China in the global vortex

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The post-pandemic scenario will possibly be one of a deepening of social and political struggles. They should seal, in the coming years, the transition from neoliberal globalization to systemic chaos until a new order is established.

Covid-19 marks a turning point in neoliberal globalization, whose origins date back to the 1970s, with the breakdown of the gold dollar standard and the establishment of the flexible dollar standard.

Neoliberal globalization advanced through the strong diplomacy of the dollar and weapons that, in the 1980s, multiplied the indebtedness and strangled the modernization processes in the periphery, imposed the 2nd Cold War, promoted commercial financial deregulation and opening. In the 1990s, it expanded with the dissolution of the USSR, the establishment of the Washington Consensus, European monetary integration and the emergence of the expansive phase of a new Kondratiev cycle. The world economy was driven by the expansion of international capital flows, international trade, state spending and public debt, the financial and military role of the United States and the growing transfer of economic dynamism to China.

The financialization of the United States and the European Union severely limited their productive performance, reducing their relative advantages on the technological frontier. The high level of state and corporate indebtedness, focused on the manufacture of fictitious capital, and the growing displacement of segments of the industrial sector, increased the US trade deficit, weakening its productive sector. Global industry has begun to increasingly focus on China, which has surpassed the United States in the number of patents filed annually since the 2010s. China's projection trajectory in the world economy has been established through strong state leadership based on monopoly or direct and indirect control of strategic sectors.

China's trajectory of projection in the world economy was established through strong state leadership based on monopoly or direct and indirect control of strategic sectors. Its innovation system combines strong public investments in education and health; the state monopoly in strategic sectors such as defense, energy, petrochemicals, telecommunications, shipbuilding and pharmaceuticals; state control, through majority presence, in the banking sector; its strong influence through equity participation, presence on business councils and pressure for public policies in the electronic information, chemical products, design and research, transportation, construction, steel and iron, design and research segments; and the existence of a private sector of small and medium-sized companies that, even after privatization, maintained a strong community dimension.

Between 1994 and 2008, the Chinese development pattern strongly linked its internal dynamics to the US market. China devalued the renminbi, established a fixed peg with the dollar and occupied the space opened by the appreciation of the yen and the German mark, under the influence of the United States. Exports grew dramatically relative to GDP and levels of inequality also increased, albeit combined with a drastic reduction in poverty. The sharp rise in the US trade deficit was accompanied by China's growing role in financing its public debt, of which it became the main foreign creditor in the first decade of the XNUMXst century. Its growing participation in international trade has caused a tree of commodities and an increase in the prices of basic products, which transferred value to peripheral countries, contributing, together with the increase in their international investments and financing, to the extension of the new Kondratiev cycle to Latin America and Africa.

China played a strategic role in the development of the world economy during neoliberal globalization. Its high growth rates allowed it to finance part of the fictitious capital accumulation in the United States, support the dollar and boost its own development and that of peripheral countries. However, the expansion of the American debt, the reduction of its growth rates, since the 2008 crisis, made China redirect the dynamics of its pattern of accumulation towards the internal market, prioritizing the reduction of inequalities, Eurasia, through the Belt and Road Initiative, and the BRICS, the embryo of a project for the Global South, driven by States representing the main economic and geopolitical forces in Eurasia, Africa and Latin America. Since 2013, China has slowly reduced its investments in US debt, which increased from $60 billion to $1,24 trillion between 2000 and this year. In 2015, it practically universalized the health system and became a world leader in the generation of renewable energy and in the production of transport equipment powered by clean energy. It has strengthened the role of its state-owned companies, which represent the vast majority of its infrastructure, public services or high-tech projects, which require large investments and lower profit rates. The importance of these Chinese companies in the world economy has increased. In 2000, they represented just nine of the global companies listed on the Fortune 500 Global. In 2017, there were already seventy-five, which increased the participation of state-owned companies among the largest companies in the world, which now represent 22% of the profits in the ranking. new emerging biotechnological paradigm and calls into question its main supports: international trade, international capital flows, political liberalism, financialization, inequality, and the ecological and environmental deterioration of the planet. The imbalance between the geospatial scales of movement of people and goods and the levels of intervention in ecosystems, on the one hand, and strategic planning, the provision of public services (education, health, infrastructure and culture) and environmental preservation technologies, on the other hand, it opens a civilizational and environmental crisis, of which Covid-19 is possibly the first global expression, which indicates the insufficiency of the dominant pattern of accumulation to assume the new phase of the technical-scientific revolution, intensive in public goods. The United States and the most prominent European powers – as well as their most important dependent peripheries, such as Brazil and Mexico – are being hit the hardest and are expected to lead economic depression, death statistics and losing leadership in international politics. Trump's unilateral policy on US hegemony intensifies during the pandemic, with cuts in international aid to WHO and vulnerable countries such as Afghanistan, Syria, Palestinian Authority, Yemen, El Salvador, Guatemala, Honduras; threats to allies such as Saudi Arabia to cut hydrocarbon imports to protect US oil companies; or military intervention against opponents such as Venezuela.

Measures to combat the crisis will require high levels of State intervention, probably public spending between 50 and 70% of GDP in central countries, and will update the secular trends towards its expansion, which have been manifested since the XNUMXth century, with accelerated intensity. Such levels of state intervention will face the resistance of big capital in capitalist societies, which will seek to appropriate value transfers and pass on their costs to workers, significantly increasing deficits, the incidence of interest in the public budget and class struggle in the post -pandemic. On the other hand, the Chinese accumulation pattern, based on strong state control over the financial system and the productive sector, presents a much lower public debt, greater intervention elasticity and strategic capacity to direct intervention towards socially vulnerable sectors.

Covid-19 and the post-pandemic scenario must challenge the hegemony of the dollar. The soft dollar standard rests on increasingly vulnerable assumptions: the ability of the US to continue borrowing; in its international financing through the deposit of reserves in the FED; capital account liberalization and deflationary policies that guarantee a high level of international reserves; and in the absence of sound monetary alternatives. US government debt levels will reach World War II peaks or higher, with the difference that the US is now in a steep economic decline, as the axis of world growth moved to China, even impacting its military budget, which in 2000 was six times that of China and Russia combined and, in 2019, just twice that. The need for states to increase public spending to fight the economic depression and the political crisis will exert pressure for the use of international reserves and the establishment of capital controls in the balance of payments. The IMF itself recommended controlling the capital account for peripheral countries, given the destabilizing private movements of flight to the dollar. Finally, China has advanced in monetary alternatives to the dollar, internationalizing the renminbi, making it part of the IMF currency basket in 2016 or creating its digital version in 2020. social and political. They must seal, in the coming years, the transition from neoliberal globalization to systemic chaos until a new order is established.

*Carlos Eduardo Martins is a professor at the Institute of International Relations and Defense (IRID) at UFRJ. Author of Globalization, dependence and neoliberalism in Latin America (Boitempo).

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