The revival of Japanese militarism

Abe: Too much of a willing tool for US designs in the Far East.

Abe: Too much of a willing tool for US imperial designs in the Far East.

Peter Symonds, wsws.org

Nearly seven decades after the end of World II, the right-wing government of Prime Minister Shinzo Abe is rapidly remilitarising Japan, freeing its armed forces from any legal or constitutional constraints and revising history to whitewash the past crimes and atrocities of Japanese imperialism.

Abe has been engaged in an ideological offensive that was marked by his visit December 26 to the notorious Yasukuni Shrine to Japan’s war dead, including 14 convicted class A war criminals. The same month, he appointed four right-wing figures to the board of governors of Japan’s public broadcaster NHK in order to shift its political orientation.

The purpose of the appointments has quickly become apparent. In late January, the new NHK chairman, Katsuto Momii, triggered a public furore by justifying the systematic abuse of hundreds of thousands of women as sex slaves by the Imperial Army in the 1930s and 1940s. Momii apologised for expressing his private view in his role as chairman, but did not retract the remarks.

This week, another Abe appointee, Naoki Hyakuta, declared that the Rape of Nanking, one of the worst atrocities of the twentieth century, “never happened.”

In 1937, Japanese troops entered the city and over a period of weeks engaged in an orgy of rape, murder and destruction in which up to 300,000 Chinese civilians and soldiers were killed.

Yet Hyakuta claimed that the Nanking massacre was fabricated in order to cover up the crimes of the US in dropping atomic bombs on Hiroshima and Nagasaki. It is an argument that until now has been confined to extreme right-wing fringe groups. They justify the horrific crimes of Japanese imperialism in the 1930s and 1940s by pointing to those of US imperialism during World War II.

The denial of crimes on the scale of the Rape of Nanking has only one meaning—it is the ideological preparation for new wars and new atrocities.

The Japanese government is not alone. Five years after the eruption of the 2008 global financial crisis, capitalism is mired in economic slump and financial turmoil, fuelling inter-imperialist rivalries, neo-colonial interventions and diplomatic intrigues in every corner of the world.

It is no accident that as Abe is refurbishing Japanese militarism, the new grand coalition government in Germany is repudiating its previous policy of military restraint. Nor is the Japanese government the only one rewriting history. The British and Australian governments, among others, are seizing on the anniversary of World War I to glorify the bloodbath that claimed the lives of millions in the inter-imperialist struggle for colonies, markets and strategic dominance.

The chief destabilising factor in world politics is the eruption of US militarism. US-led neo-colonial interventions have devastated Afghanistan, Iraq, Libya and Syria. Now, in the name of Obama’s “pivot to Asia”, the US is engaged in an all-out diplomatic offensive to undermine China and encircle it militarily.

The Obama administration is responsible for encouraging Japan to take a more aggressive stand against China, creating a dangerous new flashpoint in the East China Sea—the disputed Senkaku/Diaoyu islands. Yesterday, US Secretary of State John Kerry met with his Japanese counterpart and affirmed again that Washington would back Tokyo in a war with Beijing over the rocky, uninhabited outcrops.

Having pressed Japan to remilitarise, the US has set political forces in motion that it does not control. The Abe government, while affirming the US-Japan alliance, is determined to defend the interests of Japanese imperialism.

Since coming to power in December 2012, Abe has boosted the military budget and established a National Security Council to concentrate foreign and defence policy in his hands. He is pushing to end constitutional restraints on the involvement of the armed forces in aggressive wars.

This revival of militarism is both to prosecute the interests of Japanese imperialism abroad and project outwards, against a foreign “enemy”, the tensions produced by the growing social crisis at home. Abe came to power promising to end two decades of deflation and economic stagnation. However, his “Abenomics” has proven to be a chimera, boosting share markets but failing to produce sustained growth.

Abe set out his agenda very clearly at the World Economic Forum at Davos last month. He made clear that Japanese imperialism was not about to relinquish its position as a leading power in Asia.

Dismissing those who described Japan as the “land of the setting sun”, Abe insisted that “a new dawn” was breaking. His portrayal of China as an aggressive new power comparable to Germany prior to World War I went hand-in-hand with an outline of pro-market restructuring designed to turn Japan into one of the “most business-friendly places in the world.”

There is no significant opposition in the Japanese political establishment to Abe’s rightward lurch to militarism. While voicing tepid criticisms of the government, the opposition Democratic Party of Japan, along with the Japanese Communist Party, fully backs Japan’s claims to the disputed islands in the East China Sea—the central issue in mounting tensions with China.

The working class, however, has a long history of opposition to Japanese militarism. The crimes of the wartime regime in the 1930s and 1940s were not confined to atrocities abroad such as the Nanking massacre. The Tokkō, or “thought police”, were as ruthless as the Nazi Gestapo in Germany in eliminating all forms of criticism or opposition, especially among workers. Abe’s recently enacted secrecy law provoked widespread opposition in Japan precisely because it recalled the 1925 Peace Preservation Law that greatly expanded the role of the Tokkō.

Abe’s provocative attacks on China, the comments by his NHK appointee denying the Rape of Nanking, and related developments constitute a sharp warning to workers and youth in Japan and every other country. The preparations for war are accompanied by a campaign of lies and jingoism that presages class war against the working class. Workers can halt the drive to war and the assault on their living standards and democratic rights only by unifying their struggles internationally on the basis of a socialist program to put an end to the bankrupt profit system.

A Prosperous China Versus An Imperial US

The Inescapable Antagonism

China’s Xi jinping

by JOHN V. WALSH

China has stated its goals quite unambiguously. “A moderately prosperous society by 2020” is the first goal and “a strong socialist nation by 2049” as the second. But this may be simplified: China’s leadership wants its people to have a standard of living equal to that of the developed nations of the West. And that, along with restoring and preserving sovereignty, has been the main part of the Chinese program since 1949 – at least. China’s great historical achievement is to lift hundreds of millions out of poverty, accounting for most of the eradication of poverty in the recent past. This achievement is rarely mentioned in the West.

