China’s growth shields region but economic, social and political crises loom
Developments in Asia over the past twenty-four months have followed a different trend from that of Europe and the United States. The role of China in the region, and India to a lesser extent, has tended to shield most of the region from the worst of the 2009 world recession and ensured significantly higher growth rates than the advanced Western capitalist economies in 2010. However, this is not to say that the world economic crisis has had no effect, just that it has affected the region in a different way. There are a number of factors that have put Asia in this position, all of which have an important bearing on how this region will develop in the short and medium term.
The excellent CWI World Congress discussion on Asia was introduced by Clare Doyle and replied to by Peter Taaffe, both from the CWI’s International Secretariat.
The huge stimulus that China injected into its economy in 2009 was able to be directed with some precision into infrastructure projects, business loans etc. due to the control still exercised by the state over the banks and finance sector in China.
Across the region, whole economies have succumbed to the massive gravitational pull of China as it buys up raw materials and semi-finished goods to feed its booming industry. Malaysian trade within ASEAN (Association of South East Asian Nations) has more than doubled, helping it to achieve a 7% growth rate (a reflection of the Malaysian economy’s reorientation toward China).
One illustration of the rapid growth of China lies in a comparison with Australia, which, along with Japan, has the most developed economy in the region. Just twenty years ago, Japan was the largest economy in the region and the Australian economy was the same size as the Chinese. Today China is second only to the United States and is set next year to become the largest manufacturer in the world, only the third country to hold this position since the advent of the capitalist world market some two hundred years ago. This rapid economic development has important consequences for the geo-politics of the region and indeed the world.
The dominant role of the United States in the region has been uncontested for more than forty years. However China cannot accept this domination continuing in the same form. US military might is too great to be challenged directly, but the Chinese shift towards developing its navy and, in particular, its submarine fleet could lead to ‘no-go’ areas in the Pacific for the US, something that Robert Gates, US Secretary of Defence, has warned about. But the US will not accept being squeezed out of the region.
Open warfare is not posed for a host of reasons but there are ‘hot-spots’ where conflict can develop that could bring the interests of China and the US into more open conflict. Sponsored and propped up by China, North Korea is one potential area of conflict, demonstrated starkly by the recent shelling of a disputed island by the North. North Korea is an exceptionally unpredictable element in the constellation of forces in the region and it is hard to anticipate how it will develop in the immediate period. North Korea could stagger along or implode or even a managed top down merger with the South under the auspices of China and the US is not excluded. It is hard to say which outcome will develop at this stage. Other countries in the region have a tightrope to walk, dependent on China economically and the US militarily.
China and the US
It is not just on the question of China that the US has a heavy strategic investment in the region. The continuing occupation of Afghanistan and the spilling over of that conflict into Pakistan and its subsequent destabilisation are major factors in the calculations of US imperialism. The question of the fragmentation of Pakistan is clearly posed. The creeping ‘Talibanisation’ of whole areas of the country including key cities such as Karachi and the terrorism and destabilisation that brings has reached crisis proportions. The military is the sole force keeping the centrifugal forces in that country from ripping it asunder. The Zardari government is hardly stable or to the benefit of the working class, urban poor and peasantry, as the botched handling of the devastating floods has shown, something the political Islamists are capitalising on. In Pakistan, the CWI has organised more than half a million workers in a new trade union federation and has played an important role in raising and administering flood aid in cooperation with those affected.
The economic floor provided by Chinese growth is not a permanent feature of the region. A looming re-correction of China’s super-heated property market is on the cards. Investors and speculators looking for a quick return are investing massively in property. To the extent that entire sky-scrappers are left empty as absentee owners await a further rise in prices before selling on the property. The Chinese property market is now almost three times Chinese GDP; a higher proportion than that which preceded the 1990s Japanese collapse of the sub-prime collapse in the US in 2007. In addition, China is under enormous pressure to revalue its currency which, although it is resisting at this stage, shows the number of factors that could undermine Chinese growth.
The factor most consistently underestimated by the capitalist commentators is the role of the working class in China and the potential for a social explosion that is fermenting below the surface. The repression of Chinese workers and youth and the continued absence of democracy is, in reality, a reflection of the fear of the Chinese regime. Psychiatric hospitals are now filled with political dissidents that the regime would rather label ‘mad’ than make martyrs out of by traditional incarceration. Many of these ‘patients’ are petitioners who have travelled to Beijing in keeping with age-old custom. Continued repression in cyber-space, concerning the ‘great firewall of China’, continues. Even so, mass protest breaks out continuously. One recent example was the trashing of a school canteen by students provoked by a price increase. The response of the regime was to retreat and order the restoration of the previous price rather than attack the students – surely an indication of fear at the catalyst for discontent repression of school students would represent.
