Southeast Asia / China: A New Capitalist Miracle?

A discussion on East Asia is of critical importance for the whole of the CWI. The idea of the Asian “economic miracle” has replaced the collapse of Stalinism as the main propaganda weapon of the capitalists internationally.

They hail the dawn of the “Pacific century” which will see this area of the world emerge as the main area of economic activity. The working class in Europe and America must adjust accordingly for, in the words of one Swedish newspaper, “in future wage levels will be decided in Peking not in Stockholm”.

This is a new discussion and confronts Marxists with a number of new questions. It is just the start of a discussion and it is a theme the CWI must return to repeatedly to follow the changes in the situation. Four questions are posed which need to be answered by this discussion:

1) Is there a shift in the world balance of power towards Asia, and can the East Asia region emerge as the main area of economic activity in the future? The answer is yes it can, but this does not mean that it will. The outcome will be decided by struggle in the coming period.

2) Is China capitalist? The answer is yes while, for historical reasons, the Chinese regime has its own peculiarities. To all intents and purposes we can now speak of a capitalist China. An important sub-heading in this discussion is: Where is China going? Towards Great China (the incorporation of the Hong Kong, Macao and eventually Taiwan) or towards break-up?

3) Will developments in East Asia provide a lifeline for world capitalism? This is the central thrust of the capitalists’ arguments, but this is false.

4) What explains the exceptional growth rates of many of these economies? This is taken up below.

Another question which must be answered, which runs like a thread through this discussion, concerns the implications of developments in East Asia for the working class movement and the CWI. The CWI’s analysis of Stalinism’s collapse and its international consequences was an important factor allowing the CWI to become a pole of attraction while other groups on the left became disorientated or disintegrated altogether. An analysis of capitalism’s development in East Asia and perspectives for the workers’ movement can play a similar role in attracting new forces towards the CWI.

Asia’s Star Rising

There is unquestionably a shift taking place in the world balance of power towards this region. This process has been underway for some time but it has not been concluded. A discussion on how far this shift has gone or can go has important implications for world perspectives. In 1921, in a speech to the Comintern’s 3rd Congress, Trotsky asked: “Has a new world division of labor been established? Of decisive importance in this sphere is the fact that the center of gravity of capitalist economy and bourgeois power has shifted from Europe to America. This is a fundamental fact that every comrade must firmly and clearly bear in mind in order to understand the events now unfolding before us…”(The World Economic Crisis and the New Tasks of the Comintern).In 1960 the countries of Pacific Asia (including Australasia) accounted for 10 percent of world GDP. By 1980, this proportion had risen to 16 percent and by 1995 to 26 percent. To provide a comparison, in 1995, North America (Canada and the USA) accounted for 28 percent of world GDP. Of the world’s 100 biggest industrial companies, 28 are now based in the Pacific Asia region. 20 years ago this figure was ten.

A number of economic studies predict the ascendancy of East Asia and especially China in the coming two decades. The latest is a report from the British Treasury (June 1996), which forecasts that China could overtake the USA by the year 2015. A report from the Australian National University (1995) predicts that China will be the world’s second economy by 2005, i.e. in less than ten years’ time. The World Bank’s well publicized 1992 report predicted that in 25 years’ time only one European economy will rank in the world’s top seven (Germany in sixth place). It raised the possibility of Britain being overtaken by Taiwan and Thailand. This World Bank report has been the subject of an intense debate among bourgeois economists. This was the first report based on so-called “Purchasing Power Parities” (PPP’s) instead of official exchange rates. This method, which is now common, means that local production costs are taken into account and the figures adjusted accordingly. It has, however, produced widely varying estimates. The latest Economist survey on China (March 1995) while rejecting the World bank’s original PPP-based estimates of the size of China’s economy, argued that: “China’s GDP per head on a purchasing-power basis last year might be guessed to lie at around $2,OOO. That would credit China with an economy about the size of Germany’s; but ranked by GDP per head, it would still be among the world’s 30 or 40 poorest nations.”

