China’s Rise in Global Economy: Minqi Li’s Analysis

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Table of Contents

Introduction
Interpretation of China’s History
Significance of Labor Militancy and Environmental Degradation
Conclusion
Works Cited

Introduction

China has achieved a rapid economic growth and development in the last three decades. Currently, China is the second largest economy in the world. As the country continues to develop rapidly, it is expected to have a great influence on economic and political issues in the world. In this respect, the possible impact of the rise of China on the world economy has been interpreted in different ways by various scholars.

This paper will discuss Minqi Li’s analysis of the rise of China. The discussion will shed light on Minqi Li’s interpretation of China’s history. The significance of labor militancy and environmental degradation in China will also be discussed. In addition, the paper will discuss the effect of the rise of China on global capitalism.

Interpretation of China’s History

Revolution Period

Several violent revolutions occurred in China between the mid 19^th century and the mid 20^th century. Integration of China into the capitalist world economy was the main cause of the revolutions (Li 9-11). During the revolution, there were competing political and economic ideologies in China. In politics, the country was divided between those who believed in the political party system of governance and those who preferred the dynastic system of governance.

For instance, the Nationalist Party overthrew the Qing dynasty in 1911. However, the party lost leadership after Yuan became an emperor. Generally, China lacked a strong system of governance during the revolution period due to the varied political ideologies that were held by the ruling class.

China was also characterized by social classes that believed in capitalism and those that believed in socialism. The capitalists consisted of the bourgeoisies who dominated the domestic and international trade. The socialists, on the other hand, included peasants and workers (Li 10-12).

The capitalists failed to lead the country due to their small number and limited access to financial capital. As a result, socialism became the main economic system after the Communist Party came to power. Thus, the main achievement of the revolutions was the creation of a new state whose leadership was expected to fulfill the political and economic expectations of the majority of Chinese.

The Maoist Period

During the Maoist period, China had officially adopted a formal government, which was led by members of the Communist Party. This period was significant in the history of China because it addressed most of the social and economic inequalities that had developed due to capitalism. China was predominantly a socialist state during the Maoist era.

Thus, its economy was characterized by “state ownership of the means of production in cities, collective ownership of land in the countryside, and centralized economic planning” (Li 28). The government nationalized businesses that were owned by capitalists in urban areas. Similarly, the land that was owned by capitalists in the rural areas was confiscated by the government and redistributed to poor peasants. This led to a relatively equal distribution of wealth.

Another major achievement of the Maoist period was rapid economic growth that helped China to catch up with the western world. China’s GDP per capita was higher than that of Western Europe, Eastern Europe, East Asia, and South Asia. The economic success helped the country to build the stock of capital, which led to the rapid growth that was realized after 1980 (Li 29-35).

In particular, heavy investment in irrigation technologies, heavy industry, social capabilities, and transportation systems in the Maoist era led to rapid economic growth during the reform period. In terms of social and economic development, life expectancy in China increased by nearly 30 years.

Moreover, the level of illiteracy among adults was significantly reduced. The citizens enjoyed free healthcare, free education, and job security, which are currently not available in China due to capitalism. Thus, Li interprets the success of the Maoist period as proof that socialism is superior to capitalism.

The Period of Economic Reforms

Economic reforms were initiated by Deng Xioping to address the failures of the Maoist era. During the Great Leap Forward (GLP), poor production policies led to severe food shortages and slow economic growth (Li 55-61). The failures of the GLP led to the ideology that socialism was not sustainable in China. This ideology was supported by the capitalists who were still struggling to regain their control over the country’s economic and political system. The economic reforms promoted a market-oriented production system.

It promoted capitalism by encouraging private ownership of the means of production and privatization of state owned enterprises. Managers in private and public companies got the authority to make production decisions. This led to a significant improvement in economic growth and living standards (Li 57-59). However, Li considered the reforms to be a source of conflicts in China. For instance, the intellectuals who supported capitalism increasingly opposed the Communist Party, thereby creating political tensions.

Moreover, the working class gained a very strong bargaining power, which they used to demand for high wages. This led to conflicts since business owners preferred to pay low wages to enjoy good profit margins. The rise in inequality also increased dissent, thereby threatening political stability in the country.

Significance of Labor Militancy and Environmental Degradation

Labor Militancy

The rising labor militancy in China is one of the major factors that shape the country’s model of economic growth. In early 1990s, the government embarked on large-scale privatization of state owned enterprises. As a result, millions of workers were laid off. The resulting increase in labor militancy forced the government to open the economy to foreign investments. In particular, the government had to attract foreign direct investment (FDI) to increase job opportunities.

