The difficult reality for the United States is economic dependence on the world’s number two economy that deepens with China’s relentless march toward becoming the world’s number one.
Richard D. Wolff is professor of economics emeritus at the University of Massachusetts, Amherst, and a visiting professor in the Graduate Program in International Affairs of the New School University, in New York
This article was produced by Economy for All, a project of the Independent Media Institute
On the one hand, U.S. policy aims to constrain China’s economic, political, and military development because it has now become the United States’ chief economic competitor and thus enemy. On the other hand, U.S. policy seeks to secure the many benefits to the United States of its companies’ trade with and investments in China. U.S. debates over “decoupling” the two countries’ economies versus the milder version of the same thing—“de-risking”—exemplify, on both sides, U.S. policy’s split approach to China.
The difficult reality for the United States is economic dependence on the world’s number two economy that deepens with China’s relentless march toward becoming the world’s number one. Likewise, China’s stunningly rapid growth over recent decades entangled it in a complex economic codependence with the U.S. market, the U.S. dollar, and U.S. interest rates. In stark contrast, neither the Soviet Union nor Russia ever offered the U.S. economic opportunities or competitive challenges comparable to what China now does. In this context, consider World Bank 2022 data on GDPs in Russia, Germany, China, and the United States: $1.5 trillion, $3.9 trillion, $14.7 trillion, and $20.9 trillion, respectively.
The political right wings of both major U.S. political parties and the military-industrial complex have long prevailed in shaping how U.S. mainstream media treat the country’s foreign policies. Over the last decade especially, the media has increasingly accused China of aggressively expanding its global influence, of authoritarianism at home, and of policies targeting the United States. Over recent decades, big business interests promote a quite different U.S. foreign policy prioritizing profitable coexistence between the United States and China. U.S. policy splits and oscillates between these two poles. One day Jamie Dimon of JPMorgan Chase bank and U.S. Treasury Secretary Janet Yellen go to Beijing to support mutuality of interests while at the same time, President Biden labels Xi Jinping a “dictator.”
The history and legacy of the Cold War accustomed U.S. media, politicians, and academics to traffic in hyperbolic denunciations of communism plus parties and governments they link to it. Right-wing political forces have always been eager to update anti-Soviet, Cold War logics and slogans for use against China’s government and Communist Party as continuing villains. Old (Taiwan and Hong Kong) and new issues (Uyghurs) mark an ongoing campaign.
Yet as the Cold War wound down and then collapsed with the USSR’s demise, Nixon and Kissinger reconnected with a China already launched on an economic development surge that never stopped. Capitalists from the system’s old centers in the G7 (Western Europe, North America, and Japan) poured investments into China to profit from its relatively much lower wages and its rapidly growing internal market. Over the last 50 years, consumer goods and capital goods flowed out of factories in China to markets around the world. China became deeply entangled in global supply chains. Exports from China brought an inflow of payments in U.S. dollars. China lent many of those dollars back to the U.S. Treasury to fund its growing budget deficits. China joined Japan as the two major creditor countries of the United States, the world’s greatest debtor country.
China’s investment of its accumulating dollars in U.S. Treasury bonds helped to enable the fast-rising U.S. national debt over the last half-century. That helped keep U.S. interest rates low to fuel U.S. economic growth and its recoveries from several economic crashes. China’s relatively low-priced exports reflected its low wages and active government development supports. Those exports to the United States helped prevent inflation over most of those years. In turn, low prices reduced pressures from employees for higher wages and thereby supported U.S. capitalists’ profits. In these and still other ways, U.S.-China connections became deeply embedded in the functioning and success of U.S. capitalism. Cutting those connections would risk very adverse economic consequences for the United States.
Moreover, many proposals favoring such cutting are ineffective and ill-informed fantasies. If the U.S. government could force United States and other multinational corporations to close up shop in China, they would most likely move to other low-wage Asian locations. They would not return to the United States because its wages and other expenses are too high and thus non-competitive. Where they do go will entail sourcing inputs from China, already their most competitive producer. In short, forcing capitalists to leave China will help the United States minimally and hurt the Chinese minimally as well. Closing off the China market for U.S. microchip-makers is likewise a faulty fantasy. Without access to the booming Chinese market, U.S.-based companies will be uncompetitive with other chip-makers based in countries not closed out of the Chinese market.
U.S. capitalism needs the inflow of most Chinese exports and needs inclusion in China’s markets. U.S. megabanks need access to China’s fast-growing markets or else European, Japanese, and Chinese banks will eventually outcompete the U.S. banks. Even if the United States could force or maneuver G7 banks to join a U.S.-led exit from China, China’s banks and those of its allies in India, Russia, Brazil, and South Africa (the BRICS) would control access to the profitable financing of China’s growth. In terms of aggregate GDPs, the BRICS are already a bigger economic system, taken together, than the G7 taken together, and the gap between them keeps widening.
