Tag Archive for China

‘Market Leninism’ is Kinda Just Fascism

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Political commentator and Daily Beast managing editor John Avlon has been throwing around a label for the emerging political economies of Russia and China that I think was introduced by Nicholas Kristoff in the New York Times two decades ago. Avlon explains in a Daily Beast commentary that was picked up by several other outlets:

Russia and China, along with some of their old satellite states, have traded Marx and Lenin for Market Leninism. The militaristic one-party state endures with varying degrees of electoral kabuki, but the nomenklatura now attracts global capital, swilling champagne in jet set nightclubs instead of behind dacha walls.

This twist on “Marxism-Leninism” may sound slightly catchy, but if you think about it, they’re basically just becoming fascist economies, and there’s really no need to invent a new term – certainly not one so ridiculous as “Market-Leninism”. The neo-nomenklatura, or the new propertied ruling class, of Russia and China are the freshly christened millionaires and billionaires who parallel the domestic industrialists of fascist European nations in the 1930s. Those outside the Party’s core don’t directly wield tremendous political power, but if they play by the rules, they thrive on the kind of institutionalized corruption and cronyism that marked Italian, German, and Spanish experiments with fascism.

This critique isn’t meant to start a semantics debate; I really just want to take the opportunity to highlight the structural similarities between the post-Communist economies like Russia’s, China’s, and Vietnam’s, with the European fascism of the mid-Twentieth Century. It’s worth noting, due to the frightening prospects for this model influencing contemporary American political economy, which may be far more likely than you’d guess.

We currently define economies with broad strokes based on dominant attributes.* The US is characterized by private ownership of most industry, as well as by market determinants of material and wealth coordination; we call this market capitalism, even though the markets aren’t pure and there are lots of publicly owned enterprises. In the Soviet Union, industrial ownership was nationalized and central planning was the chief method for deciding who made and consumed how much of what goods and services – command socialism.

In fascist countries like Germany and Italy, the model was private ownership of most industry, markets determining most prices, but the state intervening heavily through command to enforce nationalistic priorities and to ensure stability. Basically, Hitler and Mussolini reserved the prerogative to override any market signal with a new directive.

This is a power still out of executive and even governmental reach in modern Western Europe and North America but exercised with regularity in China and Russia today. When contemporary Western governments want to broadly influence industry, they tend to do it through the blunt instrument of legislative policymaking that encourages or discourages certain economic activity for national priorities. Executives can’t command very much in the economic sphere.

The transformation of the past quarter century, in both Russia and China, has involved much greater market influence internally, to be sure. But also a massive privatization of industries, and there’s nothing Leninist about privatization. Avlon even alludes to this being the major variation between the Cold War and now, citing the fact that “the nomenklatura now attracts global capital” in his paragraph defining “Market Leninism”.

Of course, to be clear, that’s not the part that upsets John Avlon or Nick Kristoff. To Western neoliberals, privatization of the means of production is a natural step. They are just upset about the nationalistic tendencies that manifest as the one-party state overriding market forces. Avlon is complaining about the heavy-handed, iron-fisted, one-party domination of these countries’ economies and the refusal of individual civil liberties. That’s where the (quite legitimate) charge of lingering “Leninism” comes from.

Yet if you’re going to mix private ownership with overwhelming government interference in the coordination aspect, aren’t you really talking about fascism? Fascist economics is all about maintaining a small, wealthy capitalist class while enforcing strict adherence to nationalistic principles and service to the state, with the government intervening to both stabilize and reprioritize economic activity.

Writing of then-Chinese ruler Deng Xiaoping, Kristoff noted in 1993 that China’s leadership was post-Marxism-Leninism, with a privatization spree already underway. Deng and his circle had eschewed Marx’s rejection of markets yet retained “a fondness for Leninism, in the sense of highly disciplined one-party rule with centralized decision-making”. Kristoff added, “Their aim, in other words, is Market-Leninism.”

