Yves here. Michael Hudson and Patrick Bond discuss the future of China, and use financialization and seriousness about climate change as litmus tests for whether China is merely doing capitalism lite or is charting a new economic path.
By Paul Jay. Originally published at theAnalysis.net,
Hi, welcome to theAnalysis.news, I’m Paul Jay. We’re going to talk about China. We’re going to have two guests who agree on so many things, but they have some disagreements about just what is the character of China, and we’re going to get into that.
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So as I understand it, here’s a very non-expert take on how the development of socialism in China was expected to take place. It was in the first stage of the People’s Republic. It was an attempt to build a fully socialist economy, meaning almost entirely government, state-owned. The Chinese Communist Party would plan five-year, ten-year plans, and socialism would develop.
After Mao’s [Zedong] death, Deng Xiaoping became the pre-eminent leader and ushered in what have been called market reforms. This was supposed to be a kind of mixed economy where the State would continue to own important sectors of the economy, but there would be a market, a relatively free market to take advantage, of sort of, spontaneous creativity or initiative or whatever it is the capitalist free market is supposed to do. Also, an opening up of China into the network of global capitalism.
This stage was supposed to develop a more sophisticated industrial base, a larger industrial working class, and so on. Then that would eventually lead to a stage of a mixed economy, but with more socialistic characteristics and less capitalist characteristics. That’s kind of where we are now, if I’m understanding it correctly. Xi Jinping is saying that it’s time to rein back on the power of the billionaire class in China, and it’s time to increase prosperity amongst ordinary people. The stage of needing such a free reign of billionaires is no longer the same, at least. Of course, some people wonder exactly what does that really mean when so many billionaires are actually in the Communist Party and even at senior levels.
But I’m left with two questions. First of all, I’m not Chinese, so what’s my interest in what’s happening in China? Well, first and foremost, my interest is, is China serious about climate change policy? Is there a state of government is the party really interested in the kind of transformation that would be necessary, transformation off fossil fuel to really do what’s necessary in the World’s second-largest economy to deal with climate?
Second of all, and this is far more an issue for the Chinese people than it is for me. But in judging China, is the well-being of the majority or of ordinary Chinese people getting better, in spite of the fact there’s a lot of billionaires? That’s what the language and rhetoric coming out of China is, but is it actually happening? Are they at least on the way to increasing people’s well-being and decreasing the inequality gap?
So in a second segment, we’re going to talk about China’s foreign policy outside of China’s borders. Is China’s economic relations with other countries socialist in some sort, or is it predatory capitalist? And we’ll also get into the accusation, is China an aggressive military power? This is the language of not just neo-conservatives in the United States, but more or less the language of the [Joe] Biden administration.
So joining us now are two friends of the show who, as I said early on, agree on all kinds of things, including I think they would both like to see socialism develop in China, but they don’t agree on just what’s going on now. So first of all, joining us from Johannesburg in South Africa is Patrick Bond. He’s a political economist, a political ecologist. He teaches at the University of Johannesburg in the Department of Sociology. His best-known work is Elite Transition from Apartheid Neoliberalism in South Africa. He has edited more than a dozen major works on the region’s political economy and political ecology. He spent a lot of time looking at the nature of China’s economic relationship with South Africa.
Now also joining us as a friend of the show, Michael Hudson. Michael is an economist a professor of economics at the University of Missouri, Kansas City. I believe he’s an emeritus professor there. He’s a researcher at the Levy Economics Institute of Bard College, and he’s also a former Wall Street analyst, political consultant, commentator, a journalist. Both of my guests have been to China many times, and both spent a lot of time studying what’s going on there. So thanks very much for joining me.
Great to be with you, and what an honour to be with Michael as well and to explore differences.
I can’t remember now who we said we would start with, but I think we said we would start with Patrick. Let me just ask you, start with one question, and then I guess we’ll go into the second, but they are related. Is the well-being of people increasing? Is the inequality gap decreasing as being said? And then later we can talk about whether China is serious about climate. So go ahead, Patrick.
