The “China Has Moved to Capitalism” Lie

In the comments section, a defender of capitalism (who I think doesn’t understand it very well) takes issue with my defense of Maoist China:

True, Maoism has a spotty record, but compared to India, Communist China looks like paradise.

Compared to India, many parts of Oakland look like paradise!

Under Mao, China experienced great famines, political repression, persecution of intellectuals during the cultural revolution, and other problems during the so-called “Great Leap Forward” and “Cultural Revolution” (More like “Great Leap Backwards” and the “Cultural Devolution”).

Only when Deng Xiaoping took over did China begin to prosper, which they did by adopting Capitalism. As he said, “I don’t care if a cat is black, white, red, or yellow, so long as it catches mice” (paraphrase). While China is more Socialist than India due to its relative absence of baseline poverty, China’s economic growth came more from Capitalism than Communism.

Of course, let’s also not forget that China has a ton of people. Therefore, even if the vast majority of people are poor, there are at least 400-500 million well educated and middle class people, which is more than the entire population of the United States. I know that India also has a ton of people and they’re not doing as well, but you get my point. Besides, India’s on the rise.

Robert, I think you too often conflate Capitalism with neoliberal economics and corporate America. Adam Smith hated corporations and believed in a truly free market.

If he were alive today, he wouldn’t approve of corporations outsourcing jobs, corporate tax breaks at the expense of working people, or the fact that many politicians are on the payroll of corporations and special interests. He wouldn’t approve of monopolies that harm local industries and drive people out of business.

I’m just as angry about corporate greed and theft as you are, but to attribute various ills to Capitalism is just wrong.

Also, let’s be honest, Can you name a nation that became wealthy through an economic system that wasn’t Capitalism? Sure, you have European nations that are Socialist in many ways, but they got rich in the first place through Capitalism. The wealthy non-western nations (ie. Japan, South Korea, Singapore) became wealthy by adopting western ways, which practiced Capitalism.

Well, I hate capitalism. Recall that I am a socialist. However, I support any kind of socialism, from piecemeal programs in places like the US to social democracy in Europe to China’s neo-Communism. The best system is a mixed economy with capitalist, socialist, collective, family and other forms of ownership. I call that socialism. You may call it what you will.

First of all, China and India were in the same place in 1949. Even all through the Mao era, China kicked India’s ass, and they are still doing so under neo-Communism. Maoism and neo-Communism simply kick ass on the Indian system, period.

Also understand that China’s economy grew by about 10% per year during the Mao era. Even during the Cultural Revolution, industrial growth grew by 10% a year. An incredible number of elementary, middle and secondary schools was built in rural China. School enrollment at all levels exploded. Health care was brought to all of rural China via the barefoot doctors program. How can you possibly call this Cultural Devolution?

The Great Leap Forward did have a problematic famine, and in one year, there were 4.3 million excess deaths as compared to 1949. But in the years immediately before and after that year, the death rate was vastly higher in 1949.

The real killer was capitalist China! Every year, Maoism was saving a good 10 million plus lives.

We need to take this into consideration when thinking of why people put up with Maoism.

A new system comes in, Maoism. It’s repressive, but so was the old system. More importantly, the state cares about you, the lowly worker or peasant. And with each year after 1949, increasingly fewer and fewer people are getting sick and dying. People are living longer and longer every year. Looking back at the previous system, many more people were sick, many more were dying, and people were not living as long. Sure, there was a small setback and a famine for one year, but there was more like a short return to the bad old days.

Seen in this context, you can see why the people regarded Maoism as a Godsend and not some killer system. Sure, the system killed a few people, but many more were being killed before. You do the math!

It is important to note that China’s recent growth has not occurred due to “capitalism.” Most of that growth is coming from public firms, generally controlled by small municipalities and labor collectives. Under Mao, all firms were officially owned by the workers. Such is the case in China of today – all Chinese firms are officially owned by the workers. Sound like capitalism to you? The 3rd largest manufacturer of TV’s in the world is a public firm – it’s owned by the workers – a socialist enterprise.

Under the Chinese system, municipalities and labor collectives run firms. They compete with each other. For instance, if a municipality has a very successful enterprise, they will make lots of money. They will pay their workers more and give them better benefits. So workers flock to those cities from all over China to try to work for that firm. In this way, cities compete with each other. Sound like capitalism to you?

The cities that do best turn into “company towns.” They provide public housing for the workers, public transportation, public day care, etc. Sound like capitalism to you?

It is illegal to own land in China. Does that sound like capitalism to you? This is another Mao era decree that the radicals have been trying to get rid of. Chinese land ownership is so fair precisely because of the forbidding of the private ownership of land. Were that not in place, a few rich people would own all of rural China, like they do in India.

The state owns all the land. You go out into the wild areas, and it’s all state-owned. And much of it is protected too. If the state didn’t own that land, private speculators would have bought up a lot of that land and destroyed it.

They do let you lease the land your home is on. And if you have been paying rent on your home for a long time, increasingly, the state is just giving you the house. You own your house. You can even sell your house to someone else. You can sell the land-use rights on the land that you own the rights to. The state gives you a house to live in for free. Sound like capitalism to you?