Consider the simple consequences of that fact. China has a population of 1.36 billion and the United States has a population of 320 million. So if China is to have a per capita GDP equal to that of the United States, its total GDP must be more than four times the size of the US economy. Four times.

As we have known at least since Thucydides military power flows from economic power. That is also true of “soft” power, scientific discovery and technological achievement and capacity. (This week USA Today carries a story on the rapid growth of new and original patents in China., alarming the Pentagon.) Growth in China’s economic power therefore closes the door on US global hegemony. The only way for the U.S. to maintain the hope of such hegemony is for China to change course and accept a lesser standard of living. But China will not accept such second class status voluntarily.

First such a future is not just, nor will the Chinese perceive or accept it as just. Second such a course demands that an accomplished, talented and determined people with a great culture accept a daily life less prosperous than the developed world enjoys.

Hence if the U.S. Empire to remain the first of global military powers in a way that is beyond challenge, it has no choice but to keep China down. There is an unavoidable contradiction between U.S. military dominance and Chinese economic development. Moreover even China’s economic power by itself is at odds with the hegemonic maneuvers of the U.S. Sanctions on sovereign nations, embargoes and blockades by the US will not work if China is willing to trade with the threatened nations. This forecloses U.S. economic control of other, weaker nations.

However, there is no necessary conflict between the two nations, China and the U.S., or the two peoples. The prosperity of China does notpreclude a high level of prosperity in the U.S. Economic development and prosperity is not a zero sum game. As the Chinese repeat at every turn, there can be a win-win situation for all nations of the world with China’s development. That has already proven true in the present Great Recession where the Chinese economy has been the main driver of the global economy, perhaps preventing the Great Recession from tumbling into the Great Depression. That is also true for the development of other nations, India for example.

So the question is whether the United States wishes to remain the dominant military power in the world and to bring China down. Unfortunately, such anti-China strategies have already been put in place by the U.S. and they will be intensified.. The “New Silk Road Strategy” in Central Asia has been put forward by Hillary Clinton to “contain” China. Since the first term of George W. Bush, at least, the U.S. has sought to enlist India to “counterbalance” China – with limited success. So far the Indians do not seem to be taking the bait. The “Pivot to Asia” espoused by Clinton, Obama and others in the higher spheres of U.S. foreign policy has attempted to enlist Australia, the Philippines, Japan, South Korea and Vietnam against China.

Some of this follows classic patterns in diplomacy. For example, as John Mearsheimer outlines in his book, The Tragedy of Great Power Politics, the goal of a regional hegemon is to prevent the rise of a regional hegemon in other parts of the globe. Mearsheimer points out that right now there is but one regional hegemon in the world, the U.S., which reigns supreme in the Western Hemisphere. The first tactic and the preferred one to accomplish the put down of another emerging hegemon is “buck passing.” In simple terms, that means getting another regional power to do the dirty work, sparing oneself the pain and cost. In that light consider the ravings from Japan’s Prime Minister Abe, backed up and encouraged, even incited by the American “think” tank,CSIS (The Center for Strategic and International Studies). And today, news arrives that Abe’s party, the ruling LDP (Liberal Democratic Party), has eliminated from its platform the pledge that Japan “will never wage war again,” a pledge in place since the end of WWII, causing considerable consternation in South Korea, China, Taiwan and elsewhere in the neighborhood!

Furthermore, the United States is in no danger from a powerful China. We are separated by a vast ocean from China, and the power of nuclear weapons makes a challenge to U.S. sovereignty impossible except on a suicidal basis. Additionally, the U.S. remains a largely self sufficient economy with resources aplenty. Only severe paranoia could lead us to fear an economically prosperous China. And more than that, as Henry Kissinger, like many others, points out in his book On China, the Chinese have no history of overseas expansion.

That was true even in the early 15^th Century when China was the greatest naval power in the world, sailing giant ships to Africa and elsewhere long before Columbus set foot on a ship. There was trading, but no conquest and no enslavement. Conquest and enslavement turned out to be the work of European civilization. And even now with China the second largest economy in the world it has not a singly overseas military base even though it provides more UN peacekeeper personnel than any other nation. As Kissinger points out, American exceptionalism is missionary; it insists that all the world be like us. One can see one of the most fanatic incarnations of that in Hillary Clinton and other “humanitarian” imperialists, many regarding themselves as “progressives.” China’s exceptionalism, on the other hand, is a high self-regard for its culture but no desire to spread it. If the rest of us do not want to follow the Chinese way, then we have missed out and it is no business of the Chinese to change that in their view.

The bloody history of the U.S. over the last Century is quite a different matter. If the United States insists on its status as the dominant and unchallengeable military power, then we are on the road to conflict, certainly a new Cold War the beginning of which the “pivot” represents, and quite possibly we are on the road to WWIII. We in the United States are the ones who can control this and perhaps save the world from the very worst suffering and deadly conflict. The answer is to abandon Empire, dismantle our overseas bases, end our occupation of foreign nations, including South Korea, Japan and Germany, adopt a defensive strategy to protect our land and come home. Trade and talk, yes. Military intervention, no. We have a potential partner for peace in China. Let us give it a try. Establish trust and verify it. In short, Come Home America. A paradise awaits us here. Let us leave others in peace to construct their own.

John V. Walsh can be reached at John.Endwar@gmail.com He is a founding member of ComeHomeAmerica (www.ComeHomeAmerica.US ). At that site you can read the statement of CHA opposing intervention in Syria. It is a statement of principle and applies to every U.S. intervention.

