With all the goings-on in Africa and Southwest Asia, Al Jazeera has become my newspaper of choice (though it’s not a newspaper…) much like the Financial Times did in the run-up to the current Iraq War. Al Jazeera comes through, on a different topic:
In early March, China‘s National People’s Congress will approve its 12th Five-Year Plan. This plan is likely to go down in history as one of China’s boldest strategic initiatives.
In essence, it will change the character of China’s economic model – moving from the export- and investment-led structure of the past 30 years toward a pattern of growth that is driven increasingly by Chinese consumers. This shift will have profound implications for China, the rest of Asia, and the broader global economy.
Like the Fifth Five-Year Plan, which set the stage for the “reforms and opening up” of the late 1970s, and the Ninth Five-Year Plan, which triggered the marketisation of state-owned enterprises in the mid-1990’s, the upcoming Plan will force China to rethink the core value propositions of its economy.
Premier Wen Jiabao laid the groundwork four years ago, when he first articulated the paradox of the “Four `Uns” – an economy whose strength on the surface masked a structure that was increasingly “unstable, unbalanced, uncoordinated, and ultimately unsustainable”.
I have no love for China’s government, and I say this as a socialist. Even in the mainstream media at this point, outside of pure propagandists like those on Fox and their ilk on the other outlets (of whom there are plenty), there’s not too much talk about socialism when discussing China, at least not in the same terms as one heard during the Cold War, either for or against. Socialism lies in the relationship of labor to the means of production. Marx, 1844:
Political economy conceals the estrangement inherent in the nature of labor by not considering the direct relationship between the worker (labor) and production. It is true that labor produces for the rich wonderful things – but for the worker it produces privation. It produces palaces – but for the worker, hovels. It produces beauty – but for the worker, deformity. It replaces labor by machines, but it throws one section of the workers back into barbarous types of labor and it turns the other section into a machine. It produces intelligence – but for the worker, stupidity, cretinism.
When, therefore, capital is converted into common property, into the property of all members of society, personal property is not thereby transformed into social property. It is only the social character of the property that is changed. It loses its class character.
In China, labor is exploited as in the United States. There’s a lot of talk about Chinese growth, however, coupled with unspoken but clear warnings of a Yellow Peril. The ever-dependable Mr. Buchanan:
With her immense trade surpluses, China’s reserves have surged from $200 billion in 2002 to $2 trillion. Awash in dollars, Beijing now waits patiently, writes McMillion, to cherry-pick the crown jewels of America’s industrial empire–“patents, talents, natural resources, brands”–at fire-sale prices in the global crash.
The important distinction to be made between the United States and China at this point is the role of long-term planning in macroeconomic decision making. China gives it primary importance, the United States, the clear personal predilections of the President notwithstanding, discounts its possibility. To be sure, there’s no actual theoretical discussion of this in the press: even a Paul Krugman, while pushing a Keynesian approach in his Times column, never extends the point (to my knowledge) to advocate for a role for macroeconomic planning in principle.
It should be noted that the glorious wars so mythologized by the right were won by economic planning. That is to say, without planning, the French would be speaking German today. From the Monthly Review:
[D]uring the Second World War, Harry [Magdoff] was actively involved in planning for machine-making firms in the United States. It took a long time for companies to adapt to the central plan, for selfish reasons and private business mentality. At an early stage, stumbling blocks were common in the airplane industries, limiting urgently needed production. One airplane company had more machine tools of some types than was needed but not enough of another type. Production was stalled in many firms for like reasons. Harry was called in to try to find a way out and proposed a possible solution that worked. It involved coordination of supply procedures. Before long, the plan began to work, in large part by taking the human elements into account. Business leaders had been trained to be guided by the market. Bookkeepers and other clerical workers had long-ingrained habits of work where standard practices had to be quickly changed. The bosses were consulted and their suggestions helped design details of the plan. Exceptional accuracy was required of clerical workers. To get the cooperation needed, meetings were held with the workers, without bosses present. The plan was described and the reasons for it explained. Then the workers were asked for their opinions and advice, much of which influenced the final shape of the program.
The skepticism that people feel about the efficacy or even possibility of central planning admits only the shortcomings while denying the achievements. There is nothing in central planning that requires commandism and confining all aspects of planning to the central authorities. That occurs because of the influence of special bureaucratic interests and the overarching power of the state. Planning for the people has to involve the people. Plans of regions, cities, and towns need the active involvement of local populations, factories, and stores in worker and community councils. The overall program–especially deciding the distribution of resources between consumption goods and investment–calls for people’s participation. And for that, the people must have the facts, a clear way to inform their thinking, and contribute to the basic decisions.
All this took place in a capitalist economy with capitalist labor relations. Socialism may require macroeconomic planning, but planning does not require socialism. Be clear about that. We are talking about capitalist planning, and the proof was in the successful prosecution of the war–success defined strictly in military terms. Unfortunately, the Monthly Review gets no attention in our discourse, which has always confounded me.
A look at any high school economics text, which is the best representation of US economic mythologizing one will find, will see primarily a discussion in terms of freedom. This is one of the great problems in the United States: we have defined our notion of freedom as “freedom from” rather than “freedom to.” Above all, we have our least-examined Big Lie: the “Free Market.” There’s nothing free about the market mechanism, which is a means of determining price and nothing more. One’s choices are limited by any number of factors, even if we only consider those as understood in capitalist economics, like scarcity. Indeed, the notion of opportunity cost implies a limit to whatever freedom the market might offer. We imagine that if government is not directly involved, then we are, ipso facto, free. This clearly is nonsense. There are all kinds of other considerations that limit our freedom as human beings, and the number of poor people in the US who rave about living in a free country would be laughable if it weren’t so deeply sad.
