedom for the nouveau rich in urban centres can be bought and the voices of the lowest rung go unheard. Given the lack of regulation of big business and the lack of social responsibility shown in the system, it seems fair to call this cowboy capitalism. The US and Europe pay lip-service to human rights but they say little about the poorest rungs of Chinese society. In the end, the poor are the losers in the geopolitical game, which produces images of an inevitably rising China.

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