Topics‎ > ‎World‎ > ‎

Comments on the IMT's 'World perspectives 2012'

posted 9 Mar 2012, 12:58 by Admin uk   [ updated 14 Mar 2012, 12:15 ]

The following are some comments on the IMT's World Pespectives Document 2012 and concern the section on China. The comments in red are by Heiko Khoo                                                                     

In the past, China provided relief to a world economy facing stagnation and slump. China can no longer do this. The Chinese economy, although still maintaining high levels of growth, is showing signs of faltering. This has serious social and political implications. Marxists understand that the rapid growth of the Chinese economy in the last period enormously strengthened the working class. The Chinese ruling clique avoided a social explosion because the constant growth of the productive forces gave people hope of future improvement. But now all the contradictions are coming to the surface.                                                                                                     

The argument that China’s economy is faltering is based on assertion not evidence. Why are the rulers of China called “the Chinese ruling clique”? A Communist Party and bureaucracy runs the country would be one possible argument, another would be that it is run by the bourgeoisie. The latter is the position adopted by the IMT in 2006, so how did the Chinese bourgeoisie now become a “ruling clique” ?

The avoidance of “a social explosion” in the past is said to be caused by “the constant growth of the productive forces” it is thereby being asserted that that has somehow come to an end. Yet there is not a shred of evidence for this claim as we shall see.


After a long period of very rapid growth, China shows signs of slowing down. For three straight quarters (January through to September 2011), year-on-year growth slowed, as the government, concerned about rising levels of inflation, restricted lending and raised interest rates. The problem arises from the fact that U.S. and European demand for Chinese goods has weakened.


What signs of ‘slowing down’ are these? What level of decline do the IMT leadership expect for China? The 12th Five Year plan predicts 7 percent growth over 5 years, and the latest government work report forecasts 7.5% in 2012 does the IMT have an alternative prediction? If so what is this prediction based on? Any why were all the IMT’s previous predictions about Chinese economic decline wrong? Surely one has to investigate why one gets things wrong?


The main problem is that the fast-growing economies of Asia have to sell their goods on the world market. China still has a relatively high rate of growth. Its industries are still churning out a mass of cheap commodities. But China must export to continue to produce. Where is the market for these commodities if the economies of the USA and Europe are in a slump?


Now we are told China’s growth is still “relatively high”. It has actually experienced the fastest and longest growth rate of any country in history, and this counts as “relatively high” in IMT speak. But let us not forget that this was all “in the past” according to paragraph 148 of World Perspectives 2012.


Now we are told ‘a mass of cheap commodities’ can’t be sold. Where have they been sold during the greatest fall in world output since the 1930s? We are told “China must export to continue to produce” do the leadership of the IMT not read anything?


One example will suffice to negate this nonsense. The Chinese automobile industry (a mass of cheap commodities remember?) is now by far the largest in the world. It produced 18.4 million units in 2011. Let us not mention, airplanes, ships, high-speed trains, computers, hardly items generally found in the pound shop!

Desperately the IMT asks “where is the market” if not in Europe and the USA? This is absurd, the Chinese buy their own goods, the state buys goods, and Europe and the USA are not the only places that buy things.

Part of the nature of economic crisis is that shifts in economic weight take place within it and because of it. For example the shift to the USA as the centre of the world economy took place in the inter-war years and even during the Great Depression and World War Two.


As John W. Schoen, Senior Producer at the new site commented in September 2011:


·       “Policymakers in China, the world’s third largest economy behind the U.S. and EU, face their own set of tough choices. Rapid growth rate has fuelled inflation that is running at a double-digit rate, according to analysts -- much higher than official targets. To contain inflation, Beijing has raised interest rates five times and lifted banks' reserve requirements nine times since October [2010]. If it clamps down too hard, though, a deeper economic slowdown could reverse China's efforts to lift hundreds of millions of people out of poverty.