I think inequality has clearly been kind of a major problem, and hence Xi Jinping is finding ways to clamp down on this ultra billionaire class. I think even though there’s no question that the level of poverty is much lower than in Mao’s time, there’s just no question. The structural conditions which do lead to a super exploitive experience, that is to say, above and beyond regular labour going to the market, and being paid a wage, not the full value that’s inputted. The super exploitation that continues.
There’s really two ways that this, I think, represents a challenge for anyone arguing trying to represent the model. One is the HUKOU [system of household registration used in mainland China] system, which is the migrant labour reservation in which rural people are about 27% of the urban workforce. They’re not given full rights. It’s very much like, Paul and Michael, what we have in this country and still do a migrant a labour system.
It’s especially damaging for gender relations because it adds another burden, a social reproduction burden to keep the men and, of course, the left behind family reproduce at a much lower wage in the cities than would normally prevail, where there’s equality, where there are no such restrictions.
A second aspect, Paul and Michael that I think we have to grapple with is that it’s the environmental super-exploitation. It is climate, a massive amount of implicit subsidies that the Chinese economy is essentially giving its fossil fuel industries. It’s also the conditions of pollution in many of the Chinese cities. Sometimes they’ve been able to, for example, during a Winter Olympics or during big events, close down factories, but in some of these cities, the air quality is really the worst in the World, along with Indian cities.
So, where I sit in Johannesburg, we’re always looking for ways that this semi-peripheral or sub-Imperial layer of countries is grappling with the internal tensions. I think we can use that word, a word that Ruy Mauro Marini, the Brazilian, used to describe this layer of countries where they are super exploitative. Of course, we haven’t even begun to talk about the way that labour unrest, community unrest, 200,000 protests a year, about half in the rural areas, mostly overland, dispossession. How those are repressed and how a new system of social credit is coming in.
And a very final point to begin. China is also driving world capitalist crisis by overproducing that’s part and parcel of being an excessively competitive capitalist society in which the exports which we can come to and talk about because it drives the Belt and Road Initiative. These, in turn, are doing a lot of damage elsewhere around the World to the working class.
Okay, Michael, your turn.
Well, I think Patrick has described what the major tensions are in China right now. I had thought that our discussion is going to be as China capitalist or socialist, but we’ve jumped ahead of that right into the tensions that are there. It begins with the inequality, and I think Patrick’s emphasis on the rural population of China is important for Westerners to understand because China is now primarily still a rural country. The great tensions are about how small rural localities are going to finance themselves. Right now, they are financing themselves largely by selling land to real estate developers. That’s led to the Chinese families when they do get money, the first thing they want to buy is a house for their children, usually for their son, because women tell me that the only way of getting a house is to marry a man whose family has given him a house and also then to get a car. If you’ve driven in Beijing traffic, it’s more crowded than New York.
The very first thing about inequality is I began to hear that this may be 14 or 15 years ago when I was lecturing students. They all said they wanted to graduate, they wanted to go into the Communist Party, and they wanted to cure up corruption, what you and Patrick call inequality, they called corruption because, for them, it was a corruption of socialism. There was a consciousness certainly in Beijing that there were really two different philosophies of development in China. The Beijing philosophy was strongly socialist and Marxist. Shanghai was where Milton Friedman had been invited in the 1970s to talk to the Chinese leaders to say, you don’t want to emulate the kind of Stalinist bureaucracy that you had in Russia. You have to have spontaneity. You have to let somehow entrepreneurs develop something spontaneous. You don’t know where it’s going to be, but certainly, you can’t plan spontaneous innovation from a bureaucracy down. It has to come from the bottom up.
