China & the USA: Globalisation and the Decline of America's Supremacy 9783030610968, 9783030610975

Table of contents :
Preface and Acknowledgements
Contents
List of Figures
List of Tables
1 Introduction
2 The Vulnerability of the American Empire-State
3 The Ordoliberal EU
4 The “Power of Constraints” and the Convergence of the Governorates of the Left and the Right in Europe
5 A First Set of Conclusions
6 How China Rose to Prominence
7 Data and Analysis of Chinese Ascendancy
8 China’s Aggregate Demand Management Since 2008
9 Neo-liberalism, China and Covid-19
10 Conclusion
Bibliography
Index

Citation preview

China & the USA Globalisation and the Decline of America’s Supremacy Vassilis K. Fouskas Shampa Roy-Mukherjee Qingan Huang Ejike Udeogu

China & the USA

Vassilis K. Fouskas · Shampa Roy-Mukherjee · Qingan Huang · Ejike Udeogu

China & the USA Globalisation and the Decline of America’s Supremacy

Vassilis K. Fouskas Centre for the Study of States, Markets & People (STAMP), Royal Docks School of Business & Law University of East London London, UK

Shampa Roy-Mukherjee Centre for the Study of States, Markets & People (STAMP), Royal Docks School of Business & Law University of East London London, UK

International Business School Guangdong University of Finance & Economics Guangzhou, China

International Business School Guangdong University of Finance & Economics Guangzhou, China

Qingan Huang Centre for the Study of States, Markets & People (STAMP), Royal Docks School of Business & Law University of East London London, UK

Ejike Udeogu Centre for the Study of States, Markets & People (STAMP), Royal Docks School of Business & Law University of East London London, UK

International Business School Guangdong University of Finance & Economics Guangzhou, China

International Business School Guangdong University of Finance & Economics Guangzhou, China

ISBN 978-3-030-61096-8 ISBN 978-3-030-61097-5 (eBook) https://doi.org/10.1007/978-3-030-61097-5 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. Cover illustration: © Harvey Loake This Palgrave Macmillan imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

Preface and Acknowledgements

We decided to publish this short book at a very crucial international juncture where on the one hand, Britain, amidst soaring unemployment and the Covid-19 pandemic, is poised to complete her Brexit negotiations and leave the EU and on the other, the observable decline of America’s global political economy and the concomitant rise of China and other Asian caucuses challenge America’s post-Cold War “unipolar moment” posing a serious threat to her supremacy. Having failed to integrate China into her globalisation project, the USA has gradually resorted to a type of “off-shore balancing”, while openly threatening China with war.1 Effectively, the USA is now employing its multi-faceted strategy trying to isolate China from the integrationist process of neo-liberal globalisation. Off-shore balancing, among other things, includes war threats and rather explicit calls for “regime change”, a bankrupt policy tried out in Afghanistan, Iraq, Libya and elsewhere; an increased presence of the US military in South and East China Seas involving Japan and Australia (the 1 On 23 July 2020, in a pompous speech full of anti-Communist demagogy, US Secre-

tary of State, Mike Pompeo, said that “China cannot be contained” and Cold War methods cannot save the world from this “new tyranny”, insisting that “more assertive ways are needed”. This is because, Pompeo went on, “the USSR was closed off from the free world, whereas Communist China is already within our borders”; see, Peter Symonds, “US Secretary of State sets out case for conflict with China”, WSWS, 25 July 2020, https://www.wsws.org/en/articles/2020/07/25/lead-j25.html?pk_campaign=new sletter&pk_kwd=wsws (accessed on 25 July 2020).

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USA has been exploiting the conflict between China and Japan over the disputed Senkaku/Diaogu islands in East China Sea); and an attempt to create alternative geo-economic spaces in Asia displacing China’s primacy as the world’s global supply chain hub—India being the most serious candidate. This policy of warmongering while trying to isolate and impose sanctions on China, also affects American corporations that have a close connection with China and Chinese enterprises. In summary, and without even touching upon the chaos caused by America’s withdrawal from the Middle East and the Arab Spring theatre, this is not a pleasant situation.2 Some talk of a “new Cold War” or a “technological” Cold War between China and the USA, but these characterisations seem to us inappropriate.3 The rise of China has been preoccupying us for some time now and, admittedly, the literature on the topic is vast and polymorphous. In particular, there is a “counter-literature” suggesting that the ascendance of China is, at best, a “bubble” similar to that of Japan in the 1980s or, at worst, a trompe l’œil —a sort of visual illusion—either because profits generated by US multinationals operating in China and elsewhere are repatriated back to the USA or because China in no way can match US global military power and projection capabilities.4 As we exhibit here, this

2 On this issue, the discussion between Vassilis K. Fouskas, Bülent Gökay and Biljana Vankovska, “Crisis in the Eastern Mediterranean and Covid-19”, Journal of Balkan and Near Eastern Studies, v.22, n.3, April 2020, pp. 295–306, covers a lot of ground. It discusses the refugee crisis on the Greek-Turkish border in Covid-19 conditions and the consequences the withdrawal of US power from the Middle East bears on regional security. 3 See, Bob Davies and Lingling Wei (2020) Superpower Showdown. How the Battle Between Trump and Xi Threatens a New Cold War (New York: Harper). These and other similar characterisations, often launched by such publications as The Economist, fail to grasp the macro-historical features of antagonistic imperial systems, which always resemble technological, geo-political, economic and cultural/civilizational competitive elements, including competitive military and intelligence technologies. Furthermore, China’s challenge is different altogether: the USSR presented the global political and economic system with an alternative mode of ordering society. Moscow had state allies and agencies in Communist and even Socialist parties across the entire world, including the Middle East. China has none of this and she does not aspire to construct a global Communist system. The global competition between China and the USA today concerns the differing modes of organising global capitalism; and the national-state power which will govern the reordering of global capitalism. These issues become clearer when we analyse below, albeit briefly, the Chinese political and economic system. 4 A couple of lines of wisdom come from two authors that are adamant about the decline of US supremacy: “This [military] dimension of US dominance”, Alexander Cooley

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literature comes from both Marxist and non-Marxist authors, as is indeed the case with the literature that suggests that the rise of China is inexorable and is here to stay, possibly succeeding in the long run the primacy of the USA in the global economic and political system. We are writing from this perspective and we do not adhere to strict Marxist postulates. We are arguing that we are in the midst of a long and protracted period of imperial-hegemonic transition, hence the so many “morbid symptoms” (Antonio Gramsci—see our Conclusion). But we cannot predict when this hegemonic transition will be completed or if at all. Also, we cannot predict whether this will be peaceful or not, although America’s ruling class seems to be poised to endorse a disastrous policy of “regime change” in China. The truth is, however, that history has not produced examples of peaceful transition from one global hegemon, or ensemble of hegemons, to another.5 Last but not least, we are not in a position to comment on whether the Chinese/Asian global imperial posture, whenever it comes to prevail, would be more benevolent and “democratic” than America’s own. On this point, what can be said with some certainty is that only social struggle at national and global levels can determine this outcome. However, beyond our broader and long-term research interests on the economic rise of China and Asia, there is a very specific reason that triggered the production of this short book. In October 2019, Justin Rosenberg (Sussex University, UK) invited us to contribute to a special issue of Cambridge Review of International Affairs (CRIA) he was planning to guest-edit on “uneven and combined development” (UCD). One of the “elements” for the special issue, Justin told us, was to discuss an article on UCD he co-authored in which the concept was used to explain, among others, the rise of the Trump and Daniel H. Nexon say, “is especially ill-suited to deal with this global crisis and its ripple effects” and “no amount of military spending can reverse the processes driving the unravelling of US hegemony”; see theirs “How hegemony ends; the unravelling of American power”, Foreign Affairs, July–August 2020, https://www.foreignaffairs.com/art icles/united-states/2020-06-09/how-hegemony-ends (accessed on 25 July 2020). 5 Thucydides statement on the Peloponnesian War postulates the inevitability of armed

conflict if a global hegemon is threatened by a rising rival—the so-called Thucydides trap. Thucydides analysed two structural forces in operation that drive this inevitability. First, he notes the rising power’s growing sense of entitlements that demands more and more sway in the global distribution of power. Second, singles out the fear of the declining power and its anxiety to defend the status quo and its privileges. A Thucydidean realist analysis of US-China antagonism falls out of the scope of this book.

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phenomenon in the USA and the Brexit process in the UK. This could have been either a full-fledged article or a shorter one that could be included in CRIA’s “Forum” section. Gladly accepting the invitation, we began working on the project trying to gear our research design towards the specific requirements of the commissioned article. Following an initial collective phase of research, contemplation and correspondence under the auspices of the Centre for the Study of States, Markets & People (STAMP) at UEL, it was understood that our contribution could be neither a small piece readied for the “Forum” section, nor a full-fledged article of 9000 words as the suggested alternative choice. We all felt that nothing short of a lengthy statement on the USA and China, addressing all major differences in analysis and approach and covering existing gaps in the literature would satisfy us. After all, the juncture opening up by the increased tensions between the USA and China in conditions of global pandemic and America’s presidential election necessitated a much broader intervention in the debate. Thus, we set to work towards a short book which, among others, would discuss the interesting article on UCD that Justin Rosenberg had co-authored. Having said this, we owe a debt of gratitude to Justin that has motivated us to produce this statement. Although he may disagree with our analysis, he would certainly recognise that they are an essential part of the debate within the British and international Left that has a long pedigree and, surely, plenty of future. At any event, we are hoping to have a fruitful dialogue with the contributors of CRIA and beyond, especially since the approximate publishing schedule of the special issue coincides with that of our book. The manuscript, reviewed by Palgrave’s anonymous reviewers, has undergone many modifications. We thank Palgrave’s reviewers for their useful comments and suggestions and we hope we have addressed their concerns. We would also like to thank Gilbert Achcar (SOAS, UK), Alan Cafruny (Hamilton College, USA) Constantine Dimoulas (Panteion University, Greece), Massimo De Angelis (UEL, UK) and Alexander Chrysis (Panteion University, Greece). They have all engaged constructively with our research and made perceptive comments on earlier drafts of the manuscript. The section on “Neo-liberalism, China and Covid-19” owes much to an article Vassilis K. Fouskas had co-authored with Bülent Gökay, published in open Democracy as “Covid-19 and the bankruptcy on neo-liberalism in the context of global shift” (5 May 2020). Needless to say, none of our readers is responsible for the final outcome. Last but not

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least, we wish to thank Dr. Anca Pusca, Palgrave’s senior editor in New York, who warmly embraced our project and steered the editorial process with utmost professionalism under the unprecedented conditions caused by the pandemic. London, UK August 2020

Vassilis K. Fouskas Shampa Roy-Mukherjee Qingan Huang Ejike Udeogu

Contents

1

Introduction

1

2

The Vulnerability of the American Empire-State

9

3

The Ordoliberal EU

19

4

The “Power of Constraints” and the Convergence of the Governorates of the Left and the Right in Europe

23

5

A First Set of Conclusions

35

6

How China Rose to Prominence

39

7

Data and Analysis of Chinese Ascendancy

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8

China’s Aggregate Demand Management Since 2008

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9

Neo-liberalism, China and Covid-19

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10

Conclusion

73

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CONTENTS

Bibliography

81

Index

89

List of Figures

Graph 7.1

Graph 7.2

Graph 7.3

Graph 7.4

Graph 7.5

Graph 7.6

USA vs China: Number of publicity traded companies, 2003–2019 (Source Own elaboration of data from Shanghai Shenzhen CSI 300; S & P 500; Forbes Global 2000) Gross revenue for the last financial year (2019) plus year-on-year percentage rate of change of revenue and gross profit; regional level data (Source Own elaboration of data from Shanghai Shenzhen CSI 300; S & P 500; Forbes Global 2000) Country level data (Source Own elaboration of data from Shanghai Shenzhen CSI 300; S & P 500; Forbes Global 2000) China’s top 10 exports of goods to the world in 1992 ($bn) (Source Authors’ own analysis based on data from UN Comtrade database. Available at https://com trade.un.org/labs/dit-trade-vis/?reporter=826&type= C&year=2018&flow=2&commodity) China top 10 export of goods to the world in 2018 ($bn) (Source Authors’ own analysis based on data from UN Comtrade database. Available at https://com trade.un.org/labs/dit-trade-vis/?reporter=826&type= C&year=2018&flow=2&commodity) China vs USA net export ($m, 1980–2018) (Source Authors’ own analysis based on data from Bloomberg trade statistics database)

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LIST OF FIGURES

Graph 7.7

Graph 7.8

Graph 7.9

Graph 8.1

Graph 8.2

Map 6.1

USA and China trade in goods with the world since 1992 ($bn) (Source Authors’ own analysis based on data from UN Comtrade database. Available at https://comtrade.un.org/labs/dit-trade-vis/?rep orter=826&type=C&year=2018&flow=2&commodity) NFC shared ownership by government and the maximum proportion held—Regional level data (Source Own elaboration of data from Shanghai Shenzhen CSI 300; S & P 500; Forbes Global 2000) Country level data (Source Own elaboration of data from Shanghai Shenzhen CSI 300; S & P 500; Forbes Global 2000) Average wage index for main transatlantic economies, Japan and South Korea, 2008–2017 (Source Own elaboration of data from ILO database https://ilostat. ilo.org/data/) Average wage index for “global East”, 2008–2017 (Source Own elaboration of data from ILO database https://ilostat.ilo.org/data/) China’s Belt & Road Initiative (Source Strait Times Graphics)

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List of Tables

Table 2.1 Table 2.2 Table 7.1

Percentages of profit rates, 1960–1973 Government debt List of top five global corporations

12 18 50

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CHAPTER 1

Introduction

Abstract The introduction lays out the key arguments of the book and the presentation order. Against certain positions supported by such scholars as Leo Panitch and Justin Rosenberg, the book argues that China’s rise in global political economy is the complex result of: (a) the global American project of neo-liberal financial statecraft, which created unsustainable levels of financial growth and vulnerability due to the erosion of the real economic sector and loss of labour productivity— debt vulnerability is one such instance; and (b) China’s distinct path of domestic economic development, which is the result of western capital penetration since the 1980s and the relative, both political and economic, autonomy of the Chinese state to steer America’s global project and private enterprise to its own advantage. Keywords China · USA · Huawei · Capitalism · Globalisation · Financialisation

Huawei, China’s leading maker of telecoms equipment and 5G networks, has risen to global prominence by way of partaking in specialised hardware and software networks through joint ventures with foreign companies and government contracts. In particular, as well as capitalising on Chinese state support, it benefited from its 2003 joint venture with the © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 V. K. Fouskas et al., China & the USA, https://doi.org/10.1007/978-3-030-61097-5_1

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3Com corporation, an American digital electronics company. The venture focused on supplying networking and software equipment to companies. Investing heavily in research and development, Huawei went global in 2005, when its foreign sales exceeded the domestic ones and partnered with Vodafone and the British Telecom, supplying transmission equipment for the BT’s twenty-first Century network. In 2007 and 2008 Huawei began joint ventures with America’s security software vendor, Symantec Corporation, and with Australia’s telecom company, Optus. The partnership with Symantec aimed at providing encrypted data solutions and security to various business networks. In 2012, Huawei bought Symantec’s share, as Symantec pulled out of the venture on grounds of fear—as the New York Times reported at the time—that the American government would prevent the company from obtaining classified information related to cyberthreats.1 Huawei acquired the much-needed technological and managerial know-how through joint ventures with various transatlantic and Australian companies. Also, by investing heavily in research and development, Huawei succeeded not only to compete on equal footing with foreign conglomerates; it also surpassed them to such a degree that, today, it has become the leader of 5G digital networks across the globe, even investing in 6G technologies since August 2019.2 The Trump administration considers Huawei as a threat to its security and urges other states to steer away from doing business with the company. On 1st December 2018, the company’s chief financial officer, Meng Wanzhou, was arrested at Canada’s Vancouver airport and has since been facing criminal charges in the USA related to theft of trade secrets and violations of sanctions on Iran. Yet, in the midst of the Covid19 pandemic in March–April 2020, Huawei “delivered 500,000 masks, 50,000 goggles, 30,000 gowns and 120,000 to hospitals in New York”.3

1 Nicole Perlroth and John Markoff, “Symantec Dissolves a Chinese Alliance”, New York Times, 26 March 2012, https://www.nytimes.com/2012/03/27/technology/sym antec-dissolves-alliance-with-huawei-of-china.html. 2 Deng Li, “Huawei started research on 6G network”, HC, 15 August 2019, https://www.huaweicentral.com/huawei-started-research-on-6g-network/ (accessed 13 April 2020). 3 “Thanking Big Brother”, The Economist, 18–24 April 2020, p. 43. The Economist should not be surprised. China has for some time now outcompeted the USA in terms of international aid. “An AidData study”, Cooley and Nexon write, “found that total Chinese foreign aid assistance between 2000 and 2014 reached $354 billion, nearing the

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This book demonstrates that the Chinese political economy follows a similar trajectory to primacy as that of Huawei.4 This short story of how an insignificant Chinese company gradually rose to such a global prominence by “joining and combining forces” with western companies goes a long way to show that America’s globalisation project, which is the empire’s chief response to its overaccumulation crisis in the 1970s, has in the long run benefitted China more than America itself. China’s integration in America’s globalisation project has helped to establish China’s increasing importance in world economy, undermining America’s supremacy. Put differently, uneven and combined development (UCD) has been strengthening China’s political economy at the expense of the transatlantic economies as a whole, not the other way around.5 Since the late 1970s, China has been on a path of economic growth and ascendance. By the time of the Great Recession of 2007–2008, more than 700 million Chinese, mainly peasants, had been brought out of poverty creating a sizeable middle class surpassing the size of the entire population of the United States. Witnessing extraordinary rates of growth, China began contributing substantially to the globe’s GDP, also by way of investing in, or offering foreign aid to, Asian, African, Latin American and Eastern European countries. Chinese global corporations have also penetrated the markets of the transatlantic core, with acquisition of assets and signing of contracts in the EU/UK, Australia and the US. Some of these attempted acquisitions, it should be noted, are often blocked due to fear that this may lead to a complete domination of Chinese interests over vital technological sectors of the core (China, of course, retaliates by blocking access to its domestic market). As we shall

US total of $395 billion. China has since surpassed aid disbursals”; Alexander Cooley and Daniel H. Nexon (2020), op.cit. 4 In this respect, the work by Peter Nolan and others is important; see, for instance, P. Nolan, J. Zhang and C. Liu, “Global Business Revolution, Cascade EFFECT and the Challenges for Catch-up for Large Indigenous Chinese Enterprises [in Chinese: quanqiu shangye gemin, pubu xiaoying yiji zhongguo qiye mianlin de tiaozhan]”, Journal of Peking University (Beijing da xue xue bao), v.43, n.2, 2006, pp. 132–140. 5 This is our key disagreement with the thesis put forth by Justin Rosenberg and Chris

Boyle in their application of UCD to the case of China’s rise, attempting at explaining the Brexit and Trump phenomenon in the USA and Britain respectively in 2016; Justin Rosenberg and Chris Boyle, “Understanding 2016: China, Brexit and Trump in the History of Uneven and Combined Development”, Journal of Historical Sociology, 2019, pp. 1–27. https://doi.org/10.1111/johs.12217.

