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On China’s overcapacity

The article below, written for Friends of Socialist China by Shiran Illanperuma, addresses the latest ideological weapon in the Biden-Trump trade war against China: that of ‘overcapacity’. According to Western politicians and neoliberal economists, China’s industrial subsidies and production capacity are to blame for the US’s trade deficit and its apparent inability to reindustrialise its economy.

Shiran, citing fellow Marxist economist Michael Roberts, observes that the US and EU have sustained trade deficits since decades ago, before China’s emergence as an industrial superpower: “In a previous era, it was Japan and Germany that were the source of the US’s protracted trade deficits.” This rather suggests that “the main problem is the decline in the competitiveness and productive capabilities of the US itself rather than China’s (or, for that matter, anyone else’s) industrial policies.”

The article shows that China’s capacity utilisation and inventory levels almost exactly match those of the US. Hence, according to standard metrics, China is no more guilty of ‘overcapacity’ than the US itself. What is true is that China is actively working to contain excess capacity in mature industries such as coal and steel. However, in emerging technologies – particularly those required for solving the climate crisis – China is leveraging its socialist market economy to rapidly innovate and develop its productive forces. It should be noted that this strategy is responsible for a decrease in solar PV and wind energy costs of around 90 percent over the last decade. From the standpoint of maintaining a habitable Earth, the accusations of Chinese ‘overcapacity’ are beyond absurd.

Ultimately, what’s driving these accusations is that “Western imperialism is in crisis and can no longer sustain the position of its old labour aristocracy.”

The thesis of Chinese overcapacity therefore serves a dual purpose. First, it provides the Western ruling class with a means to deflect criticism of its own neoliberal policies in order to scapegoat China for the destruction of its industrial base. Second, it allows that same ruling class to resort to protectionism and subsidies on behalf of monopoly capitalists.

Shiran concludes:

For its part, China is developing technologies that are crucial for the future of mankind. It has done so while the ruling elite in the West gamble away wealth produced by workers through stock buybacks and real estate speculation. It is up to the Western Left to organise workers against imperialism and anti-China chauvinism, and to fight to liberate the productive forces necessary to address the socioeconomic and ecological challenges of this century.

Shiran Illanperuma is an independent journalist and researcher. He is currently reading for a master’s degree in economic policy at SOAS University of London.

In the last few months, there has been an intensified campaign by Western politicians, academics, and mainstream media to popularise the narrative of “Chinese overcapacity.” Like the disproven narrative of the “Chinese debt trap” before it, this appears to be a coordinated attempt by the West to scapegoat China for structural problems and imbalances in the world capitalist economy.

The thesis of China’s manufacturing overcapacity has been in circulation since at least the global financial crisis. In short, the argument goes that China’s investment-driven growth model creates both local and global imbalances. It is argued that higher investment suppresses consumption (as a share of GDP) and drives income inequality and excess production capacity within China. It is further argued that such imbalances are to blame for China’s excessive exports and massive trade surplus, which is said to be at the cost of the United States’ trade deficit.

In academia, this argument has been popularised by Keynesian economist Michael Pettis, who is a Professor of Finance at Peking University. Brad Setser, a former senior advisor to the United States Trade Representative, has also been a champion of this argument. Notably, the overcapacity thesis has also been a consistent theme of the IMF on China.

In May, the IMF Mission to China published a report stating that in order to ensure growth, China’s key priorities should include “rebalancing the economy towards consumption by strengthening the social safety net, liberalising the services sector, and scaling back distortive supply side policies that support the manufacturing sector [emphasis added].”

The IMF is, of course, a Western-dominated institution, where China controls just 6% of voting shares despite contributing to 18% of global GDP.

The overcapacity thesis has been an increasing source of diplomatic tension. US Treasury Secretary Janet Yellen has attempted to rally the G7 on the issue and coax Global South countries such as India and Mexico into the debate. Meanwhile, European Commission President Ursula von der Leyen has argued that Chinese industrial policy is distorting the EU market for electric vehicles (EVs).

The Chinese side has reacted strongly to these allegations. Chinese President Xi Jinping said that there was no such thing as a Chinese overcapacity problem. Meanwhile, Chinese Ministry of Commerce spokesperson He Yadong has said that the accusation of Chinese overcapacity was a typical Western double standard. More recently, Chinese Foreign Ministry Spokesperson Wang Wenbin said, “Overcapacity is just a pretext the US uses to try to coerce G7 members into creating fences and restrictions for Chinese new energy products.”

Following in Trump’s footsteps, the Biden administration recently threw up a slew of new tariffs against Chinese products, including 25% on steel and aluminium, 50% on semiconductors, 50% on solar panels, and a whopping 100% on electric vehicles (EVs). As the US-led trade war against China intensifies, it is worth reflecting on the facts behind the overcapacity thesis.

Measuring China’s overcapacity

French entrepreneur and analyst Arnaud Bertrand has argued that the concept of overcapacity can be measured with a few standard metrics: 1. capacity utilisation rates; and 2. inventory levels.

In economics, capacity utilisation refers to the share of production capacity that is in use at any given time. Generally speaking, a prolonged period of high capacity utilisation can indicate a need to expand productive capacity. In contrast, a prolonged period of low capacity may indicate a need to reduce productive capacity. Bertrand points out that the capacity utilisation rate in China is 76%, which is around the same as in the United States, which is 78%.

Inventory levels are generally used as a measure of how well sales are doing. A growing inventory of goods might mean a combination of sluggish demand or overproduction, while a shrinking inventory might mean growing demand and underproduction. Bertrand points out that the finished good inventory index PMI for China stood at 49, while a similar index for manufacturing inventory for the United States stood at 50.

Neither of the above numbers suggests that China has any more overcapacity than the US. On the contrary, the fact that Chinese industrial profits continue to grow suggests that there is ready demand for Chinese manufactures. Several analysts have also argued that China’s drive to increase production capacity for new energy products makes it indispensable in the global fight for ecological sustainability.

Tariffs, technology and industrial policy

In the following article, well-known Marxist economist Michael Roberts assesses the latest set of protectionist measures taken by the Biden administration against China. Roberts notes that these measures include “a quadrupling of the tariff rate to 100% on Chinese electric vehicle (EV) imports, doubling the levy on solar cells and more than tripling the fee on Chinese lithium-ion EV batteries.” These tariffs constitute a doubling-down by President Biden on the measures introduced by the Trump administration in 2018-19.

The article observes that “Chinese EVs are now better and cheaper than their Western counterparts”, and this reflects China’s rapid advance in several key areas of green technology.

China has scaled up its green industries rapidly. It now produces nearly 80% of the world’s solar PV modules, 60% of wind turbines and 60% of electric vehicles and batteries. In 2023 alone, its solar-power capacity grew by more than the total installed capacity in the US.

Biden’s protectionist measures are being justified on the basis that they will stimulate domestic production of green technology in the US. However, Roberts argues that this is unlikely to be the outcome, given historical precedent. Previous tariffs on solar panels, introduced in 2012 and later expanded, did not revitalise the US solar industry. “On the contrary, the American global market share of the solar industry has considerably decreased since the original tariffs were placed — from 9% in 2010 to 2% today. Meanwhile, China’s share of the industry rose from 59% to 78%. There’s no reason to believe that the recent tariff increase will reverse this trend. There’s even less hope that they will help spur a domestic EV industry.”

The article also points to the irony of the US accusing China of violating WTO rules with its green tech subsidies, whilst simultaneously introducing a substantial package of its own green subsidies. “It seems that China’s industrial policy of subsidies is ‘gaming the system’, while US industrial policy of similar subsidies is just ‘protecting’ US industry.”

Rather than boosting domestic production, the tariffs are likely to have the opposite effect, by raising costs for US consumers and businesses and disrupting supply chains. The article notes that “Trump and Biden’s imposition of tariffs risks hindering the adoption of low-emission technologies by American businesses and consumers.”

In general, the US’s strategy of attempting to stifle China’s development will not be successful and will certainly not benefit the US economy; indeed “the cost to the US economy and the profitability of US industry will be considerable, and even more to the real incomes of Americans.” However, in a context where “the US is losing its imperialist profit extraction from trade with China and increasingly being squeezed out of world markets by Chinese goods”, there appears to be a bipartisan consensus on continuing with these last-ditch attempts at destabilising and weakening China, even if ultimately they prove to be a classic case of “lifting a rock only to drop it on one’s own feet.”

The article was originally published on Michael Roberts’ blog on 20 May 2024.

Last Tuesday, the trade and technology war launched by the US on China back in 2019 took another ratchet up.

The US government announced a new series of protectionist measures on Chinese goods imported into the US. It included a quadrupling of the tariff rate to 100% on Chinese electric vehicle (EV) imports, doubling the levy on solar cells and more than tripling the fee on Chinese lithium-ion EV batteries. These tariffs are equivalent to an annual $18bn of Chinese goods on top of the previous $300bn slapped down under Trump.

The new tariffs specifically target ‘green goods’, most notably EVs, but tariffs on lithium-ion batteries, critical minerals and solar cells will also be substantially increased. The measures are set to take effect this year (with the exception of graphite, where Chinese dominance is most stark, so tariffs begin in 2026).

China is the world leader in EV production and innovation. Chinese EVs are now better and cheaper than their Western counterparts. Biden’s intention is to stave off Chinese competition while stimulating domestic EV supply. But China’s EV imports are only 2% of the US market. And all the goods that these new tariffs were slapped on constitute only about 7% of US-China trade. What this shows is that, even the US government recognizes that the US still relies heavily on Chinese goods imports and cannot cut them all dead.

That’s because the tariff and technology war is not just about protecting the ailing US auto industry. China is totally dominant in EV manufacture because it’s also totally dominant in battery (cell) manufacture. And it’s also totally dominant in the manufacture of the chemicals that go into those cells (cathode & anodes).

China is also utterly dominant when it comes to the refining of the materials that then go into the chemicals that then go into the cells which go into the EVs.

The latest danger from China: too much clean energy?

This brief article by Friends of Socialist China advisory group member Stefania Fusero, originally published in Italian in Futura Società, brings some much-needed clarity to the question of US allegations concerning China’s “over-capacity”, particularly in green technologies such as renewable energy, electric vehicles and lithium-ion batteries.

Stefania rightly points out that, by demanding that China curtail its production of materials that are essential for a global green transition, US Treasury Secretary Janet Yellen “implicitly admits that the priority for the US government is not to join in the global fight against climate breakdown, but instead to sustain the profits of US corporations and financial elites.” This in turn serves to reiterate that “Western governments serve the interests of small oligarchic minorities, not the masses of their populations.”

Stefania notes that the diverging priorities of China and the US are amply evidenced by the fact that, while China directs enormous resources towards development, infrastructure, sustainable energy, and the fight against poverty, the US devotes enormous resources to war, domination, hegemonism, and the pursuit of a ‘rules-based international order’ where the rules are written in Washington and serve the exclusive interests of the US ruling class.

The article concludes by predicting failure for the US’s tactic, citing Radhika Desai’s recent article in CGTN: China “will not roll over and play dead when asked to harm its own economy, its own workers and the possibility of dealing with climate change, all only so that the interests of unproductive inefficient and financialised US corporations may be advanced.”

The article was translated into English by the author.

Giuseppe Masala gave an exhaustive explanation in l’Antidiplomatico of the real reasons which brought US Treasury Secretary Janet Yellen back to China.

Among other things, after quoting from a statement by Yellen – ”we now see the development of excess capacity in ‘new’ industries such as solar panels, lithium-ion batteries and electric vehicles” – Masala rightly states that, translated into simple language, Yellen is saying that the US productive system cannot cope with Chinese competition.

Simplicius the Thinker gets to the same conclusion in his post Yellen Dispatched to Beg China for Face-Saving Slowdown: “The fact of the matter is, China is simply leaping ahead of the decrepit, deteriorating U.S. by every measure and the panicked elites have sent Yellen to beg China to ‘slow down’ and not embarrass them on the world stage.”

There’s more to it, though. When Yellen denounces and laments China’s “overcapacity of clean energy” – specifically mentioning solar panels, electric vehicles and lithium-ion batteries – she gets straight to the issue of the global climate breakdown.

In this context, contrary to incessant Western smearing campaigns, China has acted consistently with the commitment to defend the environment Xi Jinping announced in 2014, and has translated it into a climate strategy the extent of which has never been seen before, as acknowledged by the president of the Environmental Defense Fund: “the world has never before seen a climate program on this scale.”

In solar energy alone, the International Energy Agency noted that China’s PV-focused industrial policies have contributed to more than 80 percent cost reductions, helping the sector become the most cost-effective electricity generation technology in many parts of the world – an important contribution to global decarbonisation.