The Labor Share Question in China :: Monthly Review

By Hao Qi } MONTHLY REVIEW

In the past two decades, China’s economic growth has been increasingly dependent on investment.1 To maintain the growth of investment, China must sustain a fairly high rate of profit, and the fall in labor’s share has been seen as a crucial factor to sustain profitability.2 Using a raw measure of labor’s share—the compensation of employees as a percent of GDP—as shown by the bottom solid line in Chart 1, labor’s share has experienced a major decline from 51.4 percent in 1995 to 42.4 percent in 2007.

If we use different denominators to replace GDP in order to exclude the impact of depreciation and taxes—as shown by the top two lines in Chart 1, the general trend does not change much. After the outbreak of the global crisis in 2007, China’s growth slowed down and workers’ struggles against poor living and working conditions were surging—the strike at the Tonghua Steel Company is a telling example.3 As a result, labor’s share returned to 45.6 percent in 2012.

Chart 1. Raw Measurements of Labor’s Share, 1978–2012

4 In this story, the decline of labor’s share is caused by sectoral changes, mainly the decrease of agriculture and the increase of industry and services as a percent of GDP in the reform era (from 1978 to present), which these economists superficially understand as economic modernization.5Moreover, owing to the fact that China’s agricultural production is mainly organized by rural households, profits and wages are not distinguishable in statistics and thus labor’s share in agriculture is much higher than that in other sectors. So, as the mainstream story claims, sectoral changes automatically cause labor’s share of the whole economy to fall; also, since sectoral changes are labeled as “modernization,” the decline of labor’s share should be seen as an inevitable result.

Does the decline of labor’s share result from sectoral changes? This question needs to be addressed with a class analysis, which is entirely omitted by the mainstream story. In what follows it will be argued that the decline of labor’s share resulted from the loss in the power of the working class during the transition to capitalism. Sectoral changes have disguised the class conflicts in this historical process.

Debunking the Mainstream Story

The mainstream story has been accepted by the Chinese Communist Party (CCP). In the Report to the Eighteenth National Congress of the CCP in 2012, raising labor’s share of the national income was set as a goal for the reform of income distribution; however, policies later proposed for this goal were merely focused on enhancing the skills of workers (derived from the neoclassical human capital theory) and creating more jobs for workers by promoting the development of the service sector and labor-intensive, small-scale enterprises. No policy was proposed to strengthen the power of the working class.6

Mainstream economists and policy makers believe that there is a U-shape curve relating labor’s share to the composition of the various sectors. In their view, once the economic structure is fully “modernized,” once the share of agriculture stops shrinking and the service sector takes an increasingly large share of the economy, labor’s share would begin to rise; hence the only effective way to raise labor’s share is to promote change in relative size of the sectors. However, the mainstream story is based on nothing but a definition of labor’s share that has nothing to do with the causal relations or the distribution of income within the working population.

Sectoral changes are not equivalent to economic modernization as a process of economic development. Sectoral changes involve the redistribution of labor power from agricultural to non-agricultural sectors and from industry to the service sector. In China, the influx of the migrant workers into the urban areas cannot be reduced to the rational response of peasants to the urban-rural income gap and the loosening of the restrictions on migration, since the urban enterprises must have prepared certain social and economic conditions for the absorption of migrant workers. One such condition was the class power relation: if the urban working class in the state-owned sector was sufficiently powerful, all the employment opportunities in that sector would be provided to the urban working class instead of migrant workers. In fact, the children of the urban workers were the main source for the new employment in the state-owned enterprises (SOEs) before the massive layoffs took place in the mid–1990s. Only when the power of the urban working class was undermined could the SOEs absorb migrant workers.

One telling example is the labor outsourcing at the Tonghua Steel Company. From 1996 to 2000, there were over eight thousand layoffs, as the company claimed it had hired “too many” workers. During the same period, the company began outsourcing work—mostly to migrant workers from the rural areas, as their wages averaged only half what the company paid its own workers. The company thus weakened workers’ power through layoffs.7

Another example is Liuye, a construction company founded in 1963 in Luoyang, Henan Province. Since the early 1990s, most of the production workers were laid off, and only the management, skilled workers, and some office staff were retained. Since then, Liuye established a construction team for each project; each construction team had a manager and some skilled workers from Liuye, while the rest of the workers were all migrant workers. With this regime, Liuye could make full use of the low wages and flexibility of migrant workers, which was impossible before the layoffs took place.8 In fact, the management made use of the massive layoffs in the 1990s to replace the workers who worked in the socialist era with migrant workers who were not only cheaper but also easily disciplined.

These layoffs resulted in not only the transfer of migrant workers, but also the expansion of the service sector. During the period 1996–2003, the share of industry in total employment decreased from 23.5 percent to 21.6 percent. This is the only period in the reform era that witnessed the decrease of industry’s employment share. During the same time, the share of the service sector in total employment increased from 26.0 percent to 29.3 percent.9 These changes were caused by the relocation of the laid-off workers. The China Urban Labor Survey recorded job changes due to layoffs for a sample of 949 people: beforehand, 42.1 percent of the sample worked in manufacturing and 21.5 percent worked in the service sector; after being laid off, only 14.4 percent worked in manufacturing and 44.3 percent worked in the service sector.10

Another example is the development of the service sector in the Tiexi district in Shenyang, Liaoning Province. Before the 2000s, several large-scale industrial SOEs were located in Tiexi, and thousands of workers lived nearby. The massive layoffs triggered continuous conflicts between those enterprises and the laid-off workers. Worried about the social instability caused by the concentration of those conflicts, the local government decided to relocate those enterprises to remote and scattered areas and then introduce commercial and real estate programs into Tiexi, even though some of the land was polluted by previous industrial production and thus unsuitable for non-industrial usage. Only a decade later, one can hardly tell from the appearance of the city that Tiexi was previously an industrial area.11

These examples have shown how sectoral changes intertwined with the dynamics of class conflicts in China. The decline of labor’s share in China was not an automatic result of sectoral changes, since those changes actually disguised the underlying class conflicts. In this perspective, this relationship is similar to that in the history of world capitalism: industrialization in the early period of traditional capitalist countries separated means of production from laborers and forced the proletarianized to work in factories as free labor; financialization in the late period of monopoly capitalist countries strengthened the power of financial capital and dragged the whole economy into the cycles of boom and bust. Along with industrialization and financialization, major changes took place in distribution, but those changes resulted from class struggle, not from the sectoral changes.

