This program
is a follow-up on an earlier program we did. That program was devoted to the Soviet Union,
that first example in the modern period of history of an attempt to build a socialist
society. I built that program and the one today around
the following assumption; that in many conversations about capitalism and socialism as alternative
systems mention is made, particularly by the older generations, of the Soviet Union and
today about the People's Republic of China. These are looked at as examples (good, bad
or mixed) of what socialism is. They certainly are examples of what some of
the early efforts at building socialism look like and because they're spoken about so often,
referred to and thought about, it seemed a reasonable time for me to devote some attention
to analyzing them. We did that with the Soviet Union in the earlier
program and today we're going to do it with the People's Republic of China. Before I jump into it let me be really clear
about how we are going to do it. This is not an exercise in “we're good. They're bad. '' Either way that comes from the Cold War
which was supposed to have ended in 1989-90 but clearly hasn't, or at least the Cold War
is alive and kicking in the minds of some of our fellow citizens. This is too bad because it prevents the kind
of balanced approach of looking at the pros and the cons that a mature and intelligent
conversation ought to be about. Capitalism has strengths and weaknesses. Socialism is an alternative and it has strengths
and weaknesses. We'd all be better off if we were able to
talk about all of that without resorting to childish invocations of how “we're good
and they're bad”. You really ought to get over that at a certain
point in your life or else something's wrong. We’re not going to go there so let's go. Let me begin by talking about what economists
often talk about when comparing different kinds of societies and
comparing different countries. You might remember that Adam Smith's great
work “The Wealth of Nations” published back in 1776 was about explaining why some
way nations are wealthy and some nations are not and to account for that, to understand
it. Part of that was a very generous impulse Mr.
Smith understood that poor countries would like to not be poor and wanted to learn what
the rich countries might be able to teach them about how to get to that situation. China was one of the poor countries at the
time Adam Smith wrote and it got poorer after that. By the 20th century (the last hundred years
or so) the Chinese people were not only the most numerous people of any country on earth
(they remain today the most populous country on this planet by far) but also very poor. The capitalist part of the world had grown
much richer in the intervening couple of centuries so they were even further behind as well as
being absolutely poor. So, they were focused, like most of the people
in the world are, on overcoming poverty. So that's been their major goal and it's a
reasonable place to start to assess how well they've done. If these numbers trouble you then please understand
it's because you did not know about them before, not because there's anything wrong with the
numbers. Over the last 20 years the People's Republic
of China has increased its output of goods and services faster than any other country
on this planet. In the case of the comparison between the
People's Republic of China on the one hand and the United States of America on the other
they're not even close. Let me explain with some numbers. The rate of growth of output of goods and
services (the productivity of the economy, if you like) [for China] in 2005 was 11%. In 2017 it was 15%. In 2010 it was 12% and it has slowed down
since then. Over the last year it was a mere 6.4%. If you wanted to average it out it was probably
in the neighborhood of 10-11% over the last 10, 15, 20 years. By comparison, let me give you the numbers
for the United States of America. Its average growth rate in the 1950s and 60s
was 4%. In the 70s and 80s it fell to 3% and in the
last 10 years it has averaged 2%. In the latest year it was 3.2%; half of what
it was in China, but for most of the last 20 years the rate of growth of China has been
2 to 3 to 4 times that of the United States. That, in a simple way, tells us something. Number one it explains why we're reading and
hearing so much about China; because they have become the second most important economy
in the world because they have achieved these extraordinary rates of economic growth. Number two it will help you understand something
else about the people of China: they are not about to be pushed around, neither by Mr.
Trump nor anybody else because they have the economic strength
to resist. Number three, if you're the government of
the People's Republic of China (and that is a government in which the Communist Party
of China is dominant) you are hardly about to change the way you organize your economy
given how well it has been doing. Governments change either willingly or under
pressure when they're doing badly for their people. It makes people bitter, angry, critical, and
liable to push for change. This is something Americans no doubt understands
since it's a situation we face here in American capitalism, or in Europe with
their capitalism that's not doing really well for an enormous number of people. As a consequence, criticisms are rising. You see a rediscovery of socialism, for example,
here in the United States, you see the yellow vest movement demanding fundamental changes
in France and you see all kinds of other movements we don't have the time, today, to go into. I like to deal with them occasionally, at
least, in other programs. This is already enough to explain to you why
the People's Republic of China is the economic phenomena of our time. Let me turn next to the second most typical
statistic to look at if you're comparing countries and you're trying to understand what's going
on with the development or not, of wealth and poverty. This number is called the “real wage”. Here's what it means: how much can people
afford to buy with the average wages they get. To understand that we look at two numbers. First, how much money is given to people per
hour for the work they do and on the other hand what are the prices of the things they
buy with the wages they get. In other words, if your wage goes up by 10
percent but so do all the prices you face, you're not one bit better off. You got 10 percent more money but it doesn't
buy you anything but the same quantity of things it bought you before. When we adjust the wages workers get for the
prices they have to pay, we get what's called the “average real wage”. What you can afford with the money you get. Let's compare the last 20 years in the United
States that is this century so far in the United States with that in China. In the United States real wages (the average
