rfmcdonald | [LINK] "China and the coming crisis"

At Open Democrqacy, Minqi Li predicts that the coming economic storm in China will have global repercussions.

In response to the last structural crisis, global capitalism adopted ‘neoliberalism', a set of policies and institutions designed to defeat the working classes in the core and semi-peripheral countries. But the global balance of power was not turned decisively to the favour of the capitalist classes until China undertook ‘reform and openness'. China’s capitalist transition provided several hundreds of millions of capable workers with wage rates at a small fraction of those prevailing in the core countries. The incorporation of such a massive cheap labour force undermined the bargaining power of the western working classes decisively.

Since then, China’s social structure has been fundamentally transformed. A large militant working class has emerged. According to my estimate, China’s wage-earning working class expanded from about 230 million in 1990 to 370 million in 2012. When the more privileged urban ‘middle class’ (professional and technical workers) are included, the total of urban and rural wage workers grew from about 250 million in 1990 to 420 million in 2012. Currently, about 100,000 ‘mass incidents’ (mass protests) happen annually. About 10 million people are involved in these ‘mass incidents’ every year.

After sharp declines in the 1990s and stabilisation in the early 2000s, labour income as a share of China’s GDP began to rise after 2010, reflecting the growing strength of the Chinese working class. The squeeze on capitalist profit has led to the rapid decline of China’s economy-wide profit rate. In the early 2000s, China’s economy-wide profit rate was about twice as high as the US level. Since 2007, China’s profit rate has fallen precipitously. Under the current trend, China’s profit rate could, in a few years, fall towards levels that were last seen in the US during the Great Depression.

As several mainstream institutions have predicted, a major crisis of the Chinese economy could plunge the global capitalist economy into a crisis that will prove to be more destructive than the ‘Great Recession’ of 2008-2009. The question is whether global capitalism can survive the coming crisis, and whether favourable conditions required for global capital accumulation can be restored