How Deep Did Labor’s Share Fall?

Before explaining the fall in labor’s share, it is necessary to know how deep labor’s share fell in China. The raw measure in Chart 1 does not tell us all the facts, since the compensation of employees suffers from several problems under China’s statistical system. First, the agricultural income of rural households is treated as the compensation of employees, which needs to be discussed. Second, the income of the self-employed is also treated as the compensation of employees, but the self-employed sector is quite diversified: a great number of self-employed units are based on household labor, while others may hire workers, and some may hire more than a small enterprise hires. The third problem is the salaries of managers, which should not be treated as labor’s income. However, since we lack macro-level data on the salaries of managers, we will discuss some micro-level evidence at the end of this section.

Chart 2 shows labor’s share in three ways. The dashed line (LS1) treats the self-employed sector as a capitalist sector. Different from the official method that treats all the self-employed income as labor’s income, LS1 only treats an estimated wage part of the self-employed income as labor’s income. The solid gray line (LS2), on the contrary, assumes all the labor in the self-employed sector is household labor, thus the self-employed sector is excluded from both the numerator and the denominator in calculating labor’s share. The actual scenario should lie between LS1 and LS2; fortunately these lines are quite close to each other. Both LS1 and LS2 show a sharply downward trend that began in 1990, whereas the downward trend in Chart 1 began in the mid–1990s, which implies that the development of self-employment has disguised the actual decline of labor’s share.

Chart 2. Labor’s Share in Different Measurements, 1985–2007

12 In the decollectivization of the rural economy in the early 1980s, collective enterprises were transformed into township and village enterprises (TVEs) that were later controlled or privatized by individuals. In 1990, nearly one-fifth of rural laborers were working in TVEs; in 2010, this number became one-third.13 Moreover, since the early 1990s, more and more rural laborers have migrated to urban areas; in 2011, the number of migrant workers reached 159 million, or 44 percent of total urban employment.14 However, due to the high cost of housing, education, and medical care in the urban areas and relatively low wages that migrant workers can earn, most cannot live with their families in the urban areas.

For a typical rural family, wages from working in TVEs or in the urban areas make up a large portion of the family’s income, while some of the family members (especially aging parents and young children) still need to engage in agricultural production and live in the rural areas, since the living cost in these areas is much lower. In this context, capitalists are not required to pay wages sufficient for the laborers to reproduce the labor power in the urban areas, and the agricultural income and the rural society becomes indispensable for the reproduction of labor power of their families.

Therefore, although LS3 does describe something about distribution, it meets with a theoretical contradiction: the labor’s income implied by LS3 cannot satisfy the need of the working class to reproduce labor power. The distribution process in reality takes the semi-proletarianization of migrant workers and their families as its foundation. In this process, the working class makes use of both wage income and agricultural income to complete the reproduction process, and the capitalists take advantage of the double roles played by the working class to pay fewer wages. Excluding agricultural income from the calculation of labor’s share oversimplifies the distribution process because it ignores the internal relationship between workers and peasants in the reproduction of labor power and the reliance of the working class on the rural society. In contrast, LS1 and LS2 are better measures of labor’s share as they consider agricultural income as an integral part of labor’s income.

The last problem with measuring labor’s share is the salaries of managers. Under the socialist statistical system, China was collecting data on the salaries of cadres in factories, since the state attempted to control the income gap between cadres and workers, while after China replaced the socialist statistical system with the GDP accounting system in the early 1990s, these data were no longer collected. Nevertheless, from the data of the companies listed in China’s domestic stock markets, we can compare the average salary of managers, including board members, supervisors, and executives, with the average wage of urban employees in the formal sector.15 As shown in Chart 3, from 1999 to 2009 the ratio of the managers’ average salary to the urban average wage increased from 4.2 to 6.7, or by 60 percent. This implies that, if managers’ salaries are excluded from labor’s income, it is very likely that labor’s share in fact dropped more quickly in the past decade.

Chart 3. Ratio of Managers’ Average Salary to Urban Average Wage

Sources: Data of managers’ salaries are from Guotaian Database. The urban average wage is from National Statistical Bureau, China Statistic Yearbook 2012 (Beijing: China Statistics Press, 2012) (in Chinese).

Class Power and Labor’s Share

Labor’s share is widely used in Marxian economics as a proxy for the power of the working class. In China, labor’s share as an outcome of distribution is closely associated with the transition to capitalism, and this relationship can be observed in the transition of incentive systems on the shop floor.

In the Maoist era, there was a recurring debate on “material incentives” and “politics in command” during the transformation of incentive systems. Although a Soviet wage system was established in 1956, there was a lack of consensus among the leadership on how to operate this wage system.16 In particular, given that the Soviet Union underscored the role of material incentives, there was a debate on whether material incentives such as bonuses and piece-rate wages should be encouraged in China.

