Loren Goldner: Fictitious Capital and Contracted Social Reproduction Today; China and Permanent Revolution (2012)

“Capital is the moving contradiction, (in) that it presses to reduce labor time to a minimum, while it posits labor time, on the other side, as the sole measure and source of wealth.” Marx, Grundrisse[1]
This quote from the Grundrisse identifying the fundamental contradiction of the capitalist mode of production, succinctly describes the situation on a world scale today: once again, as in 1914, capital requires, in order to survive as capital, a vast devalorization of all existing values, however great the destruction of human beings and means of production which that entails.

This has in fact been the situation since ca. 1970/73. Global capital has put off the day of reckoning, a full- blown deflation, by a vast pyramiding of debt—fictitious capital—and by a series of “countervailing tendencies” which have supported that debt while contracting social reproduction.

Prior to looking at the specifics of the four decades since 1970/73, let us first sketch the broad shifts which have occurred. The post-World War II Bretton Woods system of fixed exchange rates anchored on the U.S. dollar had just collapsed. At that time, world accumulation was clearly divided into the three zones of 
1) advanced capitalist (OECD) countries (the US- Europe- Japan), 
2) the “socialist” bloc (the Soviet Union, and Comecon) and 
3) the “Third World” of “non-aligned” countries, with China as an outlier. 
Both the “socialist” bloc and the Third World were deeply indebted to western banks, and would become more so in the course of the 1970’s. The working class in the U.S. and western Europe was in the midst of its biggest strike wave since the immediate post-World War II period. Third World nationalism of the “Trikont” variety, promoted by countries such as Algeria and Cuba, was still a potent force, and would culminate in the mid-1970’s in the U.S. defeat in Indochina, the independence of Portugal’s colonies in Angola, Mozambique and Guinea-Bissau, and pro-Soviet regimes in Somalia and Ethiopia on the Horn of Africa. The anti-apartheid struggle in South Africa had reached a new level in the 1976 Soweto riots. A new independence of the Third World was even echoed in the emergence of OPEC (Organization of Petroleum Exporting Countries) in the oil price surges of 1973 (and later 1979), however linked most OPEC nations were in reality to the U.S. and U.S. financial markets [2]. 
At the United Nations, a “Group of 77” of Third World countries aggressively attacked Western economic dominance. “Euro- communism” seemed to be on the march in France, Spain and Italy[3]. The US-backed Shah of Iran aspired to be a regional power in the Middle East. Few in the West had yet heard of Islamic fundamentalism, either of the Shi’ite or Sunni variety, and few yet took seriously the “Four Tigers” in Asia (South Korea- Taiwan- Hong Kong- Singapore), still in the early phase of their industrial emergence. China, still largely autarchic and still in the last convulsive throes of the “Cultural Revolution” was a “quantité negligeable” in the world economy. France and Germany by the late 1970’s were in the first stages of forming a single European currency to stop their whip-lashing by the fluctuations of the dollar. The southern cone of South America (Argentina- Chile- Brazil- Uruguay) was under vicious military dictatorships propped up by the United States.
Forty years later, and thirty-five years into the “neo- liberal” era, we see first of all the (relative) decline of the United States. The European Union, conceived as a counter-weight to American hegemony, is endangered by a meltdown of its single currency and, following that, by outright disintegration. In the U.S., (if not quite as much in Europe), strikes receded, until quite recently to near- invisibility [4]. The Soviet bloc has collapsed, with only Poland and the Czech Republic having, to date, regained a precarious footing. The Third World has fragmented with the full emergence of the “four Tigers”[5], followed by the “flying geese” of aspiring tigers, currently led by “socialist” Vietnam [6]. Islamic fundamentalism has swept aside Third World nationalism in much of the Arab world and in Afghanistan and Pakistan. The small populations of the oil-rich Gulf states and Saudi Arabia are in a class by themselves, but their large imported South Asian work force is a potential regional time bomb. One-third of the world’s population, in Africa [7] and in parts of Latin America has been trapped in economic stagnation since 1980.
China, in the meantime, fully in synch with neo-liberal global restructuring and, in fact, a key to its success globally, as shall be shown, has become the manufacturing “workshop of the world”, in counter-point to the hollowing out of so many other countries. We will return to the practical implications of this for world revolution after analyzing in detail the “balance sheet” of the world austerity aimed at preserving fictitious values. Most of the past four decades have been a period of defeat and recomposition for the working class; in the following, we will (somewhat artificially) bracket class struggle while distilling the “economic” drift of the period, and conclude with a world strategic outlook.
Capital had inaugurated a comparable, extended period of devalorization once before, on the eve of the First World War, when the mere sharp collapse of paper values, the bankruptcy of weaker capitals, general price deflation and a period of extended unemployment for the working class to push down wages were no longer sufficient to achieve the necessary devalorization, as had been the case through the 19th century. Outright physical destruction of labor power—of workers—and of capital plant became part of the process whereby capital destroyed enough “value” to restart production at an adequate rate of profit. 
Between 1914 and 1945, two world wars, the 1920’s period of brief reconstruction [8], the 1930’s decade of depression, fascism and Stalinism were all part of the process which laid the foundations for the 1945-1970/73 postwar boom. The world process of devalorization [9], like all shakeouts before it (the decennial crises studied by Marx from 1817 to 1866 and the “long deflation” from 1873 to 1896) moved production and reproduction as a whole to a new “standard of value”, or what Marx refers to in Capital as a “revolution in value”. Each capitalist phase of boom and bust (from “peak to trough” as the jargon goes) constitutes a “manifold” based on a new such standard, an “apples to oranges” transformation in which a unit of socially necessary labor time is incommensurate with that of the preceding phase, or with the following one. 