Complaining about what she calls “clean energy overcapacity”, Yellen implicitly admits that the priority for the US government is not to join in the global fight against climate breakdown, but instead to sustain the profits of US corporations and financial elites. She lays bare the fact that Western governments serve the interests of small oligarchic minorities, not the masses of their populations.

Just take a simple look at the composition of the US public debt, which has reached the stratospheric figure of $34 trillion, of which 14 trillion has gone to military spending since the start of the war in Afghanistan. While the US has been throwing money into the bottomless pit of its endless wars ‘on terror’, China has been investing in the development of its economy, its infrastructure, as well as the fight against poverty, demonstrating that the priority of the PRC is development, whereas the priority of the US is war.

It is thus unsurprising that the foreign policies of the two countries are poles apart, both in the guiding principles and the parlance set out in their respective official documents, and in the posture adopted towards other countries.

China uses the language of diplomacy, rejects the logic of opposing blocs, is not part to any military alliances, and engages with partners for its various international projects, the Belt and Road Initiative first and foremost, in ways which are beneficial both to itself and to them. The US, on the other hand, does not want partners, but vassals from whom it demands exclusive allegiance to the point of agreeing to sacrifice their own interests, and does not hesitate to use the weapons of military and economic threat, in line with a purported ‘international rules based order’, which the US bends to its own will and convenience.

Will China bow to the requests and more-or-less veiled threats coming from the USA and its satellites?

As Radhika Desai writes in a recent article: “Sadly, for Yellen, China is neither Japan nor Europe but a socialist economy whose government is oriented towards advancing egalitarian development for its people. Yellen will find it willing to cooperate for the benefit of people and the planet. But it will not roll over and play dead when asked to harm its own economy, its own workers and the possibility of dealing with climate change, all only so that the interests of unproductive inefficient and financialized US corporations may be advanced.”

The Multipolar Challenge: Implications for dollar dominance and the shifting tides of US hegemony

We are very pleased to reprint the following article by Efe Can Gürcan, which was originally published in BRIQ Belt and Road Quarterly, Volume 5, Issue 1.

In his article, Dr. Gürcan, who is currently a Visiting Scholar at the London School of Economics and Political Science (LSE) and is a member of the FoSC Britain Committee, argues that the global political economy has long been characterised by the commanding presence of the US dollar – a linchpin that has steadfastly upheld US hegemony across decades. He further endeavours to illuminate the multifaceted interconnections between a multipolar world and the potential reconfiguration of the dollar’s global standing. His findings suggest that China emerges as the principal contender to US hegemony, spearheading initiatives aimed at dedollarisation, with the prevailing trajectory being towards asset diversification in a post-hegemonic context. Evident manifestations of such inclinations are China’s policies on RMB internationalisation, exemplified by the introduction of the CIPS (Cross-Border Interbank Payment System), UnionPay, and the Digital Yuan. These strategies complement the growing prevalence of bilateral trade in alternative currencies, a growing intention to conduct oil trading in non-dollar currencies, currency swap agreements, and the prospective advent of a BRICS currency. Institutionally, this shift is anchored in frameworks such as the New Development Bank, the Shanghai Cooperation Organisation (SCO), the Asian Infrastructure Investment Bank (AIIB), and the Belt and Road Initiative (BRI). The mounting view of dollar dominance as a manipulative instrument of US foreign policy, coupled with the perceived waning of US hegemony and diminishing confidence in the US dollar, impels developing nations to hasten their currency diversification pursuits. This momentum is observed particularly within the framework of South-South cooperation, with China’s proactive stance being a pivotal influence.

Developing his argument, Efe explains that this emergence of multiple power centres, each with its own economic and political clout, threatens to reshape the traditional dynamics of international economic relations, challenging the very sanctity of the dollar’s global supremacy.

He also considers it relevant to address the negative implications of dollarisation for the developing world. Adjustments in US monetary policy have frequently precipitated debt, exchange rate, and financial crises in various developing economies. Noteworthy instances include the Latin American debt crisis of the 1980s, the Asian financial crisis of the 1990s, and the 2018 exchange rate crises in Türkiye, Brazil, Argentina, and other economies, sparked by an increase in US dollar interest rates. Therefore, dollarisation is typically linked with high and unstable inflation, exchange rate fluctuations, and undisciplined monetary policy.

Global confidence in the US dollar has been foundational to its dominance. Such confidence has roots in the United States’ past contributions to global production, its unrivalled military prowess, and its capacity to maintain its currency’s purchasing power through technological advancements and a robust service sector. However, recent geopolitical shifts and the multipolarisation of world politics appear to be eroding this global confidence. China’s ascent as the leading producer and exporter of high-tech goods, combined with the repercussions of the 2007-2008 financial crisis and US military challenges in countries like Afghanistan, Iraq, and Syria, have raised questions about the dollar’s unassailable position.

He cites the work of Daniel McDowell to emphasise that sanctions are a crucial tool in the strategic use of the dollar to counter the emerging powers threatening US hegemony. Primary sanctions aim to directly isolate the targeted individual, company, or government from the dollar-based financial system. In turn, secondary sanctions are designed to exclude the target from global financial networks through the involvement of foreign financial institutions.

Turning to the trend towards dedollarisation, he explains that it emerged against the backdrop of the unprecedented rise of the Latin American left in the 2000s as an important catalyst in multipolarisation, which includes Lula’s Brazil, a leading BRICS+ member. Multipolarisation of the global political economy, he adds, goes hand in hand with the rise of South-South cooperation, embodied not only in the rise of the Latin American left and its social justice-oriented regionalism, but also in the proliferation of Eurasia’s security-oriented regionalism, including the SCO, the Eurasian Economic Union, the Collective Security Treaty Organisation, and other cooperation schemes such as the BRICS+, BRI, and the AIIB. These organisations hold the potential to serve as conduits for dedollarisation in forthcoming years.

Particularly significant are trends in the global energy market. If Saudi Arabia and potentially other Gulf countries start trading oil in yuan or other currencies, this would significantly erode the dollar’s dominant position in global energy markets. Additionally, the March 2023 agreement between Chinese and French energy companies to settle an LNG deal in yuan is also of historic importance. Given the magnitude and importance of energy deals, conducting transactions in currencies other than the dollar could set a precedent for future trade agreements. Equally important is China’s recent move to use the Shanghai Petroleum and Natural Gas Exchange as a platform for yuan settlements with Arab Gulf nations, a strategic effort to bypass the US dollar in energy trade. Given the vast volumes of oil and gas traded between the Gulf and China, this shift could have a significant impact on the demand for the US dollar in global energy markets. A similar situation goes for nuclear energy. The 2023 agreement between Bangladesh and Russia to use the Renminbi for the settlement of a nuclear plant transaction is yet another sign of countries seeking alternatives to the US dollar for significant infrastructure and development projects.

In this evolving landscape, therefore, China is seizing the opportunity to amplify its global financial footprint. In fact, China’s push to reform the dollar-centric global financial system began following the 1997 Asian financial crisis. Dai Xianglong, who was then the Governor of the People’s Bank of China (PBoC), expressed in 1999 that the instability caused by the dominant role of a few national currencies as international reserve currencies, as well as the system’s failure to address balance of payments imbalances, leads to international financial crises. In the wake of the 2007–2008 global financial crisis, Zhou Xiaochuan, Dai’s successor, emphasised the need to overhaul the international monetary system. He proposed an international reserve currency that would be independent of individual nations and identified the weakening dollar as a key factor in the global economic crisis.

China’s endeavours to reduce reliance on the US dollar and bolster the international stature of its currency, the RMB, have involved strategic maneuvers in global financial diplomacy. An integral part of this strategy has been the establishment of currency swap agreements with developing nations. By 2017, China had entered into swap agreements that amounted to more than $500 billion with 35 countries. Both the number of countries and amount of funds involved have continued to increase significantly.

China’s proactive steps towards dedollarisation and establishing the RMB as an international currency have manifested in various other innovative financial undertakings. Initiated in 2002, China’s UnionPay credit card system was instituted as a competitor to globally renowned credit card giants, Visa and MasterCard. By 2019, UnionPay’s ascendancy in the global credit card market was evident, as it held the lion’s share, accounting for 45% of credit cards in circulation. This significant development is not merely about market competition. It represents a strategic move to offer an alternative financial lifeline to nations, such as Russia, Iran, and Cuba, which, due to Western sanctions, find themselves estranged from the dominant international payment systems.

The advantages of the Digital Yuan are manifold. Beyond expediting financial transactions, the use of this blockchain-driven technology enhances China’s capability for comprehensive financial oversight and synchronisation – key attributes for maintaining a robust economy.

And the BRI stands out as one of China’s most ambitious global projects. While the initiative primarily focuses on infrastructural development and connectivity across continents, it also carries significant financial implications. By financing projects within the BRI framework, China can encourage or even mandate the use of yuan for transactional purposes, thereby promoting its global usage. If the BRI projects are primarily transacted in yuan, it could lead to an increased demand for the currency, thereby internationalising it and challenging the dominance of the US dollar.

Presently, dedollarisation represents a nascent trend, predominantly evident in developing nations seeking to diversify their monetary assets. In this context, the notion of “post-hegemony” encompasses not only the relative waning of US global influence and the rise of alternative power hubs, but also the burgeoning South-South collaboration.

Towards the conclusion of his article, Efe turns his attention specifically to Türkiye, which, he outlines, has articulated on multiple occasions its interest in deepening ties with non-Western multilateral organisations. Ankara has repeatedly signaled its intention to explore membership possibilities within the SCO and BRICS, two prominent platforms that present alternatives to the Western-centric global order. Furthermore, Türkiye’s engagement with the BRI is noteworthy. Within the BRI framework, Türkiye has championed its role in the Middle Corridor Initiative, serving as a critical bridge linking China to Europe, thereby reinforcing its geopolitical and geo-economic significance in Eurasia. Another testament to Türkiye’s eastward gravitation is its active engagement with the AIIB. As an institution primarily led by China, the AIIB has seen Türkiye emerge as one of its main beneficiaries, funneling considerable funds to support Ankara’s expansive infrastructure projects. Türkiye possesses a 2.54% voting share within the AIIB. Following India and Indonesia, Türkiye has emerged as the third-largest beneficiary of AIIB loans. As of 2019, Türkiye received 11% of the total loans extended by the AIIB. The majority of these funds are allocated to the energy sector. However, despite these efforts, and public statements opposing dollar dominance, Türkiye has achieved limited success in moving away from the dollar.

China’s efforts to promote the RMB on the international stage and challenge the hegemony of the US dollar, he concludes, are multifaceted. It is not just about the currency itself but is deeply tied to China’s broader strategic initiatives and global institutional leadership. In this context, the evolving financial landscape is a clear signal that the dominance of the US dollar is being actively challenged in the context of South-South cooperation, as a “post-hegemonic” form of international cooperation. Certainly, the perceived weaponisation of the dollar and the rise of the developing world as a site of resistance to US hegemony, is hastening this shift, as developing countries collaborate to develop and implement alternatives that insulate them from the economic risks of US policy decisions.

Efe Gürcan’s article is a serious study of a key issue in contemporary international political economy and one that deserves careful study.

The global political economy has long been characterized by the commanding presence of the U.S. dollar—a linchpin that has steadfastly upheld U.S. hegemony across decades. The dollar’s ascendancy, transcending mere economic value, has become emblematic of U.S. strategic influence in both the economic and geopolitical landscapes. However, as we witness the dawn of a new era marked by a multipolar global order, there is growing speculation about the potential waning of the dollar’s omnipotence. This emergence of multiple power centers, each with its own economic and political clout, threatens to reshape the traditional dynamics of international economic relations, challenging the very sanctity of the dollar’s global supremacy.

This article is anchored around the following pivotal inquiries: In what ways is burgeoning multipolarity in the global political economy reshaping perceptions and realities of the U.S. dollar’s dominance? How might a diminished dollar centrality impact the broader edifice of U.S. hegemony and the equilibrium of the global economic order? Which rising powers are at the forefront of this tectonic shift, and what strategic levers are they employing to influence the trajectory?

The present study endeavors to illuminate the multifaceted interconnections between a multipolar world and the potential reconfiguration of the dollar’s global standing. With this in mind, it also aims to elucidate the strategic implications for the United States and chart the evolving dynamics that will define the future global economic landscape. Using the method of Geopolitical Analysis Grid (GAG) (Cattaruzza, 2020; Cattaruzza & Limonier, 2019), moreover, this study systematically dissects the strategies and actions of pivotal emerging actors within the multipolar matrix. GAG facilitates a layered exploration of nation-states’ economic postures, geopolitical imperatives, and strategic alignments, all juxtaposed against their unique historical and socio-cultural backdrops. By assimilating these diverse insights, the present article uses this method to forge a holistic perspective on the emergent challenges and opportunities sculpting the global political economy. In this context, the article begins by establishing the conceptual and methodological framework that guides this research. The second and final section delves into an empirical analysis of multipolarization and de-dollarization.