So, in the 1970s, I remember I talked to Chinese officials, and on one occasion, they said, oh, you’re a futurist. You work with Herman Kahn at the Hudson Institute. You worked with Alvin Toffler. Why don’t you come to Shanghai, where we have our research Institute? And I said, oh, that’s great, especially, by the way, I have a Marxist background. And they said, oh, I’m sorry, you can’t come. They said if you have a knowledge of Marxism. They’re worried you will interfere with party discussions. And all the Marxist we talked about, they’re the old Stalinist bureaucrats. We don’t want that. We want to develop something else. So I didn’t go to China at that time, but obviously, what they did work.
They let a lot of spontaneous wealth be developed, but somehow they’d imagined that this spontaneity would be part of an industrial planning process, that everybody would do what Milton Friedman said in the textbooks. They would all make normal profits, and no one would get rich off unearned income, and no one would really get richer than the other because of the magic of the free market, would make everybody the same.
Well, already 15 years ago, they saw that’s not the same. We’ve got the local innovation, but there are a lot of people getting rich, very often by property, in the public domain, very often by monopolies. We’ve got to have an economy that is dovetailed into an economy that is more even. Right now, in the last few years, they realized that there’s a lot of opposition in the United States to Chinese imports, and they would like the Chinese incomes as they go up not to be spent on housing, to bid up the housing prices, but to buy the goods and services that now these factories are producing so that they can raise the living standards for the home market.
I think that that’s going to be what the upcoming meeting of the Communist Party this spring is going to be all about. I think they’re going to try to push. For now, it’s time to take the private sector economy and make it part of the socialist economy. The focus is really on real estate and housing. President Xi has said houses are to live in. They’re not for investment vehicles. Housing is not a commodity. It should be a public right. It should be a public utility. So the question is, how is China going to deal with the housing issue? How is it going to deal with the local rural finance issue, and essentially, how is it going to deal with the billionaires? Well, we’ve seen how it dealt with Jack Ma and the others. How is it going to be to make it possible to get moderately rich but not super-rich? I think that’s the problem that they’re going to be discussing and coming out with some plan for in the next few months.
So, Patrick, let’s start with again what Michael raised right at the very beginning, but I think it leads to this question, which is, is the Chinese Communist Party leading China towards an increased amount of socialism? Is this really socialism with Chinese characteristics? Meaning this is the way they’re going to get to socialism. Or is this a party that’s managing a mixed economy but big capitalist sector and a lot of billionaires in the party? So that this actually isn’t heading any more towards socialism than perhaps a capitalist social Democratic country, if that.
Well, Michael said that some of these new innovations around Xi Jinping’s control of the elites, that’s especially Jack Ma in Alibaba, but also Pony Ma [Ma Huateng] and Tencent. So there’s a degree to which I’m absolutely delighted to see big data under the thumb of a state because I’d love to see some other controls on all the other fangs, Facebook and Apple, Netflix and Google. These all need to be regulated or ideally nationalized. I also certainly agree there’s a wonderful new development in banning cyber-currency. I think that’s been very important to stop a kind of overproduction moving into financialization.
Michael already mentioned the real estate speculative bubble that’s bursting in several of the big construction companies. There is a danger that cyber-currency, like in the West, will become one of these kind of bubbles, a place where rich people just park their money and see it grow. Then also, they’ve done exchange controls. The main imposition, actually, Paul and Michael, if you recall, the Chinese stock market crashed a couple of times. It was mid-2015 and early 2016 to stop that exchange controls were imposed. I’m absolutely in favour of these sorts of regulations, But is that moving to socialism or clever band-aiding of capitalism?
When FDR [Franklin D. Roosevelt] Was able to put the Glass-Steagall Act in the United States or the Federal Reserve was established because JP Morgan couldn’t control all the banking crises just over 100 years ago. Those really weren’t about introducing socialism. They were about taking some of the worst excesses of capitalism and sort of ironing them out.