As a result, companies from western countries relocated to China to take advantage of the cheap labor (SACOM). However, most foreign companies that produced in China exported their goods to other parts of the world to improve their earnings. This means that China had also to adopt economic policies that promoted exportation of manufactured goods. Therefore, labor militancy led to the adoption of the FDI and export-led economic growth strategies in China.

The increase in labor militancy also influences the distribution of income in the country. One of the factors that cause labor militancy in China is low wages (SACOM). Thus, as workers continue to demand for better wages, income will be redistributed from the rich capitalists to the working class. The significance of this redistribution is that domestic demand will increase. Consequently, China will be able to reduce its reliance on external demand, which exposes it to negative exogenous economic shocks.

Nonetheless, increased labor militancy will intensify class struggles that have historically pitted the capitalists against workers. As a result, the country’s political stability will be weakened. In addition, demanding for high wages will inevitably reduce economic growth by reducing profitability.

Environmental Degradation

Environmental degradation will have a serious negative effect on the sustainability of economic growth in China. The country has already exceeded its bio-capacity (Li 131-133). This means that China does not have adequate resources within its territories to support production in various sectors of its economy. The resource shortage will inevitably reduce the rate of capital formation and economic growth in future.

Therefore, the only way to sustain rapid economic growth in China is to exploit the resources in other countries. However, this strategy will also expose China to the risk of going to war with its rivals such as the US and German, which also depend on external natural resources (Li 131-132).

The implication of this risk is that China must invest heavily in military capabilities to overcome the resource constraints that it faces due to environmental degradation. This will require a lot of financial resources since the country’s military is very weak in terms of access to technology and equipment. Therefore, modernizing the military might result into a reduction in the amount of financial resources that are allocated to development projects.

Environmental degradation is also a threat to the survival of China’s population. The available land in the country is not adequate for food production and disposal of the wastes generated by the population. Thus, increased pollution of the air and water bodies will result into a rise in morbidity and mortality rates.

The Rise of China Indicates the End of Capitalism

The rise of China will lead to the collapse of capitalism because of the expected changes in the country’s wage rate that will have a negative impact on profitability in the core (developed) states. Capitalism is characterized by profit maximization and endless accumulation of capital (Alperovitz 17). This can only be achieved if production costs are low.

However, maintaining low production costs in the core countries is increasingly becoming difficult because their working classes are able to engage in political and economic struggles. This has led to an increase in wage rate and taxation costs, which in turn have reduced profitability. In this respect, businesses in the core countries have had to relocate their production plants to countries with cheap labor to protect their profit margins.

China is the main beneficiary of capital relocation from the core countries because of its large population and very low wage rate. Increased capital flows to China will increase industrialization and urbanization in the country (Li 107-112). As a result, the wages received by the proletariats and the semi-proletariats will significantly increase. As workers continue to demand for pay increments, China’s wage rate will converge to those of the core states. This will lead to the collapse of global capitalism in the following ways.

First, the producers/ businesses in China might not be able to sustain the high wage rates in the long-run. This means that the rate of capital accumulation in the country will significantly decline. Moreover, China might be relegated to “the status of a periphery or poor semi-periphery state” (Li 109).

In this respect, economic decline might prevent investment in cheap sources of energy and transport infrastructure in China, thereby reducing the growth of capitalism. Nonetheless, the negative effect on capitalism is likely to be minimal since wages are likely to reduce during economic decline.

Second, if the profit and wage rates in China converge to those of the semi-periphery states in a downward manner, global capitalism will face serious challenges. In particular, the monopoly of the semi-periphery states in the production of certain goods will be replaced with intense competition from China (Li 107-111). Consequently, the wage rates in the semi-periphery states will reduce to the levels in China. This means that the semi-periphery states will become periphery states.

The resulting reduction in global demand will lead to the demise of capitalism by reducing profitability. The core states will also experience increased resistance from the periphery and poor semi-periphery states. Similarly, the poor semi-periphery states will experience high political instability due to the revolutions that are likely to arise as poverty increases. Thus, intrastate and interstate political instability will lead to the collapse of capitalism by preventing production.

Third, if the convergence in profit and wage rates occurs in an upward manner, China will be elevated to the status of a well-to-do semi-periphery state. Thus, China’s workers will be entitled to the wage rates that are equal to those in the well-to-do semi-periphery states.

Given the large size of China’s labor force, capitalists will have to double the workers’ share of surplus value (Li 110-112). This might not be possible because it will be very expensive. Moreover, it will significantly reduce the percentage of the surplus value that will be received by the rest of the world.

