Capitalist crisis, a socialist alternative
Section One: World Relations
Chapter Seven: Asia
‘Rogue states’ and the bomb
The nuclear tests and rivalry between India and Pakistan, which sent a frisson of horror throughout the world, could set off a mad scramble to acquire a nuclear potential amongst ‘rogue’ states in completely volatile and unstable areas of the world. These tests have served to highlight a new situation, which the world bourgeoisie is frantically attempting to come to terms with. They highlight the explosive conflict between India and Pakistan on the one side, but above all, between India and China for domination of south Asia. The mad spiral of tit-for-tat tests from unstable regimes, could get completely out of hand and produce unforeseen horrors. The past military doctrine, ‘Mutually Assured Destruction’ (MAD), did sum up in an insane fashion the balance of power between the major nuclear powers, particularly between US imperialism and Stalinist Russia.
We consistently argued against those who predicted a nuclear holocaust whenever the major powers came into conflict. Given the scale of nuclear weapons on both sides - enough to destroy the world a number of times over - there was no likelihood that one of the major powers would initiate a nuclear attack because this would mean complete destruction for themselves. The capitalists don’t go to war for the sake of it, but to acquire markets, materials and prestige. A worldwide nuclear conflict would destroy the productive forces and, above all, the most important productive force, the working class.
We did not rule out the possibility of ‘accidental’ nuclear explosions or an attack by a minor state on another. In this case, the major powers would even consider a limited retaliation as a quid pro quo. However, even in the case of a ‘small’ nuclear exchange, the social and political fall-out would be incalculable. Therefore, the five nuclear ‘haves’ (America, Russia, China, Britain and France, who had each tested a nuclear weapon before 1 January 1967) introduced the Nuclear Proliferation Treaty (NPT) in 1970, which was extended indefinitely in 1995. One hundred and eighty-six states signed the Treaty. They promised to work towards nuclear disarmament, as part of an effort towards general and complete disarmament and the ‘have nots’ promised not to acquire nuclear weapons on their own, in return for help with their civilian nuclear industry. However, India, Pakistan, Israel, Brazil and Cuba remained outside the NPT.
At the same time, the US and Russia moved very slowly to dismantle their nuclear stockpiles. They will each have 3,500 warheads, "finely targeted on the other’s cities in 2003" and they are expected to have 2,500 each in 2008. This is not certain however given the likely acquisition of a nuclear capability by more and more states. The US, as the major military superpower, is dragging its feet over the process of disarmament. The five adherents to the NPT are really like a bunch of notorious drunkards inviting everyone else to sign the pledge. They have the sole right to remain as nuclear powers and no one else is to become one.
Blair, Brown and the whole cabal of New Labour, are particularly vulnerable to the charges of hypocrisy. Bourgeois commentators in Britain have pointed out that New Labour was built on nuclear weapons. Opposition to CND and opposition to "giving up Britain’s bomb", was the Ark of the Covenant as far as Blairite New Labour is concerned. Now they denounce India and Pakistan for setting down the road that they have already trod.
Notwithstanding this, the tests have starkly shown that a nuclear conflict between minor antagonistic powers is possible. It is not a question of ‘logic’ or what is sane. Put together the explosive cocktail of dire poverty, extremely volatile politics, a bitter clash over Kashmir, and add to this nuclear weapons and it is not difficult then to imagine a train of events which could completely spiral out of control and result in the horror of a nuclear exchange. In 1990, India and Pakistan "came so close to a nuclear ‘exchange’ over Kashmir that the American officials who became involved still cannot recall it without shaking". Seymour Hearsh, a well-known US commentator, has written up the secret history of the crisis in which he comments that it was "much more frightening than Cuba".
The US in the past acquiesced to Pakistan’s acquisition of nuclear weapons because it was its ‘client’ state in the region. This changed with the end of the Afghanistan conflict and the loosening the ties of India with Russia, upon whom it leaned in the past. This has led, in the words of the Brookings Institute in Washington, to a situation where "Pakistan is a profoundly insecure state. It is a state that feels itself surrounded by enemies, beginning with Iran. Afghanistan has turned out to be a terrible disaster for them. The Indians are as troublesome as ever. Their friends are not really friends. The US has moved out of the region and the Chinese have cooled. Add to that their domestic troubles."
In the wake of the tests there has been speculation that the CIA was taken off guard by the first Indian tests. However, the BJP, the communalist victors in the Indian general election, had long signalled that if they won, nuclear tests would begin. Moreover, Indian defence minister, the ‘socialist’ George Fernandez, gave an interview a week before the tests in which he said India would ‘go nuclear’. India probably brought this forward in the light of the successful testing of a rocket in Pakistan which could reach as far as Madras in the southern part of India. Lahore, the capital of Pakistan, is five minutes ‘missile time’ away from Indian territory. Nawaz Sharif had written urgently and personally to Clinton on 3 April, over a month before the first Indian tests took place, warning in detail about the impending explosions and their implications.
