Will China Save the Global Economy?

Understanding the People’s Republic of China (PRC) constitutes a formidable challenge to every Marxist. Of course it's not a challenge based on some racist notion of “oriental inscrutability” or even the task of unraveling the obstacles presented by size, diversity, and complexity. Instead, it is the perplexing doctrine of “socialism with Chinese characteristics” that confounds many of us. While no one can contest that the Chinese Communist Party is the leading force in Chinese society, some see the Party as leading the PRC in the wrong direction-- along the path of capitalist restoration.

That capitalist relations of production exist and and have grown in the PRC is unquestionable. Both domestic private corporations and multinational capitalist enterprises have gained far more than a toe-hold in the national economy. Nonetheless, it is pointless to engage in the popular parlor game on the left of declaiming the PRC as socialist or capitalist. The more pertinent and useful question is: “Where is the PRC headed?”

I raised that question in an essay-- The Chinese Puzzle-- in December of 2011. Despite many reservations about the deceptively dubbed “reforms” accepted by the Chinese leadership, my judgment was that the socialist underpinnings of the economy, while dangerously weakened, were still intact: the state sector, relative to national annual product, was still five times greater than a typical European social democracy like France; the financial sector was predominantly state owned; and the planning mechanism was weak, but functional.

At the same time, I was fully cognizant of the many problems wrought by capitalist “reforms”:

The entry of capitalist features into the PRC economy has plagued it with the maladies that arise from the anarchy of markets: imbalances, speculative fervor and bubbles, inflation, labor unrest, grey and black markets, and labor market chaos. In the spring and summer of 2010, workers rose against low wages and working conditions in many areas. Again, this year [2011], there were significant actions for better pay, working conditions and against layoffs. In the fall, the PRC’s sovereign wealth fund was forced to buy shares in major Chinese banks. Despite the fact that private investors own a quarter or less of the country’s biggest banks, a sell-off by foreign investors caused a near panic met by the sovereign wealth funds’ intervention. Today, inflation, a construction bubble, and over reliance on exports weigh on the economy. (my emphasis)

But the PRC's economic stability during the worse years of the global economic crisis demonstrated, in my estimation, the existence and value of the remaining socialist base.

I concluded on a note of caution:

The country’s participation in global markets could present problems that even its remaining socialist tools cannot overcome. Moreover, it is not clear if the PRC will strengthen these safeguards or jettison them, as its leading Communist Party shapes this awkward mix of socialism and capitalism.

A Right Turn

Four months later, alarms sounded with the publication of a joint World Bank and the PRC State Council's Development Research Center report that urged an acceleration of privatization, deregulation, financial market liberalization, and openness to foreign corporate penetration. Of course this prescription is the conventional wisdom promoted by the World Bank. But most alarming was the endorsement of this agenda by such a prominent PRC body. The report urges:

In the financial sector, it would require commercializing the banking system, gradually allowing interest rates to be set by market forces, deepening the capital market, and developing the legal and supervisory infrastructure to ensure financial stability and build the credible foundations for the internationalization of China’s financial sector.

The study, China 2030, clearly represented the manifesto of the rightist “capitalist roaders” in the PRC leadership. As I noted at the time (The Battle for China's Future, 3-06-12), “...the leadership [walks] the thin, risky line between emerging capitalism and the remaining socialist institutions. But, clearly, The World Bank and its Chinese allies are determined to influence that direction. And there should be no doubt which direction China 2030 is intended to push those leaders.”

With the subsequent ascendency of the Xi Jinping leadership group, it became clear that further “reforms”-- economic liberalization-- were forthcoming. Xi sought to unleash market forces, diminish the power and size of the public sector, and court, in various ways, foreign capital and corporations. Keen to minimize the rampant corruption that accompanied the expansion of the private sector, the government also mounted an aggressive campaign to investigate and prosecute the most flagrant abusers. They hoped that this would dampen public resentment of economic inequities that invariably comes with the expansion of private profiteering.

Clearly, PRC's new generation of leaders have accepted the market dogma that further growth was threatened by regulation, a prominent public sector, and financial restraint. Clearly, they have been persuaded by liberal ideologues that more capitalism and less socialism is the order of the day.

And clearly, they have not foreseen the dangers lurking on that path.

