China’s crackdown on the three mountains

A December 2020 meeting of the Chinese Communist party Politburo, vowed to end what it called a “disorderly expansion of capital”.  The Chinese leaders were worried that the capitalist sector in China had got too big for its boots.  Companies like Jack Ma’s Ant Group had expanded into consumer financing and looked to raise foreign funds to do so.  In effect, the Ant Group aimed to take over household lending from the state banks.  Ant was going to do what it liked and said so with a lot of fanfare in the press.  Ant and other Chinese capitalist tech and media companies were increasingly engaged in typically ‘Western’-type mergers, secret contracts and other financial irregularities. 

China’s regulators had been turning a blind eye to all this for years.  Moreover, the financial faction in China’s leadership had got agreement to allow foreign investment banks to set up majority-owned companies in China for the first time, with the eventual aim of ‘freeing up’ the finance sector from state control and allowing unregulated cross-border capital flows.  In other words, China was set to become a full member of international finance capital.  The authorities were also allowing uncontrolled cryptocurrency mining and operations in the country.

But the COVID pandemic changed all this.  There was growing public anger at how the rich in China, as in the rest of the major economies, have gained hugely from the financial and property price boom during the pandemic, while the majority struggled through the lockdowns and faced increased costs in education, health and housing and a serious risk to decent jobs for graduates and others.  Education, health and housing are the ‘three mountains’ that all Chinese households aim to climb to get a better life – and yet costs for these were spiralling while the rich made millions. 

Now the Chinese leadership has been forced to zigzag back from ‘disorderly expansion’ and respond to the public backlash through a crackdown on the consumer tech and media giants and by introducing curbs on private education and speculative property development.  It has also banned cryptocurrency operations.

Take education. The vast majority of Chinese parents pay for extracurricular private tutoring – survey estimates range from 65% of families with school-aged children in 2016, up to 92% this year. A 2019 survey from recruitment firm 51job Inc showed nearly 40% of parents spent 20-30% of their income on children’s education.  The private classes come at eye-watering costs that contribute to an industry worth more than $150bn (£108bn). The quality and resource of education varies greatly between urban and rural areas, from province to province, and between top- and lower-tier cities. There are few university places relative to the number of students and even fewer at prestigious universities, which are concentrated on the east coast and in major cities. It is in these areas where private tutoring has exploded in the past decade. Now China’s state council is barring for-profit companies from tutoring in core curriculum subjects and foreign investment in such companies.

Take health.  Approximately 95% of China’s population is covered by a public insurance programme financed mainly from employee and employer payroll taxes, with minimal government funding.  This supposedly funds universal health care but it is very basic.  So most Chinese are forced to pay private fees to get better care, just as in many advanced capitalist economies.  And during COVID, Chinese households faced exorbitant costs for healthcare.

And take housing.  Property prices in coastal cities, where the best work and pay is, have doubled in the last ten years. In Shenzhen, the average apartment price has risen so much that some are finding it cheaper to live in Hong Kong, one of the most expensive property markets in the world.   Since 2015, residential property prices have appreciated by more than 50% in China’s largest cities. Over the past decade, average residential land supply per new resident in the top 10 cities is only 230 square feet—little more than the size of a typical hotel room—or less than 60% of the average per capita residential space in China.

Speculation has been rife as local governments try to raise funds by selling land to developers which then build estates through borrowing at low rates often from the unregulated shadow non-bank sector.  “Property is the single most important source of financial risk and wealth inequality in China,” said Larry Hu, head of China economics at the foreign-owned Macquarie Securities Ltd. And he is right.

So the government has had to respond to public disenchantment, echoing Xi Jinping’s famous words that “housing is for living in and not for speculation.” Vice Premier Han Zheng added that the sector shouldn’t be used as a short-term tool to stimulate the economy. The banks have been told to jack up mortgage rates.  Local governments are being directed to accelerate the development of government subsidized rental housing and have been told to increase scrutiny on everything from financing of developers and newly-listed home prices to title transfers.