I’ll add one other that I had great hopes for, but I’m not sure I do. Which is the Chinese State is so strong it can identify the problem, the deep problem of overproduction, massive overcapacity, about one-third excess capacity in all the heavy industries. In my view, that comes from a classical way that capitalism is excessively competitive, introduces new machinery to get ahead and overproduces as it’s throwing off workers. In that respect, what the Chinese promised was a devaluation closure.
The zombie companies running around with vast overcapacity, lots of state support and state banking support could be gradually managed and closed down. I mean, it’s much better than a kind of great Depression, what you saw if you call in 2008 with GM [General Motors] and these big crashes of big industrial companies. However, I’m not sure that’s actually happening. I think there’s been some cheating.
So I would put it to you that instead of this being a transition to socialism, it’s a very skillful capitalist manager who knows that there are limits internally. Then when we talk about the international dilemma or about the climate dilemma, I think a lot of what Xi is going to have to do is displace those contradictions internationally, not actually resolve them. That would be the big problem we have in other parts of the World where, for example, Chinese investment from the overcapacity is moving outward through the belt and road and creating more damage.
All right, so in a word, the answer to Michael’s question, or my question, is that you don’t think this is a transition to socialism. This is a way to manage Chinese, some people call state capitalism.
I’m a firm believer that transitions to socialism, transitions to a more feminist society, transitions to a non-racial society, as we call it here. Those have to come from below. In China, we also see the awesome capacity, especially with social credit, using Tencent and Alibaba and others to basically surveil everybody and smash unions and smash ordinary people as they go about if they protest, if they’re jaywalking even. I think that means we’re not going to see anything from above that’s wholesome and progressive until the energies from below are really let loose.
Okay, Michael, your go.
Well, Patrick was quite right to emphasize the role of finance. I think we can clarify the discussion by saying, what is capitalism and what is socialism? And when people say capitalism, they usually think of the industrial capitalism of the 19th century. The role of industrial capitalism was radical at that time because its job, as Marx pointed out, was to free societies from feudalism. The common denominator of the Physiocrats in France, Adam Smith, John Stuart Mill, Marx, the entire 19th-century development of value and price theory was to say, we want to get rid of the Rentier class. We want to get rid of Britain’s landlord class. That led to parliamentary reform to take away the House of Lord’s privileges in London. They also want to get rid of the predatory banking class that was inherited from the feudal time when the banks would make loans to governments and then insist that the government is paying them by creating monopolies like the bank of England.
Well, the whole tendency of getting rid of the feudal class meant cutting costs. And the way to cut costs to make an industrial economy competitive, whether you were England or the United States or Germany, was to lower the wage that employers industrial manufacturers had to pay labour. The way that you lowered it, you didn’t want to lower the living standards because you needed to raise the productivity of labour to make it more productive. What you needed to do was lower the cost of living, and you did that by having increase in government creation of the basic living costs for education, free, public. Health, free public. That was the Conservative policy of Britain’s Prime Minister, Benjamin Disraeli. You had governments investing in communications, in roads, in canals, in transportation and radio. The whole idea was to minimize the cost of living by government spending, not privatization.
So by the late 19th century, almost all the economic writers across the political spectrum thought the World was evolving. Industrial capitalism was evolving into socialism. There was Christian socialism, there was anarchic socialism on the Right. There was Marxism, there was middle-class socialism. There were all sorts of different kinds of socialism. But one way or another, the government was going to end up with the basic utilities. As you saw developing in Germany and Central Europe just in the early 20th century, banking was the most important.
Well, all of this tendency began to be fought back leading up to World War One by the Rentiers fought back. They said, no, no, landlords are productive, bankers are productive, and they were unable to stop the whole movement towards socialism. Then this all failed in the West. You had the Russian Revolution, but all throughout the West, you’ve had a rollback of the socialist idea. It took a revolution in China to establish what people had expected to be the evolution of industrial capitalism into socialism. The distinguishing factor of China Vis-à-vis the West today is the West has not evolved into socialism. It’s evolved into finance capitalism that is predatory, polarizing and aggressive.