The decision to go forward with liberalization was felt dramatically in PRC equity markets. PRC leaders urged investors to enrich themselves. Beginning in November of 2014, regulations against leveraging-- margin buying-- were relaxed, interest rates were cut, and international access to stock markets was expanded, resulting in the rapid advance of an already hot market. Initial public offerings (IPOs) multiplied; market capitalization increased five times in one year; margin loans doubled in six months, reaching 2.27 trillion yuan; individual investors surpassed 75 million, with even 31% of college students playing the market. The PRC leaders had unleashed a stock-market frenzy, resulting in Chinese combined equity markets, at their peak, becoming the largest in the world after the New York Stock Exchange.

The stock market “miracle” drove the benchmark Shanghai Composite index to a new high in mid-June of this year, reaching 5166 from 3334 at the end of last year.

But then the market collapsed. Less than a month later, $3.5 trillion in nominal value disappeared, with the market dropping to 3507. By late August it had further eroded to 3210.

Government measures to stem the crash were ineffectual. Despite suspending IPOs, suspending trading on many stocks, restraining margin buying, and allocating $19 billion to a market stabilization fund, the market continued to falter. Twenty-four million investors left the market, presumably after suffering large losses. To put a perspective on the losses, they were over 14 times the GDP of Greece.

Unlike in the past, the PRC had no socialist tools in their tool box (or they chose not to use them). Unlike in 2008 when the PRC leaders swiftly injected public funds into public enterprises and public projects to propel the economy away from the private folly of the global economy, the PRC leaders were overwhelmed by market forces that they were so eager to unleash.

In their enthusiasm to embrace markets, the leadership had pledged in February to allow the yuan's exchange rate against other currencies to float and remove controls on capital flows. Despite four quarters of capital outflows, the government freed the yuan exchange rate on August 11, unleashing a devaluation that promises to accelerate capital outflows. In the face of a collapse of the PRC equity markets, the leadership chose to answer with further market “reforms.” Moreover, Western commentators (see Paul Krugman, for example) bizarrely blame the rout on too few market reforms rather than the aggressive liberalization that overheated equity markets, an endorsement of a demonstrably failed policy. Capitalist bromides brought the PRC economy to this juncture. Will the PRC leaders continue to embrace them?

Global Turbulence

The current chaos in world-wide equity markets has made the PRC a convenient whipping boy. The commentariat sees economic problems in the world's second largest economy as dragging the global economy down. While China's economy is moving in the wrong direction and, consequently, contributing to the enduring capitalist crisis, it is far from the efficient or final cause of the painful throes of the capitalist system. Long developing, deeply embedded processes are working to undermine the capitalist system (see my The US Economy: A Midyear Report Card, 6-12-15).

But it is important to stress, nonetheless, that the Chinese economy-- even with its remaining socialist features-- is no longer able to rescue the global capitalist economy as it did, in part, in 2008. As Lingling Wei and Mark Magnier wrote in The Wall Street Journal (China to Flood Economy with Cash, 8-24-15):

Beijing’s struggles this summer have spooked many investors into viewing China as a threat to,

 rather than a rescuer of, global growth. During the financial crisis of 2008 and early 2009, China, with a colossal stimulus plan, acted as a shock absorber. Lately, it is China that is providing the shocks.

This is a stark and candid admission of the abandonment to the market of important, critical elements of the socialist economy by PRC leaders. One can only hope that they will come to their senses before they join others in trying to manage the unmanageable.

Zoltan Zigedy

zoltanzigedy@gmail.com

Honoring Nina Simone

I remember the first time that I heard Nina Simone’s voice and piano. My older sister bought the Bethlehem 45 rpm recording of I Loves You, Porgy in 1958. I was fascinated with the B-side recording of Love Me or Leave Me because of the intriguing piano bridge resembling a Bach fugue—it was both strange, yet oddly appropriate. I still have the record over fifty years later—worn, but still very playable.

I recall, some years later, anxiously stripping away the cellophane from a new arrival from the Record Club of America, the latest LP from Nina Simone. If you wanted to hear interesting music in a small town in the Midwest in the 1960s, that would be the way to do it. I fit the disc carefully on the spindle of the console in our living room and cranked up the volume. The recording, Nina Simone in Concert proved to be a milestone in the journey of Nina Simone, the political commentator and agitator. The last cut begins with Nina Simone stating emphatically, “The name of this tune is Mississippi Goddam. And I mean every word of it....” My aunt, who was working in the kitchen and seldom listened to, and never commented on, my unconventional interests in music, drifted into the room and announced “she MEANS every word of it.”

