The ongoing tensions between the United States and China have continued to escalate as the global economic crisis deepens. While the US economy is still the most powerful in the world, its dominance is being challenged by a rapidly shifting multipolar world, with China as a powerful economic force and hub for global assembly. The US is attempting to enforce various measures to counter the perceived “threat” from China, but it faces obstacles as the interests of different economic blocs compete with each other. Despite US efforts to revive archaic agreements and institutions established during and after the Second World War, when the US dominated the capitalist world, there is no full agreement with Europe, for example.
All countries in the Asia-Pacific region are subject to sharpening geopolitical tensions. One aspect of these developments is the increased importance of India, which has seen significant growth in recent years, as a counterbalance to Chinese influence in the region and the world.
The recent Quad Plus agreement is an attempt to align key economic powers in the region. Along with the Quad members of the US, Japan, Australia, and India, South Korea, New Zealand, and Vietnam have also been drawn into the alliance. This could, potentially, enforce trade barriers against China, particularly by cutting-off essential resources and the latest technology to prevent China dominating the region. The Quad alliance represents one-third of the world’s GDP and double that of China (with the US still responsible for 24.5% of the global GDP).
The Chip and Science Act, passed in 2022 in the US, and the planned European Chips Act, along with various deals with world leaders in cutting-edge tech development such as the Netherlands, are designed to block China from accessing this technology. This chip and tech blockade had a devastating impact in China, where a huge number of small factories were forced to close down and tens of thousands of workers lost their jobs. Chinese growth expectations are the lowest, at only 5.5%. But in reality, it is expected to slow down further as the global economy itself may be pushed into a recession this year. The growing technology blockade against China and rising tensions in relation to Taiwan, a key leading chip producer in the world, combined with the enormous crisis that is developing within China itself, have put into question its further growth. In addition, the threat of military tension with China is growing.
In January of this year, US General Mike Minihan issued a memo to the military called “China Fight” in which he predicted that China will invade Taiwan by 2025. Though the Defense Department said it is not an official memo, military expenditure in massively increasing. The US Indo-Pacific commander calls it the largest build-up since the Second World War. This year, the US expects to spend $800 billion on defence – a record amount – double the reported amount of Chinese spending.
India Presented as Alternative to China
India’s emergence as a major economy in the world is linked to US/Western tensions with China. Previously, India linked with the former USSR against China and Pakistan, while also keeping a distance from the US. This combination of the USSR’s collapse, the weakening of Russia, and huge growth in China, led India to be more open to the US. There is a general assumption that India can benefit from cornering China in the world market. Some raise the possibility that India could emerge as a major economic power, or even surpass China. But this was always a highly speculative scenario. However, there is no serious engagement with this idea anymore, including from the former governor of the Reserve Bank of India (RBI), who dismissed the idea as “premature”.
While some still believe that India will be immune to the current crisis, and could reap some benefits from the conflict between the US and China, this idea lacks widespread support. Nevertheless, the growth rate for India this year is predicted to be above 5.5%, which is a slightly higher prediction than that of China. Some policy decisions made by Modi, such as relaxing various investment regulations, changing labour laws, changing land laws – including providing state-owned land for private industrial development – and some infrastructure developments, were designed to attract more FDI and have had some impact. Apple is moving its production to India and similar headline stories have created expectations. One aspect of this movement of capital, supposedly away from China, is that those companies are either based in Taiwan or have close links with the Chinese market.
But in reality, they are not the main reason for the maintenance of India’s growth currently. Other key factors that have enabled India to maintain its growth are conveniently ignored by a majority of commentators, particularly in the West. For instance, India is one of the countries in the Quad that refused to condemn Putin or make any effort to cut its links with Russia. In fact, it greatly benefited from the cheap oil flowing as a result of the Ukraine war, buying more than enough even to export to the West. India’s unreliability for the West was further exposed through recent free trade agreement talks between India and Russia. Current growth is not largely led by developing manufacturing and industrial developments. The Indian economy remains a debt-driven economy. Not only is the debt-to-GDP ratio 85% (external debt last year was $620 billion), but also the government’s recent decision to increase the limit of borrowing for state governments will add to the country’s already high debt burden.
India Cannot Replace China
Episodic infrastructure development without a plan for production will not automatically result in economic growth. Although India has overtaken China as the world’s most populous country, labour participation in work continues to fall. Even the government’s previous estimates admit that only 5% of the young workforce in India has undergone formal work training. More than 60% of the population lives on less than $3 a day. Even this estimate is questioned by many as official data collection is completely corrupted. Even the World Bank has complained about the lack of proper data and stated that Indians accounted for 80% of those who became poor globally in 2020. Women’s participation in the workforce is one of the lowest, at 9%, and continues to decline. It is a small section of the middle class (still substantial in terms of absolute numbers) and a much smaller percentage of the super-rich that gives an illusion, at times, of a shining India. The reality is that India leads the world in dire poverty and acute class polarisation. But these upper strata are mainly concentrated in a few areas within key cities such as parts of Bangalore or Pune, Mumbai, etc. These enclaves are also dominated by the service sector rather than substantial manufacturing hubs and will not be enough to position the Indian economy as a whole as a world assembly hub.