What sort of source is this? John W. Schoen Senior Producer at, what makes his statement valid or noteworthy? It is that it fits the Chinese economic doomsday scenario mythology that the IMT want to peddle! It is not based on any facts, inflation in double digits did you bother to check? The learned man at msnbc starts with “If” China “clamps down” (on what?) it “could reverse” efforts to lift hundreds of millions out of poverty”. Does he mean it could reverse the fact that China has lifted hundreds of millions out of poverty? Or “reverse efforts”? What evidence is presented for this “If” it “could” scenario? Nothing.

Anyone who studies China knows that poverty reduction has massively escalated since 2011, with a vast extension of low cost housing, (the biggest public sector housing programme in human history) a vast extension of welfare, pensions, social insurance and health care provision, and wages have risen dramatically. So how exactly is this reversing efforts to lift hundreds of millions out of poverty? This is simply rubbish.


 “China is also coping with a banking hangover of its own, after years of massive government lending for expansion of state-owned enterprises and infrastructure upgrades.


What is this banking hangover? “lending for expansion of state enterprises and infrastucture” i.e. in the expansion of the public sector and infrastructure and services that promotes economic growth  and development. Why the quote? Because the IMT can’t be bothered to find out the facts themselves, so they rely upon an amateur pundit from MSNBC.


“‘There is a two-tier system within China and I think the lending that’s taking place and the percentage of nonperforming loans is now at a level that is disturbing,’ David McAlvany, chief executive at McAlvany Financial Group told CNBC. ‘Ultimately, (China's banks) will have to see some comeuppance’.” [Recession's second act would be worse than the first,, By John W. Schoen, Senior Producer, September 22, 2011]


Now for the double whammy quote, someone from some “Financial Group” is dragged in to tell CNBC, “I think” … China will get its “comeuppance” how exactly is this quote supposed to enlighten Marxists about Chinese political economy and the laws of motion which govern it? This remains unexplained.


The Chinese authorities revealed they had not understood the full extent of the crisis that broke out in 2008 in the advanced capitalist countries. They saw it as a recession that would soon be over and they implemented polices accordingly. In 2008, the US$586 billion stimulus package was introduced with the aim of keeping buoyant the Chinese economy, creating greater internal demand as export markets shrank. This, however, came at a price, with a significant increase in central government public debt. Chinese public debt grew very slowly in the past, from zero percent of GDP in 1978 to around 7 percent by 1997, to just under 20 percent in 2003. But as a consequence of the public spending in the face of the world crisis of capitalism, it shot up to 37 percent in 2010.


The stimulus package was the largest programme of state intervention since the Chinese revolution in 1949. It can hardly be characterised as lacking boldness. The cited figures on public debt are not presented in a way that provides any meaning. Public debt if it is invested in goods, services and infrastructure for the masses is surely a good thing? How exactly does the IMT envisage public debt under their concept of socialist economic expansion?


As The Global Post reported (July 8, 2011):

 “China's banks have been engaging in risky ‘off balance sheet’ lending somewhat reminiscent of Enron’s shenanigans. Last week, Beijing released a national audit revealing that local governments owe an estimated $1.65 trillion in outstanding loans. This week, Moody’s has indicated that the problem is significantly worse, by as much as $540 billion. And that's only local government debt. It doesn’t include the central government’s huge obligations, or those of banks that are essentially guaranteed by Beijing. Even for a miracle economy like China's, that’s a lot of debt.”


“A lot of debt” says the “Global Post” so? What is the significance of all this for Marxist analysis of Chinese political economy? Silence…


In the same article, Victor Shih, a U.S.-based expert on China’s economy, in answering the question “How much debt does China have?”, explained the following:

“That depends on what you include. Large sectors of the Chinese economy are owned by the government. The debt of these state-owned enterprises is what’s called a ‘contingent liability’ — ultimately it’s the responsibility of the government. If you count all of these liabilities, then you get to an extremely high number, something like 150 percent of the Chinese gross domestic product, or more.

“A more restricted definition is debt that’s owed by either the central or local governments. That is about 80 percent of China's GDP.”