Mao Zedong was critical of this, and he suggested that the emphasis on material incentives was a reflection of the ignorance of political and ideological work. Mao argued these incentives merely underscored distribution according to work, but do not underscore the contribution of individuals to socialism.17 Thus the proponents of “politics in command” proposed an entirely new path to generate work incentives. The key of the new path was to make workers recognize that they themselves were the masters of factories, and the purpose of production was consistent with the long-run interests of the working class.18 To this aim, material incentives that merely relate workers’ contribution with their short-run economic benefits were eliminated, workers were encouraged to participate in the management of factories in various ways, and the income gap between workers and cadres was controlled since significant inequality would be contradictory to workers’ position as the masters of factories.

With the end of the Maoist era, the first attack against the working class was the deprivation of political rights that the workers had gained. The mass organizations established during the Cultural Revolution were dismissed; radical workers were criticized and punished; the four great rights—the right to speak out freely, to air one’s views fully, to write big-character posters, and to hold great debates—as well as the right to launch strikes were all eliminated in the 1982 amendment of China’s Constitution. Now, workers could no longer criticize cadres. Without the participation of workers in management, the Maoist incentive system lost its foundation and the material incentive system eventually took its place.

From the reformers’ point of view, the material incentive system could play important roles. First of all, material incentives, as compensation for workers’ loss of political rights, shifted workers’ attention from political rights to economic benefits. Secondly, through material incentives the reformers attempted to set up an image that they, in contrast to the leadership in the Maoist era, cared more about the living conditions of workers and the fairness in distribution. Thirdly, material incentives strengthened the power of cadres in management since cadres could decide how to distribute bonuses among workers.

From the position of the working class, the material incentive system benefited workers in the short run but sacrificed their long-term interests. Bonuses could grow as quickly as labor productivity did, but this does not imply that workers’ total wages (including bonuses) could catch up with labor productivity. As workers’ income increasingly relied on bonuses, workers had to be more obedient to cadres in production, which in turn meant that workers were in an unfavorable position with respect to distribution.

Chart 4 shows the bonus-wage ratio—the ratio of bonuses to total wages—for the Tonghua Steel Company and the state-owned sector as a whole (including SOEs and non-enterprise units such as government institutions). For the steel company, this ratio reached its peak at 4.2 percent in 1959, while in several years of the 1970s this ratio fell to zero. After the Maoist era, the bonus-wage ratio boomed and reached around 20 percent for the state-owned sector. This high bonus-wage ratio was not able to sustain itself; after 1993, this ratio dropped, and in 1996, it returned to the level of ten years earlier.

Chart 4. Bonus-Wage Ratio in Tonghua Steel Company and in the State-owned Sector, 1958–1996

Sources: The bonus-wage ratio of Tonghua Steel Company is from Tonghua Steel Company, Tonggang History 1958–1985(unpublished book; in the Tonghua City Library). The bonus-wage ratio of the state-owned sector is from National Statistical Bureau, China Statistic Yearbook various issues from 1981 to 1997 (Beijing: China Statistics Press) (both in Chinese).

Note: The bonus-wage ratio of the state-owned sector is not available; instead the ratio of the sum of bonuses and piece-rate wages to total wages has been used.

It is not difficult to figure out why the bonus-wage ratio failed to sustain its growth. The viability of material incentives relies on the growth of labor productivity, as the former cannot be generated without the latter. If enterprises are affected by macro fluctuations (as in the mid–1990s), the growth of labor productivity cannot be realized and thus material incentives would not function.19 Under this circumstance, the power of the management was threatened by the problems with the incentive system. For a capitalist enterprise, if the carrot of material incentives does not work, the stick strategy would take its place—capitalists would create unemployment so as to discipline workers. In the early 1990s, however, the management in China’s SOEs did not have the power to fire workers unless workers made serious mistakes such as crimes.

If it were impossible to tame the workers who had socialist experience from the Maoist era, the rational strategy for enterprises was to segregate the labor market in order to explore new sources of labor power, and the state indeed responded to this imperative. The early 1990s witnessed policy changes that reduced barriers for migrant workers to work in the urban areas.20 In the following two decades this new component of the Chinese working class suffered from long working hours and poor working conditions. A 2009 survey from the National Bureau of Statistics has shown that on average migrants work 58.4 hours per week, much more than the 44 hours stipulated in China’s Labor Law. Nearly 60 percent of migrant workers did not sign any labor contract, and 87 percent of them did not have access to health insurance.21 The segregation of the labor market in the early 1990s could provide enterprises with a larger labor force, but without the stick of unemployment the SOEs could never undermine the power of their workers.

In the mid–1990s, China launched a massive privatization of SOEs. Along with this privatization, about 30 million workers were laid off.22 This was a crucial turning point in Chinese capitalism that fundamentally altered the power relations between workers and capitalists. Workers with socialist experience were forced to leave factories, whereas young workers without socialist experience became the majority of the labor force in SOEs. Due to this change, institutions in SOEs began to converge with those in private enterprises: short-term labor contracts, dispatched workers, and overtime work became the routine in both SOEs and private enterprises.23

After the reform, despite the convergence of the institutions on the shop floor, the labor market on the contrary became more segregated. In the center of the labor market was a group of skilled workers in SOEs who enjoyed relatively high wages, benefits, and job security; whereas on the periphery were the laid-off workers and migrant workers who received low wages and benefits with less job security. The segregation of the labor market was clearly observed in the statistics. In 2011, there were 359 million urban employees in total; among them only 19 percent worked in the state-owned sector; another 21 percent worked in the formal sector excluding the state-owned sector; 34 percent worked in the informal sector—either in private enterprises or in the self-employed sector. Ironically, the remaining 26 percent of urban employees (or 97 million employees) turned out to be “invisible” for the National Statistical Bureau because they did not know which sector those employees should belong to.24 In fact, the “invisible” employees were mostly migrant workers working in private enterprises or in the self-employed sector; their jobs were so informal that they were not registered in any way.