There is no denying, however, that China has become a motor of growth within the region. Of course the effects of this growth are extremely uneven, increasing rather than diminishing class differences. In 1995 China had received a total of $135 billion in foreign direct investment (FDI), which makes China the world’s second biggest recipient of FDI after the USA. This year the total is forecast to exceed $150 billion. The following table compares the production of certain manufactures in China and Japan during 1994:

China Japan
Colour TVs 13.1m 13.4m
Fridges 4.7m 5.2m
Washing Machines 7.13m 5.5m
Motor Cycles 1.9m 3.0m

China’s agricultural output fell as a proportion of GDP from 30 percent in 1978 to 23 percent in 1994. The fall in the percentage of the total workforce employed on the land from 71 percent in 1978 to 58 percent in 1994 also shows the scale of industrialization that has taken place. In a country of nearly 1.3 billion people this change encompasses tens of millions. There is extreme poverty especially among sections of the rural population in China, while at the same time a significant improvement in living standards for a sizeable layer of the urban population seems to have been achieved. According to figures from the Swedish newspaper Dagens Nyheter, in the regions around the big cities of Peking, Shanghai and Canton, with around 100 million inhabitants, 97 percent have televisions, 78 percent have fridges and 76 percent have washing machines (compared to 6 percent 15 years ago).

At the same time there are only a quarter of a million cars in the whole of China. Toyota have already moved in, with Fords and General Motors set to follow. The car companies are licking their lips over what is forecast to become the world’s biggest car market in 20 years’ time. Just from an environmental point of view, the additional greenhouse gases released by such an expansion of car usage would have catastrophic effects.

The Dragon Economies

It is symbolic that the world’s tallest building is currently under construction in Malaysia’s capital Kuala Lumpur. It consists of twin towers, one being built by a Japanese company and the other by Koreans. The Japanese are winning the race for the time being. But even when it is finished in one or two years’ time, it will only be the world’s tallest building for a year or two before another building, under construction in Shanghai, overtakes it. On one bank of the Huangpu River in Shanghai the Chinese are building a new business district, Pudong, which they boast will become “Asia’s Wall Street”. Already by 1998 Pudong will house roughly half the total office stock of Singapore. As the Economist (March 1995) commented, “one of the great all-time property crashes looks inevitable, no matter how fast Shanghai grows”. A feature of East Asia’s economies is that alongside a real development of the economy is perhaps the most rampant speculation anywhere in the capitalist world. However, the idea that Asia will become the world’s leading economic power, and pay back centuries of colonialism by overtaking America and Europe, is a powerful propaganda weapon for the region’s capitalist classes. This is one element in the race to possess the world’s tallest building. The most high profile exponent of these ideas is Malaysia’s Prime Minister, “Dr. M” Mahathir. He advocates shutting Australia, New Zealand and the USA out of Asian economic forums such as APEC (Asia Pacific Economic Co-operation) and proposes that Japan should replace the USA as the leading economic and political power in the region.

There are enormous variations in the economies of the region. Some, like the Philippines, have missed out on the “miracle” altogether and remain extremely poor. But in others there has been an exceptional economic growth. South Korea was poorer than Ghana in 1962. Since then its GDP has increased 17-fold. Today it is the world’s fifth largest car producer after France, and plans to overtake France by the end of the decade. Even beyond the four so called “tigers” (S. Korea, Singapore, Taiwan and Hong Kong) some of the region’s economies have experienced phenomenal growth. Malaysia’s GDP has increased ten-fold since 1970. In 1960 manufactures accounted for ten percent of Malaysia’s exports but today they account for 80 percent. The Thai economy has also developed extremely rapidly and China of course has been the fastest growing economy in the world for the last fifteen years.

The CWI has pointed out that capitalism on a world scale has entered a period of depression; a chronic stagnation of the productive forces. This is reflected in the growth of mass unemployment and the worldwide attack on welfare and the past gains of the working class. Do the rapid growth rates in many East Asian economies contradict this view? It’s more a case of the exception that proves the rule. Similarly during the “Great Depression” of 1873-96, the US economy began to grow quickly, a process which later led to its dominant position in the capitalist world order. Between the civil war and 1913 US industrial output increased 10-fold. Of course such a situation cannot exist indefinitely. Rather than East Asia opening up an escape route for world capitalism, the region’s economies will be “integrated” into the world capitalist crisis.