China, since its revolution, is the only country that has really kept the banking and credit creation sector in the public domain. To me, that’s the single most important aspect of Chinese socialism, and the government has done exactly what the logic of any industrial country is. Whether you’re capitalist or socialist, you want to provide public infrastructure at low costs so that you could become the exporter that China has become.
So the question is, the qualities that we’re saying are positive or negative in China, how many of these are intrinsic to capitalism or socialism, and how much of these are independent from the socialist position? Well, you and Patrick have both mentioned pollution and the environment. I’ve heard more talk about the environment in China than any other country because, as Patrick said, the air can get pretty heavy there.
So obviously, China wants to do what it can to clean up the environment, but it realizes that this is a worldwide problem, and there’s only so much one country can do. The United States is doing what it can to fight against the fact that China is establishing an industrial leadership position in solar panels and solar energy. That’s one of the problems.
The other problem Patrick mentions is the race problem, the ethnic problem. I haven’t seen that in China, but obviously that’s a big problem in the West, where the rentiers essentially, I think the race problem is an attempt by the capitalist class here to try to make the population think of itself, certainly in the United States, in terms of an ethnic identity or a gender identity, anything except the common identity of being a wage earner. If you can get people to think of themselves as an identity apart from wage earners, then you’re not really going to have class consciousness. Well, in China, there certainly is a class consciousness, and there’s also a consciousness of the rural-urban tension that Patrick mentioned.
I was a professor at Beijing University for two years, and many of my students came from rural areas, and they said, well, we’re able to come to Beijing because we can live here and get a residency requirement because we’re students. But then we have a choice. Either we go back to our local districts and work there, or we become a schoolteacher or something that they permit the residents to have. So there’s this tension. This is not really part of a distinguishing feature of capitalism or socialism because you have such tensions everywhere, but China is trying to resolve it in a way that raises living standards and, in that sense, is socialist. The way to do this is you don’t want all of the population to congregate in dense cities for the ecological reasons that you have met. I think that’s the big challenge that China and every other country faces in common, it’s a common problem. It’s a common problem that spans socialism and capitalist economies.
So, Patrick, if I’m understanding Michael’s argument correctly, the fact that the State in China has kept finance primarily under the control of the State and the party is an indication that it is part of a transition to socialism. What do you make of that? I think I got the argument right.
If indeed we’d see these forces unleashed from below and I would include Michael, the ethnically oppressed people in Xinjiang and Tibet. I’d include Hong Kong Democrats and the Hong Kong Confederation of Trade Unions, which was basically disbanded. I would really say there’s a huge amount of potential drive towards socialism from below, but I don’t see regulation of finance and State finance, especially when so much of the financial asset base is bogus, it’s a zombie. That, let’s say, unpayable debt that is basically swallowed by all of these companies. It’s a sort of Ponzi scheme, isn’t it? I mean, it’s not as bad as the United States permit schemes and financial speculation, that’s for sure.
I’ll just give you one critical example, Michael, of where I’m worried if you say the solution to the problem of pollution is emissions trading, in the five biggest cities, set up carbon markets. If you say and you don’t, but certainly this is the dominant policy position in China. That we can solve a market problem, excessive pollution, it’s an externality it’s not costed into the market. We can solve that with a carbon market, a national carbon market that comes from these five big metros. Then I’ll dispute that I’m not saying you will.
That, to me, privatizing the air, allowing people the right to kind of buy the right to pollute. That’s definitely the wrong use of finance. It’s moving us into an ultra-capitalist fault solution. The carbon markets, Paul, you’ll know, from Canada in the West, and certainly, Michael, if you remember, the Chicago Climate Exchange and the European Union’s emissions trading scheme has just zigzagged all over the show. These are not ways to solve the problem. They’re ways that we really have to dispense with.