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see, Chinese cutting-edge global ascent in banking and finance, digital innovation, biotechnology, nanotechnology and science creates massive competitive pressure on the economies of the core. This is a competitive constraint upon the transatlantic economic bloc, disrupting processes of integration in it and, as such, cannot be ignored. China’s competitive pressure, among others, forced the transatlantic economies to resort to harsh austerity in post-2008 conditions, with the Trump administration even initiating trade wars.6 In EU/Eurozone contexts, this meant further radicalisation of the post-1992 Treaties towards stricter budgetary controls of national governments on the basis of ordoliberal orthodoxy.7 6 Chinese leaders stress again and again that their notion of globalisation rests on the premise of “a community of shared future and destiny”, in order to “build a world of enduring peace and prosperity”—implying a non-hegemonic project; see, among others, President Hu, “十八大报告全文英汉对照” Full text of Hu’s report at 18th Party Congress, 12 December 2012, https://web.archive.org/web/20181008174828/http:// www.fjfao.gov.cn/wsbs/ggfwpt/fyzl/ssyy/201212/t20121212_1141709_10.htm, Charlotte Gao, “A Community of Shared Future”: One Short Phrase for the UN, One Big Victory for China?”, 5 November 2012, https://thediplomat.com/2017/11/a-com munity-of-shared-future-one-short-phrase-for-un-one-big-victory-for-china/, and Jacob Mardell, “The Community of ‘Common Destiny’ and Xi Jinping’s new era”, 2 October 2017, https://thediplomat.com/2017/10/the-community-of-common-destinyin-xi-jinpings-new-era/, all accessed on 19 April 2020. The Economist has picked on these Chinese leadership notions implying an “alternative globalisation project” many times; see, for instance, “Thanking Big Brother”, op.cit. 7 Although, like neo-liberalism, ordoliberalism means supply-side economics projected by a state’s public policy par excellence, it is nonetheless a form of neo-liberalism that applies primarily to German-Austrian public policy contexts. As Michel Foucault was the first to see in his Cours au Collège de France, 1978–79, this “ordo-model” of neo-liberalism is far more disciplinarian, legalistic and “bio-political”, especially by way of constitutionalising the rule of neo-liberal economics and attempting at de-politicising completely economic decision-making. These, in turn, are mathematically quantified and modelled after a strict anti-inflation bias. Fundamental, in this respect, is the “isolation/independence” of the central bank mechanism from political bargaining and class pressure. Germany has, over the years, managed to transpose onto the European Treaties these ordoliberal-disciplinarian principles reflecting its own model of capitalism. Interestingly, as Ray Kiely shows in his recent work [The Neo-liberal Paradox (2018), Cheltenham: Edward Elgar, and our review in The Political Quarterly by Vassilis K. Fouskas, v.90, n.4, 2019, pp. 812–814] ordoliberalism preceded historically the intellectual formation of neo-liberalism (Milton Friedman and the Chicago School). The best theoretical statement on ordoliberalism available in English is written by Werner Bonefeld (2017), The Strong States and the Free Economy (London: Rowman & Littlefield); on how Germany defeated France in secret negotiations since the early 1960s about the creation of the Euro and the role of a European Central Bank and how, eventually, transplanted its economic model on the EC/EU via the Treaties, see the perceptive accounts by Kenneth Dyson and Kevin Featherstone

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We posit that China’s entry into WTO in 2001 boosted its domestic economy on a programme that, predominately, did not resemble supplyside economics due to the guiding/re-structuring role the Chinese state and the local government maintained in the making and re-distribution of the total composition of social capital. The modern state, as Nicos Poulantzas argued in his last theoretical statement, is not only present in the reproduction of social relations of production and social/technical division of labour, but also in their very constitution and genesis.8 Post-Maoist China is not an exception. In fact, the Chinese state has grounded its integration in global capitalism by way of asserting its independence from, rather than dependence upon, US capitals and power. As we shall see, key, in this respect, have been China’s state-owned enterprises (SOEs) and the way in which they benefit both from state funding and their articulation/combination strategies with western corporations operating in China and abroad. China continues to borrow at the rate of circa $2bn a year from the World Bank not because it needs these funds but because, as Eswar Prasad put it, “there is a glaring optics problem”.9 The reason they still borrow is because they feel that the expertise of the World Bank is valuable to them. World Bank loans come with advisers and auditors who help implement (and monitor) bank-funded projects. Thus, Bert Hofman, the World Bank’s country director for China, says “China gets access to (1999), The Road to Maastricht. Negotiating Economic and Monetary Union (Oxford: O.U.P.); very informative is the book by Pierre Dardot and Christian Laval (2009), La nouvelle raison du monde. Essai sur la société neolibérale (Paris: La Découverte). The Maastricht Treaty is an ordo Treaty. The landmark of Germany’s ordoliberal domination of the EEC/EC/EU has been the defeat of Mitterrand’s Keynesian experiment in France (1981–1983). The Eurozone crisis has further radicalised the ordoliberal Treaties towards harsher austerity for EU, especially Eurozone, members; on this, see Vassilis K. Fouskas and Bülent Gökay (2019), The Crisis of Euro-Atlanticism and New Authoritarianism; Global Power-Shift (London and New York: Palgrave-Macmillan), esp. Chapters 3 and 5. We dwell on these themes below when we examine the ordoliberal convergence of party systems across the EU, especially the British and the German ones. 8 Nicos Poulantzas (1978), L’Etat, le pouvoir, le socialisme (Paris: P.U.F.), pp. 121 ff., 157–185, passim. 9 See, Jason Beaubien, “Flush with cash, China continues to borrow billions from the World Bank”, NPR, 31 January 2019, https://www.npr.org/sections/goatsands oda/2019/01/31/689960866/flush-with-cash-china-continues-to-borrow-billions-fromworld-bank?t=1587062138954 (accessed 16 April 2020). This dialectics of combined learning and development benefitting the Chinese state is not captured, for instance, by Sean K. Starrs, “Can China unmake the American making of global capitalism?”, Socialist Register, 2019, p. 177.

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international experts; the World Bank remains engaged with China and is able to see how new projects play out”, so this is a “win-win”. We show, therefore, that China’s integration into global capitalism is not driven by US/foreign capital. Primarily, it is driven by an independent sovereign actor: the Chinese state.10 Further, we show that China’s response to the Great Recession has been the extreme opposite to the West’s: whereas, by and large, the transatlantic bloc reinforced austerity measures and supply-side public policy, China shifted its policy to boosting aggregate demand management, raised real wages and increased welfare spending. Thus, rather than being an independent variable in a complex set of causal international inter-dependencies favouring a quasi-hegemonic reproductive capacity of the American state and its globalisation strategy, UCD is being steered by the domestic needs of the Chinese state and society. UCD has thus assisted China’s rise in global political economy undermining America’s primacy in the international system.11 In this respect, the strategy of neoliberal financialisation—sustained by what the late Peter Gowan called Dollar-Wall Street Regime (DWSR)—put forth by the USA after the end of the Bretton Woods system, did not restore America’s supremacy in the capitalist core but undermined it further.12 As we shall see, however, there are strong domestic and international pressures on China to adhere to the neo-liberal programme by way of, for example, abolishing capital and financial market controls.

10 We do not want to give the impression that the Chinese state is over and above social and political struggles. As every state, it is the creation and composition of a society divided into social classes. Our chief aim is to emphasise the relative autonomy of the Chinese state vis-à-vis foreign multinational enterprises and geopolitical influences. We thank Constantine Dimoulas for his comments on this point. 11 To paraphrase Justin Rosenberg, one of the key “follies” of UCD theory—Rosenberg

refers to “globalisation”—was the idea that greater global economic inter-dependence has fatally weakened the nation-state. We agree with this thesis, stressing also the fact that UCD/globalisation strengthened the Chinese state, especially since the Great Recession, a thesis with which Rosenberg disagrees; see, Justin Rosenberg (2000), The Follies of Globalisation Theory (London: Verso). 12 See, Peter Gowan (1999), The Global Gamble; Washington’s Faustian Bid for World

Dominance (London: Verso), esp. pp. 19–39. Gowan did not agree with the thesis of China’s economic incorporation into America’s globalising capitalist order. His views occupied a middle ground between Giovanni Arrighi’s position of China’s rise and America’s terminal decline, and Leo Panitch’s thesis of America’s continuing domination of world economy on the basis of its expansionary, all-inclusive neo-liberal globalisation strategy.

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INTRODUCTION

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To wrap up this rather long introduction, we will be arguing that China’s rise in global political economy is the complex result of: (a) the global American project of neo-liberal financial statecraft, which created unsustainable levels of financial growth and vulnerability due to the erosion of the real economic sector and loss of labour productivity—debt vulnerability is one such instance; and (b) China’s distinct path of domestic economic development, which is the result of western capital penetration since the 1980s and the relative, both political and economic, autonomy of the Chinese state to steer America’s global project and private enterprise to its own advantage. The international instance is not ignored. It is encompassed via its interpenetrating mélange with the domestic environment of China’s social formation under the aegis of the Chinese state. The USA does not control the Chinese state and its policy orientation.13 China, as well as Russia and Iran—to name but two of the most important international actors—are not part of America’s hub-and-spoke system of neo-imperial governance established in the 1940s and developed under successive geopolitical and economic expansions ever since.14 We will examine these two themes in turn. We will also shed light on the way in which the party-systems of the Euro-Atlantic core came to serve the new structural constraints of neo-ordo-liberal financialisation, constraints which do not apply to China’s political system. We will refrain, however, from entering into how this discussion extends to social struggles that have taken place within national and party formations. This, in many respects, makes this contribution incomplete but in order to proceed readers should assume that all evidence and data we present here are but crystallisations of social and political struggles at national, regional and global levels. As regards the global geopolitical implications of our 13 This, at least, is recognised by supporters of “America’s global economic supremacy” thesis; see, among others, Sean Kenji Starrs (2019), op.cit., p. 194. 14 America’s neo-imperial governance put forth in the 1940s is predicated on three broad axes: the centrality of the dollar in global currency markets and trade as a reserve currency; the control of key polities of the core, such as Western Europe and Japan; and the ideational construct of the Soviet Union as a formidable enemy. For an analysis of America’s hub-and-spoke system of neo-imperial governance in a historical perspective, see Vassilis K. Fouskas and Bülent Gökay (2005), The New American Imperialism; Bush’s War on Terror and Blood for Oil (Connecticut: Praeger), esp. Chapter 2, where the views of Dean Acheson, Paul Nitze and George F. Kennan are brought into perspective. We show that Acheson’s views prevailed and that post-9/11 global politics and economics showed the limits of America’s neo-imperial governance across all of its three strategic premises. The book is prefaced by Peter Gowan.

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analysis, this is certainly the topic of a different book, although we have offered some thoughts on this in the Preface.15

15 For a very interesting reading, in this respect, see Alan W. Cafruny, “Can the United States contain China?”, Russia in Global Affairs, v.17, n.1, January–March 2019, pp. 100– 122.

CHAPTER 2

The Vulnerability of the American Empire-State

Abstract This chapter deals with the rise of financialised capitalism in the West and its crisis in a historical perspective. It counters arguments that downplay financialisation as a component of neo-liberal policymaking, assessing neo-liberal globalisation as a virtuous cycle of capitalist growth, centred around the robustness of US capitalism and the capacity of the American state to integrate under its aegis other socio-economic formations: in this view, the American state is “the author of neo-liberal globalisation”, integrating China in its very system, the making of global capitalism having the colours of the American empire-state. This chapter shows that this is not the case. Further, China’s integration into the structures of global political economy from the 1980s onwards brought more benefits to China than to transatlantic economies. Keywords Stagflation · Imperialism · China · USA · Neo-liberalism

“Whenever we try to predict or shape the future”, wrote Lal Jayawardena, “it is invariably in the image of our understanding of the past”.1 The “rise

1 Lal Jayawardena, “Preface”, in Stephen A. Marglin and Juliet Schor (eds) (1991), The Golden Age of Capitalism. Reinterpreting the Post-war Experience (Oxford: Clarendon Press), p. v.

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and fall” of the Bretton Woods order, as well as the responses to it by the USA, inform our grounding of China in today’s global capitalism. Neo-liberal financial statecraft marks a historical phase of capitalist modernity that pertains to a double transformation: first, it aims at transforming the internal environment of the state via the public policy of neo-liberalism, for Anglo-Saxon states, and ordoliberalism for EEC/EC/EU/Eurozone states; second, it transforms the external environment of it via the liberalisation of the exchange rate mechanism, the opening-up of money/financial markets and the transnationalisation/ globalisation of the corporation. Both transformations are feeding each other. In this new dialectic of national/international, the transformation of the global multinational corporation (American, Japanese, European) is very important. A key feature of the new global corporation is that it takes advantage of technological innovation, relinquishes the Fordist model of mass production for mass consumption and, in its search to discover cheap labour markets and favourable taxation regimes, creates polygonal supply chains and networks of production, assemblage, circulation and consumption across the entire globe. Joint transnational ventures and mergers and acquisitions become the new norm. The aim is the augmentation of profitability by way of making up the losses incurred under the previous Keynesian/Fordist regime of fixed exchange rates and solid industrial economic growth—what came to be called the “Golden Age of Capitalism” (1950–1960).2 Returns and assets, however, tend to be increasingly financialised—and often dollarized—as the dollar was freed of its gold fetter investors realised that speculation on paper assets denominated in dollars was more profitable than employing unionised workers handing out full-time contracts and high (Fordist) wages.3 It should be noted, that neo-liberal financial statecraft was and remains a project structured, primarily, along the reproductive expansionary needs

2 Apart from the aforementioned edited volume by Marglin and Schor, see also, Eric Hobsbawm (1994), The Age of Extremes: The Short Twentieth Century, 1914–1991 (London: Abacus). 3 In this respect, we consider the contribution of the monthly journal, Monthly Review, and its authors as very important. See, among others, John Bellamy Fosters and Fred Magdoff (2009), The Great Financial Crisis: Causes and Consequences (New York: Monthly Review Press).

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of the American empire-state and comes as a response to the overaccumulation crisis of the 1970s (the stagflation—economic stagnation accompanied by high inflation). This crisis, unlike the Great Recession, manifested itself in the real economic sector, especially in industry. As we have shown elsewhere, the overaccumulation crisis of the 1970s was caused by multiple factors—strong social and trade union movements, the erosion of America’s gold reserves, the Vietnam war etc.—was captured, to a great degree, by debates and arguments developed, among others, by Giovanni Arrighi, Alex Callinicos, Leo Panitch, David Harvey, Robert Brenner, the French “regulation school” and the Monthly Review group.4 Nevertheless, what seems to us as the most prominent factor is the structural force of uneven (and combined) development in the core capitalisms of Europe, Japan and the USA. This form of competitive constraint in the 1970s drove down the (average) rate of profit over a period of years, forcing industrialists to inflate the economy, seek state support and, eventually, to financialise as the decline in profitability was sustained and persistent (Table 2.1). Importantly, at the time, the markets of the global South were relatively closed due to anti-colonial struggles, import substituting policies (Brazil, Argentina) and the rise of Baathist socialism in the Middle East (Egypt, Syria, Iraq). Similarly, the Soviet bloc and China could not offer free markets to the West to support its recovery from its overaccumulation crisis.5 Uneven (and combined) development had also generated a balance of payments crisis for the USA from the early 1960s onwards, not least because other members of the core, such as France, began exchanging their surplus dollars for US gold reserves, as gold remained a tradeable commodity. This, brought the Bretton Woods system to its knees, forcing the Nixon administration to get rid of the gold fetter and devalue the US dollar, placing essentially the entire global political economy on a pure dollar standard, especially after the US-Saudi

4 See Vassilis K. Fouskas and Bülent Gökay (2012), The Fall of the US Empire: Global Fault-Lines and the Shifting Imperial Order (London: Pluto Press), where we present a summary of these debates reviewing key works written by those authors. For a recent contribution to this discussion, see Richard Lachmann (2020), First-Class Passengers on a Sinking Ship: Elite Politics and the Decline of Great Powers (London: Verso). 5 For a very interesting reading about the global political economy of the Cold War, see Oscar Sanchez-Sibony (2014), Red Globalisation: The Political Economy of the Soviet Cold War from Stalin to Khushchev (Cambridge: C.U.P.).

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Table 2.1 Percentages of profit rates, 1960–1973 Business Peak year** 1973 1973/peak year Manufacturing Peak year** 1973 1973/peak year

ACC*

USA

Europe

Japan

17.2(¥) 13.6 0.79

22.3(†) 14.8 0.66

16.3(©) 11.3 0.69

32.0(® ) 19.6 0.61

23.6(¥) 19.3 0.82

34.9(†) 22.5 0.64

19.9(©) 12.1 0.61

46.5(® ) 33.5 0.72

Notes *The seven most industrialised countries at the time (USA, Canada, UK, France, Germany, Italy and Japan) **Year before sustained decline in profitability ¥ Year 1968 † Year 1966 © Year 1960 ® Year 1970 Source Own elaboration of data from Amstrong, Glyn and Harrison (1984), Capitalism since World War II: The Making and Break-Up of the Great Boom (London: Fontana), p. 257

agreement of 1973–1974, which stipulated that oil should be traded in dollars only.6 Thus, neo-liberal financial statecraft is essentially a project driven by the American state in its hub-and-spoke hierarchical agreement/partnership with other subordinate political economies of the global core and the global periphery. The interest rate hike engineered by the head of the American Fed, Paul Volcker, causing havoc in the debt markets of Latin America and (communist) Eastern Europe, should be seen as representing the culmination of the first period of the statecraft (1971–1990). Moreover, the relentless drive to open up East European markets to American and European capital, a process explained by Peter Gowan, stems precisely from the need of the saturated capital of the core to expand globally, overcoming their overaccumulation crisis at home.7

6 We analyse the importance of this agreement in Fouskas and Gökay, The New American Imperialism, ch.1. 7 See, Peter Gowan, The Global Gamble, op. cit., pp. 187–248, and his various contributions to New Left Review and Labour Focus on Eastern Europe.

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Having said this, the “big success” came during the second period of financial statecraft (1990–2007), which ended up in the Great Recession of 2007–2008. This period embraced mortgage markets (housing) and massive involvement of the shadow banking sector, creating unsustainable levels of debt. Further, the project, having as key operational offshore hubs the Wall Street and the City of London, was assisted by the opening-up of East European markets in the wake of the collapse of “really-existing socialism”. Moreover, as the “Volcker shock” came to an end signalling the end of the first period of the statecraft (1971–1990), the American Fed ushered in an era of low interest rates, which drove up the price of stocks and bonds. These were “owned exclusively”, as Robert Brenner put it, “by the very rich”.8 The creation of this new cross border financial oligarchy in the transatlantic area headed by US financial capital and extended with myriad of tentacles via the global proliferation of banking, accounting, insurance and other financial services, severely side-lined the power of industrial capital and the real economic sector of the core. With the partial exceptions of Germany and Japan, the manufacturing base of the core since the 1980s has been shrinking. Today’s manufacturing base of Britain and the USA stand at 8.8 and 11.1% of their respective GDP (but it is 21% in Germany and 20.8% in Japan). No accident, the western economies as a whole have since the 1970s entered a period of “long downturn”, that is a period of slow and protracted decline of their real economic sector, which could not be matched by periods of financial euphoria, such as that of 1991–2007—the second period of financial statecraft that corresponds to low interest rates. When credit was cheap, hence accessible, demand was financed by increased borrowing, creating unsustainable levels of consumer (and other) debt.9 Further, the financial oligarchy packaged, rated, priced and sold this and other forms of debt and paper assets across the globe—such as that resulting from retained profits—in a delirium of grotesque profiteering and speculation creating an unsustainable financialisation chain.10 Most part of this fictitious capital had not trickled down to the real economic 8 Robert Brenner, “Editorial: Introducing Catalyst”, Catalyst, v.1, n.1, Spring 2017. 9 For the rise of consumer debt in the UK in a comparative perspective, see Seun Alele

(2020), Financialisation and the Rise of Consumer Debt in the UK, 1971–2008, PhD dissertation, University of East London. 10 The literature among heterodox and Marxist economists, as well as sociologists, on the topic of financialisation is vast. We would like, however, to single out the work of

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sector as investments in production and infrastructure, especially since the global (western) corporation was migrating to the “global East and South” (China, India, Brazil, South Africa, Turkey and elsewhere). All forms of debt increased exponentially during the second period of neoliberal financial statecraft and much of the “growth” recorded, especially during the Clinton years (1990s), was debt-driven. There are arguments that downplay financialisation as a component of neo-liberal policy-making, assessing all the above as a virtuous cycle of capitalist growth, centred around the robustness of US capitalism and the capacity of the American state to integrate under its aegis other socioeconomic formations: in this view, the American state is “the author of neo-liberal globalisation”, integrating China in its very system, the making of global capitalism having the colours of the American empirestate.11 Effectively, financialisation is dealt with as part and parcel of the total circuit of productive capital and not as speculative process relatively dissociated from real commodity production.12 We counter that the two phases of the US-led financial statecraft did not remotely match the levels of economic development of the Golden Age of Capitalism. As Richard Lachmann recently put it: [US] growth was much faster and shared far more equitably before 1974 than after. Similarly, Western European GDP enjoyed annual average compound growth rates of 4.08 per cent for 1950-73 but only 1.78 percent for 1973-98. The comparable figures for Japan are 8.05 percent and 1.33 percent. Bretton Woods was successful at limiting if not blocking

Costas Lapavitsas on the issue of financialised capitalism. Essentially, he outlined financialisation of core capitalisms alongside three characteristics: financialisation of financial enterprises; financialisation of non-financial enterprises; and financialisation of everyday life, especially speculation on the housing market. See especially his Profiting Without Producing: How Finance Exploits Us All (2013) (London: Verso). In the periphery, Lapavitsas argues, financialisation assumes a “subordinate form”; see also the review of this work by Vassilis K. Fouskas (2015), The Political Quarterly, v.86, n.1, January–March 2015. 11 The key work here is that by Leo Panitch and Sam Gindin (2012), The Making of Global Capitalism: The Political Economy of American Empire (London: Verso). Ray Kiely and other scholars around the Socialist Register have espoused similar positions. 12 “This is a false dichotomy”, Leo Panitch, Greg Albo and Sam Gindin warn. “Money Capital, Bank Capital, Credit and Speculative Capital Are All Necessary Moments in the Circuits of Capitalist Production and Exchange”, in Greg Albo, Sam Gindin and Leo Panitch (2010), In and Out of Crisis (Oakland: PM Press), p. 33.

