Wherever the capitalists look they can find no solution. The illusion that Asia could save them is fast evaporating. They are waking up to the fact that Asia, despite its colossal productive potential, cannot make up for the loss of demand and production in Europe and the USA. This is highlighted by the case of Japan, which has gone from being a model of growth to a country plagued by long-term stagnation, rising unemployment and growing social contradictions. [part 1]
In the 1990s, Japanese governments introduced a series of stimulus programmes and were also forced to implement a number of bank bailouts such as the $500 billion bank bailout in 1998. Thus, from having a budget surplus in 1991, the country ended up with a deficit of 4.3 percent by 1996 and 10 percent by 1998. In 1995, its debt to GDP ratio stood at 90 percent. Today it has a 225 percent GDP debt level, and its economy was severely hit by the earthquake, although it was already slowing down even before that.
Japan has gone from the average annual growth rate of 10 percent of the 1960s to the 5 percent of the 1970s and 1980s, finally ending up with near zero growth after the 1997 crisis. In the same period the general level of unemployment has gone up from 1.5 percent (1960-75) to 2.5 percent (1975-90) to today’s level of 5 percent. However, for the youth the situation is far worse. Unemployment for 15-24 year olds jumped to 10.5 percent in 2010.
There has also been a high degree of casualisation in the labour market in Japan. Over 40 percent of the country's workforce is now part-time only. Many workers are now employed on short-term contracts. Gone are the days of jobs for life, which was a key element that allowed for social and political stability for such a long time.
As a consequence, political conclusions are beginning to be drawn, particularly by the youth. This is leading to growing youth protests and a greater interest in left-wing literature. A manga comic book based on Marx’s Capital was a best-seller. And the 400,000-plus-strong Communist Party has been attracting thousands of young people to its ranks.
In the past, China provided relief to a world economy facing stagnation and slump. China can no longer do this. The Chinese economy, although still maintaining high levels of growth, is showing signs of faltering. This has serious social and political implications. Marxists understand that the rapid growth of the Chinese economy in the last period enormously strengthened the working class. The Chinese ruling clique avoided a social explosion because the constant growth of the productive forces gave people hope of future improvement. But now all the contradictions are coming to the surface.
After a long period of very rapid growth, China shows signs of slowing down. For three straight quarters (January through to September 2011), year-on-year growth slowed, as the government, concerned about rising levels of inflation, restricted lending and raised interest rates. The problem arises from the fact that U.S. and European demand for Chinese goods has weakened.
The main problem is that the fast-growing economies of Asia have to sell their goods on the world market. China still has a relatively high rate of growth. Its industries are still churning out a mass of cheap commodities. But China must export to continue to produce. Where is the market for these commodities if the economies of the USA and Europe are in a slump?
As John W. Schoen, Senior Producer at the msnbc.com new site commented in September 2011:
“Policymakers in China, the world’s third largest economy behind the U.S. and EU, face their own set of tough choices. Rapid growth rate has fuelled inflation that is running at a double-digit rate, according to analysts -- much higher than official targets. To contain inflation, Beijing has raised interest rates five times and lifted banks' reserve requirements nine times since October . If it clamps down too hard, though, a deeper economic slowdown could reverse China's efforts to lift hundreds of millions of people out of poverty.
“China is also coping with a banking hangover of its own, after years of massive government lending for expansion of state-owned enterprises and infrastructure upgrades. Recession's second act would be worse than the firstsecond act would be worse than the first, , By John W. Schoen, Senior Producer, September 22, 2011]
The Chinese authorities revealed they had not understood the full extent of the crisis that broke out in 2008 in the advanced capitalist countries. They saw it as a recession that would soon be over and they implemented polices accordingly. In 2008, the US$586 billion stimulus package was introduced with the aim of keeping buoyant the Chinese economy, creating greater internal demand as export markets shrank. This, however, came at a price, with a significant increase in central government public debt. Chinese public debt grew very slowly in the past, from zero percent of GDP in 1978 to around 7 percent by 1997, to just under 20 percent in 2003. But as a consequence of the public spending in the face of the world crisis of capitalism, it shot up to 37 percent in 2010.
As The Global Post reported (July 8, 2011):
“China's banks have been engaging in risky ‘off balance sheet’ lending somewhat reminiscent of Enron’s shenanigans. Last week, Beijing released a national audit revealing that local governments owe an estimated $1.65 trillion in outstanding loans. This week, Moody’s has indicated that the problem is significantly worse, by as much as $540 billion. And that's only local government debt. It doesn’t include the central government’s huge obligations, or those of banks that are essentially guaranteed by Beijing. Even for a miracle economy like China's, that’s a lot of debt.”
