Part 1: a trajectory characteristic of capitalist decadence

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China is typical of those countries that were unable to take part in the process of industrial revolution that took place in the ascendant period of capitalism; it is marked by the colonial yoke and its failure to carry out the bourgeois revolution, although it made several abortive attempts to do so. As long ago as 1820 China was the first world power economically with a GDP that was as much as a third of the wealth produced world-wide but by 1950 China's GDP was only 4.5%. That is, it was reduced seven fold relative to the rest of the world. 

The above graph shows a reduction of 8% in GDP per head of population in China throughout the ascendant period of capitalism: it went from $600 in 1820 to $552 in 1913. This betrays the absence of a real bourgeois revolution and recurring conflicts between the various warlords within the weak dominant class. It is also bears witness to the heavy colonial yoke that the country endured after it was defeated in the Opium War of 1840, a defeat that was the beginning of a series of humiliating treaties that carved up China in the interests of the colonial powers. An already weakened China was ill-equipped to confront the conditions imposed by capitalism's entry into decadence. The relative saturation of the markets and their domination by the big powers, which are characteristic of the whole period of capitalist decadence, condemned China to absolute underdevelopment for the majority of this period and its GDP per head diminished even more rapidly (-20%) between 1913 ($552) and 1950($439). 

All these elements fully confirm the analysis developed by the Communist Left, which holds that in decadence it is no longer possible for new states and powers to emerge, given that the world market is saturated[1]. Only in the 1960s did Chinese per capita GDP return to its 1820 level ($600). It increased perceptibly thereafter but it is only during the last thirty years that its growth has leapt to figures never seen before in the whole history of capitalism[2]. It is this recent period in China's history which is exceptional and which must be explained, as it apparently contradicts certain givens about the evolution of capitalism.

However, before examining the real nature of this incredible growth in East Asia, we must mention briefly two other characteristics of decadent capitalism that the analysis of the Communist Left has brought out. They are factors that have had a big impact on the Asian continent: the general tendency towards state capitalism and the integration of every country into an imperialist bloc that promises it protection. Here too the recent evolution of China seems apparently to contradict these characterisations. On the one hand, China plays the lone wolf on the international scene. On the other hand, the way in which it continually carries out  reforms and eases controls makes it look like capitalism in 19th century Manchester, as described by Marx in Capital or by Engels in The Condition of the Working Class in England. We can say very briefly that this is by no means the case. On the latter point, all these reforms are carried out on the initiative of the state and under its strict control. On the first point, it is the implosion of the two (US and Russian) imperialist blocs after 1989 that has enabled every country to play ‘lone wolf' since then. We will examine these two factors before explaining the economic success in East Asia over the last quarter of a century. 

The General Infrastructure of State Capitalism in Decadence

As we stated in 1974 in a long analysis of state capitalism:"The tendency towards state control is the expression of the permanent crisis experienced by capitalism since 1914. It is the system's way of adapting in order to survive once the economic locomotive of capitalism has no further capacity historically. Once the contradictions of capitalism have become such that they can only tear the world apart because rivalry and imperialist war are inevitable, state capitalism expresses the tendency towards autarchy, permanent economic war and national concentration in order to protect the national capital. (...) during the decadent period  the permanent crisis of the system makes it necessary to make certain changes to the organisational structure of capitalism because of the relative saturation of the markets. (...) As there is no simple economic solution to these difficulties, the blind laws of capitalism cannot be left to work themselves out freely. The bourgeoisie tries to control their consequences by means of state intervention: subsidies, the nationalisation of sectors in deficit, control of raw materials, national planning, monetary budgets, etc." (Révolution Internationale old series n°10, pg 13-14).

This analysis is simply the position developed by the Communist International in 1919:"The nation state was once an energetic impulsion to capitalist development but now it has become too narrow for the expansion of the productive forces", as it states in its Manifesto. This contradiction between the social relations of capitalist production and the brake that they now apply to the development of the productive forces is at the heart of the general tendency towards state capitalism during the decadent period of capitalism. The bitter competition on a world market that is now globally saturated and controlled by the big powers, obliges each nation state to try to control its fate by implementing measures of state intervention at all levels: social, political and economic. In general the development of state capitalism in decadence expresses insoluble contradictions between the needs of the accumulation of capital, which becomes more and more international, and the narrow national framework of bourgeois property relationships. "State control of economic life is a fact, however much liberalism may protest. To return, not only to free competition, but also to the domination of trusts, syndicates and other capitalist formations, is now impossible", affirms the Manifesto of the Communist International mentioned above. 

The tendency for the state to take control of the national interest and for there to be a withdrawal into the national framework produced a sharp halt in the expansion and internationalisation of capitalism that took place during the whole of the ascendant period. During this period, the exports of the developed countries as a proportion of world production went on growing to the point that they more than doubled. In fact they went from 5.5% in 1830 to 12.9% on the eve of the First World War (table 2). This illustrates capitalism's relentless conquest of the world in this period.

