The Question of China

2010 again highlighted the newly important role of China in world economics and politics. The following is a slightly longer version of the review published in Socialist Studies[1]  (Written April 15, 2010Part of a series of articles, “Reflections on 2010”). • It is difficult to ignore the centrality of China as we enter the second decade of the 21st century. The biggest industrial revolution in human history is underway in the world’s most populous country. This fact is forcing many to rethink old orthodoxies. Minqi Li’s book is an important contribution to this project. The Rise of China and the Demise of the Capitalist World Economy is very successful at posing the big questions, no small achievement in itself. But the analysis is premised on a questionable political economy and an overly “rosy” view of the Mao period in China. The answers provided are not always convincing, and sometimes schematic in a way which detracts from the overall effect of the book itself. These weaknesses notwithstanding, this is a book with which any who are interested in the current dilemmas of world capitalism, and the prospects for building an alternative, should be familiar.

The first dozen or so pages are the first reason to read this book. Li sketches out in spare, but gripping prose, the horrendous history of China’s (and India’s) encounter with European “civilization.” With an analysis rooted in World Systems’ theories, Li shows clearly the key role that both of these countries played in the rise to dominance of European capitalism. “The tributes from India played a crucial role in the British rise to world financial and commercial supremacy.” (p. 6) But China was at least as important.

According to Li, the two opium wars (1839-1842 and 1856-1860) – where the western powers succeeded in keeping China open to the British-controlled drug trade – these wars “marked the beginning of China’s incorporation into the capitalist world-economy.” (p. 6) In those wars, China was forced to cede Hong Kong to Britain, and open five of its ports to trade. These wars also triggered a near collapse of the state, and created the conditions for a major peasant rebellion – Taiping Tianguo – whose suppression led to untold hardships for the Chinese people. Defeat at the hands of Japan in 1894-95 led to China paying “an enormous indemnity of 230 million taels of silver” which “amounted to three years of the Qing government’s annual fiscal revenue or one-third of Japan’s gross national product.” (p. 7) Another peasant based uprising – the Boxer Rebellion – was suppressed by the armed forces of eight western powers. In the treaty which ended that war, China was forced to pay another indemnity almost twice as big as the one after the Sino-Japanese war. The list goes on and on and on. If you want to know why there were endless streams of impoverished Chinese labourers available for the dangerous and thankless task of building Canada’s railroads in the late 19th century – this history, summarized very effectively by Li, provides the answer.

The second reason to read Li’s book is his important notion that the enormous pool of cheap labour, created in this process of imperialist depradation, has become one of two important “strategic reserves” for world capitalism. “China’s deeper incorporation into the capitalist world-economy helps to lower the global wage cost and restore the global profit rate.” (p. 16) This is an indispensable insight necessary to explain the long expansion of the 1990s and the intense economic boom experienced by the world economy just before the so-called “Great Recession.” Theorists who have attempted to understand the dynamics of the world economy without this appreciation for the role of China have been forced either to deny the fact of economic expansion over a fifteen year period of time, or to be tempted to see the fact of this expansion as proof that neoliberalism had gone some distance to overcoming capitalism’s internal contradictions. Properly theorizing the role of China allows Li to escape both traps.

But there are some matters that need further discussion. First his political economy rests on an assumption that capitalism cannot survive industrial and economic development in the “semi-periphery”. In an interesting discussion of the potential trajectories of the periphery and semi-periphery, he suggests that if Chinese wage rates “converge upwards towards the semi-peripheral levels” – an important possibility to discuss, given the upward pressure on wages in China’s urban areas – “this will greatly reduce the share of the surplus value available for the rest of the world.” (p. 111) This neglects the fact that with an increasing organic composition of capital, wage rates and overall surplus can (and in fact do) both increase. It is not a zero-sum game. China’s impact on world capitalism, then, cannot just be seen in terms of its impact on wage rates. It has also become an enormous market for commodities to feed its industrial revolution. It is also China’s emerging home market which is transforming the world economy. Li is aware of the central role of organic composition to Marx’s theory of capitalism, he mentions it, but does not integrate into his own political economy.

