There Is No Cold War with China
The Cold War was pretty bad, we're headed for something potentially much worse. Plus, a primer on the history of Chinese communism and how its demise saved capitalism.
Just last week, the United States announced a new round of tariffs on Chinese exports, in a major reversal from President Biden’s campaign promise. The embrace of protectionism is a sign of the strategic weakness of the United States and its relative decline in relation to China. But this latest round of tariffs hardly proves a New Cold War. To evaluate the Cold War question, we need more context.
Let’s begin with Some Basic Facts About China.
To understand what China is now, we need to understand the governance of Communist China in the past. This 1974 pamphlet is a tremendous start. It covers how China organized its rural communes, its urban centers, its medical system, among other economic questions in accordance to communist ideology. It’s an essential read for anyone who wants to understand how socialist power works in practice and how one governs transformational political processes.
The China of that 1974 pamphlet doesn’t exist anymore! China is no longer communist, and it hasn’t been communist since the 1970’s. For some, the notion that China – a nation ruled by the Chinese Communist Party (CCP) – has not been communist for nearly fifty years may come as a shock. Others may vehemently disagree. However, we really need to accept the fact that communism was defeated in China if we are to accurately assess the Cold War hype.
What is China Now?
China is fully integrated with the capitalist world economy. In the 1970’s the CCP overthrew communism for what they termed Socialism with Chinese Characteristics, a euphemism for capitalist rule and a phrase the CCP continues to use to this day. At the time that the CCP initiated capitalist rule, the capitalist world economy was suffering a major structural crisis. Capitalist profits were falling amidst mounting costs and popular unrest. In the 1970’s the United States instituted new political controls, now known as neoliberalism or the Washington Consensus. These efforts at jump-starting the profit-rate and reinstituting capitalist legitimacy were only possible because the CCP overthrew communism and imposed capitalist rule on China.
The economist Minqi Li describes this process:
In response [to the post-1968 structural crisis], the global capitalist classes organized a counter-offensive in the form of “neoliberalism.” In the meantime, China, with its massive cheap labor force, has become the center of global capital relocation and the “workshop” of the world. China’s deeper incorporation into the capitalist world-economy helps to lower the global wage cost and restore the global profit rate. However, the neoliberal success has been limited. Global profit rates never returned to their previous high levels. Moreover, the neoliberal strategy turns out to be very costly for the global capitalist classes.
For Minqi Li, geographic expansion has always characterized the capitalist world economy, but the incorporation of China is possibly capitalism’s final frontier.
Historically, the capitalist world-economy has responded to the pressure of rising costs through successive geographical expansions, relocating capital to new areas with lower costs. Obviously, this process cannot proceed indefinitely as sooner or later it will reach the maximum possible limit—the entire globe… China was one of the last large geographical areas to be incorporated into the capitalist world-economy… To use a military analogy, China had served as one of the large strategic reserves of the capitalist world-economy.
China is not hostile to capitalism. In fact, China saved capitalism, on at least two separate occasions decades apart. First, when it overthrew communism and turned its millions of peasants into sweatshop slaves. Then again, in the wake of the financial collapse, when the CCP stabilized the Euro by using its massive dollar reserves that it had accumulated due to its decades of export production in order to rescue the free-falling currency.
China is the guarantor of the capitalist world economy.
What Was Chinese Communism?
To understand the magnitude of what was lost when communism was overthrown, we must appreciate just how drastic of a change it was.
For decades, the Chinese Communist Party, under the leadership of Mao Zedong, had emphasized two key principles in economic development: balance and revolution. Under Mao’s leadership, the CCP sought to balance China’s economic growth, primarily by refusing to sacrifice agriculture for heavy manufacturing, while also prioritizing the continuation of the communist revolution.
In this era, the CCP constructed many of its factories inland and in a decentralized network as a means of ensuring that they could maintain economic production while at war with imperialist powers. That is to say, revolution was paramount in economic planning, an example of the well-worn Maoist phrase politics in command. This policy had the secondary effect of resisting the urge to become an export economy, which would have prioritized centralized manufacturing in coastal provinces near ports. Had the CCP pursued the export path, it would’ve necessitated the betrayal of the peasants by rapidly pushing them into factory work for export, rather than continuing their prominent role in what was termed socialist construction.
The peasants had been the key supporters of the revolution both politically and in their massive participation in the victorious Red Army. After the CCP defeated the nationalists to unify China in 1949, the CCP used land reform to re-organize the peasants into rural communes, which were political-economic units that structured both economic production and political life in rural China.
When Deng Xioaping commenced the process of “opening up” in the 1970’s, these rural communes were dismantled, thus stripping the peasants – that is the masses of the Chinese people – of both their political power and economic role. Deng’s policy effectively liquidated the peasants. Millions of peasants were rapidly degraded into migrant laborers, many of whom wound up in newly formed Special Economic Zones, the first of which was founded in 1980. These Special Economic Zones were centralized manufacturing districts located in coastal provinces where free market capitalism hyper-exploited these former peasants in order to prop up the capitalist world-economy through cheap exports. Rather than politics in command, Deng ushered in a new era of profit in command — the essence of socialism with Chinese characteristics.
New Cold War or New World System
In the United States, media outlets and politicians refer to this mass enslavement of the Chinese people as “off-shoring” or “China stealing our jobs.” It’s delusional. This process was catastrophic at a world-historic scale, and the U.S. public is intentionally misled about it because to acknowledge it would call the entire social foundation of the country. Everything from consumer goods to the credit system we use to run up debt were all made possible by the overthrowing of communism in China and the resulting hyper-exploitation of its people.
China, essentially, wants a better return on its investment — like any emerging guarantor of the capitalist world economy. The United States is attempting to block its efforts. But that is not why China cannot be accommodated on revised terms. The more fundamental problem is that the capitalist world economy is in a terminal structural crisis that is accelerating by the day. Immanuel Wallerstein, a pioneer of world-systems analysis, identifies three “structural strains” that capitalism can no longer bear:
(1) the deruralization of the world, ending capitalism’s ability to check the rising share of expenditure on labor power as a percentage of world total value created;
(2) the ecological limits of toxification and nonrenewal of resources, limiting the ability of capital to reduce costs of inputs by continued externalization of these costs;
(3) the spreading democratization of the world, evidenced by ever-expanding popular pressures for expenditures on health, education, and lifetime income guarantees, which have created a steady upward pressure of taxes as a share of world value created.
These intractable problems amount to a terminal decline of the capitalist world economy that cannot be overcome within the limits of the existing world system. A new world system must emerge to take this one’s place. It is the declining status of the capitalist world economy as a whole that makes the conflict between the U.S. and China fundamentally distinct from the Cold War with the Soviet Union – a point we will return to in our next installment.