wage of the American worker) has stagnated. It has gone nowhere. That's true not only for the 20 years we're
talking about of this century, it's true for the last 25 years of the 20th century. Here's a statistic for you to think about
as an American if you're watching this program from the United States or listening to it
on the radio here. In 1973 the wage of the United States, the
average wage of an American, was able to buy (here we go now) MORE things than it was in
2018. The real wage in the United States is less
today than it was then. It's not less by a lot but it means that over
the last 40 to 45 years Americans who have worked harder than ever, who have been more
productive than they ever were across that time, have not shared in their greater productivity. Their real income, their real wages have not
gone up. The real hourly wage in the United States
is lower today than it was in 1973 and that is something to think about. But now comes the Chinese story. Over the same period of time, the last 20-25
years, real wages in the People's Republic of China have quadrupled. Let me tell you that again. The basket of goods and services that an average
worker gets in China for an average hour of his or her work is four times greater today
than it was 25 years ago. Yes, Chinese wages remain below the average
in the United States because they were and they still are a poor country when you divide
their total economy by the enormous number of people that live in that country. But if you want to understand why the people
of China support their government here's a clue: their real wages went up four times
over the last 25 years in a society led by a government in which the Communist Party
is the dominant political force. Let me pause to let all of this sink in. This is not about whether you like these numbers
or don't this is not about whether you're critical of many aspects of Chinese society
or you're not. I myself find things in China I admire and
things in China I would like to avoid. I try to look at the strengths and weaknesses. But when it comes to the economics of their
socialist system and I compare its performance over decades to this moment, there is no contest
about which system has served its people better in terms of economic growth of output. The economy as a whole and the real wages
of the average worker in that society. Is China an example of equality? No. It has a great deal of inequality. There the United States and China have something
in common; high inequality that's actually getting worse. We will continue after the mid program break
to talk about what's going on in China so that we understand what the internal
mechanisms are that explain this performance. Before breaking let me remind you, please,
to make use of our websites: rdwolff.com and democracyatwork.info. Please subscribe to our YouTube channel. Just go to youtube.com/democracyatwork. And finally I want to thank our Patreon community
for the support it continues to provide. We are grateful and appreciative. We'll be right back. Welcome back friends to the second half of
today's economic update. We've been talking about the People's Republic
of China. In the first half today we spoke particularly
about its performance as an economy: its rate of growth in production of goods and services
on the one hand and the rate of growth of the average real wage of a Chinese working
person on the other. Having shown the remarkable success of their
economic growth program in both those ways I want to turn now to how they did that. How do they organize their economy and particularly
in what ways differently from that of the United States or Western Europe that might
help us account for their extraordinary performance? First, and perhaps most important for many
of you that are watching and listening, is to understand that the Chinese economy for
quite some time now has had a mixture of privately-owned enterprises and state-owned enterprises. wYou might think of it as a mixed economy
between private and state. It is also true over the last 2025 years that
the role of the private sector has been enlarged, relative to the role of the state sector. However, that has to be made a little more
complicated by noting that the Chinese, in managing this balance between the state and
the private, give the dominance to the state. They say that the state-owned enterprises
will always be the leading sectors, the main industrial groups within the Chinese economy. There's plenty of room for private enterprises
but the leading part of the economy will be the state. Why are the Chinese doing that? First and foremost, they are doing it because
it's their way of learning from the experience of the Soviet Union. When the Soviet Union's kind of socialism
(in which the state was overwhelmingly dominant and the private sector
was really quite restricted), when the Soviet Union collapsed in on itself in 1989 it went
through an extremely quick transition from an overwhelmingly state industrial sector
to an overwhelmingly private one. This was pushed by the folks in Russia who
wanted these changes, it was pushed by foreign advisers led by Jeffrey Sachs now of Columbia
University. It was called a kind of “cold shower treatment”
or sometimes “shock therapy” as a way of fixing what was understood to be wrong. The Chinese analysis is that the suffering
of the Russian people in the 30 years since then (the failures of the Russian economy
in the 30 years since then) had largely to do with the excessive speed and the excessive
extent of what happened in the Soviet Union. They have been determined not to repeat that
mistake. In other words, their communist party's plan
is to make the transition slow and limited. Yes, foreign enterprises can come in if they're
private capitalist enterprises, and many have. Yes, Chinese people can set up private enterprises
as many have. But the leading sectors of the economy will
remain state-owned enterprises running the program of economic development that the state
organizes under the leadership of the Chinese Communist Party. It's important to understand that the Chinese
kind of socialism is itself a learning process in which what happened to the Soviet system
is playing a major role, in this case of what not to do in the way that happened in the
Soviet Union. But it is not the only factor that's involved. To continue the comparison with the Soviet
Union, because the Soviet Union was the first socialist country and completely isolated
after the 1920s, surrounded by a world that hated what they were doing, they couldn't
and didn't find a way to build their economy by exporting. They could not produce for the
rest of the world, make a lot of money that way and use it to develop their own economy. They had to do it pretty much on their own. The Chinese have taken a different path there