Conceptual and Methodological Framework

To ensure a comprehensive and coherent analysis, it is imperative to commence by establishing a conceptual and methodological framework that will guide our examination of multipolarization and de-dollarization. The notion of U.S. hegemony is pivotal in framing this research. By “hegemony,” I refer to a scenario wherein a single state (or a group of states), “plays a predominant role in organizing, regulating, and stabilizing the global political economy (Du Boff, 2003, p. 1).” Notably, in the aftermath of World War II, U.S. imperialism emerged as the linchpin, driving the imperialist system and positioning itself at the epicenter of global hegemonic relations. It is essential here to clarify that my interpretation of “hegemony” does not necessarily require unanimous consent and unquestioned leadership. It rather encapsulates a nuanced interplay of consent and coercion in varying degrees, serving to relatively stabilize the international order and its alliance system led by a hegemonic power that pretends to act in the general interest, even in the face of discernible dissent (Gürcan, 2022b). For instance, the widely held conviction, prior to the 2000s, that the United States was unparalleled in global leadership—attributed to its economic superiority as a model nation, credibility in global governance, perceived military invulnerability, cultural appeal, and the dominance of the dollar—served as a quintessential illustration of U.S. hegemony.

Another essential term in this context is “multipolarization”, which describes the shift in the global balance of powers, as political, economic, and military clout becomes more evenly distributed, elevating the systemic importance of multiple states (Gürcan, 2019b). In turn, the term “dollar hegemony” describes a situation in which the U.S. dollar is widely adopted as the foremost instrument for international reserves, the main unit of account, and the primary means of payment, achieved through a combination of consensual and coercive measures. “Dollarization” is thereby the result of this hegemony, emerging from a process that entails the use of the U.S. dollar as a reserve of value, a medium of exchange, and a unit of account. Understood as such, one could identify three main types of dollarization. Financial dollarization pertains to the dollarization of assets and liabilities, whereas transaction dollarization relates to the payment system. Price dollarization concerns pricing units for goods and services (Vidal, et. al., 2022; Basosi, 2021; Levy-Yeyati, 2021).

What the US really means by overcapacity

In the article below, prominent Marxist economist and International Manifesto Group convenor Radhika Desai responds to the media hype about China’s putative “overcapacity” in renewable energy production – a story that gathered steam during US energy secretary Janet Yellen’s recent visit to China, in which she accused China of “flooding” the world’s energy markets with cheap green energy.

Radhika starts off with the very reasonable point that, given the number of climate records that were broken in 2023, “one might think everyone would welcome China’s plentiful and cheap clean energy equipment”. China’s unparalleled investment in solar and wind energy have resulted in a dramatic fall in the cost of these technologies worldwide, thereby providing a powerful boost to humanity’s efforts to avoid climate catastrophe.

Furthermore, when it comes to “distorting markets” via subsidies, “the US offers billions in industrial subsidies and talks of reviving industrial policy. Moreover, it denies the simple fact that no country has industrialized without protecting itself, and using myriad forms of state direction, including subsidies.” Indeed China’s subsidies are perfectly consistent with WTO rules.

The article notes that declining conditions of the US working class are caused not by Chinese “overcapacity” but by “pro-corporate and pro-financialization neoliberal US policies” which have “deindustrialized the US, stagnated working class wages and, by shifting income and wealth from the ordinary people towards a tiny elite, generated vast inequality”.

Radhika concludes by observing that, as a socialist government committed to the welfare of its people, China “will not roll over and play dead when asked to harm its own economy, its own workers and the possibility of dealing with climate change, all only so that the interests of unproductive inefficient and financialized US corporations may be advanced”.

This article first appeared on CGTN.

U.S. Treasury Secretary Janet Yellen was recently in China to talk about its “clean energy overcapacity.” What can that possibly mean? At a time when the world needs more and cheaper clean energy equipment to deal with climate change, isn’t China helping the world by making this equipment more widely available at prices more of the world can afford? Surely, that is just what the world needs in 2024.

After all, 2023 broke so many climate records. It was the warmest year on record. There were record-breaking forest fires and floods. It was the hottest northern hemisphere summer. July 2023 was the hottest month on record. Considering these facts, one might think everyone would welcome China’s plentiful and cheap clean energy equipment.

Evidently, not. The U.S. Treasury Secretary Janet Yellen accused China of flooding the world with cheap clean energy exports, distorting global markets and harming workers. What explains this perversity?

The crux of the problem is the U.S.’s stance on climate change. It would be understandable if it supported solutions that were beneficial to it and its people. However, not only does the U.S. seek benefits not for its people but its corporations, it seeks solutions that not only benefit them but also put them in a dominant position.

Yellen kicked off her campaign against Chinese overcapacity at a solar energy plant in Georgia just days before she set foot in Beijing. She alleged that China had previously inflicted overcapacity in steel and aluminium and was now doing this in the clean energy sector, particular in solar panels, lithium-ion batteries and electric vehicles. “China’s overcapacity distorts global prices and production patterns and hurts American firms and workers,” she stated.

Capacity can only be excessive in relation to demand. When the problem is labelled overcapacity the ‘solution’ is to cut (other nations’) capacity. One could always see it as a problem of restricted demand, to be solved by expanding it. U.S. elites have long approached the crisis of the 1970s as one of over-capacity and sought to deal with the problem by restricting or even reducing industrial capacity in its rivals. It did this to Japan starting in the 1990s. It is currently doing this to Europe, forcing it to deindustrialize, allegedly in order to fight the hyped-up danger that Russia poses. And now, Yellen has brought this effort to China.

If China’s industrial capacity is deemed excessive, it must be restricted so that, when such equipment becomes scarce, U.S. products of lesser quality and higher cost will find markets. It also amounts to saying that the U.S. absolutely does not wish to increase the rest of the world’s capacity to demand more by increasing development and therefore demand there.

In speaking of China distorting markets, Yellen is saying that China captures markets through subsidies. This is, of course, particularly rich when the U.S. offers billions in industrial subsidies and talks of reviving industrial policy. Moreover, it denies the simple fact that no country has industrialized without protecting itself, and using myriad forms of state direction, including subsidies. This understanding defined the terms on which China entered the World Trade Organization in 2000. The U.S. was willing to grant these terms only because it assumed that China would be no more successful than other developing countries in using such provisions to industrialize and become a technological leader. It was wrong.

Finally, Yellen speaks of China harming U.S. workers. The sad, even macabre, reality is that U.S. workers have been harmed over all these neoliberal decades not by China but by the pro-corporate and pro-financialization neoliberal U.S. policies. They have deindustrialized the U.S., stagnated working class wages and, by shifting income and wealth from the ordinary people towards a tiny elite, generating vast inequality.

Sadly, for Yellen, China is neither Japan nor Europe but a socialist economy whose government is oriented towards advancing egalitarian development for its people. Yellen will find it willing to cooperate for the benefit of people and the planet. But it will not roll over and play dead when asked to harm its own economy, its own workers and the possibility of dealing with climate change, all only so that the interests of unproductive inefficient and financialized U.S. corporations may be advanced.

Why is China’s economy doing so well and why is that a good thing?

In this thoughtful and highly informative article, Marc Vandepitte – an author on international politics from Belgium – uncovers some of the secrets behind China’s remarkable economic success, and explains why this success should be considered favourably in Europe.

Marc starts by debunking the narrative gaining ground among Western ‘China-watchers’ that China’s economic outlook is grim; after all, “the country is still achieving growth rates that we can only dream of”, in spite of a US-led containment campaign and assorted other challenges.

Marc notes that China’s per capita GDP has increased by a factor of 50 in the last four decades, and that since 1990 China’s share of global industrial production has increased from 2.5 percent to 35 percent. What’s more, “in terms of industrial production of the future – green production – China is the absolute leader.”

The article goes on to explain how China’s economic success is based on a combination of factors, including its socialist model of land ownership, its huge investment in education and health care, its focus on science and technology, and its striking blend of state-led planning and decentralisation.

China’s dramatic successes are driving development throughout the Global South – in particular via the Belt and Road Initiative – but the country’s emergence is also a boon for the West. “Western economies are closely intertwined with the Chinese economy and in many areas the West needs China more than the other way around. For example, Europe cannot possibly achieve its climate goals without China.”

Marc concludes:

Europe stands at an important crossroads in history. Will it allow itself to be dragged into a destructive trade war initiated by the US, or will it succeed in charting its own autonomous course and building a constructive economic relationship with China, based on mutual benefit? The stakes are high.

Peculiar media framing

If you believe the mainstream media, China is in bad shape: the economic engine is said to be sputtering, or worse, the economy is in a downward spiral. Bizarre, as the IMF expects economic growth of 4.6 percent in China this year. That is almost five times as much as in Europe and more than three times as much as in the US.

The Western media are apparently struggling with China’s growth miracle, and so they focus blindly on the problems and challenges. By concentrating on what is going less well, they lose sight of what China is very strong at.

Certainly, the Chinese economy is facing some significant challenges, but despite an aging population and increasing hostility from the West, both in terms of investment and trade, the country is still achieving growth rates that we can only dream of.

In this article, we are exploring the reasons for this decades-long spectacular growth. We also look at why this is a good thing and what is the best way for Europe to respond.

Government Work Report signals China’s commitment to peace, development, sustainability and common prosperity

Premier Li Qiang delivered the government work report on behalf of the State Council at the opening meeting of the second session of the 14th National People’s Congress, held at the Great Hall of the People on 5 March. The report provides an extraordinarily thorough and comprehensive account of the government’s work over the past year and the major tasks facing China in the months ahead.

The ambitious GDP growth target of 5 percent has already attracted a great deal of commentary. As FoSC co-editor Carlos Martinez points out in comments to China Daily (article republished below), this figure signals significant confidence in China’s continued economic rebound following the pandemic, as well as resilience to a complex and challenging international environment characterised by numerous conflicts, sluggish growth and attempts at decoupling. “However it also reflects China’s economic new normal, in which ultra-fast growth based on quantity is giving way to high-quality, sustainable growth based on innovation.” This is highly consistent with China’s medium-term modernisation strategy of becoming a moderately developed country by 2035.

The report notes China’s impressive advances in renewable energy, artificial intelligence, quantum computing and other high-tech fields which are increasingly becoming cornerstones of the Chinese economy. In terms of its commitment to humanity’s shared fight against climate breakdown, the report observes that, in the past year, China accounted for over half of newly installed renewable energy capacity worldwide. Furthermore, green development and the principle of nurturing harmony between humanity and nature are clearly recognised as key pillars of China’s economic strategy going forward.

Per capita disposable income has increased faster than GDP growth in recent years, and the increase in income is highest for low-income groups. This reflects the government’s ongoing commitment to common prosperity and its sincere efforts to reduce inequality. Living standards are improving, and the government is working to ensure that the benefits of economic growth are shared by all. This is an inspiration for those of us in the West, where inequality, poverty, homelessness, food insecurity and social alienation are all on the rise.

The report concludes by discussing China’s continued commitment to world peace and development, and its opposition to hegemony and bullying. At a time when the US and its allies are escalating their aggression against China, expanding NATO operations against Russia and supporting a genocide in Gaza, China’s commitment to peace, multipolarity and international fairness is a breath of fresh air.

China has set a rational GDP growth target that indicates substantial confidence and robustness in its economy and the government is working to ensure that the benefits of economic growth are shared by all, global experts said.

Premier Li Qiang delivered the latest Government Work Report to the National People’s Congress on Tuesday, in which he disclosed major targets for this year’s development, including GDP growth of around 5 percent. He also outlined major tasks for 2024, including striving to modernize the industrial system and developing new quality productive forces at a faster pace, invigorating China through science and education, expanding domestic demand, continuing to deepen reform and pursuing higher-standard opening-up.

Carlos Martinez, co-editor of the London-based platform Friends of Socialist China and author of The East is Still Red, said that China’s GDP growth target signals significant confidence in its continued economic rebound following the COVID-19 pandemic, as well as resilience to a complex and challenging international environment characterized by numerous conflicts, sluggish growth and attempts at “decoupling”.

“It also reflects China’s economic ‘new normal’, in which ultrafast growth based on quantity is giving way to high-quality, sustainable growth based on innovation,” he said.

He added that the Government Work Report showed that China’s per capita disposable income increased faster than GDP growth, and the increase in income was highest for low-income groups.

“This reflects the government’s ongoing commitment to common prosperity and its sincere efforts to reduce inequality,” he said. “Living standards are improving, and the government is working to ensure that the benefits of economic growth are shared by all.”