There is a system of free public education available to most Chinese, through the graduate level. Sound like capitalism?

China offers health insurance, but it’s rather expensive, and most cannot afford it. But it covers 85% of your medical costs. You call that capitalism?

The Chinese state is now planning to spend a tremendous amount of money upgrading the rural areas, because there is starting to be some serious poverty there. People are leaving the rural areas to work in the cities. The state will spend vast sums of money on roads, infrastructure, irrigation, schools, housing, health care, etc in the rural areas. Only a socialist state would do that. Capitalist states never do these things.

All farmland in China is owned by the state. It is often managed by rural collectives though, and they can keep a lot of what they sell. A capitalist country where all farmland is owned by the state? Come on.

The banks in China are very heavily regulated. This is why China largely avoided the latest Neoliberal World Recession. Sound like capitalism to you?

China has not “moved to capitalism.” It is a mixed system with capitalism, socialism and other forms of ownership, a huge public sector and a vast state with tremendous spending power that spends wild amounts of money. The state has very heavy involvement in the economy, including planning it in some ways.

Deng’s reforms have resulted in millions of Chinese dying for lack of health care who would have not have died otherwise. That is because under these wonderful capitalist reforms, all state medical clinics began charging for visits and medicine. Many people can’t afford it, so they just get sick and die. Was it worth it? I say no.

Deng’s reforms have resulted in the closing of schools all over rural China. In some areas, 80% of the elementary schools and 50% of the middle schools have been shuttered. Those schools were built during the “horrible” Cultural Revolution. Was it worth it to shut down all these schools in China for the sake of economic reforms? I say no.

The great growth in Western Europe occurred after World War 2 in the context of a mixed socialist-capitalist system called social democracy. It’s not true at all that Western Europe developed due to capitalism.

Japan has had a social democracy since World War 2, but the benefits are provided by corporations, not by the state so much.

South Korea, Taiwan and Japan all had extensive land reforms that helped their economies take off. Your economy will never go anywhere with semi-feudal relations in the countryside.

Taiwan has an extensive social democracy in place.

Singapore has a very well-developed social democracy. Furthermore, Singapore is not reproducible. Sure, it’s rich, but the area around it in Malaysia is poor. Malays commute to work in Singapore every day. Singapore’s riches have come via paying low wages and buying cheap materials from surrounding poor countries.

None of those East Asian states developed via neoliberalism. They all had land reforms, extensive social democratic programs run by either corporations or the state, and especially massive state involvement in the economy, even including economic planning.

India is up and coming? 50% of the population of India is malnourished. India can’t even feed its own people. From 1995 to today, the malnutrition rate in India has been flat at 50%. This amid sky high economic growth. If all that economic growth can’t even feed the people, good God, what good is it?

The “pure free market” of Adam Smith was nothing of the sort. Actually, Smith was an advocate of state intervention to protect society from the ravages of unfettered capitalism. He described pure free market capitalism as one of the most evil systems ever designed by man.

You ever hear neoliberals quote Smith on that? Of course not. All neoliberals are liars. They pick and choose what they want out of Smith and elide the rest. They describe China as “capitalist”, but if we tried to transplant a tiny bit of the Chinese system to the US, they would scream “Communism!”

The pure free market you laud is nothing but neoliberalism. Guess what? It doesn’t work. It only works for about the top 20% of society, and everyone else gets screwed.

It creates incredible inequality and tons of poverty at the same time it produces vast riches at the top, and is everywhere associated with a tremendous amount of corruption of the political class. Everywhere you have a pure free market, you generally have a massively corrupted political class, since the capitalists purchase the state via money-based elections and their control of the media. Corruption under pure free market conditions is not a bug, it’s a feature. It goes right along with it, always.

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49 thoughts on “The “China Has Moved to Capitalism” Lie”

  1. Hey Robert, would you consider Nazi Germany capitalist or socialist? I think they did have a sort of populist, anti-Jewish banker side to them.

    1. It wasn’t very good from a worker POV, that’s for sure, but they were nationalists. They opposed the Jews because the Jews were not “real Germans.” They wanted to take the economy out of the hands of the Jews and put it back in the hands of the capitalists.

      However, the state does play a huge role in the NS system, so it is socialist in that sense anyway. The firms have to make what the state tells them to make and the state buys a lot of their products. But the firms don’t care, because they are assured of making high profits.

      But NS was characterized by extreme abuse of the workers, so it was profoundly anti-socialist in that way. Working class movements, unions, etc. were all seen as “Communist” and were attacked. Many union members were the first to be imprisoned at Dachau and many died there.

      It was really a pro-capitalist, anti-worker system, but it was *national capitalist* for sure, not *international traitor capitalist* like we have nowadays. The capitalists were required to work for the good of Germany, and this was better than these traitor international capitalists we have today who just sell out the country and have no loyalty to any flag.

      They built a lot of infrastructure too, but it was mostly so they could drive tanks down the highways. Anyway, they were not neoliberals at all. That sort of classic fascism isn’t anything like the neoliberalism with minimal state we see in the capitalist world today. NS was a strange beast!