That reflected the depth and intensity of Nina Simone's commitment to social justice. Mississippi Goddam rang with indignation, anger and righteousness. It made no accommodation to the audience’s delicate sensibilities or comfort. It shouted demands in a way that few artists' works before or since could match. And most importantly, it came at a time when the Civil Rights movement needed an anthem reaching beyond liberal pieties and calls for patience.

But my own favorite from the album was the brilliant adaptation of the Bertolt Brecht-Kurt Weill collaboration, Pirate Jenny. Brecht typically imbued the song with a vengeful settling of accounts between the haughty elites and the common folk. But in Simone's interpretation, “Pirate Jenny” is transformed into an uncompromising act of anti-racism as well. Jenny is changed into a segregation-era Black cleaning woman fantasizing:

You people can watch while I'm scrubbing these floors
And I'm scrubbin' the floors while you're gawking
Maybe once ya tip me and it makes ya feel swell
In this crummy Southern town
In this crummy old hotel
But you'll never guess to who you're talkin'.
No. You couldn't ever guess to who you're talkin'.

Jenny's fantasy envisions a pirate ship invading the town and destroying all but the hotel. The survivors puzzle over why the hotel is spared. The pirates round up the citizenry and, to their surprise, Jenny steps forth:

And you see me stepping out in the morning
Looking nice with a ribbon in my hair...
And they're chainin' up people
And they're bringin' em to me
Askin' me,
"Kill them NOW, or LATER?"
Askin' ME!
"Kill them now, or later?"

Noon by the clock
And so still by the dock
You can hear a foghorn miles away
And in that quiet of death
I'll say, "Right now.
Right now!"

Then they'll pile up the bodies
And I'll say,
"That'll learn ya!"
…

Somehow Simone draws on a well of righteous anger exceeding even the bitter wrath of Brecht's lyrics. While it is unpopular to speak this way in an era of hypocritical civility, her version displays a purity of violence, a chillingly brutal exacting of justice. You can hear it here.

Surely, since her death in 2003, Nina Simone is deserving of an homage, a tribute to her intense musical commitment to social justice. Unfortunately, the recently released documentary on Netflix What Happened, Miss Simone? is not that tribute. Instead, it is a vehicle for placing Simone's activism in the midst of a troubled life, sandwiched between a conflicted childhood and a psychological breakdown. Apart from archival footage, the principle commentators on her life are her vulgar, materialistic, and artless ex-husband and an estranged daughter. They too easily dismiss her activism to fault her for their own unvarnished complaints. In an earlier documentary, Simone's brother, Sam Waymon, who often performed with her, uncharacteristically called the ex-husband “a sonofabitch.” Thus, the new documentary is tainted by post-mortem grievances, an all-too-common opportunity for settling scores or self-aggrandizement.

Also, the film maker, Liz Garbus, shows a shallow grasp of the historical moment and the political gravity of Simone's profound synthesis of commitment and music-- in her interpretation, it is simply a product of Simone's demons. She fails to explore the deep and indelible influences of her political mentors: Langston Hughes, James Baldwin, her neighbor, Malcolm X, and most of all the formidable Lorraine Hansberry. She described their discussions in her autobiography: “It was always Marx, Lenin and revolution—real girls’ talk.” Hansberry was the inspiration for To be Young, Gifted, and Black.

Yes, Nina Simone was a revolutionary. She described her years as a movement's musical conductor as the best years of her life. And she attributed her subsequent expatriation to the death, exile, and pacification of other leaders of that generation. Much of the psycho-therapeutic speculation obsessing current commentaries of Ms. Simone's life misses the point (or evades the point). Simone's depression and sometimes erratic behavior was an understandable reaction for a serious, passionate woman experiencing both defeat and betrayal. Those who have not made commitments and sacrifices will struggle to understand.

It is painful to see the trivialization and sensationalizing of Nina Simone's life that accompanies the current “revival” (A biopic, and another documentary are coming). As with Paul Robeson, ML King Jr, and so many others, there is a veritable industry of parasitic writers devoted-- borrowing from the spiritual popularized by Robeson-- to “scandalizing her name.” A recent Rolling Stone article by Christina Lee (10 Things We Learned From New Nina Simone Doc, 6-29-15) typifies the banalities served up as pertinent to the Simone revival. Out of the many important elements in Nina Simone's life, author Lee is drawn to her sexual appetite, her lonely childhood, her emotional issues, and other irrelevancies, including her once performing on a Playboy-mansion location television show. Ms. Simone did not suffer fools.