Whichever way one looks at it, in massively increasing public spending, China has upped its level of public debt significantly. For now it has provided stimulus and allowed the economy to maintain high levels of growth. But this cannot go on forever. China’s debt is still low compared to that of countries like Japan, the USA and many European countries, but it is going up. So long as China’s economy keeps growing it can finance this level of debt, but if there is any significant slowdown then all the contradictions of the situation will come to the surface.


Ah now it comes! The Marxist theory of Chinese Political economy is:


The debt in China is sustainable provided the economy continues to grow!


Surely you didn’t need to write all these paragraphs just to say one sentence?

The IMT leadership should really try to economise on words, quotes and paragraphs and concentrate on saying something meaningful! So now we are at the starting point…Can China continue to grow? The socialist alternative to capitalism traditionally put by Marxists (and the IMT still claim this title and attempt to apply this method to every other country than China) is to call for “public ownership of the commanding heights of the economy and the banks and a massive programme of public works”. Now anyone who has bothered to read anything other than the magnificent Global Post, MSNBC and CNBC will know this is precisely what is happening in China. But these facts don’t fit into the “official line” of IMT, that China is capitalist. Therefore, according to the IMT, the commanding heights and banks can’t possibly be publicly owned. Therefore the expansion of the economy can’t be called a massive programme of public works! Thus the IMT seeks to change the facts to fit erroneous theories.


Apart from the future financial crisis that all this will provoke in China, there is also the fact that the growth of the economy has generated huge and rising inequality: “communist” China is one of the most unequal countries on earth. A small number have become very rich but the conditions of millions of workers resemble those of Britain in the times of Charles Dickens. This has given rise to unbearable tensions, reflected in a rise of suicides of young workers, strikes and peasant disturbances.


The main source of inequality is the gap between urban and rural, as well as between rich urbanites and poor urbanites, but the wages of workers and the welfare provided by the state have all improved significantly precisely during the Great Recession. Is this not the opposite to the processes in Europe and the USA? And why is this the case?


High rates of growth should not be regarded as a guarantee for social stability. Egypt grew at an average of 5.5 percent since 2003, and in some years the rate of growth was over 7 percent. This rapid growth coincided with the biggest strike wave since World War II and it ended in revolution. There are lessons here for China in the future. The authorities are worried. During the Egyptian revolution, Chinese censors scrubbed “Egypt” from the search engines. China has invested in creating a huge internet police that monitors what people are doing online.


The real surprise is not that there is a huge Internet police, but that the use of broadband Internet in China was developed and rolled out by State Owned companies so fast and universally, there are now over 450 million internet users in China.




They think that if you can stop people from finding out about revolutions in other countries, they can stop people drawing revolutionary conclusions about the situation in China. But the point is that what will lead to revolutionary upsurges in China are the living conditions of Chinese workers and peasants. And no amount of internet police can hide that from the Chinese people.


It is not true that the Chinese state prevents people from finding out about revolutions. The attempt to start a ‘Jasmine revolution’ in China was actually led by counter-revolutionary forces who called a demonstration for “freedom” at Mc Donnalds in central Beijing. But, how can there be a counter-revolution when China is already capitalist? No-one except a few western journalists turned up. Despite Alan Woods claiming China is on the edge of a Jasmine revolution there is not the slightest evidence for this.


Inflation stands above 6 percent, which is high enough in itself, but food price inflation exceeds 13 percent. The purchase of foodstuffs accounts for more than one-third of the monthly spending of the average Chinese consumer. High inflation has persisted despite the government measures. Measures like restricting the amount of money banks can lend and hiking interest rates five times since October 2010 have not had the desired effect.


No sources even worth providing here? I guess simply repeating platitudes from the bbc or the Guardian does not require sourcing, but perhaps its relevance could be explained?


A totalitarian regime resembles a pressure cooker with the safety valve clamped down. It can explode suddenly, without warning. Although it is difficult to get accurate information, the published reports, which understate the real position, suggest that unrest in China has become increasingly frequent. Every year China experiences tens of thousands of strikes, peasant protests and other public disturbances, often linked to anger over official corruption, government abuses and the illegal seizure of land for development.


Why is it difficult to get accurate information, because you do not even make the slightest effort to look for it, as is evidenced by the sources you cite as authorities.