The report also discussed China’s continued commitment to world peace and development, and its opposition to hegemony and bullying. Martinez said that China’s commitment to peace, multipolarity and international fairness is “a breath of fresh air” compared with the United States-led West.

George Koo, a retired international business adviser in Silicon Valley, California, said that China’s GDP growth target of around 5 percent for this year is “a reasonable, general consensus target”.

He added that China has highlighted the development of “future industries” as a key part of its development plan for the next few years, and frontier technologies have to be an essential part of China’s future industries.

Hugh Goodacre, a lecturer in the history of economic thought at University College London, said the Government Work Report is a milestone document on the path chosen by China in pursuing its own characteristic model of economic development. Having in recent years advanced well beyond the former focus on extremely high growth, most notably in its export sector, the Chinese government and people are now confronting the tasks of orienting production toward domestic consumption with determination and energy as well as directing the country’s productive forces into the advanced sectors that count most in a modern economy.

Christopher Bovis, a professor of international business law at the University of Hull in the United Kingdom, said that China is ambitious in setting targets for economic growth at around 5 percent, a figure which when compared with other economies is a “near game changer”. To facilitate this growth plan, the Chinese government has set a proactive fiscal policy, coupled with a prudent monetary policy.

He said that what has taken the markets by surprise is the creation of conditions, including investments, that will boost domestic demand for products and services. The plan of the Chinese government has prioritized the features of research and development in disruptive and innovative markets to spearhead growth fueled by domestic consumption.

The report also prioritized sustainable agriculture to ensure food security, alongside an innovative approach to transitioning to cleaner energy production, contributing to global environmental objectives for decarbonization, Bovis added.

Cavince Adhere, a Kenyan scholar of international relations with a focus on China-Africa relations, said the Chinese economy exhibited remarkable resilience to beat last year’s growth target and “was the most important anchor of global economic wellness” last year. With the right environment in place, backed by responsive tools and policies, the new growth target of around 5 percent for this year will “certainly be achieved”.

Because of its economic stability at home, China has morphed into an important development partner for emerging economies, especially those in Africa. China has provided markets for Africa’s products and continues to be a strong source of technology and finance for the continent’s development, Adhere added.

Understanding the role of the private sector in the Chinese economy

We are pleased to publish below the text of a speech by Dr Jenny Clegg at a public meeting in Manchester, Britain, organised by the Greater Manchester Morning Star Readers and Supporters Group. The title of the event was China and the Western Left, and it aimed to uncover the nature of China’s political economy and its role in the world. The other guest speaker was Friends of Socialist China co-editor Carlos Martinez.

Jenny’s speech seeks to explain the role of the private sector in the current phase of China’s development. Jenny lays the ground for understanding today’s domestic capitalist class by uncovering the role of the national bourgeoisie in the history of the Chinese Revolution, including in the massive strike wave of the 1920s, the United Front to resist Japanese invasion, and the period of rebuilding during the New Democracy phase between 1949 and 1956. Jenny posits that this group, while not always reliable, “had an anti-imperialist side” and furthermore “was prepared to accept CPC leadership in the right circumstances – something still influencing the CPC’s attitude to today’s private entrepreneurs.”

The speech explains the unusual nature of China’s socialist market economy, in which the public and private sectors have an essentially symbiotic relationship, and where the state maintains overall control.

“The majority of large-scale private enterprises are linked into the state through mixed-ownership arrangements, with the state investing and divesting to shape industrial growth according to overall plans… Around 40 percent of private entrepreneurs are Party members and around half of private enterprises have CPC cells organised within them. Over 40 percent of workplaces so far are unionised, more than twice the rate here in Britain.”

As such, “the relationship then between the socialist state and the private sector is one of unity in developing the economy as well as struggle to ensure public benefit.”

A member of our advisory group, Jenny is a retired academic and an activist in the anti-nuclear, peace and friendship movements. She is the author of China’s Global Strategy: Towards a Multipolar World, published by Pluto Press.

The major stumbling point for the Western Left in understanding China as a socialist country is the question of the growth in recent decades of market relations and the private sector. This question requires in the first place a consideration of the contribution that the domestic capitalist class made in China’s revolutionary process before getting some measure of the private economy in China today.

The historical role of the national bourgeoisie in the Chinese revolution

One hundred years ago – minus one year – in 1925, on May 30, a British officer ordered the police in the Shanghai British concession to open fire on Chinese protestors, killing at least nine of them. The protests were part of a mounting strike wave in which the Communist Party of China (CPC) – founded in 1921 – was very active, and the incident sparked some momentous developments as anti-imperialist feelings surged.

Ayear-long strike in Hong Kong, starting in 1925, dealt a great blow to British imperialism, which from its island base had extended its influence, becoming the leading imperialist power not only in China but across Southeast Asia. The fact that Chinese capitalists supported and funded the strike, showing they too had an anti-imperialist side, was a particular lesson for the CPC.

The Kuomintang (KMT), supported by the CPC in the first United Front, began to prepare its army for the Northern Expeditionwhich set off in 1926to overthrow the feudal warlords and imperialist rule. As it advanced, peasant associations spread like wildfire.

The British Tory government launched a 20,000 strong expeditionary force; and in due course cities along the Yangtze came under British bombardment.

And in Britain, Hands off China became the largest anti-imperialist movement during the General Strike.

The situation in China became highly radicalised as peasants’ moderate demands for rent reductions gave way to land seizures and workers took over the British concession in Wuhan. These developments caused KMT Nationalist army officers to take fright, and what followed was a brutal massacre of communists in Shanghai, ordered by KMT head Chiang Kai-shek. Too late, the remaining CPC activists formed their own Red Army but, failing to capture an urban base, retreated to the mountains to set up worker-peasant soviets.

Over the next ten years, the CPC carried out various land reform policies with limited success. It was Mao who recognised the Leftist errors thatfailed to take capital into account in implementing reforms to eradicate feudal relations. Taking corrective measures, following the Long March (1934-35), by the time the Japanese escalated its occupation of China in 1937, the CPC was ready to meet the new anti-imperialist upsurge by entering a second United Front of resistance with the KMT.

In the red base areas under its control, the CPC moderated its land reform policies, and the two-class Soviet strategy was replaced with a New Democratic alliance including the national bourgeoisie as well as the petty bourgeoisie.

These adjustment proved a great success: in the eight years to the defeat of Japan in 1945, the red bases grew from a population of one million to nearly 100 million people, almost a quarter of China, and the Red Army from 30,000 to 900,000.

New Democracy was to continue through the ensuing years of civil war (1945-49), the founding of the People’s Republic (1949), up to the 1956 transition to socialism.

In 1949, whilst others fled, some capitalists stayed on to make valuable contributions to China’s recovery. The fact that China was able to stabilise within three years to 1952 after a century of wars and economic ruin was truly remarkable.

Then in 1956, when private enterprises were nationalised, these former owners stayed on as managers, as Mao declared the contradiction with the national bourgeoisie, now antagonistic under socialism, was to be handled in non-antagonistic ways, that is by ideological struggle.

History thus shows the important role the nationalist capitalist class played in the Chinese revolution: if not always reliable, not only did it have an anti-imperialist side but it was prepared to accept CPC leadership in the right circumstances – something still influencing the CPC’s attitude to today’s private entrepreneurs.

BRICS+ and the future of the international order

This thought-provoking article by Elias Jabbour – associate professor of theory and policy of economic planning at Rio de Janeiro State University, and member of the Friends of Socialist China advisory group – explores the shifting dynamics of global power and the emergence of BRICS+ as a significant factor in the evolving international order. The article underlines the significance of China’s socialist development in particular – which has positioned it at the centre of a rising multipolar world – and an emerging “globalisation with Chinese characteristics” which promotes development, peace and common prosperity, in contrast to the enforced inequality and violence that characterise imperialist globalisation.

Elias notes the resurgence of the Global South as a key factor in the transformation of the international order, and the role of BRICS+ in this process. While the Global South is made up of “a heterogeneous set of countries, with differentiated levels of development”, these countries collectively “have the ability to converge on some fundamental issues for their own future, and for that of humanity itself.” Put in other words, the countries of the Global South have a shared interest in opposing imperialism, defending sovereignty and pursuing peaceful development. China stands at the centre of the process of uniting the countries of the Global South in promoting a multipolar, democratic and fair system of international relations.

The article also highlights the significance of the Belt and Road Initiative as a key component of China’s global strategy, and the potential for BRI to transform the global economic landscape by promoting infrastructure development, economic integration, and a shift away from the financialised neoliberal model associated with the US.

Elias discusses the disastrous consequences of the collapse of the Soviet Union and the concurrent global imposition of neoliberalism. On the other hand, the US’s moment of triumph did not last long, and the last decade and a half have witnessed “the erosion of the ability to reinvent capitalism due to financialisation and the emergence of a socialist country (China) as an economic power whose path reflects nothing of the neoliberal recipes sold by the IMF and the World Bank have contributed to the acceleration of a systemic transition, in which a new globalisation centered on China is only its greatest expression.”

In conclusion, the article argues that the political future of BRICS+ and the broader Global South is intricately linked to China’s trajectory and its ability to offer a developmental model that counters neoliberalism. It suggests that the global struggle against underdevelopment and for independence is gaining momentum, with BRICS+ playing a pivotal role in shaping a more equitable global order.

This article first appeared in Geopolitical Economy Report.

The emergence and rise of new poles of power to the detriment of existing ones is nothing new in history. Since the 18th century, there have been countless examples of transitions in international hegemony. This accelerated with the emergence of industrial capitalism in England, which was more advanced than the Portuguese and Spanish commercial capitalism that for centuries had dominated much of the world, especially Latin America.

Even the capitalist dynamic inaugurated by England has characteristics that are not unfamiliar to economic historians with great theoretical and conceptual rigor.

Well known is Vladimir Lenin’s discovery of the uneven nature of the development of nations and the tendency of the most developed countries to lose dynamism while others begin to enjoy what economist Alexander Gerschenkron called the “advantages of backwardness”.

So the international order cannot be observed, from a historical point of view, as a march where countries change positions like in a military parade.

The emergence of monopolistic capitalism brought with it the tendency toward war, for example. We have witnessed two great world wars where the center of the dispute was world power, with results that consolidated new political actors on the international stage, mainly the United States.

A new systemic transition

I start from the historical principle that reality has shown Lenin to be correct, regarding the uneven development of the system and the tendency toward stagnation in the developed centers. These processes open spaces of power in the world.

I also say that we will have little to offer in terms of explanation for the future if we do not relate the transformation of the United States into a unified continental economy at the end of the 19th century, and its impacts on the development of the international capitalist system, with what we have witnessed in China over the past decades: the emergence of a unified continental economy in the third-largest country in the world, which is generating huge impacts on the international political economy – and is still little investigated by so-called experts.

This is a fundamental point when we want to develop a sophisticated thinking about the BRICS+ and the future of the international order. I will return to this point.

On the other hand, we are witnessing a new wave of systemic transition today. This time, there is the emergence of new poles of global power on one side, while on the other there is an accelerated stage of political, social, moral, and economic decomposition of a hegemonic power: the United States of America.

It is interesting to note that the new order that is emerging is itself the product of the order created by the United States after World War II, which accelerated in the late 1970s with the rise of neoliberalism, and especially after the end of the Soviet Union.

Globalization led by the powerful finance of the United States was a reality that transformed the economic geography of the world, but which is eroding within its own limits. Since the moment when financialization became the dominant dynamic of accumulation in capitalism, and neoliberalism won hearts and minds around the globe, the world has entered a spiral of greater instability and unpredictability.

Ken Hammond: Through 45 years of reform, the CPC has remained committed to the original goals of the revolution

In this article for Global Times, China expert and Friends of Socialist China advisory group member Professor Ken Hammond reflects on the 45th anniversary of China’s Reform and Opening Up, initiated in December 1978.

Ken observes that the material basis for reform was China’s prevailing relative poverty and underdevelopment: “Slow but steady growth in the economy had modestly exceeded population growth, so that while there had been significant improvements in life expectancy and public health, housing provision, education, and other social services, in 1978 China remained a poor country.” In order to build a socialist society that was “abundant enough to meet not only basic needs but to allow all people to pursue their self-development, to fulfill their potential as human beings and members of society”, China’s leaders introduced policies “to revise the organization and operation of Chinese enterprises and to open the country to foreign capital in order to drive a process of development which would give China the capacity to produce goods and services in much greater volume and at much lower costs.”

There is a near-consensus in China that the reform process has been hugely successful, in that the vast majority of people live better lives than they used to, and China is far stronger than it was. “China has become a world leader in innovation and creativity, and is at the forefront of the fight to save the planet from the menace of climate change through the development of alternative energy and the building of an ecological civilization. China is playing a central role in improving the lives of people in developing countries around the world through its Belt and Road Initiative and other efforts to support the flourishing of a multipolar world with a future of shared prosperity.”