Nina Simone was a unique voice, a great artist, an artist who drew strength from the deepest emotions of love and hate: love for the people and hatred of bigotry and exploitation. She was a beacon in her time, a messenger of revolutionary sentiment.

Those unfamiliar with her work and life might watch the earlier documentary, Nina Simone, The Legend, a competent European production from 1992. Also, there are numerous performances on YouTube, including this mix. And certainly the Netflix documentary is worth a look despite its flaws. One can only hope that the forthcoming documentary, The Amazing Nina Simone, created with the assistance of Simone's brother, Sam Waymon, will better represent her enduring legacy.

Zoltan Zigedy

zoltanzigedy@gmail.com

Wake Me When It’s Over

Mainstream commentators-- both liberal and conservative-- would like us to believe that Presidential contests are like beauty pageants. Primaries allow the two-party “beauties” to appear before the judges (the voters) to show their wares. Televised debates are meant to expose the contestants’ political personalities. And, in the fine tradition of high-school-civics-book democracy, the people are allowed to decide the winners.

As polished and innocent as this shallow imagery appears, it hides a far more insidious process.

A far better comparison would be with the delightful humbuggery of the Wizard of Oz. Like Dorothy, we are deceived into confusing fantasy with reality. And our corporate media refuses to pull back the curtain to expose the deceit.

Republicans

Take the Republican primary, for example. With 16 (or more) candidates announced as primary contestants, it looks like the textbook-picture of democracy: a political flavor for every Republican. Of course the truth is that most of the candidates have no hope of winning the nomination, but do hope to gain political advantage, jobs, or future consideration. Many candidates appeal to the storm troopers of the Republican Party, the angry bigots, religious zealots, and unhinged war mongers; these forces serve as a social base for a future fascism. But they present a painful contradiction for the Republican Party, a party first and foremost serving the interests of monopoly capital. They can, and have won regional and local power, but they will not win a national election. The leaders of the Republican Party know this. They also know that the vulgar xenophobic right will not necessarily or consistently carry out the corporate agenda.

That's why the Donald Trump campaign is such a problem for the Republicans.

A recent lengthy Wall Street Journal commentary (July 25/26, 2015) featured on the front page of the week-end Review section addresses this problem. Written by a prominent senior fellow at the right-wing Hoover Institute, Peter Berkowitz, the article expresses the tensions in the Party and calls for reconciliation, while promoting the interests of wealth and corporate power. Clearly, the Trump phenomenon is of big concern to Republican king makers. Berkowitz euphemistically distinguishes between “social conservatives” and “limited-government conservatives.”

His social conservatives are the Republican neo-fascists, the Doctor Strangeloves, who would like to boil minorities in oil, nuke the Iranians, and impose Old Testament law on the US. Since World War II, they have been both an essential element of the Republican electoral effort and a hindrance to winning national office. Republican leadership trumped nuke-happy General Douglas MacArthur with the saner, business-friendly, and genial General Dwight Eisenhower in 1952. When Barry Goldwater, a nuclear terrorist and neo-segregationist, won the 1964 nomination and was crushed in the general election, the point was driven home: the wacky-wing of the Republican Party must be mollified, but kept out of national contests.

While Reagan courted and appeased the social conservatives, his imprint is most felt with his restructuring of the relation of labor-to-capital, to the benefit of capital. To that extent, he was the ultimate limited-government (read: corporate) Republican. He served capital well, while fostering a small-town, Midwestern tradition-loving image to appease the rabid-right. While he may have been the ultimate con man, his ease in constructing images and his persuasiveness account for the respect won from supposed political adversaries like Bill Clinton and Barack Obama.

The Reagan approach-- attack taxes, unions, public services, benefits, pensions, etc. while coddling the haters and those rushing toward Armageddon-- served as the template for Republican national politics until our time. Unfortunately, Donald Trump-- a figure with B-grade acting chops rivaling Ronald Reagan's-- threatens to break the template. Trump's independence imperils Party stability. His open disdain for the rules and conventions demanded by the Republican leadership upsets the process. His imperviousness to Party criticism frightens the Party's watchdogs. His freedom from financial entanglements beyond his own resources erases possible leverage. But most of all, Trump's threat to run in the general election terrorizes Party big wigs.

