Readers will remember the China syndrome: the fear of a nuclear meltdown in the West, in which reactor components melt through their containment structures and into the underlying earth, “all the way to China.” Now, to judge by Paul Krugman’s latest, the fear seems to be running in the opposite direction: the fear is that an economic meltdown in China will make its way “all the way to the West.”
The fact is, mainstream economists in the West have a particularly difficult time making sense of the Chinese economy, based on the fear that the West has failed in its mission to show China and the rest of the world its future. Last year, it was Daron Acemoglu who worried that the development of capitalism in China was based not on a “happy connection between prosperity and democracy” but, instead, on a system in which “rulers have been able to deliver strong economic growth without surrendering political and social control.” Krugman’s fear is a bit different: that the period of massive investment based on low wages is coming to an end and what China needs, but is failing to engineer, is an increase in private consumption.
Indeed, the main thing holding down Chinese consumption seems to be that Chinese families never see much of the income being generated by the country’s economic growth. Some of that income flows to a politically connected elite; but much of it simply stays bottled up in businesses, many of them state-owned enterprises.
It’s all very peculiar by our standards, but it worked for several decades.
Let me offer two quick comments. First, how is it possible to consider “peculiar by our standards” a situation in which a large part of the income generated by a country’s growth flows to a tiny elite or stays bottled up in businesses? Isn’t that exactly what’s been going on in the United States and in other western countries over the course of the past three decades, with the one difference being that in the West we’re talking about private corporations as against China where much of the investment takes place within state enterprises?
In fact, if anything, workers’ wages have been rising in China (almost tripling between 2002 and 2009)—as against the general wage stagnation that has taken place in the West.
My second comment, which I made last year, is that China may well be showing the West its own past. It is exactly this process of “primitive accumulation”—of large-scale migration from rural to urban areas to toil long hours for low wages under working and living conditions that drive laborers to attempt to commit suicide—that originally paved the way for capitalist development in the West.
The tensions and contradictions of capitalist development in China are not, in the end, all that peculiar. We have seen them before, albeit under different historical and social conditions. But to understand them, we have to leave behind the idyllic conditions presumed by mainstream economists in the West and face the fear that capital itself is the source of the current economic meltdown.