Completely corrupted individuals dominate all right-wing political parties in India. In addition, the state simply doesn’t have the ability to deliver huge planned development. It is this character of the state that is one of the main differences between India and China.
How China emerged as the second-largest economy in the world and became a “world factory” is linked to the ‘hybrid’ or mixed nature of the Chinese state. The peculiar mixture of a market economy with state-controlled enterprises that emerged out of the former deformed workers’ state, where capitalism and landlordism were abolished, but society was ruled-over by a bureaucratic Maoist regime.
Development of Chinese State
Unlike in the West, the former Soviet Union and China developed as powerful industrialised countries through social revolutions that got rid of landlordism and capitalism. However, the Chinese revolution differed from the Russian revolution in many aspects, particularly how the revolution had actually taken place. In China, a large army dominated by the peasantry, which emerged from a long civil war headed by Mao, surrounded the cities and took power, winning over sections of the intelligentsia and the workers. This immediately presented enormous complications for the Chinese Communist Party (CCP). Further struggles between rival class interests within the CCP and society immediately emerged. Though the CCP won over a large section of the working class, it never established democratic workers’ control. Their model was Stalin’s USSR instead. A party bureaucracy emerged that balanced between classes and consolidated its own dictatorial grip on power.
New economic plans were implemented under the bureaucratic grip of the party rather than through democratic control of the workers and peasants. The Great Leap Forward, which brutally developed industries at the cost of suffering and starvation for many, was imposed by the CCP and with its rigid hierarchical structure. Not only domestic changes but various other factors such as wars in the region, the Cold War, etc., further increased China’s isolation and, in turn, consolidated the CCP’s grip. With the element of plan, though without democracy, the role of the state played a crucial role in transforming China into one of the leading industrial nations, enabling it to achieve large-scale production.
Capitalist market relations and the reintroduction of private property has also taken place under the full grip of the CCP. China’s turn towards the market started well before the collapse of the Soviet Union. The CCP faced huge crisis, following the failure of the Great Leap Forward and the subsequent Sino-Soviet split that emerged following the death of Stalin. The introduction of the “Cultural Revolution” in 1966 by Mao, to gain more control of the party apparatus, created additional economic and political instability. In addition, alarmed by the developments in the Soviet Union, the CCP under Mao went ahead with the ruthless consolidation of their grip on the party and state. However, following Mao’s death, some of the witch-hunted leaders took control back with the help of the military and a section of the party. Under the leadership of Deng Xiaoping, the party began to reverse some of the policies of the 1960s. This so-called “liberalisation of productive forces”, as they called it, involved relaxing price controls, establishing economic zones where private and state enterprises could operate together, etc. These were the early steps taken to introduce elements of capitalist relations as part of the “open door policy,” which was started in 1979. This was not privatisation as it is often misunderstood to be. Rather, the state encouraged the emergence of small-scale privately owned enterprises.
The dramatic collapse of the Soviet Union massively accelerated this process in China. However, the introduction of these policies did not result in immediate prosperity, or develop China into a powerful economy overnight. On the contrary, it led to an increase in inflation and new economic problems. The economic meltdown was averted only through decisive state intervention. At the time of the collapse of the Soviet Union and the brutal “shock therapy” economic experiment that took place there, the CCP was introducing measures to further strengthen the state. Previously, the collapse of the Chinese economy by 1988 was only prevented through the direct intervention of the state, which quickly reversed the policies of price liberation and other capitalist measures. These measures also helped to consolidate the support of the CCP, which played a role in repressing the democracy movement that emerged in that period. Historical developments following the Chinese revolution, and the ‘hybrid’ character of the state that emerged from it, played a crucial part in making China what it is today. Organising resources, including financial resources, the ability to control and direct economic activities, and to decide the political direction and priorities without being dictated to by the market, and the ability to quickly mobilise resources when large-scale production or construction is necessary, as well as the ability to mobilise a well-educated large-scale workforce, are the result of the powerful party-state apparatus that exists in China.
The CWI has repeatedly emphasised in its publications that China is neither a fully planned economy nor a fully transformed capitalist economy. It is this “platypus” character that gives the Chinese state a certain flexibility to control and develop its productive capacity. As the CWI predicted, the state acted quickly when the crisis developed in the market economy in a way that no other state was able to do. Reacting to the world economic crisis and subsequent geopolitical tension, current President Xi Jinping acted to consolidate his and the CCP’s grip over the state and asserted their authority over private enterprises. The state can still act decisively, while at the same time huge market forces will come into contradiction with such measures.