Mussolini, Franco, and Hitler all had similar takes on Marx and Lenin. They were vehemently opposed to using central planning to orchestrate socioeconomic equality, preferring distinctive class divisions as virtuous. So they figured, why not let capitalist markets do the default economic coordination, since as Marx himself had rightly argued, markets and the pursuit of profit will tend to exacerbate those class divisions? But the fascists concluded they should indeed use a strong, unopposed nationalist party and cadre to enforce essential central planning in favor of state power whenever necessary. This was one of Lenin’s highly miscalculated (and vile) contributions to the actual implementation of the Marxian project; it’s what Hitler, Mao, Lenin, and Mussolini all had in common vis-a-vis economics.

The transformations in China and Russia have been very much in this direction and sound exceedingly fascistic. In each:

  1. the means of production are increasingly owned primarily by an elite wealthy class or nationalized to enable graft;
  2. controlled by fiat or regulated in such a way as to sustain rent-seeking among capitalist cronies;
  3. otherwise with market forces doing the basic price-setting and coordinating; and
  4. a state that offers boisterous rhetorical support for the “working class” but deprioritizes worker’s rights and effectively outlaws autonomous organization of labor.

In the case of Russia, in fact, you’d be pretty hard-pressed to draw many significant structural differences between its political economy and those of mid-20th Century fascist states. China maintains more nationalized industries, but this too is changing through a form of liberalization that so far affects capitalist property rights far more than individual political rights.

Avlon’s concern seems to be that economic liberalization has not led to democracy in the formerly communist states, which on one hand undermines hypotheses that capitalism is inherently democratizing, but on the other hand suggests they’re just not doing capitalism right.

What’s worse, some [American] CEOs privately grouse that they would rather invest their capitol [sic] in one-party states, not only because of the potential rate of return, but also because they feel America’s political system is increasingly inefficient and chaotic when it comes to making long-term decisions.

I’m far more concerned that China (more so than Russia, for sure) will demonstrate a more durable version of capitalism during periods of economic tribulation than the relatively laissez faire nations of the world generally have. As crises driven by resource depletion and climate change generate more and more national emergencies, Americans will hopefully begin to realize what a danger markets pose and how weak the various preferred methods of regulating or manipulating them through political means. And you can bet your bald spot China will be responding more assertively and often more effectively to similar challenges on its land and shores.

Avlon continues, about the claims of inefficiency in the capitalism-democracy mix:

We’ve heard these claims before. In the 1930s, the buzz was that liberal capitalist democracy was decadent and declining – that the pluralism and diversity of the USA was our greatest weakness because we could not reason together. … The mirror-image systems of communism and fascism promised to solve problems quickly through command and control.

This is of course true in the long run, and Avlon is right that democratically influenced Western capitalism proved more resilient in peacetime than the even-more-vicious manifestations such as the Soviet and Nazi systems. But what about a softer form of command-and-control capitalism? The new fascism has features that are attractive to capitalists unconcerned about the personal liberties of industrial workers and the poor. And make no mistake, this system is more likely to appeal to liberals than to conservatives.

Note as well, any Western capitalist eyeing the Chinese system with envy is not lusting over any remnant unique to Marxism. He’s not licking his lips over the use of central planning to flatten classes. His nascent drool has nothing to do with high rates of public ownership of industry. He’s looking at private ownership and a government-manipulated market, currency, etc.

Fascist economics is, after all, a form of capitalism. It’s only a couple of steps removed from the American-style cocktail. Classic fascism embraced all of the main elements of the American political economy except (1) fondness for international trade and (2) our less-bilateral influence between industry and polity. Whereas the fascist government reserved the right to control industry (the erstwhile funders of the ruling party) in service to the state, the Western “democracy” observes a largely hands-off policy, behaving more like a puppet on behalf of its funders, with only the pretense of respect for a so-called “national interest” and intervention to avert only the most egregious market failures.

Other characteristics of fascism include fomentation of class antagonism and elimination of effective political opposition. Class antagonism has not reached fascistic levels in the United States by any means, mostly because the working class has not played an active role in the conflict as it did in 1920s Europe. (However, we certainly have the fascist work ethic down!)

