Li 00a pre ii 20/8/08 11:13:53 First published 2008 by Pluto Press 345 Archway Road, London N6 5AA www.plutobooks.com Copyright © Minqi Li 2008 The right of Minqi Li to be identifi ed as the author of this work has been asserted by him in accordance with the Copyright, Designs and Patents Act 1988. The Rise of China and the British Library Cataloguing in Publication Data Demise of the Capitalist A catalogue record for this book is available from the British Library ISBN 978 0 7453 2773 0 Hardback World-Economy ISBN 978 0 7453 2772 3 Paperback MINQI LI This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. Logging, pulping and manufacturing processes are expected to conform to the environmental standards of the country of origin. The paper may contain up to 70% post consumer waste. 10 9 8 7 6 5 4 3 2 1 Designed and produced for Pluto Press by Chase Publishing Services Ltd, Fortescue, Sidmouth, EX10 9QG, England Typeset from disk by Stanford DTP Services, Northampton PLUTO PRESS Printed and bound in the European Union by www.plutobooks.com CPI Antony Rowe, Chippenham and Eastbourne Li 00a pre iv 20/8/08 11:13:54 Li 00a pre iii 20/8/08 11:13:53 Contents List of Tables List of Tables vi 2.1 Economic growth rates of China and selected regions List of Figures vii of the world, 1950–76 29 Preface: My 1989 ix 2.2 Life expectancy at birth in China and selected countries, 1960–2000 34 1. An Introduction to China and the Capitalist 2.3 Adult illiteracy rate in China and selected countries, World-Economy 1 1970–2000 35 2. Accumulation, Basic Needs, and Class Struggle: 2.4 Primary school enrollment in China and selected The Rise of Modern China 24 countries, 1970–2000 36 3. China and the Neoliberal Global Economy 67 2.5 Secondary school enrollment in China and selected 4. Can the Capitalist World-Economy Survive the Rise countries, 1970–2000 36 of China? 93 3.1 Distribution of value added in the global commodity 5. Profi t and Accumulation: Systemic Cycles and chain of a talking globe model for children’s education 71 Secular Trends 113 3.2 Share of the world’s total current account surpluses 6. The End of the Endless Accumulation 139 or defi cits 1995–2006 79 7. Between the Realm of Necessity and the Realm 4.1 The structure of social classes and occupations in the US 101 of Freedom: Historical Possibilities for the 4.2 The structure of social classes and occupations in Latin Twenty-First Century 174 American countries (1990/1992) 103 4.3 The evolution of the structure of China’s social strata, Bibliography 193 1978–99 105 Index 202 4.4 Class structures in the core and the semi-periphery 107 4.5 Manufacturing workers’ wage rates in selected countries 108 5.1 Ecological footprint of the world’s major regions, 2003 131 6.1 Estimates of electricity generation cost from alternative energy sources 155 6.2 Energy cost schedule 156 6.3 World’s metallic mineral resources 164 vi Li 00b pre v 20/8/08 11:13:49 Li 00b pre vi 20/8/08 11:13:49 viii The Rise of China and the Demise of the Capitalist World-Economy 5.5 Share of world GDP, 1975–2006 124 List of Figures 5.6 Long-term movement of the output:capital ratio, UK 1855–2006/US 1850–2006 127 5.7 Long-term movement of the profi t share, UK 1855–2006/US 1890–2006 128 6.1 World primary energy consumption: historical and 2.1 Share of world GDP, 1820–2000 25 projected, 1965–2050 160 2.2 Index of per capita GDP, 1820–2000 25 6.2 Energy effi ciency, 1975–2004 161 2.3 China’s crude death rate, 1936–80 41 6.3 World economic growth: historical and projected, 2.4 China’s natural disasters, 1950–80 43 1965–2050 163 3.1 World economic growth, 1951–2006 74 6.4 World’s grain production, 1950–2006 (actual)/ 3.2 Corporate profi tability, US 1950–2006/ 1984–2100 (trend) 167 China 1980–2005 75 6.5 China’s grain production, 1950–2006 (actual)/ 3.3 Property income as share of GDP, Europe and Japan 1996–2100 (trend) 169 1960–2006 76 6.6 World primary energy consumption, carbon dioxide 3.4 Contribution to world economic growth (PPP), equivalent stabilizing at 450 ppm 171 1976/78–2006 77 6.7 World economic growth, carbon dioxide equivalent 3.5 Contribution to world economic growth (current US$), stabilizing at 450 ppm 172 1966/75–2006 78 3.6 US foreign debt and the world’s foreign exchange reserves, 1980–2006 80 3.7 Real oil price and world economic growth, 1950–2006 82 3.8 Long-term variations of US stock prices, 1871–2006 83 3.9 Macroeconomic structure of the US economy, 1960–2006 84 3.10 US real wage and real median