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Issue #1492      9 March 2011

Culture & life

USA and China: compare the pair

The USA is the world’s biggest debtor nation. The economy at the heart of the capitalist system owes so much money that if the countries that loaned the money to the US asked for it back, the effect would be an economic disaster.

Beijing Central Business District. (Photo by Andy Wong)

Shortly after WW2, the US was the leading economic power globally, and could impose its will on much of the rest of the world. Only the socialist countries were able to withstand its economic pressure, but doing so meant enduring a US-imposed economic blockade that warped their development and frustratingly denied their people many of the consumer-oriented products of modern technology.

The US and European leaders of imperialism successfully used the shortages and other supposed “inadequacies” of socialism to besmirch the very concept of a non-capitalist system.

The leaders of the Communist Party of China (CPC) watched these developments with interest, especially after the treacherous strategies of the opportunist Gorbachev finally led the USSR to destruction.

The Chinese Communists analysed the experience of the USSR and of their own chequered history, and realised afresh that any revolution that failed to raise the living standards of the people, that failed to meet their hopes and aspirations, would not last. To lift the living standards of the Chinese people, the CPC would have to rein in the population growth and create jobs for millions of people.

The harsh but necessary one-child policy took care of the first problem; offering China’s huge but untrained population to capitalists in search of cheap assembly labour began the process of dealing with the second problem.

Steps were taken to minimise the anticipated ill-effects of working with and for capitalists: their factories were restricted to certain designated zones, workers in those zones had to be paid at higher rates than in other parts of China, the factories were on leases that in 20 to 40 years reverted to China. The foreign companies using the cheap Chinese labour also had to train the workforce in all aspects of the business, from the factory floor to international sales, so that when the factories reverted to China, they could be successfully managed by the local workforce.

As China’s workforce learnt how to run the various industries now operating in the country, and took more and more control of it, the country’s economy grew apace. Socialist China became more and more entrenched in the global economic system, and there was nothing the capitalist could do about it.

The US firm Wal-Mart, the world’s biggest retail outfit, has some 7,000 suppliers. Every one of them sources their materials from China. The US was once (and for a long time) the world’s biggest manufacturer of automobiles. That title now belongs to China.

Last year, China’s GDP (Gross Domestic Product) grew by a whopping ten percent, despite the global economic crisis. The government was able to rake in eight billion Yuan in taxes, which allowed it to meet one of the targets set at the previous Party Congress of significantly raising the standard of living of the working people. (The target set before the onset of the global financial crisis was to raise per capita standard of living fourfold in the course of the present five year plan. They may yet do it.)

Already, China has displaced Japan as the world’s second largest economy (it has also replaced Spain as the world’s third most popular destination for tourists). It maintains the world’s largest monetary reserves, which the cash-strapped USA finds particularly galling.

Both the US and the EU have pressured China to revalue the Yuan and to open its markets for “free trade” with them both. The Chinese government seems unlikely to fall for that. In fact, in a tactfully worded warning, China’s President Hu Jintao told US journalists in January that both countries had “gained bilateral benefits from an equally solid win-win relationship that would be lost if there is confrontation”.

The US would seem to be in a poor position for throwing its weight around in this regard. It is so deeply in debt that the Republicans are threatening to shut the government down by refusing to authorise fresh borrowings.

Public employees (teachers, officials, anyone in a semi-government job) are being attacked in various Republican-controlled states in an attempt to force them to accept wage cuts, as though the country’s debt problems have been caused by “greedy workers” rather than really greedy capitalists.

When the US economy was dominant, the US dollar was the currency of international exchange. Today, however, governments are cautious about accepting US dollars as payment, regarding a currency guaranteed by the US government as a dubious asset at best.

One of the factors that precipitated the Iraq war and the attacks on Iran was the decision of Iraq and some other Arab countries to begin writing oil contracts in Euros instead of US dollars.

Globally, the US and Europe are being challenged financially by the emerging BRIC countries: Brazil, Russia, India and China. Last year, China’s direct foreign investment grew by a whopping 36.3 percent, to US$59 billion (and that’s excluding the financial sector).

US right-wingers express concern about Chinese investments in the US and Europe, but actually most of China’s foreign investment is in Asia and Latin America. By foolishly aping the US position, Australian politicians – both Labor and Liberal – are digging a most uncomfortable hole for themselves, and for us.  

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