as well. Early on the Chinese decided (at the end of
the last century the beginning of this one) to hitch their economic wagon to the world
market, to become the producer of goods and services for sale around the world. In order to do that they had to build industries
that produced what the rest of the world did either at a higher quality or at a lower price
or both. Basically, they've done that which is why
Chinese automobiles join Chinese appliances, Chinese clothing, Chinese you-fill-in-the-blank
is everywhere. Most of what you will see in an average Walmart
is made in China and there's a reason why Walmart stocks up on Chinese goods, and they're
not the only company of course. So, they hitched their wagon to the world
market and they've done very, very well because of it. The Russians couldn't do that and the Chinese
could and they did. Here's another thing: private capitalists
didn't go into Russia hardly at all but they have been rushing, stumbling all over themselves
to get into China. The Chinese understand that and they offered
Western capitalist enterprises the following deal. We need your technology, the Chinese said. We need your money, your capital to be invested. So here's the deal. We offer you, we will provide you with well
disciplined, efficient, hard-working workers at a very low wage (the one that we have here
in our poor country) and we will build the roads and provide the supports for you to
be able to make a lot of money producing here in China more cheaply than you could ever
produce in America, or Western Europe, or Japan etc. All we ask in exchange is that you share your
advanced technology because that's why we're doing this with you. You will have access to our workers and you
will have access to our customers to sell your product, but we want your technology
and your capital. Nobody put a gun to any capitalist enterprises’
head. They made the decision to accept the offer
of the Chinese because it was profitable them for them to do so. If it meant that they laid off workers in
their home countries, these capitalist enterprises, they could care less. They did that. They abandon whole industries. They abandon whole communities. That's how capitalism has always worked only
this time, with this destruction of working people in the West there was a boon to the
workers of China, which is why I gave you the numbers about the average real wage. So, the Chinese used the world market. The deal they struck with private capitalists
and the lessons they learned from the Soviet Union to organize what they call a special
Chinese kind of socialism that allows for private enterprise (a considerable amount),
allows for market dealings (a considerable amount), but controls from the top through
the state-owned enterprises the leading or dominant sectors of the Chinese economy. The last part of the show for today is to
give a little historical context China is an old civilization and a quite homogeneous
civilization. The Han people are the dominant ethnic group
and other ethnicities are small and scattered. The Chinese are a proud people with a long
history of a pretty well-developed civilization which at various times over the last couple
of thousand years was much more developed than civilizations in the West were. So for them it was doubly embarrassing, humiliating
is the word they used, to fall under the control of foreign colonialists in the 17th, 18th,
19th century from Britain, from France, from Germany, from the United States. It culminated in a horrible moment of rebellion
called the Boxer Rebellion at the end of the 19th century when a futile effort by the Chinese
authorities to push back against the Western imperialists was defeated. China was never made into a colony. They're very proud of that. But they had to give away Hong Kong and parts
of their country to the foreigner who controlled them, who settled their merchants and other
companies in these special territories where they didn't find
themselves subject to Chinese Authority or Chinese law. The Chinese, as a people, made a commitment
to find their own way, to break, led by Sun Yat-sen at the beginning of the 20th century. And when that wasn't sufficient and when they
were added the humiliation of the invasion of their country by the Japanese in the 1930s
a revolt of a much deeper sort took place in China. They were successful. At first it was an alliance between the nationalists,
who wanted to build up a capitalist China. and the Communists, who wanted to build up
a socialist China. But they worked together to push the Japanese
out. By 1945 they had done so, together with the
fight of the United States and its allies against Japan. As soon as World War II was over the alliance
between the capitalist / nationalist Chinese under their leader Chiang Kai-shek ended up
in a civil war with the Communists, their former allies, led by Mao Zedong. A civil war broke out from 1945 to 1949 ending
with the decisive and complete victory of the Communist Red Army. The Chiang Kai-shek people left the mainland
of China and went to Taiwan where their descendants still live and still imagine that they, on
the little island, are China whereas the vast mass of people on the mainland are something
else. No one hardly is left in the world who shares
this delusion. From 1949 to now, 70 years, is historically
not a long time. But from a decimated, poor, colonialized country
China is now the number two economy in the world. It is an incredible achievement. Not to understand that, not to understand
what this means in the minds in the feelings and in the pocketbooks of the Chinese people,
not to understand that it has involved moving four to five hundred million people off of
the poverty-stricken countryside into the urban industrial jobs along the coast of China,
these are misunderstandings that make no sense. You are not helped in understanding, let alone
fixing the problems of the world, by living in the delusion that the things I've tried
to get across today are not the case, don't have to be taken into account and somehow
don't matter. Unfortunately, in the mainstream media of
the United States, and in other parts of the West, most of this is simply not reported
on, not covered, evaded. That doesn't do anyone a service unless it's
the people who run the kinds of society China isn't, who are afraid of the model and the
example China offers. For my part it is our effort, here at economic
update, to provide the kind of information on the basis of which rational decisions can
be made about making the world a better place. I hope you have found these in-depth analyses
of the Soviet Union and China a useful part of the ongoing debate about capitalism and
its alternatives, the number one of which is varieties of socialism. Thank you for your attention and I look forward
to speaking with you again next week.
