Neoliberalism on China and Beyond

Literature review presentation for SOSC530 Lecture 11

Prepared by Sharon Wong

Here we go…

• Neoliberalism “with Chinese Characteristics”• State Neoliberalism

• Neoliberalism on Trial

• Freedom’s Prospect

Neoliberalism “with Chinese Characteristics”

• Historical Background• 1978 – political uncertainty due to Mao’s death• Several years of economic stagnation• Deng Xiaoping: ECONOMIC REFORMS!• Coincided with the turn to neoliberal solutions in the U.S. and the

U.K.

What are the “Chinese Characteristics”

• Incorporating neoliberal elements with authoritarian centralized control

• Chile, South Korea, Taiwan, and Singapore already established the compatibility between authoritarianism and the capitalist market

How?• Bringing in Market Forces• Stimulating competition and introducing market

pricing• Devolution of political-economic power to the regions &

localities• avoid confrontation with traditional power centers in BJ• local initiatives could pioneer the way to a new social order

• Opening-up to foreign trade and investment under strict state supervision• Putting an end to China’s isolation from the world

market

Giving up Egalitarianism?• Negative! Claimed to be still a long-term goal!• But… individual and local initiative had to be unleashed• So as to... ↑ productivity and spark economic growth• Xiaokang (小康 ) & “Four Modernizations” (四个现代化 )• Agriculture• Industry• Education• Science and Defense

Internal Transformations• Socialism with Chinese characteristics vis-à-vis Privatization

with Chinese characteristics• State-manipulated market economy delivering spectacular

economic growth and rising living standards for a significant proportion of the population > 20 yrs• State neoliberalization

So and Chu’s State Neoliberalism

• Contrasting between China’s experience of neoliberalism, and that of the North

• A highly contradictory term: • the party-state: communist and standing on the side of workers

and peasants, • could not carry out all sorts of neoliberal policies to assault

workers and peasants and undermine their interests

General Path

• Singular and unique hold on power by the Communist Party; at the same time, embraced economic reforms• Amass wealth and upgrade its technological

capacities• So as to • Better manage internal dissent and defend itself

against external aggression• Project its power outwards onto its immediate

geopolitical sphere of interest, i.e. East and South-East Asia

Situations before the late 1970s• Rural and urban dwellers were conferred to their own

sector’s welfare benefits and rights holding back any mass rural migration to the cities• Urban area: SOEs – State-owned enterprises• Reasonably profitable• Security of employment with wide range of welfare and pension

benefits• The iron rice bowl 铁饭碗

• Rural area: Agrarian sector organized to a commune system• State-owned banks a depository for savings and provided

investment moneys outside of the state budgets

In late 1970s and the 1980s(So and Chu’s State neoliberalism)

• Decollectivization• dissolution of agriculture commune system to promote “Personal

responsibility system”• Proletarianization of peasants• Marketization• created labor market

• Fiscal decentralization and the weakening of the central state• bottom-up revenue-sharing system to build more independent

and powerful local states• Opening up and spatial differentiation• open door policy toward foreign investments

In the 1980s – Dissolution of agricultural communes

• Peasants were given the right to use communal lands under an individualized ‘personal responsibility system’• could sell surpluses at free market prices

• By the end of 1980s, could lease the land, hire in labor and sell their products at market prices• Township village enterprises (TVEs) were created out of the

assets held by the communes and became centers of• Entrepreneurialism• Flexible labor practices• Open market competition

The establishments of TVEs

• Constitution of December 1982 - causing the political and administrative powers turned over to newly created township and village governments• later those governments took possession of the

communes’ industrial assets and restructured them as TVEs, allowed by legistlation

The TVEs• Capital sources• Savings by the initial surge in rural incomes • JV with foreign capital (particularly from HK or through the Chinese

business diaspora) • Active in rural peripheries of areas liberated for foreign

investment, e.g. Shanghai and Guangdong• Significances of TVEs• As proving grounds for reforms Gave dynamism in the economy

during the first 15 years of the reform period (late 1980s to 1990s)• “Whatever worked with the TVEs could later become the basis of state

policy”• Surge of development in light industry producing consumer goods

for export export-led industrialization path (1987)

Second wave of neoliberal reforms• The Tiananmen Incident• Deng’s violent crackdown indicated neoliberalization

in the economy was not to be accompanied by progress in the fields of human, civil, or democratic rights