      I hate to say good things about NS, but it did have some positive aspects, which were of course massively outweighed by the negatives.

  2. Dear Robert
    NS wasn’t bad for the workers at all. In the Third Reich, the income of the working class rose, even though wages didn’t go up much. Let’s say that wages were 100 in 1932 and the employment rate 75, then in 1939 the wages might be 105 but the employment rate 100. This means that the income of the working class went from 75 x 100 = 7500 to 100 x 105 = 10500.
    The best thing to do for the working class is provide full employment, and that’s what they got under the Führer.
    The unions were abolished but they were replaced by the DAF, the Deutsche Arbeitsfront. Hitler saw unions as agents of the class struggle, but he was not hostile to the working class. Many laws were adopted in the Third Reich that were designed to protect workers from exploitation.
    Whatever NS was, it wasn’t plutocratic. Hitler didn’t rush to cut taxes for the rich and privatize everything. He was a populist, and his popularity rate of 90% from 1935 to 1939 proves that.
    Regards. James

  3. Robert, What do you think the world would look like today if Operation Barbarossa succeeded and the USSR under Stalin surrendered to Hitler in 1942?

  4. Rob,

    This post has many errors Rob, here’s one:

    There is one bank in China. It’s owned by the state, a national bank. This is why China largely avoided the latest Neoliberal World Recession. No private banks, only one bank owned by the state? Sound like capitalism to you?

    No.. you’re just wrong:

    By no means an inclusive list.

    Abn Amro Bank, Beijing
    Agricultural Bank of China, Beijing
    Alahli Bank of Kuwait, Beijing
    American Express Bank, Beijing
    ANZ Banking Group, Beijing
    Arab Bank, Beijing
    Banca Commerciale Italiana, Shanghai
    Banca di Roma, Shanghai
    Banca Nazionale del Lavoro, Shanghai
    Banco Ambrosiano Veneto, Beijing
    Banco do Brasil, Beijing
    Banco Exterior de Espana, Beijing
    Banesto, Beijing
    Bangkok Bank, Shangai
    Bank Austria, Beijing
    Bank of America, Beijing
    Bank of China, Shanghai
    Bank of China Shanghai Trust and Consultancy, Shanghai
    Bank of Communications, Beijing
    Bank of East Asia, Shanghai
    Bank of East Dalian, Dalian
    Bank of Montreal, Beijing
    Bank of Nova Scotia, Chongqing
    Bank of Orient, Xiamen
    Bank of Shanghai, Shanghai
    Bank of Tokyo-Mitsubishi, Beijing
    Banque Francaise du Commerce Exterieur, Beijing
    Banque Indosuez, Shanghai
    Banque Paribas, Shanghai
    Barclays Bank, Shanghai
    Bayerische Vereinsbank, Beijing
    Beijing City Commercial Bank, Beijing
    BNP Beijing, Beijing

    Cariplo, Beijing
    Chemical Bank, Beijing
    China Bank International, Shenzen
    China Construction Bank, Beijing
    China Credit Industry Bank, Shenzen
    China Everbright Bank, Beijing
    China International Trust and Investment Corporation, Beijing
    China Investment Bank, Beijing
    China Merchant Bank, Beijing
    China Minsheng Banking Coproration, Beijing
    Chinese Mercantile Bank, Shenzen
    Chiyu Banking Corporation, Xiamen
    Cho Hung Bank, Tianjin
    Citibank, Beijing
    Citic Industrial Bank, Beijing
    Commercial Bank of Zhejiang, Ningbo
    Credit Agricole Indosuez, Shanghai
    Credit Lyonnais, Shanghai
    Credit Suisse First Boston, Shanghai
    Credito Italiano, Beijing
    CS First Boston, Beijing
    Dai-ichi Kangyo Bank, Shanghai
    DBS Bank, Shanghai
    Den norske bank, Beijing
    Deutsche Bank, Guangzhou
    Development Bank of Singapore, Beijing
    Dresdner Bank, Beijing
    East Asia Bank, Shanghai
    Export-Import Bank of Japan, Beijing
    First National Bank of Chicago, Beijing
    Fuji Bank, Beijing
    Fujian Industrial Bank, Shanghai
    Guangdong Development Bank, Beijing
    Guotai Securities Company, Shanghai
    Hang Seng Bank, Shanghai
    Hanil bank, Shanghai
    Hanvit Bank, Shanghai
    Hokkaido Takushoku Bank, Beijing
    HSBC, Shanghai
    Hua Xia Bank, Beijing
    HypoBank, Shangai
    Industrial and Commercial Bank of China, Beijing
    Industrial Bank of Japan, Shanghai
    ING Bank, Shanghai
    International Bank of Paris and Shanghai, Shanghai
    International Commercial Credit Bank, Shenzen
    Investment Bank of China, Beijing
    KBC bank, Shanghai
    Korea Exchange Bank, Beijing
    Kwantung Provincial Bank, Beijing
    Liu Chong Hing bank, Shantou
    Long Term Credit Bank of Japan, Shanghai
    Merryl Lynch, Shanghai
    MeesPierson, Shanghai
    Merita Bank, Beijing
    Midland Bank Group, Beijing
    Mitsui Bank, Beijing
    Monte dei Paschi di Siena, Beijing