The “cluster” of new modes of transportation in the mid- 19th century, from canals to railroads to steamships, was one such manifold; the new electronics, chemical and automotive technologies from the 1920’s to the 1940’s was another, or closer to our own time, the revolution in both communications and in the transport of commodities (maritime and airborne) since the 1970’s.
By the late 1960’s, the postwar boom had brought world capital to another moment in which the current cost of reproducing labor power could no longer serve as the systemic “numeraire”, the common denominator, for commodity exchange. Capital again, as in 1914 but more diffusely, entered a new period in which physical destruction on a world scale was a necessary part of the movement of devalorization and potential revalorization....
It is no secret that China, since 2008, is at crossroads, where its ruling class can no longer rule as before, and to survive must take the leap in the dark of a major reform and restructuring of the economy and with it, of society more generally. The export model, as sketched above, which served it so well for three decades, is broken, in the context of the world crisis. The legitimacy of the regime has depended on steady 8-10% annual growth and the jobs and rising incomes such growth provided, whatever the social costs in infernal working hours and conditions, and the environmental destruction, it entailed. The Western powers as well, through their NGOs and the Hong Kong-based labor scene, knows quite as well as the regime that the latter must, if not exactly “change everything so everything can remain the same”, embark on a major gamble that can staunch the rising tide of opposition, above all represented by an increasingly militant working class, whose centrality to the social “equation” has now became a banality in mainstream opinion in China itself[74]. (The American New Deal of the 1930’s, not in programmatic content but as a template, was one example of such a gamble; Russia under Gorbachev was another such gamble, albeit one that failed. ) 
One is reminded of Tocqueville’s remark that the most dangerous moment for an oppressive government is when it attempts to reform itself. Already the recent events in Wukan rank as an important, and apparently successful experiment[75]in integrating deep democratic discontent into a reformed status quo. Along with its unprecedented growth rates over three decades, China has developed a significant “middle class” which has till now been content to accept the “contract” of apolitical quietism in exchange for higher levels of consumption and upward mobility (however much such mobility is linked to a dog-eat-dog level of competition for jobs among the millions of technically-trained students emerging from China’s universities every year). 
This “middle class” is the basis of a growing would-be “civil society” and a space of criticism through the new social media that the regime never before had to confront. Environmental disasters, corruption at every level, the regime’s attempts to finesse such high-level scandals as the fall of Bo Ji Lai or the 2011 wreck of China’s high speed train and subsequent attempts at cover- up, are all objects of the scrutiny and commentary of “netizens” which cannot be simply crushed or ignored, however much the older methods are still in use. As was the case in, for example, Egypt in 2011, this electronically- savvy “middle class” can potentially play a role in any coming “regime change”, even if (as in Egypt) is can hardly come to power on its own.
This is where the dynamic of “permanent revolution” comes into play. The Chinese ruling class–apparently the entire new central committee of the CCP consists of billionaires–carefully studied the collapse of the Soviet bloc. The prospect of a Chinese “Solidarnosc” is widely held up as a model in the underground labor milieu (although only Solidarnosc of the early, 1980-81 period, with little consideration of what happened after 1989), and as a model to be avoided at all costs in ruling circles. 