I would say that Michael makes a point at the end of his last comment. If the United States, Europe, Japan, Canada, Australia, Saudi Arabia, the big Western polluters find this layer, China in the lead starting in 2009 in the Copenhagen accord, which basically means they made the United Nations Framework Convention on Climate Change, the annual UN conference their party. This is the Imperial and the sub-Imperial polluters coming together, and they are just again this year in Glasgow promoting carbon markets. They’re failing to make the emissions cuts that will basically allow civilization to continue. So we really are talking about a capitalist West and the capitalist fractions of the East and of the BRICKS; Brazil, Russia, India, China, South Africa. Working Imperial/sub-Imperial climate policy, it could well destroy us all.
Before I ask Michael a follow-up, I just want to say something which I meant to say in the introduction. None of this conversation in any way implies that the West, and particularly the United States is any better. In fact, I think we all three of us would agree on almost every single score. It’s far worse. We talk so much about how rotten the American system is, we’re not dealing with it in this conversation, but I know somebody is going to be writing in the comments. What about the U.S.?
Well, nobody here disagrees. I don’t think. Both in terms of real climate action, not just rhetoric, inequality, even on the question of Democratic rights, although I do want to get into that. The substance of real Democratic rights in the United States is based on how much money you have. If you have money, you’ve got more Democratic rights. If you live in downtown Baltimore. Even the Department of Justice said people that live in downtown Baltimore, constitutional rights are violated every day. But we’re not talking about the U.S. now.
So let me ask you, Michael, on that point that Patrick is saying this transition to socialism, it’s not enough to have FDRish type regulation of finance. There also needs to be from below, a process of workers organizing and making more and more demands for more socialism, which I think also requires more democracy to make those demands. He’s saying that given the State of the surveillance state in China, it’s very difficult for people to get organized in that way. What do you make of that argument?
I want to clarify what I said about finance, which just came up. When I said that China has kept central banking money and credit creation in the public hands, it’s done much more. It means there’s no financial class in China. In the United States, you have Wall Street as the central planner for the United States. You have the banks in charge of allocating credit and resources. It’s a bank credit that has been increasing housing prices here and, to some extent, credit that’s been increasing housing prices in China, too.
There’s no class of bankers that are acting as the way that landlords did in Europe in feudal times down through the 19th century when the Chinese government will make a loan to a factory or to industry, and the factory is unable to pay for one reason or another, or when families are unable to pay, the Chinese can write down the debt. They say, okay, we’re not going to say close down the factory and be sold for scrap or gentrify your apartment. We created credit to put your means of production or housing or whatever in place because we think it’s useful for the economy, and we’re not going to shut you down just because you can’t pay. We’re going to write down the debt.
There’s nothing like that in the United States. You can’t write down student debt. You can’t write down the debt for renters or homeowners who have lost their job during the pandemic and are about to face eviction, 200,000 evictions in New York City when the Moratorium on evictions during the pandemic expires in a month or two. China is free of that class, and it is the financial class, the banks and Wall Street that have sponsored the landlord class because 80% of bank loans are to real estate. China doesn’t have the financialization that has been polarizing and undercutting the West.
Patrick sort of segued from this control of finance to promote the economy to the fact that once everybody goes around with cell phones, paying their bills with a cell phone, the government can listen, and they’re just as much listening in the United States and other countries in the West. This is something that nobody really expected. This is a kind of telephone technology that is, again, universal. I think all the governments are listening in. The question is, I guess that Patrick Rose, is the government going to use that’s listening in, to say, well, we don’t want the factory people to organize, we don’t want labour unions, we don’t want criticism.
