By now, ample honest confessions have been put forward by US policy
makers to explain to the Congress and American labor the real aim of US
support for China's accession to the WTO: To force open Chinese markets
and to change China's socialist political system toward capitalist
democracy and to reduce the authority of the central government and the
CPC toward a decentralized nation.
There is a historical precedent of this strategy in the Open Door
doctrine declared by the US in 1900.
Peasant uprisings are rare in Chinese Hhistory, ony seven in more than 4
millennia of recorded history. Hong Xiuquan's Taiping Uprising which
Mao Zedong hailed as a true peasant movement despite its Christian
facade, was put down in 1865 by Minister Li Hungzhang under Zeng Kuofan,
the Qing dynasty general. The feat was accomplished with the help of
American mercenary Frederick Townsend Ward (1831-1862) who arrived in
Shanghai in 1859. After a few victorious battles, F.T. Ward was killed
in action 3 years later by rebel forces.
F.T Ward's Fourth Rank (Si'pin) government post and the command of the
mercenary Ever Victorious Army (Changsheng Jun) were taken over in 1863
by Charles S. Gordon, known as Chinese Gordon, a British mercenary who
had made a name for himself by defeating the ineffective Qing dynasty
army in the sacking of Peking by British and French troops 3 years
earlier, in 1860.
The saga of Chinese Gordon is as weird as if General Norman Schwartzkopf
were hired by Saddam Hussein 3 years after the Persian Gulf War to help
suppress revolts by Islamic fundamentalists in defeated Iraq.
As a result, Li Hungzhang gained the confidence of the Qing court and
became China's pre-eminent foreign policy vicar.
A legacy of the Taiping Uprising was the emergence of private armies
that became the basis of war lordism. Yuan Shikai, a protege of Li
Hungzhang, exploited his control of private armies to proclaim himself
Emperor, betraying the Revolution of 1911.
In desperation, the late Qing court unrealistically fantasized that an
accommodating posture towards intruding Western powers would buy China a
needed period of peace during which military modernization could take
place with Western help, to eventualy allow China to throw off her
foreign yoke. The minister selected to execute this policy was Li
Hungzhang. The policy only accelerated the fall of the Qing dynasty.
The first Foreign Ministry in Chinese history was created in 1861, after
the Opium War. Prior to that time, China did not have diplomatic
relations with any nation which it did not considered as a tributary
state. The victorious Western imperialist powers force the Chinese
government to form a foreign office to deal with them as more than
equals and to hold the Chinese government to implement the terms of the
unequal treaties. The office was known as Tsungli Yamen.
But its authority was eclisped by Minister Li Hungzhang who added the
post of Superintendent of Trade to his own portfolio in 1870. Li
Hungzhang, as Trade Sperintendent, settled the Tiensin incident in 1870,
opened relations with Japan in 1871, settled the Margary killing in
1876, negotiated the French control over Anna (Vietnam) in 1884, and
accepted Japanese influence over Korea. In 1861, China appointed an
Englishman, Horatio N. Lay to be inspector-general of customs.
By then, the scramble for concessions on Chinese soil by foreign powers
raged like wild fire. Li Hungzhang, accepting a personal bribe of
500,000 rubbles, let Russia appropriate the Liaodong peninsula which
China had bought back from Japan three years earlier with 30 million
taels of silver. The Germans grabbed Shangdong, the British took
Weihaiwei and Kowloon and the New Territories north of Hong Kong and
exclusive British rights to the Yangtse and the French grabbed Kwanchow
Bay. These development pushed the US, then preoccupied with the Spanish
War and the Cuban independence struggle, to demand the Open Door Policy,
as a way to safeguard its economic interests in China. The Delano
family, of FDR lineage, was heavily involving in the opium trade in
China with its China Clippers.
The principles of the Open Door doctrine have been basically imbedded in
WTO rules. Its purpose is to prevent conflict among the G7 powers so
the weak economies of the world can be exploited efficiently for the
strong economies' benefit.
The defeat of Napoleon in 1851 left the British Empire unrivaled, just
as the dissolution of the USSR in 1990 left the American Empire
unrivaled after the Cold War.
Britian, controlling 75% of all China trade, and being the most
competitive trading nation, wanted to open trade to other foreign
concessions in China. She turned to the relatively benign US for help.
British old China hands, like Lord Beresford who wrote The Break Up of
China (1898), and A.E. Hippisley of the Chinese custome service,
persuaded John Hays, US Secretary of State, to declare the Open Door
Policy on March 20, 1900, to extend British trade into other European
conncession in China, depriving China the option of playing the Western
powers against each other.
Lenin wrote in 1916: Imperialism the Highest stage of World
Capitalism. It shows that to fight imperialism, one must fight
capitalism. There is no way one can accommdate capitalism without
accepting imperialism.
China's struggle against imperialism is far from complete. It is
inevitable that the road back to capitalism will bring also the return
of imperialism and the re-emergence of a compradore economy.
Neo-imperialism is invading the entire globe with rules of market
fundamentalism and neo-liberalism. And the regime WTO is the modern
version of the Open Door doctrine in the new age of neo-imperialism.
Why does China needs foreign capital and FDI? A country does not need
these nominal transfers if it is a net exporter, unless it must imports
for survival. China has most everything it needs internally. All it
needs is to organise them internally through sound domestic policy,
through a rational domestic currency regime. There is no need for huge
amounts of dollars, except for purchase of arms and technology which can
be earned by a relative small export sector. In the long run, both
technology and arms must be home grown and risk ineffectiveness. So the
need for foreign currency for these purposes must be only transitory. A
haevy dependence on foreign arms and technology will only delay/prevent
the development of indigenous capabilities and thus weakens China's
security.