The threat of war, a permanent feature held over the heads of the peoples of the sub-continent, has existed since the formation of the states of Pakistan and India 50 years ago. They have been involved in three wars and India was humiliated in the border war with China in 1962. India’s tests were aimed at Pakistan and China also. China is believed to have supplied Pakistan with some of the missile intelligence to allow it to develop its missile capability. Prior to the election, the BJP ‘theoreticians’ highlighted the "potential strategic threat from China" that lay behind India’s desire to prove its nuclear status. One commented to the British Financial Times, "Who is competing with India for investment and for markets? China. Where is the ideological competition? China. And we are face to face on a difficult border, with outstanding territorial disputes."
But it is the mass of the peoples of India and Pakistan who pay a terrible price for the mad arms race between the ruling class of both countries. India has 1.1 million men under arms, compared to 600,000 for Pakistan. However, Pakistan pays a much greater price with at least a quarter of government spending going towards the military. India spends $9.94bn, 2.8% of its GNP, whereas Pakistan spends $2.9bn or 5.2% of its GNP. Given the catastrophic economic situation of Pakistan, a new arms race will be ruinous. The country has a GNP of just $483 per head, and in 1996 had a foreign debt of about $13.12bn. In the wake of the tests and as part of the worldwide financial turmoil, the Pakistan stock exchange has plunged. Pakistan is having difficulty repaying its debt and there was even a threat made by prime minister Nawaz Sharif that it could default on these debts. The popular euphoria that followed the tests could evaporate.
India, on the other hand, which believed it could ride out the threats of sanctions from the West, has also paid an economic price. The stock market lost a quarter of its value. Its foreign investors deserted India in the wake of the tests. It has lost its ‘safe haven’ status and Moody’s, the international financial analysts, have downgraded the country’s sovereign credit ratings from "investment to speculative grade". This drop in stocks is partly a reflection of the international financial crisis, but also of the disastrous economic and social policies of the BJP-led government.
Both in Pakistan and in India there are unstable governments, which could rapidly collapse. On the other hand, the desperate economic and social situation coupled with nationalist governments could, ‘accidentally’, step over the nuclear threshold. It is this nightmare that has prompted the introduction of sanctions against both countries. Although generally ineffective, they can have an effect in this situation, particularly on an already weakened and beleaguered Pakistan. In the wake of the tests, the Indian government has offered to negotiate a ‘no first use’ agreement. It is possible that under the pressure of international capitalism, both sides will temporarily back away. However, the tests have underlined the terrible danger that confronts the peoples of this region and other parts of the world.
Again the limitations of US imperialism’s power have been underlined. After the first Indian tests and before Pakistan had responded, Clinton phoned Nawaz Sharif in order to try to prevent the imminent explosion of five nuclear devices. According to the New York Times, Clinton had "all but begged" Mr Sharif to hold off. Clinton declared: "If you do this, Nawaz, I have to do this [impose sanctions], and it will hurt you a lot more than it will hurt India."
Nuclear horror 'hot spots'
The Indian sub-continent joins the Middle East as a ‘hot spot’ where nuclear horror, although of a limited character, is possible. But it is not the only one. The very instability and chaos of North Korea, a state possessing nuclear weapons, could result in the unleashing of a nuclear weapon on the South. Iran is attempting to acquire from Russia and from Pakistan a nuclear capability and a rocket delivery system which could hit Tel Aviv. This can speed up the nuclear capability of Israel. Add to this the possibility of Libya acquiring such weapons, of Saddam Hussein or any other unstable dictatorship going down the same road and the horror of a nuclear exchange is not just a Dr Strangelove fantasy.
There is also the spread of fiendish chemical and biological weapons, which can wipe out millions. It is only now being revealed that in the latter stages of the Iran/Iraq War, gas was used by Iraq on a mass scale for the first time since the second world war. This capability was supplied to Iraq by Western imperialist firms. Iraq was at that stage an ‘ally’ of the West. The horror suffered by Iranian troops has only now been fully revealed.
If a nuclear ‘exchange’ does take place then it will have massive political repercussions not just in the region concerned, but worldwide. In fact, it could trigger off revolutionary explosions in the form of mass demonstrations and general strikes throughout the world. Undoubtedly, in the wake of events in the Indian sub-continent, the demand for ‘disarmament’, particularly of nuclear weapons, can grow. We support the genuine sympathy of the masses for disarmament. We have to give critical support to all the peace movements but, at the same time, pointing out that it will not solve the threat of war and particularly of nuclear war, which hangs over the heads of humankind.
It is even possible, not certain, that the bourgeoisie internationally can begin to dismantle their nuclear capability. The stockpile of weapons between the US and Russia could be dismantled fairly rapidly. It is even possible that some kind of programme to destroy chemical and biological weapons could be set in motion. However, this would not remove the threat.