• Another wave:• Monetary policy became a prime means of control• More opening to the outside, e.g. Shanghai Pudong

• Democracy of consumption to forestall social unrest

The 1990s(So and Chu’s State Neoliberalism)• Strengthening of Managerial capacity• Cadre responsibility system

• Strengthening of Fiscal capacity• Tax Sharing Scheme• The provinces that rely on the central government for revenue

• Debt-financed investments in huge mega-projects

“Liberating” the SOEs

• In early 1980s most of China’s phenomenal growth rate was being powered from outside the SOE sector• In 1983s SOEs were allowed to hire ‘contract

workers’ with no social protections and limited tenure• Granted managerial autonomy• Managers could retain a certain proportion of their

profits and sell any surplus they produced over their targets at free market prices

Saving the SOEs• Short-lived dual pricing system turned out• Still, SOEs did not flourish• Fell into debt and had to be supported • by the central government or • by the state-owned banks (lending to SOEs on favorable terms

and credits)• Causing later serious non-performing loans to grew exponentially

in volumes

Corporatizing the SOEs• In 1993, the state “turned targeted large and

medium SOEs into limited liability or shareholding companies”; some could even offer public issues of shares• In 1994, all but the most important of the SOEs

were converted into ‘share-based co-operatives’• all employees had the nominal right to purchase shares

• By 2002, SOEs accounted for only 14% of total manufacturing employment relative to the 40 % share they had held in 1990

Foreign Direct Investment• 1980s – the 5 Special Economic Zones (经济特区 )• Xiamen 厦门• Shantou 汕头• Shenzhen 深圳• Zhuhai 珠海• Hainandao 海南岛

• Tax holidays, early remittances of profits and better infrastructure facilities• Produced goods for export to earn foreign

exchange and to observe foreign technologies and managerial skills• > 2/3 FDI came from overseas Chinese (esp. HK

and TW)

Bankruptcies of TVEs and SOEs• More and more ‘open coastal cities’ and ‘open

economic regions’ for FDI• After 1995 opened the whole country up to FDI

of any type• Competitive pricing mechanisms took over from

the devolution of power from the central state to the localities as the core process impelling the restructuring of the economy• Bankruptcies of TVEs and SOEs

Unemployment surged Labor unrests

Huge mega-projects

• Debt-financed investments to transform physical infrastructures to absorb capital and labor surpluses and solve labor unrest• Three Gorges Dam• New subway systems and highways• High Speed Railway (HSR)• The Olympic Games

• Deficit-financed high risks of fiscal crisis• Rapid urbanization

Rapid Urbanization

• Provides a way to absorb the massive labor reserves from rural areas• Provinces and cities engaged in inter-urban

competition• They resist BJ’s effort to rein in their investments have the power to fund their own projects by selling rights to develop real estate

Real-estate development and property speculation

• Banks and other financial institutions imprudently funded massive property developments throughout China

• In 1996 Shanghai bubble burst but resumed even more vigorously in the late 1990s

State-owned Banking System

• Largely state-owned banking system expanded rapidly after 1985• Employees raised from

973,355 to 1,893,957• Branches raised from

60,785 to 143,7960

200000

400000

600000

800000

1000000

1200000

1400000

1600000

1800000

2000000

1985 1993

State-owned Banking System

• Lots of money went to failing SOEs• Creating asset bubbles• Non-performing loans• In 2003, a complex

transfer of $45 billion from its foreign exchange reserves to 2 big gov’t banks,

0

500

1000

1500

2000

2500

3000

1985 1993

Deposits

Loans

Modernization of education of science

• Investment in a definitive strategy of research and development for both military and civilian purposes• Commercial satellite provider• Foreign corporations transfer a significant

amount of their research and development activity into China, e.g. Microsoft, Oracle, Motorola, Siemens, IBM and Intel• Cheap but skillful labors in China• Huawei: selling at 1/3 lower than its rivals

External Relations

• Foreign Trade: From 7% in 1978 to 40% in 1990• In 1994, abolished dual currency exchange rate

devaluated the official rate of 50% inducing massive growth in trade and capital inflows• By 2002, >40% GDP by FDI• Export-led development strategy• Not intended in 1978• Fully forced after Deng’s southern tour in 1992