Second – his relationship to the Mao era is contradictory. He makes the very interesting observation that “it took the entire Maoist era to develop the necessary industrial and technological infrastructure before China could become a major player in the global capitalist economy.” (p. 13) This is an important insight, and it opens the door to understanding the Maoist era as one of the assertion of sovereignty, allowing for national economic reconstruction and repairing the damage done by imperialism. But that is not the entirety of Li’s view. He calls the Mao era “Chinese socialism” and in clinging to an understanding of that era as being socialist, he is driven to either minimize its problems, or worse. He has a completely positive view of the Cultural Revolution, arguing that university students “were required to return to work in their home areas after graduation, so that university education would not become a path for careerist students seeking to join the elite class.” (p. 38) There are other analyses which would say that once Mao’s section of the bureaucracy had emerged victorious, radical students were exiled to the countryside, where they could not coalesce as a threat to the reconsolidated Maoist leadership. Li also has an unfortunate section (pp. 39-42) where he challenges statistics which call the Great Leap Forward catalyst for one of the largest famines in human history. His statistics don’t challenge the fact that something happened in that period leading to a great increase in “excess deaths.” Surely the point should not be to argue definitions as to whether this constituted a famine or not, but to address the fact that something calamitous happened in that period, and that this calamity needs to be explained.

In addition, the world systems theory which is such a strength in an understanding of the past of capitalist development, becomes a barrier when trying to peer into the future. He rests the conclusion of his work on a highly speculative article by Immanuel Wallerstein. Both Li and Wallerstein accurately identify the fact that modern capitalism is riven with contradictions. Both agree that these contradictions have been partially offset by the rise of China – an important insight that should be taken very seriously. But then they make the mistake of trying to gaze into the crystal ball to see what the future holds many years down the road. Wallerstein asserts – and Li quotes him approvingly – that “after 2050 or 2075 … we shall no longer be living in a capitalist world-economy.” (p. 174)

It is as important in this century, as it was in the past century, to insist that there is a difference between seeing the contradictions of capitalism, and predicting its collapse. We can with confidence predict recurring capitalist crises, but its collapse and replacement by a new system will require political action and organizing, and the success of that action and organizing is not inevitable. When Li says “it is quite conceivable that by the mid-twenty-first century various forms of socialist economic organizations will become dominant in the world” (p. 182) it makes the reader ask: “how do you know?”

Further, his image of this socialist future is not comforting. He builds his case on the interesting insight that the second of the reserves on which capitalism is calling is in the sphere of the ecology, “the remaining resources, and the remaining space for pollution” (p. 13)). This is a very good and very valid observation. But Li asserts that even with a socialist transformation, it is too late to stop catastrophic climate change, and all that entails – “a catastrophic sea level rise,” a shrinking of the inhabitable space of the world to “Canada, Siberia, northern Europe, and a few places near Antarctica” (p. 184) and a consequent massive flight of population, and inevitable crash of population. With echoes of Malthus, Li asserts that a socialist world will have to oversee, “an orderly, long-term decline of the world population so that eventually it falls back to a level consistent with the earth’s sustainable ecological carrying capacity.” (p. 188) Even in a socialist world, “there will be re-ruralization and a large portion of the world’s labor force will need to return to agriculture.” (p. 187) Our choices he says are to do this in an orderly fashion through a socialism “which might share important similarities with the historical socialist states”, or in a catastrophic fashion through “a neo-feudalist outcome (which might resemble today’s North Korea).” (p. 181) And while “some form of socialism would be preferred” he argues, “even feudalism is better than capitalism.” (p. 187) If our alternatives are East Germany or North Korea – then the future is grim indeed.

Li has begun a conversation. His insights into the role of China in the reshaping of modern world capitalism are important. Coming from a theorist who spent two years in jail for his role in the Tiananmen Square rebellion of 1989 should give many pause. Too many on the left in the west dismissed that rebellion as being “anti-socialist.” That this rebellion has generated such an important Marxist theorist means that such attitudes will need to be reconsidered.

(c) 2011 Paul Kellogg


[1] Paul Kellogg, “Book Review,” Li, Minqi. 2008. The Rise of China and the Demise of the Capitalist World Economy. New York: Monthly Review Press. ISBN 978-1-58367-182-5. Pages: 208. In Socialist Studies (6:1), Spring 2010: 220-223. All page references in this review article are to Li 2008.