A capability to produce weapons, including nuclear, chemical and biological weapons, can remain even if those weapons are destroyed. Nazi Germany, through its rapid rearmament programme, assisted by Britain and other imperialist powers, because it had the technology and industry, was able to rapidly rebuild its forces. Therefore the threat of a nuclear ‘exchange’, with millions and millions of victims, the long-term threat which still hangs over humankind of nuclear annihilation, can only be eliminated by removing the source of conflict, that is the system that is based upon private ownership of the means of production and of the nation state. The choice which Karl Marx put before society, of socialism or barbarism means, in the modern era, socialism or nuclear annihilation.
China - a major player
An important by-product of the crisis over the nuclear tests between India and Pakistan is that it illuminated the role of China as a major geo-political player on the Asian and world stages. This was further underlined by the role of the Chinese government in not immediately devaluing its currency, in response to the falling yen. Devaluation of the renminbi could boost Chinese exports but seriously undermine foreign investment under current conditions. Clinton’s visit to China, despite noisy opposition from the Republicans in the USA, cemented the growing alliance between the US and China, particularly with regard to events in Asia.
The region does not fall under the hegemony of one power. The USA, Japan and now China rub up against one another for economic and strategic domination of the area. Japan is unable to "punch its military weight", because of the legacy of the second world war. This triangular relationship which has undergone many shifts, is destined to play a key role.
The clash between the Chinese Stalinists and US imperialism as the military super-power that controlled Asia, was the dominant feature throughout the ‘Cold War’. However, in 1970, the then Chinese prime minister, Zhou En-lai, declared that China and the US had "identical global interests". Both were in opposition to Russian Stalinism, the only other military super-power at that stage. The collapse of the USSR introduced important changes, a post-Cold War shift in ‘geo-political tectonic plates’. The Soviet Union was removed as a threat to China as much as it was to the US. However, China drew closer to Russia because of the enhanced superpower status of the US, which was reinforced in the post-Tiananmen Square massacre period. A period of flux followed in relations between China and the US, which reflected the domestic and international position of both powers. The growing ties between the US and China in the 1990s, occasionally punctuated by sharp clashes, over Taiwan for instance, led to the visit of Clinton to China in June/July 1998.
The role of China, both in Asia and the world, is linked to both the character of the regime today and economic processes which are now unfolding domestically. Statistics are not entirely reliable but at ‘market prices’, China’s gross national product was $966bn in 1998. This would put it seventh in the world after the US, Japan, Germany, France, the UK and Italy. It was, however, the world’s 9th largest merchandise exporter in 1997 and the 11th largest importer. China has also become the world’s 2nd largest holder of foreign exchange reserves after Japan. Exchange controls, which the openly capitalist economies of Asia have abandoned, allowed China to play a ‘stabilising role’ in the region’s recent financial crisis. China is a peculiar hybrid with an almost pure capitalist sector in Guangdong and the coastal provinces, together with a huge but disintegrating remnant of the ‘planned economy’ in the hinterland.
The class character of China
Is it capitalist or does it still remain a Stalinist regime? [Footnote: The question of the current class character of China is an issue that is still being discussed in the CWI. The issue will be featured in discussion bulletins that will be published during 1999. There is agreement on the processes that are taking place and perspectives for China. Some comrades are of the opinion that capitalist restoration has been completed rather than the hybrid described in paragraph 194 that was presented to the World Congress by the International Secretariat]
Marxists, as Trotsky commented, do not think in ‘fixed categories’. It is for us a question of understanding the processes, economically, socially and politically and, in particular, the direction in which society is moving. Of course, it is not sufficient merely to describe processes. The dialectic teaches that quantity becomes quality and therefore the class character of a regime is thereby changed. It is clear that China has a large capitalist sector and, as a whole, is moving irrevocably in a capitalist direction. Yet latest analyses show that the number of people employed in state-owned enterprises actually grew from 72 million in 1977 (79% of the urban labour force) to 112 million in 1996 (still around 65% of the urban labour force). Even in 1996, the share of investment and fixed assets within state-owned and other collective enterprises was 69%. The number of urban companies under state ownership is presently around 80% but is planned to fall to "well under 50%" by the year 2002. On the other hand, a writer in The Guardian newspaper in Britain correctly pointed out: "China’s version of capitalism - market Stalinism - is a contradictory mishmash of elements."
The state sector is concentrated largely on central and provincial state-owned enterprises of steel, chemicals, heavy engineering, shipbuilding, textiles, banking and trading. It still makes the largest contribution to non-agricultural gross domestic product. The military, through the Peoples Liberation Army, is an "arena of economic power in its own right involved in manufacturing and exporting, hotels and technology requisition". The Chinese Red Army has also been implicated in illegal gun running and in the organisation of prostitution rings.
In addition to this, China has a large local state sector consisting of township and village enterprises, which are a "form of rural collectivism" but are also a major source of subcontracted manufacturing operations linked to firms in Hong Kong and Taiwan and via these to companies in the US and China. There is also a significant joint venture sector in which foreign and domestic interests have collaborated in manufacturing and services. There has also been a big rise in domestically-owned private companies. Agriculture, on the other hand, still continues as the primary basis of livelihood for about 60% of China’s population. These few details, which can be considerably added to in a more thorough analysis, show how contradictory is the picture of China today.