To sum up: during the country’s transition to capitalism, as the bonus-centered incentive system could not sustain itself, enterprises needed the existence of a reserve army to discipline workers and a segregated labor market to divide and conquer the working class. A continuous influx of migrant workers and the 30 million laid-off workers from the state-owned sector jointly expanded the reserve army of labor within a few years in the 1990s. The reserve army significantly depressed the power of the working class as a whole, and the segregation of the labor market also weakened the solidarity of the working class. This is why we have witnessed the major decline of labor’s share since the early 1990s.

Conclusion

There is a new turning point for the Chinese working class.25 After the outbreak of the global capitalist crisis, labor’s share in China began to recover. Along with this fact, one can also observe that the nominal wage level has grown faster than nominal GDP since 2008, and in 2012 China’s working-age population decreased for the first time in the reform era, which implies that the reserve army of labor will shrink in the near future.26 More importantly, there is a developing workers’ struggle for a decent living wage that is sufficient to afford the cost of living in the urban areas. The new generation of migrant workers who were mostly born in the 1980s and ‘90s insists on living in the urban areas. This has led to struggles for higher wages. Workers’ struggle for a larger share of the national income will eventually end the high-profit era for capitalists and thus open up a new era for the Chinese economy.

ABOUT THE AUTHOR
Hao Qi hqi [at] econs.umass.edu is a PhD candidate of the department of economics at University of Massachusetts Amherst. His research interests include Marxian political economy and income distribution.

Notes

↩See Andong Zhu and David Kotz, “The Dependence of China’s Economic Growth on Exports and Investment,”Review of Radical Political Economics 43, no. 1 (2011): 9–32.
↩See Chong-en Bai, Chang-Tai Hsieh and Yingyi Qian, “The Return to Capital in China,” Brookings Papers on Economic Activity 37, no. 2 (2006): 61–102.
↩On July 24, 2009, workers at the Tonghua Steel Company launched a strike and beat the general manager to death. The Tonghua Steel Company was a state-owned enterprise that was privatized through a local government-led program by introducing a “strategic” private shareholder in 2005. After privatization, the company laid off workers, constrained wage growth, and cut benefits such as the heating subsidy, while the management gained huge bonuses through privatization. This struggle forced the local government (the biggest shareholder) to introduce another state-owned enterprise to replace the private shareholder.
↩In China’s reform era, agriculture as a percent of GDP has declined from 28.2 percent to 10.0 percent, the service sector as a percent of GDP has increased from 23.9 percent to 43.4 percent, and the share of industry has been roughly stable. Sources: National Statistical Bureau, China Statistic Yearbook 2012 (Beijing: China Statistics Press, 2012) (in Chinese).
↩See National Development and Reform Commission, Ministry of Finance, and Ministry of Human Resources and Social Security, “Some Opinions on Deepening the Reform of the System of Income Distribution,“ http://gov.cn (in Chinese).
↩This example is from my interviews.
↩Ibid.
↩National Statistical Bureau, China Statistic Yearbook 2012.
↩Cai Fang, “The Consistency of China’s Statistics on Employment,” Chinese Economy 37, no. 5 (2004): 74–89.
↩This example is from my interviews.
↩Pan Ngai and Lu Linhui, “Unfinished Proletarianization: Self, Anger, and Class Action Among the Second Generation of Peasant-Workers in Present-Day China,” Modern China 36, no. 5 (2010): 493–519. Tu Lv, Chinese New Workers (Beijing: Law Press, 2012) (in Chinese).
↩National Statistical Bureau, China Statistic Yearbook 2012.
↩The sample is from Guotaian database, which provides the information about the salaries of about 30,000 board members, supervisors, and executives in the listed companies in China. The formal sector includes state-owned units, collective-owned units, cooperative units, joint-ownership units, limited liability corporations, share-holding corporations, foreign-funded units, and units with funds from Hong Kong, Macao, and Taiwan.
↩The Soviet wage system in China featured an eight-grade scale for workers and separate scales for cadres and technical staff.
↩Mao Zedong, Mao’s Notes and Talks on Reading Socialist Political Economy (Beijing: National History Academy, 1998) (in Chinese).
↩See Stephen Andors, China’s Industrial Revolution: Politics, Planning, and Management, 1949 to the Present (New York: Pantheon Books, 1977).
↩Deng Xiaoping’s southern tour in 1992 triggered an investment boom which further led to continuous inflation in the following years. In 1994, the government decided to restrain banking credit to deal with inflation. This policy succeeded in controlling inflation but meanwhile depressed the profitability of enterprises.
↩In the 1980s, the government strictly controlled the migration of labor forces. Migrant workers were called the “blindly floating population.” In the 1990s, most of the constraints on migrant workers were eliminated, whereas workers were still facing the possibility of being repatriated. See Tu Lv, Chinese New Workers (Beijing: Law Press, 2012) (in Chinese).
↩National Statistical Bureau, “Investigation Report on Migrant Workers 2009,” http://stats.gov.cn (in Chinese).
↩The number is estimated by the reduction in the employment of the state-owned sector from 1995 to 2000. Data is from National Statistical Bureau, China Statistic Yearbook 2012.
↩In the interviews with some workers in SOEs, I found that new workers in SOEs mostly signed three-year-long labor contracts, and dispatched workers, who were hired by external labor agencies but worked for SOEs, were quite common in construction and transportation. Many of my interviewees complained about overtime work, and one interviewee who had working experience in both SOEs and private enterprises said that there was no difference with regard to overtime work in both kinds of enterprises.
↩National Statistical Bureau, China Statistic Yearbook 2012. Philip Huang suggests that the statistical apparatus in China neglects this part of employment because of the misleading influence of mainstream economic and sociological theories. See Philip Huang, “China’s Neglected Informal Economy: Reality and Theory,” Modern China35, no. 4 (2009): 405–38.
↩Minqi Li, “The Rise of the Working Class and the Future of the Chinese Revolution,” Monthly Review 63, no.2 (2011): 38–51.
Statistical Communiqué of the People’s Republic of China on the 2012 National Economic and Social Development,” http://stats.gov.cn (in Chinese).