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capital flows and modulating changes in exchange rates, preventing the banking crises that emerged after 1970 with unrestrained speculation in currencies and the enormous growth in “hot money”. Worldwide, there were at least 124 financial crises from 1970 to 2007.13

We also argue that China has never been part of America’s hub-and-spoke system of neo-imperial governance, nor can it become so now that this system is in tatters; if anything, the Chinese state took advantage of America’s expansion in order to advance its own developmental goals at home and abroad. Debt is a form of capital, but it is fictitious capital. Thus, it is not a “superstructure” of the real process of capital accumulation and development and it should not be confused as such. As Marx put it, “in the way that even an accumulation of debts can appear an accumulation of capital, we see the distortion involved in the credit system reach its culmination”.14 Thus, we argue that neo-liberal financial statecraft and the unsustainable levels of debt incurred in its second phase of evolution (1991 onwards) represent a major vulnerability of American capitalism and of the transatlantic core it leads geo-politically. As many Marxists and non-Marxist commentators have remarked from the very early days, this decline, has been long and protracted, dating back to the 1960s.15

13 Lachmann (2020), op. cit., p. 359. 14 Karl Marx (1894/1991) in Chapter 30 of volume III of Capital (London: Penguin),

pp. 607–608. 15 Prominent proponents of the “USA decline thesis” since the late 1960s and 1970s have been such political economists, among many others, as Ernest Mandel and Robert Gilpin. See, for instance, Ernest Mandel (1969), “Where Is America Going?”, New Left Review, v.54, March–April, as well as subsequent work; Robert Gilpin (1987), The Political Economy of International Relations (Princeton: P.U.P.). Note that Nicos Poulantzas in the 1970s opposed Mandel and the “USA decline thesis” (Panitch still uses Poulantzas’ insights approvingly in his work). For further discussion, see Fouskas and Gökay (2012) and Fouskas and Dimoulas (2013), Greece, Financialisation and the EU: The Political Economy of Debt and Destruction (London and New York: Palgrave Macmillan). In general, if we want to have an intellectual yardstick grouping authors and currents of thought, the following might be a “rule of thumb”: The “USA supremacy thesis” is supported by Marxisants, such as Leo Panitch, Sam Gindin, Ray Kiely and most authors writing for the Socialist Register; and authors of the Right, such as those writing for the RAND corporation and various IR realist experts, such as Stephen Brooks and William Wohlforth (2008) in their World out of Balance: International Relations and the Challenge of American Primacy (Princeton: P.U.P.)—but not John Mearsheimer (an offensive realist), or Christopher Layne (a neo-classical realist), who accept the rise of China and the protracted decline of the USA. Further, the “USA decline thesis” is supported by

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Furthermore, because of the inappropriate measures taken by the polities of the core to address the underlying causes of the Great Recession of 2007–2008, the debt situation got worse. The augmentation of debt, both public and private, as a percentage of GDP increased exponentially since the 1990s. Further, a key feature of the “stabilisation” packages in the wake of the collapse of the Lehman Brothers in September 2008 was their half-baked Keynesianism (some call it “new consensus macroeconomics), i.e. monetary bail-outs for large global and national corporations in the financial and banking sectors, while dropping the interest rates to near-zero and allowing a timid industrial policy, often via trade protectionism.16 Thus, enterprises continued their profiteering and speculative activities by financialising their profits, instead of investing them into material production, the result being further drops in industrial output and a pilling up of debt, including consumer debt. Since 2008, the debt increased exponentially in every single economic sector (government, household, non-financial corporate, financial corporate). In 2019, global debt was over $260 trillion or 325% of global GDP. By comparison, in 2012 the figure was $207 trillion or 300% of global GDP.17 If we look at government debt, then matters are more revealing. The USA tops the list holding the world’s 31% of government debt, or 104.3% of its GDP, i.e. $21,465 bn. It is followed by Japan (17%) and China (9.8%), but these two countries’ government debt, especially China’s, is largely due to financing of its state-owned enterprises (see

most “world systems theorists”, such as Immanuel Wallerstein, Christopher Chase-Dunn and Giovanni Arrighi, the Monthly Review journal, Alex Callinicos and David Harvey; and the French “regulation school” (Michel Aglietta Gerald Dumenil et al.). They all have a leftist/Marxisant orientation as does Andre Gunder Frank in his last macro-historicalsociological statement of 1998, ReOrient. Global Economy in the Asian Age (Berkeley: University of California Press); on the liberal-democratic-realist front, authors such as John Mearsheimer, Charles Kupchan, Stephen Walt and Joseph Nye, among others, accept, in one way or another, that America’s economy has been declining for some time now, seeing China as the most probable successor to American primacy. 16 For a post-Keynesian critique, see Philip Arestis, “New Consensus Macroeconomics: A Critical Appraisal”, Working Paper No. 564, The Levy Institute of Bard College and University of Cambridge, May 2009; for a Marxist critique, see Stavros Mauroudeas, “Economic Crisis and the Crisis of Economics”, in https://stavrosmavroudeas.wordpress. com/tag/new-macroeconomic-consensus/ (accessed 15 February 2020). 17 See Emre Tiftik and Khadija Mahmood, “High and Rising Debt Levels: Should We Worry?”, Institute of International Finance, https://www.iif.com/Portals/0/Files/ content/GDM_July2019_vf3.pdf (accessed 21 February 2020).

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below). Covid-19 will increase debt at astonishing levels in 2020: the IMF has estimated that across the “advanced” countries, gross government debt will rise to $66 trillion, or 122% of GDP, an increase of 17%, and with the USA running a deficit of 15%.18 Overall, contrary to what had been the case in the 1970s and 1980s when the debt was primarily an affair of the “global South”, the world’s debt today is mostly held by the “advanced” economies (75.4%). If lower—and, indeed, near-zero since 2009—interest rates do not bring about lower debt levels relative to GDP, it means that investors benefitting from this favourable economic climate direct their profits to speculative profiteering rather than material production and job creation. Effectively, it means that responsible for the large government debt in the “advanced” economies are the low levels of industrial production, the high concentration of economic activity in services and consumption, hence the disabling of the production of real use and exchange values. Growth becomes driven by bubbles generated in banking and financial services. Characteristically, the city-state of Singapore, an offshore financial services economy par excellence and the largest logistics centre in the world, has accumulated large amounts of government debt (see Table 2.2). In addition, much of the debt accumulated in advanced economies, especially non-financial corporate debt, are not highly rated by credit-rating agencies.19 Furthermore, “gig” and precarious work have since the 1980s proliferated. The breakdown of the Fordist/Keynesian consensus brought about not just a proliferation of part-time and flexible work, but also, especially after the Great Recession, a deepening of the process of exploitation and formal/informal subsumption of labour to capital via “gig” work and zero-hour contracts. In Anglo-American neoliberal contexts, the welfare state was further retrenched and large services of it, especially in the UK, have been privatised. In ordoliberal Eurozone, the situation took on an unprecedented turn.

18 See “After the Disease, the Debt”, The Economist, 25 April–1 May 2020, p. 15. 19 See, Mike Roberts in Brave New Europe, https://braveneweurope.com/michael-rob

erts-it-was-the-virus-that-did-it (accessed 1 July 2020).

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Table 2.2 Government debt Rank

Country

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

USA Japan China Italy France UK Germany India Brazil Canada Spain Mexico South Korea Australia Belgium Holland Argentina Singapore Greece Austria

Debt to GDP (%)

Gross debt ($bn)

% of world total

104.3 237.1 50.6 132.2 98.4 86.8 61.7 68.1 87.9 89.9 97.1 53.6 37.9 41.4 102.0 52.4 86.1 113.6 184.9 73.8

21,465 11,788 6764 2744 2736 2455 2438 1851 1642 1540 1386 655 652 588 543 479 447 414 404 337

31.0 17.0 9.8 4.0 3.9 3.5 3.5 2.7 2.4 2.2 2.0 0.9 0.9 0.8 0.8 0.7 0.6 0.6 0.6 0.5

Source Own elaboration of data from IMF (2019), https://www.imf.org/external/datamapper/GGX WDG_NGDP@WEO/OEMDC/ADVEC/WEOWORLD

CHAPTER 3

The Ordoliberal EU

Abstract This chapter makes a statement based on previous research by the authors, namely that the EU project is based on Germany’s ordoliberal canon. EU’s ordoliberal Treaties are inspired by Germany’s model of capitalism and institutions, which themselves had to be reformed injecting even more austerity and discipline in the co-federated members-states in order to deal with the crisis and keep the EU as a whole being competitive on a global scale. Thus, the chapter shows that it is also the external combined competitive constraint articulated between the EU, China, Japan and the USA that necessitated the introduction of such unprecedented neo-colonial treaties as the Fiscal Compact and the European Semester programme on the part of the European Commission. In order to keep a competitive edge in the global division of labour, the central institutions of the EU have been forced to defend the primacy of Germany in the Eurozone. Keywords Ordoliberalism · Neo-liberalism · European Union · Globalisation · Germany

The global financial crisis contaminated the ordoliberal EU via the banking sector, as many French and German banks were exposed to

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Anglo-American financial products.1 The introduction of the EMU in 1999 (2001 for Greece) turned the banks and the financial system of the region into a hotbed of speculation. The EMU widened the pre-existing gap between European core (surplus countries) and periphery (deficit countries) but, before the crisis, the economies of the periphery operated as platforms of inflows and outflows of cheap money. When the Great Recession brought about a sudden stop across the transatlantic banking sector, the banks, in order to avoid bankruptcy and de-leverage, turned to governments asking them to socialise their liabilities. The German and French governments obeyed and began forging repayments on periphery via humiliating bailout agreements.2 The absurdity of these agreements were mainly twofold: first, they displaced the crisis from the core to the periphery (Ireland, Greece, Spain and Portugal); second, they transferred the liabilities from private to public institutions “socialising” them and making them “sovereign”—hence the adage “sovereign debt crisis”. Thus, the periphery ended up paying for the banking crisis of the core through harsh austerity packages, a process described well by Varoufakis in his aforementioned accounts. But this did not happen only in order to buttress the political elites and institutions of the EU and the core states and save the banking system and the Eurozone from total collapse. This is only the internal competitive constraint. Because the EU is both a single market and a customs union whereas most of its members operate via a common currency, it competes in global markets with the USA, Japan and China. Thus, the ordoliberal Treaties of the EU had to be reformed and inject even more austerity and discipline in the co-federated

1 See Costas Lapavitsas et al., “Eurozone Crisis: Beggar Thyself and Thy Neighbour”, Journal of Balkan and Near Eastern Studies, v.12, n.4, December 2010; Vassilis K. Fouskas and Constantine Dimoulas (2013), op.cit.; see also Vassilis K. Fouskas and Constantine Dimoulas (eds) (2018), Greece in the 21st Century: The Politics and Economics of a Crisis (London: Routledge), esp. the contributions by Matthias Kaelberer, Turan Subasat, Kees Van Der Pijl, and Stavros Mauroudeas. For an interesting neo-Gramscian interpretation of the Eurozone crisis, see Leila Simona Talani, “The ECB and the Quest for Competitiveness of the Eurozone: From the Competitive Devaluation of the Euro to QE”, Journal of Balkan and Near Eastern Studies, v.19, n.4, 2017. 2 Good accounts are offered here by one of the protagonists of the Greece-EU/IMF stand-off; see Yannis Varoufakis (2016), And the Weak Suffer What They Must? (London: Vintage) and his Adults in the Room (London: Bodley Head, 2017) a best-selling testimony on his six-month tenure as Greek Minister of Finance, culminating to the referendum of July 2015 on Greece’s fate in the Euro-zone.

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members-states and that is how harsh austerity has become a permanent trait of the EU/Eurozone. It is, therefore, also the external combined competitive constraint articulated between the EU, China, Japan and the USA that necessitated the introduction of such unprecedented neo-colonial treaties as the Fiscal Compact and the European Semester programme on the part of the European Commission. Thus, in order to keep a competitive edge in the global division of labour, the central institutions of the EU have been forced to defend the primacy of Germany in the Eurozone, hence its ordoliberal/neo-mercantilist model of “low wages, low inflation, export-led”. These are the roots of what Bob Jessop calls enduring austerity post-2008, a concept that tangles-up well with precarious and “gig” labour markets and a lackluster process of capital accumulation across the economies of the core as their nonchalant levels of GDP growth indicate.3 Contrary to China’s pro-Keynesian turn after the Great Recession as we shall see below, between 2010 and 2019 the Eurozone and the USA “cut their public spending-to-GDP ratios by about 3.5% (…); Britain’s own fell by 6%. Taxation, meanwhile, rose by between 1 and 2% of GDP”.4 The Resolution Foundation found out that the numbers of selfemployed workers in the UK grew by 22% since the 2008 financial crisis, numbering to some 5 million people. Part of this growth has been in high-skill, higher-pay sectors (e.g. advertising, banking), taking advantage of the 20% corporate tax rate. The rest has been registered in precarious sectors, such as construction and cleaning, whereas platforms such as Uber, Deliveroo and Hermes flourished.5 These trends register two outcomes: first, identified by the Foundation, the Treasury ends up receiving less taxable income, which forced the Treasury

3 See Bob Jessop, “Ordoliberalism and Neoliberalisation: Governing Through Order or Disorder”, Critical Sociology, v.45, n.7–8, double issue on “Neo-liberalism and Ordoliberalism: One or Two Critiques?” (guest edited by Vassilis K. Fouskas and Shampa Roy-Mukherjee), November 2019, pp. 967–982. 4 See “Undercut”, The Economist, 25 April–1 May 2020, p. 15. 5 See Dan Tomlinson and Adam Corbett (2017), “The Nature of Self-employment in

21st Century Britain and Policy Implications”, https://www.resolutionfoundation.org/ app/uploads/2017/02/Self-employment-presentation.pdf (accessed 9 April 2020); see also Michelle Chen, “A New World of Workers: Confronting the Gig Economy”, Socialist Register 2020 (London: Merlin press), pp. 122–142.

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to extend IR35 to restrict tax avoidance of self-employed6 ; second, it indicates further intensification of labour exploitation and broadening of class divide, having severe negative implications on individual health, wellbeing and healthy ageing This will be further intensified by the economic crisis caused by Covid-19. To all intents and purposes, the so-called the “new consensus macroeconomics” has not worked. State sponsored capital injections in the wake of the 2008 crisis and other stimuli—such as historically low interest rates—failed to deliver job creation, general welfare and sustainable development—they only led to soaring fiscal deficits. The recapitalisation of banks did not help SMEs to recover from the crisis. What happened was debt inflation, massive increase in income inequality and poverty, whereas large global corporations with excess capital bought back their own shares leading to even higher stock prices. At the same time, capital flight to US Treasury Bills continued, shoring up US bond price and the dollar as the world’s reserve currency, a trend reinforced by the Covid19 pandemic.7 All in all, the transatlantic bloc failed to address the key underlying cause of the 2008 financial crisis, that of neo-liberal financial statecraft which clearly was an inadequate response to the stagflation of the 1970s. As if the Great Recession never happened, the neo-liberal governorates of the Left and the Right continued implementing supplyside policies coupled with massive dosages of authoritarianism in order to sustain harsh austerity measures, hoping to address challenges stemming from the global competitive constraint of UCD. It is interesting to see how this bi-partisan neo-ordo-liberal consensus in European party politics has been formed.

6 See “Understanding Off-Payroll Working (IR35)” (2019) https://www.gov.uk/gui dance/understanding-off-payroll-working-ir35 (accessed 22 April 2020). 7 Robin Harding, “Coronavirus Risk the Return of Currency Wars”, Financial Times, 10 March 2020, https://www.ft.com/content/ae093bea-62ba-11ea-b3f3-fe4680ea68b5 (accessed 11 March 2020).

CHAPTER 4

The “Power of Constraints” and the Convergence of the Governorates of the Left and the Right in Europe

Abstract This chapter structures its argumentation along two points. The first (general) point it makes is that the new set of institutionaleconomic constraints laid out in the wake of the stagflation of the 1970s (stagnation accompanied by high inflation) forced political formations of the (mainly social democratic) Left and the Right to converge within the policy perimeters of supply-side economics. The second (specific) point it makes is that this was forced by the same party-political agencies that were previously subscribed to pro-Keynesian and pro-industrial policies via a conflation of party politics, state-bureaucratic politics and supplyside constraints. Thus, both governorates of the Left and the Right in the West are responsible for the catastrophic turn and the Great Recession of 2007–2008 that further undermined the supremacy of the USA, the hegemonic power in the western bloc. Keywords European Left · Right-wing parties · Odroliberalism · Neo-liberalism · Public policy · Constraints

The origins of the European Union today are to be found in ordoliberalism. As such, it is an extension of the German-Austrian model of capitalist development, although this does not make the EU flat or an

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extension of Germany. There are great regional variations and discrepancies within the EU and the development is both combined and uneven at the same time, hence the debt crisis that inflicted the EU/Eurozone and the disintegrative tendencies of Euro-Atlanticism as a whole. The general point we are making here is that the new set of institutional-economic constraints laid out in the wake of stagflation forced political formations of the (mainly social democratic) Left and the Right to converge within the policy perimeters of supply-side economics. The specific point we are making is that this was forced by the same party-political agencies that were previously subscribed to Keynesian policies via a conflation of party politics, state-bureaucratic politics and supply-side constraints. In a 1939 essay titled “The Economic Conditions of Interstate Federalism”, Hayek presented a blueprint on how a European federation could work by way of removing impediments to the free movement of “men, goods, and capital”, as he put it.1 As long as a “single market” is in place, Hayek wrote, prices and wages would tend to match production costs across the continent. All that is needed to achieve a balanced price system without state interference is a federal regulatory framework whose aim would be to reduce and even eliminate state interference, undermining state support for domestic industries and eliminating independent monetary policies. Effectively, Hayek advocated the setting up of a liberal framework of rules across Europe in order to eliminate the power of nation-states, making them instead serve “interstate liberal-federal” rules. From this perspective, national currencies and sovereignties disappear. Arguably, the “framework” envisaged by Hayek adumbrates nothing more and nothing less than the binding neo-ordoliberal Treaties of the EEC/EC/EU, which in a single market mechanism eliminate the power of nation-states that signed up to those Treaties. In this respect, monetary sovereignty is paramount: interstate (co)federal principles dictate that a state’s central bank liquidity and interest rate is determined by the federation’s central bank that sits outside the jurisdiction of that state proper. Clearly, this indicates loss of monetary sovereignty, which is a fundamental aspect of national sovereignty. Moreover, interstate (co)federalism prohibits recycling of surpluses across the (co)federated states and societies, thus depriving help to the debtor states and the poor. Clearly, this 1 We draw from Friedrich von Hayek (1939/1947), “The Economic Conditions of Interstate Federalism”, in Individualism and Economic Order (Chicago: University of Chicago Press).