    Nanyang Commercial Bank, Beijing
    National Australia Bank, Beijing
    National Bank of pakistan, Beijing
    Natexis Banque, Shanghai
    Nippon Credit Bank, Beijing
    Oversea-Chinese Banking Corporation, Shanghai
    Overseas Union Bank, Beijing
    People’s Bank of China, Beijing
    People’s Construction Bank of China, Beijing
    Po Sang bank, Shenzen
    Qingdao international Bank, Qingdao
    Rabobank, Shanghai
    Republic National Bank of New York, Beijing
    Royal Bank of Canada, Shanghai
    Sakura Bank, Shanghai
    Sanwa Bank, Beijing
    Shanghai Commercial Bank, Shanghai
    Shangai Pudong Development Bank, Beijing
    Shantou City Commercial Bank, Shantou
    Shenzen Development Bank, Shanghai
    Shinhan Bank, Tianjin
    Societe Generale, Shanghai
    Standard Chartered Bank, Beijing
    State Development Bank of China, Beijing
    Sumitomo Bank, Shanghai
    Swedbank, Beijing
    Swiss Bank Corporation, Beijing
    Tat Lee Bank, Beijing
    The Chase Manhattan Bank, Shanghai
    Tokai Bank, Tianjin
    UBS, Beijing
    United Overseas Bank, Xiamen
    Westpac Banking Corporation, Beijing
    Wing Hang Bank, Shenzen
    Xiamen Commercial Bank, Xiamen
    Xiamen International Bank, Xiamen
    Zhejiang Commercial Bank, Ningbo
    Zhuhai City Commercial bank, Zhuhai

    1. Foreign-owned banks are allowed to set up shop in China, but they are strictly regulated. All Chinese banks are owned by the state in one way or another and are intensively regulated. It’s was this extreme regulation and state ownership that allowed China to avoid the Neoliberal Bankers Depression.

      You are trying to say that it’s the same as the neoliberal US system of banking, and it’s simply not true.

      Those nations that had state banks or strictly regulated banking emerged relatively well from this Neoliberal Bankers Depression. Nations that went the most neoliberal of all on banking (Iceland, Latvia) were the most devastated of all. You can practically plot it on a graph.

  5. To Rob:

    You are trying to say that it’s the same as the neoliberal US system of banking, and it’s simply not true.

    No Rob. Many of the Chinese banks have publicly traded stock and there is no one bank as you asserted. Yes they have regulation, that doesn’t mean they aren’t capitalist.

    1. Yes, but the Tea Partiers and neoliberals (who you support, BTW) say that all regulation of banking and business is socialism and Communism. You are engaging in the typical neoliberal game there (and you are a neoliberal) of praising Chinese “capitalism” while if the same thing happened anywhere else on Earth you would call it “failed socialism.”

      Can you explain why China avoided the Neoliberal Bankers Recession? I’m told it was due to their strict regulation of banking.

      Hong Kong won’t even let you own land!? But you get “rights to the land for 70 years?” WTF man? In the rest of the world and in Tea Party land, that’s called socialism and Communism. With the neoliberal liars of the Heritage Foundation, it’s called super-capitalism.

      No one with any sense believes anything the Heritage Foundation says about anything, much less their crazy “free vs not free”, “economic freedom” indexes. It’s all bullshit politics man, all of it.

      Neoliberal = LIAR! Neoliberals are all liars, every single one of them. No exceptions!

  6. To Rob:

    And I think they give you your house. You own your house. I think the state just gives it to you. But I don’t think you can sell it. The state gives you a house to live in for free. Sound like capitalism to you?

    No Rob, you are wrong again. You can buy and sell houses in China. Do a Google search on Chinese Property Bubble. You can also buy and sell land use rights which last for 70 years for residential property. (Similar to Hong Kong which is ranked number 1 by the Heritage Foundation as being uber capitalist…)

    http://seekingalpha.com/article/198717-china-s-property-bubble-biggest-in-its-history

    http://www.time.com/time/magazine/article/0,9171,1971284,00.html

  7. Some communist stock and commodity exchanges:

    Shanghai Stock Exchange
    Shenzhen Stock Exchange

    Beijing Commodity Exchange
    China-Commodity Futures Exchange of Hainan
    Dalian Commodity Exchange
    Shanghai Cereals and Oils Exchange
    Shanghai Commodity Exchange
    Shanghai Metals Exchange
    Shenzhen Mercantile Exchange
    Suzhou Commodity Exchange
    Zhengzhou Commodity Exchange

  8. The glorious revolutionary stock and commodity exchanges of “Red” China:

    Shanghai Stock Exchange
    Shenzhen Stock Exchange
    Beijing Commodity Exchange
    China-Commodity Futures Exchange of Hainan
    Dalian Commodity Exchange
    Shanghai Cereals and Oils Exchange
    Shanghai Commodity Exchange
    Shanghai Metals Exchange
    Shenzhen Mercantile Exchange
    Suzhou Commodity Exchange
    Zhengzhou Commodity Exchange

  9. Some revolutionary quotes:

    To get rich is glorious.
    Deng Xiaoping

    Let some people get rich first.
    Deng Xiaoping

  10. To Rob:

    Yes, but the Tea Partiers and neoliberals (who you support, BTW) say that all regulation of banking and business is socialism and Communism.