There are special factors in Asia’s post Second World War history which explain current developments. These special historical factors can be summarized in just one word: Stalinism! The shadow of the proletarian revolution, albeit in a distorted Stalinist form, cast itself over the entire region in the wake of the Chinese revolution of 1949. US imperialism fought two wars, in Korea and Vietnam, in an attempt to hold back the revolution. It was in this region that US strategists first spoke about the “Domino Theory” which was a bourgeois version of Trotsky’s idea of the Permanent Revolution; that the revolution, having started in one country, would spread to others.

From 1945-52, Japan was in practice a US colony, ruled directly by General MacArthur. Here the Americans forced the feudal oligarchy (with US financial support) to carry out a land reform. South Korea and Taiwan were little more than buffer states where the Americans encouraged, with finance which otherwise wouldn’t have been forthcoming, similar measures to be taken. Once again we see that reforms are a by-product of revolutionary struggle. The fear of losing the entire continent to Stalinism forced Imperialism to intervene over the heads of the local rulers and carry out some of the tasks of the bourgeois democratic revolution.

Paradoxically the present rapid capitalist development in China would have been impossible without the economic foundation constructed by Stalinism – the shattering of feudal relations and carrying out the tasks of the bourgeois democratic revolution: land reform, the unification of the country and the expulsion of the imperialists. While bourgeois commentators would never accept this, the clearest proof is to pose the question: Why is it China and not India which is attracting all this foreign investment?

But another important factor in the region’s economic development is the role played by the state. This flies in the face of all the neo-liberal theories, about privatization and giving the market a free hand, which hold sway among the capitalists internationally. An examination of any of the successful economies in this region shows a common feature; the state plays the dominant role. The Swedish newspaper Svenska Dagbladet described Singapore as “almost a state capitalist country”. In addition to state control over key sectors of the economy, Singapore’s ruling PAP itself owns important companies as do the KMT in Taiwan. Malaysia has “Five Year Plans” and it is not alone in this.

The World Bank’s recent report on South Korea drew the conclusion that “you need a government guiding hand”. The big Korean corporations, the “chaebol” (Daewoo, Hyundai etc.) were built up under the protective wing of the state. In the current negotiations over South Korea’s application to join the OECD (Organization for Economic Co-operation and Development), a sticking point is the position of the chaebol. The South Korean government feels already that they are acquiring too much independence and that this will increase if the OECD’s conditions are accepted.

A Lifeline for World Capitalism?

A discussion on perspectives for the region inevitably raises complex issues; a struggle between contradictory tendencies, which is not clear in all cases how this will work out. However, one thing is clear, the capitalists’ idea, at least among some of them, that East Asia will provide a lifeline for world capitalism, ignores two vital issues – the class struggle and the struggle between rival national capitalist classes. It ignores, in other words, the decisive questions of war and revolution. That is leaving aside a discussion on the economic perspectives for the region where there are already signs of a slowdown in important economies like Taiwan and South Korea, not to mention Japan.

The historical comparison of the shift in world power from Europe, especially Britain, to the USA that occurred at the start of the century serves a certain purpose in this discussion, but there is one major difference. In East Asia we are not talking about one ruling class, as was the case with America. We are talking about a number of rival national bourgeoisies, some with deep mutual antagonisms. This region is nothing like as “homogenous” as even the EU, if that can be regarded as a model of harmonious relations!

Even when Trotsky wrote about the struggle between Britain and the US, he did not envisage that this would be a peaceful process, that the British bourgeoisie would gracefully accept the loss of economic hegemony. In fact, as he raised in the Forward to Where is Britain Going, Trotsky had the perspective for war at a certain stage between the two countries. This perspective was cut across by the victory of fascism in Germany and the subsequent threat to British imperialism posed by Germany’s own imperialist ambitions. Britain was forced to accept its diminished world role and seek US support to remain a regional power in Europe. Even if events took a different course, Trotsky’s idea that the conflict between Britain and America would be settled by force proved to be correct.

What is perhaps not so well known about the economies of East Asia is that the world’s most frenzied arms race is underway here. The Economist, in a special feature on Asian Security (23rd December 1995) commented that this “could yet stop East Asia’s miracle countries in their tracks”. Two elections have taken place in the first half of 1996 under the threat of military invasion, in Taiwan and South Korea. The Financial Times (23rd May 1996) reported that Japan has recruited 2,000 spies from its military forces to “keep watch on potential flash points in East Asia”.