However, it is quite clear that the ‘planned economy’, understood in a Marxist sense and which to some extent existed in China in the past, is rapidly disintegrating. Moreover, there is no significant sector of the Chinese ‘bureaucracy’ that still adheres to the plan. There are divisions amongst this privileged layer with some in the state sector wishing to maintain it, as a source of privileges and plunder. There is also a fear that the process of privatisation and sell-off of state assets, unless matched by a corresponding growth in industry, will see a massive increase in unemployment with much greater social and political consequences for China than we have hitherto seen in the former USSR and Eastern Europe. But the process of the restoration of capitalism is quite clear.
There has been a long series of ‘reform’ measures in China since 1979. But the policy of faster reform of state enterprises, ratified at the 15th Communist Party Congress in September 1997, has introduced the most comprehensive privatisation of state assets since the process began. This was summed up by the Chinese prime minister, Zhu Rongji, who visited the British bourgeoisie’s ‘holy of holies’ in the City of London - London’s Guildhall. He invited the financial werewolves, gathered to hear him, to intervene in China: "You are welcome to acquire state enterprises." He added the proviso: "But with one condition - that you don’t lay off a single worker." This sums up the dilemma of the Chinese regime. A desire to move rapidly to the market but a fear of the social and also the political consequences.
However, the injunction not to sack workers is not being followed by the Chinese cousins of the City of London financial sharks. The process is quite clear in the City of Shenyang. This is located in the former Manchuria and was once known as ‘China’s Ruhr’. Now there is a massive sale of state enterprises, which on completion would mean that out of 230 large industrial plants, only 16 would remain under the control of the state. Wishing to maintain a state capitalist sector, the plan is to coalesce these firms into five groups modelled on Korea’s now discredited chaebol. Some of these companies, according to the British Financial Times, were offered for sale at "just one yuan [about 7p] each". Little wonder that the Wall Street Journal described what is happening in China today as: "The sale of the century."
Emerging Chinese capitalists have been brutal in their treatment of the existing workforce. Their ‘shock therapy’ includes the immediate removal of the ‘iron rice bowl’ of ‘socialist era benefits’. One worker, after being reprimanded for sitting on a seat ‘reserved for dignitaries’, smashed the chair in frustration. He was threatened with the sack if he did not donate a new chair by the following Monday. The new boss boasted to the British Financial Times: "He bought the chair but we fired him anyway." The emerging capitalists found that the Communist Party’s ‘structures’, the trade unions and the local party cells, had been ‘very useful’ in ‘settling disputes’ largely in favour of the capitalists.
Brutal ‘shock therapy’
The result of all this, a brutal sink-or-swim philosophy for former state enterprises, is a massive and deepening divide between the prosperous coastal parts of China, where most businesses are already private, and the inland and northern parts, where the concentration of ailing state industry is highest. These latter industries are scheduled to be rapidly privatised. The 1997 September reforms, introduced by the ‘Communist’ Party, will result in a huge slashing of jobs in the civil service, together with the restructuring of state-owned enterprises, and also the recapitalisation of the banking structure.
Massive, increased unemployment could only be avoided if China could continue to generate big economic growth. But this has begun to slow down. A predicted growth rate at the start of 1997 of between 9.5-10% has resulted in an actual growth of 8.8% and it is expected to slow down even more in 1998 to under 8%. China, already showing some of the deflationary tendencies of other Asian countries, could see a dramatic worsening in its position by a combination of the reform package and the effects of the Asian crisis. There has been a 40% cut in 1998 in promised Japanese foreign direct investment (FDI) and the contraction in Asia has affected Chinese overseas sales.
But even without the effects of the Asian crisis, the contradictions and imbalance in the Chinese economy were leading to a slowdown. In some senses China’s financial crisis is just as bad as that of any other Asian country except, in the words of a writer in the British Financial Times, "foreigners are not involved" because of state control on capital movements. As in Japan, the government has closed down some financial institutions, noticeably the Hainan Development Bank. This bank was unable to pay its debts. In fact, the commercial banks in China have ‘problem loans’ worth roughly $180bn or 20% of total assets. Private-sector economists believe the situation is even worse, suggesting that most of China’s banks are technically insolvent. The Hainan Development Bank is located in the country’s largest special economic zone, which is a purely capitalist sector. The state banks are also heavily indebted. The commercial banks are under pressure from the government to hand out financial support to loss-making state enterprises because of the fear of rising mass unemployment.
There are estimates that unemployment could rise to almost 400 million from the 200 million presently unemployed. In some industrial cities in the north-east, real unemployment is probably up to 50%. In the countryside, the situation is equally daunting. By the year 2000 the ‘surplus labour force’ in rural areas will top 370 million. If China is to avoid massive unemployment in the next immediate period ahead, which will inevitably lead to widespread social protests, strikes and upheavals, it can only do so by maintaining its growth or by resorting to another devaluation.