Food prices are of particular concern to the Chinese government, as they directly affect the lives of millions of workers and peasants in the country. The “Communist” Party leaders fear this could cause social unrest as workers suffer the consequences of the price rises. Sharp clashes will inevitably emerge between the ruling economic and political strata and the masses.


The ruling “economic and political strata” you mean the capitalist class? Or have they disappeared from your theory again?


The crisis of the global economy has led to falling profits and investments, a situation that is aggravated by a drying up of credit. This forces many factories to resort to seek unofficial credit at usurious rates of interest. They face a choice of paying these rates or cutting wages. The result is pay cuts or even failure to pay any wages at all.


One minute! How can you forget what your wrote only a few paragraphs ago? Credit has dried up??? Only a few paragraphs before you claimed there has been a massive expansion of credit in China and associated debt, now you claim credit has dried up, how do you come to such statements?

Why does no one notice these glaring contradictions?  Where does your data come from? The fact is wages have risen almost universally! The confusion about the “drying up of credit” stems from the denial of a differentiation between private capital and state enterprises. Private enterprises have never been major credit recipients from state banks. Instead state banks transfer private savings into credit for state enterprises.


In November 2011, Guangdong’s acting governor said the province’s exports dropped 9 percent in October from the previous month. Provincial leaders are also contending with widespread protests by farmers over land seizures. Factories are cutting the overtime that workers depend on to supplement their low basic salaries. There have been strikes and demonstrations in car, footwear and computer factories in Shenzhen and Dongguan, two leading export centres in southern Guangdong province.


The Chinese Academy of Social Sciences has estimated that there were more than 90,000 “mass incidents” in 2006, with further increases in the following two years. The ruling class is preparing for unrest on a far bigger scale. China increased its domestic security budget by 13.8 percent in 2011, to 624.4bn yuan (£59bn). For the first time in its history China now spends more on the maintenance of internal order than on defence.


Ah now “the ruling class” make a guest appearance. A round of applause must be due! Are they the same as the “ruling economic and political strata” and the “ruling clique”? And what is their role? Supposedly it is to finance the state apparatus responsible for “internal order”. Note that nowhere have the words “the ruling capitalist class” or the “bourgeoisie” been used. I guess by avoiding the issue of whom the ruling class is you can try to avoid dealing with the minor problem, that the state apparatus is based on public property not private property! But who cares, it is only the fundamentals of Marxist theory and analysis that is at stake? What is this compared to the prestige of the IMT leadership?

Some general comments by Mick Brooks:

Paras 9 & 27: in both these paras it is suggested (i) that credit should be pumped into the economy
in a slump, not a boom, and (ii) that this would work. The impression is given (not spelled out)
that the ruling class sits around in a room, comes to an agreement and then pulls levers to achieve
results. The capitalist class can postpone slumps when they feel like it. They just made a mistake,
that’s all. Though members of the ruling class do occasionally meet up (Mont Pelerin, Davos etc) this
is a fundamental misunderstanding of how capitalism works.                                                                                                                  

22. Say’s Law is usually paraphrased that every seller brings a buyer to market with them (aggregate
demand = aggregate supply, therefore no overproduction). It was developed in the early nineteenth
century. The efficient markets hypothesis was developed by Eugene Fama in the 1960s. It states that
the price (e.g. of a share) fully reflects all available information. The only thing both theories have
in common is that they are both erroneous. (This is a bit pedantic.) In para 12 the bond markets are
seen reflecting the general anxiety. This is contradicted when it says (para 56) that bond market
attitudes to Italy are a self-fulfilling prophecy i.e. not efficient markets at work.

24. The parasitical service sector. Service sector is not a Marxist concept. Most service sector
workers are not parasitic in any case. They are about 26-27m out of 30m workers in Britain. Are
nurses parasites?

33. Quantitative easing will lead to ‘an explosion of inflation’. Not so far. How long do we have to

69-70. ‘The EU wouldn’t allow the devaluation of the Drachma after exit from the Euro’ (?). They
would impose tariffs. It’s a legalistic point but the EU is supposed to have a common tariff policy, not
just pick on individual countries. Some in the EU would be glad to see the back of the Greeks. They
don’t fear exports from Greece, even with a devalued currency.