    I don’t know what the Tea Party nor the neoliberals do or do not support in regards to banks. In my opinion there was widespread fraud that basically triggered the US Real Estate and I am not tolerant of fraud.

    1. I don’t know what the Tea Party nor the neoliberals do or do not support in regards to banks.

      For Chrissake man, you’re a neoliberal spokesman and you don’t know what they stand for? Neoliberals oppose any and all regulation of banking, straight from Miltie on down through the Chicago School. It was a neoliberal, pro-business impulse that got rid of the banking regulations in the first place, starting with your Republican hero, Phil Gramm and his wife, Wendy.

      The Tea Partiers oppose any and all government regulation as socialism and Communism. I am on the one of the main Tea Party mailing lists. I recently got a mail from them telling me that they are dead set against banking reform as a socialist project to kill capitalism.

      In my opinion there was widespread fraud that basically triggered the US Real Estate and I am not tolerant of fraud.

      This is where your ideology makes no sense. The neoliberals got rid of all of the regulations on banking, so arguably there wasn’t even any fraud involved in all these shenanigans. Also, you are a neoliberal, and neoliberals have always opposed any and all anti-fraud legislation as “anti-business.” The US Chamber of Commerce has opposed every anti-fraud measure ever proposed as “anti-business.”

      Truth is that capitalists the world over want to have the legal right to rip you off. The only thing that stops them is socialist regulations.

  11. To Rob:

    Can you explain why China avoided the Neoliberal Bankers Recession?

    It’s really quite simple. It’s called underwriting.

    US version. No money down, no documents required to determine if you actually make money.
    Skim money of the fees and resell the loan to a sucker.

    Chinese version, 30% down payment. Loan is held by the bank.

    See the difference? By the way US did basically the same thing (well 20% down and actually checking to see if you had a job.. ) for many decades.

      1. Yeah, but you’re a neoliberal, and as such, you automatically oppose all state efforts to regulate the banking sector. Or am I wrong here?

        We had a discussion about this before – In my opinion what happened in the banking sector was criminal behavior. I have no problem with certain types of regulation such as for the banking sector, construction, used car sales, auto repair, food standards, pollution control, etc. There can come a point when regulations become onerous however I believe there is a middle ground.

  12. Look, Bob- the tea party folks have been described
    …by a Nation columnist, I believe,–but on the other hand it could have been an American Conservative Mag columnist– as “lost at sea.”

    There are a healthy segment of tea party people who are indeed for some banking regulation and restoring Glass Stegall. Have even they they pressed home their stances hard enough with proper emphasis as compared to other of their stances? I doubt it. But do “lost at sea” people
    do much in proper size and shape after a few days?

    1. I would be surprised if Teabaggers came out for Glass-Stegall and re-regulation of banking. Their whole thing is that the government is too big and needs to be radically downsized.

      Also I just got an email from a major Teabagger organization opposing banking reform as “socialism.” It may have started out as a genuine grassroots movement, but these teabaggers are just being used by the Republican Party anymore. All they do is what their Republican and corporate paymasters tell them to do.

      It’s a fake grassroots astroturf organization funded by Newt Gingrich, Grover Norquist, the Coors, Scaife, and Olin Foundations and the whole thing is being astroturfed by Fox News.

      I would be stunned if any significant number of teabaggers supported any regulation of anything at all.

      The teabaggers are like to opposition to Clinton in the 1990’s and especially like the opposition to Roosevelt in the 30’s. Remember they called the New Deal socialist too.

      They are lost at sea. But they’re also hopeless. I know these people well. They’re weaned on hatred of liberals and Democrats with their mother’s milk. They’re hopeless. I keep hearing that we need to reach out to these people and win them over to our side, but they really are hopeless.

      Race and class are deeply intertwined in US society. The teabaggers are basically a White upper middle class older movement. And yes, in the US sense, it is quite racist.

    2. Sure they don’t know their ass from a hole in the ground and they don’t know what the Hell they are talking about, but isn’t that true of your average Republican?

      These people understand nothing about politics or economics. They are political amateurs. In particular, they know zero about economics.

      The Republican leadership and the corporate crowd understand economics, but they just willfully pursue Hooverism out of blind obeisance to some strange God of Neoliberal Fundamentalism. Their agenda is irrational and what they are say are mostly just never-ending strings of lies, but at least I think they understand what they are doing.

      They actually believe that it’s perfectly normal to have wild booms followed by horrible busts that could even be major Depressions. Remember Hoover? “We must not interfere with the natural business cycle.” They know full well that their crazy philosophy blew up the economy and created a World Depression but they don’t care.

      Their economics is supposed to do shit like that. That’s how it works. The Depressions and all are a feature, not a bug. They never really come out and say this (Although to his credit Ron Paul does) but I’m sure that this is what they think. Your average teabagger has no conception even of Hooverian economics. They don’t understand that the economics that they push will create wild booms and busts called Depressions due to its unregulated nature.