Connection with HK• HK’s chaotic entrepreneurial capital attracted by

the cheap labor in Guangdong area in the late 1970s• Interested in TVEs in rural areas (allowed to

build JV with foreign capitals)• provided machinery, inputs and the global

marketing• Emulated by other foreign capitalists, e.g. TW,

JP, S. Korea and the U.S.• offshore production center

Internal Market

• Mid 1990s, attracted foreign capital• 10% of a billion population constituted a huge

internal market• Heavy reliance of FDI makes China a special case

different from JP or S. Korea• Inter-regional trade is weak

More Export

• Joining WTO and shifting structures of international competition• inevitable realignment of trading relations

• In 1980s, low-value-added production• In 1990s, low cost but highly skilled labor

attracted value-added ladder of production to compete with S. Korea, JP, TW , Malaysia and SGP, e.g. electronics and machine tools• Causing negative competitive effects on other

countries

More Import

• Raw materials and energy• In 2003, of the world’s production, China took• 30% Coal• 36% Steel• 55% Cement

• Importing from everywhere, including• Suadi Arabia, Sudan, Iran, Russia, Australia, Brazil,

Argentina and even the U.S.

Dominating East and SE Asia

• A regional hegemon with enormous global influence• Looking like the imperial empires in the nineteenth

century but in economics term• Slower growth can roil commodity and financial markets

everywhere (e.g. 2004)

External outlets for internal surpluses

• Fund the US debt• Invest overseas to secure position in foreign markets• E.g. TV assembled in Hungary to assure Europe

markets and N. Carolina to assure the US’s

Comparison(So and Chu’s State Neoliberalism)• 1980s – Expand private sector• 1990s – Reducing public sector• Privatization and corporatization• Commodification of human services• Deepening of liberalization

The dark side can be…

Environmental degradation

• Rural and communal lands were dispossessed and sold to real-estate development

Banking system• 50% of its loan portfolio is non-performing• Only way out is by piling up balance of payments surpluses

against the US.• But conversely, Chinese economic dynamism is held hostage

to US fiscal and monetary policy• Excessive labor cannot be absorbed there comes a politics of

overt repression

Departing from the neoliberal template?• Massive labor surpluses creating social and political

instability• Either absorb or violently repress• The latter, authoritarian

• High fixed capital and excessive production capital and boom and bust cycle of urban investments • All of the above require China to act like a Keynesian

state• Maintain capital & Exchange rate controls

Dilemmas

• Chinese business diaspora reabsorbed into the Chinese polity in 1997 already structured along capitalistic lines• The neoliberal rules of international trade set up

through the WTO, which China joined in 2001• Political demands for liberalization began to

emerge• Worker protests surfaced in 1986• Student movement against corruptions and requesting

for greater freedoms climaxed 1989

Reconstructing class power?• Fastest-growing economies at the same time one of the

most unequal societies• Social inequality was never eradicated during the

revolutionary era• Regional inequalities have also deepened• Southern coastal cities vs. northern region

• Uncertain indicator of the constitution of class power• Wholesale process of proletarianisation

Accumulation of wealth

• The privatized SOEs Managers• Indigenous (土著 ) capital coming from TVEs• Real-estate development encouraged by

dispossession • Speculation in asset values using credit granted

on favorable terms• Surging consumer culture emerged in the main

urban centers and postmodern culture including westernization

Social Resistances in 1990s(So and Chu’s State Neoliberalism)

• Cadre-capitalist class formation• Fusion of political, economic and social capitals

embedded in the local society• Trickily transforming communal capital into private

capital

• Working class formation• Workers in the state sector begin to feel like

proletarians in a capitalist

• Peasants discontent• The middle class intellectuals the New Left

Social Unrests• Super-exploitation of labor• Capital accumulated by private and foreign firms comes from unpaid

labor

• Land seizures in rural area• All manners of protests, ‘many of them violent, have broken

out with increasing frequency across the country in recent months’• The party is clearly fearful of the potential breakdown in order

and is mobilizing party and police powers to forestall the proliferation of any general social movement that may arise• China was the 2nd largest spender of military expenses on the World in

2009

The moral claims of the Maoists

• Masses constituted by ‘workers, the peasantry, the intelligentsia and the national bourgeoisie whose interests were harmonious with each other and also with the state’