The main factor behind the military build-up is the fear of China’s growing ambitions in the region. The transition to capitalism inevitably raises the question of a Chinese imperialism emerging. However, the geo-political make-up of the region is even more complicated than this – it has been compared to a game of three-dimensional chess. A tri-polar balance of power is emerging between Japan, the US and China. They each have their own interests in the region to defend, but none of them are capable on their own of becoming the decisive power in the region.

To take Japan first, political factors connected with its imperial history, inhibit the development of a Yen bloc. There is a parallel with the position of Germany in Europe, with an important exception that there is no Asian equivalent of the German-French axis which allows German capitalism to pursue its ambitions through the agency of the EU. Korea was occupied by the Japanese from 1910 to 1945, and the antagonisms between them still play an important role in their respective foreign policy. Japan is, for example, less than enthusiastic about the prospect of a unified Korea, and therefore pursues a different line in its attitude to the North Korean regime. The growth of China threatens to revive even deeper rivalries for the Japanese capitalists to contend with. At a certain stage, to prevent an East Asian regional bloc acquiring greater cohesion, America and Europe will attempt to divide and play off the different states in the region.

This is notwithstanding the fact that regional economic integration has already gone a long way. Japanese capital plays the dominant role in the region and the last five years have seen a marked shift of Japanese FDI away from the US and into Asia. Japan’s trade with the rest of East Asia now almost equals its trade with the US and EU put together. Martin Wolf wrote in the British Financial Times (11th June 1996) that “Japanese foreign direct investment is also increasingly directed not at exports outside the region, but at consumption within it. Thus it contributes to perhaps the most striking fact about the whole East Asian area – its growing self-sufficiency, with half of its total trade inside the region.” This article warned the US that: “Overall, it will find Japan and the rest of East Asia more difficult to push around.”

At the same time Japan’s economy has clearly entered an entirely new phase. The years of rapid growth are a thing of the past. This is despite record first quarter growth figures in 1996 (the result of a massive injection of government funds) which marked the end of the most serious recession Japanese capitalism has experienced for 50 years. The flipside of Japan’s penetration into East Asia is the problem of the “hollowing out” of the Japanese economy with the loss of a number of industries to other economies in the region. A recent alarm report from MITI, the Japanese trade ministry, pointed out that hi-tech production and not just traditional heavy industry is being relocated elsewhere in the region, and that this is continuing despite the upturn in the Japanese economy.

The new problems confronting Japanese capitalism explain the harder line in trade negotiations with the US. In 1995, the two countries stood on the brink of a “car wars”. The Clinton administration threatened sanctions against the Japanese unless the proportion of US cars sold on the Japanese market increased. Cars account for 60 percent of Japan’s monster trade surplus with the US. The architect of the new tougher line towards the Americans was Hashimoto who has subsequently become Japan’s Prime Minister. While the outcome of this confrontation was another fudge, most media commentators judge the Japanese to have come out of it better. This year the trade surplus has been reduced from $60 billion to $40 billion, but almost all the increased imports are Japanese cars re-imported from plants in the US. Recent trade skirmishes of this kind show the deepening tensions between the US and Japan. The Japanese foreign ministry has become sharply divided between a pro-American and anti-American faction. The Malaysian Prime Minister Mahathir’s anti-US ideas have, if anything, received more publicity in Japan than in Malaysia. At the same time the US and Japan are increasingly forced to lean on each other, not least because of the China’s growing ambitions.

China Flexing Its Muscles

The Chinese regime, aware of its increased economic weight, is attempting to exploit the conflicts of interest between the different imperialist blocs. Recently there was a tilt towards the EU, as a means of exerting pressure on the Americans. Prime minister Li Peng announced that: “If the Europeans adopt more co-operation with China in all areas, not just in economic areas but also in political and other areas, I believe the Europeans can get more orders from China” British Financial Times (11 June 1996). Boeing of the US was passed over for a big order which went instead to Airbus of France. Then when Helmut Kohl made some criticisms of the Chinese regime’s repression in Tibet, Germany was similarly threatened with a loss of business.
Militarily, China is also beefing up. Military spending has doubled during the last ten years. Security agreements with Russia and the former Soviet Central Asian republics have allowed the Chinese to draw their troops back from the northern border and to concentrate their attentions southward. Military policy is now concentrated on building up the Chinese navy. An aircraft carrier bought from Australia has been stripped down to enable the Chinese to build more. It doesn’t take a military genius to work out that this is a definite shift from a primarily internal force to a force which has the ability to play a regional role.