At some point and still among some groups of people–neoliberal economists above all, and acolytes of Ayn Rand–the critique of planning took on a more developed form. We begin at the beginning, with Ludwig von Mises‘ 1920 critique of the “Economic Calculation Problem,” so-called:
Money could never fill in a socialist state the role it fills in a competitive society in determining the value of production goods. Calculation in terms of money will here be impossible…
[A]s soon as one gives up the conception of a freely established monetary price for goods of a higher order, rational production becomes completely impossible. Every step that takes us away from private ownership of the means of production and from the use of money also takes us away from rational economics.
The neoliberal intelligentsia, such as it was and continues to be, used up a good deal of verbage declaring things that were taking place to be impossible. A later example, from Mrs. (not Ms.) Thatcher, well-known:
Who is society? There is no such thing!
We also have a discussion, worthy of Newt Gingrich, of what is and therefore what is not “rational.” I can’t think of a better example of what Foucault labeled “power-knowledge” than this particular discussion of planning. The argument goes like this: price, a result of the market mechanism, i.e., supply vs. demand, is information one uses in order to make a rational economic calculation. Goods are allocated socially based on the individual calculations based on price and weighing opportunity cost and shortages and surpluses are thus avoided. Since state intervention through planning changes–Milton Friedman would say, “distorts”–price, that is to say, the information one uses to make a rational calculation, state planning cannot be, because of the distorted price, rational. This limits the ability of people to conceive of planning as an actual possibility within the limits of the discourse we actually have in this country.
Leave off the fact that the state has always been an economic actor, and therefore no market has ever functioned without state intervention of a sort, if only as a consumer. Leave off, too, that the social distribution of goods so described means that the rich get the most stuff and that the language used totally obscures this. I am most concerned with the equation of economic rationality with the absence of surpluses and shortages, that is to say with efficiency, narrowly defined. Marcuse critiqued this in One-Dimensional Man:
We are again confronted with one of the most vexing aspects of advanced industrial civilization: the rational character of its irrationality. Its productivity and efficiency, its capacity to increase and spread comforts, to turn waste into need, and destruction into construction, the extent to which this civilization transforms the object world into an extension of man’s mind and body makes the very notion of alienation questionable. The people recognize themselves in their commodities; they find their soul in their automobile, hi-fi set, split-level home, kitchen equipment. The very mechanism which ties the individual to his society has changed, and social control is anchored in the new needs which it has produced.
It could be for example perfectly rational to plan in such a way that a society is certain that there will be a surplus of food available, accept the inefficiency of producing food that isn’t needed in exchange for not having hungry people. We don’t do that here in the United States, but our agriculture is very efficient, as is our market mechanism, taken by itself, ruthlessly so, like Monty Python’s Spanish Inquisition.
The problem is a fundamental contradiction of capitalist decision making, which one might think of if one wants to avoid an explicitly Marxian analysis, as the difference between microconomics and macroeconomics. To look at my own life: I hate driving, but I love biking and I love public transit, especially trains but also buses. Public transit systems take all kinds of guff in the press because they don’t generally make money. The state needs to allocate resources to fund them. So, public transit is inefficient and therefore “irrational,” because what sense in there in keeping afloat an economic enterprise that constantly loses money? If one adopts capitalist logic, in which the end of economy must be profit, this is irrational. If one looks macroeconomically, though, it makes a lot of sense, bearing in mind the material limits of the viability of internal combustion engine transportation in the long-term–in 2011 I might say “near medium-term”–to have an alternative system in place so that the economy as a whole can allocate resources to greater profit in other sectors. So, too with health care.
China, institutionally, has in its planning mechanism a real check on the narrow interests of capitalists. Returning to the Al Jazeera article, one might become someone jealous and wish to be Chinese.
Instead, under the new Plan, China will adopt a more labor-intensive services model. It will, one hopes, provide a detailed blueprint for the development of large-scale transactions-intensive industries such as wholesale and retail trade, domestic transport and supply-chain logistics, health care, and leisure and hospitality.
Such a transition would provide China with much greater job-creating potential. With the employment content of a unit of Chinese output more than 35 per cent higher in services than in manufacturing and construction, China could actually hit its employment target with slower GDP growth. Moreover, services are far less resource-intensive than manufacturing – offering China the added benefits of a lighter, cleaner, and greener growth model.
The long-term macroeconomic health of any society that’s bigger than Singapore is a function of its domestic market. That means that people need jobs to buy stuff. The Chinese government understands this, as well as understands given natural limits to growth the need for “less resource-intensive” growth, When the market fails to provide these, reason dictates, the state might well intervene. It’s not a complex proposition. Unfortunately, our President has to contend with this nonsense:
…So be it.
It is possible to be rational without being real, and that’s precisely how we do it in the United States. The President understands this but also knows that to fight it is more than just a political question, much less an even more narrowly defined legislative battle. Chinese capitalists, however, owe their existence as capitalists to the planners, and as a result the planners still hold sway. This bodes well for China and less well for the United States.
I am not suggesting that Chinese planning will save the day, economically or environmentally. China has two contradictory goals: surpass the United States in both the raw size of GDP and then, later, per capita GDP, and sustain that supremacy over the long-term. The first is a matter of waking up from the nightmare that began in 1492 or so. We won’t be happy as a species until we move past everything the disastrous creation of the modern world entailed and continues to. The second requires an economy that doesn’t destroy the species in the process. This is a tough balancing act that may well not be possible to maintain using the mechanism of the state, let alone the market.
‘Nuff said, I’m done.
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Crossposted at http://www.palaverer.com/