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is an anti-Keynesian principle blocking deficit spending and aid. At the same time, it indicates democratic deficit because the federated central bank mechanism is over and above any socio-political control and check, unassailable from social struggle and political pressures that occur within the nation-state proper. For Hayek and the ordoliberals, the price mechanism, that is, the control of inflation and the framework of rules within which a competitive order can exist and thrive, is of utmost importance. In post-war (West) Germany, Müller-Armack was directly involved in economic policy and the construction of the European project.2 He, under the command of his Minister, Erhard, was Germany’s chief negotiator in the Treaty of Rome, which proclaims without hesitation “the establishment of a regime ensuring that competition is not distorted in the common market”, facilitating an increase in the “competitive strength of enterprises”. To this effect, state aid, considered as a factor that distorts the price mechanism and the market, was to be proscribed by the 1957 Treaty. Having established the basic economic liberties (free movement of people, capital, services and goods), the Treaty constitutionalised the “social market economy” notion, marktwirtschaft, put forth and theorised by the German negotiator already in 1932. Ever since the Treaty of Rome, marktwirtschaft represents the most fundamental aspect of Europe’s acquis, which is effectively the EU’s Constitution today endorsed by the European Court of Justice and upheld by the Commission and the Council. To understand marktwirtschaft it is important that one begins to understand society not as an organism divided into classes and constantly permeated by class struggle—in fact, a Marxist would argue that classes exist only through class struggle—but as an ontology premised on competition, whether individual or entrepreneurial. Müller-Armack explained that market is “social” because it satisfies the choices of the consumer and puts pressure, through competition, on enterprises and workers to improve productivity and quality of the end-product to be consumed. Keynesians and socialists criticised this by counter-arguing that such a postulate undermines social cohesion and solidarity and cannot be “social” or “socialist”. Müller-Armack responded by saying that marktwirtschaft is not the same—as the notion of a liberal economy, because marktwirtschaft is desired by society and represents a collective choice. It 2 See, among others, Dardot and Laval (2009), op.cit., pp. 51ff, 90–91; also, Bonefeld (2017) and Dyson and Featherstone (1999).

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is a social machine in need of a regulatory economic constitution, because this type of regulation orders a fair competition between enterprises and checks the price mechanism. In addition, this regulatory—institutional interference aims at constructing individuals responsible for their actions, not individuals expecting to receive welfare benefits at the expense of the taxpayer. In effect, marktwirtschaft turns the individual and his/her biological self from being an antagonist to the market relations and the enterprise to a co-responsible human being seeing his/her interests as identical with that of the market and the enterprise.3 Individualism is a cultural condition to be constructed and not left to the spontaneous mechanism of free markets. In this respect, marktwirtschaft directly opposes the Keynesian welfare state and socialist alternatives, as well as classical liberal notions of laissez faire. However, because of the embeddedness of the Bismarckian welfare state in Germany, an embeddedness that continued throughout the Cold War, the ordoliberals had more success in Europe with this policy notion in the long run, than in Germany itself. In the beginning, ordoliberals faced some serious obstacles in Europe, especially during the 1950s and 1960s. Above all, they had to come to grips with the dominant position of Keynesian policy-making—with all its variations—within the nation-states and the virtuous cycle of capitalist development—the “Golden Age of capitalism”. During the early stages of the process of European integration, ordoliberals and marktwirtschaft had to strike a compromise, especially with the French who, despite having problems matching the dominant position of the D-Mark in the common market, were extremely hesitant to give away national power without surrendering the D-Mark in an (exchange rate) mechanism providing currency stability across the common market.4 Nevertheless,

3 This aspect is analysed well by Michel Foucault in his pioneering analysis of ordoliberalism as biopolitics, Michel Foucault (1979/2010), The Birth of Biopolitics (New York: Palgrave), pp. 33–178. 4 It was De Gaulle’s France, through his Finance Minister, Valéry Giscard d’Estaing, who in March 1964 proposed to his German counter-part, Herr Schmücker, a common currency. This came as a surprise to the Germans but this sort of semi-structured and rather secret meetings continued through to the 1970s, when eventually an abortive EMS was established. Germany’s objection throughout had been that it cannot give up its currency without first putting in place a political (European) union. De Gaulle aimed at undermining the dominant position of the dollar as a reserve currency and wanted to connect Europe with the Soviet Union geo-politically. Henry Kissinger, who could

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the ordoliberals had left an important imprint on the common market and its subsequent governing structures from the very beginning: given that the institutions of the EU did not evolve in response to class struggle and political-social pressures—its life began as a cartel of steel and coal which controlled prices and output by means of an unelected bureaucracy— it enjoyed all the requisites to develop into a governing aggregation of rules and norms at a later stage, resembling the German-Austrian ordoliberal model of capitalism. Effectively, the building of the EU’s supranational institutions was a top-down construction permeated only by state-national elite struggles. The turning points were the collapse of Keynesianism during the stagflation (economic stagnation accompanied by high inflation) of the 1970s and Francois Mitterrand’s U-turn in 1983 when, unable to compete with the D-mark in the EMS, abandoned his nationalisation programme and committed France to the single market that adumbrated? the Maastricht Treaty (1991–1992) and the launch of the Euro in 1999 (2001 for Greece). In this respect, the Growth and Stability Pact, formalised via Council resolution in 1997, had been the most ordoliberal set of rules ever produced in the 1990s. The above political processes were administered by state and party bureaucracies, as well as capable technocrats. Political parties and individuals are agencies that operate within a given set of material-institutional constraints laid out by national and international class structures and interests. At the same time, as active participants of social and political struggle—and this is valid especially for the parties of the Left—they are in a position, at least in theory, to push the boundaries of those constraints bringing them closer to the class interests these parties are committed to. The Right has a moral and class obligation to push the boundaries towards the maximisation of profit for the enterprises, while holding onto political class power. The Left has a moral and class obligation to push those boundaries towards high wages and social welfare. The question of state power for the Left, a question distinct from that of governmental power, arises always at the level of nation-state when a left political party is able to project the interests of the class it represents as broader popular-national interest—the issue of working class hegemony

see the dominant economic position (West) Germany was already assuming within the common market, asked De Gaulle how France would prevent Germany from dominating the continent. The General’s answer was: “par la guerre!” See, among others, Varoufakis (2016), pp. 20–56.

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within the broad ensemble of subaltern classes— without relinquishing the primacy of the core class it represents—that is, the working class.5 The question of socialism and state power arises from the moment in which the subaltern classes can suppress the bourgeoisie and alter the relations of production (property relations) and the markets corresponding to them, thus altering the cultural-ideological and objective-socio-economic underpinnings of value theory. Historically, this issue has been posed only in radical-revolutionary periods in world history (the Russian revolution, the Chinese revolution, the de-colonisation period, the Cuban revolution etc.). Here, we confine ourselves to the case of the social democratic, Keynesian Left. Sadly, the Keynesian Left, being a pro-systemic reformist movement, failed to push the boundaries of capital accumulation towards a new balance of power between labour and capital in favour of the former during the post-stagflation years of the 1970s. But Right-wing parties did push towards neo-ordo-liberal financialisation, because this was deemed to be the remedy for the falling tendency of the (average) rate of profit. Yet the problems did not end here. The parties of the Left not only failed to push the class boundaries of capitalism in favour of the subaltern classes, but also contributed to the shaping and strengthening of those boundaries together with the neo-liberal Right against the class and popular interests they supposedly represented. Let us have a brief look at that process. The German SPD was not the kind of party that could push class boundaries in favour of the working class and its allies. Bound by the reformist-revisionist tradition of Eduard Bernstein—“the movement is everything, the end-aim (of socialism) nothing”—the SPD at its Bad Godesberg programme of 1959 abandoned not just class struggle and nationalisations but, in a significant concession to the ordoliberalism of

5 We accept the distinction between state power and governmental power, a distinction that can be found in some rare texts of Marx, when he was writing on the British Constitution. Lenin, in his works on state theory, was far more explicit on this distinction, although it was Nicos Poulantzas in his first important work, Political Power and Social Classes, that theorised it within the corpus of political Marxism. A left-wing party may be in governmental power but without controlling key sections of the bourgeois state power, such as the Ministry of Defence or the Interior Ministry. Also, it may not be in a position to organise the national economy alongside socialist principles due to a lack of hegemonic support in society. Antonio Gramsci has elaborated the issue of class hegemony in his Quaderni del carcere. The bibliography on these themes is vast.

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marktwirtschaft, its programme stated most dramatically that Germany needs “as much competition as possible and as much planning as necessary”.6 German trade unions were incorporated not only into government, but were also placed into boardrooms, “where unionists sat next to company directors, delivering wage restraint in return for power.”7 French neo-revisionism, as we briefly stated above, began with the abandonment of the Keynesian programme by Mitterrand in 1983. In Britain, matters were more complicated. The Labour Party had laid the foundations of the British welfare state in the 1940s, and the 1960s and 1970s were dominated by Labour governments resisting neo-liberal reform, whether it was coming through the country’s EEC membership or through internal pressure. It took the party sixteen years from 1979— when it lost power to Thatcher’s triumphant neo-liberal project amid a dramatic economic crisis—to come to grips with its commitment to socialism and nationalisations, abolishing the famous “clause 4” in 1994 under the neo-revisionist “Third Way” leadership of Tony Blair. This neorevisionist act, a direct concession to German ordoliberalism rather than Anglo-American neo-liberalism as we shall see below, paved Blair’s way to governmental power.8 Effectively, the Labour Party did not simply accept the new constraints imposed by Thatcher’s neo-liberal reforms, setting out the new boundaries within which the political and economic game should take place; in the event, it began a journey as an active institutional participant in shaping and strengthening neo-liberal financialisation from positions of governmental power. Under Tony Blair, the Labour Party became part and parcel of the process of neo-liberal financialisation adopting key tenets of German ordoliberal EU, something which Thatcher fought against. From this perspective, Blair was not a Thatcherite. We should not forget that Britain is a very peculiar case. Historically, Britain has always had one foot in Europe and the other in the world as a

6 Donald Sassoon (1996), One Hundred Years of Socialism (London: Fontana), p. 250. 7 Varoufakis (2016), op.cit., p. 63. 8 We insist on this point: Blair was and remains the most ardent supporter in Britain

of the German model of capitalism and efficiency, witness the fact of his pro-Remain campaign over the issue of Brexit in Britain, undermining the Labour Party of Jeremy Corbyn, which tried to abolish austerity via a left Keynesian agenda. A left Keynesian agenda cannot take place within the constraints of the ordoliberal EU, but this is something we cannot discuss here in detail.

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global imperial power. She preferred to manage German affairs and expansionist designs in East-Central Europe and the Balkans via France, and French affairs and designs via Germany. An off-shore balancer par excellence, Britain mastered the largest formal empire in history, only to lose its primacy and retreat, like other European colonial powers, after WWII. Because of its geographical position, naval-commercial power and the role of the City as the globe’s main financial centre, Britain has always had a lukewarm relationship with Europe. Edward Heath, Britain’s conservative PM in 1973 and the most pro-European Prime Minister Britain ever had, managed to overcome French—and inner-party—objections, achieving EEC membership. Labour had had the same internal divides. The socialist star of Labour politics, Tony Benn, vehemently criticised the European project as a capitalist and undemocratic endeavour. Thatcher herself—although she and the majority of her ruling group were arch neoliberals inspired by von Hayek’s work—never agreed to concede monetary sovereignty to Brussels and, via it, to Germany. In her last parliamentary speech on 22 November 1990, she would argue that Europe’s future central bank would be accountable to no parliament and such a bank would be completely undemocratic.9 She was right. Not because she had any intention to criticise the EU from reformist and left-Keynesian social democratic positions, as Tony Benn and others were doing at the time, but because her ideological formation and political aim was to sustain a neo-liberal project at home under the aegis of Westminster, while re-launching Britain as a neoimperial power abroad re-inventing empire and driving global finance. There are elements of realism in Thatcher’s view. By turning Britain into the globe’s financial hub after the fall of Keynesianism, Thatcherite neo-liberalism wanted to turn Britain into the gatekeeper of financialisation and global production networks, by-passing Europe and Germany.

9 Thatcher answered the question by Alan Beith—a Liberal Democrat—about whether she would continue her fight against a single currency and an independent central bank— as follows (before she could answer, another MP interjected: “No, she’s going to be a governor”): “What a good idea”, Thatcher boasted, answering to the interjection. “I had not thought of it. But if I were, there would be no European Central Bank accountable to no one, least of all to national parliaments. Because under that kind of central bank there will be no democracy [and the central bank] taking powers away from every single parliament and be able to have a single currency and a monetary policy and an interest rate policy that takes away from us all political power” (readers should visit YouTube and type into the search box “Margaret Thatcher’s last speech as PM”).

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However, Blair’s “Third Way” neo-revisionism went beyond Thatcher’s Euroscepticism, embracing the ordoliberal agenda comprehensively.10 Blair’s new Labour Party assumed office in 1996, in the midst of Bill Clinton’s successful Presidential terms and when the bubble of neo-liberal financialisation was in full swing. The Wall Street and the City of London had already become the hubs of a triumphant global capitalism, delivering prosperity, low inflation, high financial profits, easy borrowing at teaser interest rates and all this in a global environment freed from any global competitor after the collapse of the Soviet Union and its satellite states. It seemed like the “end of history” was at hand. Unimpeded, NATO and the EEC/EU headed eastwards, providing new members with security and neo-liberal conditionality: you reform your economy in a free market direction “becoming prosperous like us”, and then you join the two clubs. Interestingly, what triggered the bombing of Belgrade and Yugoslavia in 1999 by NATO forces was the refusal on the part of the Yugoslav delegation at Rambouillet of the so-called “Appendix B”, which stipulated, among others, that Yugoslavia should accept free market economic principles (the other two conditions were that within three years the Kosovars should be given the chance of voting for independence and possible annexation to Albania; and that NATO forces should be given permission to deploy not only in Kosovo but anywhere in Yugoslavia).11 Blair’s new Labour Party was one of the most hawkish advocates of NATO’s bombing campaign, a fact that demonstrated clearly that “Third Way” lacks any separate foreign policy instrument. But did “Third Way” have a distinct, progressive economic and social policy? In more than one occasion, and having abolished the Labour Party’s constitutional commitment to socialism as enshrined in clause 4 before he assumed office, Blair stressed that: [O]ld fashioned state intervention did not and cannot work. But neither does naïve reliance on markets. The government must promote competition, stimulating enterprise, flexibility and innovation by opening markets

10 After the Brexit vote of summer 2016, Blair fought for a second referendum hoping to “withdraw the withdrawal”, as the late Stephen Haseler put it to Vassilis K. Fouskas in a private conversation; see also V.K. Fouskas, “Against a Second Brexit Referendum”, opendemocracy.net, 1 December 2018. 11 See, Vassilis K. Fouskas (2003), Zones of Conflict (London: Pluto Press), ch. 3.

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(…) In government, in business, in our universities and throughout society we must do much more to foster a new entrepreneurial spirit.12

Revealingly, in June 1998, Blair signed jointly with Gerhard Schroeder, Germany’s chancellor and SPD leader, a “working paper” laying out in full the ordoliberal agenda of the Left in Europe.13 The initiative was sponsored by the SPD’s think-tank, Friedrich Ebert Stiftung. The “trademark of this approach”, the two leaders argued, is the “New Centre” in Germany and the “Third Way” in Britain. And after confirming that both political forces “share a common destiny within the European Union”, they go on to assert that “the essential function of the market must be complemented and improved by political action, not hampered by it.” Moreover, public expenditure is not an end in itself but must be used in order to “enable people to help themselves”. In a direct attack on the welfare state, both leaders argued that “universal safeguards”, must cease to be the norm; in their stead, what needs to be promoted is the “importance of individual and business enterprise to the creation of wealth”. “Left-wing” ideas, the paper continued, “should not become an ideological straitjacket” and globalisation should be promoted by government action that “create conditions in which existing business can prosper and adapt, and new businesses can be set up and grow” by way of boosting “efficiency, competition and high performance”. And in an attempt to address Europe’s unemployment challenge, which is “far too high” in some countries, the authors revealingly state: “To address this challenge, Europe’s social democrats must together formulate and implement a new supply-side agenda for the Left”, setting out a “robust competitive market framework” (our emphasis). This “supply-side agenda” is essential as it will put a break on the government’s borrowing requirement, addressing the issue of debt. Deficit spending—one of the pillars of Keynesianism— should be avoided. Further, high taxation on corporations is excluded, because they lower profits and competitiveness, while jeopardising jobs. Having a part-time job is better than having no job at all and “flexible markets are a modern social democratic aim”. The joint paper goes on to explain the notions of “human and social capital”, two fields that 12 Cited in Alan Finlayson (2003), Making Sense of New Labour (London: Lawrence and Wishart), pp. 177–178. 13 Tony Blair and Gerhard Schroeder (1998), “Europe. The Third Way/Die Neue Mitte”, Working Document No. 2, Friedrich Ebert Stiftung, June [mimeo].

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in a “modern service and knowledge-based economy” mean continuous education and vocational training, whereas public investment should be well-calculated and “directed at activities most beneficial to growth and fostering necessary structural change”. Blair joined openly the agenda of Europe’s ordoliberal Left embracing all of its postulates, especially its disciplinarian-biopolitical aspects. Crucially, both leaders avoided to tackle perplexing issues, such as the role of the ECB or the constraints imposed on each EU government by the EU’s ordoliberal acquis , issues that Thatcher tackled head on by denouncing close links with the “Brussels bureaucracy” as unaccountable and undemocratic. At times, he—and Schroeder, for that matter—conceive of the EU and the regulatory framework it provides somewhat disingenuously, when they state that “companies must not be gagged by rules and regulations”, as if they were unaware of the EU’s cumbersome competition policy and anti-trust legislation. At home, Blair followed a two-pronged ordoliberal policy. On the one hand, he conceded operational independence to the Bank of England to set interest rates in order to keep inflation under control but, on the other, he actively promoted asset price inflation (Kiely 2018, 158), especially in the housing sector, a key feature of the financialisation bubble in the Anglo-American world and elsewhere, such as Spain. Thus, when the neo-imperial financialisation chain blew up in 2007–2008 necessitating the pumping of trillions of taxpayer money into the banking sector to save capitalism from total collapse, neither Schroeder’s “New Centre” nor Blair’s “Third Way” should be considered as innocent. They were directly involved in the shaping of neo-liberal globalisation/financialisation by way of not just adopting the ordoliberal rulebook in its entirety, but also by contributing to the writing of its very rules and misleading the public who voted for them.14 The punishment, as we all know, did not take long to come. One after the other, the ordoliberal/neo-revisionist Left parties across 14 Tony Blair has never given up of the ideas of the German ordoliberal model. As late as 2020 while speaking at a virtual event hosted by the ordoliberal Social Market Foundation, he argued that having the target of 50% of the young people who go to university is not right. He called this “snobbish” and he insisted that “for too long we’ve been training people for jobs that don’t exist”. Blair praised Further Education Colleges, but without making any commitment as regards funding for those Colleges; see, Nicola Woolcock, “Blair’s Target of 50% Getting a University Place Is Dropped”, The Times, 10 July 2020, p. 2.

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Europe collapsed, creating ample space for the emergence of the radicalxenophobic Right, but also of the radical Left. In some cases, such as the British Labour Party under the leadership of Jeremy Corbyn, the ordoliberal left became thwarted from within the party, albeit for a short period. In other cases, such as in Spain, new radical-left aggregations were born, contesting enduring austerity and bondage but, time and again, the experience was short-lived. In Greece, Syriza, a promising radical party, swept to power in January 2015 on an anti-austerity agenda, only to capitulate, after six months of bitter negotiations with the troika and after over-turning a popular referendum outcome that voted against ordoliberal austerity. At any event, the Eurozone crisis was not just a lesson for the ordoliberal European Left. It represents a lesson for the ordoliberal movement as a whole. For all the safety valves and regulation guarantees offered by the strong hand of the ECB, the Commission, the Council and the European Court of Justice, free market financialised capitalism proved to be an animal too difficult to tame. The institutional-economic “constraints” that tamed the European social democracy forcing her to switch policy from Keynesianism to neo-ordo-liberalism are subject to wider and more powerful global movements. The banking sector of the North Atlantic area was extremely intertwined—this is, in fact, one of the key dimensions of financialisation and financialised capitalism.