But these mountains won’t be climbed easily by the Chinese leaders, if at all.  That’s because the Chinese authorities have leant ever more towards expansion through the capitalist sector and particularly into unproductive sectors like property and finance – at the expense of productive sectors like manufacturing technology, residential housing, public education and health.

Much of the property speculation has been to build ever more commercial developments rather than housing.  That’s because the main prerogative for local governments is to accrue revenue. If they can attract more businesses into their jurisdictions and if those businesses become profitable, then the local government can collect more corporate taxes.  At the same time, residential land supply is deliberately kept scarce so governments can make money on residential land sales. In effect, residential land sales serve as a cross-subsidy on local governments’ pro-business land policy that sells commercial land cheaply.

Beijing is pushing hard for implementing a long-delayed property tax, which could provide an alternative source of revenue for municipal governments and reduce their reliance on land sales. But a property tax is unlikely to come anywhere close to offsetting the revenue loss that would result from selling less land.  Given that average households will be exempt from the property tax, it seems unlikely to generate more revenue than income tax (1% 0f GDP), while annual land sales are currently on the order of more than 7% of GDP.

The real estate sector accounts for 13% of the economy from just 5% in 1995 and for about 28% of the nation’s total lending.  Given that local governments have $10 trillion in debt, land sales are the most crucial and reliable source of income for debt repayment.  So any drastic changes would seriously raise the risk of local government defaults.  So the new government crackdown on China’s capitalist sectors will not be enough to alter the huge inequalities of income, wealth and access to jobs, housing and education in China. 

Let’s be clear, China has a high level of inequality of incomes by international standards, although it is still lower than many other ‘emerging’ economies like Brazil, Mexico or South Africa – and the gini inequality ratio peaked just before the Great Recession and has been falling since.  

Source: National Bureau of Statistics

The main reason for the high inequality ratio is the disparity of incomes between urban and rural workers and between the wages in coastal and inland cities, as well as educational qualifications.

When it comes to inequality of personal wealth, China is not so unequal as many of its economic peers.  The gini inequality of wealth ratio is much higher in Brazil, Russia and India, and higher in the US and Germany.  According to the latest estimates, the top 1% of wealth holders in China take 31% of all personal wealth compared to 58% in Russia, 50% in Brazil, 41% in India and 35% in the US.  This is a good measure of the economic power of the top elite and oligarchs in these countries.

Much is made of the number of billionaires in China, but given the size of the population and GDP, the per capita ratio compared to the US and other major economies is relatively low. Despite the large expansion in the number of millionaires, millionaires in China remain relatively rare: about one for every 200 adults. Millionaires account for 3% of adults in Italy and Spain; France, Austria or Germany about 4%), and around 6% in social democratic Scandinavia; above 8% in the US and Australia and highest of all in Switzerland (15%)

And the inequality of wealth in China is centred on property, not financial assets (so far), unlike the main capitalist economies of the G7.  And that is because finance has not been fully opened up to the capitalist sector.

Source: Piketty et al  https://blogs.lse.ac.uk/businessreview/2019/04/01/income-inequality-is-growing-fast-in-china-and-making-it-look-more-like-the-us/

But the contradictions of China’s state-controlled economy alongside a large and growing capitalist sector intensified during the COVID pandemic.  And that was expressed by the factions in the Chinese leadership.  Officials in the financial and banking sector want to open up the economy to foreign capital and allow the renminbi to become an international currency.  They argue that the economy is too biased towards investment and exports over consumption.  Chinese economists trained in America and Europe, backed by resident foreign economists in Chinese universities and the World Bank, press continually for a ‘switch from investment to consumption’.  But has this worked in the G7 capitalist economies where consumption has failed to drive economic growth and wages have stagnated in real terms over the last ten years, while real wages in China have shot up? 

Source: Penn World Tables 10.0, author’s calculations

Indeed, consumption is rising much faster in China than in the G7 because investment is higher.  One follows the other; it is not a zero-sum game.  And not all consumption has to be ‘personal’; more important is ‘social consumption’ ie public services like health, education, transport, communications housing; not just motor cars and gadgets.  Increased personal consumption of basic social services is what is necessary.  And it is here that China needs to act.

