The truth lies somewhere in between. Both have changed to the worse and certainly not to the better for the simple reason that the capitalism practiced in both countries do not work anymore. Capitalism as we understood decades ago has metamorphosed into a monopoly financial monster that controls the existence of humanity and the world. Capitalism has distorted to become a cabal to, and winced at, the finance capital. Those halcyon days of humming machines are gone forever.
The global capitalist crises are as ineluctable as they are incessant. Finance hegemony in pursuing exorbitant accumulation of the fictitious capital has wrecked havoc of the economic lives all over the world with no mercy or hesitation. As long as there is no force to arrest its hegemony, capitalism is doomed.
The Chinese economic crisis in terms of uncontrollable inflation came out from the high-speed and high-volume money supplies, which in turn from the impulses unflinchingly pursuing profits of the bureaucratic and the comprador capitals. Its currency has mired in a dual ditch wherein the RMB (Renminbi)’s domestic value falls and foreign value tends to rise. The crisis faces attacks in two fronts at the same time – currency hyperinflation and slump in export industry. Unemployment, unstable social conditions, severe discontentment, income and assets inequality, corruption, bourgeois dictatorial traumas and myriad other calamitous shocks are the awful gallows no one wants even to think about. “How bad will it get? Warnings from some analysts that China could trigger a global crisis seem overblown. But the fact that people are saying such things is an indication of how out of control the situation looks right now.”
The root cause of China’s muddle is not necessarily its weak currency policy. Its overproduction relative to both Chinese and global purchasing power is a much more important root cause. When severe and long-term unemployment of the world takes hold as of now, China’s growth accelerates and so do the other BRIC countries’. Even with the depressed RMB, global commodity production glut cannot be avoidable because unemployment and austerity become two cudgels: for protection against domestic consumption in the advanced capitalist countries.
In the advanced countries, automation as a strategy attacking wage hikes and other working class benefits has accelerated. For instance, GM workers’ hourly earnings declined from $27 a couple of years ago to $14; wages bite only 11% of the input now, thanks to heavy machinery and automation. Productivity accelerates and profits have soared sky high. However, automation is a double-edge sword that serves as job-killer hence a wage-saver and surplus-value-killer hence a profit-rate drag. Thus, the Western capital’s profits increase at the expense of a falling average rate of profit, which means falling interest rate and over-accumulation of capital not being able to invest for reproduction due to lower rate of profit. The U.S. unproductive or surplus capital of the real sectors has increased from $1.8 trillion to $2 trillion in less than a year.
In China and other developing countries, the situation somehow is different. Due to low-wage levels, accelerated automation is out of the question. Productiveness measured in output per unit working hour is low and the aggregate profit is not as high as in the West but because of employing enormous labor power, the surplus value created in overseas is much larger than in the West and so is the average rate of profit. Consequently, enormous “hot money” or FDI (foreign direct investments) flow into these countries in hot pursuit of better than average returns. As interest rates in these countries increase, more FDI will bubble up.
As a result the above-mentioned contradictions, the over-heated economy has nowhere to go but onto – inflation in China, India and severe and long-term unemployment as well as economic stagnation in the West.
“So our newest economic superpower may indeed be on its way to some kind of economic crisis, with collateral damage to the world as a whole. Did we need this?” Well, “that is the way it is,” as Walter Cronkite used to say at the end of his news report. One cannot deal systemic putrefaction and downcast with piecemeal reforms.