State capitalism is an economic system in which government bureaucrats control and regulate state-owned corporations. Some 85% of Chinese enterprises are state-owned. Although there are private companies, they are also government-regulated.
Government control over such economic assets is often thought to be a form of socialism. But the key determinant of whether an economic system is truly socialist or not is whether it is the workers or their representatives who manage state enterprises rather than functionaries who are a separate class in and for themselves.
In China, the death of Mao Zedong in 1975 led to the dominance over the Chinese state of Deng Xiaoping and his fellow “capitalist roaders,” among them the current President of China, Xi Jinping and his accomplices.
Deng Xiaoping is today best remembered for saying that “it makes no difference whether a cat is white or black so long as it catches mice.” It was his way of saying that development can take place in China whatever the economic system — whether capitalist or socialist.
That metaphor does have a point. Development is indeed possible under any system as long as a country’s leaders have the vision, the competence, and the will to see it through. China has developed despite its current leaders’ abandoning the socialist path that Mao Zedong favored after the Chinese Communist Party won the struggle for a “new democracy” — shorthand for the campaign for independence and the right of a people to manage their own affairs — in 1949.
China today has the world’s second largest economy, which has grown from a low of 3.8% in 1990 to an all-time high of 15.4% in 1993. In 2017, the Chinese economy grew by 6.9%, which compares to the US growth rate then of 2.3%. However, its growth was slightly below that figure last year at 6.4%.
Despite predictions that the growth rate of China’s economy will continue to decline, the fact is that for a country that as recently as the 1940s was thought to be “the sick man of Asia,” its development has been outstanding. China is today among the most technologically advanced countries in the world. It has been a nuclear power since the 1950s and has the biggest standing army on the planet, with over two million personnel in five service branches.
But because its armed forces’ equipment is behind that of the United States despite continuing efforts to modernize it, its army is not the most powerful in the world. That title belongs to the US military, and most analysts say that despite the often harsh rhetoric from both sides, China is unlikely to provoke the US into any war. That means that contrary to President Rodrigo R. Duterte’s fears, China is unlikely to respond militarily to any Philippine attempt to defend its sovereignty over its Exclusive Economic Zone in the West Philippine Sea. It knows very well that if it does, the US will intervene under the terms of its Mutual Defense Treaty with the Philippines.
Although the development of China from a backward feudal land that for a long time was the doormat of the imperialist powers to what it is today is undeniably outstanding, it has come at a cost.
In taking the capitalist road to development, Deng’s successors have developed into a class whose interests demand that they maximize their privileged status through the unremitting expansion of the economy that has so benefitted them. The class disparities that socialism should have minimized have remained. The gap between rich and poor is growing. Billionaires co-exist with the very poor. Workers can be arbitrarily laid off. Many are not even paid on time, and wages have, in many places, not kept pace with the cost of living. So difficult has the situation of workers been that protests and demands for changes are common in today’s China, although ignored and not reported by the government-controlled media.
Some Chinese activists who describe themselves as Maoists, and who have taken to heart China’s being ruled by a political formation that calls itself a “communist” party whose basic principle is supposedly that of allegiance to workers’ rights and even dominance, have tried to organize workers for better pay and working conditions, but have been suppressed by the Xi regime. Some are still missing and unaccounted for.
The reality is that the leadership of the Communist Party of China has been highjacked by bureaucrats who are hardly committed to the “dictatorship of the proletariat” that during the socialist stage of the march to communism every communist party says is needed. A bureaucratic elite rather than a workers’ dictatorship governs China.
The expansionist policies of that privileged class have made China the contemporary face of the drive for “world domination” that used to be attributed to the former Union of Soviet Socialist Republics (USSR), where the restoration of capitalism in the 1960s led it to impose its will on other countries. The USSR’s totalitarian system at home and its expansionist policies abroad gave socialism a bad name that has endured today in many parts of the world, including, perhaps most specially, the Philippines.
To many Filipinos, because it is ruled by a political party that still calls itself communist, China is still the bogeyman that the US inveighed against during the Cold War as part of the “international communist conspiracy.” That much is evident in the belief that what China is doing in the West Philippine Sea and elsewhere on the planet is part of its “communist” aims rather than the expression of the imperialist aspirations that are driven by its drive to acquire new markets and sources of raw materials. It is moving to be the equal, if not the superior, of the US global hegemon, hence its aggressive drive for dominance in Asia, Africa, and Latin America.
President Duterte’s declaration at one point that China’s economic system is different from that of the US has reinforced the common assumption that the Chinese economic system is socialist. Like the US system, it has some socialist characteristics, but while the former is still largely based on free enterprise capitalism, and China’s economic system mostly government-controlled, both are essentially capitalist.
Chinese occupation and militarization of the West Philippine Sea has led to most Filipinos’ further disaffection with socialism. And yet socialism is enjoying a resurgence even in the United States, where, as economic difficulties besiege the workers and the middle class, it is gaining support among young people as an alternative to the existing system.
Even some US politicians, among them would-be Democratic Party nominee for the 2020 presidential elections Bernie Sanders, have openly advocated government’s taking such semi-socialist steps as heavily taxing the super-rich 1% of the population to help fund social services, in addition to enabling other forms of control over the economy.
This is occurring in the global headquarters of free trade and free market economics, while in China, which from the 1950s to the 1970s was thought to be the most extreme advocate of socialist development, has transformed itself into one of the 21st century’s most aggressive champions of predatory capitalism. The Philippines only recently saw how rapacious it can be when a Chinese vessel rammed and sank the Filipino fishing boat F/B Gem-Ver 1 on June 9. Through that brazen display of violence and impunity, China was telling Filipinos to stay out of their own waters so it can exclusively exploit the vast resources of the West Philippine Sea.
Luis V. Teodoro is on Facebook and Twitter (@luisteodoro).
Published in Business World
June 27, 2019