Celestial Empire won’t let America do as it pleases in Asia

Andrey Mikhailov, Pravda.ru

A year ago the American media reported that the U.S. was planning to make a strategic shift in 2013 by redirecting a portion of its [strategic] resources to Asia. However, the results of this year make it clear that these politico- economic games have been canceled, first of all because of the position of China. The rapprochement of the U.S. and Asia was put on the back burner because of the “special” behavior of China. China is obviously on top.

Recently a friend asked me whether the Chinese had icebreakers. The media reported that in Antarctica, the Russian ship “Akademik Shokalsky” in distress was assisted by a Chinese icebreaker “Snow Dragon.” My friend was puzzled why the Chinese would have an icebreaker if they had no ice. My answer was, the Chinese now have everything. China has soared to a status of the world superpower so quickly that many people still do not realize it. The United States seem to have missed the emergence of a global competitor, a global economic supergiant with a bunch of analytical services. The current attempts to get back everything that was given away without a fight to the ubiquitous Chinese all over the world in general and in North-East Asia in particular have not been successful. Recently the Voice of America, an information propaganda channel that aims to disseminate rose-colored glasses information about the United States throughout the world and controlled by the State Department and all sorts of advanced analytical services, said that Asia felt the new strength in dealing with the superpower rapidly losing its influence. The examples are numerous, and in 2013 they were particularly abundant.

In December of 2013, going to the North-East Asia, U.S. Vice President Joseph Biden planned to convince Japan and South Korea that the U.S. was still planning to increase its investment in this region. However, the focus turned to China’s unexpected decision to expand its defense identification zone to the territory contested by Japan and South Korea. According to Biden, he openly discussed the issue during a meeting with President Xi Jinping, the Voice of America reported.

One of China’s new warships.

Speaking in a South Korean university, Biden made it clear that the U.S. expected China not to perform any actions that could lead to “an escalation of tensions.” But China dismissed the important meeting of the president of the United States with the leadership of neighboring countries as if it had not happened. As a result, the airspace over the disputed islands called Senkaku in Japan and Diaoyu in China was added to the extended zone of China’s defense. Partly these were active, not to say aggressive actions of China in the disputed territory that have led to calls of the United States to make a turn towards East Asia, as well as strengthen the relations with key allies, Japan and South Korea.

China with its incalculable human resources and the economy growing by leaps and bounds has nearly stopped to consider the possible U.S. interests in the region and the rest of the world. Africa, Latin America, Central Asia and even to some extent Europe have long been “mastered” by the Chinese, producing a great deal of the most diverse, inexpensive goods of quite a high quality. These goods are no strangers to the United States itself. The Chinese trade expansion has become a real problem for American industry. Let us just look at the recent global crisis that is still ongoing in the West in various forms. At the end of 2000s the U.S. attempts to draw Yuan in financial, commodity and currency exchange games to support the dollar were quietly ignored by Beijing.

An incident that took place during the visit of U.S. Vice President Joseph Biden in Asia is indicative. China has recently put into operation an aircraft carrier, the “Liaoning” , and conducted exercises in the South China Sea. The sea is very controversial in the sense that China participates in a bunch of territorial disputes with various countries -Brunei, Vietnam, Malaysia, Taiwan and the Philippines. At the time when Biden was actively calling for a closer collaboration of the Japanese and the South Koreans, a Chinese warship accompanying a brand new aircraft carrier got in the way of an American missile cruiser and unceremoniously forced it to change its course to avoid a collision. U.S. Secretary of Defense Chuck Hagel immediately called China’s behavior irresponsible. The Beijing that used to be very attentive to cues from Washington in the past was deaf to them this time. Simply put, the Chinese ignored the main U.S. military. Was it possible to imagine such behavior 15 years ago?

And finally, remember that Barack Obama has failed to get Japan to even promise to scale up the international coalition in Afghanistan. This was a very surprising development. Next the media reported that not only China but even neighboring Japan was beginning to ignore the United States.

Analysts have long been scaring the international community with the annual growth of Chinese military power. Having muscles inflated with arms, one can easily ignore the competition. In light of the rapid increase in Chinese military spending, the only point of comparison with the United States is now China. According to the media, China is constantly increasing its military budget, and over the last ten years its annual growth amounted to an average of 12 percent.

In addition, Beijing has been paying increasingly more attention to the improvement of military equipment and technology, gradually reducing the number of troops. The Pentagon has information on the construction of new submarines in China, the modernization of missile and nuclear weapons, and China is in no hurry to talk about this. In 2013, the English-language media released a message that Washington was going to place troops in Australia and send more warships to Singapore and the Philippines. But numerous experts believe that the U.S. will not be able to particularly strengthen its position in the Asia-Pacific region, it is too late.

American headlines often say something to the effect that while the U.S. is retreating, someone else is coming forward. It is obvious that by ‘someone” they mean China.

The Next Boogeymen

Defeated by the Taliban, Washington Decides to Take On Russia and China

by PAUL CRAIG ROBERTS

The several days of organized protests in Ukraine are notable for the relative lack of police violence. Unlike in the US, Canada, Thailand, Greece, and Spain, peaceful protesters have not been beaten, tear gassed, water cannoned, and tasered by Ukrainian police. Unlike in Egypt, Palestine, and Bahrain, Ukrainian protesters have not been fired upon with live ammunition. The restraint of the Ukrainian government and police in the face of provocations has been remarkable. Apparently, Ukrainian police have not been militarized by US Homeland Security.