Much is also made of China’s rising debt levels.  Mainstream economists have been forecasting for decades that China is heading for a debt crash of mega proportions.  It’s true that according to the Institute of International Finance (IFF), China’s total debt hit 317 per cent of gross domestic product (GDP) in the first quarter of 2020. But most of the domestic debt is owed by one state entity to another; from local government to state banks, from state banks to central government. When that is all netted off, the debt owed by households (54% of GDP) and corporations is not so high, while central government debt is low by global standards. Moreover, external dollar debt to GDP is very low (15%) and indeed the rest of the world owes China way more: 6% of global debt. China is a huge creditor to the world and has massive dollar and euro reserves, 50% larger than its dollar debt.

Source: IIF

A financial crisis is ruled out as long as the state controls the banking system, but there are dangers because of the recent attempts to loosen it up for private and foreign institutions to enter the arena (eg there are a growing number of bankruptcies in speculative financial entities).

Chinese leaders want to curb the debt level.  Controlling the debt level can come in two ways; through high growth from productive sector investment to keep the debt ratio under control and/or by reducing credit binges in unproductive areas like speculative property.  Japan’s secular stagnation was the result of the lack of applying these two factors in its capitalist economy.  But given the power of state control over the levers of investment, China can avoid the Japanese outcome. 

The basic contradiction of China’s economy is not between investment and consumption, or between growth and debt; it is between profitability and productivity.  The growing size and influence of the capitalist sector in China is weakening the performance of the economy and widening the inequalities exposed during the pandemic.  Indeed, it was the state sector that has helped the Chinese economy climb out of the pandemic slump, not its capitalist sector.

I did a little empirical test of the relation between the profitability of Chinese capital and real GDP growth (based on data from the Penn World Tables 10.0 – details provided on request).  What I found was that the state-dominated investment and capital stock in China meant that there has been no correlation between the profitability of Chinese capital and real GDP growth since the formation of the People’ Republic – indeed it was negative.  The profitability of capital did not decide the level of investment in productive assets and economic growth.

Source: Penn World Tables 10.0; IRR series for profitability; real GDP growth calculations

However, after Deng’s reforms in the 1980s, the correlation turned positive, although less positively correlated than in the rest of the G20 economies or the G7.  And since China entered the World Trade Organisation and privatised sections of its state sector in the late 1990s and early 2000s, there has been a significant correlation between the profitability of Chinese capital and real GDP growth.  So the Chinese economy has become increasingly vulnerable to its capitalist sector and to international capital and their profitability. 

This is the Everest facing China: how to raise productivity to meet the social needs of its 1.4bn people, in the face of vagaries of the profitability of its capitalist sector. China’s workforce is falling. productivity growth has been slowing and China faces a technology and trade war with the US and its imperialist allies. The three mountains will not be climbed unless that Everest is also conquered.

As part of its 2021-25 national plan to reduce inequalities, various provinces are engaged in building “a common prosperity demonstration zone”.  According to the plan, in Zhejiang province, labour compensation will be raised to more than 50 percent of GDP by 2025; the enrollment rate in higher education to more than 70 percent; and the proportion of personal health expenditure versus the total health expenditure will be managed to be below 26 percent.  Will this work and be applied to other provinces?  We shall see.

29 thoughts on “China’s crackdown on the three mountains

  1. The belief that an economy can be steered with capital in such a way that there is constant growth and never crises has a long (social democratic) tradition. This tradition is experiencing a renaissance in China with Mao collars.
    It is typical of this tradition that the working people or wage earners are only identified as consumers, not as self-determined owners and directors of the production.

    Wal Buchenberg

    1. I think that is a really important point. This is very explicit in Keynesian theories which focus to a fault on the role of effective demand. Furthermore, this focus on people as consumers instead of workers fosters — and is sustained by — some of capitalism’s worst qualities. Workers are stripped of their agency to alter and reorganize their workplaces and freedom and choice are reduced to deciding which brand of breakfast cereal to purchase at the supermarket.