China is regarded as “Clinton’s foreign policy question No. 1”. Most recently the conflict has centered on Chinese pirate copies and especially Taiwan. But these issues are part of a deeper potential conflict. Therefore despite their own disputes over trade, the US and Japan this year signed a renewed military agreement, the “Japanese/US joint declaration”. The US wants the Japanese to shoulder an increased military burden in the region, but this in itself is extremely problematical. A higher Japanese military profile will prompt retaliation from other governments, for example the Koreans and the Chinese. This would signal an even more frenzied arms race.

The new US policy of “containment” towards China was one factor in last year’s rapprochement with Vietnam. The Vietnamese regime’s “market Leninism” has seen fundamentally the same process of capitalist restoration take place as in China. The shift in US relations with Vietnam is partly to counterbalance China’s influence in the region. Vietnam’s membership of ASEAN (Association of South East Asian Nations) on the 20th anniversary of its military victory over the US is ironic, given that ASEAN was originally built, not as a trading bloc but more of a military alliance to hem in the Vietnamese revolution. Now the former deformed workers’ states of Burma, Laos and Cambodia are all being invited into ASEAN. They have at least one thing in common… a border with China.

The US plays a decisive role in the region, firstly economically – although this is increasingly being challenged, and then militarily/politically. But the US cannot exercise sole sovereignty in the region for the obvious reason that it is not an Asian power. Its military presence is increasingly challenged, for example in Japan where anti-American feeling reached new heights after the rape of a child by US servicemen in Okinawa. Therefore the US is compelled to perform a balancing act in the region. As the Swedish newspaper Dagens Nyheter commented:

“A struggle for regional influence between Japan and China, without the USA as a balancing force could be catastrophic for stability in the region… Increased Japanese activity is cited as an example of what could provoke China to implement its territorial claims on its neighbors”.

The most obvious means for the US administration to punish China is to withdraw its Most Favored Nation status (MFN) as far as trade is concerned. The British Financial Times called this the “economic equivalent of a nuclear bomb” and its editorial pleaded for the administration not to take this step. The dilemma for the US is that while this would exert enormous economic pressure on China, it would also have serious consequences for US companies and could tip the whole East Asia region into recession.

An Invasion of Taiwan?

Taiwan is “at the core” of today’s Washington/Peking conflict according to Li Peng. The Chinese military maneuvers off the coast of Taiwan during March 1996 were mainly intended to scare the island’s voters not to support a pro-independence candidate in the presidential election. In local elections held in December 1994, the pro-independence DPP took 38 percent of the vote compared to 56 percent for the ruling KMT. In the capital Taipei the DPP received 44 percent of the vote and won the mayoral seat. The KMT, descendants of the defeated nationalist armies of Chiang Kai-shek which fled to the island in 1949, do not advocate formal independence but adhere instead to the delicate formulation that someday China and Taiwan will be reunified. The Chinese tactics seem to have succeeded, with the victory of the KMT’s candidate. Subsequently relations have cooled down but it would be a mistake to think the problem has disappeared. This is a critical issue for China, something which they are not prepared to negotiate over. It is a peculiar position because Taiwan is a de facto independent state. According to the Chinese President Jiang Zemin, the number one threat is what they term “splittism”; the breakup of China. They fear that a concession to Taiwan which strays from the current fudged formula of “One China” would open the floodgates to rebellious provinces within China itself. China’s leaders are haunted by the historical figure of Gorbachev. Even the US Defense Department has produced a report on China which raises the possibility of a Yugoslav-style break-up. Recently there’s been an escalation of separatist activity, with bombings in Tibet and the emergence of the “tiger” movement in the largely Muslim province of Xinjiang.

The new forms which this process is assuming are related to the shift to capitalism. Bourgeois commentators agree that the Taiwan crisis today is not the same as the conflicts of the 1950s and 60s. Deng Xiaoping’s expression “One China, two systems” was first applied to Taiwan, and then later in discussions over Hong Kong. Yet when Taiwan and China represented two different social systems, the Chinese regime had less to fear from Taiwan. Paradoxically now that they are both fundamentally capitalist, the government in Peking cannot tolerate a challenge from this quarter.