In the same article, Victor Shih, a U.S.-based expert on China’s economy, in answering the question “How much debt does China have?”,explained the following:
“That depends on what you include. Large sectors of the Chinese economy are owned by the government. The debt of these state-owned enterprises is what’s called a ‘contingent liability’ — ultimately it’s the responsibility of the government. If you count all of these liabilities, then you get to an extremely high number, something like 150 percent of the Chinese gross domestic product, or more.
“A more restricted definition is debt that’s owed by either the central or local governments. That is about 80 percent of China's GDP.”
Whichever way one looks at it, in massively increasing public spending, China has upped its level of public debt significantly. For now it has provided stimulus and allowed the economy to maintain high levels of growth. But this cannot go on forever. China’s debt is still low compared to that of countries like Japan, the USA and many European countries, but it is going up. So long as China’s economy keeps growing it can finance this level of debt, but if there is any significant slowdown then all the contradictions of the situation will come to the surface.
Apart from the future financial crisis that all this will provoke in China, there is also the fact that the growth of the economy has generated huge and rising inequality: “communist” China is one of the most unequal countries on earth. A small number have become very rich but the conditions of millions of workers resemble those of Britain in the times of Charles Dickens. This has given rise to unbearable tensions, reflected in a rise of suicides of young workers, strikes and peasant disturbances.
High rates of growth should not be regarded as a guarantee for social stability. Egypt grew at an average of 5.5 percent since 2003, and in some years the rate of growth was over 7 percent. This rapid growth coincided with the biggest strike wave since World War II and it ended in revolution. There are lessons here for China in the future. The authorities are worried. During the Egyptian revolution, Chinese censors scrubbed “Egypt” from the search engines. China has invested in creating a huge internet police that monitors what people are doing online.
They think that if you can stop people from finding out about revolutions in other countries, they can stop people drawing revolutionary conclusions about the situation in China. But the point is that what will lead to revolutionary upsurges in China are the living conditions of Chinese workers and peasants. And no amount of internet police can hide that from the Chinese people.
Inflation stands above 6 percent, which is high enough in itself, but food price inflation exceeds 13 percent. The purchase of foodstuffs accounts for more than one-third of the monthly spending of the average Chinese consumer. High inflation has persisted despite the government measures. Measures like restricting the amount of money banks can lend and hiking interest rates five times since October 2010 have not had the desired effect.
A totalitarian regime resembles a pressure cooker with the safety valve clamped down. It can explode suddenly, without warning. Although it is difficult to get accurate information, the published reports, which understate the real position, suggest that unrest in China has become increasingly frequent. Every year China experiences tens of thousands of strikes, peasant protests and other public disturbances, often linked to anger over official corruption, government abuses and the illegal seizure of land for development.
Food prices are of particular concern to the Chinese government, as they directly affect the lives of millions of workers and peasants in the country. The “Communist” Party leaders fear this could cause social unrest as workers suffer the consequences of the price rises. Sharp clashes will inevitably emerge between the ruling economic and political strata and the masses.
The crisis of the global economy has led to falling profits and investments, a situation that is aggravated by a drying up of credit. This forces many factories to resort to seek unofficial credit at usurious rates of interest. They face a choice of paying these rates or cutting wages. The result is pay cuts or even failure to pay any wages at all.
In November 2011, Guangdong’s acting governor said the province’s exports dropped 9 percent in October from the previous month. Provincial leaders are also contending with widespread protests by farmers over land seizures. Factories are cutting the overtime that workers depend on to supplement their low basic salaries. There have been strikes and demonstrations in car, footwear and computer factories in Shenzhen and Dongguan, two leading export centres in southern Guangdong province.
The Chinese Academy of Social Sciences has estimated that there were more than 90,000 “mass incidents” in 2006, with further increases in the following two years. The ruling class is preparing for unrest on a far bigger scale. China increased its domestic security budget by 13.8 percent in 2011, to 624.4bn yuan (£59bn). For the first time in its history China now spends more on the maintenance of internal order than on defence.
This indicates that they are well aware of the danger that these widespread grievances will eventually burst out in an explosion like that which swept away the regimes in Tunisia and Egypt. Explosive developments in China can occur when they are least expected. We must be prepared.
The total population in India was last reported at 1,210.2 million people in 2010, up from 434.9 million in 1960, increasing by 178 percent during the last 50 years. India has 17.54 percent of the world’s total population, which means that one person in every 6 people on the planet is a resident of India. Together with China, it is destined to play a decisive role in the future of Asia and the world.
India, like Brazil and China, achieved high rates of growth thanks to the boom in world trade. But this did not solve any of the problems of Indian society. It has led to a big increase in inequality, with the privileged elite enriching itself, while the masses remain sunk in a sea of appalling misery.
In the last decade, roughly 159 million have been added to the working age population, but only 65 million got employment of any type whatsoever. The per capita production and consumption of food has been declining over the medium term, and malnutrition in a large section of the population is at levels comparable to sub-Saharan Africa. Nearly half of all children under five suffer from moderate to severe malnutrition; a third of adults suffer from chronic energy deficiency. A new measure of “multidimensional poverty” (which takes into account deprivations of nutrition, child mortality, schooling, enrolment, electricity, sanitation, drinking water, flooring, cooking fuel, and assets) finds that there are more poor people in just eight states of India than in all of sub-Saharan Africa.