Vs.• Massive proletarianisation of workforce, the

breaking of the ‘iron rice bowl’, the evisceration of social protections, the imposition of user fees, the creation of a flexible labor market regime, and the privatization of assets formerly held in common

Harvey’s conclusion…• China moved towards neoliberalization and the

reconstitution of class power, albeit ‘with distinctly Chinese characteristics’• At the same time, moving towards a confluence with the

neoconservative tide in the U.S.• The authoritarianism• The appeal to nationalism• The revival of certain strains of imperialism

Turning point: the Retirement of Jiang (2002)• The Three Representatives• 三個代表思想要求中国共产党要：• 始终代表中国先进社会生产力的发展要求；• 始终代表中国先进文化的前进方向；• 始终代表中国最广大人民的根本利益。

• Hu & Wen’s policy• “Return to the good old days of the 1950s when the

Maoist Party was in full control”

So and Chu’s Positive projection vs. Harvey’s negative conclusion• The Cadre-capitalist class has failed to capture

the central party-state. Thus, the central party-state can still uphold the moral high ground of state socialism• Punishing Capitalist for tax evasion• Safety net for peasants by cutting rural taxes

• State intervention of certain areas of capitals• Develops plans for strategic development and decrees

prices and regulates the movement of capital• Shares risks and underwrites research and

development

So and Chu’s Positive projection vs. Harvey’s negative conclusion (con’t)• Actively mobilized the ideology of nationalism• Defines itself as carrying out a national project to make China strong

and powerful• A national cohesiveness based on cultural heritage and tradition

rather than hostility toward the outside world• No excessive nationalism – control anti-Japanese sentiment, restrain

anti-Americanism in the aftermath of the NATO bombing of the Chinese embassy in Yugoslavia

• Adopts authoritarian policies to discipline labor, suppress labor protests, and to deactivate civil society• maintain a favorable environment to attract foreign investment• facilitate capital accumulation• seems unavoidable in export-led industrialization

• The way out – State Neoliberalism

Emergence of State Neoliberalism(So and Chu’s State Neoliberalism)• The late 1990s, began to feel the pains of a

neoliberal economy• Super-exploitation of labor power• The World’s most unequal societies• Environmental degradation

• Leading to discontent and social conflict in society• Increasing call to regulate the market• Growing numbers of labor protests, peasant

demonstrations, social movements, and other large-scale social disturbances

Transition from Neoliberalism to State Neoliberalism in the 21st Century(So and Chu’s State Neoliberalism)

• Building a new socialist countryside and a harmonious society signaling a change of ideological orientation if the Chinese state• State would play a more active role in moderating the

negative impacts of marketization• Abolishment of agricultural tax• Increase of rural expenditure by 15% to guarantee minimal living

allowances for farmers• 87% hike for the health-care budget

• De-commodification of human services• Promoting the spread of Mimumum Living Standard

Assistance for the rural population

Future Trajectory• 4 possibilities• Return to socialism• Moved away from socialism >30 years• Working class and the peasants are still disorganized

• Return to neoliberalism• When matured and consolidated its power, will push forward the

neoliberal project

• Move to imperialism• Great powers will try every means to prevent other states from

challenging its position

• The consolidation of state neoliberalism

Consolidation of State Neoliberalism• The party-state is promoting domestic consumption and

to improve collective consumption and social insurance

• Facing sharp economic downturn and the prospect of growing social unrest, the part-state has abundant reasons to move away from neoliberalism to state neoliberalism

• If going on like this, “China appears to be emerging as the only poor country that has any chance in the foreseeable future of subverting the Western-dominated global hierarchy of wealth”.

Let’s go back to the Harvey’s

Neoliberalism on Trial• Stimulating global capital accumulation? Nope!• Reduction and control of inflation is the only systematic

success neoliberalization can claim• Only success quoted: Sweden, a Circumscribed

neoliberalization• Why are so many persuaded and fallen into the trap?