Although a capitalist class has emerged, it has done so in collaboration with, and under the control of, the party state. Some party leaders themselves belong to the capitalist class. According to some reports, among the 5,000 delegates who attended the CCP’s National People’s Congress in March this year, there were 80 billionaires and hundreds more millionaires. This Congress agreed to new policies to tighten control over the market. However, the CCP has around 100 million members, who are mainly workers and peasants. Through repression and a balancing act between classes, the party state has prolonged its existence. For example the current regime uses anti-corruption measures and rhetoric to consolidate their influence.
This balancing act is not stable and, of course, will not last forever. The enormous discontent among the workers, along with a huge desire for democratic rights, such as freedom of speech, an end to the dictatorial control of the party etc., will eventually result in mass resistance. The idea that a section of the capitalists will split the party and state apparatus and exploit the masses’ desire for democracy to bring about a complete transition to a market economy is not automatically a given though it is one possible scenario. Furthermore, given the instability, the capitalist class themselves fear the masses. Democratic rights and greater freedoms can unleash the revolutionary potential of the powerful Chinese working class. The fast-changing world situation, at a certain stage, as the masses go through a series of struggles and gain experience, can result in the development of a revolutionary movement that can push aside the bureaucratic control of the party and unleash struggles that lead to the establishment of the genuine workers’ democracy, nationalise the large private concerns and create a democratically planned economy. The direction of travel will ultimately be determined by the strength of class forces among other factors.
Development of India
No such development had taken place in India. It is a common misconception that India became fully “socialist-leaning” immediately after gaining independence from British rule in 1947. The British colonialists left India/Pakistan mostly underdeveloped with enormous poverty. Nehru’s government was forced to take certain measures to keep the country functioning, maintaining some sectors, such as transport and energy, under state control. At that time anti-imperialist feelings and the transformation of the USSR etc. led to widespread illusions internationally in what was seen as “socialism”, governments like Nehru verbally reflected that (as did the ideas of ‘African Socialism’), plus Nehru and others in the so-called ‘Non-Aligned Movement’ balanced between the two power blocs. But the Nehru government never challenged capitalist relations; rather, it is the Congress Party that facilitated the emergence of Indian landlord capitalism. The so-called “mixed economy” of the Nehru and Indira Gandhi period was capitalist in the main but with state control of parts of the economy, which was poorly funded and led to further deterioration. The state did not intervene to control the market, nor did it have any plans or interest in developing state-owned enterprises or implementing a planned economy. Further, the “liberalisation” that took place under the Narasimha Rao government in the 1990s was, in many ways, a logical consequence of the decades-long policies of the Congress Party that dominated Indian politics up until then.
Ultimately, no country was able to industrialise and develop high productive ability purely on a market basis. This became even truer as imperialism developed and exploited rest of the world. Without the direct involvement of the state and large-scale investment, or the introduction of a plan for development, it is not possible. Dictated by market forces, the Indian state will continue to assist the plundering of vast resources and increase the exploitation of labour. This can produce riches for the small elite and a section of beneficiaries beneath them, but will not result in transforming India into a fully developed industrial nation.
As the Sri Lankan example shows, random infrastructure investment alone will not be enough. Credit and cheap labour has driven the Indian economy so far. Its IT boom is linked mainly to the service sector rather than the development of the tech industry as such. Increasing productive ability is not just linked to infrastructure (though this is also severely lacking in India) but also many other factors. The classic notion that the state providing free land and limited subsidies, cheap labour, married with foreign FDI, can perform the miracle of developing India as a world industrial hub, is an erroneous assumption.
It will take nothing short of a socialist revolution to develop the resources of India for the benefit of all. A socialist planned economy will bring together all resources under democratic control of workers, which will give them the flexibility and ability to take the whole society forward. As we have seen in the case of the Soviet Union and China, even a partial plan, albeit scarred with top down bureaucratic control, and wider, though still extremely limited, involvement of workers and peasants, developed these nations. However, due to bureaucratic control, gains from the revolution were deformed, and eventually defeated without workers’ democracy and an appeal to workers across the world to unite to build socialism through laying foundations for a global plan of production. The struggling masses in India should not repeat this mistake.
Recently, we have seen one of the largest farmers’ struggles and a general strike taking place in India. Additionally, numerous other struggles have emerged, such as those for women’s rights and against brutal caste repression. All these struggles should be brought together into a generalised opposition to the Indian state and the landlordism and capitalism it relies on to survive. The development of a mass movement, linked to workers’ actions, such as strikes, will be vital in mounting a challenge for power. However, to control their fate, workers must organise their own mass party of workers, peasants, youth, and poor. However the communist parties in India, for decades, have tried to manage capitalism, but workers, in order to control their own fate, need to organise their own mass party against landlordism and fight for socialism. Such a party will be able to transform not only the South Asian subcontinent but the entire region.
The future of the Chinese masses will also be determined through a similar process and mass struggle, not just achieving democratic rights, but building their own independent trade unions and other organisations, but also taking control of resources. In this struggle Indian workers have a lot in common with Chinese workers. Each can set an example in their own countries and come together in united struggle to establish a socialist confederation that can plan the use of resources for the benefit of humanity and transform the region and the world for the better.