It’s in the nature of governments to do that, and that’s the exact opposite of how China developed with let 100 flowers Bloom during its takeoff. So this is certainly a political issue as much in China as it is in the United States and in Europe. I think that’s independent from the economics of socialism and capitalism. It’s the politics of the government of the centralizing dynamic of politics. How do you cope to prevent the polarizing dynamic of political power and bureaucracy in the same way that you prevent the financial dynamic and the economic dynamic, thus creating billionaires? You have to have checks and balances against this, and all the countries, I guess, are trying to put this in.
I have not been a party to any of the discussions in China of pollution trading. I refuse even to get into it. I think it cannot be solved by the market. Patrick is absolutely right. It’s appalling to think that the third World could somehow let Goldman Sachs and other Wall Street firms say, look, there’s a huge market. We can make hundreds of billions of dollars by selling the right to pollute. The problem is you don’t want the pollution. You don’t want to sell the rights to pollute and offset you want to stop the pollution, it’s not market-oriented. I don’t know whether you can say there’s a socialist solution because probably the worst polluters after the Russian Revolution were Russia.
You look what it’s done. There are no more sturgeons in the Black Sea and the other seas that they off-loaded. They just dump everything into the sea. So certainly, it’s ironic that socialist planning in the Soviet Union did not take account of the pollution. You still have major pollution in the former Soviet Republic, like Kazakhstan, with Kurdistan, with oil, with spills, with gold mining. So it spans the entire political spectrum from capitalism to socialism to whatever you want to call these other phenomena.
Patrick, we’re getting near the end of this segment, and we’re just beginning this domestic conversation. But let me just ask you one question to sort of end, and then I’ll give Michael the last word because I think, Patrick, you had the first word, but we obviously have to do more of this domestic conversation. It’s far too complicated to knock off in 40 minutes. Let me just as a final question to you.
Let’s say it’s what you said, this is actually a form of managing capitalism as opposed to a transition to socialism. At this stage of human history. Is this a better form of capitalism? Now you take this issue of the lack of the right to organize, the surveillance State. Certainly, that’s part of the equation here of whether it is or isn’t. Now, the polling I’m seeing I was looking up yesterday. Harvard has an Institute that’s been trying to do public opinion polling, and they say it’s hard to do, but they say the vast majority of Chinese people seem to support the party and the government, and their life is getting better. So I don’t know what that’s worth, but it seems like the party seems to have majority support there.
Well, I should just add to Michael’s comparison of the surveillance statement. The difference really is that totalitarian capacity. For example, Michael, if you do violate some of the local laws, you go to a protest, you do something that meets official disapproval. Well, you’ll be cut off from going a fast train or an airplane. Tens of millions already in the pilot stages of the so-called Social Credit, in which the Chinese Communist Party and the biggest company in Asia, Tencent, which South Africans have about nearly a third ownership in for a historical accident and Alibaba and others. These are quite terrifying, and I think if I wanted to say, yeah, it’s much better to see a balanced top-down reform of capitalism in the manner we’ve been talking, paul. I would give Michael credit, though, to say repressing finance. There’s this phrase financial repression is very much part of it.
And we do feel that here. So in the Southern tip of Africa, where China has been very aggressive in financing very corrupt coal-related exports and coal-fired power plants and major high carbon infrastructure. We were all delighted, and it seems to be genuine when Xi Jinping said last year that he would no longer allow the belt and road to be a site for this displacement of the overproductive, overcapacity of coal-fired power plants. So he basically used the banks to turn off the switch, which we were about to see turn on of more coal-fired power plants here in South Africa and certainly across the region.
So there are little moments where we’re delighted to see some of that control because the pressures on the world environment. We’re really at the point of nearly no return. I think my last point on that, Paul. There’s about according to the International Monetary Fund, I would never quote them approvingly, but here’s just one example of their attempt to measure how much damage China is doing to climate globally. They’ve come up using their carbon price, they priced the damage from a ton of emissions at $60 a ton. Their objective is the two-degree Paris objective, not the 1.5 aspiration. So given those two very serious caveats, they’re saying that China is doing about $2.2 trillion of damage per year that is subsidized by the State, implicit subsidies and failure to regulate the externality costs.