Continued ‘record growth’, which some economists now say has been exaggerated at least in gross terms, will not be possible in the changed economic situation of Asia and the world. Therefore, despite the collaboration between China and Clinton over the Japanese yen, another devaluation of the Chinese currency is inevitable although the US bourgeoisie and the Japanese capitalists hope that this can be done in a ‘controlled’ way that will not trigger off a new wave of devaluations.
But strikes and demonstrations will inevitably be a growing feature in China. Already demonstrations of pensioners and workers have taken place in cities in south-western China over the non-payment of pensions and ‘unpaid salaries’. According to The Independent in Britain, "In the past two years there have been cases where thousands took to the streets to protest". It is possible that these protests will be much wider and more explosive than even the demonstrations and protests of the Russian workers for non-payment of wages in the past period. The development of independent trade unions and even of workers’ independent parties, will inevitably be posed in China in the future and open up the prospect for the development of genuine Marxist forces.
A Chinese capitalism
Various scenarios have been advanced for the development of China in the next period. The regime is clearly set on transforming China to capitalism, but without the ‘mistakes’ of introducing limited democracy, as in the former USSR and Eastern Europe. Its model is South Korea between the early 1960s and the mid-1980s. However, it seems to forget that these dictatorial regimes, such as South Korea, became completely unviable with the rise of the proletariat, a consequence of rapid industrialisation.
The development of capitalism in China will have the same consequences and will make impossible the rigid control exercised from the centre by the Beijing regime. In reality, processes are developing which can tear the central state apart. In the past, China was rendered apart by local warlords. There are elements of this at the present time in the tremendous regionalisation which has developed through the ‘two-speed’ China.
On top of this, there are national conflicts. In the north-west, Muslims in the region of Xinjiang have been executed for daring to raise the question of independence. There is the problem of Tibet for China. But even the growth of regionalism could turn, at a certain stage, particularly on an increasingly capitalist background with the growth of huge disparities between different regions, into demands for separation. This would clash with the Great China philosophy of the central Beijing regime which clearly looks toward becoming a superpower alongside US imperialism.
The fate of China is decisive for developments in Asia and the world. In the immediate period, it faces serious economic difficulties. A US expert has commented: "I would not wish [the Chinese government’s] assignment on a close friend." It is against this background that Clinton’s visit to China took place. This was for a mixture of economic and strategic reasons. The value of direct US investment in China has multiplied six times in six years, bringing overall actual investment to just over $18bn. At the same time, Chinese goods to America have grown in value from just under $9bn in 1992 to more than $32bn today. Given the crisis in Asia, China therefore assumes importance for US big business. Already major US monopolies, such as Boeing, General Electric and others, have lucrative contracts with China.
At the same time, there is growing concern in the US that the trade surplus of China’s trade with the US, put at just over $10bn, could spiral to $50bn this year. The relationship is skewed in China’s favour at the present time with China’s exports to the US rising by 18% in one year while imports from the US into China have grown by only 2.6%. The purpose of Clinton’s visit was to enhance US capitalism’s prospects in China. China is the US’s fifth biggest trading partner and exports to China (including Hong Kong) have doubled since 1990.
With the increase of privatisation of industry and agriculture, US capitalism looks greedily towards a new market at a time when Asia as a whole is declining. However, China is not capable of providing a lifeline either for US or world capitalism. Moody’s investor services has warned that China’s banking system is "critically weak" and has also stated that poor statistics and low levels of disclosure and a degree of corruption, mask the underlying position of the state banking system.
Powers’ struggle in Asia
At the same time, the struggle for domination in Asia between the three giants, the US, China and Japan continues despite the soothing phrases about ‘constructive engagement’ and a ‘tripartite’ agreement for ‘stability’ in Asia. China has come a long way from the time when Mao Zedong advocated a proliferation of nuclear weapons by states throughout the world to break the ‘hegemony’ of Russian Stalinism and US imperialism. Now Washington and Beijing have come to a tentative agreement that their nuclear warheads will "not be pointed at one another" as a sign of ‘peaceful cooperation in Sino-US relations". Up to recently, 13 of China’s 18 nuclear intercontinental ballistic missiles were targeted at US cities. The fact that China is considering a bilateral detargeting deal represents an important shift in the Chinese leadership’s attitude. Beijing had indicated previously that it would only detarget on condition that the US made a nuclear ‘no first use’.
The clear aim of China is to court Washington, thereby undermining Japan and furthering the aim of China to become the major player in the area. At the same time, Beijing continues to push its goal of a ‘Greater China’ by exerting pressure on the US over Taiwan. As recently as March 1996, China fired missiles towards Taiwan and the riposte of the US was to send warships into the Taiwan Straits, warning of ‘grave consequences’ if Taiwan was hit. This was a factor, it seems, in forcing Washington and Beijing to avoid the potential dangers of a head-on collision and to build a ‘more stable’ relationship. However, China is pressing the US for an agreement on the ‘three Nos’: no ‘one China, one Taiwan’; no Taiwan under independence; and no Taiwan membership of the UN. Beijing is attempting to lean on the UN to establish its long-held proposal to bring Taiwan, as with Hong Kong, back into the ‘Chinese family’.