      In particular, they don’t seem to grasp that the state must engage in stimulus and deficit spending in an economic recession or depression. To fail to do so has serious consequences.

  13. Rob,

    OK, well, you’re not a neoliberal after all I guess. They seem to oppose all of those regulations last time I checked.

    Here’s an example of a relatively unregulated financial market working well. The 3 major credit bureaus give ratings on a consumer’s credit worthiness. There are flaws but overall the system is a pretty good indicator of risk. The people who pay for the credit reports are the ones handing out the money. The opposite was true in the banking disaster. Credit agencies such as Moody’s and Fitch were paid by the people selling the bonds, derivatives, credit default swaps, etc. A similar analogy would be consumers who receive credit cards from banks etc.. are the sole customers of the credit bureaus. EG the people receiving the money are the ones in control of their credit report, not the other way around. Such a scenario is ripe for fraud and pandering to the customer’s wishes. In the case of the US.. the customer’s were fly by night mortgage brokers, banks, etc.

  14. To Rob

    Remember Hoover? “We must not interfere with the natural business cycle.”

    The reality is Hoover interfered with the natural business cycle plenty. Part of Roosevelt’s campaign against him was that Hoover interfered with the business cycle.

  15. To Rob

    In particular, they don’t seem to grasp that the state must engage in stimulus and deficit spending in an economic recession or depression. To fail to do so has serious consequences.

    Keynesian economics holds that the state should build a surplus during good times and spend the surplus during bad times. The reality is there was already a substantial Federal deficit as well quite a few state and local deficits (not to mention ever large fiduciary obligations such Federal, state, and local pensions as well as Medicare and Social security…) What we are setting up is a stagflation scenario. Inflation on items we need (energy, food, medicine…) and deflation on the things we posses (Houses, commercial real estate..) combined with a stagnant economy and high unemployment.

    The end result of the current actions (and previous actions..) by the Fed will be the US economy will likely look similar to the Latin American economies of the 70s. High unemployment combined with high inflation.

    1. I don’t agree with your assessment at all. In particular, Latin American economies never engaged in much stimulus spending.

      The US hasn’t run a surplus for quite some time. There is no deficit or debt crisis at the moment.

      During a recession and in particular in this one, no one is loaning money and business are not spending. Neither are they hiring. They only way to stimulate the economy therefore is for the state to spend, loan and hire where the business class is not.

      You are right we are heading for permanent high unemployment, but that’s not the state’s fault. That’s a crisis in US capitalism. And the only way to lower that unemployment is for the state to have a jobs program to put people to work, since businesses are not hiring. In particular, banks are not loaning money and have not been loaning much to business for 20-30 years now, preferring to make money off derivatives and consumer loans.

      The deflation now threatening to occur is due to the Neoliberal Depression. There is little to no inflation to speak of at the moment and interest rates are already as low as they can go.

  16. To Rob

    There is little to no inflation to speak of at the moment and interest rates are already as low as they can go.

    Of the following which is higher and which is lower for the past five years?

    Food
    Sales Tax
    Gasoline
    Medicine
    Tuition
    Housing

    Of the 6 only housing is lower because of the dramatic over building spurned by extraordinarily poor underwriting and very low interest (real) rates.

  17. To Rob

    The US hasn’t run a surplus for quite some time. There is no deficit or debt crisis at the moment.

    False there are deficit and debt crises at the state and local in many communities. The US Federal government has not hit the wall yet because of foreign central banks (The Chinese and Japanese in particular..) and partial monetization. The Chinese have been complaining like crazy about runaway US spending. Eventually we will hit a wall…it’s a not a matter of if but when.

    1. There is a lack of money at the state and local levels, yes. But in a recession or depression, the last thing you do is cut spending and services. That’s what these states are doing. It’s madness. At the Fed level, there is no debt or deficit crisis and what problems exist were all caused by your Republican friends like Bush and Reagan. They did this as a deliberate strategy to bankrupt the state, something that you guys never complained about. A bankrupt state would have to gut all social spending, and this was their intention all along.

      There is going to be a debt/deficit crisis in about 2020, but it’s almost exclusively due to runaway medical costs. There are proposals to deal with these through health care reform, but you guys oppose all of that. I don’t know what to say. It’s your views that are creating the whole debt/deficit crisis that you are complaining about.

      All of the 3rd World borrowed money, mostly from the IMF and the World Bank (Western banks). Imperialism loves this because it’s very profitable to the West to sell the darkies money. Imperialism doesn’t care at all that it devastated their economies. That was the plan all along. The 3rd World debt is unpayable. Argentina said screw you and just defaulted, and now they are doing fine. Venezuela simply paid theirs off.

      It’s nonsensical to predict a 3rd World debt crisis for the US. Doesn’t make sense at all. Most of the Developed World has a much worse debt problem than the US, and they aren’t even facing this problem. This must be some kind of neoliberal debt hawk fantasy that they are putting out.