  2. The low debt owed by the central government is I suspect an indicator not of financial strength but weakness. The SEZs are de facto neocolonial concessions. In the Long March away from Maoism, can the return of financial warlordism in the provinces still be so far away?

    Another way of looking at it is, does the central government have any interest in equalizing the provinces at all? The northeast is possibly even declining, a kind of rust belt, which seems to me to be the consequence ultimately of the commitment of the national government to permanent economic warfare/siege of northern Korea. The region is economic zone with an inner unity, thus, attacks hit both sides of the border.

    As to whether the central government wants to climb the three mountains, the whole point of demonizing the Cultural Revolution is to fight the devotion of resources to the countryside; to promote the credentialism of education to create an elite with more or less guaranteed prospects; to smash the iron bowl, not to fill it with medicines.

    Nor is it clear to me that the central government is doing anything truly effective. Restricting spending on tutoring is also a way of restricting spending on education, preserving the elite centers of education for the currently existing elite, closing the doors to competition. Ant may not be allowed to get foreign financing, but as I understand it, Ant is essentially getting subsidized money from the various provincial governments and collecting the interest on it. This continues unabated as I understand it. (The notion that nationalization is for bankrupt firms instead of those that could be genuinely useful in meeting people’s needs is surprising common, even in social democratic circles.)

    There has been report of a plan to increase party representation in large private businesses. Some interpret this as the party cracking down…but it’s not clear to me that embedded party members are different from embedded journalists in military units. Only time will tell if this isn’t a promise to build a service corps for businesses, where party promotion depends on successfully representing the needs of the business.

    In the end, I suppose it’s a question of whether the capitalist road can be trod forever, magically turning somehow into socialism. Or whether at some point, the repeated issues require that the capitalists need state power to re-organize government to serve their needs, that the conflicts with the state property forms and the vital principle of production for profit.

    1. This is the biggest pile of blather regarding China that I think I have ever read in one place, written by someone who I suspect has never laid eyes on or set foot in the country.

      As I tried to wade through vacuous assertion after false assertion–CCP ignoring rural problems; contemporary NE China ignored by the state; the “harmful” effects of private tutoring on elite education; Ant getting subsidies [no, it’s getting nationalized and broken up!]. On and on…. when I realized that I was witnessing a Mao/Kim Jong-il era dinosaur waking from decades of dogmatic slumber. Truly astonishing!

      There’s lots to criticize about the CCP’s authoritarian system, but criticizing its economic policies requires facts, not vacuous political slogans.

      1. Ant is not being nationalized, it is merely deprived of foreign direct investment via IPO. Nor is it being nationalized. But someone who thinks breaking up big finance is a good thing, is a Teddy Roosevelt Progressive, a true dinosaur. The claim that Ant provides its loans from its own revenue stream, or whatever nonsense is being hinted here, is an extreme one, that seriously needs support.

        Your point that only those who have been afforded the privilege of foreign travel can enter any conversation is equivalent to a claim that only eyewitness testimony is acceptable. Also, it limits all discussion to those who can afford foreign travel.

        The extension of mass education to the countryside was largely the doing of the Cultural Revolution. The Dengists have never put the same emphasis on the countryside. Not doing so was a cardinal aspect of Dengism.

      2. Apologies for my sloppy use of the term “nationalization.”

        “On 12 April 2021, The Wall Street Journal reported that under the pressure from the Chinese government, Ant Group would be transformed into a financial holding company overseen by China’s state-controlled central bank.”

        And also apologies for my irritable tone above…..

        I will say that foreign travel is no longer a “privilege,” but a priority that most people except the desperately poor can afford now. And when someone wants to sharply criticize the economic policies of any country from afar, they need to be factual, not just theoretical. Deng was China as an underdeveloped country in 1978; Xi is China as a participant in the global economy in 2021. And Xi appears to understand the threat that global BigTech/Finance pose to *any* state far better than most of his critics in the West.

        There is plenty to criticize in China’s authoritarian system, but I think Roberts’ post above gives a fair summary of the CCP’s intentions.

      3. Our host no doubt disapproves contention among commenters.

        I must still insist that, given Xi’s reiterated plans to increase the role of the market in investment, that is a declaration that “oversight” by the central bank doesn’t mean de facto “nationalization” either.

