Cooking the Books 2

Capitalism with Chinese characteristics

Last month a pro-Beijing think-tank, Anbound, sent us (and others) an op-ed on ‘China’s state capitalism in the Eyes of the West’. Although the words ‘state capitalism’ were sometimes in inverted commas, sometimes they weren’t suggesting that they had no real objection to the term.

The article was in response to one that had appeared in the Economist on 15 August entitled ‘The new state capitalism: Xi Jinping is trying to remake the Chinese economy’. This argued that the head of the Chinese dictatorship, Chairman Xi, ‘is presiding over what he hopes will be the creation of a more muscular form of state capitalism. The idea is for state-owned companies to get more market discipline and private enterprises to get more party discipline, the better to achieve China’s great collective mission.’

The Chinese think-tank summarised the Economist article:

‘China is gradually establishing a commercial legal system, and its response to enterprises is more sensitive. The formulation of bankruptcy and patent regulations has increased fivefold since 2012. Predictable rules make the market run more smoothly as well as increase economic production. Finally, the last element is to blur the boundary between state and private firms. State-owned enterprises are forced to increase financial returns to attract private investors’.

This sounds like the sort of ‘mixed economy’ that exists in the West, so why is it called ‘state capitalism’ and not just ‘capitalism’? The answer seems to lie in the sentence that followed:

‘At the same time, the state has also strengthened the implementation of strategic control over private enterprises’.

Even this is not that different from what some governments of traditional capitalist states aspire to, though in China’s case it is being done more systematically and by a state controlled by a single dictatorial party.

In any event, it is not the same as the state capitalism that used to exist under Mao where most of the industrial means of production were owned by the state, itself monopolised by a bureaucracy whose top members effectively owned them collectively and benefited from this in terms of a privileged lifestyle. When referring to the USSR, which was the same, Maoists called the privileged ruling group a ‘red bourgeoisie’. A case of people in glasshouses throwing stones.

What exists today is more akin to the New Economic Policy that the Bolsheviks were forced to adopt in 1921 and which Lenin described as the development of capitalism under the control of ‘the proletarian state’, by which he meant a state controlled by a vanguard party (falsely) claiming to represent the working class. For Lenin this was to be a temporary expedient to help overcome Russia’s economic backwardness, and the capitalists it generated were small fry. In China it is seen as a permanent situation in which the one-party state controls and directs the activity of large shareholder-owned capitalist corporations, many export-oriented.

Is it a viable alternative way of running capitalism to the multi-party political system that exists in the capitalist countries of the West? It is certainly working at the moment. The new class of private capitalists seem content with the situation and are not campaigning for the end of one-party rule. They probably prefer the stability this brings, just as their counterparts in fascist Italy and Nazi Germany did.

In fact, like them, China is seeking to control and direct private capitalism to achieve the same ‘great collective mission’ of winning a place in the sun at the expense of the older, more established capitalist states that dominate the world.