But China is not the only ‘rising star’ in Asia. India too has experienced rapid growth of more than 8% and has begun to assert itself more in the region. US investment bank, Morgan Stanley, considers India a new ‘miracle economy’ that could outpace Chinese growth within five years. Projections are that the urban population of India will double by 2030 creating huge new reserves of labour. But these superficial projections by the capitalist commentators do not take into consideration the crucial issues of the potential for profitable investment for the capitalist class and the potential to employ labour productively, the potential for both seem hugely limited in India. The Indian infrastructure is incapable of supporting Chinese-style industrialisation and the state levers that China was able to employ to lay the foundations for Chinese growth are absent in India making a comparable development unlikely.
The potential for a lifeline in the development of a larger domestic market lags even behind China in many respects. Despite much talking up of the ‘Indian middle class’ it, in fact, remains smaller than the Sri Lankan and Pakistan middle classes. Not to mention it is quite a stretch to define this layer as ‘middle class’ as the income threshold is defined as ownership of a phone, colour television and two or three wheel transport i.e. a family income of around $145 per month. In reality, this is a developing working class, but even so, 850 million people in India have no ‘purchasing power’ to speak of and exist in conditions of grinding poverty. In addition, the recent exposure of massive corruption throughout India has led to a dropping off of foreign direct investment and it is unclear how permanent this will be.
A rivalry is developing between India and China. In Sri Lanka, both powers are carving out spheres of influence through their economic role. In the North of Sri Lanka, India is investing and sending in their own workers to develop power stations and other infrastructure. In the South, China is building (and leasing) a new massive port than will become a commercial hub in that area. In Nepal too, an unstable country, which has been rocked by uprisings of working class, peasants and poor in recent years under the leadership of the anti-Indian Maoist forces. China and India both share a border with Nepal, which is sandwiched between the two powers and both of whom have a vested interest in what sort of regime exists there.
Unresolved national questions
Within both China and India a series of unresolved national questions remain. In India, the question of Kashmir is becoming particularly acute. Recently an ‘intifada’ has developed, as the population of Indian-occupied-Kashmir has begun to protest and fight back against the brutal repression of the Indian army. Curfews, suppression of democratic rights and arbitrary ‘justice’ are all fuelling massive anger and resentment. This is leading to the development of the demand for ‘neither India nor Pakistan’ but for an independent Kashmir that can determine its own future. The CWI is agitating for the convening of a national constituent assembly to give this aspiration a concrete form.
In Sri Lanka, the question of the rights of the Tamil people has become particularly acute since the bloody ending of the civil war, which resulted in the annihilation of the Tamil Tigers. The Rajapakse government is little more than a dictatorship after a change in the constitution allowing Rajapakse to stay on as president indefinitely. The rights of the Tamils are being trampled on, with Sinhalese ‘colonisation’ of the north taking place. Sinhalese schools are being set up, Tamil road names changed, Buddhist temples and statues being built and the demobilised soldiers of the government forces given land in the north to settle on. The question of democratic rights is taking centre stage and the United Socialist Party (CWI Sri Lanka) is at the forefront of campaigning to unite workers and poor across the ethnic divides.
The economic growth of the region has in no way benefited the vast majority. Despite economic growth, the working class and poor in Malaysia face cuts to subsidised fuel and food and an austerity budget from the ruling elite. The economic malaise of Japan continues, with a third of the workforce now in the ‘precarious’ sector. This picture is repeated from Pakistan, to Thailand, the Philippines and Indonesia. But no governments in the region rest on a stable base. A mixture or repression, quiescence of working class leadership and the lack of an alternative is keeping a lid on this, to an extent, but an explosive cocktail is being prepared under the surface. The role of China has delayed an economic crisis that will expose the fragility of the ruling elites’ grip on power in the region. Even so, the forces of Marxism are growing. The forces of the CWI have never been stronger in Asia and will play an increasingly important role in the struggles of workers, youth and the poor people of the region, as struggle develops through the working out of the contradictions that are rife throughout Asia.