        I must still insist the general notion of anti-trust is a failed petty-bourgeois nostrum. I must insist that Deng did not magically transform China from a nightmare via the magic of the market. If the market was so great, why is India what it is, but not China, which was supposedly wrecked by Maoism?

        I must still insist the extent of Chinese development is still, on a per capital basis generally too low to place China as a fully-developed country. The inequality of such development as there is, makes China socially and politically weaker, not stronger. The insistence on treating the hot spots of the neocolonial concessions as “China” is a political proposition, I think, not a sound analysis.

        I will not insist that China’s “authoritarian” political system is not worthy of criticism, but I will say that the remarkably small number of wars conducted by the Chinese government make it much less worthy of criticism than the US government…and I don’t understand what “authoritarianism” can mean, except a fetish for “free elections” like the US. The thing is, the ability of the US government to wage war regardless of the population’s wishes strikes me as quite “authoritarian.”

        I will let our host speak for himself. But I believe the consistent slowing of rates of growth in China reflect the ever increasing role of the capitalist sectors of the Chinese economy. This I think is in full conformity with the avowed policy of Xi, a goal. If anything, this insistence on increasing the role of the market is the primary sign of authoritarianism in the Chinese system. This is why I am not so sure the CPC really means to conquer the three mountains, as serving the market and conquering the mountains are in my view *simply not the same thing.*

        Lastly the notion that only the desperately poor cannot afford foreign travel, therefore only wrong priorities prevents foreign travel, puts me in my place.

  3. China, isolated within even a failing (but very violent) world capitalist system will have difficulty escaping (de-linking) from it’s pathologies. I think China’s relation to Russia is critical here. But what is Russia? Just a quasi-capitalist oligarchy battening down within and feeding itself (and the “West”) on the hollow shell of the ex-Soviet Union? Has there been more than a military resurgence in industrial production? A movement to the left in the Communist party? I have seen little interest in such questions.

    1. China rising was seen in a “if USSR didn’t fall apart we would have been just like China” light in Russia. Capitalist restoration couldn’t undo the Revolution completely, hence culturally Russia is more akin to China than to the West. It’s a socialist state temporarily occupied by counter-revolutionaries – think of France after Napoleon. It’s not going to last.

  4. Time to Fez up Michael. You marshal facts which support the conclusion that China is a capitalist state yet you also include language which is ambiguous. Bit like spread betting. But do you or don’t you consider that the Chinese state represents the general interest of the capitalist class or do you consider, because of the presence of the CCP, it also represents a distinct interest alongside the general interest of the Chinese capitalist class.

    In the end of course definitions mean less than the economic laws that govern production which are found in all capitalist countries including China and that is the effect of the rising composition of capital imposing itself on the rate of profit, which I may add, is aggravated by the fact that third generation urban Chinese youth are no longer willing to work in the old way like their parents, creating barriers to raising the rate of surplus value. What we in the West call, the perfect vortex.

    1. I dont think I need to fez up as my position on the class nature of the Chinese state has been stated on many occasions on this blog and in papers to conferences and journals. In my view, China is not capitalist but neither is it socialist. The capitalists lost control of the state in 1949 and were eventually expropriated. They have not regained control of the state. On the other hand, China after 1949 was never a workers democracy moving towards socialism – in my view, something impossible in one country. Instead, China is a weird beast trapped in transition with the state controlled by a bureaucracy that rests mainly on a planned state-owned economy keeping out the capitalist sector/class from political power and from directing the economy. The Chinese economy does not operate primarily as capitalist production for profit – yet.