Taiwan is the fourth largest economy in East Asia and a significant economic power. It is the fifth largest exporter of capital in the world and the second largest investor in East Asia after the Japanese. In Thailand, for example, it is the fourth largest investor, the second in Malaysia, the first in Vietnam and the third largest in China itself. Currently the Taiwanese capitalists have around 25,000 investment projects on the Chinese mainland. Economically, the Chinese province of Fujian, across the Taiwan strait, looks increasingly to Taipei rather than Peking. The Chinese regime’s nightmare is that in a period of political and economic turmoil, with secessionist tendencies growing, some of the rich southern provinces could seek an ally in Taiwan against the central government and even attempt to breakaway altogether.

Capitalist economic relations in China have resulted in an enormous gap between the richest and poorest regions. This, rather than the ethnic make-up of the country, is the most striking parallel with the former Yugoslavia. In Yugoslavia the gap between the richest area and the poorest was 6:1; in China it’s 10:1. Only 30-40 percent of tax revenues now reach the central government. The position of the center is being undermined both by rich and poor provinces. One example is in the rich Yangtse River Delta where local authorities have plans to build nine international airports in an area of just 100 square kilometers. A delegate to the Peoples’ National Congress from the poor inland province Shanxi told the press that “we ignore what Peking says”. Poor regions do everything to go around the regimes attempts to clamp down on spending.

Another important factor is the increasing role played by the rest of the 52 million overseas Chinese. They play a similar role in the economies of East Asia to that which the Jewish people traditionally played in Europe. Their cultural identity and cohesion as an ethnic group has similarly been reinforced by a history of persecution. The table below shows how much of the economy is controlled by the ethnic Chinese:

Share of population Share of economy
Malaysia 32% 60%
Indonesia 4% 50%
Philippines 1% 40%
Thailand 10% 50%
Vietnam 1% 40%

The overseas Chinese (including Hong Kong and Taiwan) are the biggest investors in China, accounting for 82 percent of total investment, compared to 5 percent from the USA and 4 percent from Japan. Most of the investment is funneled through Hong Kong. The growing role of the overseas Chinese within the economy is another potential threat to the regime in Peking.

The danger of a total break-up of China, a return to rule by local warlords, is one possibility in the situation. Today’s rapid economic growth is a factor holding these forces in check. But when this comes to a halt, especially in the event of a slump, events could move very quickly indeed. Devoid of its previous social base, the so-called Communist Party is increasingly dependent on Chinese nationalism, as the conflict with Taiwan demonstrates. At a certain stage the US and Japan may choose to encourage separatism in order to weaken China, although this in itself is a policy fraught with dangers. Hong Kong, which returns to Chinese rule next year, will be an important test case. It could create a new internal conflict and the city’s importance economically means that the regime cannot act as they have done, for example, in Tibet. It’s instructive that Macao, which returns to China in 1999, was twice offered back by the Portuguese, in the 1950s and again in 1974, but the Chinese Stalinists declined the offer.

Chinese Capitalism

The main fault-line within China’s ruling group is not today between pro-capitalists and anti-capitalists. It is between centralizers and decentralizers. The Economist commented that even the “most gung-ho supporters of Deng’s reforms” are now in a coalition with former “hard-liners” like Li Peng on the need to re-establish central control, not so much over the economy as over the provinces. As explained before, when the regime embarked on the reform program in 1978, the aim was not consciously to reintroduce capitalism. Deng’s policies were a version of Bukharin’s ideas to stimulate the economy through certain elements of capitalism, especially in the countryside. However, a turning point was reached in the period from 1989-91 with the collapse of Stalinism internationally. Then Peking realized there was no turning back. In 1990 the first stock exchange was opened in China, now they have three and next year, with Hong Kong, they acquire the second most important financial center in Asia. At the party congress in 1993 the leadership formally dropped objections to the private sector occupying a bigger share of production than the state. This merely recognized an accomplished fact. In 1994 the state sector accounted for 34 percent of industrial output compared to 78 percent in 1982. Bankruptcy laws have been in operation since 1986 which permit the closure of unprofitable state companies. While these laws have been administered very selectively to avert a social explosion, they have resulted in rationalizations and new working practices being forced on workers. Many state companies have been “commercialized” so that they function to all intents and purposes as private companies, “slipping away from the state’s grasp” in the words of the Economist.

