The Rise of China and the Demise of the Capitalist World-Economy

Minqi Li, The Rise of China and the Demise of the Capitalist World-Economy (London: Pluto Press, 2008).

For those who concern themselves with the issue of global capitalist leadership and its transition phases, the last decade has been a living laboratory of sorts. Since September 16, 2008, when US officials let the investment bank Lehman Brothers go down the tubes, and a worldwide credit crunch and accumulation slowdown ensued, the minds of those persuadable that US hegemony is on its way out and a prospective Chinese hegemony is on its way up have been concentrated all the more. Reports from the international business press are now combed daily to test the thesis that the baton of global capitalist leadership is being passed across the Pacific: the financially supine US accedes to China’s demand for more say-so in IMF decision-making (validation of the thesis!), or China continues to load up on US Treasury notes because it sees no safer store of value for its voluminous currency reserves (its rejection!). Certainly, then, a book with the telltale phrases “the rise of China” and “the capitalist world-economy” will help us arbitrate if we are contemporaneously witnessing the decisive moment of hegemonic transition?

Well yes, perhaps, but not in a fashion customary to most students of global geo-economics and geopolitics. Li acknowledges that US hegemony is irrefutably over and done; the desperation of the neoconservatives’ gamble to revive US power by means of military adventurism in and around the Persian Gulf and Caspian Basin, a project now mostly in tatters, only proved that US hegemony was already overripe (124f). But Li’s central argument is that a succeeding Chinese hegemony can never be born – because it is China’s ill luck that just as it is on the verge of assuming global capitalist leadership, the very global capitalist system itself is reaching the end of its lifespan. Although such a terribly ironical message will not be well received in the halls of Zhongnanhai, surely Li is onto something here. How can anyone with eco-socialist sensibilities, attuned to the destructive manner in which capitalist growth has disrupted the carbon cycle and thereby sabotaged its own footings, not at least suspect this?

More provocatively and more interestingly, Li proposes that the grand socio-historical process that has escorted China to the cusp of hegemony is the same process that has the global capitalist system at death’s door. Unfortunately, one of the central weaknesses of the book is that Li tends to give analytic priority to the macro-level deus ex machina forces responsible for global capitalism’s incipient demise; his attention to the distinctive and particular contributions China’s ascent is making to this outcome (which he regards as inevitable) is incomplete. Li’s skewed focus is probably the byproduct of the framework he adopts, an austere version of world-systems theory that errs on the side of functionalism.

Li minces few words in the opening pages of the book. He asserts that, like all socio-economic orders, global capitalism (or, in his preferred parlance, the “capitalist world-economy”) is defined by underlying conditions that are exhaustible, and once these conditions are used up, so too is the capitalist world-economy (2, 126). What are the two utmost structural characteristics of the capitalist world-economy? The first is the unceasing expansion of capital. The second is a division of labor that straddles multiple political jurisdictions, i.e., the absence of a system-encompassing regulatory authority. It is axiomatic for world-systematists that the second feature is the steward of the first – in other words, it is geo-economic competition between states that enables endless accumulation to persist and thrive (3f). (In fact, this claim is so axiomatic among world-systematists that too often it is merely declared rather than convincingly demonstrated, and Li is also guilty of this. However, this lacuna must go uncontested here.) But while the lack of a truly global sovereign (so to speak) ensures that capitalist growth will go on unabated, it also presents a “steering problem”: what agency will devise, implement, and enforce solutions to the myriad system-threatening injustices and irrationalities thrown up by accumulation on a world scale? Typically this task falls to the hegemonic leader, but just as typically the danger lurks that the hegemonic leader will orchestrate global geo-economic and geopolitical arrangements in the service of its own narrow imperial interest, rather than the broader interest of stably reproducing the capitalist world-economy – a danger reinforced by the ongoing reality of inter-state competition.

Without putting it quite this way, Li effectively contends that the capitalist world-economy is running out of juice for two types of reasons. One, as some of its constitutive features increasingly fade away, so too must the system itself. (There is no denying that with this move, Li borders on tautological reasoning – but that seems to be an occupational hazard of most world-systems theorizing, one that will withstand further scrutiny here.) Two, other of its constitutive features remain robust, and this is a menace precisely because these features keep the system from handling today’s unique challenges, such as the unsustainable mining and degradation of the earth’s biosphere. Each of these two types of reasons intertwines with China’s recent ascent in specific respects.