Persuading the many• The volatility of uneven geographical development has

accelerated, permitting certain territories to advance spectacularly at the expense of others

• Neoliberalization - a huge success from the standpoint of the upper classes, either restored class power to ruling elites or created conditions for capitalist class formation

• Spectacular shifts of emphasis under neoliberalizastion giving it the appearance of incredible dynamism• the rise of finance and of financial services

Main substantive “achievement”• To redistribute, rather than regenerate, wealth and income• Through accumulation by dispossession• Including • commodification and privatization of land and forceful expulsion of

peasant populations• Conversion of various forms of property rights• Suppression of rights to the commons• Commodification of labor power and the suppression of alternative

forms of production and consumption• Colonial, neocolonial, and imperial processes of appropriation of

assets• Monetization of exchange and taxation• Salve Trade• Usury, the national debt and the use of the credit system as a

radical means of accumulation by dispossession

Achieving accumulation of dispossession• Privatization and commodification• Financialization• Management and manipulation of crises• State redistributions• Cutting expenditure on social welfare• But increasing spending on surveillance and policing

Neoliberal’s evils

• Commodification of Everything• Cutting powers of trade unions and other working-class

institutions• Transformation in the spatial and temporal co-ordinates of the

labor market• Degrading value of the labor

• Environmental Degradations• Destruction of tropical rain forests due to unrestrained

application of neoliberal principles

On Rights• Theoretically upholding liberalization and freedoms of

individuals• Actual practices of neoliberalism underpins the restoration or

creation of class power and the results in terms of impoverishment and environmental degradation

Universalism of rights• Rights only focus on political economic rights• Became an imperialists’ tool for westernization• To accept neoliberal regime of rights is to accept that we have

no alternative except to live under a regime of endless capital accumulation and economic growth no matter what the social, ecological, or political consequences

UN Charter• Derivative rights• Freedoms of speech and expression• Of education and economic security• Rights to organize unions

• Enforcing these rights would have posed a serious challenge to neoliberalism• Entailing a revolution of great significance in political-economic

practices

Freedom’s Prospect• Roosevelt – excessive market freedoms lay at the root of the

economic and social problems of the 1930s Depression• Vs.• Bush – neoliberal freedoms at the center of his political

rhetoric

The End of Neoliberalism• Heavy debts in the capitalist countries, both developed and

developing• 2 worst-case scenarios from the standpoint of the U.S.• A short burst of hyper-inflation would provide one way to delete the

outstanding international and consumer debt• A long-drawn-out period of deflation of the sort that Japan has been

experiencing since 1989.

Consolidation of neoconservative authoritarianism• Maintaining global hegemony through control over oil

resources

• Fear and insecurity both internally and externally were easily manipulated for political purposes

• God-given character manifesting destiny of the US to be the greatest power on earth and as a beacon of freedom, liberty , and progress

• Actually the US hegemony is crumbling • The New Imperialism

Alternatives• Engaging with the plethora of oppositional movements• Seek to distil from and through their activism the essence of a

broad-based oppositional programme• Resort to theoretical and practical enquiries into our existing

condition• Seek to derive alternatives through critical analysis

• Most importantly, initiate dialogue between those taking each path and thereby to deepen collective understandings and define more adequate lines of action

Oppositional movements• Different from traditional labor movements• Not in the form of organized political parties• Direct relevance to particular issues and constituencies • Choi Yuen Village• The Korean Farmers

Critical Analysis• Urging people to respond in class terms: If it looks like class

struggle and acts like class war then we have to name it unshamedly for what it is

• Shows how and why popular movements are currently bifurcated• Defining movement types

• Expanded reproduction concerning the exploitation of wage labor and conditions defining the social wage

• Against accumulation by dispossession

• Points up exploitable contradictions within the neoliberal and neoconservative agendas• Monopolization, centralization and internationalization of corporate

and financial power• Startling increase in class and regional inequalities

Critical Analysis (Con’t)• Discourses to request for broader Rights• To Life chances, Political association and Good Governance• For control over production by the direct producers• To the inviolability and integrity of the human body• To engate in critique without fear of retaliation• To a decent and healthy living environment• To collective control of common property resources• To the production of space• To difference

Critical Analysis (con’t)• Argue against the neoconservative assertion of a moral high

ground for its authority and legitimacy• Criticizing the anti-democratic nature of neoliberalism backed

by the authoritarianism of the neoconservatives that should surely be the main focus of political struggle

To Conclude…

• There is a far, far nobler prospect of freedom to be won than that which neoliberalism preaches

• There is a far, far worthier system of governance to be constructed than that which neoconservative allows

Movie recommendation• Inside Job• http://www.youtube.com/watch?v=XsAFyTZfd4o

Thank you!