CHAPTER 5

A First Set of Conclusions

Abstract This chapter sums up the main conclusive points that can be drawn so far from the previous chapters. In the main, it summarises the way in which the West’s contradictory economic and political developments since the 1970s have undermined its own primacy in global political economy, clearly conceding ground to Asian economies in the 1990s. Thus, the triumphalism of the collapse of Communism in the 1990s did not last long. Keywords China · USA · Stagflation · Financialisation · Globalisation

We can now sum up the main points that follow from the above discussion: First, neo-liberal financial statecraft, the response to the stagflation (stagnation accompanied by high inflation) of the 1970s that, by and large, continues to be operational to the present day, has not restored the rate of capital accumulation and valorisation enjoyed by the transatlantic core during the Golden Age of the 1950s and 1960s—it only increased profiteering in fictitious “capital” markets.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 V. K. Fouskas et al., China & the USA, https://doi.org/10.1007/978-3-030-61097-5_5

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Second, the American corporate state initiated and led the global neo-liberal statecraft via a complex system of neo-imperial articulations in the core, typically characterised by hub-and-spoke arrangements established in the 1940s. We have discerned two distinct periods of this statecraft: the first corresponds to the “Volcker shock” of high interest rates, the ostensible aim being to “break the back of inflation” (1971–1990); the second to a period of low interest rates and massive financial speculation and profiteering (1991– 2007). Further, since the Anglo-American core failed to address the causes of the Great Recession, the West’s debt obligation rose to unsustainable levels. Third, the global competitive constraint that has been eroding America’s world primacy since the 1960s combines a set of international competitors that can be analysed in two distinct phases involving relatively different states or state assemblages. America’s position in the global division of labour was antagonised consecutively by Japan, (West) Germany, South-east Asia (mainly in the 1960s, 1970s and 1980s) and the EC/EU (from 1990s onwards); and then China (at least since 2001) could be added on. Fourth, the competitive constraint on the Anglo-American core was reinforced with the insertion of the Euro as a reserve currency in global currency markets, as Germany’s ordoliberal project was transposed onto the EU institutions via the Treaties. The dominance of Germany’s economic policy model across the EU is undisputed, yet it failed to protect the contamination of the bloc from the implosion of the global financialisation chain—so the “fortress Europe” theory has been a complete myth. At any event, as we shall see in more detail below, both the Eurozone and the rise of China have disrupted the efficacy of America’s hub-and-spoke system of neoimperial governance, further undermining its primacy in the global political economy, hence its hub-and spoke arrangements and negotiating positions. As we have argued in the Preface, America has for some time now been pursuing an “off-shore balancing” policy, most clearly identified in Trump’s “America first” idea.

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Having said that, China is not primarily responsible for the slow and protracted decline of the manufacturing base of Anglo-Saxon economies.1 If anything, as we shall see below, China and other economies—especially petro-states, such as Saudi Arabia—help sustain the value of the dollar and the low interest rates regime of the American Fed. Rather, the primary responsibility for the decline of the West lies with the policy of their corporate financial and political elites, a bi-partisan consensus between the parties of the Left and the Right initiated in the 1980s and established the 1990s, especially after the failure of Francois Mitterrand’s Keynesian experiment in France in 1981–1983, followed by the transformation of the Italian Communist Party into a “Third Way” neo-revisionist formation.2 These parties, usually of social democratic and centrist stock, having embraced neo-liberalism and ordoliberalism, offer abundant opportunities to xenophobic and racist parties to flourish as they are unable, or do not want, to grasp the actual causes of the crisis that have engulfed their neo-liberal regimes since 2007–2008 and which has been further exacerbated by Covid-19. It is true, however, that China has since its entry in the WTO (2001) been amassing a sustained push towards global primacy at a moment when the Anglo-American core is rather unwilling to change policy direction, whereas the EU/Eurozone is essentially left without policy instruments of recovery from its multiple crises, including the havoc caused by the pandemic. Overall, the corporate financial and political elites of the transatlantic core seem to have no strategic orientation as to where they want to see their political economies going, since socialism is, obviously, off the table.

1 This view transpires in Justin Rosenberg and Chris Boyle (2019), op.cit. On the basis of the evidence we gathered, we would suggest that China enters the competitive constraint of UCD mechanism in full in the 1990s, and definitely after its entry in WTO in 2001. Thus, the Rosenberg-Boyle thesis on the erosion of USA manufacturing basis due to outsourcing to China and Asia stands up, but after the 1990s. 2 The classic work on neo-revisionist socialism is by Donald Sassoon (1995), op.cit. The process of the transformation of Italian communism is examined in detail in Vassilis K. Fouskas (1998), Italy, Europe and the Left: The Transformation of Italian Communism and the European Imperative (London: Routledge).

CHAPTER 6

How China Rose to Prominence

Abstract This chapter outlines the main institutional features of the Chinese political system and the state and explains its resilience and independence vis-à-vis external imperial influences. Further, it lays out the main economic policy principles that guide Chinese economic policy and discusses the ways in which China’s ruling class connect its principles of economic development with geo-economic and geopolitical expansion in Asia and beyond. In this context, the chapter sheds light, among others, on the Belt and Road Initiative (BRI) and explains how China’s mode of economic development and expansion differs from that of the West. Keywords China politics · Belt and Road Initiative · Chinese economic model · Competition

China’s party-political system is not subject to the institutional-economic constraints found in the West’s two-party political systems, not least because the history of economic and political development in China since WWII differs fundamentally from that of the transatlantic assemblage cum Japan and Australia. China, for example, has never been part of the huband-spoke neo-imperial governance of the USA, which set out a number of institutional and other constraints for all western polities, including Japan and Australia. In China, policy bargaining processes, convergence © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 V. K. Fouskas et al., China & the USA, https://doi.org/10.1007/978-3-030-61097-5_6

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to centrist policies and forms of decision-making are happening within the central and regional apparatuses dominated by the Chinese Communist Party (CCP).1 The only constraints that are reflected and accounted for within the Chinese polity are those pertaining to the international political economy system as a whole and the distribution of political-military power generated from it. Governmental power and state-class power in China—a distinction fundamental to western polities—do not apply in the same way to China’s political system as in the West. Further, no formal distinction of powers exists—legislative, judiciary and executive2 —and China’s Central Bank mechanism are directly controlled by the CCP. All policy decisions by the Bank are deeply political decisions, as opposed to the “de-politicisation” mantra of neo-ordo-liberal postures—which are, of course, the exact opposite: the anti-inflationary bias of the ECB and other banks is deeply political, namely, neo-liberal. The party is unofficially factionalised in Marxist, centrist and liberal caucuses, but all bargaining processes and decision-making happen within its ranks and institutional hierarchies itself has set up. Such institutional hierarchies are: (a) the National People’s Congress—NPC, the “legislative branch”, with some 2000 members—that oversees (b) the State Council of state ministers and commissioners; next to these two bodies stands (c) the People’s Political Consultative Conference, which is a sort of an advisory “upper house” composed of delegates of eight other minor parties that pre-existed the foundation of Communist China in 1949, as well as business associations and trade unions, representative groups from Hong Kong and Macau, women’s groups and so on. The same composition is also reflected in the NPC but the overwhelming majority of

1 We draw here on Sebastian Heilman (ed) (2017), China’s Political System (London:

Rowman and Littlefield); see also Susan V. Lawrence and Michael F. Martic (2013), Understanding China’s Political System, CRS Report for Congress, 20 March; and Ai Qilai (2017), Multi-party Cooperation and Political Consultation System Under the Leadership of the Communist Party of China (中国共产党领导的多党合作和政治协商制度中国出版集 团) (Beijing: Beijing Book Co.). 2 We would like to recall, at this point, that this formal distinction and “independent”

functions of the three government powers in western polities are, by and large, a myth. On this topic, see no other work than Louis Althusser’s doctoral dissertation, which shows that even in Montesquieu’s classic work the “separation of powers” is completely exaggerated and rather non-existent; Louis Althusser (1959), Montesquieu, la politique et l’ historie (Paris: Presses Universitaires de France), pp. 98–108.

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members belong to the CCP. The CCP dominates all the aforementioned institutional bodies. It should also be noted that, since 1949, China’s Constitution has undergone four amendments in 1954, 1975, 1978 and 1982, each of which brought about more autonomy to local administration and regional ethnic minorities. Self-governance is allowed to the degree that processes and decisions do not deviate from directions and policies adopted by the National People’s Congress, the NPC. Effectively, the institutional constraints are set out by the CCP via a deeply politicised institutional process. The key to understand the above, that is China’s political system, is the confluence between the National People’s Congress and the CCP. The Central Committee (CC) of the CCP—some 200 members—is elected from the NPC but the NPC is historically dominated by the CCP. From then on, the process is typical of a Communist Party structure: the CC elects the Political Bureau (PB) which in turn elects the PB’s Standing Committee, the highest echelon of leadership. Thus, democratic bargaining processes are happening within the ranks of a number of public institutions enjoying a relative autonomy from each other, the connecting link being the prevailing posture of the CCP in all those public institutions. Party factionalism and conflicting class interests in China’s political system do not block or paralyse its functioning and decisionmaking, nor do they obstruct economic and technological development, quite the opposite. We should also make clear that, as results from the above brief analysis, when we refer to the “Chinese state” we refer to the entire complex institutional system described above, which is dominated by the CCP. But it is not identical with the CCP as it provides the same liberal-democratic façade as western two-party systems, the sole difference being that bargaining processes are taking place within hierarchies permeated and dominated by the CCP. It is this that provides China’s political system with mechanisms of flexibility and adjustment, without relinquishing sovereignty. From the start of the reforms in the late 1970s to the present day, key to China’s development has been the continuous, mass supply of labour from the countryside. This labour force was initially accepted very low wages as they usually maintained other sources of income, usually rent, from the peasant plots they left behind but which they never

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relinquished.3 This low-skilled, enormous resource came to radicalise manufacturing domestically, especially since the Chinese state began using the South-east Asian region as a platform for the production of cheap intermediate goods that were eventually finalised on the mainland readied for export to western markets.4 This “regional globalisation” undermined Japan’s regional primacy and was boosted further by China’s entry in the WTO in 2001. This, in turn, enabled China to partake in global production networks, acquire essential know-how and advanced managerial skills and climb up the global supply chain. The global (western) corporation, the so-called TNCs or MNCs, entered China in the 1980s. They were benefitting from the cheap supply of labour and rents and huge consumer market, and also low taxation but at the same time the Chinese state benefitted—at every level: provincial, county, local, central—through subsidised industry, infrastructure and local exporters who combined skills and knowledge brought into the country from the global (western) corporation.5 In this combined way, China’s position in the global production networks and supply chains was being slowly but constantly upgraded. In every step of the way, the role of the Chinese state, which never adhered to a western-style pluralist party system, has been instrumental in steering and shaping this historical process of transformation of China’s political and social economy. Capital controls have been the landmark of China’s resistance to America’s global financial statecraft. The Chinese state has always regulated its capital account, including reinforcements of regulation in periods of crisis, such as during the 1997 South-east Asian “panic”, or the Great Recession of 2007–2008. Thus, speculative inflows of capital from the transatlantic core were put in check, while prohibiting capital flight and keeping relatively low the value of the renminbi. This displeased US exporters who “could not beat the China price”. Capital controls suppressed domestic financial interests which, in turn, put pressure on the Chinese state to

3 Apart from the work of Peter Nolan, mentioned above, see the interesting discussion between Robert Brenner and Victor Shih, “China’s Credit Conundrum”, New Left Review, v.115, January–February 2019, pp. 59–74. 4 See David Shambaugh (2005), “The Rise of China and Asia’s New Dynamics”, in David Shambaugh (ed), Power-Shift: China and Asia’s New Dynamics (Berkeley: University of California Press), pp. 1–20. 5 Brenner and Shih, op.cit.; and Arthur R. Kroeber (2016), China’s Economy (Oxford: O.U.P.), pp. 27–110, 163ff.

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liberalise the capital account/markets, but so far these efforts have not been very successful. What has been happening, however, especially since the Great Recession, was an enormous boost of the aggregate demand management on behalf of the state, including incremental real wage growth (see below), at the moment when western labour markets faced an all-out neo-liberal attack from all sides (harsh/enduring austerity, “gig” work, zero-hour contracts, precarious and uninsured work, breakdown of the welfare state and public institutions and so on). Capital controls, however, helped China build enormous foreign reserves and achieve an unparalleled export-oriented growth at the expense of its competitors, especially the USA and the EU. Thus, China avoided any resort to classic import substituting industrialisation strategy (ISI) and all its subsequent hazards, typical of the developing economies (constant currency devaluation, problems importing intermediate and high-tech goods to support local industry and so on). Taking advantage of the regional platform of south-east Asia, China’s manufacturing produce was exported all over the world building enormous dollar and other foreign-currency reserves. The process, controlled by China’s central bank agency, the State Administration of Foreign Exchange (SAFE), i.e. the Chinese state, has been directed into two main outlets. One portion of the trade surplus has been used to buy American debt (T-bills), which, amongst other things, helps re-finance the US debt obligations towards bankrupt American corporations, keeping US interests low and, importantly, keeping the value of the dollar stable. Many countries hold American debt, especially those with trade surpluses, such as Saudi Arabia, recycling dollars earned from petro-trade via purchasing of T-bills—the famous “petro-dollar recycling”. Currently, topping the list, China holds nearly $1.2 trillion US paper. This gives China enormous leverage in its trade negotiations with the Trump administration, because any substantive reduction of holdings would cause mayhem in America’s finances, let alone the knock-on effect such a move may have for other international investors of T-bills and other US debt. The other portion of the surplus, however, goes to the financing of large export-led corporations and infrastructure projects in China proper, especially in western regions and beyond. The developed coastal area in East China, which is where most American and western TNCs are based, have over the last ten years been experiencing an exodus of labour force in order to be employed in state-run developmental projects in western regions and abroad. This is mostly connected to the territorial

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and maritime routes of the Belt and Road Initiative (BRI), launched in 2013, which aims to unite geo-economically the south and central Eurasian plateau (Map 6.1)—Pakistan’s port of Gwadar figures prominently—including large swaths of Africa, especially via the maritime leg of BRI, reaching out to Greece (the port of Piraeus), the Balkans and Eastern Europe with the 16+1 initiative.6 China’s investment-spree in infrastructure—modern innovative factories, railways, ports, refineries, bridges, motorways etc.—using the western China platform as a model trampoline for penetrating CentralSouth Asia and beyond, indicates a developmental model distinct from that of the USA: the Chinese state aims at resource extraction to fuel the country’s growth, as opposed to commodification of public spaces and financialisation of profits—the model pursued by the US-led neoliberal financial statecraft. It also aims at externalising environmental costs to other Asian countries for highly polluting production, which are now contested in China by social movements.7 The grand majority of Chinese corporations leading these projects are state-owned and even when private shareholders prevail, especially in international operations, the state maintains a substantial part of the shares and financing, influencing the strategic direction of corporations and investments (see below). Moreover, China’s lending of money and buying of bankrupt enterprises abroad are relatively free of any political conditionality, such as that

6 The literature on BRI is already vast. See, among others, Alessandro Arduino and Xue Gong (eds) (2018), Securing the Belt and Road Initiative (London and New York: Palgrave-Macmillan); Astrid Pepermans, “China’s 16+1 and Belt and Road Initiative in Central and Eastern Europe: Economic and Political Influence at a Cheap Price”, Journal of Contemporary Central and Eastern Europe, v.26, n.2–3, 2018. For a geo-economic perspective that ties up with environmental concerns due to severe deforestation, especially in North-East and South-West China, see Julie Michelle Klinger and Joshua S.S. Muldavin, “New Geographies of Development: Grounding China’s Global Integration”, Territory, Politics, Governance, v.7, n.1, 2019, pp. 1–21. There is no doubt that BRI and Chinese expansion are results of an overaccumulation crisis China has been developing since the 1990s, or what David Harvey called “spatial fix”. See, among others, Alex Callinicos (2010), Bonfire of Illusions: The Twin Crises of the Liberal World (Cambridge: Polity), pp. 116ff., passim; David Harvey (2003), The New Imperialism (Oxford: O.U.P). 7 We thank Massimo De Angelis for pressing on this point. We would also add that the massive de-forestation taking place in North and South-eastern regions is responsible for furthering China’s environmental degradation.

Map 6.1 China’s Belt & Road Initiative (Source Strait Times Graphics)

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employed by the IMF or the World Bank and other lenders.8 In short, capital controls, massive surplus of cheap (and relatively skilled) labour force and use of the south-east Asian platform have given China an enormous advantage in by-passing the pitfalls of ISI to sustain remarkable levels of GDP growth for decades. Significantly, since 2016, China has been ranking above the USA in terms of GDP PPP (Purchasing Power Parity), which adjusts a country’s GDP for differences in prices (inflation) and wages.9 In this context, America’s global strategy of financial statecraft and corporate expansion produced an uneven and combined outcome of which the main long-term beneficiary is the Chinese rather than the American state and its geopolitical allies. In many respects, the West’s long and protracted economic decline can and must be traced back in the 1960s, when its industrial might and global credit capacity came to be doomed in the stagflation of the 1970s, never to recover under the post-Bretton Woods regime of neo-liberal financialisation. Arguments have been made that “national power cannot be equated with national accounts” and other metrics, such as share of world manufacturing and so on, because we “no longer live in a world of nationally discrete political economies”.10 According to this line of argumentation, the world has been transformed by the American global corporation—or TNCs/MNCs—most of which reside historically in the eastern coastal area in order to export the produce around the globe and repatriate profits and innovation to the USA, while cashing on China’s trade

8 See Mike Roberts, “Xi Takes Full Control of China’s Future”, https://thenextre cession.wordpress.com/2017/10/25/xi-takes-full-control-of-chinas-future/ (accessed 15 February 2020). This dimension is important. Chinese banks, at times, lend money with higher interest rates than the IMF or the World Bank, but they do not condition the delivery of funds upon domestic pro-market reforms and other privileges that the receiving state in need should institute in order to get the funds. 9 This is very important. It means, for example, that a Chinese pilot’s training to fly a military jet is paid much less and without any additional cost to his living standards compared to the training costs of an American pilot to fly a similar jet. 10 Sean Starrs, “American Economic Power Hasn’t Declined—It Globalised! Summoning Data and Taking Globalisation Seriously”, International Studies Quarterly, v.57, 2013; Sean Starrs, “The Chimera of Global Governance”, New Left Review, May– June 2014, pp. 81–96; these arguments, among others, brush off the fact that US TNCs operating in China pay wages—and rather higher than those paid by China’s SOEs— in renminbi, boosting the consumer power of the Chinese worker, thus contributing to Chinese GDP. This said, the GDP is not simply an accountancy problem. It is, nevertheless, an issue what you include in it when measuring it.

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surpluses via the T-bills system—this is the “China as America’s head servant” argument.11 As we can see from the evidence presented above, this argumentation is rather poor, although we recognise the inter-dependencies, thus the competitive constraint of globalisation, which apply to all core actors involved, including China. In particular, we recognise the role of the dollar as the world’s key reserve currency, which remains unchallenged to date despite the hit it received from Covid-19.12 Overall, however, this argumentation fails to stand up to close scrutiny: it abstracts from the political role of the Chinese state in the composition of total capital formation in China at regional and municipality levels; it also brushes off the role of State-Owned Enterprises (SOEs) played in steadying China’s persistent economic growth; and, last but not least, it fails to touch upon the outbound projections of Chinese capital under the command of the Chinese state. As a consequence, these accounts cannot evaluate the ways in which China’s penetration in western economies disrupts the integration process of the transatlantic bloc and its geopolitical cohesion. Overall, they miss the long-term historical tendency of China’s rise and America’s decline, that is America’s leading political-economic position in the postWWII global order. Given that these arguments were made some years ago, it is important to revisit briefly the relevant metrics of the situation today as regards the global position of American corporation compared to China’s own.