Nonetheless there have inevitably been problems and contradictions associated with market reforms, including inequality and environmental degradation. Ken writes that the Chinese leadership always understood these contradictions, and calculated that they could be overcome and managed over time as long as the guiding role of the Communist Party of China was maintained (this can be usefully contrasted with Gorbachev’s perestroika, which was accompanied with a sidelining of the Communist Party of the Soviet Union and a hollowing out of the institutions of working class power).

Ken points out that, particularly over the last decade, “the CPC has managed the complexities of policy and practice, guiding the processes of development and the intricate dialectic between the socialist core and the private sector, remaining committed to the original goals of the revolution, and navigating China’s re-emergence as a significant participant in global affairs.” He concludes that, “guided by the insights of Marxist theory and the deep historical experience of China’s ancient civilization, and with the ongoing leadership of the CPC, the road ahead is one of hope.”

In December 1978 the leadership of the Communist Party of China (CPC) made a momentous decision to open a new program of economic development. Over the first three decades of the People’s Republic of China, a foundation for a modern socialist system had been built, but this had been an arduous process, with advances and retreats, successes and failures, and much contention about how best to pursue the goals of enhancing production in industry and agriculture and of improving the material conditions and the livelihoods of the Chinese people.

Slow but steady growth in the economy had modestly exceeded population growth, so that while there had been significant improvements in life expectancy and public health, housing provision, education, and other social services, in 1978 China remained a poor country. China had achieved a kind of egalitarianism of poverty, but this was not the goal of the revolution. Socialism is a society of shared prosperity, based upon the equitable distribution of the wealth produced by social labor, wealth which should be abundant enough to meet not only basic needs but to allow all people to pursue their self-development, to fulfill their potential as human beings and members of society. To achieve this, China’s leaders understood that this required bold new measures and a radical will to experiment.

Deng Xiaoping and others formulated new policies designed to utilize the mechanisms of the market to develop the productive economy. Marxists have long recognized the historical role of markets in the rise of the capitalist system, including the massive expansion and enhancement if productive capacities. The aim of the new policies, which came to be labeled as reform and opening-up, was to revise the organization and operation of Chinese enterprises and to open the country to foreign capital in order to drive a process of development which would give China the capacity to produce goods and services in much greater volume and at much lower costs. This would not happen overnight, and it would entail certain risks and challenges.

Markets can generate growth and development, but they also generate contradictions. The Chinese leadership understood this, and recognized that the key to success, the key to survival and flourishing of the socialist project, would be the guiding role of the CPC. They anticipated that rapid development using market mechanisms could create contradictions involving inequality, corruption, environmental stresses, as well as other problems. If the markets and foreign capital were simply allowed to run unregulated these could overwhelm the country and lead to the end of the socialist venture and the abandonment of the goals of the revolution. They understood that all of this would take time, that, as Deng Xiaoping famously said, some people would get rich first, and make accommodations with the global capitalist system in order to acquire the capital, technology and other resources needed to advance along the path of development.

As China marks the 45th anniversary of the reform era, we can see that much has been achieved. China has reached the primary stage of socialism, a society of modest prosperity, in which more than 800 million people have been lifted out of absolute poverty, in which health, education and social services have been dramatically improved. China has become a world leader in innovation and creativity, and is at the forefront of the fight to save the planet from the menace of climate change through the development of alternative energy and the building of an ecological civilization. China is playing a central role in improving the lives of people in developing countries around the world through its Belt and Road Initiative and other efforts to support the flourishing of a multipolar world with a future of shared prosperity.

All of this has been possible because of the leadership of the CPC. Over the past decade under General Secretary Xi Jinping, the CPC has managed the complexities of policy and practice, guiding the processes of development and the intricate dialectic between the socialist core and the private sector, remaining committed to the original goals of the revolution, and navigating China’s re-emergence as a significant participant in global affairs. There is much work to be done. The contradictions of development remain as factors which must be carefully attended to, and the tensions in global geopolitics as the world goes through an era of structural transformation and some long-established powers find it difficult to embrace the newly emerging realities pose serious challenges.

It is time to celebrate what has been accomplished, and to reaffirm commitment to the tasks which lie ahead. Guided by the insights of Marxist theory and the deep historical experience of China’s ancient civilization, and with the ongoing leadership of the CPC, the road ahead is one of hope.

Michael Roberts: debt trap accusation “does not hold much water”

In the following article, which was originally published on the author’s blog, the renowned Marxist economist Michael Roberts dissects the oft repeated claim that China is ensnaring countries, in this case specifically Sri Lanka, in a debt trap and then taking over the country’s assets.

This widespread charge, he notes, “does not hold much water. It leaks badly… China is not a particularly large lender to poor countries like Sri Lanka compared to Western creditors and the multi-national agencies.” Whilst China holds 10% of Sri Lanka’s debt, commercial lenders, from the imperialist countries, account for nearly 50%.

Moreover, he argues, the rise in the country’s debt burden did not result from any trap set by China, but rather from the desperate needs of the previous Sri Lankan government. After the 2008 global financial crisis, Roberts explains, interest rates fell globally, and Sri Lanka’s government looked to international sovereign bonds to further finance spending. But the country was then hit by the Covid pandemic, which ravaged the tourism sector, on which Sri Lanka was heavily reliant.

As for the port project at Hambantota, which is the most frequently cited example of China’s supposed debt trap, “China did not propose the port; the project was overwhelmingly driven by the Sri Lankan government with the aim of reducing trade costs.”

Noting a recent US district court case, Roberts explains that “it is the obscure Hamilton Bank that is opposed to any agreement [on the restructuring of Sri Lanka’s debt] and instead is demanding full repayment [of US$250 million plus interest] on its holding of Sri Lankan bonds. Hamilton is what is called a ‘vulture’ fund’, buying up the ‘distressed debt’ of poor country governments at rock bottom prices and then pushing for full repayment at par (the original bond issue price), using the blackmail of refusing to agree to any ‘restructuring’.”

He adds that in a presentation, the bank, whose directors include former British Conservative MP, government minister and personal assistant to Margaret Thatcher, Sir Tony Baldry, says that “suing a sovereign for non-debt payment can be a justified and lucrative business.”

Last week a US district court granted Sri Lanka’s request for a six-month pause on a creditor lawsuit against the country. Hamilton Reserve Bank holds a big chunk of one of Sri Lanka’s now-defaulted bonds and had been suing it for immediate repayment.

The court decided that there should be a pause in Hamilton’s demand for immediate repayment so that Sri Lanka could arrange a deal with other private sector creditors and bilateral lenders, as well as obtaining new funds from the IMF. The IMF has been unwilling to cough up money as long as it considered Sri Lanka unable to pay back its debt obligations. It is insisting that all creditors agree to a ‘restructuring’ of existing debt before agreeing to new IMF funding (which would also be accompanied by strong ‘conditionalities’ ie fiscal austerity, privatisations etc).

The IMF, World Bank and other Western creditors have claimed that what is holding up a rescheduling is China. In turn, China is refusing to agree to a deal unless all other parties are agreed on the terms, and it does not like the terms currently proposed.

In the case of Sri Lanka and many other poor peripheral countries in serious debt distress, it is regularly argued that they are in a ‘debt trap’ caused by taking loans from China to such an extent that they cannot repay them and then China insists on taking over the country’s assets to meet the bill. Indeed, US President Biden reiterated this charge only this week in a speech claiming that the West was ready to help poor countries expand their infrastructure.

China and the purity fetish of Western Marxism

In this essay, extracted from the book The Purity Fetish and the Crisis of Western Marxism, Carlos Garrido takes a detailed look at China’s socialist market economy and seeks to understand why so much of the Western left insistently misunderstands it.

Carlos discusses the assorted tropes about China’s ‘authoritarianism’ and ‘totalitarianism’, as well as the obscene slanders that are thrown at it in relation to human rights in Xinjiang. However, the central focus of this essay is the Reform and Opening Up process introduced from the late 1970s, specifically addressing the claims that the existence of markets and private capital in China make it a capitalist country.

The author explains that markets have existed in human society for long before the advent of capitalism (citing Marx that “market economies have existed throughout human history and constitute one of the significant creations by human societies”) and that the character of any given market is determined by its overall socioeconomic context. Deng Xiaoping made this point with particular clarity: “We cannot say that market economy exists only under capitalism. Market economy was in its embryonic stages as early as feudalist society. We can surely develop it under socialism… As long as learning from capitalism is regarded as no more than a means to an end, it will not change the structure of socialism or bring China back to capitalism.”

Carlos writes that the reform strategy responded to a specific set of circumstances and needs, “wherein an overly centralized economy, combined with imperialist-forced isolation from the world, stifled development and necessitated reforms which would allow China to develop its productive forces, absorb the developments taking place in science and technology from the West, and ultimately, protect its revolution.” Given that China has emerged as a science and technology powerhouse; given the extraordinary increase in living standards; and given the continued legitimacy and popularity of the CPC-led government, it seems uncontroversial to say that the strategy has been highly successful.

In the context of an escalating New Cold War against China, “all progressive forces in the West should unite against the US and NATO’s anti-China rhetoric and actions.” China “stands as the main global force countering US/NATO led imperialism. Its rise signifies much more than the end of US unipolarity – it marks the end of the Columbian era of European global dominance that began in 1492.” As such it is imperative that the Western left develop its understanding of Chinese socialism and build solidarity with People’s China, rather than “parroting state-department narratives on China with radical-sounding language.”

One debateable assertion the essay makes is in regard to Hua Guofeng, who served as top leader of the CPC for two years following Mao’s death in 1976. Carlos writes that “Hua Guofeng’s two whatevers (‘We will resolutely uphold whatever policy decisions Chairman Mao made, and unswervingly follow whatever instructions Chairman Mao gave’) perpetuated the sort of book worshiping which not only sucked the living spirit out of Marxism-Leninism and Mao Zedong Thought, but proved futile in dealing with the problems China faced.”

This is at odds with recent research presented by Isabella Weber in her book How China Escaped Shock Therapy: The Market Reform Debate. Weber writes that the two whatevers slogan was essentially a means of emphasising loyalty to the Chinese Revolution and socialist construction, and that “paying tribute to Mao in the year after his passing was not unique to Hua.” Meanwhile, “Hua redefined revolution itself as ‘liberation of productive forces’ and elevated national economic development to the highest priority” and in so doing “paved the way for the Deng-era reforms.” It was under Hua that major efforts were first made to attract foreign investment. Weber considers it “remarkable that such drastic changes occurred under a leader who has frequently been described as a relatively unremarkable Mao loyalist.”

This article first appeared on Midwestern Marx.

The stakes of the imperialist West’s New Cold War against China are as great as they can get. This means that the Western left’s role as controlled counter-hegemony and left-wing delegitimizers of socialist states – a role ideologically grounded in their purity fetish outlook – is as dangerous as it can get. In our current geopolitical climate, all progressive forces in the West should unite against the US and NATO’s anti-China rhetoric and actions. Unfortunately, what we find from large portions of this Western left is parroting of state-department narratives on China with radical-sounding language. Leading ‘socialist’ outlets in the US often echo baseless ruling class propaganda such as the ‘Uyghur genocide,’ Zero Covid authoritarianism, Belt and Road imperialism, debt trapping, and other similar fabrications.[1] Far from a concrete-dialectical study of China, in many of these spaces the claims of the ruling class are just assumed to be true, and anyone who dares to question them – and henceforth, bring the real truth to light – is labeled a puppet of Xi Jinping and the ‘CCP’ (which, like the Western bourgeoisie, is continuously labeled by these ‘socialists’ as CCP and not CPC in order to play on CCCP fears from the last cold war).[2]

Most of these tactics center on age-old claims of communist ‘authoritarianism,’ ‘totalitarianism,’ and all other such words used to equate fascism with communism and judge ‘democracy’ according to Western liberal-bourgeois standards. These assumptions and purity fetish engagements with Chinese socialist governance blind the Western Marxist from seeing China’s de facto geopolitical role as a beacon in the anti-imperialist struggle, in the Covid struggle, in the struggle for environmental sustainability, and in the struggle to develop with the darker nations which have been kept poor by centuries of colonialist and imperialist looting, debt traps, and superexploitation.[3]

The unquestioned, purity fetish grounded, and Sinophobic assumption of Chinese ‘authoritarianism’ and ‘lack of democracy’ also prevents the Western Marxist from learning how the Chinese socialist civilization has been able to creatively embed its socialist democracy in “seven integrated structures or institutional forms (体制tizhi): electoral democracy; consultative democracy; grassroots democracy; minority nationalities policy; rule of law; human rights; and leadership of the Communist Party.”[4] It has withheld them from seeing how a comprehensive study of this whole-process people’s democracy would lead any unbiased researcher to the conclusion Roland Boer has arrived at: namely, that “China’s socialist democratic system is already quite mature and superior to any other democratic system.” This is a position echoed by John Ross (and many other scholars of China), who argues that the “real situation shows that China’s framework and delivery on human rights and democracy is far superior to the West’s.”[5]

The purity fetish Marxists of the West love to think about democracy in the abstract, and hold up as the pure ideal a notion of democracy which is only quantitatively different from the bourgeois notion. Then, this ideal notion of bourgeois democracy is measured up against the atrocity propaganda riddled caricature of socialist states which their ruling classes paint – and they unquestioningly accept. When the caricature of reality fails to measure up to the ideal, reality – which they have yet to engage with – is condemned. What the Western Marxist forgets – thanks to the purity fetish and their social chauvinism – is that in societies divided by class antagonisms we can never talk about ‘pure democracy,’ or abstract democracy in general; we must always ask – as Lenin did – “democracy for which class?”[6] The ‘democracy’ and ‘democratic freedoms’ of capitalist to exploit and oppress will always be detrimental to working and oppressed peoples. Only an all-people’s democracy (a working and popular classes’ democratic-dictatorship) can be genuinely democratic, for it is the only time ‘power’ (kratos) is actually in the hands of ‘common people’ (dēmos).