77. ‘The Drachma would lead to a revolutionary situation like Germany in 1923.’ Did hyper-inflation
lead automatically to a revolutionary situation? Wasn’t the preceding history of class struggle in
Germany important? Was Zimbabwe in a pre-revolutionary situation a few years ago? Simplistic,
ridiculous historic comparison.

The main point about this section on Greece is that it takes for granted that it’s all about bailing out
the poor old Greeks (I supposes he gets this from the Economist.). It’s not. It’s about bailing out the
European banks that lent the Greeks money. That’s a fundamental misunderstanding. It means you
get everything upside down. Secondly the preoccupation is with Greece getting bombed out of the
Eurozone. Most Greeks still support the Euro. It’s repudiating the debts that’s the big issue for them.
Default may or may not lead to exit from the Euro.

This is worse than his recent article on Greece, even. It doesn’t mention the political parties in
Greece. It’s all down to the ‘revolutionary youth’. That’s the way they’re going. They are actually
abandoning class analysis and the traditional attitude to the mass organisations.

Despite this emphasis on unorganised youth the document underplays the ‘Occupy’ movement
internationally and the inspiration of Tahrir Square it fed on, which are the real achievements
theyouth have led.

107. Is the attitude of ‘Germany’ rational? Isn’t the German bourgeoisie just pursuing its own
national interests, even though this may produce a catastrophe for everyone? In other words it’s
an instance of the other main obstacle to progress under capitalism, the continued existence of the
nation state.

Eurobonds are not explained at all to the reader.

China. This is very superficial. Just cuttings on the economy strung together. No political analysis.

India. Lumped together with Brazil and China. Really? India’s growth spurt is relatively recent. Is
India’s faster growth because of liberalisation? That is the argument that socialists have to answer.
Brazil’s economic record is far from impressive till it was buoyed up by exports to China over the last

Pakistan. Nothing much on the PPP ranks, just intrigues at the top.

218-219.The first para suggests a split in Islamist organisations on class lines. This is contradicted in
219. Islamists are all bourgeois at best (like Christian democratic parties in Europe) What about the
Salafists? They are outright reactionary.

228. What is the point of comparison of Egypt with the July days? A premature semi-insurrection led
to the revolutionary movement being driven underground in 1917. None of this has happened in the
Arab spring.

Libya. This is very poor analysis. Was Libya ever a deformed workers’ state? The movement against
Gaddafi was a ‘genuine popular revolution, but...’ Was his overthrow a step forward? How about
imperialist involvement, definitely downplayed here? What are the perspectives?

Syria. Apparently it’s a revolution against Assad. That means it’s progressive, right? But what are its
objectives? What are its chances of success?

249. ‘Democratic bourgeois counter-revolution’ (as well as a revolution?). Where did this concept
come from? This means Syria was a deformed workers’ state. When did it stop being one? Was the
transition completed (para 246)? If so, why were we not told at the time?

Iran. What happened to the pre-revolutionary situation there?

The section on the Arab revolution is the worst in the document, and it’s the most important area
in the world to analyse what happened last year and what are the perspectives for the region in the
future. The Egyptian events are really downplayed in the document – much more important than
Libya or Syria.

Cuba. This is a relatively well-informed section. The economic crisis is down to the collapse of
Stalinism and, more recently, of world capitalism. The collapse of Stalinism was thirty years ago, and
Cuba got over the worst of it a long time ago.

313. Organic crisis. Meaningless. It’s a weasel way of saying ‘final crisis’.

361. This is ridiculous. Of course Germany isn’t going to invade Russia. Who ever thought it would?
Nor is Japan likely to invade China any time soon.

367. The Norwegian massacre ‘shows the contradictions of capitalism’. This is not wrong, just
meaningless unless it’s made concrete.

At the end there is virtually nothing on the social democratic and Stalinist parties. The real
significance of the document is what it doesn’t mention.