Were the United States to pursue its resumed Cold War crusade against China—economically, politically, and/or militarily without nuclear warfare—the results could risk major dislocations, losses, and costly adjustments for U.S. capitalism. With nuclear warfare, of course, the risks are still larger. Other than extreme parts of the U.S. right wing, no one wants to take such risks. The United States’ G7 allies surely do not. Already they are imagining their desired futures in a bipolar world split between falling and rising hegemons and perhaps counterhegemonic groupings of other nations. Most of the world recognizes China’s relentless growth and expansion as the major dynamic of today’s world economy. Most likewise see the United States as the major antagonist tilting against China’s rise into a global superpower position.
What many observers of the China-U.S. clash miss are those of its causes and shapers located in the extreme tensions and contradictions besetting the employer-employee class conflicts within both superpowers. Those class conflicts in the United States respond to this basic question: whose wealth, income, and social position will have to bear the major burden of accommodating the costs of declining hegemony? Will the redistribution of wealth upward across the last 30-40 years persist, be stopped, or be reversed? Are rising labor militancy across the United States and the quasi-fascistic resurging U.S. right wing foretastes of struggles to come?
China’s remarkable ascension rapidly transformed a rural, poor, agricultural economy into an urban, middle-income, and industrial economy. The parallel transformation in Western Europe took centuries and occasioned profound, bitter, and violent class struggles. In China, the transformation took a few decades and was likely the more profoundly traumatic for that reason. Will similar class struggles erupt there? Are they building beneath the surface of Chinese society already? Might the Global South be where global capitalism—the system defined by its employer-versus-employee productive core—goes finally to play the endgame of its profit-maximization fetish?
Both the United States and China display economic systems organized around workplace organizations where a small number of employers dominate a large number of hired employees. In the United States, those workplace organizations are mostly private enterprises. China displays a hybrid system whose enterprises are both private and state-owned and operated, but where both types of workplace organizations share the employer-versus-employee organization. That organization typically features the employer class accumulating far more wealth than the employee class. Moreover, that wealthy class of employers can and usually does buy dominant political power as well. The resulting mix of economic and political inequality provokes tensions, conflicts, and social change.
That reality is already well established in both the United States and China. Thus, for example, the United States has not raised its federal minimum wage of $7.25 per hour since 2009. Both major political parties are responsible. Yellen gives speeches bemoaning the deepening inequalities in the United States, but the deepening persists. In the tradition of blaming the victim, American capitalism tends to fault the poor for their poverty. Xi Jinping also worries openly about deepening inequalities: likely more urgent in nations calling themselves socialist. Even though China has taken significant steps to reduce its recently extreme economic inequalities, they remain a serious social problem there too. The U.S.-China clash depends as much on each nation’s internal class conflicts and struggles as it depends on their policies toward one another.
China adjusts to the twists and turns in the United States’ split policy approach. It prepares for both eventualities: cutthroat competition abetted by intense economic nationalism possibly including military warfare or a conjointly planned peaceful economic coexistence. As China awaits the United States’ decisions on which way to guide the United States’ economic future, China’s growth will likely continue, matching and then surpassing the United States’ global economic footprint. China’s stunning economic growth success across the last 30 years secures China’s remarkable hybrid economy of private and state enterprises supervised by and subordinated to a powerful political party. An anxious world awaits the next chapter in capitalism’s always dangerously uneven mix of class and national struggles.
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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).
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.
The Russia delusion
Denial and self-delusion about the changing world economy have led to major strategic mistakes. US leaders predicted before and shortly after February 2022, when the Ukraine war began, for example, that Russia’s economy would crash from the effects of the “greatest of all sanctions,” led by the United States. Some US leaders still believe that the crash will take place (publicly, if not privately) despite there being no such indication.
Such predictions badly miscalculated the economic strength and potential of Russia’s allies in the BRICS. Led by China and India, the BRICS nations responded to Russia’s need for buyers of its oil and gas.
The United States made its European allies cut off purchasing Russian oil and gas as part of the sanctions war against the Kremlin over Ukraine. However, US pressure tactics used on China, India, and many other nations (inside and outside BRICS) likewise to stop buying Russian exports failed. They not only purchased oil and gas from Russia but then also re-exported some of it to European nations.
World power configurations had followed the changes in the world economy at the expense of the US position.
The military delusion
War games with allies, threats from US officials, and US warships off China’s coast may delude some to imagine that these moves intimidate China. The reality is that the military disparity between China and the United States is smaller now than it has ever been in modern China’s history.
China’s military alliances are the strongest they have ever been. Intimidation that did not work from the time of the Korean War and since then will certainly not be effective now.
Former president Donald Trump’s tariff and trade wars were meang, US officials said, to persuade China to change its “authoritarian” economic system. If so, that aim was not achieved. The United States simply lacks the power to force the matter.