80 percent of prices and most wages are now determined by the market. The regime has plans for an independent Central Bank “on the European model”. It is clear from this that even while China retains a sizeable albeit minority state sector there is very little of a “planned economy” left. It’s more a case of a big dose of state capitalism on the lines of other East Asian countries. The capitalist class probably numbers millions in China today. Price Waterhouse estimates that 450,000 expatriate Chinese managers are now based in China. The Wall Street Journal 26th April 1994 spoke of the old bureaucracy “using economic reforms to transform themselves from a special-privilege class to a new power class”.

Tens of thousands of the sons and daughters of top party officials have set themselves up in business. An example of this emerged in the “Mr. Copper” fraud case, where the Chinese company involved CHIEC was linked to Deng’s favorite son-in-law. The armed forces (PLA) have been described as “more of a business than a fighting force”, and are reckoned to bring in more from their various companies, both military and non-military, than they get from the state budget. For this reason in our material we should avoid using the term “bureaucracy” to describe what is essentially a capitalist regime. Of course there are capitalist bureaucracies, but this term is associated so much with Stalinism in China’s case that it can lead to confusion.

A Period of Political Shocks

The idea that the “miracle economies” of East Asia will save world capitalism is false. The region is entering a period of political shocks, wars and revolutions. The capitalists may come to curse the very economic “miracle” they are currently praising because of its role in strengthening the working class. On the economic front, there are already signs of a slowdown in some of the most important economies. Japan has left the fast lane altogether, and faces problems similar to US and European capitalism. But even South Korea is encountering growing difficulties. Samsung has even ordered its managers to stop playing golf because of falling exports.

The collapse in prices for computer chips has severely hit both Taiwan and South Korea which together invested $30 billion to secure a leading position in this field. South Korea’s current account deficit hit a record of $8 billion last year and this year is forecast to rise to $12 billion. Just as the Japanese budget deficit now exceeds that in many European countries, a growth of indebtedness can be expected in all the economies of the region. The Bank of International Settlements (BIS) claims that 80 percent of the $100 billion loaned from western banks last year went to the economies of East Asia. The furious property boom underway in the region’s cities must at a certain stage give way to a Japanese style crash or worse. Therefore the current business cycle in East Asia has many of the features of the 1980s’ “bubble economy” in the older industrialized countries.

As Marx explained, capitalism is creating its own gravedigger in the form of the working class. In East Asia some of the most important detachments of the world working class are emerging. The Chinese working class must now be the biggest in world. Inevitably the Asian capitalists’ propaganda that they are going to “pull it off” and become modern and industrialized economies within a generation, must have some effect on workers’ consciousness. But widening class differences, super-exploitation and the strengthening of the working class numerically are an explosive mixture. There must be similarities with the position of the Russian working class at the start of the century. It is a case of a fresh working class which in many cases does not have the complicating factor of the debris of former workers’ parties.

The mass unrest in Indonesia shows what will happen throughout the region and signals the beginning of the end of the Suharto regime. The 1990s have seen the emergence of an illegal trade union movement with over two million members according to reports and a network of working class political activists. The bourgeois opposition grouped around Sukarnoputri shares the regime’s fear of what will happen if the workers and the urban poor take to the streets and therefore prefers to protest through the courts rather than turn to the masses.

The magnificent strike of the Korean car workers is another example of what to expect. The strike at the second biggest car parts producer, Kia, which threatened to spread throughout the auto industry, resulted in a big victory. The workers won an 11 percent rise, one hour off the working week, reinstatement of 300 sacked workers and $370 compensation each for loss of pay during the strike. Most significant was the fact that this strike was led by the illegal trade union federation KCTU, which now claims over 400,000 members despite operating illegally with three of its leaders still under arrest. The growth of KCTU is an indication of what can happen elsewhere where unions are forbidden or, as in South Korea, only state controlled unions are tolerated.

Just as capitalism in the region has assimilated from the older industrialized countries in order to try to overtake, the workers movement can prove to be among the most receptive to Marxism and the CWI. The lightning growth of our section in Pakistan gives us a glimpse of what is possible. This discussion is important for all our sections, to raise our understanding and help us attract the first recruits to the CWI and the world socialist revolution from this decisive region.