Post-capitalist Social and Economic Organizations

In the post-capitalist world, the subsistence production system is likely to be the dominant economic organization (Li 178-179). Since endless accumulation of capital is no longer sustainable, countries are likely to focus on production for subsistence purposes only. In this regard, the main aim of economic activities will be to satisfy basic needs at the individual level rather than to create surplus value for the market.

This will ensure sustainability of economic activities and the survival of the human population by preventing overexploitation of natural resources. Therefore, production is likely to be conducted on a small-scale basis by individuals or families rather than large corporations that are owned by several people.

However, large-scale production might still be required to achieve economies of scale in the post-capitalist society. In this respect, social, public, or communal ownership of the means of production will be used to facilitate large-scale production (Hanna and Alperovitz 20). Collective ownership will facilitate access to the required labor and financial resources to achieve the desired level of output.

Central planning is likely to be the most dominant form of resource allocation. However, central planning is often associated with inefficiency in resource allocation due to lack of the information that planners need in order to make distribution decisions. In this case, market socialism might be an alternative to central planning.

Nonetheless, this system might also not work due to market failures. Consequently, countries are likely to resort to central planning since efficiency and capital accumulation will not be relevant in the post-capitalist society. Specifically, central planning will be used to allocate resources as long as it will be able to ensure ecological sustainability.

Ecological Sustainability and Satisfying Human Needs

A socialist society is likely to satisfy the needs of human beings and ensure environmental sustainability in the post-capitalist global economy. The main objective of governments in the post-capitalist society will be to ensure that economic activities are compatible with ecological sustainability (Li 179).

In order to achieve this objective, the market system of resource allocation will have to be replaced with social and political institutions. Specifically, each country will have to establish a national planning department to facilitate allocation of resources without causing environmental degradation.

Ecological sustainability can only be ensured if the world economy is based on organic agriculture and renewable sources of energy rather than industrial production using fossil fuels. The implication of this requirement is that countries will have to restructure their economies by replacing their industrial sectors with organic agriculture (Li 180).

This will involve relocating people from cities to the rural areas to facilitate production in the agricultural sector. Therefore, various countries will have to cooperate and form a global socialist government to oversee the production system.

The global socialist government will be responsible for allocating resources and coordinating the migration of people to the rural areas. This will include regulation of population growth to prevent overexploitation of natural resources (Lazzarato).

The government will also coordinate the global efforts to reduce emission of greenhouse gases to prevent environmental degradation and climate change. In this context, economic activities will be compatible with ecological sustainability if the global socialist government succeeds in delivering its mandate.

The role of Democracy

Enhancing democracy is one of the requirements that leaders will have to meet in order to ensure the success of the socialist society. At the global level, socialist governments will have to negotiate the desired level of greenhouse gases and capital accumulation (Li 181-188). In addition, they will have to agree on the desired population growth rate and the amount of resources that will be allocated to each country. Therefore, democracy has to be enhanced to ensure that the outcomes of the negotiations are supported by all countries.

Undoubtedly, countries are likely to engage in eco-friendly economic activities if global resource allocation is done in a democratic and transparent manner. At the individual level, central planning in the global socialist government is likely to limit freedom. Individuals will not have the freedom to make decisions regarding what they want to produce and how to produce it.

Democracy is also important because of the proletarization of the working class that has already occurred due to capitalism. Workers in the core, semi-periphery, and periphery states have already acquired adequate education and political consciousness.

Therefore, they have powerful organization capabilities that will enable them to engage in a serious class straggle to prevent the ruling class from exploiting them (Li 181). This means that democracy and freedom must be enhanced in the economic and political arena to ensure peaceful coexistence in the post-capitalist socialist governments.

Conclusion

The rise of China is a threat to the survival of global capitalism. China’s reserve army of workers has traditionally supported the rapid development of global capitalism by providing cheap labor. Eventually, the wage and profit rates in China will converge to those in the core and semi-periphery states. The resulting increase in the cost of production will lead to the demise of capitalism.

In addition, capitalism will collapse because most countries have already exceeded their bio-capacities. This problem is exacerbated by the lack of a powerful world government to regulate capitalism. In this regard, capitalism is expected to be replaced with global socialism in future. This will ensure that capital accumulation is compatible with environmental sustainability.

Works Cited

Alperovitz, G. “The New Economy Movement.” The Nation 2011: 17. Nation Archives. Web.

Hanna, T. and Gar A. “Beyond Corporate Capitalism: Not so Wild a Dream.” The Nation 2012: 20. Nation Archives. Web.

Lazzarato, M. Biopolitics/ Bioeconomics: A Politics of Multiplicity. Web.

Li, M. The Rise of China and the Demise of the Capitalist World Economy, London: Pluto Press, 2008. Print.

SACOM. Workers as Machines: Military Management in Foxconn 2010. Web.

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