      1. You are an outstanding Marxist theorist, and more importantly, you deal with Marxism as a practical science. I am familiar with all your writings on China, but this piece has subtle differences in emphasis. They make your inbetweeners definition of China, as neither capitalist nor socialist, untenable. Take these two observations in your article. “The growing size and influence of the capitalist sector in China is weakening the performance of the economy and widening the inequalities exposed during the pandemic.” “And since China entered the World Trade Organisation and privatised sections of its state sector in the late 1990s and early 2000s, there has been a significant correlation between the profitability of Chinese capital and real GDP growth.” Taken together the conclusion is inescapable, the capitalist mode of production dominates the economy. The legal forms of ownership are secondary, be they state or private. In China, generalised commodity production prevails, therefore the labour of the individual only becomes part of the labour of society INDIRECTLY. Thus it cannot be a socialised economy in any shape or form. In the end, a society dominated by the law of value cannot escape its contradictions. The state banking system is no insurance against crisis, and debts are debts. To use an analogy, two patients both have an incurable disease, falling profitability, but one is treated privately at home while the other is treated in a hospital by the state. Sure the patient in the hospital may survive a bit longer because of the support, but that is all. Since 2012-3 the rate of profit in China has fallen by 40% crushing the rate of investment, and with this depressed profitability comes the inability to service debts regardless of their origins. This will bleed the banks, both private and state.

        My concern is this. Since 1917 Marxists have have tended to tail political developments failing to categorise them correctly. It adds new meaning to Marx’s observation that consciousness always lags behind events. In the case of China it influences programme. As the situation becomes more critical in China, calls will arise for a bourgeois democratic revolution to get rid of the CCP. By identifying China as a fully developed capitalist society, our programme must be to call for an immediate communist revolution, well to get rid of the present Communist Party inter alia. Who says history is without humour?

      2. Correction: Michael please substitue what follows for my response to ucanbe, which includes a passage I forgot to remove.

        “As the situation becomes more critical in China, calls will arise for a bourgeois democratic revolution to get rid of the CCP. By identifying China as a fully developed capitalist society, our program must be to call for an immediate communist revolution…. Who says history is without humor?”
        Ucanbe, I think you miss the contradictions in your joke.

        In the first place, China is not “a fully developed capitalist society”. China was able to surprise and disturb the capitalists precisely by developing as both a competing capitalist power and a quasi-socialist state. The empire needs it to be neither and fully exploitable.
        China had been centuries further ahead in political organization and social wealth than all of Europe put together before its decline under Qing dynasty, which left it open to be preyed upon by an industrializing, violently expanding Europe.

        Ideally, left in peace, China may have evolved from the Qing to the advent of a Mao Tse Tung, maybe a thousand years from now; and those latter day Maoists might have gone on to peacefully develop communism in one country over the centuries without even a period of socialist transition. Utopian? But so is your purely economic (and not so political) misunderstanding of China’s present historical situation as a “fully developed capitalist society” and its consequences.

        There have been calls for a bourgeois democratic revolution led by privileged urban youth for decades before the color revolutions. Such calls might succeed, but, given historical circumstances, not in producing a new, true communist party, but much more likely in a fully exploitable comprador state… But let’s suppose a true communist state does emerge. Wouldn’t it find itself in the same situation as the old, false communist fully capitalistic communist state that you so unhistorically disparage? isolated, surrounded by the very nuclear pigs riding on sharks and bomb-laden birds of prey threatening it right now? Under such conditions, wouldn’t the new true communist state, in short order, begin to look much like the old, authoritarian fully capitalist communist state…or worse– a “stalinist” dictatorship?
        …which, of course, must be immediately overthrown by democratic bourgeois youth….in the interest of the Chinese people?

        “Who says history is without humor?”
        However the nature of that humor depends on one’s point of view. Your academic marxist speculations are restricted to the point of view of capital’s imperial center. Seen from the point of view of the periphery, socialism in China is much further advanced than in London, Paris, or New York. Millions of Chinese know that. So do more and more declassed Western socialist urban youth.

    2. I agree with most of what you say with one important reservation:you say, ” As the situation becomes more critical in China, calls will arise for a bourgeois democratic revolution to get rid of the CCP. By identifying China as a fully developed capitalist society, our programme must be to call for an immediate communist revolution, well to get rid of the present Communist Party inter alia. ” I think this will definitely occur.There is no such institution as bourgeois democracy, however; and to call for multiple parties would be a step backwards. Competing political parties are not an example of democracy but of moderated oligarchy, which reforms would consolidate the oligarchy even further. Our programme must be for democracy and the abolition of ALL parties, not their freedom. Recall that democracy originally meant the rule of hoi aporoi i.e. those without resources and the definition of a democratic constitution was selection by lot.