American polls suggest that media outlets have been successful in a) portraying China’s advances economically and technologically as a threat, and b) using that threat to lobby against regulations of US high-tech industries.
The tech delusion
Of course, business opposition to government regulation predates China’s emergence. However, encouraging hostility toward China provides convenient additional cover for all sorts of business interests.
China’s technological challenge flows from and depends on a massive educational effort based on training far more STEM (science, technology, engineering and mathematics) studengs than the United States does. Yet US business does not support paying taxes to fund education equivalently.
The reporting by the media on this issue rarely covers that obvious contradiction and politicians mostly avoid it as dangerous to their electoral prospects.
Scapegoating China joins with scapegoating immigrants, BIPOCs (black and Indigenous people of color), and many of the other usual targets.
The broader decline of the US 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? The answer to that question has been crystal clear: The US government will pursue austerity policies (cut vital public services) and will allow price inflation and then rising interest rates that reduce living standards and jobs.
Coming on top of 2020’s combined economic crash and Covid-19 pandemic, the middle- and-lower-income majority have so far borne most of the cost of the United States’ decline. That has been the pattern followed by declining empires throughout human history: Those who control wealth and power are best positioned to offload the costs of decline on to the general population.
The real sufferings of that population cause vulnerability to the political agendas of demagogues. They offer scapegoats to offset popular upset, bitterness and anger.
Leading capitalists and the politicians they own welcome or tolerate scapegoating as a distraction from those leaders’ responsibilities for mass suffering. Demagogic leaders scapegoat old and new targets: immigrants, BIPOCs, women, socialists, liberals, minorities of various kinds, and foreign threats.
The scapegoating usually does little more than hurt its intended victims. Its failure to solve any real problem keeps that problem alive and available for demagogues to exploit at a later stage (at least until scapegoating’s victims resist enough to end it).
The contradictions of scapegoating include the dangerous risk that it overflows its original purposes and causes capitalism more problems than it relieves.
If anti-immigrant agitation actually slows or stops immigration (as has happened recently in the United States), domestic labor shortages may appear or worsen, which may drive up wages, and thereby hurt profits.
If racism similarly leads to disruptive civil disturbances (as has happened recently in France), profits may be depressed.
If China-bashing leads the United States and Beijing to move further against US businesses investing in and trading with China, that could prove very costly to the US economy. That this may happen now is a dangerous consequence of China-bashing.
Working together (briefly)
Because they believed it would be in the US interest, then-president Richard Nixon resumed diplomatic and other relations with Beijing during his 1972 trip to the country. Chinese chairman Mao Zedong, premier Zhou Enlai, and Nixon started a period of economic growth, trade, investment and prosperity for both China and the United States.
The success of that period prompted China to seek to continue it. That same success prompted the United States in recent years to change its attitude and policies. More accurately, that success prompted US political leaders like Trump and Biden to now perceive China as the enemy whose economic development represents a threat. They demonize the Beijing leadership accordingly.
The majority of US mega-corporations disagree. They profited mightily from their access to the Chinese labor force and the rapidly growing Chinese market since the 1980s. That was a large part of what they meant when they celebrated “neoliberal globalization.” A significant part of the US business community, however, wants continued access to China.
The fight inside the United States now pits major parts of the US business community against Biden and his equally “neoconservative” foreign-policy advisers. The outcome of that fight depends on domestic economic conditions, the presidential election campaign, and the political fallout of the Ukraine war as well the ongoing twists and turns of the China-US relations.
The outcome also depends on how the masses of Chinese and US people understand and intervene in relations between these two countries. Will they 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?
2 thoughts on “Richard D Wolff: The fatal contradictions of China-bashing”
Stan Squiressays:
I am fromVancouver,Canada and i wanted to say that all forms of Societies had it’s time in History.As the world progressed the forms of Gov’ts progressed leaving the former behind.
So Capitalism had it’s time in history and helped Humanity progress as much as it could with Capitalist methods. At the present time Humanity can’t progress any more with Capitalist methods. It is time to move on and keep progress going by uniting countries around the world. That never was the aim of Capitalism as can be seen in the world today. Today a multi-polar world is already here and Capitalism is on the decline. Today progress is been made much quicker than it happened in the Capitalist 20th century. There is evidence of that in all parts of the world especially China.
I am fromVancouver,Canada and i wanted to say that all forms of Societies had it’s time in History.As the world progressed the forms of Gov’ts progressed leaving the former behind.
So Capitalism had it’s time in history and helped Humanity progress as much as it could with Capitalist methods. At the present time Humanity can’t progress any more with Capitalist methods. It is time to move on and keep progress going by uniting countries around the world. That never was the aim of Capitalism as can be seen in the world today. Today a multi-polar world is already here and Capitalism is on the decline. Today progress is been made much quicker than it happened in the Capitalist 20th century. There is evidence of that in all parts of the world especially China.