11 Hung Ho-Fung, “America’s Head Servant”, New Left Review, v.60, November– December 2009. 12 See, especially, Colby Smith et al., “Dollar Blues: Why the Pandemic Is Testing Confidence in the US Currency”, Financial Times, 31 July 2020 (accessed 1 August 2020).

CHAPTER 7

Data and Analysis of Chinese Ascendancy

Abstract This chapter focuses on contemporary empirical data and through many graphs and comparative macro-economic tools shows how China’s political economy is set to surpass that of the USA in the very near future. It argues, among others, that China’s comparative strength does not simply lie in its importance in world trade of manufacturing produce and the surplus it generates. The crucial strategic substratum of China’s ascendance has been the role of the Chinese state in guiding the country’s development inside and outside China proper. Further, the Chinese state controls the production of rare earth elements (europium, gadolinium, dysprosium, terbium etc.), which allow China to bid for a monopolistic position in global political economy undermining head-on America’s primacy in digitisation, nanotechnology, biotechnology, electronics and cyber-security. Keywords Chinese state · Rear Earth Elements · Multinational/transnational corporations · USA · China · Neo-liberal globalisation

With regards to Chinese corporations, we sourced data from The Shanghai Shenzhen CSI 300 Index, a market capitalisation-weighted stock market index that tracks the performance of the top 300 A-shares © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 V. K. Fouskas et al., China & the USA, https://doi.org/10.1007/978-3-030-61097-5_7

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Table 7.1 List of top five global corporations Company value

Country

Sales

Profits

Assets

ICBC China 179.9 45.2 4,034.5 JP Morgan Chase USA 132.9 37.2 2,737.2 China Construction Bank China 150.3 45.2 3,382.4 Agricultural Bank of China China 137.5 30.9 3,293.1 Bank of America USA 111.9 28.5 2,377.2 Forbes Global 2000 top five publicly traded companies in $bn, 2019 Add-up of assets according to sales, profits, assets and market value China 467.7 114.9 10,711.0 USA 224.8 61.2 5,114.4

Market value 305.1 368.5 225 197 287.3

717.1 655.8

stocks traded in the Shanghai and Shenzhen stock exchanges. We have filtered the index to select both financial and non-financial corporations. As regards the USA, we used the S & P 500, a market capitalisationweighted index of the 500 largest US publicly traded companies, and we filtered the relevant TNCs on the basis of the same criteria – financial/non-financial. We have used these two sources to compare them with the Forbes Global 2000 list for past years. Our findings indicate that China’s corporations, both financial and non-financial, have since 2003 been on a continuous rising path in their sheer numbers as publicly traded companies, whereas the USA’s record shows a slow and protracted decline of its listed corporations, including the add-up metrics used by all the indices of the Forbes Global 2000: sales, profits, assets and market value (see Table 7.1). Interestingly, the Industrial and Commercial Bank of China (ICBC) has been taking up the top spot on the Forbes list for seven years in a row (2013–2019). This is a state-owned bank with over $4 trillion in assets employing nearly half a million people. All of China’s major banks have made the top ten and three of them figure in the first five. However, one should factor in the low taxation regime in the USA, which soars up company revenues. JP Morgan Chase, for example, climbed up to the second spot due to rising profits thanks in part to major tax cuts by the Trump administration. Of the 61 countries represented on the 2019 Forbes list, the United States is home to the largest number, 575 companies. China and Hong Kong were next with 309, followed by Japan with

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Graph 7.1 USA vs China: Number of publicity traded companies, 2003–2019 (Source Own elaboration of data from Shanghai Shenzhen CSI 300; S & P 500; Forbes Global 2000)

223. As we can see from the graph, the breakdown looks very different than it did when Forbes first published the “Global 2000” in 2003. In 2003 the United States contributed 776 companies while China and Hong Kong had just 43. By comparison, Graph 7.1 shows China’s constant upgrading on the list, as in 2014 the USA contributed 564 companies while China and Hong Kong 207. Thus, without taking into account the low taxation regime in the USA, from 2014 to 2019 China added up 102 publicly-traded corporations to the USA’s 11. Our findings are similar when we filter our research with the number of non-financial corporations at regional and country levels. We have cross-checked the aforementioned three databases with regards to the growth rate of nonfinancial TNCs (both for their revenue and gross profit), as well as the average gross revenue for them in the last financial year (2019). As we can see from the graphs, although European TNCs/MNCs recorded the highest average revenue for 2019, followed by the US and then Japan, Chinese non-financial TNCs/MNCs (including Hong Kong and Taiwanese firms) recorded the fastest year-on-year revenue and gross profit growth. At this rate, it will not be long before average revenues

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Graph 7.2 Gross revenue for the last financial year (2019) plus year-on-year percentage rate of change of revenue and gross profit; regional level data (Source Own elaboration of data from Shanghai Shenzhen CSI 300; S & P 500; Forbes Global 2000)

from these firms surpass those from the other regional non-financial TNCs/MNCs. At country level, Chinese TNCs/MNCs recorded the second highest average revenue in the last fiscal year (2019) and the highest year-on-year growth of gross revenue (Graphs 7.2 and 7.3). It is also important to note that the arguments that China as a vehicle for America’s globalisation project, disregard the structure and composition of China’s exports in a historical perspective. In Graphs 7.4 and 7.5 we compare China’s top 10 export of goods to the world in 1992 and 2018, and we see a clear shift from mainly peripheral goods in 1992 to mostly core-strategic products in 2018. This is a glaring oversight made by writers supporting China’s economic subordination to US-led globalisation project, inasmuch as they fail to factor in China’s control over a number of geological resources, such as rare earth elements (REEs) (Graphs 7.6 and 7.7).1

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Graph 7.3 Country level data (Source Own elaboration of data from Shanghai Shenzhen CSI 300; S & P 500; Forbes Global 2000)

Articles of apparel, accessories, not knit or crochet Electrical, electronic equipment Mineral fuels, oils, distillation products, etc Articles of apparel, accessories, knit or crochet Footwear, gaiters and the like, parts thereof Nuclear reactors, boilers, machinery, etc. Toys, games, sports requisites Cotton Articles of leather, animal gut, harness, travel good Other made textile articles, sets, worn clothing etc. 0.0

2.0

4.0

6.0

8.0

10.0

12.0

Graph 7.4 China’s top 10 exports of goods to the world in 1992 ($bn) (Source Authors’ own analysis based on data from UN Comtrade database. Available at https://comtrade.un.org/labs/dit-trade-vis/?reporter=826&type= C&year=2018&flow=2&commodity)

1 Among others, Sean K. Starrs (2019), op. cit., p. 187, who says: “The majority of exports by Private Owned Chinese Enterprises remain in low-value exports, such as clothing and cheap consumer goods”. No empirical evidence supports such claim.

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Electirical, electronic equipment Nuclear reactors, boilers, machinery, etc. Furniture, lighting, signs, prefabricated buildings Plastics and articles thereof Vehicles other than railway, tramway Artcles of apparel, accessories, knit or crochet Articles of apparel, accessories, not knit or crochet Optical, photo, technical, medical, etc apparatus Articles of iron or steel Organic chemicals 0.0

100.0

200.0

300.0

400.0

500.0

600.0

700.0

Graph 7.5 China top 10 export of goods to the world in 2018 ($bn) (Source Authors’ own analysis based on data from UN Comtrade database. Available at https://comtrade.un.org/labs/dit-trade-vis/?reporter=826&type= C&year=2018&flow=2&commodity) 400000 300000 200000 100000 0 -100000

1980-1984

1985-1989

1990-1994

1995-1999

2000-2004

2005-2009

2010-2014

2015-2018

-200000 -300000 -400000 US Net export to China

China Net exports to USA

Graph 7.6 China vs USA net export ($m, 1980–2018) (Source Authors’ own analysis based on data from Bloomberg trade statistics database)

In this respect, China’s comparative strength does not simply lie in its importance in world trade of manufacturing produce and the surplus it generates. The crucial strategic substratum of this shift from peripheral to core products over the last three decades rests in the fact that the component parts of micro-chips and electronic equipment are

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3000.0

2500.0

2000.0

1500.0

1000.0

500.0

0.0

China exports

USA exports

Graph 7.7 USA and China trade in goods with the world since 1992 ($bn) (Source Authors’ own analysis based on data from UN Comtrade database. Available at https://comtrade.un.org/labs/dit-trade-vis/?reporter=826&type= C&year=2018&flow=2&commodity)

derivatives of rare earth elements (europium, gadolinium, dysprosium, terbium etc.), which allow China to bid for a monopolistic position in global political economy undermining head-on America’s primacy in digitisation, nanotechnology, biotechnology, electronics and cyber-security. Herein lies America’s fear of Huawei and other high-tech Chinese giants. US and foreign firms exporting electronics and other core commodities from China are depending on China’s political control of these geological resources. Further, REEs give China a steady edge in the sectors of consumer electronics, green technology and even military technology. Often, these resources, as well as the production and distribution processes are controlled by China’s SOEs.2 Data we revisited again for

2 We have outlined this dimension of China’s advantage resulting from RREs in our The Fall of the US Empire (2012), op.cit., pp. 117ff. A Council on Foreign Relations report prepared by Eugene Gholz (2014), “Rare Earth Elements and National security”, argues that the USA should not worry so much about “China’s control of 97% of rareearth oxide production and of the processing business”, as market forces would correct this imbalance without major consequences for the economic and political security of the American state and its allies. The author brings up the Chinese embargo of REEs on

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Graph 7.8 NFC shared ownership by government and the maximum proportion held—Regional level data (Source Own elaboration of data from Shanghai Shenzhen CSI 300; S & P 500; Forbes Global 2000)

the purposes of this article re-confirm and reinforce our previous findings as regards the role of the Chinese state in the participation of the total capital composition of the country, the best indicator being its involvement with Chinese corporations, especially non-financial corporations. On the contrary, Britain and the USA have the lowest state participation in the total composition of capital of non-financial corporations (NFC) at both regional and country level as shown in Graphs 7.8 and 7.9. On average, firms in China, Hong Kong and Taiwan have had circa 41% of their total outstanding shares owned by government. In some cases, the government had outright control of the firms, with around 96% ownership of all outstanding shares of the NF-TNCs/MNCs. American and British NF-TNCs/MNCs have the least proportion of their outstanding shares in the hands of a government body. The highest Japan in 2010, which brought about no geopolitical benefits to China, as she claimed maritime rights and some disputed islands from Japan. Non-Chinese consumers of REEs, the report argued, were able to diversify promptly. However, reliance on “market forces” to act as a corrective to a state’s intention to use a strategic commodity as a geo-political weapon is rather naïve. As we shall see, Britain and the USA are very concerned about this dimension of Chinese primacy over REEs. We thank Alan Cafruny for drawing our attention to this report.

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Graph 7.9 Country level data (Source Own elaboration of data from Shanghai Shenzhen CSI 300; S & P 500; Forbes Global 2000)

proportion of their total outstanding shares in the hands of a government body is only about 1.23%.3 We should also point out that Chinese authorities, being fully aware of the leading position of western corporations in high-tech sectors, launched in 2015 the “Made in China 2025” initiative. If successful, this will end reliance on western technology and upgrade China’s industrial capability and smart manufacturing.4

3 Very similar to ours are the findings of the US-China Economic and Security Review Commission; see reports for the years 2017, 2018 and 2019 in https://www.uscc.gov/ annual-reports/archives (accessed 10–18 March and 1–5 April 2020). This is a very important think-tank. It was created by the Congress in October 2000 with the legislative mandate “to monitor, investigate, and submit to Congress an annual report on the national security implications of the bilateral trade and economic relationship between the United States and the People’s Republic of China, and to provide recommendations, where appropriate, to Congress for legislative and administrative action”. 4 See, “Made in China 2025”, Institute for Security and Development Policy, June 2018 https://www.isdp.eu/publication/made-china-2025/ (accessed 17 April 2020). Ten key industries have been singled out for improvement: advanced IT, automated machine tools and robotics, aerospace and aeronautical equipment, ocean engineering and hightech shipping, modern rail transport equipment, energy saving and new energy vehicles, medical devices and medicine, agricultural equipment. China, nevertheless, faces competitive constraints by the more industrialised economies of Germany and Japan; and by the low-cost manufacturers of India, Brazil and other periphery economies.

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To sum up, the Great Recession changed the public policy orientation of the Chinese state. Since 2009, construction and urbanisation of western rural areas took astonishing dimensions, and these projects were mostly funded by the state. What now seems to be driving China’s growth is domestic demand and sustainable levels of labour productivity, rather than exports driven by extremely low wages. Even in the midst of the Covid-19 pandemic, China performs better than the transatlantic core.5 Moreover, as we have demonstrated above, Chinese corporations, both public and private, have intensified their involvement abroad. Western governments are now openly blocking off Chinese acquisitions of assets in their jurisdictions. We shall deal with these two issues in turn.

5 This did not leave The Economist unconcerned; see the Editorial of 18–24 April 2020 with the characteristic title: “Is China winning?”, p. 7.

CHAPTER 8

China’s Aggregate Demand Management Since 2008

Abstract This chapter focuses on China’s pro-Keynesian turn after the global financial crisis, at a moment when western polities were opting to a deepening of their neo-ordo-liberal agendas. It provides evidence of rises in wages and welfare provision and compares and contrasts this with developments in the western core states. The success of the Chinese model on a global stage, prompted the USA and her allies to impose a number of restrictions and sanctions on China and Chinese companies, leading many analysts to argue—falsely in our view—that there is a new Cold War in the making. Keywords Wages · Welfare state · China · USA · Neo-liberalism

A The pro-Keynesian turn of the Chinese government since 2009 can be seen from the real wage growth and from budgetary increases in health care provision. On the contrary, real wage growth in “advanced” G20 countries has been generally non-existent, and the welfare state is being retrenched further, because of the enormous pressure by private companies and neo-liberal governance to commodify every public economic space. Real wage growth in China sustained labour productivity since the Great Recession. After 2009, labour productivity in China rose by 7–8% per year, whereas in the USA the increase was a bare 1%. In the EU, © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 V. K. Fouskas et al., China & the USA, https://doi.org/10.1007/978-3-030-61097-5_8

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Graph 8.1 Average wage index for main transatlantic economies, Japan and South Korea, 2008–2017 (Source Own elaboration of data from ILO database https://ilostat.ilo.org/data/)

productivity growth was worse than the USA, especially in the Eurozone, which “hovered below 1%” post-2009.1 Quite clearly the USA and the UK have the worst welfare provision of the states of the transatlantic core. Further commodification/privatisation plans have currently been put on hold, due to Covid-19 emergency, which has placed the entire transatlantic economic bloc to a standstill. Asia and the Pacific have seen annual wage growth increase since 2000 of up to 5.5%. Also, in terms of welfare reforms, China’s response to the Great Recession of 2007–2008 was qualitatively different from that of the West (Graphs 8.1 and 8.2).

1 Costas Lapavitsas, “The Crisis Has Exposed the Absurdities of Neoliberalism: That Doesn’t Mean It Will Destroy It”, Jacobin, 27 March 2020, https://jacobinmag.com/ 2020/3/coronavirus-pandemic-great-recession-neoliberalism (accessed 29 March 2020). For further critical discussion on the importance of social struggle within national formations proper to reverse neo-liberalism, see Gilbert Achcar, “Self-Extinction of Neoliberalism? Don’t Bet on It”, New Politics, 24 April 2020, https://newpol.org/self-extinc tion-of-neoliberalism-dont-bet-on-it/ (accessed 25 April 2020).

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Graph 8.2 Average wage index for “global East”, 2008–2017 (Source Own elaboration of data from ILO database https://ilostat.ilo.org/data/)

In 2009, China put forth an “Equalisation of Basic Public Health Services” (EBPHS) policy aiming to promote universal health care and strengthen public health care provision. Contrary to widely-held views in the prevailing supply-side mindsets of western governorates, Chinese authorities consider health as the “core premise of human development”. Following a time-series and cross-sectional analysis, including comparisons with 131 countries, China’s 2017 Modernization Report drafted by experts in China’s Academy of Science, put forth a radical proposal aiming to apply engineering “super-highway practises” to modernise the country’s health system. Recognising that the country’s investment in its health system is low compared to western economies (10% as opposed to 15% of government expenditure), the Report proposed an overhaul of health governance in China based on increased investment, modernisation and technology application aiming at well-being and healthy ageing.2 The recommendations of the report have informed China’s health policy since

2 See Lei Liu, Xijun Zhao and Chunqi He, “Promoting the China Health Modernisation by Health Superhighway System”, Healthcare, v.6, 2018, www.mdpi.com/journal/health care (accessed 16 April 2020).

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and assisted the country to deal with the Covid-19 pandemic.3 Further, digital monitoring of citizens mostly through their mobile devices and “Bentham-like panopticon” cameras placed in buildings, helped China to deal with the pandemic better than most core western states.4 Chinese biopolitical authoritarian intrusion into private lives proved efficient, if not more efficient, in dealing with the pandemic, whereas the neo-ordo-liberal authoritarian polities of the transatlantic core, with their pro-business attitude, austerity agendas and neglect of human life failed to coordinate and produce a joint response while precipitating a second wave of the pandemic. Let us now move on to look at some FDI data to decipher the dialectics of value movements between Chinese and western markets. B The Euro-Atlantic core is the strongest economic assemblage of the globe. In 2018, America held more than 60% of its total investment position/FDI stock in Europe, equalling $3.6 trillion, whereas that of Europe to the USA was in the region of 68%, or $4.3 trillion.5 We get the same picture if we look at trade figures, as well as services, especially finance and the digital economy: EU countries and the USA have the strongest commercial, investment and general economic links. The USA trade deficit with China in 2019 ($345 bn) is more than double the USA deficit with the EU ($178 bn). Only in the services and digital sectors the USA has a surplus with the EU of the amount of $75 bn in services and $93 bn in the digital economy. However, the USA trade deficit with China in 2019 was $345 bn, more than double the USA deficit with the EU. We need to look at some FDI data in more detail to clarify the picture, especially with regards to the “repatriation” of TNC revenues from China to the USA, an analytical angle keen to Leo Panitch and other scholars supporting the “US supremacy” thesis. According to UNCTAD’s Bilateral FDI Statistics Report for 2018/19, repatriation of profits by American MNCs/TNCs has increased mainly 3 See Xu Wang, Xiaoxi Zhang and Jiangjiang He, “Challenges to the System of Reserve Medical Supplies for Public Health Emergencies: Reflections on the Severe Acute Respiratory Syndrome Coronavirus 2 (SARS-CoV-2) Epidemic in China”, BioScience Trends, v.14, n.1, 2020, pp. 3–8. 4 See “Creating the Coronopticon”, The Economist, 28 March–3 April 2020, pp. 19–22; Yuan Yang et al., “China, Coronavirus and Surveillance: The Messy Reality of Personal Data”, Financial Times, 2 April 2020. 5 See “Executive Summary”, The Transatlantic Economy 2020, US Chamber of Commerce (2020), https://www.uschamber.com/report/the-transatlantic-economy-2020 (accessed 20 April 2020).