However the entry into capitalism's decadent period was marked by a sharp halt to capitalism's penetration of the world. The stagnation of world trade between 1914 and 1950 (graph 2), the halving of the exports of the developed countries as a proportion of world production (from 12.9% in 1913 to 6.2% in 1938 - table 2) and the fact that the growth in world trade was very often inferior to that of production, showed in their different ways the marked retreat into the framework of the nation state during the decadent period. Even during the auspicious period of the post-war boom, which saw an energetic recovery of world trade up until the 1970s, the percentage exports of the developed countries (10.2%) always remained less than their 1914 level (12.9%) and were even lower than in the 1860s (10.9% - see table 2[3]). It was only thanks to the phenomenon of ‘globalisation' from the 80s onwards that the proportion of exports rose above the level it had attained more than a century earlier.

This distinction between the dynamic operating in the ascendant period of capitalism in contrast to that in its decadent period holds true also in terms of the flow of investments between countries. The proportion of Direct Foreign Investment (DFI) increased to 2% of world GDP in 1914 whereas it only reached a half of this (1%) in 1995 in spite of the fact that it has developed considerably as a result of globalisation. This is also true in terms of DFI in the developed countries. Although globalisation has doubled DFI from 6.6% in 1980 to 11.5% in 1995, this percentage is no greater than the 1914 figure (between 12% and 15%). This economic focus on the national level and the developed countries in the decadent period is also illustrated by the following: "On the eve of the First World War 55 to 65% of DFI was to be found in the Third World and only 25-35% in the developed countries. At the end of the 1960s this relationship was reversed; in 1967 only 31% of the DFI stocks of the developed Western countries went to the Third world and 61% remained in the developed countries in the West. Since then this tendency has been further reinforced. (...) Towards 1980 these proportions became 78% of DFI in the developed countries and 22% in the Third World. (...) This shows the importance to GDP of direct investment within the developed countries of the West, which was round about 8.5% to 9% in the middle of the 1990s, in comparison to 3.5 to 4% around 1913. That is, it more than doubled."[4]

Whereas ascendant capitalism transformed the world in its own image by drawing more and more countries into its orbit, its decadence somehow froze the situation as it had been at its zenith: "The impossibility of any new big capitalist units arising in this period is also expressed by the fact that the six biggest industrial powers today (USA, Japan, Russia, Germany, France, Britain) were already at the top of the tree (even though in a different order) on the eve of the first world war" (International Review n°23, ‘The Proletarian Struggle under Decadent Capitalism', , p.24). All of this illustrates the dramatic retreat into the national framework that characterises the whole phase of capitalist decadence and is carried out by means of energetic state capitalist policies

 

Table2 : Western developed countries exports in value (% GDP)

1830

5,5

1860

10,9

1890

11,7

1913

12,9

1929

9,8

1938

6,2

1950

8

1960

8,6

1970

10,2

1980

15,3

1990

14,8

1996

15,9

Philippe Norel, L'invention du marché, Seuil, 2003 : 431.

The whole of East Asia was particularly affected by this general withdrawal into the framework of the nation state. Following the Second World War almost half the world population was excluded from the world market and cordoned off by the division of the world into two geo-strategic blocs, a situation that only came to an end in the 80s. Those involved were the Eastern bloc, China, India and several countries of the Third World such as Cuba, Vietnam, Cambodia, Algeria, Egypt, etc. This brutal exclusion of half the world from the market is a clear illustration of the relative saturation of the world market. It meant that, in order to survive the hell of decadence, each national capital was forced to take direct command of its own interests at a national level and integrate itself into the policies adopted by the two big powers, so obtaining their protection. Even so, this policy that they were forced to adopt was a conspicuous failure. In fact, the entire period experienced fairly mediocre growth for India and China, especially the former, which did even less well than Africa:

 

Table 3 : Per capita GDP (Index 100 = 1950)

 

1950

1973

Japan

100

594

Western Europe

100

251

United States

100

243

World

100

194

China

100

191

Africa

100

160

India

100

138

Source : Angus Maddison, L’économie mondiale, annexe C, OCDE, 2001.

It is true that growth in China was higher than that of the whole of the Third World between 1950 and 1973 but it was still less than half of world growth, and was based on a brutal super-exploitation of the peasants and workers. It was only possible thanks to the strong support of the Eastern bloc up until the 1960s and to China's integration into the American sphere of influence thereafter. Moreover it experienced two serious down-turns during the periods known as "the Great Leap Forward" (1958-61) and the "Cultural Revolution" (1966-70), which murdered millions of Chinese peasants and proletarians through atrocious famine and material suffering. We pointed out this global failure of the policies of autarchic state capitalism more than a quarter of a century ago: "In the 20th century protectionist policies have been a total failure. Far from allowing the less developed economies to have a breathing space, they have led to the asphyxiation of the national economy" (International Review n°23, ‘The Proletarian Struggle under Decadent Capitalism', p.24). This is because state capitalism is not a solution to capitalism's contradictions but is rather a placebo that enables it to postpone their effects. 