When China borrows in foreign currency, no matter from whom, China is
setting up a short position in that foreign currency.
So when China borrows dollars, it is placing itself in a position of
risk because it is shorting dollars which have the advantage of not
needing reserves, being a reserve currency by defintion.
The freedom from export is not universally true. It is true however for
large economies such as China and Brazil, but may not be true for
smaller economies that need disproportionally large amounts of dollars
in relation to their GDP to buy basic commodities (oil, wheat), goods
and services (aircrafts, medicine, arms, consulting) that must be paid
for in dollars.
The idea that a country should export its way out of a recession is
dubious. Recession means a reduction of growth. Exporting one's way out
of a recession means all of a country's people are put to creating
products to give to somebody else, while getting nothing in return in
terms of the real standard of living. In the case of China as an
exporter of low cost labor, it means that its own human resources are
being transformed into products that are sent to foreigners for the
latters material benefit. So when China exports its way out of a
recession, it has decided to put its people to work for someone else. In
a sense, Chinese have become the world's low paid slaves economically
and that is a serious condition.
By putting excessive emphasis on exports, the Chinese government risks
doing the dirty work of the imperialists by assuming voluntarily the
role of a compradore.
Under mercantilism, export-led growth is the orthodox prescription for
stimulating aggregate demand to recover from recession or stagnation and
utilize excess capacity.
For countries that persistently run export surpluses, it means that
their own resources are being transformed into products that are sent to
foreigners for the latter's material benefit. So when a country exports
its way out of a recession, it has decided to put its people to work for
someone else.
Countries pursuing such a foolish policy are persistently depriving
their own citizens of a big portion of the production of goods and
services that their resources provide.
In an open economy with flexible exchange rates, a nation that runs a
persistent export surplus is likely to see its exchange rate rise over
time. This will therefore permit the domestic population to buy more
real foreign product per unit of domestic currency, therefore raising
the standard of living of domestic residents -- even as the nation
continues to send some surplus of current production abroad rather than
keeping them at home. And over time, this can be one way, given the
rules of the free market exchange rate system, to increase domestic
standards of living.
But China does not have a freely convertable currency and it has chosen
to park its foreign exchange reserves in US government bonds for the
benefit of the US economy. What is the sense of buying US government
bond at 6% while borrowing the same amount of foreign capital at 16%?
Export growth often only reorganizes the economy into two tiers - a
prosperous export tier and a depressed domestic tier - with problematic
socio-political consequencies. China is facing this problem now, And
it will get worse.
For example, if the country has an oil consuming economy -- and
especially if its demand for oil is directly and inelastically related
to its economic development, the export-led growth will result in
appreciation of the domestic currency relative to the dollar, and makes
oil in the international market cheaper for the appreciated currency.
Lower energy costs not only improve a developing nation's standard of
living very rapidly but it makes investment in manufacturing, etc
cheaper and more profitable.
But when it come to oil and wheat, the appreciation of the purchaser
currencies, earned from export of other goods, does not necessarily
lower oil or wheat prices unless global supply is unlimited and can
increase in a timely manner. Often the opposite occurs. Purchaser
currencies appreication causes more demand and therefore prices to rise
both as a result of increase purchasing power for the same given amount
of money, and also the fundamentals behind a high exchange value
translate into more inflationary demand. Growth comes with inflation
and recessions come with deflation unless the economy is in a state of
stagflation.
Of course the problem with many countries pursuing export led growth
is that it cannot be pursued by all countries simultaneously. Only if
other nations run persistent deficits can some countries run persistent
surpluses. Except for the United States, other countries can not run
persistent trade deficits. Instead they must "tighten their belts"
under the rules of the game and depress their own economy -- lowering
the standard of living and thereby reducing imports which then depresses
the economy of the country pursuing export led growth. The result is a
global depression. Only as long as the US persistently runs larger and
larger trade deficits with benign neglect can the rest of the world
improve economically.
This is an insight that Greenspan/Rubin/Summers have never grasped.
Globalization requires a worsening US trade deficit. The US has no
choice but be the market of last resort. This is the function of the
leading component of the global economy, just as it is the role of the
central bank to be lender of last resort. The US dual policy of a strong
dollar being in its national interest and its unrealistic quest for
declining trade deficit in an expanding global economy is self
contradictory.
Exporting your way out of a recession depends on the strength of your
foreign position. If sending all of your resources abroad is not
bringing the necessary liquidity to the home country, then it is better
to expand at home.
China still has a large current account surplus, which does not seem to
be eroding, and its exports continue to expand. It has a high level of
reserves which yield a modest level of interest income, so why on earth
would it want to pile up more reserves in order to get out of
a recession when it has policy options that enable it to expand
domestic demand?"
No doubt, China will need to continue to seek trade surplus to finance
the coming arms race. That is a scenaio dictated by Washington.
Export is important for China only as a "take-off" phase development
strategy. The global markets of last resort cannot sustain the growth
demand of 20% of the globe's population. Everyone in the US will have
to buy 1,000 beany babies and wear out 100 pairs of sneakers a year.
This is precisely the weakness of China's reform strategy. The entire
thrust is to strengthen China's international competitiveness rather
than domestic health. The PLA saw the light. It reduced its unwieldy 3
million men army by half and retsructure a 500,000 modernized force with
modern high tech war-fighting capability. The economic planners have
yet to understand the China only needs an internationally competitive
export sector that constitutes no more than 20% of the its economy. The
rest of the Chinese economy can be more effectively developed with some
insulation the the rest of the capitalistic globe. This is why WTO is
not good for China at this time, until the rules change in favor of the
developing economies and socialist systems.
Henry C.K. Liu
Louis Proyect
(The Marxism mailing list: http://www.marxmail.org)