The 1989 events in Tien An Minh more than anything alerted the regime to the fact that it was “riding the tiger”[76]. Nevertheless, it confronts a dilemma not unlike the one which the Soviet and East European Stalinists failed to finesse: it wishes to complete the transition to full membership in the capitalist world market, but at the same time its own bureaucratic form of rule is the main obstacle to such a transition. It knows full well that it could be swept away in the torrent just as Gorbachev et al. were. Unlike the post-1985 Soviet Union, however, China for decades after 1978 could offer world capital a decently educated, skilled and very cheap work force, still very much in the process of moving from agriculture to industry and urban life.
A fundamental reason for the CCP’s is that many aspects of the old system are still in place. Shanghai may long to join, or even supplant, New York and London as a world financial center, but has none of the depth required to be one. The renminbi is nowhere near being able to play the role of an international reserve currency. Capital flows in and out of the country are still regulated, a regulation that served China well during the 1997-98 Asian meltdown, when countries (South Korea, Thailand, Indonesia) which had dispensed with capital controls were devastated while China was untouched. The state still can maintain the “zombie banks”, with huge balance sheets of uncollectible debt, by government fiat. Corruption is endemic and reaches the highest levels. The state-controlled All-China Federation of Trade Unions (ACFTU) must be converted to something along Western lines to retain credibility.
The rise of China has been and will continue to be a useful alibi for Western and above all U.S. capital as it goes into the next phase of the post-2008 crisis. Different eruptions of xenophobia and calls for protectionism from both government and union officials appear with every electoral cycle in the U.S. Japan has claimed the Diaoyu Islands, setting off a wave of anti-Japanese riots in China; nine powers lay claims to potential oil discoveries under the South China Sea[77], and Vietnam has given the U.S. navy the use of Da Nang harbor, built by the U.S. during the Vietnam war. Even while the U.S. defense budget is eight times larger than that of the next ten powers combined, the Pentagon denounces every sign of increased Chinese military prowess, such as the recent launching of its first aircraft carrier. The announced American “pivot to Asia” is a further realignment of priorities.
Yet China, with 100,000+ plus “incidents” a year of riots, land disputes between peasants and party officials, not to mention the impressive strikes of 2010, is a powder keg. The regime’s legitimacy ever since 1978 has rested on delivering 8-10% annual economic growth and the resulting jobs and rising incomes. It may attempt to implement an updated, “German” corporatist model of free unions and enterprise committees, combined with increased domestic consumption to substitute for declining exports, but the obstacles and risks are great.
Meanwhile, the depth of the crisis in the West has, after decades of rollback, increasingly the proletariat in Greece, Italy, Spain, Portugal, France and even the U.S. is doing what “it is compelled to do” (Marx) by crisis conditions.
When this deepening ferment in the West meets a similar ferment in China, the linkups that failed in 1848 and 1917 (the latter being the turning point of history when history didn’t turn, as CLR James put it) may “turn the world upside down” far more than the “bourgeois revolution with red flags” of 1949 ever did... read the full article: 

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