[Marxism] WSJ complains that market forces don't drive China

Marvin Gandall marvgandall at videotron.ca
Fri Apr 7 14:38:23 MDT 2006

Louis Proyect wrote:

> Walter wrote:
>>("The matter of principle on which the American political process is
>>now becoming focused is that it is the Chinese government, not our
>>political process or the independent determination of markets, that
>>is determining the result. We are buying more tee shirts, shoes and
>>appliances and living in larger homes than we otherwise would because
>>of a Chinese government decision. We are producing fewer appliances
>>and less agricultural output than the market would have us make as
>>well, thanks to a decision by the Chinese government. It does no good
>>to tell American politicians that if the Chinese want to subsidize us
>>we should let them, because the very fact of their subsidy changes
>>our behavior in a way determined by them, not by us.")
> What is the point of crossposting this item? It only sows confusion to
> frame it in the WSJ's terms as a complaint that "market forces don't drive
> China". Of course they do. China produces for profit, not for human need.
> The WSJ's complaint makes about as much sense as the John Birch Society
> characterizing Eisenhower as a Communist in the 1950s. For extremists like
> the WSJ op-ed writers, anything that falls short of their own Attila the
> Hun capitalist fundamentalism is practically Trotskyite. I wouldn't take
> this business seriously and would urge Walter to read Martin
> Hart-Landsberg or Gerard Greenfield on China. Marxist scholarship
> generally has more to say on such topics than WSJ editorialists.
Well, for one thing the article was not a WSJ editorial, but an op-ed piece
by Bush's former economic advisor, Larry Lindsey. Nevertheless, Louis is
right in pointing out that market forces clearly operate in China, and
neither the WSJ nor Lindsey nor any other representatives of the big
bourgeoisie would deny this, as Walter's headline misleadingly suggests. In
fact, as is widely known, US and Western corporations are making large
profits using China as an export platform as well as serving its growing
domestic market, and Chinese corporations are becoming increasingly
important competitors in the global economy. What exists within world
capitalist circles is a consensus that China's maturing market forces are
still too constrained by the state, but disagreement about how quickly China
can afford, for social reasons, to dismantle these controls, including over
the currency. If anything, the WSJ speaks for the big US and Western
corporations in understanding the social concerns of the Chinese leadership
and counselling restraint on the Bush administration.

The Chinese leaders are themselves part of this discussion, and are quietly
engaging behind the scenes with Western capitalism on these issues every
day. In particular, there is an elaborate choreography going on between the
US and Chinese authorities with respect to revaluation of the yuan, and it
is very likely there will be a "compromise" over its value which falls
somewhere between what the demogogues in Congress want and what the Chinese
claim they can afford. Lindsey's piece anticipates this outcome, and is
something in the nature of a setup which will allow Bush to to take credit
for the inevitable compromise when it comes about, and for defusing
protectionist pressures in Congress and elsewhere against the burgeoning
US-China trade relationship. In this sense, Walter should have more
accurately made his subject line: "Compromising over the yuan." The
important paragraph in Lindsey's article is the following:

"As a matter of principle, Mr. Bush should seek to leave office with an
exchange rate consistent with one that would be market-determined, a goal
requiring an appreciation of the yuan of roughly 1% per month. In the last
year, the Chinese position has been "as little as possible," a pace that to
date has amounted to less than 1% per quarter. Splitting the difference
between these two rates would produce a compromise pace of adjustment that
would be challenging but manageable for the Chinese economy. It should also
be one that would answer America's justifiable concerns about currency
manipulation. Mr. Hu may still feel that his principle of not risking party
control prevents him from such a compromise. But then his choice would be
clear: an economically damaging fight on principle in which China would be
the bigger loser, or splitting the difference on numbers."

"Splitting the difference" for Lindsay means arriving at a figure between
what he considers to be fair value for the yuan (a one-third markup by 2009)
and the pace at which the Chinese are currently proceeding ( which would
take it up about 10% over that period). In other words, the "compromise"
would see the yuan rise by roughly 20% by the time Bush leaves office. Not
all of this difference will be made up by the yuan appreciating by that
amount; the dollar is also poised to fall. The yuan has already been rising
on a trade-weighted basis against other global currencies - for example, it
is strongly up 18% against the euro during the past year - but it has not
moved against the USD because a steady stream of Fed-engineered interest
rates has kept the dollar overvalued. But the long-awaited decline of the
dollar should occur when the tightening cycle soon comes to an end, as
expected, and that, coupled with a modest upward revaluation of the yuan,
should come close to Lindsey's target and presumably make both sides happy.

In any event, whether it does turn out that way or not, that's how I read
Lindsey's piece, one which hardly warrants exaggerated claims or
pyrotechnics on either side.

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