Taiwan big business has already built up considerable and lucrative contacts with China: they have invested between $30bn and $60bn on the mainland. But the growth in support of Taiwan’s opposition Democratic Progressive Party, which stands for independence, shows the difficulty in securing Beijing’s hope of ‘one China’. This will remain the case so long as democratic rights are refused by the Beijing regime. Other important factors will have a decisive impact on the prospects for ‘one China’, such as economic and political developments within Taiwan, between Taiwan and China, and the fact that separation between the two countries has existed for decades. The US switched diplomatic recognition from Taiwan to Beijing in 1979, but it has remained committed to defend Taiwan in the event of an attack. But Washington has leaned on Taipei (the capital of Taiwan) for greater contact with China. It has warned the Taiwanese that while Washington would "protect Taiwan’s way of life" its reaction "would not be the same" if there was a move towards independence. This shows that the so-called ‘inviolable rights’ of small nations, invoked by US imperialism in the past to justify military intervention, is so much small change. They will drop former ‘loyal allies’ when this conflicts with their wider strategic, economic and political interests.
The courtship between Beijing and Washington has inevitably excited the resentment of the Japanese capitalists, battered as they are by Asia’s economic storms. One bourgeois expert correctly characterises the situation: "There is now an undercurrent of frustration against both China and the US." Japan’s star is dimmed as that of China rises. A former Japanese ambassador to the US complained: "Five years ago, the US was more interested in its relationship with Japan. Now, the US may be equally or even more interested in its relationship with China."
One of the aims of Chinese foreign policy is to try to keep Japan firmly ‘on the back foot’, according to one diplomat. No opportunity is lost to remind Japan of its former crimes in China. The popularity of a film, The Fatal Moment, which seemingly lauds the second world war prime minister, Tojo, who masterminded the attack on Pearl Harbour, was the subject of a complaint by China. The latter also fears the latent nationalism in Japan and the future rearming of Japanese imperialism. It also resents the ‘nuclear umbrella’ of US imperialism over Japan, which it sees as a threat to itself.
There will be a shift in relationships between the three powers, alongside India, who vie for influence and power in Asia. The other minor powers in Asia view increased Chinese intervention in the region with mixed feelings. There is relief that China collaborated with the US to prop up the yen and to help finance the IMF loan which bailed out Indonesia. But at the same time, they fear the increased role and appetite of Beijing. This has led to a reaffirmation of and a greater leaning on the support of US imperialism.
Ever since US forces were ejected from the Subic Bay Base in the Philippines in 1992, the intervention of the US military in the region appeared to be diminished. Now, however, Singapore has agreed to allow US aircraft carriers and other warships to dock at a new port from the year 2000. In the past, they were only allowed to anchor offshore.
The sands will continue to shift in the complicated relationships between China, Japan and the USA. But this relationship will not be the tranquil and peaceful one envisaged by bourgeois commentators. Big clashes are rooted in the present and, particularly, the future situation in the region. The open aim of China, to become a superpower in the 21st century does not sit easily either with Japan or US imperialism. Conflicts and even outright clashes are possible. Apart from Taiwan there are a series of territorial disputes in the South China Sea.
Indonesia - The beginning of a revolution
Asia, which up to 1997 was seen as the one bright spot for world capitalism, is the region of the world where the contradictions of capitalism are most glaring, the failures of the system are most obvious, and the force that represents the greatest danger to it, the proletariat, is rising from its knees. Economically, socially and politically, Asia, of course, is in turmoil. We correctly predicted the certain downfall of the Suharto dictatorship, which has now opened the floodgates of revolution. We have a special document on Indonesia but it is still necessary to draw out some general points and see how they relate to the general situation in Asia as a whole and throughout the world.
The downfall of Suharto represented the beginning of the revolution in Indonesia. A feature of revolution is the conscious intervention of the masses in shaping their own fate. This is clearly seen in the elemental movement from below of the Indonesian workers and peasants. Hardly had Suharto vacated office on May 21, when the announcement of the creation of a myriad of parties and organisations began. The British Guardian reports: "A new party appears almost every day." There has even been the creation of a party based upon the Indonesian Chinese, the Reform Party, in the wake of the attacks on the ethnic Chinese. They are pledged to "defend our rights and create true harmony amongst Indonesian citizens". Ethnic Chinese make up less than 5% of the 202 million population but control more than 70% of the economy and have been singled out as a focus of the masses’ discontent with the Suharto regime because of the wealth of a small layer of top Chinese millionaires and billionaires.
