By FERNANDO NOGUEIRA DA COSTA*
Thomas Piketty compares the economic structures of China and the West, addressing China's stabilization into a mixed economy, balancing public and private ownership
“Beyond the environmental question”, according to Thomas Piketty, in the book A brief history of equality, “rivalries between state and ideological powers constitute one of the main factors likely to accelerate political change.” One of the most crucial questions is that of the future of the Chinese regime. Barring an unexpected collapse, the People’s Republic of China is expected to become the world’s leading economic power in the coming decades.
Thomas Piketty compares the economic structures in place in China and the West. The main difference concerns the ownership regime and, in particular, the share of public ownership. In 1978, when the pro-market reforms were launched, the share of public capital (all levels of government and collectives included) was close to 70% in China, before falling considerably during the 1980s and 1990s and until the mid-2000s, before stabilizing at around 30% of national capital from the mid-2000s.
The process of property privatization in China came to an end around 2005-2006: the balance between public and private ownership has not changed at all since then. Capital developed under public ownership has grown at almost the same pace as private capital.
In this sense, China has stabilized around a property structure qualified as a mixed economy: the country is no longer truly communist, but neither is it completely capitalist, because public property represents just over 30% of the total, that is, a minority, although substantial in comparison with other countries. The fact that it owns almost a third of everything owned in the country gives the Chinese government the possibility of intervention in deciding on the location of investments, the creation of jobs and in implementing regional development policies.
By asset category, residential real estate has been almost entirely privatized. In the early 2020s, the government and companies owned less than 5% of all housing. Real estate prices have soared, mainly because savings opportunities are limited and the Social Security pension system is not universal.
The Chinese government currently holds around 55% to 60% of the total capital of companies. This share has hardly changed since 2005-2006.
Hence the maintenance of strict control over the production system by the State and even the accentuation of control over the largest companies. There has also been a significant decrease in the share of capital in companies held by foreign investors, offset by an increase in the share held by Chinese families.
In addition to the mixed economy structure and significant state control of companies, another important characteristic of “socialism with Chinese characteristics,” as the regime defines itself, is the dominant role of the Chinese Communist Party. It had more than 90 million members in 2020, or about 10% of the country’s adult population.
For the Chinese Communist Party, Chinese-style democracy is superior to the enormous Western-style electoral market. It entrusts the country's destiny to a motivated and determined vanguard, selected to be representative of society.
For Thomas Piketty, “in practice, however, the regime increasingly resembles a perfect digital dictatorship (…) [with] widespread surveillance of the population on social networks, repression of dissidents and minorities, brutalization of the electoral process in Hong Kong, threats directed at the system of electoral democracy in Taiwan”.
He adds to his criticism the sharp increase in inequality, the extreme opacity of wealth distribution and the resulting feeling of social injustice. He hopes that this feeling will not be eternally appeased with a few arrests and dismissals.
The announced demographic decline and the accelerated aging of the population also represent major problems for the regime. They may lead to India replacing China as the world's leading economic power during the second half of the 21st century.
Thomas Piketty warns that if Western powers insist on “an outdated hypercapitalist ideology,” they will not be able to limit the growing influence of the Chinese regime. In economic and financial terms, the Chinese state has considerable assets, far greater than its debts.
At the beginning of the 2020s, the main Western states found themselves in almost zero or negative asset positions. Having failed to balance their public accounts by increasing taxes on the wealthiest taxpayers, these countries accumulated public debt by putting an increasing proportion of their public assets up for sale, to the point where the debt exceeded their assets.
Rich countries are rich because private wealth has never been higher; only states are poor. They will find themselves with an increasingly negative public wealth, i.e., debt holders will own not only the equivalent of all public assets (such as infrastructure and state-owned enterprises), but also the right to a share of future taxes collected.
However, contradictorily to his diagnosis based on data and facts, Thomas Piketty argues for a non-pragmatic therapy: “it would be entirely possible, as happened in these same countries in the post-war period, to reduce public debt rapidly by taxing, for example, the highest private assets, once again giving public authorities room for maneuver”.
Would another post-war period be necessary?! He acknowledges that this therapy “will generate some crises, given the prevailing conservatism”. China industrialized without resorting to slavery and colonialism, something the world has noticed in light of the eternal arrogance of the United States. to Trump assuming he is self-sufficient.
For Thomas Piketty, “the appropriate response to Chinese state and authoritarian socialism would be to promote a form of democratic and participatory socialism, ecological and post-colonial, finally attentive to the South and to all Western inequalities and hypocrisies”. Such an evolution would allow neoliberalism to slow down, a decline due to the failure of Reagan’s promises to boost growth through deregulation.
The middle and working classes have begun to have serious doubts about globalization and are at risk of being captured by nativism. “The risk is that neoliberalism will be replaced by various forms of neo-nationalism, embodied by Trumpism, Brexit or by the rise to power of Turkish, Brazilian and Indian nationalisms, different political movements, but whose common point consists in denouncing the weight of foreign responsibilities and of the different minorities within their own countries for their national ills”. Thomas Piketty demonstrates ignorance about Brazil.
Historically, the communist movement was formed around a platform that defended state ownership of the means of production and centralized planning. It failed and was never truly replaced by an alternative platform. Worse, anachronistic communists criticize reformists who defend the welfare state and, above all, progressive taxation as “weak” forms of socialism, incapable of challenging the deep logic of capitalism.
Dogmatic Marxists are skeptical of a reform that can be content with reducing the inequalities produced by the capitalist system without changing the relations of production. They fear, therefore, “the risk of anesthetizing the workers’ march towards the proletarian Revolution.”
According to Thomas Piketty, in the book A brief history of equality, the current scenario, due to the growing discredit of neoliberalism, points to a dispute between different visions of socialism, with the Chinese authoritarian model in competition with democratic socialism.
For Branko Milanovic, in the book Capitalism without rivals: The future of the system that dominates the world, the socialist experiences of the past ended up contributing to the development of capitalism itself and the current competition takes place between the variants of capitalism: the liberal meritocratic and the political.
*Fernando Nogueira da Costa He is a full professor at the Institute of Economics at Unicamp. Author, among other books, of Brazil of banks (EDUSP). [https://amzn.to/4dvKtBb]
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