      Also, the 3rd World debt was not caused by “excessive spending.” This must be some neoliberal fantasy. 3rd World countries have low incomes and need foreign loans to develop because they don’t have the cash on hand. You’re the 1st person I’ve ever met who said the 3rd World debt crisis was due to “excessive spending.” It can’t possibly be true.

  18. To Rob:
    I don’t agree with your assessment at all. In particular, Latin American economies never engaged in much stimulus spending.

    http://en.wikipedia.org/wiki/Latin_American_debt_crisis

    Sorry.. that’s false… there was a large amount of investment in infrastructure in 60s and 70s throughout much of Latin America. (Dams, bridges, roads, buildings…)

    Brasilia, Brazil – a city with a metro area of 3.6 million people was basically built from scratch starting in the 1960s: http://en.wikipedia.org/wiki/Bras%C3%ADlia

    The tipping point came when various countries could no longer service their foreign debt. At the moment the US is very lucky in that we owe foreign debt in our currency. That very likely change in the future. When it does, the US will have little room to maneuver.

  19. To Rob:

    Also, the 3rd World debt was not caused by “excessive spending.” This must be some neoliberal fantasy. 3rd World countries have low incomes and need foreign loans to develop because they don’t have the cash on hand. You’re the 1st person I’ve ever met who said the 3rd World debt crisis was due to “excessive spending.” It can’t possibly be true.

    First quite a bit of the developing world debt does get paid. Case in point would be much of Asia and more recently Latin America.

    Second I never used the term “excessive spending” so effectively a straw man. You used the term “stimulus spending” and I stated that much of the spending in Latin America (from loans from foreign sources…) was on infrastructure. (Which to the best of my knowledge is true.. I can confer with my father to verify.

    Third – If you have a debt crisis (as an individual or a country..) eg you can’t service your debt. Doesn’t that imply you borrowed money and can no longer pay it back?

    1. Yes, they borrowed money and they can’t pay it back, or if they do, it’s a wasted effort. Correa of Ecuador recently said he was going to default on his nation’s debt. They’ve been paying it for 28 years, and they owe just as much as they did 28 years ago. Fuck that.

      BTW, this is one of the methods of capitalist accumulation and exploitation of poor countries by rich countries that your neoliberal friends love so much. It’s basically loan sharking and permanent debt bondage. Screw that.

      Argentina defaulted on its debt and walked away. Everyone predicted disaster, but they are doing fine now. Chavez paid off his nation’s debt and said be done with them. Castro said the 3rd World debt is unpayable, and I agree with him.

      But if they had not borrowed that money, they would be even worse off than they already are. They would all be something like Somalia.

      1. To Rob:

        Correa of Ecuador recently said he was going to default on his nation’s debt. They’ve been paying it for 28 years, and they owe just as much as they did 28 years ago.

        Well have they been borrowing since 28 years ago..? Apparently yes. I read up on the situation.. hard to determine exactly what was going on.. sounds like a bit of the money was siphoned off due to LA corruption. And by the way it was only a partial default… they stated that they felt 40% was illegitimate and were going to go after some of the internal (Ecuadorean..) actors responsible for accumulating and misspending the money.

        Argentina defaulted on its debt and walked away. Everyone predicted disaster, but they are doing fine now.

        It was a disaster… it plummeted the nation into chaos.

        Chavez paid off his nation’s debt and said be done with them.

        He’s borrowing money from the Chinese instead as we are.

        that your neoliberal friends love so much.

        My neoliberal friends..? What are you talking about Rob?

      2. To Rob:

        But if they had not borrowed that money, they would be even worse off than they already are. They would all be something like Somalia.

        Who would be like Somalia..?

      3. Not true at all, Unc. The plunge into chaos occurred as a result of a variety of factors, I think mostly international capital pulling out of the country or something. There was a terrible Depression for a while, a new guy, Kirchner, came in, he said fuck this, we ain’t paying this debt, fuck you. Everyone predicted total catastrophe, I am not sure why, but nothing much happened, and now they are growing again.

        Nice to see you are shilling for the Western banks who stuck the 3rd World with that unpayable debt. :/

      4. The whole 3rd World would probably be like Somalia if they had not borrowed money to develop. Everyone knows they need access to international loans. No one disputes that. They used the money to develop. The problem there, except it’s unpayable. They’ll be in debt bondage forever.

        Further, debt payments takes up like 1/2 the average budget of these countries, and there’s nothing left over for anything else. Also they are under IMF structural adjustment to pay off the loans, and this means ruining their society and opening it up to predatory foreign firms.

        You act like all the money was wasted or something. You also act like this is a crisis of overspending. No sane person accuses the 3rd World states of overspending. It’s absurd.

  20. To Rob:

    There is going to be a debt/deficit crisis in about 2020, but it’s almost exclusively due to runaway medical costs.

    I bet something will happen before 2020, especially if the US is running deficits in excess of 1 trillion dollars.

    There are proposals to deal with these through health care reform, but you guys oppose all of that.

    You guys..? I have barely commented on the Health Care reform aside from the fact that I thought it appears to be benefiting the Health insurance companies. I have stated on your blog that I didn’t understand why we can’t just expand Medicare to cover all US Citizens and legal residents and have additional private insurance if you want additional care which is similar to the Australian system. (Well actually I have some pretty good ideas why that wasn’t/won’t be implemented..)

    there is no debt or deficit crisis and what problems exist were all caused by your Republican friends like Bush and Reagan..