That’s not just for climate, but it’s also local congestion, local air pollution, and a variety of other minor factors. If you just take climate, I think, Paul and Michael, we have to agree, and I would not use $50 or $60 a ton. The more recent research suggests it’s probably $3,000 a ton. So we’re really talking about $100 trillion a year damage, and their GDP is around $15 trillion. So this is really a system that, for the sake of all future, humanity has really got to be rethought very, very urgently.
Okay, Michael, you get the last word.
Question. Can capitalism solve this problem, or can socialism solve the problem? Can China solve the problem more readily than the United States? I follow the U.S. economy much more than the Chinese economy. You look at the U.S. economy, and the most powerful industry is the oil industry, which I worked with for many years. The oil industry absolutely runs the government’s foreign policy ever since I was on Wall Street. That was the case. The foreign policy of the government is the key to American export power and control of its allies or satellites, or whatever you call them, is oil.
That’s why they’ve got convinced the Biden administration to let them do the offshore drilling, to let them do fracking, to promote the Athabasca Tar Sands, the dirtiest oil in the country, in the World, and to build pipelines to facilitate the Athabasca Tar Sand pollution. All of this and I was the economist for [foreign language 00:47:52] evaluating the Athabasca tar Sands back in the early 1970s, and they knew it was pollution at that time. So I don’t believe that solving the environmental problem is possible under capitalism. The governments are run by the oil industry, the mining industry, and the banking industry that is essentially merged with the oil and gas industry.
The question is, can China solve it better? It certainly cannot be solved, as Patrick pointed out, with market trading, it’s not a market problem. It has to be a problem, a political problem from above. In America, the politics are run by the polluters. Pollution is their product. I don’t think they can solve it. Pollution isn’t China’s deliberate product, and it doesn’t have a self-interest in promoting the pollution such as exists in the capitalist countries. So I would hope that this absence of self-interest in promoting pollution and oil and coal would lead it to say, well, our interest is preventing pollution and cleaning up the air in our cities and elsewhere. I think the chance that certainly a socialist government is a prerequisite for dealing with this problem, and I would hope that China would get the rest of the third World to agree with this in view of the fact that the Southern sphere is going to be the great sufferer from rising sea levels and global warming.
And you think China is such a socialist government and can and will do this?
It has the power to do it, and I don’t see another government that has the power to do it. Whether it does it or not is the big issue. I haven’t had any discussions about this. I’m not a specialist in this. All I know is that it has the power, and the other governments are advocating pollution, and there’s no reason for China’s government to go along with this.
I know, Patrick, this is part of your specialization. So I said Michael could have the last word. I’ll give you just a really short last word.
To me, the constant question, if you’re doing political economy, is a combination of class analysis, with obviously gender and ethnic and, of course, ecological aspects. I don’t think there’s any pretense that the social forces are aligned to bring genuine socialism. Worker control means reduction, planning, and rationalization of all of these problems. Secondly, we’re always interested in political economy, in the capital accumulation process. So whereas Michael is right that financialization isn’t the kind of cancer that it represents in Western capitalism, nevertheless, the overproduction, the excess capacity in so many Chinese industries, especially now that the growth rate is slowing down, but the capacity is there. That really is one thing we can take to the next discussion, Paul and Michael, which is where China intervenes in the World doesn’t seem like, say, Europe back in the 1880s trying to displace its overproduction into new terrain. The one here, Africa being a particularly tragic victim in many ways.
So that is what we’re going to do. We’re going to end this segment. As I said, it’s pretty much the beginning of the conversation, but we are going to move to the external conversation. What does China do in the World, in part two. So thank you, Michael. Thank you, Patrick. Come back for the next segment, and thank you to everyone who’s watching. Please don’t forget the donate button, the subscribe button, the share button, get on the email list button, all the buttons.