What are the Ukrainian protests about? On the surface, the protests don’t make sense.

The Ukrainian government made the correct decision to stay out of the EU. Ukraine’s economic interests lie with Russia, not with the EU. This is completely obvious.

The EU wants Ukraine to join so that Ukraine can be looted, like Latvia, Greece, Spain, Italy, Ireland, and Portugal.

The US wants Ukraine to join so it can become a location for more of Washington’s missile bases against Russia.

Why would Ukrainians want to be looted?
howecon

Why would Ukrainians want to become targets for Russia’s Iskander Missiles as a host country for Washington’s aggression against Russia?

Why would Ukrainians having gained their sovereignty from Russia want to lose it to the EU?

Obviously, an intelligent, aware, Ukrainian population would not accept these costs of joining the EU.

So, why the protests?

Part of the answer is Ukrainian nationalists’ hatred of Russia. With the Soviet collapse, Ukraine became a country independent of Russia. When empires break up, other interests can seize power. Various secessions occurred producing a collection of small states such as Georgia, Azerbaijan, the former central Asian Soviet Republics, Ukraine, the Baltics, and the pieces into which Czechoslovakia and Yugoslavia were broken by “nationalism.” The governments of these weak states were easy for Washington to purchase. The governments of these powerless states are more responsive to Washington than to their own people. Much of the former Soviet Empire is now part of Washington’s Empire. Georgia, the birthplace of Joseph Stalin, now sends its sons to die for Washington in Afghanistan, just as Georgia did for the Soviet Union.

These former constituent elements of the Russian/Soviet Empire are being incorporated into Washington’s Empire. The gullible nationalists, naifs really, in these American colonies might think that they are free, but they simply have exchanged one master for another.

[pullquote]It is a good bet that the Ukrainian protests are a CIA organized event, using the Washington and EU funded NGOs and manipulating the hatred of Ukrainian nationalists for Russia. The protests are directed against Russia. If Ukraine can be realigned and brought into the fold of Washington’s Empire, Russia is further diminished as a world power.[/pullquote]

They are blind to their subservience, because they remember their subservience to Russia/Soviet Union and have not yet realized their subservience to Washington, which they see as a liberator with a checkbook. When these weak and powerless new countries, which have no protector, realize that their fate is not in their own hands, but in Washington’s hands, it will be too late for them.

With the collapse of the Soviet Union, Washington quickly stepped into the place of Russia. The new countries were all broke, as was Russia at the time and, thus, helpless. Washington used NGOs funded by Washington and its EU puppets to create anti-Russian, pro-American, pro-EU movements in the former constituent parts of Soviet Russia. The gullible peoples were so happy to have escaped the Soviet thumb that they did not realize that they now had new masters.

[pullquote]The Obama regime’s “Pivot to Asia” announced Washington’s plan to surround China with naval and air bases and to interject Washington into every dispute that China has with Asian neighbors. China has responded to Washington’s provocation by expanding its air space, an action that Washington calls destabilizing when in fact it is Washington that is destabilizing the region.[/pullquote]

It is a good bet that the Ukrainian protests are a CIA organized event, using the Washington and EU funded NGOs and manipulating the hatred of Ukrainian nationalists for Russia. The protests are directed against Russia. If Ukraine can be realigned and brought into the fold of Washington’s Empire, Russia is further diminished as a world power.

To this effect NATO conducted war games against Russia last month in operation Steadfast Jazz 2013. Finland, Ukraine, Georgia, and neutral Sweden have offered their military participation in the next iteration of NATO war games close to Russia’s borders despite the fact that they are not NATO members.

The diminishment of Russia as a powerful state is critical to Washington’s agenda for world hegemony. If Russia can be rendered impotent, Washington’s only concern is China.

The Obama regime’s “Pivot to Asia” announced Washington’s plan to surround China with naval and air bases and to interject Washington into every dispute that China has with Asian neighbors. China has responded to Washington’s provocation by expanding its air space, an action that Washington calls destabilizing when in fact it is Washington that is destabilizing the region.

China is unlikely to be intimidated, but could undermine itself if its economic reform opens China’s economy to western manipulation. Once China frees its currency and embraces “free markets,” Washington can manipulate China’s currency and drive China’s currency into volatility that discourages its use as a rival to the dollar. China is disadvantaged by having so many university graduates from US universities, where they have been indoctrinated with Washington’s view of the world. When these American-programmed graduates return to China, some tend to become a fifth column whose influence will ally with Washington’s war on China.

So where does this leave us? Washington will prevail until the US dollar collapses.

Many support mechanisms are in place for the dollar. The Federal Reserve and its dependent bullion banks have driven down the price of gold and silver by short-selling in the paper futures market, allowing bullion to flow into Asia at bargain prices, but removing the pressure of a rising gold price on the exchange value of the US dollar.

Washington has prevailed on Japan and, apparently, the European Central Bank, to print money in order to prevent the rise of the yen and euro to the dollar.

The Trans-Pacific and Trans-Atlantic Partnerships are designed to keep countries in the US dollar payments system, thus supporting the dollar’s value in currency markets.

Eastern European members of the EU that still have their own currencies have been told that they must print their own currencies in order to prevent a rise in their currency’s value relative to the US dollar that would curtail their exports.

The financial world is under Washington’s thumb. And Washington is printing money for the sake of 4 or 5 mega-banks.

That should tell the protestors in Ukraine all they need to know.

Paul Craig Roberts is a former Assistant Secretary of the US Treasury and Associate Editor of the Wall Street Journal. His latest book The Failure of Laissez-Faire Capitalism. Roberts’ How the Economy Was Lost is now available from CounterPunch in electronic format.