China switches from one imperialist bloc to  the other

On its own China was unable to confront the intense competition on a world market that was globally saturated and controlled by the big powers. In order to best defend its national interests it had to join first the Soviet bloc, where it remained until the beginning of the 1960s, and then to move into America's orbit from the 1970s. This was a necessary condition for the defence of a nationalist plan for ‘development' in decadence (Maoism) as its evolution was taking place in a situation that made it impossible for new powers to emerge and catch up with the others, as had been the case in the ascendant period. China therefore sold itself to the highest bidder within the context of the imperialist division of the world into two poles during the Cold War (1945-89). Isolation from the world market, integration into the Soviet bloc and the massive aid granted by the latter made Chinese growth possible - although only modestly since at less than half the world growth rate. However it was relatively better than that of India and the rest of the Third World. In fact, as India was only partly excluded from the world market and as it had put itself forward as leader of the "non-aligned countries"[5], it paid the price in terms of its economic growth, which was even lower than that of Africa during the same period (1950-73). The implosion of the big imperialist blocs after the fall of the Berlin wall (1989) and the continued decline of American leadership in the world have removed the constraints of international domination by the two imperialist poles and have given more latitude to every country to give free rein to its own interests.


[1] "The period of capitalist decadence is characterised by the impossibility of any new industrial nations emerging. The countries which didn't make up for lost time before World War I were subsequently doomed to stagnate in a state of total underdevelopment, or to remain chronically backward in relation to the countries at the top of the sandcastle. This has been the case with big nations like India or China, whose ‘national independence' or even their so-called ‘revolution' (read the setting up of a draconian form of state capitalism) didn't allow them to break out of underdevelopment or destitution. (...) The inability of the under-developed nations to lift themselves up to the level of the most advanced countries can be explained by the following facts: 1) The markets represented by the extra-capitalist sectors of the industrialised countries have been totally exhausted by the capitalisation of agriculture and the almost complete ruin of the artisans. (...) 3) Extra-capitalist markets are saturated on a world level. Despite the immense needs of the third world, despite its total destitution, the economies which haven't managed to go through a capitalist industrialisation don't constitute a solvable market because they are completely ruined. 4) The law of supply and demand works against any development of new countries. In a world where markets are saturated, supply exceeds demand and prices are determined by the lowest production costs. Because of this, the countries with the highest production costs are forced to sell their commodities at reduced profits or even at a loss. This ensures that they have an extremely low rate of accumulation and, even with a very cheap labour force, they are unable to realise the investments needed for the massive acquisition of modern technology. The result of this is that the gulf which separates them from the great industrial powers can only get wider. (...) 6) Today, modern industrial production requires an incomparably more sophisticated technology than in the last century; this means considerable levels of investment and only the developed countries are in a position to afford them." (International Review n°23, 1980, ‘The Proletarian Struggle under Decadent Capitalism', Development of New Capitalist Units, pg 23-24).

[2] Maddison, OECD, 2001: 283, 322.

[3] World trade developed very rapidly after 1945, even more so than in the ascendant period as trade increased five-fold between 1948 and 1971 (23 years) whereas it increased only by a factor of 2.3 between 1890 and 1913 (also 23 years). So growth in world trade was twice as much during the post-war boom than during the strongest period in the ascendant phase (Source: Rostow, The World Economy, History and Prospect, University of Texas Press, 1978: 662). So, in spite of this incredible growth in world trade, the percentage exports of the wealth produced in the world was less than the level reached in 1913 and even than that of 1860. The developed countries exported no more in 1970 than they did a century earlier. This is a definite indication of growth centred on the national framework. Moreover, the evidence of a strong recovery in international trade after 1945 is really less marked than it seems from the graph. In fact an increasing proportion of it did not involve real sales but rather exchange between subsidiary companies because of the increase in international division of labour: "according to the estimates made by the UNCTAD, the multinational companies alone account for two-thirds of world trade at present. Exchange between subsidiaries of the same group comprise a half of world trade." (Bairoch Paul, Victoires et déboires, III: 445). This reinforces our general conclusion that decadence is characterised essentially by a general withdrawal on the part of each country into its national framework and not, as in the ascendant period, by expansion and prosperity based on the relentless conquest of the world.

[4] All data concerning DFI is taken from Bairoch Paul, 1997, Victoires et déboires, III: 436-443.

[5] From 18th to 24th April 1955 in Bandung on the Indonesian island of Java, there took place the first Afro-Asian conference, in which twenty-nine countries took part. Most of them had recently lost their colonial status and all of them belonged to the Third World. The summit was called on the initiative of the Indian Prime Minister, Nehru, who was eager to create on the international scene a group of powers who would remain outside the two big blocs and the logic of the Cold War. However these so-called "non-aligned" countries never really managed to be "independent" or to steer clear of the confrontation between the two large (American and Soviet) imperialist blocs. So this movement included countries that were pro-West, such as Pakistan or Turkey, and others that were pro-Soviet, such as China and North Vietnam.