This is a "before and after" picture of Shanghai that we found via the Atlantic magazine. It depicts the city's extraordinary growth within the last 20 years (1990-2010).
When the Berlin Wall fell, a whole new world was assimilated by the capitalists: The countries of the former "Soviet bloc" and, of course, China.
We have already discussed how this process of "globalization" affected the West (here) - as John Stapleton, British M.P., argued back in 1873 "If China should become a great manufacturing country, I do not see how the manufacturing population of Europe could sustain the contest without descending to the level of their competitors".
But how did "globalization" affect China? The picture we posted above is a great example of how good capitalism is at assimilating other societies that are using inferior modes of production:
Today, there is much more wealth being created in China than ever before - but of course inequalities are also greater than ever before.
This is because capitalism is based on the exploitation of the workers by the capitalists. China was like finding a "goldmine" of cheaplabour. So they started exploiting this "goldmine", by off shoring production to China at an amazing pace.
In the early stages of this process, the Chinese workforce was not skilled, so the only companies that could go to China were companies that only needed manual labour and very little specialization from their workers (for example companies that were making clothes, shoes, etc.). We' ve all seen the documentaries and we' ve all read the
articles that talk about the conditions there (horrible for the workers - great for the capitalists), so there is no need for me to repeat them.
But as China started accumulating more and more capital, the government build new schools and universities, and now a part of the Chinese workforce is skilled and can perform (almost) anything that a western worker can (and at a lower "price" (wage) too...).
So, now even the "white collar" jobs are being off shored to China, and there are Chinese companies that are competing against the Western companies even in sectors of the economy like solar-power (China is #1 in that sector worldwide), or telecommunications (Huawai, a Chinese company, is now Ericsson's main competitor).
Here's an article from the BBC:
China attracts record foreign investment in 2010
The country attracted $106bn of foreign direct investment - which excludes investments in financial instruments such as shares - up 17.4% from 2009, according to the Ministry of Commerce. That was enough to more than reverse the 2.3% fall seen during the previous year caused by the global recession.We shall talk more about this "bubble in property prices" soon. But for now, as capital continues to pile up in China, it is no wonder that the country has 3 of its banks in the top-10 of the world's biggest banks. Via The Economist:
Over a fifth of the money went into China's property sector. The Chinese authorities have been trying - with limited success - to head off a perceived bubble in property prices.
Here are a few more of China's "accomplishments" - here are some infrastructure projects for example:
China to invest $106b in railways in 2011
China builds world's longest bridge
ANOTHER RECORD: China Is Now The World's Largest Shipbuilder
China, Colombia in talks over Panama canal rival
CHINA is in talks to build a 'dry canal' linking Colombia's Atlantic and Pacific coasts by rail, Colombian President Juan Manuel Santos was quoted as saying on Sunday.
And if you have keep getting bigger and bigger, then it obviously "makes sense" for you to expand, much like all the other the colonial/imperial powers of the past:
China beats out World Bank as biggest lender to Africa
As China increases its economic ties in Africa, has the continent entered a new era of colonialism?
And of course, as China grows into a great imperialist force, as any growing capitalist nation would do, they build up their military forces. After all, how can you become the world dominant force, unless you have a strong military? Who's going to protect your lands and investments? Who's going to fight for you, in order to gain control of
more lands and resources? Soldiers and weapons are necessary, as the imperialists have to "fight it out", as they always do, about "who gets what".
China Takes Aim at U.S. Naval Might
China is building a new class of ballistic missiles designed to arc through the stratosphere and explode onto the deck of a U.S. carrier, killing sailors and crippling its flight deck
China is even trying to end the dollar's rain as the world's reserve currency. This is pretty important, as the current monetary system is about to end, as we've mentioned in previous articles. But we shall discuss this topic in our next article.
So, let's get back to what we were saying for now, as China continues to grow and grow. It even surpassed Germany as the world leading export nation, and the USA as the world biggest consumer of oil.
At the same time of course, there are millions and millions of Chinese workers who are working incredibly long hours for just a few dollars/month, barely enough to keep them alive so that they can return to work the next day (after all, even if some of them don't
survive, who cares? There are plenty more workers that can take their place - in fact, it is a "good" thing for the capitalists if some of them die due to an accident or by killing themselves, because it helps keep unemployment levels down, and thus it is easier to control all the social unrest).
There are thousand of strikes each year in China, but "so far so good" for the capitalists, who don't even allow for "democratic elections", or for a free press in China. This is "great" for them, as it helps their authority to remain unchallenged.
An entire village (named Wukan) recentlyrevolted against the government's decision to take away the lands of the people, and of course everyone now knows about Foxconn, the Chinese company that makes all these gadgets we use, as it employs 1.000.000 workers who often commit suicide (or threaten to do so), due to the "ultra-competitive" working conditions.
Even as we speak, some of them are about to commit suicide, with Microsoft "investigating this issue", as they "had no idea" about the
conditions at this factory (in reality, of course they know, but who give a damn about the workers? After all, there are plenty more where they came from, right? So let's pay them 1$/day, and we'll make a fortune by selling them to the western consumers until they've run out of money).
Imagine if those 1.000.000 Foxconn employees would organize and revolt - they would form one of the largest armies in history! But they are "too poor" to realize their potential - and the same goes for almost all the workers in China. When you barely have enough money to eat, then it is not that easy to think about organizing a revolution, especially when your employer and the State are prepared to fire you or send the police and the army against you. Then again, when you barely have enough money to eat, then it is a good time to start thinking about a revolution, isn't? Unless the Chinese workers fight back against their oppressors, in order to at least improve their lives a bit, then not much can be done on a worldwide scale.