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due to Trump’s tax reforms. This may have reduced cross-border FDI flows, but it has affected the USA more than China and Asia. Further, although western FDI inflow to Asian economies has been decreasing, China continues to be the top investor in Africa and Latin America. China has taken the lead there in such sectors as extractive industries, transport, textiles, finance, telecommunications, IT, alternative energy projects and mining (especially in Peru). What is also important in the UNCTAD findings, is the discrimination and blocking of outbound Chinese FDI to transatlantic economies. Despite this, the Report says, China was the second largest investor in the world after Japan. Let us quote some parts of the Report at length: In the first half of 2018, the reinvested earnings of United States MNEs slumped by a net $367 billion and turned sharply negative, at −$200 billion, compared with a positive $168 billion in the same period in 2017. Although reinvested earnings in the second half of the year reverted to a positive value, FDI outflows from the United States for the full year still declined sharply, to −$64 billion, compared with $300 billion in 2017. In addition to the immediate repatriation effect, the tax reforms resolved the tax liability overhang on overseas assets, which may have contributed to a jump in cross-border M&A purchases by United States MNEs to $253 billion – a record high (…). Outflows from developing Asia fell by 3 per cent to $401 billion. Investment from Chinese MNEs declined for the second consecutive year – by 18 per cent – to $130 billion, as a result of government policies to curb overseas investment, as well as increased screening of inward investment in the United States and Europe.6

Discrimination against Chinese companies and blocking of Chinese acquisition of western assets is happening because China is challenging America’s leadership of globalisation. More specifically, China is challenging America’s primacy in advanced technological sectors, cyber technologies and military technology.7 6 UNCTAD, Bilateral FDI Statistics, “Global Investment Trends and Prospects”, Chapter 1, 2019, https://unctad.org/en/PublicationChapters/WIR2019_CH1.pdf (accessed 16 April 2020). 7 The tussle has gone very far in the run up to American Presidential elections in November 2020, as US authorities put enormous pressure on European and other governments to stop making deals with Chinese corporation. Huawei apart, another case is that of TikTok, a short video app, which America threatens to “ban or seize”; see “TikTok: Sixty Seconds of Fame”, The Economist, 25 July 2020, pp. 51–52. Also, the following

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Early in 2016, the Australian state blocked a vast land sale to a Chinese consortium, and in October 2016, Germany withdrew approval for the $1bn takeover of chip equipment maker “Aixtron” by a group of Chinese investors. The value of Chinese overseas acquisitions announced in the first nine months of 2016 totalled $191bn, almost double the inflows of foreign investment into China over the same period. Huawei apart, Chinese companies have also made inroads to the US market.8 In 2016 alone, Chinese companies invested a total of $51.09 bn in the USA, a 360% surge if compared with 2015. By 2019, Chinese investments made up more than 15% of all inbound M&A in the USA. Because of its lead in REEs, China got involved in the Royal Dutch Shell energy storage venture in Wiltshire, UK, aiming at creating the largest energy storage battery in Europe. As The Times have reported, “the Chinese developers (…) have said that more than 80% of the equipment for the battery will be made in China and that China Huaeng will take charge case is quite revealing. In December 2019, Tang Juan entered the USA on an educational exchange visa and worked as a cancer researcher at the University of California, Davis. But the FBI alleges that they found evidence that the student is affiliated to the People’s Liberation Army of China and that she is stealing intellectual property. She is now facing charges which carry penalties of up to 10 years in prison. US authorities also threaten to close Chinese consulates across the country as they are suspected of being used as microcosms of intelligence gathering; see Henry Zeffman, “FBI Agents Arrest Chinese Cancer Expert for Spying”, The Times, 25 July 2020, p. 41. Issues raised by the USA, such as Chinese oppressive policies in Hong Kong, or the suppression of human rights of the Uighur (around 12 million) and Hui (around 10 million) Muslim communities in the western Chinese provinces of Xinjiang and Ningxia, should be seen in light of this US-China antagonism and race to supremacy. The most serious situation is being developed in South China Sea, due to periodical war games by the US navy and air-force. 8 Yet, not everything can be blocked or derailed when there is real need for cash and it is China the only one that can provide it. From the thousands of examples of China’s asset acquisition in the world, from London’s black cabs to Serbian steel factories and Latin American textiles, we have singled out one in tertiary education in the UK proper. Richmond, the American International University in London, was on the verge of bankruptcy and closure in 2019, until it was rescued by the China Education Group Holdings Limited (CEG). CEG is listed on the Hong Kong stock exchange and is at the forefront of private higher education in China and Australia. CEG’s network includes nine universities and colleges in China, including the top ranked and largest private university in the country, as well as an accredited higher education institute in Australia. The China Construction Bank Cooperation, the Jianggao Branch of Guangzhou, among others, are the investors in the Group. Richmond’s official announcement lists also World Bank as a “cornerstone investor” for the Group, but the World Bank holds only 4.3% of the shares; see http://chinaeducation.hk/en/ir.php (accessed 16 April 2020). I thank Michael Keating for this information.

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of its construction and operation”.9 In February-March 2020, Britain’s former foreign secretary (2010–2014), Lord Hague of Richmond, castigated the government’s decision to allow Huawei to build battery bases for the development of 5G network in the UK. During a web seminar hosted by Policy Exchange, a London-based Right-wing think-tank, the peer warned that “Chinese state-owned enterprises were buying up global supplies of Rare Earth Metals, cobalt and lithium, which are essential to manufacture batteries—so we can’t have supply chains that are dependent for ever on China”, he concluded.10 In the end, in July 2020, the Tory government, under enormous American pressure and following a “technical review” by the UK’s National Cyber Security Centre, overturned its decision and announced that Huawei will be removed from all of the UK’s 5G networks by 2027.11 Clearly, China poses a direct challenge to traditional transatlantic interests that no doubt disrupts Euro-Atlantic economic and political operations, boosting the disintegrative tendencies of the bloc. This fact alone should have been enough to convince the disbelievers who doubt China’s inexorable ascendancy to global primacy.

9 Emily Gosden, “Shell Agrees China Deal to Bolster Green Power”, The Times, 17

February 2020, p. 37. 10 Lucy Fisher (defence editor), “We Can’t Rely on China If It Won’t Play by Our Rules, Warns Hague”, The Times, 15 April 2020, p. 5. 11 See the press release of gov.uk, “Huawei to Be Removed from UK 5G Networks by 2027”, https://www.gov.uk/government/news/huawei-to-be-removed-from-uk-5gnetworks-by-2027 (accessed 28 July 2020).

CHAPTER 9

Neo-liberalism, China and Covid-19

Abstract This chapter tests our findings about the strength of China’s socio-economic model by way of focusing on the global pandemic caused by Covid-19. We argue that China, along with other states that refused to follow the neo-liberal model of financialised capitalism, fared much better in containing the pandemic in their societies. Such examples include Vietnam, Cuba and China itself. Keywords Covid-19 · Public health systems · China · Vietnam · Cuba · Neo-liberal commodification

The crisis in which societies find themselves during the pandemic is surreal. This is not so much because of the pandemic itself and the sideeffects of the lockdown and “social distancing”, which are enough to further undermine the social bond and accentuate mental health problems while disorientating the youth. This is mostly because of the incompetence of western neo-liberal elites to find a solution that conciliates public health care and free market capitalism, which is geared towards profit maximisation and commodification of public spaces and human resources. The neo-liberal phase of financialised capitalism rests on fictitious capital profiteering, a vast expansion in debt creation, deregulation, outsourcing, and privatisation of almost all public services such as energy, water, © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 V. K. Fouskas et al., China & the USA, https://doi.org/10.1007/978-3-030-61097-5_9

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trains, health, education, roads and prisons. Neoliberalism in healthcare systems has resulted in a deterioration of the extent and quality of healthcare services by further commodifying social and human care. Constant neoliberal restructuring focuses on profit rather than human rights indicators, which disempower people, whose health needs are subordinated to the needs of the market. Neoliberalism treats healthcare as a private good for sale rather than a public good paid for with our taxes. This relocation/dislocation of healthcare from the state to the free market has a detrimental effect both on access to healthcare services and the quality of what is affordable for many people. In many western countries, the number of hospital beds were reduced, sections of essential healthcare were privatised and/or outsourced, and substantial cuts were made in health budgets. The effects of neo-liberalisation can be seen as a form of structural violence, disproportionately affecting the most vulnerable sections of the population, especially the poor and the pensioners. Forty years of neoliberalism across the transatlantic economies, especially in Anglo-Saxon assemblages, have left the countries totally ill-prepared to deal with a public health crisis of this kind. More than anything else, this crisis centred around Covid-19 has displayed the flaws of neo-liberalism and disaster capitalism. Viruses mutate constantly. In fact, mutation is part of the virus life cycle. Mutations are not always a big deal, but the socio-political circumstances in which a mutation becomes life-threatening depend on pre-existing cracks and vulnerabilities in the political economy model. Covid-19 came from several mutations occurring in other coronaviruses related to the same infection, such as SARS-like coronavirus. Based on previous similar cases, it should be possible to develop preventative medicine. But this is a massive undertaking which will require heavy investment in research and development. Only states can advance and even afford such preventative research and development. But because in the era of neo-liberalism, public investment in infrastructure, equipment, research and development of vaccines, medicines and skills was significantly reduced, it is left to the private pharmaceutical companies. Big pharmaceutical corporations, however, have no interest in nonremunerative research on infectious diseases, such as Covid-19. They rarely invest in prevention. Investment in preventive medical care does not contribute to shareholder value maximising the (average) rate of profit. Designing cures after we got sick is much more profitable. The sicker we get the more they can charge for their medicines, the more they see their

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profits increase. Health multinationals have a parasitic relationship with the states, dependent on them to sign expensive deals and such deals are more likely to come when there is a huge health care emergency, such as the current Covid-19 pandemic, not before. Contrary to the carelessness of the Tory cabinet in the UK and Trump’s government in the USA, the least neo-liberal countries in the world, many in the global South, have so far come through the pandemic in better shape: China, South Korea, and Taiwan. Most impressively, New Zealand, Cuba and Vietnam. Only ordoliberal Germany seems to survives our scrutiny, which includes the period of the second wave of the pandemic, which has been developing unevenly from the start of the holiday period in summer 2020 onwards. Five weeks after launching an aggressive nationwide lockdown, even before the disease had claimed any lives, to combat the coronavirus pandemic, coupled with one of the most robust economic relief packages of any country, New Zealand’s government announced in late April 2020 that the new coronavirus is currently “eliminated” in the nation. New Zealand’s government has also been testing the public at one of the highest rates in the world. The pandemic has killed very few people in New Zealand, fewer than one in every 100,000 people. Even though neoliberal cuts in social welfare, health and education were introduced in New Zealand in the 1990s and 2000s, since Jacinda Ardern became Prime Minister in 2017, many of the neoliberal cuts were reversed and there were major investments in housing, healthcare and education.1 Vietnam, a state with very limited resources, has so far stood out as a beacon of how to do more with less and provided probably the most effective case against the pandemic. Despite being located next door to China and having extensive social and economic links with China, Vietnam has had no fatalities as a result of the pandemic at the time of writing (July 2020). Vietnam’s proactive efforts come after two decades in which the country has experienced a large improvement in quality of life. Between 2002 and

1 See Eleanor Ainge Roy, “New Zealand ‘Peoples’ Budget Sees Arden Put Billion More into Health and Education”, The Guardian, 17 May 2018, https://www.theguardian.com/world/2018/may/17/new-zealand-people-budgetjacinda-ardern-health-education (accessed 28 July 2020).

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2018, an economic transformation helped to lift more than 45 million of people out of poverty.2 Cuba is another point in case. Despite the decades-long American blockade against Cuba, its government is succeeding in containing Covid19 on the island whilst also aiding other countries to tackle the virus. Cuban society was mobilised to fight against the virus. From 10 March onwards all visitors to Cuba were tested for Covid-19—even before the virus had been detected on the island.3 After the virus was detected, on 20 March the government introduced a lockdown which required the population to abide by social distancing rules and wear facemasks when leaving homes on essential business. On 24th March Cuba closed its borders to all non-residents—a tough decision given the importance of tourism to the economy—and those entering the country were required to spend a fortnight in quarantine. Whilst the numbers of daily deaths and new cases are at the time of writing rapidly rising across Latin America (in particular in Chile, Peru and Brazil), Cuba managed to reduce new cases and deaths down to very low numbers. Cuba has the highest doctor-to-patient ratio in the world (even when the 10,000 or so doctors currently working abroad are subtracted from the total).4 And while health spending was cut during Raúl Castro’s time as president (2008–2018), the island spends a higher proportion of its GDP on healthcare than any other country in the region.5 Trump’s America blames China for almost all things wrong on the planet, including the pandemic—Trump calls Covid-19 “the Chinese virus”. The reality is, however, that Covid-19 has had a serious impact on the shifting power structures of international political economy, accelerating the decline of the USA. China has swiftly moved out of the 2 The World Bank, “The World Bank in Vietnam”, 27 April 2020, https://www. worldbank.org/en/country/vietnam/overview (accessed 28 July 2020). The Economist cannot “solve” this mystery, simply because they cannot think outside of the neo-liberal rulebook—see “The Bat Signal”, 25 July 2020. 3 See Helen Yaffe, “Cuba and Coronavirus: How Cuban Biotech Came to Combat Covid-19”, LSE Blog, 18 March 2020, https://blogs.lse.ac.uk/latamcaribbean/2020/ 03/18/cuba-and-coronavirus-how-cuban-biotech-came-to-combat-covid-19/ (accessed 28 July 2020). 4 The World Bank Data, Cuba 1960–2018, https://data.worldbank.org/indicator/SH. MED.PHYS.ZS?locations=CU&most_recent_value_desc=true (accessed 11 July 2020). 5 The World Bank Data, Current Health Expenditure, 2000–2017 , https://data.worldb ank.org/indicator/SH.XPD.CHEX.GD.ZS?name_desc=false (accessed 17 July 2020).

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crisis phase, and acting like a leader, sent medical staff and aid to many western—such as Italy—and developing—such as Turkey—countries that have suffered tremendous losses as a result of the pandemic. This form of “soft power” has allowed the Chinese leadership to control the narrative, showing itself to be proactively assisting in alleviating suffering globally. The World Health Organisation (WHO) called the country’s efforts “perhaps the most ambitious, agile and aggressive disease containment effort in history.”6 It was the 2008 crisis that first shifted the psychological balance spectacularly, generating a widespread perception that American supremacy had reached its utmost limits. As we saw earlier, whereas the responses to the Great Recession of 2008 in the West were the deepening of neoliberalisation and austerity, China pursued a pro-Keynesian path, boosting wages, domestic consumption and health care provision. None of this has happened in the “advanced” West, especially in the Anglo-Saxon world. In recent years, China has expanded its support for global health. The Health Silk Road, established in 2017, intends to further strengthen its health spending and extend health and research cooperation between countries within China’s Belt and Road Initiative (BRI). In January, even before the pandemic fully hit the country, the Chinese managed to build a hospital with 2000 beds in just 10 days from start to finish. When Trump is threatening the WHO by withdrawing American financial support, China is promising additional funds to assist the organisation.

6 See Kai Kupferschmidt and Jon Cohen, “China’s Aggressive Measures Have Slowed the Coronavirus: They May Not Work in Other Countries”, 2 March 2020, https://www.sciencemag.org/news/2020/03/china-s-aggressive-measures-have-slo wed-coronavirus-they-may-not-work-other-countries (accessed 27 July 2020).

CHAPTER 10

Conclusion

Abstract In this conclusive chapter we summarise the findings of the book. We summarise how global production networks have benefitted China more than the USA and that the slow and protracted decline of the transatlantic economies as a whole can be traced back to the 1970s. In the long run, US-led globalisation and supply chains, in particular, brought about more benefits to Chinese rather than western global corporations. Official Chinese discourse calls this “Extensive consultation, joint contribution and shared benefits”. This is why America has been seeking for some time now to replace China as a supply chain hub with India and other minor Asian countries, in an effort to isolate Chinese high-tech companies from global production networks and joint ventures. Is war, then, between the USA and China looming large? Keywords China · USA · Neo-liberalism · Stagflation · Great Recession · European Union · Supply chains

The competitive constraint structure alongside global capitalist development since WWII has eroded American primacy in global political economy in consecutive waves, undermining the convenient hub-andspoke arrangements and negotiating patterns established in the 1940s

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under the leadership of Dean Acheson and Paul Nitze. However, globalisation is not a spontaneous fundamentalist economic ontology in perpetual motion. As such, it is not agency-free. Political and even cultural interferences from many agencies matter. Our analysis here has re-confirmed that the Poulanzas thesis holds: capitalist development and its accompanying competitive constraints are relatively conditioned by statenational power, which is present at the genesis, constitution and reproduction of social-economic relations, that is the global capitalist development per se. This applies to all states in an uneven, complex and combined way. America and its protracted structural decline since the 1960s is a case in point. Successfully outcompeted by Japan and (West) Germany in the 1960s, the USA opted to devalue and exit the Bretton Woods constraint, liberating the exchange rate and unleashing global money and the dollar. Although this was the result of a balance of payments crisis in America’s accounts since the early 1960s, the key structural cause in all three major centres of capitalism—western Europe, Japan, USA—was the tendency of the (average) rate of profit to fall, mounting a major over-accumulation crisis in the 1970s manifested in a long period of stagflation. But money and the dollar unleashed because of the floating exchange rate regime post-1971. The bloated Keynesian sector came under massive attack by western neo-ordo-liberal elites, whereas the interest rate hike of Paul Volcker bankrupted the global South and, along with “breaking the back of the inflation”, also broke the back of the working class by, essentially, destroying the Fordist (high) wage. Overall, the USA amounted a global statecraft opening up the markets of Eastern Europe and the “global South”, whereas its financial and banking sectors pursued a relentless strategy of financialisaiton of corporate profits at the expense of industrial capital and investment. Industry, in the form of the new global corporation and production networks—or TNC/MNC—migrated abroad. We have no supporting evidence suggesting that China is responsible for the decline of the West’s manufacturing base before the 1990s, a view that transpires in the Rosenberg-Boyle argumentation. The pressure on western industrial capital to migrate was internal to national formations within which it rose, got out-competed and declined under the international competitive constraint of the Bretton Woods system. Moreover, the process was contingent upon the policy choices of sovereign states. In fact, as we saw, both Germany and Japan, did not completely de-industrialise. Germany is in a position to lead within the EU/Eurozone because of

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the strong position of its exporting industries within the bloc.1 Deindustrialisation is an Anglo-American phenomenon, which shows that state power and state economic choice can determine the orientation of the real and fictitious sectors of social economy. China has had very little to do with the historical causes of the West’s de-industrialisation. China, nevertheless, enters gradually the uneven and combined mechanism of globalisation and its competitive constraint operating in the core from the mid-1980s onwards, and especially after its entry in the WTO in 2001. Adam Tooze is right when, along with Matthew Klein and Michael Pettis, he argues that China and Germany have been the net beneficiaries of trade flows since the 1990s, never mind the primacy of the dollar in international markets.2 In this book, unlike other approaches on the subject, we showed that global production networks have benefitted China more than the USA and that the slow and protracted decline of the transatlantic economies as a whole can be traced back to the 1970s. In the long run, US-led globalisation and supply chains, in particular, brought about more benefits to Chinese rather than western global corporations. Official Chinese discourse calls this “Extensive consultation, joint contribution and shared benefits”.3 This is why America has been seeking for some time now to replace China as a supply chain hub with India and other minor Asian countries, in an effort to isolate Chinese high-tech companies from global production networks and joint ventures. We have brought evidence that bears on the robustness of Chinese SOEs, the benefits of capital controls and China’s two regional platforms of expansion. One such platform is territorial located in China proper (western China and onwards to Eurasia and Africa); and the other is maritime South-east Asia and onwards to China and the world). Opting to pursue supply-side economics even after the crisis of neo-liberal financial statecraft of 2007–2008 (the Great Recession), the western

1 Among others, Costas Lapavitsas (2019), The Left Case Against the EU (Cambridge: Polity) and our review of the book by Vassilis K. Fouskas (2019), “Still Hoping for Socialism in One Country”, The Political Quarterly, v.90, n.3, pp. 596–598. 2 Adam Tooze, “Whose Century?”, London Review of Books, v.42, n.15, 30 July 2020. Tooze reviews, among others, Trade Wars Are Class Wars, by Matthew C. Klein and Michael Pettis. 3 Lu Kun, “President Xi Thought for a Better World”, China Daily, 11 June 2019, https://www.chinadaily.com.cn/a/201911/06/WS5dc22ebea310cf3e35575b34.html.