Trump has brought Republican social conservatism to center stage, presenting a possibly fatal problem to the Party. While some polls show him with a lead, that lead constitutes, at best, 16% of the possible Republican primary voters. Republican leaders know that that will not translate into a majority in a general election, given an electorate largely hostile to the Republican Fringe. Berkowitz, fearing a debacle, urges moderation. He cites rising star Governor Nikki Haley as an example of the kind of tactical acumen needed in this campaign. Her ready sacrifice of the symbolic Confederate battle flag at the South Carolina state capital demonstrated her “maturity,” while safely securing the symbol for “...'those who wish to show their respect for the flag on their private property'.” The games our politicians play!

For Berkowitz, the options are clear. The candidates best representing Republican interests are the limited-government (corporate) candidates, namely, Jeb Bush, Marco Rubio, and Scott Walker. At the same time he believes that they must be good at “blending and balancing the demands of both schools.”

No one should be confused by the conciliatory tone. Berkowitz and the Republican leadership prefer, insist upon a candidate dedicated first and foremost to serving monopoly capital. They will not allow a campaign sacrificed to nut-case principles. But insofar as Trump may provoke a bloody split or bolt the Party, they are filled with dread.

Undoubtedly, they will get a corporate candidate (likely Jeb Bush, who is raising funds at an unprecedented pace), but at what price?

Democrats

Leftists can only wish that the Democratic Party had these issues. We can only imagine that Hillary Clinton wakes up every night in a cold sweat, dreading the next morning's news about Bernie Sanders. That is not happening.

Unlike the Trump campaign, there is no danger of the Party's left wing (the so-called “progressives”) bolting or disrupting the general election. Sanders has assured the Party establishment that he will not run independently of the Democratic Party or attack the Party or the primary victor. He guarantees that he will remain loyal to the Party throughout the general election-- a loyal soldier. He refuses to attack Clinton, arguing that he prefers the high road. In other words, he eschews Trump's independence.

Like Trump, Sanders polls as high as 16% among Democratic primary voters, far below Clinton's numbers. But unlike Trump, his most loyal followers pose no threat, make no demands on the Party leaders.

As millions of dollars flow into Clinton's campaign coffers, she benefits from both the Sanders and the Trump campaign. The afterglow of the Sanders' populist revival will deflect critics of her corporate allegiances and rabid foreign policy. Trump’s rousing of the Republican Taliban will rekindle the “defeat the ultra-right” crowd who always accept the Party's tacking to the right to win over the “vital” center. We've seen this script before.

So we stand in 2015 in the same position we stood in 2007. The media and commentariat are doing their best (hundreds of millions of advertising dollars are engaged) to create the excitement of a contest where the outcome will ultimately be decided more by fundraisers than by voters. Campaign veterans in both parties estimate that the winning candidate and (her) opponent will spend over a billion dollars before the election.

In this context, a polite “insurgency” within the Democratic Party will not leave a lasting mark on the political scene. To make a difference, an insurgent would need to begin years before an election and build a formidable mass base to counteract the power of money and the entrenched Democratic leadership. The candidate would need to commit to building a movement that would encompass state and local organizations while promising to sustain movement building beyond the current and even future elections. That has not happened in the past and appears most unlikely with the Sanders campaign.

For young idealists inspired by Sanders's departure from political banality, one can only hope that they will learn valuable lessons about the institutional inertia of the two parties and shed any illusions about “knights in shining armor.” Less optimistically, quixotic campaigns like Sanders's, and Howard Dean's before him, can leave a stain of cynicism and inaction.

Is Bernie-mania a second coming of Obama-mania, an exercise of fantasy politics on the part of the left? The test for Sanders supporters who are seasoned veterans of the political wars will come when Clinton wins the Democratic primaries. Will they docilely rally behind her and work for another pro-corporate, war-mongering candidate offering a dubious lesser-of-two-evils? Or will they seek a principled third party candidate (like Jill Stein) who offers a long, unsure, and arduous path, but a path possibly offering real change?

Zoltan Zigedy

zoltanzigedy@gmail