But there are "internal" problems as well: As we mentioned before, there are signs of a real estate bubble in China, and it seems to be a "hot" topic amongst the "investor's community", as some of them predict a "rosy" future for China, whereas others predict a huge crash because of this bubble. Here's a great piece on the subject:
China 2012: The Year of the Bull (Rogers) or the Bear (Chanos)?
Jim Chanos famously said that China's real estate market is "Dubai times 1,000 -- or worse." He's been saying that for over two years. Chanos points to a credit bubble, and says he's early and sticking with his short positions. Rogers insists "China is not in a
[credit] bubble," rather it's been in a price bubble in urban, coastal real estate, and to compare China to Dubai is a false analogy. Jim Rogers is bullish on China's long term prospects: "China is going to have many serious problems along the way as it rises, but 'Dubai 1000 times over'?!"
According to Rogers, China will have many set-backs as it grows, as did the U.K. and the U.S. He notes "the U.S.'s many Depressions in the 19th century, a devastating civil war, periodic massacres in the streets, and little rule of law, few human rights, and several military governments. As recently as 1907 the whole system collapsed just as the U.S. was on the verge of becoming the greatest success of the 20th century. Yet the U.S. did a good job for a long time."
This is a picture from one of China's "ghost cities". There are many cities (or malls and other infrastructure projects, etc.) in China that have been build, but the people don't have enough money to actually use/buy them.
This is the root cause of all crises: The capitalists are accumulating more and more wealth for themselves, leaving very little wealth for the workers. But the workers are not just creators of wealth, they are also supposed to consume some of it, otherwise the products will not be sold, and the shops that sell them will go bankrupt, then the factories that make them will also go bankrupt, etc.
The Chinese workers have almost no money to spend - so they cant afford to buy all these homes that they have built. The ruling class gave out a lot of loans and spent a lot of money in order to "keep the economy going", as the workers would have no jobs if there were no building/infrastructure projects. That would lead to even more social unrest, so they built "ghost cities" instead. The workers were relatively "happy", as they at least had a job, but now noone can afford to buy these houses (and the US real estate bubble shows us what happens when the bubble "bursts").
The Chinese government is aware of this, and they' ve been trying to give out less loans and "contain" the problem. They also decided to stop announcing home price data, in order to keep the whole thing as quiet as possible. But if they don't give out a lot of loans, then there is no growth, as you cant start a business if you don't get a loan. So, China is between a rock and a hard place, and banking lending is not really showing signs of any significant slowdown.
But, like Rogers says, China will face a big crisis, but it won't be "terminal". It will be more like the crisis the USA experienced before becoming the world's leading power. Even the Great Crash of 1929 didn't "kill" the USA - in fact, 15 years later, they were the Western world's leader. Of course, a lot of people suffered, especially the workers, as they went through 10 years of high unemployment and then they went to war, so many of them died (this is always how capitalists solve the "rising unemployment problem" if anything else fails).
Furthermore, the western consumer is "dying". The capitalists have been using a very effective model for maximizing their profits for the last 20 years or so: They would employ the cheaper Asian workers in order to actually make the goods, and they would sell them to the western workers, who spent all their money, and them some more through heavy borrowing (this is why the western workers are referred to as "consumers" instead of "workers", as this is their function in the world economy. If they don't consume, the world economy doesn't work).
As the age of the "western consumer" is coming to an end, who is going to buy all these products that are made in China?
The Chinese workers are "too poor" in order to do that. And the capitalists don't really like giving a raise to the workers, do they?
So, China has a big problem, as noone has the necessary "purchasing power" in order to buy the goods they export. This is after all the reason why trade is collapsing on a worldwide scale.
What can China do?
It can "create some consumers of its own". That is, to create a "middle class", so that there are some Chinese people with enough money to buy some of the things that used to be exported (these people must also have a "consumer-mentality", which is also very hard, as these people must be educated in such a way to "be addicted to shopping").
In order to do that, China must increase the wages of some workers (it is already doing so), either in a direct way, or in an "indirect" way (ie revalue the Yuan, its currency. This is also happening, but at a "slow pace". We will talk more about the Yuan in our next post)
Here's what Spiegel reported on the subject a while ago (Germany in very interested in this, because they are also a big exporting nation, and they are facing similar problems, as the western consumer is dying. So, the too want China to create a middle class that can consume their goods as well as China's. We shall talk more about China and Germany coming together in future posts):
How Beijing Plans to Turn the Chinese into Consumers
Exports fueled the initial stages of China's ongoing economic boom. Now, however, the government in Beijing is placing a greater emphasis on domestic consumption.
The arrival of Western chain stores symbolizes the beginning of China's next revolution. The country's rising middle class has embarked on a collective spending spree, at least in the affluent belt along the country's east coast, from Beijing to Shanghai and down to Shenzhen in the south.
The shift is a delight to Western brand-name companies. "Now is precisely the right time for us to enter the Chinese market," says Redmond Yeung, the head of the Gap's operations in China. Yeung plans to open another store in Shanghai and two in Beijing almost simultaneously. Competitors, such as the apparel retailers H&M and C&A, already have outlets in China.
China is becoming a promising market for Western corporations, particularly in light of the warm welcome they often receive from government economic planners. Consumption has become an acceptable form of patriotism. [LOL - it's amazing how the capitalists can name anything that suits them as "being patriotic" and force the masses into accepting it - my note] International experience, Vice Premier Li says, teaches us that "any major power's development process must be led by domestic demand."
"Many citizens of our city cannot afford the products that are on display, at least not yet," says one saleswoman there with a shy smile. "I can't afford them either." Most customers are high-ranking officials or business executives. "When they go shopping," she adds, "they spend 10,000 yuan or more, all in one go" -- more than she makes in an entire year.