family income indices, 1964–2006/1977–2005 85 3.11 US fi nancial balances: Private, government, and foreign sectors, 1960–2006 86 3.12 Macroeconomic structure of the Chinese economy, 1980–2006 88 3.13 China: Labor income and household consumption, 1980–2005 89 4.1 Index of per capita GDP, 1975–2006 98 4.2 World energy consumption (historical and hypothetical projection), 1970–2035 112 5.1 Long-term movement of nominal interest rates: UK 1756–2006/US 1857–2006 117 5.2 Long-term movement of the profi t rate, UK 1855–2006 118 5.3 Long-term movement of the profi t rate, US 1890–2006 120 5.4 Economic growth and real interest rates, US 1960–2006 122 vii Li 00b pre vii 20/8/08 11:13:49 Li 00b pre viii 20/8/08 11:13:50 x The Rise of China and the Demise of the Capitalist World-Economy into the capitalist world-economy and did not actively participate in Preface: My 1989 the system-wide division of labor until very recently. China therefore has functioned as a strategic reserve for the capitalist world-economy, and the mobilization of this large strategic reserve in fact signals the impending terminal crisis of the existing world-system. How did I arrive at my current intellectual position? I belong to This book is unlike many of the books on China today. It is not the “1989 generation.” But unlike the rest of the 1989 generation, I one that will discuss how China’s dramatic economic growth and made the unusual intellectual and political trajectory from the Right growing geopolitical infl uence will constitute an economic, military, to the Left, and from being a neoliberal “democrat” to a revolutionary and cultural threat to the West. Nor is it one that will discuss how Marxist. I was a student at the Economic Management Department China will rise to become the world’s next hegemony, what strategy of Beijing University during the period 1987–90. This department China should adopt for this purpose, or what economic and political has now become the Guanghua Economic Management School, a model China should follow to be a “responsible” player in world leading Chinese neoliberal think tank advocating full-scale market politics. However, this book will discuss the underlying world- liberalization and privatization. At Beijing University, we were taught historical processes, which have led to the current world-historical standard neoclassical microeconomics and macroeconomics, and context upon which both the perception of China as a threat to the what later I learned was termed “Chicago School” economics—that west and the perception of China as a benign rising world power is, the theory that only a free market economy with clarifi ed private have attempted to refl ect. property rights and “small government” can solve all economic and It is this author’s view that the existing world-system, capitalism, social problems rationally and effi ciently. will come to an end in the not-too-distant future (possibly within We were convinced that the socialist economy was unjust, many readers’ lifetime) and will be replaced by some other system oppressive, and ineffi cient. It rewarded a layer of privileged, lazy or systems. This book is more about the “demise of the capitalist workers in the state sector and “punished” (or at least undercom- world-economy” than about the “rise of China.” It discusses the rise pensated) capable and smart people such as entrepreneurs and of China to the extent that it arises from the same historical processes intellectuals, who we considered to be the cream of society. Thus, that have contributed to the demise of the existing world-system. for China to have any chance to catch up with the West, to be “rich The rise of China is an integral part of these historical processes, and and powerful,” it had to follow the free market capitalist model. represents a great acceleration of these processes. State-owned enterprises were by nature ineffi cient and should all Capitalism (or the capitalist world-economy) is a social system be privatized. State-sector workers should be forced to participate in based on the production for profi t and the endless accumulation market competition and those who were incapable, too lazy, or too of capital. The operation and the expansion of the existing world- stupid, should just be abandoned. system thus depend on a set of historical conditions that help to The 1980s was a decade of political and intellectual excitement secure low environmental cost, low wage cost, and low taxation in China.