Elite Planning

By Charles Reeve, Le Monde Libertaire, February 1998

This article translated fron Le Monde Libertaire gives some background information on the current situation in China and will be appearing in a forthcoming edition of FREEDOM.

CHINA FOCUS.

In September 1997, two months before the meltdown of the East Asian banking system, the XV Congress of the Chinese Communist Party took place. For on this occasion, and with regard to the reform of the industrial state, the different tendencies within the bureaucracy came together on a circumstantial compromise. Once again this compromise takes into account both the power-relationships which exist in its core and the dangers of social revolt.

Since the middle of the 1980s the necessity of reforming the industrial state has haunted the Chinese bureaucracy. Some statistics help pinpoint the problem. This sector brings together some 120,000 large-scale enterprises of which 7,000 are directly controlled by the central government - essentially those making up the backbone of the military-industrial complex and which represents more than 100 million workers. The sector today is 70% in debt with losses rising regularly by 10% pa. Up until recently the state banks soaked up the deficit but 20-30% of bank loans remain unpaid. For some years the state has refused to finance this as it was a source of inflation. Whereas this sector constituted 80% of industrial activity in 1980 by 1997 the figure had fallen to 30%. These big enterprises modelled on the old Soviet model continue to pay only the social minimum in the way of remuneration: lodging, social security, pensions. One can easily understand that the deconstruction of this sector leads directly to social questions. It implies, eventually, the end of the ancient right to an 'iron bowl of rice' or stable employment. Today this is threatened not only by the financial withdrawal of the state: workers are no longer paid, pensions are reduced or eliminated. The social consequences of this reform are simply added on top of the precarious nature of the new workers status called 'the porcelain bowl of rice' and the massive migration of 'floating workers' and social inequalities along with savage exploitation in the foreign capital enterprises of the Special Economic Zones (SEZs).

At one time the Chinese bureaucracy thought it would be able to introduce into the state sector the western criteria of profit by linking salary and productivity. But the essence of exploitation of labour under capitalism is to not allow extensive exploitation to become its intensive variety. A qualitative jump in the process of labour valorisation being impossible, the ruling class found itself obliged to find other solutions. First it avoided the problem by setting up the SEZs where the workforce is for the first time treated as just a commodity. Then it had to modernise political control of society following the disappearance of the old Maoist ways ('movements', mass organisations, demonstrations, self- criticism etc.) which had disappeared more forcefully with the dismantling of collectivised agriculture.

THE BUREAUCRACY SHARES OUT THE PROFIT

Today the bureaucracy pretends, at last, to be in a position to launch a frontal attack on the dismantlement of the Industrial state. In fact, this process has been in progress for many years. With all the prudence a situation of social instability calls for the local authorities have gone for mergers, liquidations and bankruptcies. Those state enterprises that were made self-managing had to face up to market competition. The ruling class is simply trying to adapt the juridical framework to the new situation by, for example, voting through a law relating to bankruptcies. These modifications are carried out, however, without the concept of sate property being really damaged. In particular, the bureaucracy is still refusing the idea of the privatisation of state enterprises in big industry and prefers to lay the emphasis on the transformations of these businesses into companies based on shares and by setting up companies to manage public assets. This allows for capital to be shared out among the different cliques in the bureaucracy. Workers also find themselves obliged to buy shares in these companies... the only way they can preserve their status as a government employee! This, in effect, is another cut by the state in the meagre workers salary and represents forced savings. Despite these 'patriotic efforts' in 1997 the reform of the industrial state saw 2,000,000 workers made unemployed and 10,000,000 are expected to join them over the next three years. Those workers who in the past had a secure job thus discover the laws of insecurity. Apart from unemployment there are a whole range of intermediary possibilities going from keeping the status of a state worker but without a wage (in order to save on social contributions), to the mutation of affiliated enterprises set up by the state and functioning in a market framework. From one end of the process to the other, it is the bureaucrats who are calling the shots along with all the abuses imaginable.