To claim – as American capitalists, their puppet politicians and lapdog media, and their controlled counter-hegemonic ‘socialists’ do – that the US is a ‘beacon of democracy,’ and China an ‘authoritarian one-party system,’ is to hold on to a delusional topsy turvy view of reality.[7] If democracy is considered from the standpoint of the capitalist’s ability to arbitrarily exert their will on society at the expense of working people and the planet, then, of course, the US is a beacon of this form of so-called ‘democracy,’ and China an ‘authoritarian’ regime that stands in the way of this ‘freedom.’ If instead, democracy is considered from the standpoint of common people’s ability to exert their power successfully over everyday affairs – that is, if democracy is understood in the people-centered form it etymologically stands for – then it would be indisputable that China is far more democratic than the US (and any other liberal-bourgeois ‘democracy’).

However, the object of this text is not to address and ‘debunk’ all the assertions made about China (or any other socialist country) from the Western left – specifically the Trotskyites and the Democratic Socialists. That would, for one, require a much more expansive project, and two, is a task that has already been done many times before. Projects like Friends of Socialist China and Qiao Collective consistently engage in the practice of debunking the propaganda on China proliferated by the Western ruling class and the ‘left.’ The objective of this text is different; it seeks not only to point out falsities in the Western left’s positions, but to understand the worldview which consistently reproduces these. I have called this worldview the purity fetish. In it we can find the ideological roots for the Western Marxist positions on China.

In the Western Marxist’s purity fetish assessment of China, it is held that because China doesn’t measure up to the pure socialist Ideal in their heads, because China does not have, as Samir Amin notes, “the communism of the twenty-third century,” – it is not actually socialism.[8] The question of democracy and authoritarianism has already been assessed in previous chapters – it is a classic of the Western Marxist condemnation toolbox. My focus in this chapter will be on those who claim China is ‘capitalist’ because it developed private ownership and markets with the period of Reform and Opening Up in 1978. This form of the purity fetish centers on their inability to understand, in a dialectical manner, how markets and private property function within China’s socialism. China, according to these Western Marxists, took the ‘capitalist road’ in 1978. As Roland Boer has shown in his article “Not Some Other -ism”—On Some Western Marxist Misrepresentations of Chinese Socialism,” there are four major ‘sub-forms’ through which this first form of condemnation occurs: 1) capitalist socialism; 2) neoliberalism with Chinese characteristics; 3) bureaucratic capitalism; and 4) state capitalism. Often, variations of these can be found within the same critic, as none are the result of a rigorous, principled analysis.

As US and Western imperialist powers ramp up the New Cold War against China, Western Marxism’s erroneous purity fetish view of Chinese socialism requires closer examination.

Forecasting China?

In the following article, which was originally carried by Sidecar, the blog published under the auspices of New Left Review, on 8 September 2023, Nathan Sperber addresses some typical but fundamental western misconceptions concerning the Chinese economy.

He begins with the observations of Nobel Prize-winning economist Paul Krugman that “China is in big trouble. We’re not talking about some minor setback along the way, but something more fundamental. The country’s whole way of doing business, the economic system that has driven three decades of incredible growth, has reached its limits…the only question now is just how bad the crash will be”; only to then note that Krugman had been writing in the summer of 2013.

In fact, China’s GDP grew by 7.8 percent that year and in the ensuing decade its economy has expanded by 70 percent in real terms compared to 21 percent for the United States.

Similar dire predictions were made, the article points out in the early 2000s, “when runaway investment was thought to be ‘overheating’ the economy; in the late 2000s, when exports contracted in the wake of the global financial crisis; and in the mid-2010s, when it was feared that a buildup of local government debt, under-regulated shadow banking and capital outflows threatened China’s entire economic edifice.” Today, the trigger for such doom mongering is the relatively low growth figures for the second quarter of 2023.

Sperber asserts that the existence of structural weaknesses in the Chinese economy is not in dispute. But he also considers that a fundamental weakness in much Western coverage of the Chinese economy is that it responds to the needs of the ‘investor community’:

“The most salient preoccupations of Western commentators reflect the skewed distribution of foreign-owned capital within the Chinese economy. China’s economy is highly globalized in terms of trade in goods but not in terms of finance: Beijing’s capital controls to a large degree insulate the domestic financial sector from global financial markets. Overseas financial capital has only a handful of access points to China’s markets, meaning international exposure is uneven. China-based companies with foreign investors, offshore debt or listings on stock markets outside of the mainland (that is, free of China’s capital controls) generate attention precisely in proportion to their overseas entanglements.”

To illustrate his argument, he notes how countless news articles have been devoted to the travails of real estate giants Evergrande (Hong Kong-listed and reliant on dollar-denominated debt) and, more recently, Country Garden (Hong Kong-listed and again carrying offshore debt). Readers of the Wall Street Journal or the New York Times will be far less likely to read about State Grid, the world’s largest electricity provider, or China State Construction Engineering, the world’s largest construction firm – “two companies less dependent on global finance and over which international investors are unlikely to lose any sleep.”

Noting how the “slow-motion collapse” of Evergrande has been portrayed in the Western media as a “calamity in waiting for the entire Chinese economy”, Sperber adds that this “elides the fact that the Chinese government deliberately prevented highly indebted property developers, including Evergrande, from accessing easy credit in the summer of 2020… Of course, no large-scale corporate default and restructuring is desirable per se. But it appears that failures like Evergrande’s have been treated by Chinese authorities as the price of disciplining the property sector as a whole and reducing its weight in the broader economy.”

Although not mentioned by Sperber, his above point also serves, inter alia, to underline how, again contra to much western reportage (even by some progressive scholars not unfriendly to China), China has not strategically departed from President Xi Jinping’s insistence that homes are for living in not for speculation. Against the common western narratives, Sperber argues that a more level-headed approach would be to put China’s current economic moment in a longer-term perspective. China’s economy was comprehensively transformed in the 1980s and 1990s, and “since this era of intense institutional restructuring ended in the early 2000s, China’s GDP has more than quadrupled in real terms but the country’s fundamental economic structure has remained stable, in terms of both the balance between state-owned enterprises and private capital, and the precedence of investment over consumption.”

Nobel Prize-winning economist Paul Krugman does not mince his words:

the signs are now unmistakable: China is in big trouble. We’re not talking about some minor setback along the way, but something more fundamental. The country’s whole way of doing business, the economic system that has driven three decades of incredible growth, has reached its limits. You could say that the Chinese model is about to hit its Great Wall, and the only question now is just how bad the crash will be.

That was in the summer of 2013. China’s GDP grew by 7.8 per cent that year. In the decade since, its economy has expanded by 70 per cent in real terms, compared to 21 per cent for the United States. China has not had a recession this century – by convention, two consecutive quarters of negative growth – let alone a ‘crash’. Yet every few years, the Anglophone financial media and its trail of investors, analysts and think-tankers are gripped by the belief that the Chinese economy is about to crater.

The conviction reared its head in the early 2000s, when runaway investment was thought to be ‘overheating’ the economy; in the late 2000s, when exports contracted in the wake of the global financial crisis; and in the mid-2010s, when it was feared that a buildup of local government debt, under-regulated shadow banking and capital outflows threatened China’s entire economic edifice. Today, dire predictions are out in force again, this time triggered by underwhelming growth figures for the second quarter of 2023. Exports have declined from the heights they reached during the pandemic while consumer spending has softened. Corporate troubles in the property sector and high youth unemployment appear to add to China’s woes. Against this backdrop, Western commentators are casting doubt on the PRC’s ability to continue to churn out GDP units, or fretting in grander terms about the country’s economic future (‘whither China?’, asks Adam Tooze by way of Yang Xiguang). Adam Posen, president of the Washington-based Peterson Institute, has diagnosed a case of ‘economic long Covid’. Gloom about China’s economic prospects has once again taken hold.

That there are structural weaknesses in the Chinese economy is not in dispute. After two waves of dramatic institutional reform in the 1980s and 1990s respectively, China’s economic landscape has settled into a durable pattern of high savings and low consumption. With household spending subdued, GDP growth, slowing over the past decade, is sustained by driving up investment, enabled in turn by growing corporate indebtedness. But despite this slowdown, the current bout of doomsaying in the English-language business press, half investor Angst, half pro-Western Schadenfreude, is not an accurate reflection of the fortunes of China’s economy – plodding, but still expanding, with 3 points of GDP added over the first six months of 2023. It is rather an expression of an intellectual impasse, and of the flawed conditions in which knowledge about the Chinese economy is produced and circulated within the Western public sphere.

Jeffrey Sachs: The US economic war on China

In this latest article from his syndicated New World Economy column, Professor Jeffrey Sachs (Director of the Center for Sustainable Development at Columbia University) argues convincingly that – despite its protestations to the contrary – the US is waging an economic war on China, and that the US is losing.

Sachs writes that “starting around 2015, US policy-makers came to view China as a threat rather than a trade partner”, following the realization that China was not going to accept a permanent position at the bottom of US-led global value chains, but was in fact advancing “to the cutting edge of robotics, information technology, renewable energy, and other advanced technologies.”

The Trump administration launched a full-scale economic war against China, which the Biden administration has only escalated. One result is a significant decrease in US-China trade: “Between June 2022 and June 2023, US imports from China fell by a whopping 29 percent.” Naturally this has affected China’s economy in the short-term, but the long-term damage will be to the US, since China’s deep economic relations with the countries of Africa, Asia, Latin America, the Middle East, the Caribbean and the Pacific render it relatively less vulnerable to the US’s coercion. “China can substantially increase its exports to the rest of Asia, Africa, and Latin America, through policies such as expanding the Belt and Road Initiative.”

Sachs concludes that “the US attempt to contain China is not only wrongheaded in principle, but destined to fail in practice.”

China’s economy is slowing down. Current forecasts put China’s GDP growth in 2023 at less than 5%, below the forecasts made last year and far below the high growth rates that China enjoyed until the late 2010s. The Western press is filled with China’s supposed misdeeds: a financial crisis in the real-estate market, a general overhang of debt, and other ills. Yet much of the slowdown is the result of US measures that aim to slow China’s growth. Such US policies violate World Trade Organization rules and are a danger to global prosperity. They should be stopped.

The anti-China policies come out of a familiar playbook of US policy-making. The aim is to prevent economic and technological competition from a major rival. The first and most obvious application of this playbook was the technology blockade that the US imposed on the Soviet Union during the Cold War. The Soviet Union was America’s declared enemy and US policy aimed to block Soviet access to advanced technologies.

The second application of the playbook is less obvious, and in fact, is generally overlooked even by knowledgeable observers. At the end of the 1980s and early 1990s, the US deliberately sought to slow Japan’s economic growth. This may seem surprising, as Japan was and is a US ally. Yet Japan was becoming “too successful,” as Japanese firms outcompeted US firms in key sectors, including semiconductors, consumer electronics, and automobiles. Japan’s success was widely hailed in bestsellers such as Japan as Number One by my late, great colleague, Harvard Professor Ezra Vogel.

In the mid-to-late 1980s, US politicians limited US markets to Japan’s exports (via so-called “voluntary” limits agreed with Japan), and pushed Japan to overvalue its currency. The Japanese Yen appreciated from around 240 Yen per dollar in 1985 to 128 Yen per dollar in 1988 and 94 Yen to the dollar in 1995, pricing Japanese goods out of the US market. Japan went into a slump as export growth collapsed. Between 1980 and 1985, Japan’s exports rose annually by

7.9 percent; between 1985 and 1990, export growth fell to 3.5 percent annually; and between 1990 and 1995, to 3.3 percent annually. As growth slowed markedly, many Japanese companies fell into financial distress, leading to a financial bust in the early 1990s.