The ruling Golkar Party, which sustains Suharto and now props up his puppet Habibie, is breaking up with affiliates separating themselves and membership collapsing. Civil servants are now no longer obliged to support this party and, therefore, its ‘mass base’ is rapidly disappearing. Habibie was put in as a stopgap by Suharto, the army and the ruling class as a whole. He and Rais are clearly intended as the figureheads to derail the revolution. Habibie is the Indonesian ‘Berenguer’, who opened the floodgates of revolution in Spain in 1931. Habibie and Rais are the ‘gatemen’ of the revolution in Indonesia.
An important feature of revolution is a split amongst the ruling class. This is clearly evident in the split among the Indonesian elite, and particularly the army, on how to control the mass movement. They are also divided over what to do about East Timor, where a mass movement has reactivated in the aftermath of the overthrow of the Suharto dictatorship. The dilemma of the ruling class is summed up in the attitude of the army towards demonstrations of workers and strikes in June 1998. A demonstration and strike by the Indonesian Prosperity Union was met with army repression. Bus drivers, factory workers and unemployed labourers carrying banners and placards, demanded Habibie’s resignation, the release of detainees and lower prices. However, the strikers backed away, complaining afterwards: "The army has said they will kill us if we try and march on the House of Representatives." The army’s leading spokesman expressed the intentions of the army tops by declaring to a British Financial Times reporter: "We warned the people, the society, that it is dangerous if the reforms are uncontrolled; reforms should be conducted step by step. That is not necessarily slow." At the same time, another section of the military has warned that there cannot be a return to ‘the old regime’.
The masses are paying a heavy price for Indonesia’s economic crisis. Unemployment will probably reach 15.4 million in 1998, about 17% of Indonesia’s workforce of 90 million. Gross domestic product contracted 6.21% in the first quarter compared with the same period last year, and is likely to contract by more than 10% (some say 20%) which vastly exceeds forecasts of a drop of 4% this year. Added to this must be an increased rate of inflation to about 52%.
At the same time, the national question, particularly in relation to East Timor, has roared back onto the agenda. Some 200,000 Timorese paid with their lives in the struggle against Indonesian imperialism, a higher proportion of the population than died even under Pol Pot in Cambodia. Habibie has responded by suggesting ‘special status’ for the former Portuguese colony but only on condition that Portugal and the United Nations recognise it as an "integral part of Indonesia". Political prisoners have been released, but Gusmao, the leader of the guerrillas, has not been released and ‘political autonomy’ is completely ruled out by the regime. This position, however, is not fixed in stone for two main reasons. Firstly, although the bourgeois trends among the representatives of East Timor outside the country, namely the Nobel Prize winner Ramos Horta, are trying to get the idea of ‘autonomy’ accepted, there is an active struggle inside the country for self-determination and total independence. It is being conducted by the military resistance of FALANTIL and by the underground organisations in the factories, schools, etc along with the East Timorese in Indonesia and workers and youth in the present movement. Secondly, under the whip of the revolution, as the Financial Times commented, the government is "obliged to make new concessions to an angry public almost every day". It should also be remembered that before the annexation of East Timor, the Timorese Liberation Front (Fretilin), which stood for independence, had majority support amongst the population. The international bourgeoisie, recognising the long-term incapacity of the regime to hold East Timor, has urged the release of all political prisoners, the opening of negotiations with Gusmao and the guerrillas, and free elections.
Undoubtedly, the revolution would have developed even quicker than the pell-mell speed at which it unfolded but for the absence of a mass revolutionary party capable of going the whole way. The bourgeois opposition of Megawati Sukarnoputri (daughter of former president Sukarno), and Amians Rais (leader of the Muslim Front), has tried to apply the brake: "They have been careful not to rock the boat." (British Financial Times)
The fear of the masses’ ‘uncontrolled’ movement is summed up in the comment of one bourgeois: "Decent people will become anarchists. They will have to, because they need to eat." Indonesia is in for a long economic agony but with massive upheaval that will go beyond Asia and affect the world.
Diktats of the IMF
It is not the only country to have been affected. Thailand, according to conservative estimates, is likely to contract economically by 4.1%, and even Malaysia, if it grows at all, will be by a miserly 0.2%. The latter was supposed to have stood on the verge of becoming a new tiger only two years ago. Malaysia’s prime minister, Mahathir Mohamed, has attempted to stand up to international capital and has blamed the crisis on ‘foreigners’. He has also warned of a ‘guerrilla war’ by Asians "if foreigners use the crisis to take over regional economies". Thailand, gripped by economic desolation, has been forced to step in to ‘nationalise’ banks for fear of a complete collapse of the finance sector. This represents, in effect, a ‘nationalisation of the debt’, which the government will attempt to pass on to the workers and peasants in the country. The Malaysian regime is split from top to bottom, with Mahathir at odds with his deputy prime minister, Anwar Ibrahim. Despite the threats made by Mahathir to international capital, the regime remains firmly within the framework of world capitalism and Mahathir has conceded that he may have to eventually bend the knee and accept the ‘diktats of the IMF’.