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governorates of the Left and the Right, combined with China’s turn to demand-led reforms and wage growth, accelerated the decline of their economies even further. Western debt levels soared as a result of reckless pursuits of supply-side policies and harsh austerity at the expense of the poor, the labourer and the vulnerable. Covid-19 seems to be delivering a further blow to the West, bringing to the fore a Polanyian/Keynesian moment challenging even the neo-liberal elites in power to consider it. “Every child knows a nation which ceased to work”, Marx wrote in a letter to Kugelmann in 1868, “I will not say for a year, but even for a few weeks, would perish”.4 Airlines, tourism and hospitality, commercial rents, entertainment, football, theatres, schools, universities, gyms, retailers, shopping centres have been in total lockdown for more than three months (March–June 2020). Britain and the USA, once again, seem to be resorting to half-baked Keynesian measures to save “free market capitalism”. On the EU front, typically, surplus countries that benefit from the austerity of ordoliberal Treaties, refuse debt mutualisation. In absence of a vaccine that can defeat the virus and lack of medical support for the ill, the neo-liberal governorates of the Left and the Right are caught, once again, without a strategy: shall they let people die by re-opening business, shopping centres and schools or re-introduce lockdowns in face of a second wave of the pandemic, thus destroying “free market capitalism”? On 15 March 2020, the American Fed announced a major intervention, cutting its interest rate by 1% to near zero. This was followed by other major interventions, such as buying mortgage-backed securities and government bonds to the tune of nearly $1 trillion. The latest announcement on the Fed’s part made clear that this purchasing of assets (quantitative easing) is unlimited.5 Trump, on the other hand, who used the crisis to increase his popularity as Presidential election was looming in November 2020, proposed a generous pro-business package of roughly $2tn, which was provisionally “blocked” by the Democrats in the Congress. The Democrats, however, soon folded their hypocrisy and agreed to the package exhilarating the markets. 4 Karl Marx to Ludwig Kugelmann, London, 11 July 1868, https://thecapitalistcy cle.wordpress.com/2018/02/15/1868-07-11-value-letter-to-dr-kugelmann/ (accessed 18 March 2020). 5 See, US Federal Reserve (2020), Press Release, “Federal Reserve Announces Extensive New Measures to Support the Economy”, 23 March, in https://www.federalreserve.gov/ newsevents/pressreleases/monetary20200323b.htm (accessed 20 July 2020).

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Britain followed suit.6 On 17 March, the British government delivered an unprecedented financial handout to UK corporations, which accompanied a further slash in the interest rate, bringing it down to almost zero. Rishi Sunak, the Chancellor, announced £330 billion in loans to be made available at “attractive” rates and said he would “go further if required,” promising an “unlimited lending capacity.” This is tantamount to 15% of the country’s GDP. A further £20 billion was pledged in the form of tax breaks, cash grants and compensation to firms that have to pay statutory sick pay.7 As in 2008, however, similar fiscal packages were slated for shoring up big business with minimal impact on SMEs and the real economic sector. However, the structural pressure for state intervention is very strong— the Polanyian/Keynesian moment mentioned earlier. Thus, the British government has taken steps to nationalise the Rail operators. On 23 March, Britain’s Department for Transport announced that “it would 6 On 3 March 2020, with Covid-19 spreading rapidly and 100,000 cases recorded globally, Boris Johnson, Britain’s PM, told a press conference that he continued to “shake hands”, and even when he visited a hospital ward with Covid-19 patients, he said he had shaken everyone’s hand. Two days later, as the UK’s first death from coronavirus was announced and the World Health Organisation designated the disease as a pandemic, Johnson was asked why there was no cancellation of public events or closing of schools. He replied, “One of the theories is, that perhaps you could take it on the chin, take it all in one go and allow the disease, as it were, to move through the population, without taking as many draconian measures.” “Basically, we’re saying”, the British PM argued, “wash your hands and business as usual”. On 12 March, Johnson and his medical officers announced the so-called “herd immunity policy”. One day earlier a health minister, Nadine Dorries, announced she had caught the virus. She had been in touch with hundreds of people, including Johnson. Such was the carelessness of the British government to contain the pandemic in the first three weeks of March, that France threatened to close its border with Britain unless the Tory government took stronger measures to stop the virus; see, Sonia Delesalle-Stolper, “Covid-19: le Royaume-Uni ferme aussi et enfin”, Liberation, 23 March 2020, https://www.liberation.fr/planete/2020/03/23/covid-19-le-royaume-uniferme-aussi-et-enfin_1782834 (accessed 28 July 2020). As deaths mounted, Johnson was eventually forced to announce “social distancing” measures and then a lockdown on 23 March. In the end, Johnson announced he had the virus himself, admitting that “there is such a thing as society”. On 5 April, after ten days of self-isolation, he entered the intensive care unit of St. Thomas’ hospital in London. Being entirely the victim of his own neo-liberal policy, as he exited the intensive care, he happened to be full of praise of NHS. 7 See, Heather Stewart, “’Whatever It Takes’: Chancellor Announces £350bn Aid for UK Business”, The Guardian, 17 March 2020, https://www.theguardian.com/uk-news/ 2020/mar/17/rishi-sunak-pledges-350bn-to-tackle-coronavirus-impact (accessed 27 July 2020).

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temporarily end normal franchise agreements and transfer all revenue and cost risk to the government for at least six months”.8 It also seems that side-lining the neo-liberal rulebook of “low inflation, low wages” is of vital importance for the survival of capitalism in the extraordinary conditions created by the pandemic. As a consequence, on 9 April, responding positively to Treasury’s request, the Bank of England agreed to direct monetary financing of the government bypassing the bonds market, although this, the Treasury said, will be “temporary and short-term” and with the money paid back by the end of the year.9 Clearly, the pandemic has brought up forcefully the structural need to support the demand-side of capitalism and the abandonment of neo-liberal financialisation, more forcefully, since 2009. Austerity-stricken EU is worse off, the reason being the lack of Keynesian instruments in dealing with the crisis. With the pandemic making headways in Italy and Spain in March-June 2020 and with the entire bloc constrained by the ordoliberal disciplinarian Treaties, surplus countries, such as Germany and Holland, refused to issue the so-called “coronabonds”, a demand made forcefully by periphery states (Italy, Spain, Greece and Portugal) led by France. The rift between the surplus core and the indebted periphery of the EU is such that under pandemic and austerity conditions becomes impossible to be bridged with compromises, such as that achieved in early April 2020 or later in July, allocating 750bn Euros to the embattled European economies.10

8 See, Alex Morales, “UK Steps in to Save Railways as Johnson Warns of Lockdown”, Bloomberg, 23 March 2020, https://www.bloomberg.com/news/articles/2020-03-23/uk-steps-in-to-save-railways-as-johnson-warns-of-lockdown (accessed 25 March 2020). 9 See, Chris Giles and Philip Georgiadis, “Bank of England to Directly Finance UK Government’s Extra Spending”, Financial Times, 9 April 2020, https://www.ft.com/con tent/664c575b-0f54-44e5-ab78-2fd30ef213cb?fbclid=IwAR1UURDFR7csmGwXmQc YkPegm4nHkwWzLn8WxZSzaLG7Onc4AfRf2adgYS8 (accessed 9 April 2020). 10 No mutualisation of debt has been achieved in April 2020 and the compromise achieved is predicted to be short-lived; see in particular, Adam Tooze, “How Coronavirus Almost Brought Down the Global Financial System”, The Guardian, 14 April 2020, https://www.theguardian.com/business/2020/apr/14/how-coronavirus-alm ost-brought-down-the-global-financial-system (accessed 21 April 2020). In July, the deal struck had had more elements of mutualisation, but no one proposed mutualisation of EU countries’ “legacy debts; even the new common debt will not enjoy joint-and-several guarantees. And the question of how to repay it is left for later”; see, “A Big Fiscal Deal”, The Economist, 25 July 2020, p. 24.

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We have shown that China is neither an extension nor a proxy of the USA’s globalisation/financialisation projects, let alone a “head servant” of the American empire-state. We have appreciated these arguments to the extent that they raised important issues about the ways in which the Chinese state is constraint by the structural competitive constraint of the existing imperial order, above all that of the USA, but also other powers. But the US-centred western edifice has been in decline since the 1970s, a decline which the Great Recession of 2008 and Covid-19 have accelerated. It should also be borne in mind that no imperial order in the past has lasted forever. There is always a historical moment of succession, which amounts to a formal concession of defeat, such as Britain admitted in 1944, after several decades of continuous decline and having persevered two global wars. However, this moment of formal concession of defeat is preceded by what Antonio Gramsci used to call interregnum, during which period many fenomeni morbosi—or “morbid symptoms”—appear, such as state authoritarianism from above and racism and xenophobia from below—with both trends feeding each other.11 We seem to be right there, because, as The Economist put it amidst the Covid-19 crisis paraphrasing, rather unwittingly, the founder of Italian Communism, the “two diehard rivals refuse to lead. One is in the retreat; the other is uncertain whether it really wants to take on global responsibility. The world suffers”.12

11 See, esp., Gilbert Achcar (2017), “Morbid Symptoms: What Did Gramsci Mean and How Does It Apply to Our Time?”, International Socialist Review, 108, https://isreview. org/issue/108/morbid-symptoms (accessed 17 April 2020). 12 “Thanking Big Brother”, The Economist, op. cit., p. 44.

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© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 V. K. Fouskas et al., China & the USA, https://doi.org/10.1007/978-3-030-61097-5

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Index

A Achcar, Gilbert, viii Acheson, Dean, 74 Afghanistan, v Africa, 75 “America first” idea (Donald Trump), 36 American debt (T-bills), 43 American Fed, 76 American supremacy, 71 America’s hub-and-spoke system, 15 Anti-inflationary bias of the ECB, 40 Arab Spring, vi Ardern, Jacinda, 69 Argentina, 11 Arrighi, Giovanni, 11 Asia, 60 Austerity, 6, 71 Austerity-stricken EU, 78 Australia, v, 3, 39 B Baathist socialism, 11 Bad Godesberg programme, 28

Balkans, 30 and Eastern Europe, 44 Bank of England, 33, 78 Belt and Road Initiative (BRI), 44, 71 Benn, Tony, 30 Bernstein, Eduard, 28 Bismarckian welfare state, 26 Blair, Tony, 29, 33 “Third Way”, 33 Brazil, 11, 14, 70 Brenner, Robert, 11, 13 Bretton Woods constraint, 74 Bretton Woods system, 10, 11, 74 Brexit, v, viii Britain, v, 13, 29, 56 Department for Transport, 77 British Telecom, 2 C Cafruny, Alan, viii Callinicos, Alex, 11 Capital accumulation, 15 Capital controls, 42, 43 Castro, Raúl, 70

© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 V. K. Fouskas et al., China & the USA, https://doi.org/10.1007/978-3-030-61097-5

89

90

INDEX

Centre for the Study of States, Markets & People (STAMP), viii Chile, 70 China, v–viii, 3, 5, 6, 10, 11, 14, 15, 20, 36, 37, 43, 50–52, 56, 61, 67, 69–71, 74 2017 Modernization Report, 61 Academy of Science, 61 Constitution, 41 manufacturing produce, 43 political and social economy, 42 political system, 41 China’s Central Bank, 40 Chinese Communist Party (CCP), 40, 41 Chinese companies, 64 Chinese corporations, 44, 49, 58 Chinese high-tech companies, 75 Chinese overseas acquisitions, 64 Chinese state, 6, 47, 56, 58, 79 Chinese state-owned enterprises, 65, 75 Chrysis, Alexander, viii Cold War, vi Combined outcome, 46 Commodification/privatisation plans, 60 Communist China, 40 Competitive constraint, 4, 11, 20, 47, 73 Consumer debt, 16 Corbyn, Jeremy, 34 Covid-19, v, 17, 22, 37, 47, 58, 62, 67, 68, 70, 76, 79 Cuba, 69, 70

D De Angelis, Massimo, viii Debt, 15, 16 inflation, 22 mutualisation, 76

vulnerability, 7 De-industrialisation, 75 Deliveroo, 21 “De-politicisation” mantra of neo-ordo-liberal postures, 40 Dimoulas, Constantine, viii Disaster capitalism, 68 Dollar primacy of the, 75 as the world’s key reserve currency, 47 Dollar-Wall Street Regime (DWSR), 6 E East China Sea, vi Eastern Europe, 12 Ebert Stiftung, Friedrich, 32 Economic and Monetary Union (EMU), 20 Egypt, 11 “Equalisation of Basic Public Health Services” (EBPHS), 61 Erhard, Ludwig, 25 Eurasia, 75 Euro, as a reserve currency, 36 Euro-Atlantic core, 62 Euro-Atlantic economic and political operations, 65 Euro-Atlanticism, 24 European Central Bank (ECB), 33, 34 European Court of Justice, 34 European Semester, 21 European Union (EU), 20, 23, 30, 33, 37, 78 ordoliberal acquis , 33 Eurozone, 21, 37 F Financialisation, 14, 30, 34 of corporate profits, 74 of profits, 44

INDEX

Financialised capitalism, 67 Financial statecraft, 13 Forbes Global 2000, 50 Forbes list, 50 Fordist/Keynesian consensus, 17 Fordist (high) wage, 74 Fordist model, 10 Foreign Direct Investment (FDI) cross border flows, 63 data, 62 inflow, 63 Fouskas, Vassilis K., viii France, 78 French neo-revisionism, 29

G German-Austrian ordoliberal model, 27 Germany, 13, 24, 30, 36, 64, 69, 74, 78 “Gig” and precarious work, 17 “Gig” labour markets, 21 “Gig” work, 43 Global East, 14 Globalisation, 74 Global neo-liberal statecraft, 36 Gökay, Bülent, viii Golden Age, 35 Golden Age of Capitalism, 10, 26 Government debt, 16, 17 Gowan, Peter, 6, 12 Gramsci, Antonio, vii, 79 Great Recession, 6, 11, 17, 21, 36, 58, 59, 75, 79 Great Recession of 2007–2008, 3, 13, 42 Greece, 20, 27, 34, 78 Gross domestic product (GDP), 13, 16, 70, 77 growth, 21, 46 PPP (Purchasing Power Parity), 46

91

Growth and Stability Pact, 27 Gwadar, 44

H Harvey, David, 11 Hayek, Friedrich, 24, 30 Healthcare, 68, 69 Health Silk Road, 71 Heath, Edward, 30 Hermes, 21 Hofman, Bert, 5 Holland, 78 Hong Kong, 40, 50, 51, 56 Huawei, 1, 55, 64 Hub-and-spoke arrangements, 73 Hub-and-spoke neo-imperial governance, 39 Human rights indicators, 68

I Imperial-hegemonic transition, vii Import substituting industrialisation strategy (ISI), 43 India, 14 Industrial and Commercial Bank of China (ICBC), 50 Industrial capital, 13 Institutional-economic constraints, 39 International Monetary Fund (IMF), 17, 46 Interstate (co)federalism, 24 Iran, 2, 7 Iraq, v, 11 Ireland, 20 Italian Communism, 79 Italy, 71, 78

J Japan, v, vi, 11, 13, 20, 36, 39, 50, 74

92

INDEX

regional primacy, 42 Jayawardena, Lal, 9 Jessop, Bob, 21 JP Morgan Chase, 50 K Keynesian/Fordist regime, 10 Keynesian experiment (Francois Mitterrand), 37 Keynesian instruments, 78 Keynesianism, 16 Keynesian Left, 28 Klein, Matthew, 75 Kosovo, 31 L Labour Party, 29, 31 Lachmann, Richard, 14 Latin America, 12, 70 Left, 24, 27, 37, 76 “Left-wing” ideas, 32 Lehman Brothers, 16 Libya, v Lord Hague of Richmond, 65 M Maastricht Treaty, 27 Macau, 40 Made in China 2025, 57 Marktwirtschaft , 25, 29 Marxists, 15 Marx, Karl, 15, 76 Middle East, vi, 11 Müller-Armack, Alfred, 25 Multinational corporations (MNCs), 42, 46, 51, 74 N National Cyber Security Centre (UK), 65

National People’s Congress (NPC), 40 Neo-imperial articulations, 36 Neo-imperial financialisation, 33 Neo-imperial governance, 36 Neo-imperial power, 30 Neo-liberal, 40 financialisation, 6, 31, 46, 78 financial statecraft, 7, 10, 12, 15, 22, 35, 44, 75 globalisation/financialisation, v, 33 Neo-liberalism, 37, 67 in healthcare systems, 68 Neo-liberal Right, 28 Neo-ordo-liberal authoritarian polities, 62 Neo-ordo-liberal consensus, 22 Neo-ordo-liberal financialisation, 7, 28 “New Centre” (Schroeder), 33 New consensus macroeconomics, 16, 22 New Zealand, 69 Nitze, Paul, 74 Non-financial corporations (NFC), 56 North Atlantic Treaty Organization (NATO), 31 O Off-shore balancing, v, 36 Optus, 2 Ordoliberal/neo-revisionist Left, 33 Ordoliberal EU, 19 Ordoliberal Eurozone, 17 Ordoliberalism, 10, 23, 28, 37 Ordoliberal Left, 33 Ordoliberal orthodoxy, 4 Ordoliberal Treaties, 20, 76 Overaccumulation crisis, 11, 74 P Pakistan, 44

INDEX

Panitch, Leo, 11 People’s Political Consultative Conference, 40 Peru, 70 Petro-dollar recycling, 43 Petro-states, 37 Pettis, Michael, 75 Pharmaceutical corporations, 68 Polanyian/Keynesian moment, 77 Portugal, 20, 78 Poulantzas, Nicos, 5, 74 Prasad, Eswar, 5 Pusca, Anca, ix

Q Quantitative easing, 76

R Rambouillet, 31 Rare earth elements (REEs), 52, 55, 64 Rare Earth Metals, 65 “Regime change” in China, vii Resolution Foundation, 21 Right, 24, 37, 76 Rosenberg-Boyle argumentation, 74 Rosenberg, Justin, vii, viii Royal Dutch Shell, 64 Russia, 7

S Saudi Arabia, 37, 43 Schroeder, Gerhard, 32 Senkaku/Diaogu islands, vi Singapore, 17 “Social distancing”, 67 Social market economy, 25 South Africa, 14 South-east Asia, 36 South Korea, 69

93

Spain, 20, 78 Stagflation, 11, 22, 27, 74 State Administration of Foreign Exchange (SAFE), 43 State-class power in China, 40 State Council, 40 State-Owned Enterprises (SOEs), 5, 47 Structural violence, 68 Sunak, Rishi, 77 Supply chains, 65 Supply-side agenda, 32 Supply-side economics, 24, 75 Symantec Corporation, 2 Syria, 11 Syriza, 34 T Taiwan, 56, 69 T-bills system, 47 Thatcher, Margaret, 29, 30, 33 view, 30 The Pacific, 60 The port of Piraeus (Greece), 44 “Third Way”, 29, 31, 32 neo-revisionism, 31 neo-revisionist formation, 37 Tooze, Adam, 75 Transatlantic economies, 75 Transnational corporations (TNCs), 42, 43, 46, 50, 51, 74 Treaty of Rome, 25 Trump, Donald, 70, 71 Turkey, 14, 71 U Uber, 21 UK corporations, 77 “Uneven and combined development” (UCD), vii, 3, 6, 11, 22 Uneven outcome, 46

94

INDEX

United Kingdom (UK), 17, 60, 69 United Nations Conference on Trade and Development (UNCTAD), 63 Bilateral FDI Statistics Report , 62 United States of America (USA), v–viii, 2, 3, 6, 11, 13, 16, 20, 44, 50, 51, 56, 60, 62, 74 global financial statecraft, 42 globalisation/financialisation projects, 79 Trump’s government, 69 US debt, 43 US-led globalisation project, 52 US-Saudi agreement of 1973-74, 12 U-turn (Francois Mitterrand), 27

Varoufakis, Yanis, 20 Vietnam, 69 Vodafone, 2 Volcker, Paul, 12, 74 “Volcker shock”, 13, 36

V Value theory, 28

Y Yugoslavia, 31

W Wanzhou, Meng, 2 Western Europe, 74 West’s debt obligation, 36 World Bank, 5, 46 World Health Organisation (WHO), 71 World Trade Organization (WTO), 5, 37, 42