      1. The “definition of a democratic constitution” refers to who the jury is too. And whether or not the jurymen get paid, for that matter. Narrow and schematic definitions are useful only for trickery. The demos by the way was not simply the poor but the common people of a district. What they were not was, fellow members of the tribe. Democracy is not just sortilege but a structure eschewing tribal distinctions. Getting that wrong was however, one of the best things in this comment.

      2. ”The “definition of a democratic constitution” refers to who the jury is too. ” In a democracy, juries are chosen by lot; no judges i.e. the people judge themselves.The definition of a democracy I take from Aristotle, though perhaps it would be more accurate to translate as ‘ The mark of a democracy.’ The governing Boule or Council of democratic Athens was chosen by lot, 50 citizens from each of the 10 tribes, the 50 being chosen from the relevant demes according to population. Certainly then, such demesmen were fellow members of the same tribe. Demos originally means a district, then the people of a district, then the common people as opposed to aristocrats, tyrants, the rich, oligarchs. Thus the Old Oligarch writes that it seems just in Athens ‘that the poor and the demos have more than the well-born and rich.” Democracy is then seen as the control of the government by the poor. Aristotle writes,” It is democracy whenever the free and resourceless, being the majority, have control of the state, while it is an oligarchy whenever the rich and well-born do, being few” ( Politica 1290). I do not think Aristotle was trying to trick you. His comment on selection by lot as the mark of a democracy is made in the assumption that you would, understand that such an institution must result in the poor controlling the government, since they are the majority.

      3. It is not the case the members of a deme were “certainly” fellow members of the same tribe. They were members of the same phylai for the simple reason the demes were grouped in trittyes, which were then grouped in phylai. Phylai were not tribes in the sense of families sharing a common descent (aka “phratry.”) See https://oxfordre.com/classics/view/10.1093/acrefore/9780199381135.001.0001/acrefore-9780199381135-e-5065

        This is why democracy in Athens had so much to do with the pay for rowers in the navy, too. A premium on horses or heavy armor in the polis’ military fostered the power of the aristocrats, instead. Material factors, not just political gimmicks, need to be used in meaningful analysis. If the jurors were not paid, the poor would not be jurors. It was the pay, not the lots, that made the differences. I’ve forgotten which play of Aristophanes made so clear how big a deal this was…but re-reading Aristophanes should be rewarding in itself?

      4. ”steven johnson
        August 12, 2021 at 10:46 pm
        It is not the case the members of a deme were “certainly” fellow members of the same tribe. They were members of the same phylai for the simple reason the demes were grouped in trittyes, which were then grouped in phylai. ”’ At 18 a youth was inducted as a citizen into his paternal deme, which was one of the 139 that constituted the 10 tribes. Consequently he became a fellow tribesman of all those citizens whose demes belonged to the same tribe. The purpose of the trittyes was so to distribute the demes ( originally by LOT according to Aristotle) among the 10 tribes that each consisted of mixture of city, countryside and coastal areas, reflecting the various facets of labour such that one labour group, say farmers, would not be advancing its own interests against those of fishermen ( apart from this the trittyes were of little importance as independent organisations of government).This is not just of academic interest, for it contrasts with the views of those like Pannekoek who argue that socialism will be organised by Workers’ Councils. It is not clear to me at any rate, given that some departments of the economy employ many more workers than others, how representative of society the delegates of such councils would be. Are the numbers of each council weighed? Further, Pannekoek affirms, if I understand him properly, that the delegates of the various Workers’ Councils will get together and agree their plans. But on exactly what basis do they get together and what if they cannot agree? I strongly suggest democracy is a better system. Its mark is selection by lot. I think you introduce the minor question of pay, perhaps unconsciously, because you are opposed to selection of the government by lot ( a gimmick ?) and hold to the Platonic/Leninist prejudice that people cannot rule themselves, but need the ‘guardianship’ of an intellectual elite? It is lot that makes the difference, not pay, which is perfectly acceptable for political office in bourgeois societies. Aristophanes’ play, ”The Wasps” is an attack on the democratic nature of the Athenian courts in suggesting that the pay was a kind of bribery, yet whatever its defects it is clearly superior to the oligarchic system of judges.