In South Korea, again as we have predicted, the price being demanded of the proletariat has provoked a huge wave of strikes, which could see the downfall of the government. Korea faces a summer of massive discontent by the proletariat, which will pit the Korean Confederation of Trade Unions against the chaebol and government. The effects of the movement in Korea could spill over to the rest of Asia.
At the same time, North Korea faces mass hunger and, possibly, imminent collapse. This is not seen as a lifeline for capitalism, as initially was the case with the swallowing up of East Germany by West German capitalism. South Korea in 1998 is not Germany 1989-90. Neither Japan nor the US would be happy to step in and underwrite economic Korean reunification, although a sudden collapse would mean that they would have no alternative. The regime of Kim Dae Jung is attempting to open up a ‘dialogue’ with the North Korean regime, to push for "greater economic integration" and a gradual weaning away of North Korea from the brutal Stalinists who still cling to power. But it is the mood of the proletariat that will be decisive. Korea is likely to undergo a series of waves of struggle, presenting an opportunity for the genuine forces of Marxism to intervene, on the basis of our programme and, in particular, the idea of an independent mass workers’ party.
Even in the Philippines, the election of Estrada disguises the underlying explosive economic and social situation. Estrada was surrounded before, during and after the election by former business cronies of the Marcos regime. The spectre of a return of Marcos’s ‘crony capitalism’ is provided by the victory of Estrada. But he struck a populist note and with the absence of a mass alternative, was seen by the poor as something of a champion. He has even declared that "business will not be allowed to dictate under an Estrada presidency". However, in practice, as with the previous Ramos government, Estrada will carry out pro-capitalist policies, including further privatisations. The strike of Philippines Airlines employees against attacks on union representatives is a symptom of what is coming.
Even Singapore and Hong Kong, bastions of Asian capitalism and seen as virtually ring-fenced against the threat of economic crisis, have been touched by the Asian storms. Indeed, it has been a very bad year for Asia’s rich. According to the latest ‘rich list’ in Foyles magazine, the number of billionaires in the region is down from 119 in 1996 to 44 in 1998. Two years ago, the same magazine, on the reading list of anybody with wealth, declared that "it’s Asia’s turn". Now, as The British Guardian laments: "There is no more talk of the Asian century." Thailand, for example, has seen its billionaires wiped out. Hong Kong and Singapore, havens for the rich, although not as affected as other parts of Asia, have seen their economic performance undermined. Singapore, a city state, has seen its growth rate for this year drop from 7.8% last year to a projected growth of 0.5-1.5%. The value of the stock market has dropped by 40%. There is a financial, economic and wealth meltdown in Hong Kong where the stock market has dropped by 40% and land prices by 50%. Many of the rich British and other expatriates, victims of the crisis, are flooding onto aircraft and other transport out of the former British colony.
The effects of the crisis will, of course, not just be positive for the labour movement and the working class. Migrant labourers, conservatively estimated to be at least 6.5 million, are the major victims of the crisis as they are hounded from one country to another. Malaysia and Thailand, in particular, have evicted Chinese Indonesians and others in the most brutal fashion.
India, which only a matter of months ago was held up as a ‘safe haven’ from Asia’s hurricane, has been plunged into crisis in the aftermath of the nuclear explosions. The BJP-dominated coalition is on the point of collapse. India Today summed up the achievements of the government: "A hundred days of just being there. Even the aides of the Indian prime minister, Atal Behari Vajpayee, have urged him to go. One aide declared: ‘We’ve been saying to him, if it goes on like this, is it really worthwhile continuing’."
It is not just the nuclear tests but the disastrous June budget of the BJP and the splits, both within the government and within the BJP, that have undermined the Coalition. This budget indicated a ‘tax and spend’ policy and the threat of ‘Indian self-reliance’, that is, of protectionism for Indian industry. The debate between the reformers and advocates of Swadeshi, or ‘self-reliance’, has raged within the government and within the BJP. This threat of protectionism completely undermines the evolution of Indian capitalism towards the world market. Naturally, there was a prompt response by the speculators with equity prices marked down by a fifth and, as we have reported earlier, Moody’s (the US credit-rating agency) downgrading Indian debt and leaving it with a ‘junk bond rating’.
It is quite clear that the present government is more shaky and chaotic even than the United Front coalition government of 14 parties, which it replaced in the March general election. The economic shambles produced by the BJP-dominated government is amplified by the threat of building a temple at the previous site of a Muslim shrine at Ayodhya. This could trigger massive communal upheavals in India, which, even a section of the BJP are worried about.
At the same time, there is no viable parliamentary alternative to the BJP. The Congress Party and their allies are not able to muster a majority to topple the government. The role of the Communist Parties in propping up different bourgeois formations has had a calamitous effect on the prospects of the workers’ movement in India. Nevertheless, the growth of opposition within both the CPI(M) and the CPI, combined with the small but nevertheless steady growth of the genuine forces of Marxism in India, is a portent of the possibilities which exist in the next period.