Profit is both the motive and means of capitalist expansion, but the medium-range prognosis for the rate of profit, the engine of accumulation, is not favorable (127). According to Li, China’s hothouse development since the apogee of Deng Xiaoping is inseparable from the remedy that capital-as-a-whole adopted to deal with the flagging profits and general stagnation of the 1970s: the conquest of the global system’s last enormous low-cost (especially cheap labor) frontiers, a remedy sometimes referred to as “neo-liberal globalization” (67ff, 107f). While China’s total insertion into the capitalist world-economy has been a booster shot for global accumulation since the 1980s and especially the 1990s (69–72), once capital has fully exploited this low-cost “strategic reserve” (as well as that of India), it will have no other sufficiently vast low-cost frontiers to penetrate (13, 176). Within a generation or two at most, China’s rural labor surplus will be entirely drained, and China’s organized urban proletarians will put upward pressure on worldwide wage rates, further depressing the global rate of return (109). To make a long story short, irresolvable supply-side pressures will sap global accumulation of its indispensable dynamism (107). Meanwhile, one stubborn trait of the capitalist world-economy – the dearth of genuinely effective global governance institutions – will have already prevented the system from punctually and aggressively addressing its ultimate crisis, that of runaway climate change. While Li painstakingly shows that ameliorating climate catastrophe is impossible without a significant contraction in worldwide economic activity (171), a situation clearly incompatible with capitalist imperatives, he also suggests that on the immediate horizon it is geo-economic competition between capitalist states that will undercut the efforts of the “international community” to save global capitalism from its own greenhouse gas emissions (144); tenacious US-China disagreements over how to distribute the burdens of curbing emissions illustrate this (172).

By the end of his journey, where he engages in a bit of fanciful sci-fi speculation about what comes after the socio-environmental collapse of the capitalist world-economy – he envisions that a confederation of “lifeboat socialisms” will have a fighting chance, and indeed furnishes the opportunity for post-capitalist humanity to redeem itself through the exercising of its cooperative and creative talents (187) – Li has covered a lot of ground. Some of the material he includes is integral to his narrative arc, some seems less so. Chapter Two (“Accumulation, Basic Needs, and Class Struggle: the Rise of Modern China”) epitomizes how Li can orbit simultaneously through riveting analysis and tangential digressions. Drawing upon one of world-systems theory’s more potent insights, that no (self-proclaimed) socialist state has yet to seal itself off from the geopolitical pressures or economic encroachments of the advanced capitalist core (25–27), Li chronicles how the Maoist-era Chinese Communist Party was curiously more successful at building some of the prerequisites for China’s spectacular late-20th-century rise than it was in institutionalizing radically egalitarian and democratic communism. Here Li exhibits a fabulous grasp of a crucial dilemma that confronted putative workers’ states under the compunction to dramatically “develop” – how to generate labor productivity increases when the working class enjoys lifetime employment and welfare guarantees, i.e. “the iron rice bowl” in the Chinese context (50–54)? Li’s comprehension of why partial Maoist experiments in enlisting the voluntary enthusiasm of China’s working masses met intra-party opposition is very good (55–59). His dissection of how this dilemma was finally resolved in the late 1980s and early 1990s, through the violent smashing of the “iron rice bowl,” and of the fraught class coalitions and conflicts entailed therein, is genuinely outstanding (60–66). But the chapter is needlessly marred by a tortuous excursus on the Great Leap Forward, in which burnishing the legend of Mao (rehabilitation though it may warrant) takes priority over sociological explication of why and how “policy errors” prevailed during this complex episode (44–50).

When all is said and done, however, Li’s work is fundamentally one about inexorable, large-scale trends and the coming devolution of the global capitalist system, and should be judged primarily on this basis. One merit of the book is the corrective it provides to leftist caricatures of neo-liberal globalization that pivot on the simplistic image of the universal “race to the bottom”; Li adeptly demonstrates that on the surface, at least, the achievements of Chinese bureaucratic capitalism are considerable and that these achievements are dialectically connected to the last hurrah of US dollar dominance (72f). Li’s impressive aptitude for empirical documentation is not consistently in evidence, though. For example, his conviction that China’s (and India’s) climb to the world-system’s semi-periphery will starve the system of the surplus value it needs to operate smoothly (14, 94f, 103, 109–111, 129f, 176) is advanced as a token of theoretical faith; Li conveniently eludes the Marxist literature challenging the notion that the super-exploitation of the Global South is the essential prop of worldwide accumulation. Moreover, in entertaining the viable claim that natural resource shortages will very soon short-circuit capitalist growth, Li tends to lean too exclusively on the most apocalyptic projections available (170); perhaps the greater threat to not only capitalist reproduction but also human civilization is that there resides in the earth’s crust just enough commercially extractible fossil fuel to unleash the uncontrollable global warming that properly distresses Li. Each and every one of these criticisms should not occlude the fact, however, that The Rise of China and the Demise of the Capitalist World-Economy now sets a standard for radical debate, especially debate grounded in an admirable mixture of political economy and political ecology, on the parlous trajectory of the global capitalist system.

2010 John Gulick
Department of Information Sociology, Hanyang University, South Korea

This entry was posted in 53, Volume 24, No. 2. Bookmark the permalink.