With regard to political opposition, as Avlon notes, instead of a command-ready one-party state, US national politics is hobbled by petty divides separating the two branches of the capitalist party (that last bit is my interpretation, not Avlon’s). He obviously yearns for a vibrant two-party dynamic that can compromise decisively, but in truth all of these options are just various ways a polity can relate to its financial backbone. With such a demonstrably slim difference between fascism and capitalism, it’s not clear why the Avlons and the Kristoffs spend so much of their time focused on the shortcomings of the Chinas and the Russias instead of analyzing the corporatist structure of the US political economy.

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*There are two main determinants of the broad character of an economy. These are (1) ownership of the means of production and (2) form of coordination. To keep it simple, the ownership options are basically: collective (state or public ownership) or private (individual or shareholder ownership). On the matter of how much of what goods and services are produced and consumed by whom, the options are basically planning (command) or markets (supply/demand). The dominant options tend to determine the form of economy: market capitalist, planned socialism, market socialism, or planned capitalism (fascism).

Chinese propaganda poster from chineseposters.net.

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The Promise of Capitalist Globalization, Predictably Unfulfilled

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I swear it’s just coincidence that right after coming down so hard on Nouriel Roubini, I’m going to praise a piece appearing in his EconoMonitor blog, this one by investment executive Walter Molano.

In “The Summer of Discontent“, Molano cuts straight to the nitty gritty, squarely placing blame for the past year’s various grassroots grumblings (China labor tension, Arab Spring, London riots) on the shoulders of market capitalism — namely, its failed promise. And he doesn’t try to sugar coat it or tack on a hackneyed stupefaction proclaiming capitalism will make it all right.

Molano basically illustrates how the global game of musical chairs that was played for the last twenty years as new markets opened up and capital flooded in has, in the end, left much of the world standing, disgruntled. It’s a short piece (with dreadful paragraphing), but let me share some highlights:

The growth spurt driven by globalization expanded the economic pie, as billions of new consumers were incorporated into the marketplace. Rising commodity prices and expanding trade flows delivered huge windfalls to the developed and developing world. However, as the rapid rise of global integration began to plateau, and the effects of the downturn in the U.S. and Europe took hold, the vast aspirations of disparate societies dimmed. Not only is the American dream looking like an empty promise and the European socialist model a distant memory, the hopes for a better way of life by billions of people across the developing world is also in doubt.

It’s hard to argue with this, adding to the account that everyday people in the “developed and developing world” did not accrue benefits equitably from the windfalls, which Molano fully understands. An investment analyst has captured the spirit of the street, and he’s going to tie it into useful, plain-English macroeconomic analysis. Observe…

The mad scramble for productive and physical assets throughout the former communist states, such as Russia, China and Vietnam, created a cadre of super-rich individuals. However, the re-allocation process is over and most of the boundless opportunities are gone. Now, these populations are stratifying into the traditional class segmentations associated with modern capitalist societies, fostering disappointment and frustration for some.

Molano then actually presents a Marxist framework within which to understand the impact these changes on class in countries his colleagues typically refer to as “emerging markets” (Molano spares us this dreadful term). I actually found this to be the weakest aspect of the piece, as Molano is trying to wedge modern concepts into an arcane (if historically useful) model. Nevertheless, it’s interesting.

But Molano’s commentary isn’t done getting better (i.e., franker). I’m going to make you read his piece for the details, though.

I can’t help sharing his conclusion with you just in case you don’t take the hint and read the original:

The blurry images of the violence in London, Hama and Hangzhou are the precursors of similar events that will take place in other parts of the world, such as Istanbul, Jakarta and Bogota, when they realize that the dream of greater prosperity was dashed by the basic principles of market economics.

I’m not familiar with Molano’s prior work, so I don’t know what the rest of his take on capitalism is. His job title suggests he’s okay with taking advantage of it, but unlike many of his contemporaries examining the current hyper-crisis of capitalism, he seems to have some genuine understanding of if not sympathy for the people economics impacts most: workers (and the unemployed). His lens is still familiar to those of us who read economists and analysts speaking to an elite audience of investors, but he focuses it in a way Roubini and Jeremy Grantham don’t seem willing or able to. Not revolutionary, but kind of refreshing. Why can’t this become a trend?

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