Mao Zedong’s ‘A Critique of Soviet Economics’: bringing the ‘political’ back into ‘economy’

We are very pleased to republish this important article by Dr. Joe Pateman, which originally appeared in the World Review of Political Economy (Volume 13 Issue 4).

In his article, Joe presents a detailed analysis of Mao Zedong’s ‘A Critique of Soviet Economics’, which was published in unofficial translation by Monthly Review Press in 1977.

The author argues that, since its inception, Marxism has showcased the scientific superiority of political economy over economics. Mao Zedong, he notes, played an important role in demonstrating this superiority. In ‘A Critique of Soviet Economics’, the Chinese revolutionary leader criticised Soviet political economy for its economic focus, which underestimated the importance of politics and ideology. Mao’s critique addressed both Soviet leader JV Stalin’s 1951 work, ‘Economic Problems of Socialism in the USSR’ as well as a more substantial early post-Stalin Soviet textbook on political economy, reserving considerably more stringent criticism for the latter.

It was essential, Mao argued, to explore how the political and ideological superstructure affects the economic base. Only then can political economy scientifically understand the processes of socio-economic development, most notably the socialist revolution and period of socialist construction. Joe’s article further contends that Mao’s arguments retain key insights for the study and development of Marxist political economy today. They remain especially important in the People’s Republic of China. By upholding and enriching Mao’s insights into the critical role of politics and ideology under socialism, the Communist Party of China has ensured the successful development of socialism with Chinese characteristics.

Developing his arguments, the author begins by outlining the historical context, contents, and ideological perspective of Mao’s argument. He then examines the work itself, focusing on Mao’s theses concerning the relationship between the economic base and the political–ideological superstructure in the study of political economy, specifically as they relate to the processes of social change, socialist revolution, and socialist construction. Finally, the article argues that Mao’s analysis provides contemporary insights into the theory and study of political economy, the socialist revolution, and the successful construction of socialism in modern China.

Giving a historical context, Joe notes that the approach adopted by Mao can be traced at least as far back as the Yan’an period (late 1935 to early 1947), citing, in particular, the Chinese leader’s articles, ‘On Practice’ and ‘On Contradiction’, along with his lecture notes on dialectical materialism, all of which were written in 1937. He further tackles such issues as the role of politics and ideology in the socialist revolution, that socialist revolutions are more likely to occur in economically backward countries, the role of politics and ideology under socialism, the law of value under socialism, the relationship between industry and ideology, between economic and political rights, between economic and ideological incentives, and the role of politics and ideology in the Great Leap Forward.

Regarding the thesis that socialist revolutions are more likely to occur in economically backward countries, Joe notes that Mao referenced a quotation from Lenin claiming that the socialist revolution would be more difficult for the more backward countries. Although, according to Mao, this view was correct when Lenin expounded it in the late nineteenth and early twentieth centuries, it had become obsolete by the mid-twentieth century. In fact, the opposite proposition was now true.

“In connection with this, Mao supported Lenin’s [later] view that the socialist revolution will occur in the countries constituting the weakest links of the imperialist chain, not the strongest ones. In making this point, he emphasised that revolutions sometimes begin in the political and ideological superstructure before extending to the economic base. For the most part, this principle remains true. Most socialist revolutions have occurred in countries with relatively low levels of economic development and/or weak superstructures. Today, the developed Western capitalist countries are the countries least likely to undergo socialist transitions, precisely because they have developed pervasive capitalist ideologies and resilient political systems. The socialist movements are at their weakest in these countries, since many of the workers support capitalist ideology, and because the political systems are durable. By contrast, the socialist movement has been stronger and more successful in Latin America, where the living standards are lower due to slower economic growth, and where the political systems are fragile and corrupt. In these countries, the masses have been more supportive of socialist ideologies.

“Accordingly, when examining the prospects of socialist revolutions in the near future, political economists should focus their attention upon the countries with slow economic growth and weak superstructures, and not the countries of the developed capitalist world. In the short term, the future spread of socialism will occur first in the developing Global South, rather than the developed Global North. Mao Zedong was a leading proponent of this idea.”

Turning to the contemporary relevance of Mao’s work, Joe notes that his critique encouraged the Chinese party to depart from the Soviet approach more completely, and thereby develop an independent Marxist approach to political economy. Upon the basis of Mao’s insights, and under his leadership, the CPC was able to chart its own course of economic development, one that more accurately reflected the application of Marxism-Leninism to China’s unique circumstances.

After Khrushchev took office, Joe continues, the CPSU began to weaken its leading role in society, and it neglected the tasks of party building. This also resulted in the party’s distancing and alienation from the masses. When the CPSU lost its leading role, the Soviet Union collapsed instantaneously. However:

“The remaining socialist states—China, Cuba, Vietnam, Laos, and North Korea—have survived the Soviet collapse and have flourished precisely because they have not underestimated the role of politics and ideology in the process of socialist and communist construction. Whilst recognising the importance of economic factors, including the productive forces and relations of production, these countries have also sought to develop strong and stable political systems, whilst imbuing the people with socialist ideology. These two factors—politics and ideology—have been key to the successful functioning and development of the modern socialist states. They have developed their economic systems not in isolation from the political and ideological superstructure, but instead under the close guidance of this superstructure. Once again, this is something that economic analyses have failed to recognise.”

Specifically regarding China, the CPC has consistently maintained Mao’s principles of “politics in command” and the “mass line” as core characteristics of socialism with Chinese characteristics. Since Mao’s death, the CPC has taken seriously the tasks of party building, as well as the principle of enhancing the party’s leading role in every sphere of society. The CPC’s emphasis on developing its leadership capacity is rooted in Mao’s legacy. During every moment of economic development, and at every stage of the gradual reform and opening of China’s economic system, the CPC has led the process, and has retained total oversight over the structural economic development of Chinese socialism. At no point has the CPC decided that economic forces should dominate the political ones in the stabilisation and growth of its socio-economic system.

Hence the author contends that, if Soviet society had managed to preserve a powerful willpower factor associated with the political superstructure, as happened in China, then the economic difficulties of the 1980s would not in themselves have posed a mortal threat to the Soviet system. The Chinese experience of economic reforms shows that in the presence of political will, a socialist society, in principle, is capable of successfully solving any economic problems. He adds:

“Mao’s ‘A Critique of Soviet Economics’ also illuminates the essence of socialism and communism. In contrast to the Soviets, who viewed economic factors as the primary indicators of socialism, Mao argued that the political factors are just as essential. This insight remains relevant today. Since Deng Xiaoping began China’s economic reforms, Western analysts have accused China of abandoning socialism for capitalism. They claim that China is a capitalist country, rather than a socialist one, because it contains private enterprise and markets. This widespread perspective is founded upon the erroneous tendency to define socialism in purely economic terms. As Mao established, however, socialism is not a purely economic phenomenon.

Socialism is also fundamentally a political phenomenon. It entails the political supremacy of the working class, in addition to its economic supremacy. Once the political aspect is considered, it becomes evident that China is in fact a socialist country, since supreme political power is in the hands of one class, the working class, with the Communist Party of China as its leading representative. In China, the working class wields supreme political power, and it uses this political power to regulate and direct the economic sphere of society. As such, there is no basis for the view that China has abandoned socialism for capitalism. This claim is false in both the economic and political senses.”

However, Joe argues that, as well as offering contemporary insights, Mao’s arguments concerning the role of politics and ideology under socialism also contain limitations. “Like Soviet political economy, Mao’s one-sided analysis underestimated the importance of socialist commodity–production relations…Mao’s approach and Soviet policy shared the same fundamental error—they both underestimated the importance of commodity–production relations. In the Soviet case, this error had grave consequences. It contributed to economic stagnation and the collapse of socialism. In the case of China, Mao’s error was not fatal to socialism, though it was a factor in the Great Leap Forward’s failure to advance China’s economy as successfully as possible…Thankfully, however, Deng Xiaoping corrected Mao’s errors when he took office. Whilst upholding Mao’s achievements, Deng showed a greater appreciation for the importance of objective factors in the development of socialist society associated with the dialectics of productive forces and production relations. And now, in a new era of socialism with Chinese characteristics, China clearly demonstrates the creative synthesis of Mao Zedong’s ideas aimed at strengthening political power, and Deng Xiaoping’s ideas related to the conscious use of commodity–production relations for the development of the productive forces of a socialist society.”

In conclusion, Joe writes that: “Mao defended his ‘A Critique of Soviet Economics’ not with abstract principles, but by advancing a concrete analysis of modern society, and by pointing to the actual historical experience of socialism, especially the development of socialism in China. His defence of political economy has been vindicated by the success of the Communist Party of China, which has managed to produce the most rapid economic growth in human history. The CPC achieved this growth by retaining the principle of politics in command, by relying on the masses, and by utilising the power of socialist ideology to solve the tasks of communist construction. These principles of political economy draw directly upon Mao’s intellectual labours; and will guarantee the future prosperity and success of China.”

Joe Pateman is currently a Teaching Associate at Sheffield University in the UK. His key research interests include Marxism-Leninism, the politics of the Democratic People’s Republic of Korea (DPRK), and the black liberation struggle, as well as their interrelationship. He is the co-author of two books and the author of numerous articles published in academic and scholarly journals.

World Review of Political Economy (WRPE) is a quarterly, peer-reviewed journal, published by Pluto Journals as the official publication of the World Association for Political Economy (WAPE). The WAPE Secretariat is based at the Shanghai University of Finance and Economics and the WRPE Editorial Office is located at the Academy of Marxism, Chinese Academy of Social Sciences, in Beijing.

Abstract

Since its inception, Marxism has showcased the scientific superiority of political economy over economics. This article argues that Mao Zedong played an important role in demonstrating this superiority. In his A Critique of Soviet Economics, Mao criticised Soviet political economy for its economic focus, which underestimated the importance of politics and ideology. It was essential, Mao argued, to explore how the political and ideological superstructure affects the economic base. Only then can political economy scientifically understand the processes of socio-economic development, most notably the socialist revolution and period of socialist construction. This article argues that Mao’s arguments retain key insights for the study and development of Marxist political economy today. They remain especially important in the People’s Republic of China. By upholding and enriching Mao’s insights into the critical role of politics and ideology under socialism, the Communist Party of China has ensured the successful development of socialism with Chinese characteristics.

What we defend, what Wall Street wants to destroy

The following article by Sara Flounders unpicks US Treasury Secretary Janet Yellen’s recent demands that China “shift to a market-oriented system”, drop its putative “coercive actions against American firms”, and participate in the US’s unilateral and unenforceable sanctions against Russia.

Sara points out that the US is in no position to complain about China’s subsidies to state-owned enterprises, given that “every capitalist economy, including that of the US, subsidizes key industries”; some of those who suffered ruinous poverty as a result of the 2008 financial crisis may remember the trillions of dollars of subsidies that bailed out the banks rather than the poor. Meanwhile calls for China to end “barriers to market access for foreign firms” ring decidedly hollow in the light of hundreds of US trade barriers and sanctions on China.

China’s use of “non-market policies” is not in itself the source of the US’s escalating hostility. “Most frustrating to the imperialists is that the socialist development of the economy is guided by the 90-million member, popularly supported Communist Party of China. There is a party cell in every workplace, school and neighborhood. This is what US politicians and corporate investors consider a ‘dictatorship,’ restricting their freedom. On the other hand, unelected billionaires making all decisions are proof of ‘democracy.'”

Sara observes that China’s socialist strategy has brought about “the largest and most rapid improvement in material conditions in modern history”. Furthermore, via its Belt and Road Initiative and other programs, China is enabling the emergence of a truly multipolar order – a serious threat to the US-led imperialist system. The article concludes that Chinese socialism is creating important gains for the global working class, and should be defended and supported. “It is in the interests of workers here to defend China and condemn the onerous demands of US imperialism.”

The article was first carried in Workers World.

What is the material basis of the growing hostility on every level of the U.S. ruling class toward China?

No great struggle is based on the personalities or aspirations of individuals. At the root is a very concrete, material basis that drives the conflict. Otherwise, meetings, discussions and diplomacy would succeed. These techniques can paper over differences – but not fundamentally resolve them.

Secretary of the Treasury Janet Yellen’s talk on June 7 to a group of U.S. businesspeople at the American Chamber of Commerce in China exposed how well these U.S. corporate heads understand the basic, irreconcilable difference. They are deeply frustrated about their inability to maintain their dominant global position, as well as by China’s non-compliance with their self-proclaimed “rules-based order.” (tinyurl.com/2s45jh53)

Yellen is a top capitalist economist. She is a former Chair of the Federal Reserve and headed the White House Council of Economic Advisors. Yellen has taught economics at Harvard, Yale and the London School of Economics. Her words carry weight and reflect the thinking of imperialist think tanks, strategists, politicians and businesspeople.