THE WORKERS

The ruling class, fearing the chaos that would be provoked by a social explosion, is not out of the woods yet. During the debates at the XV Congress, Zhu Rongji, third in ranking in the state apparatus declared with non customary frankness, 'I fear that full scale reform of state enterprises might unleash social convultions we can only have difficulty in imagining'. In actual fact these last few months have seen more and more workers revolts in more and more regions and towns against the consequences of the reforms. The demonstrators often focus their anger on the communist party buildings - deemed responsible for the situation. For the moment these revolts have been localised, which allows the central powers to use either the carrot or the stick as appropriate - oblige the banks to release the necessary funds to clear up back payment of salaries or send in the police. The randomness of the revolts is so great that people have looked back nostalgically to the 'socialist good times' - a situation which brings to mind what happened in the XUSSR. Moreover, such sentiments find an echo among the conservative faction in the hierarchy or those who have not known how to make some profit from the dismantling of industry and the advantages of the market. These are then revolts which have little of a spirit of hope and have no direct links with the strikes in the SEZs which are being used against a more ferocious form of exploitation and bosses authoritarianism. This also explains the different attitudes of the former mass organisers: the unions, womens organisations, the youth, pensioners. In the SEZs they play a role of providing the work force which has been added to their traditional role as police auxiliaries (informers, strike breakers etc.). In those regions where the dismantlement of industry is taking place they have set up social welfare bureaux to find work for the unemployed, that is to say charity organisations whose responsibility is to keep the poor compliant. Behind the facade of reform we can also see the transformation of the bureaucracy and its economic role. In those regions where reform is most advanced we can note the creation on a massive scale of businesses affiliated to state industry but functioning in the private sector of the economy. Most of these companies are dedicated to trade. They have appeared from 1985 but have really taken off since 1992 that is to say after the crushing of the revolt at Tianan'men square and the repression which followed it. Often they limit themselves to playing on the difference in prices between the Plan and those of the market for produce which comes from the state industries. In most cases, these companies empty the state enterprises of their most modern assets - material and human. It is in this way that the members of the bureaucracy who control them are carrying out a transfer of productive activities which belong to the 'state's property' to those companies in the market sector. Generally it is only after this has been done that bankruptcy is declared.

THE GREAT LEAP OF SPECULATION

In conclusion, if the legal status of property remains that of the state we are witnessing an appropriation of capital and the profits of the old state enterprises. This appropriation rarely is put into new productive investment, a relaunch of production on firmer capitalist bases. The bureaucrats who seize these riches invest them in speculative sectors, within the country (real estate, prostitution or drugs) or overseas (Asian stock exchanges or even the international money markets). A small proportion is reinvested in the SEZs by handing over the funds to the Hong Kong diaspora or elsewhere. As in Russia we are witnessing a systematic pillaging of assets from the former state sector to the profit of those sectors of the economy best adapted to the market and most integrated in the international capitalist system. All these observations lead to serious doubts of this becoming a classical transformation from a bureaucracy to a bourgeois class.

When we take into account that the Korean banking system was a model for the current regime in China we can see why incompetence and disquiet are the order of the day. The current financial crisis in Asia will have consequences on the Chinese situation. But above all this crisis is perhaps the first stage in a more terrible process. The region which yesterday was hailed as the most dynamic of the global economy is today faced with bankruptcy. We might ask: does the success of the Chinese economy not hide a speculative development founded on this pillage by the bureaucrat-businessmen of those riches produced during the period of 'real socialism'? The totalitarian form of political power, associated to the interests of global capitalism might help to cover up the situation and the immense social and economic disaster.

Once again the comparison with the XUSSR comes to mind. The essential difference remains the political unity maintained by the bureaucratic state. But for how long? In the short term the loss of competivity of exports will stifle the economy whilst at the same time the fall in foreign investment (from neighbouring countries) in the SEZs will grow. On the other hand the financial role of Hong Kong as a point which attracts speculative capital seems weaker. The anti-reformist tendencies will however be reinforced and the internal struggles within the ruling class threaten to intensify. In addition once the state sector has been destructured and relieved of its most dynamic forces one can envisage a confrontation at the heart of the new ruling class of business/bureaucracy, between those nationalist currents and those who look outward to the interests of speculative capital.

Unless the revolt of the workers, up until now sporadic, takes on a new form and opens up a perspective on social emancipation.

Charles Reeve
(translated from Le Monde Libertaire February 1998)