    1) I have never been a supporter of GWB nor the Iraq war.

    2) Just because there is no debt crisis now doesn’t mean there won’t be one in the near future.

    3) Add in the state and local deficits to the Federal deficit and the US starts looking like the PIIGS.

    1. The deficits themselves are irrelevant. It is deficit and debt as a % of GNP. On that basis, we are fine for 10 years.

      I don’t understand your politics at all. You come across as a free marketeer, then support single payer (Medicare for all). You’re also a deficit hawk, but the deficit hawks all hate single payer.

  21. To Rob:

    The deficits themselves are irrelevant.

    Have you been hanging out with Dick Cheney..?

    It is deficit and debt as a % of GNP. On that basis, we are fine for 10 years.

    Highly debatable. The debt to GNP is actually higher in Japan but they owe all the money to themselves. In contrast with the US more than half of the debt accumulated since 2000 has been to foreign sources.

  22. To Rob:

    Nice to see you are shilling for the Western banks who stuck the 3rd World with that unpayable debt. :/ ..

    Well one Argentina is not the third world. I have been there several times, it’s clearly better off than place like Honduras or Guatemala… closer to Spain or Portugal.

    Two, why do you think I am shilling for Western Banks? (and by the way allegedly a fairly high proportion of the Argentine bonds were held by state pension funds in Spain and Italy… eg not Western banks and very few US banks..)

    Kirchner, came in, he said fuck this…but nothing much happened, and now they are growing again.

    No, it happened under the previous administration…. and there were definitely problems before but when they did a default on their debt their currency lost 75% of it’s value and they had almost 100% inflation in one year. I know someone who died because they could no longer get the medication required for their heart condition. One can certainly argue that they needed to reschedule their debt..but the Argentine government handled things in a very haphazard manner, basically royally screwing the poor and middle class… whereas people with money were able to snap up property for a song.

    The whole 3rd World would probably be like Somalia if they had not borrowed money to develop. Everyone knows they need access to international loans. No one disputes that. They used the money to develop. The problem there, except it’s unpayable.

    What..? So would you loan money to someone who you knew could not repay you..? Does that make sense…? Or are you saying the interest rates were two high..? An article that claimed that Western banks screwed Ecuador actually revealed how much it was paying in interest.. in 1979 actually somewhat less than the US prime rate..in 1981 3% more than the US prime rate. Do you consider those usurious rates..?

    I am not defending Western Banks but I do question the standard line about exploitation etc… via lending. Without being presented hard data I will ask such questions. I can look at a balance sheet and/or a financial statement. Where are the hard numbers..?

    The repayment of long term loans even at a relatively low interest rate is a majority of interest.
    See here:
    http://www.bankrate.com/calculators/mortgages/mortgage-calculator.aspx

    A bank has to charge something taking into account it’s own expense for money and inflation. What killed third world countries in the late 70s and early to mid 80s was the very high cost for money for US (and European) banks (17% for the US prime rate in 1981..) and inflation (between 5% to 11%) in that era which would on average yield an interest rate of around 20% just to break even.

  23. The Great Leap Forward was not a senseless fantasy as many in the neo-liberal West and some in China have since suggested in hindsight. It called for the new system of “Two Decentralizations, Three Centralizations and One Responsibility”.

  24. I’m Chinese and I just want to say you make many false statements. While it’s true that we cannot buy and sell land, we can buy and sell real estate freely.

    Also, you incorrectly surmised, “The state gives you a house to live in for free.” This is not true, as many homeless Chinese people can attest.

  25. My feeling about China is that the jury is still out.
    Any attempt to define it as fully capitalist runs into problems, some them mentioned above. It is clearly a class society, and class inequalities are widening. The Gini coefficient for China, which measures social inequality, has climbed since 1980.

    It is therefore difficult to define Chinese society as socialist, or even moving in a socialist direction.

    Unemployment exists in China, but on a minuscule scale compared to India, where it is 330 million out of 1 billion people). The estimated figure for China is 20 million for 1.4 billion people.

    If China is neither capitalist nor socialist, then the possibility is that it is a class society of a new type,
    bureaucratic collectivism. China has widespread Labour unrest, which indicates to me at least that a class in being brought into being by industrialisation whose interests are radically opposed to those of the Communist power elite.

    As a development model in poor countries, bureaucratic collectivism is clearly an outstanding success, especially when compared to the pitiful example of India.

    In addition the Chinese Communist party has avoided the social breakdown and dislocation that followed the breakup of the Soviet Union. To do this it has maintained a tight grip on information (the Internet wall) and opposed itself to demands for civil liberties. As we cannot judge China by the standards of rich Western liberal democracies, it seems to me that, for the moment at least, the price is worth paying. Would Jae Ching like to comment?

  26. China is a National Socialist state just as Germany was between 1933 and 1945. It combines pragmatic half-capitalist, half-socialist economics with an authoritarian government that promotes strong nationalism and pride among its citizens. The perfect recipe for success.

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