Yellen’s talk in China was similar to a longer presentation she gave at the Johns Hopkins School of Advanced International Studies on April 20, published in preparation for her announced trip to China. It sharply defined the Biden administration’s demands on China.

How China became the world’s industrial superpower – and why the US is desperate to stop it

In this detailed and informative video explainer on Geopolitical Economy Report, Ben Norton discusses China’s extraordinary rise and the economic dynamics of the New Cold War.

Ben notes that in 1950, China represented just 5 percent of global GDP. In purchasing power parity (PPP) terms, it currently represents 19 percent of global GDP, compared to 15 percent for the US. No other country in history has undergone such a dramatic transformation in so short a period. Ben makes the critically important point that this progress is the result of socialist, not capitalist, economics. He notes that in China’s socialist market economy, the commanding heights, including finance, infrastructure, transport and energy, are run by the state, and that the state continues to guide the economy overall, via five-year plans and multiple other mechanisms. China’s strategy has succeeded in transforming an overwhelmingly agrarian country into a leading industrial power, thereby creating the resources needed to develop more advanced socialism.

China’s rapid industrialization has led to it becoming the world’s largest manufacturer, and a leading innovator in advanced industry. This has some important – and contradictory – consequences for the West. Firstly, the West – and particularly the US – has been deindustrializing while China has been industrializing, and it now finds itself in a position where it is unable to outcompete China in terms of industrial innovation. This leads the US towards notions of ‘decoupling’ and trying to engage in various forms of economic coercion to suppress China’s rise. Secondly, however, China has become the global manufacturing center, and its high levels of productivity and innovation make it integral to multiple crucial value chains. As such, Western companies tend to be unwilling to ‘decouple’ or divest from China.

These competing needs are fomenting divisions within the Western ruling classes and are leading to decidedly incoherent foreign policy in Washington, London and elsewhere. The US is intent on preventing China from continuing to develop and becoming the world’s foremost economy, and yet the US’s financialized capitalism lacks the means to compete with (or indeed decouple from) China.

Richard D Wolff: The fatal contradictions of China-bashing

This short essay by Marxist economist Richard D Wolff assesses the frenzied China-bashing that the US political and media mainstream is currently engaged in. Wolff observes that the wave of sinophobic propaganda is designed to “provide convenient cover” for US attempts to militarily intimidate and economically strangle China.

Additionally, scapegoating China provides a convenient way for the US ruling class to deflect criticism of a vicious neoliberal capitalism that has working people experiencing a chronic decline in living standards. “Scapegoating China joins with scapegoating immigrants, BIPOCs, and many of the other usual targets. The broader decline of the U.S. empire and capitalist economic system confronts the nation with the stark question: whose standard of living will bear the burden of the impact of this decline?” As long as China can be blamed for all problems, the US government can continue with its program of austerity, deregulation and inflation.

The author points out that antagonizing, and decoupling from, China could prove to be highly detrimental to the US economy. He calls on people to “see through the contradictions of China-bashing to prevent war, seek mutual accommodation, and thereby rebuild a new version of the joint prosperity that existed before Trump and Biden.”

This article was originally published in Asia Times.

The contradictions of China-bashing in the United States begin with how often it is flat-out untrue.

The Wall Street Journal reports that the “Chinese spy” balloon that President Joe Biden shot down with immense patriotic fanfare in February did not in fact transmit pictures or anything else to China.

White House economists have been trying to excuse persistent US inflation saying it is a global problem and inflation is worse elsewhere in the world. China’s inflation rate is 0.7% year on year.

Financial media outlets stress how China’s GDP growth rate is lower than it used to be. China now estimates that its 2023 GDP growth will be 5-5.5%. Estimates for the US GDP growth rate in 2023, meanwhile, vacillate around 1-2%.

China-bashing has intensified into denial and self-delusion – it is akin to pretending that the United States did not lose wars in Vietnam, Afghanistan, Iraq and more.

The BRICS coalition (China and its allies) now has a significantly larger global economic footprint (higher total GDP) than the Group of Seven (the United States and its allies).

China is outgrowing the rest of the world in research and development expenditures.

The American empire (like its foundation, American capitalism) is not the dominating global force it once was right after World War II. The empire and the economy have shrunk in size, power and influence considerably since then. And they continue to do so.

Putting that genie back into the bottle is a battle against history that the United States is not likely to win.

Renewable energy development is less important than stopping Chinese industry!

In this brief but incisive blog post, Canadian anti-imperialist writer Justin Podur unpacks the contradictory remarks made by US Treasury Secretary Janet Yellen during her visit to Beijing, complaining about China’s use of state subsidies in certain parts of its economy. As Justin points out, “if the market system is the best and most efficient, why would Yellen complain about China using state subsidies or protections and interfering in it? Wouldn’t that just allow the US to use the market to win the game?” And why would they want China to adopt measures that would – according to free-market fundamentalism – accelerate its rise?

The reality is that the US wants Beijing to adopt an economic strategy that “would actually destroy the basis of China’s growth and ensure its subordination to the US.” One side-effect of this is that it would cause a major disruption to the solar energy industry, in which China is dominant (Justin notes that China holds 80 percent of photovoltaic patents worldwide). As such, “the imperialist anxiety to stop the rise of Chinese industry conflicts with the green priority for a transition to renewables.” But in this battle of priorities between hegemonism and the environment, the US is siding with hegemonism. An important reminder that the struggle against the New Cold War is also a struggle to keep the planet habitable.

Janet Yellen went to China and warned them there would be consequences if they didn’t adopt a market economy. There’s so many admissions in this little statement that shouldn’t go unnoticed. If the market system is the best and most efficient, as its proponents claim, why would Yellen complain about China using state subsidies or protections and interfering in it? Wouldn’t that just allow the US to use the market to win the game? If the market is the “cheat code”, as the gamers say, then how could China “cheat” by using non-market mechanisms? The flip side of the coin is also there. If the US, as its officials repeatedly cry, is desperate to stop the rise of China, why would they advise China to take steps (like market reforms) that should, according to market theory, only accelerate China’s rise? Perhaps it is because Yellen knows market reforms would actually destroy the basis of China’s growth and ensure its subordination to the US.

I want to talk about one of these Chinese industries that has grown up under state subsidy and protection that is – again according to Western environmentalists – very important in the struggle against climate change: photovoltaics (solar panels) and other renewable energy technologies.

There’s this video from a youtube channel called Tech Teller that outlines some details about the rise of China’s PV industry. The news hook for the video was the arrest of a Chinese PV executive, Pu Yonghua of Jiangsu Green Power New Energy, in Germany. It looked like Germany was going to pull a Canada (with the kidnapping of Meng Wanzhou of Huawei) and get into a pointless years-long conflict at US urging. But it looks like Pu Yonghua was released a few days later.

Tech teller’s video provides some “startling figures” about China’s dominance in PV:

of 150,000 PV patents worldwide, Chinese companies hold 120,000 of them.
The top ten PV companies in the world are all Chinese.
Chinese PV has a market share of 60% in the US and peaked at 95% in the EU. EU’s domestic PV capacity accounted for 3% of market share there.
200 countries are customers of Chinese PV products.

The EU’s attempt to raise its renewable energy use to reduce its dependence on Russian gas is ultimately a plan to transfer its dependence on Russia — to China.

China’s PV industry is so far ahead that the US and EU industries are going to have a lot of difficulty catching up. This despite, as the video tells, depraved and repeated attempts to stop China from developing by both the US and EU.

There are problems with PV, as environmentalists like Stan Cox have noted, including the mining footprint of rare earths and the use of fossil fuels in their production. But there is a Green consensus on the need to get off of fossil fuels and PV technology will be key to get there. The imperialist anxiety to stop the rise of Chinese industry conflicts with Green the green priority for a transition to renewables. It is another case of Western imperialism vs the environment. If you believe climate change is an existential issue for the species like nuclear war, you could use Chomsky’s phrase and consider it a choice between Hegemony or Survival.

Which do you think the US will choose?

Strategies of denial: Bidenomics and the New Cold War on China

In this insightful article on New Left Review’s Sidecar blog, Grey Anderson explores the Biden administration’s new industrial strategy (incorporating the American Rescue Plan, the Bipartisan Infrastructure Law, the CHIPS and Science Act, and the Inflation Reduction Act), and its connection with the ongoing efforts to suppress China’s economic rise.

Anderson writes that this anti-China orientation is not an “unfortunate by-product” of the $4 trillion spending plan, but its “motivating purpose”. The logic governing the new era of infrastructure spending is fundamentally geopolitical; “its precedent is to be sought not in the New Deal but in the military Keynesianism of the Cold War, seen by the ‘Wise Men’ who waged it as a condition for victory in America’s struggle against the Soviet Union.”

The article notes that export restrictions on AI and semiconductor components are specifically geared towards preventing China from emerging as a major player in these crucial industries, and as such constitute “a veritable declaration of economic war.” The New Cold War, however, is not solely economic, given the US’s renewed commitment to the Quad alliance, its creation of AUKUS, its huge and expanding array of military bases, its growing expenditure on hi-tech weaponry, and its increased supply of arms and military advisors to Taiwan.

The author notes that Washington is currently in a difficult position, in that it must “reconcile the imperative to prevent any state other than itself from dominating one of the great centres of world power (Asia, Europe, the Persian Gulf) with evidence of its citizens’ likely disinclination to back a major international war abroad, after twenty years of unending armed escapades.” The proposed ‘solution’ to this problem appears to be seeking to lure China into aggressive actions, thereby “hardening the resolve of the peoples in the broader coalition to intervene and for those engaged to intensify and widen the war to a level at which they would win it.”

There has been a lively debate on the American left about the Biden Administration’s industrial strategy. Discussion has focused on the prospects opened up by the massive stimulus – totalling some $4 trillion, if we factor in the American Rescue Plan, the Bipartisan Infrastructure Law and the CHIPS and Science Act alongside the Inflation Reduction Act – from training up ‘progressive technocrats’ to retrofit buildings to the feasibility of capitalist state-led ‘decarbonization’ under conditions of global overcapacity and falling economic growth.

So far, assessments have been mixed, differentiating ‘the good, the bad, the ugly’, albeit with the stress on the first. If the boost to employment and ‘green’ good works promised by the IRA cannot be dismissed, nor can its shortcomings: lack of funding for housing and public transport, neutered regulatory standards in the electricity sector, leasing agreements that give oil and gas producers access to public land. ‘The IRA’, a representative appraisal in Jacobin reckoned, ‘is at once a massive fossil fuel industry giveaway, a historic but inadequate investment in clean energy, and our best hope for staving off planetary catastrophe’.

In other words, the left critique has gone beyond ‘good, but not big enough’ – but perhaps not very far beyond. Almost entirely absent in these discussions is the geostrategic rationale that powers this national-investment drive, reshoring production on the US mainland, bagging lithium mines and sponsoring construction of microchip factories, in a militarized bid to outflank China.

Viewed from the halls of power, the anti-China orientation of US industrial policy is not an unfortunate by-product of the green ‘transition’, but its motivating purpose. For its conceptors, the logic governing the new era of infrastructure spending is fundamentally geopolitical; its precedent is to be sought not in the New Deal but in the military Keynesianism of the Cold War, seen by the ‘Wise Men’ who waged it as a condition for victory in America’s struggle against the Soviet Union.

Today, as after 1945, policymakers find themselves at an ‘inflexion point’. ‘History’, wrote future National Security Advisor Jake Sullivan during the 2020 presidential campaign, ‘is again knocking’:

The growing competition with China and shifts in the international political and economic order should provoke a similar instinct within the contemporary foreign-policy establishment. Today’s national security experts need to move beyond the prevailing neoliberal economic philosophy of the past forty years… The US national security community is rightly beginning to insist on the investments in infrastructure, technology, innovation, and education that will determine the United States’ long-term competitiveness vis-à-vis China.

Detailed at length in a report for the Carnegie Foundation, under the signature of Sullivan and a camarilla of other Biden advisers, ‘foreign policy for the middle class’ collapsed factitious distinctions between national security and economic planning. Hopes that globalized doux commerce might permanently induce other powers to accept US hegemony had been deceived. Another approach was in order. ‘There’s no longer a bright line between foreign and domestic policy’, Biden declared in his inaugural foreign policy speech. ‘Every action we take in our conduct abroad, we must take with American working families in mind.’ Trump’s victory, forged in the deindustrialized heartlands of the opioid crisis and ‘American carnage’, had shaken the Democrat establishment. What’s good for Goldman Sachs was no longer, it seemed, necessarily good for America.