  5. Real Wages in the US has been been decling since 1970. There has been a momentary bump, dueing the pandemic. Lower tiered workers had gotten lais of to skew the reality of decling take home pay. ________________________________

  6. “China’s state-controlled economy alongside a large and growing capitalist sector.” You could have said the same about France in the 1950s, for example. The embedded picture of socialist versus capitalist is false. The state-owned enterprises (SOEs) do not invest according to a unified plan. They each seek profits, even if they must use a chunk of them for one or another social program. Different cliques of top officials dominate different SOEs. And most central SOEs issue stock shares; the “investors” who buy them expect earnings growth. There is no socialist economy in all of this, and the measures taken today underline that: they are regulatory, antitrust, and specific rules of commerce, which are all tools of Japan, the major European economies, and even the United States.

    1. Yes Chinese SOE chasing profit like for examples, their train SOE that charged HSR ticktets for as high CNY500. Very profitable.

      The problem I see from this blog and its commenters is how their analysis of China is that much different from liberal economist in a way that both of them is not rooted in anyway to the ground reality in China. All being seen through Western point of view, just change the lens with Marxist or neoliberalist depends on who you are/

      1. I think they do get closer than most, in that at least the real elements at play in China’s economy and society are at least discussed. Everywhere else, it’s just cherry-picking to illustrate a foregone conclusion – either that China’s doing it right and we’re in for a Chinese century (the line taken by, for example, Moon of Alabama) or that it’s doing it wrong and is doomed to some unspecified hard landing.

        Even if the final label – capitalist or socialist – is debatable, I think this blog is the place where I’ve seen it finally nailed, a general description of the situation in China that seems to take most factors into account. While we can’t make safe forecasts of what will happen or when, firmly saying that China is plagued by contradictions and something’s gotta give, sooner or later, is probably as honest as it gets.

        My problem with China analysis is that the analysts always seem to be listing correct arguments about China, but selectively. I remember a discussion here where people were simultaneously right about: i) the ecological/sustainability challenges; ii) the major efforts at renewables and reforestation; iii) the role of Deng Xiaoping; iv) the role of the CPC; and other issues now I don’t remember. Everything seemed to be historically accurate, but no full picture emerged.

        I for one am very pleased with Roberts’ recent series on China, and with the comments. I feel I’m finally getting somewhere trying to understand what’s happening there.

  7. I agree with most of the above comments, but would like again to emphasise that we should not perceive the juridical status of an enterprise as necessarily expressing the economic relations that constitute it. The chief executives of modern capitalist companies do not own them, which does not prevent their being what Marx call the ‘bearers’ of the capitalist relationship, i.e. that relationship of dominance and servitude in which surplus value is pumped out of the direct producers.

  8. I think the readership it garnered speaks volumes of the quality of Michael’s blog. I’m really enjoying the level headed discussions here.

  9. Seems to be very useful. Only one question remains: how can we establish The authenticity of the sources? For example, take the very first sentence: “A December 2020 meeting of the Chinese Communist party Politburo, vowed to end what it called a “disorderly expansion of capital”. Where can we find an official source of this bit of information? The author has cited sources other data and offered his own analysis – – that is perfectly alright. But we at least need to check with the party’s official report on the PB meeting. Could you please help me with search a report?
    Comradely yours,
    Arindam

  10. “But a property tax is unlikely to come anywhere close to offsetting the revenue loss that would result from selling less land. Given that average households will be exempt from the property tax, it seems unlikely to generate more revenue than income tax (1% 0f GDP), while annual land sales are currently on the order of more than 7% of GDP.”

    Property tax is generally levied against all (privately owned) property, not just on new sales. So annual land sales aren’t that relevant; what matter is how much property is already owned by commercial entities.

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