Such is the scene after two decades of “economic reforms”, which were trumpeted as modernising India and turning it into a “tiger” economy. As a result of 20 years of the complete opening up of the economy to imperialist penetration, today 100 of India’s richest people own assets worth one-fourth of the country’s GDP, while more than 80 percent of the people live on less than 50 cents a day. Over 250,000 farmers, driven into desperation by a vicious spiral of poverty and debt, have committed suicide. This obscene inequality is what the free marketers describe as “progress”. And now the world crisis has begun to affect India.
The rupee has fallen to a record low. It declined by 15 percent in the second half of 2011, and the decline shows no sign of halting. The rupee’s fall is raising costs of importing materials, components and machinery for Indian companies. A further drop will lead to increased inflation, especially in fuel, 80 percent of which is imported. The Reserve Bank of India (RBI) raised interest rates 12 times since March 2010 from 4.75 percent to over 8 percent. Inflation in July 2011 was 9.22 percent, which was well above the RBI’s target rate of 4 percent to 4.5 percent. Food prices are rising even faster. The bottom 40 percent of India spends 65 percent of their income on food. With food prices growing as they are, many will be faced with malnutrition or even starvation.
A combination of falling world demand, increasing inflation and higher interest rates will prove fatal to India’s much-vaunted economic expansion. This will be reflected in a rise in unemployment and falling living standards. Millions of people will be condemned to unemployment, underemployment, selling goods on the streets or simple starvation.
There has been a wave of worker unrest in many parts of India, such as the strike of workers at the Comstar Automotive Technologies plant in Maraimalai Nagar in Tamil Nadu, the strike of 2,500 workers of the German engineering conglomerate Bosch in Mumbai, and the wildcat strike of workers at the port of Chennai to protest the death of a colleague in a dockside accident. Workers achieved an important victory after a two-week long and bitter strike at the Maruti Suzuki plant in Manesar over trade union recognition.
The existing parties offer no solution. There will be state elections in 2012 in Uttar Pradesh, Gujarat, Punjab, Manipur, Uttarakhand and Goa. The Congress government is faced with defeat, but the BJP is also unpopular. The CPs, in the eyes of many workers and youth, have been discredited by their reformist and class-collaboration policies.
The desperation of the masses is shown by the spread of the Maoist insurgency, which is now active in many states. In 2010, there were several major attacks by Maoists, including a train derailment that killed over 150 civilians, another attack that killed 26 policemen and dozens of other attacks that killed scores of security forces and civilians. Maoist attacks continued in 2011, including the dismemberment of 10 police officials in Chhattisgarh state. Despite the military clampdown, the arrests, tortures and massacres, there has been no progress in preventing Maoist attacks.
India is not the only Asian economy to experience a slowdown in growth. Eight of the 10 most-traded Asian currencies declined in 2011, reflecting the area’s heavy dependence on exports to the U.S. and Europe. The perspective is one of slower growth, rising unemployment, falling living standards and heightened class struggle in every country in Asia.
After more than six decades of formal independence the rotten Pakistani bourgeoisie has shown its complete inability to play a progressive role. The position of Pakistan is far worse than India’s. It is an unmitigated disaster.
According to sources in the Ministry of Finance, during the first quarter (July-September) of the current fiscal year, 2011-2012, foreign investment from the developed countries dropped by a massive 83 percent and the country only received foreign investment of $50.1 million. In numerical terms, this figure denotes a drop of $241.8 million.
Pakistan’s international trade gap increased by 31.38 percent in the first four months of 2011 over the previous year, owing to the highest-ever increase in imports and a fall in export earnings.As a result, the trade deficit reached $6.871 billion in July-October 2011, from $5.230 billion over the corresponding period in 2010. The current account deficit also widened to $1.209 billion in the July-September period of 2011, as against $597 million over the same period in 2010.
The country's total debt is 66.4 percent of GDP. According to the figures released by the Central Bank, Pakistan’s total debt liabilities in the 2010-11 fiscal year (FY11)—which includes domestic, external, and the debt of public sector enterprises (PSEs)—stood at a staggering 12 trillion rupees or U.S.$139.5 billion.
According to official figures the projected population for 2015 is 191 million, up from the current figure of approximately 170 million, making Pakistan the sixth most populous nation on earth. Every Pakistani man, woman and child is indebted to the tune of Rs61,000 while the Government of Pakistan (GOP) continues to borrow heavily. Soon Pakistan will not be able to service its $60 billion external debt. In order to avoid immediate bankruptcy, Islamabad will have to resort to printing money, which will lead to further inflation.
According to the 2011 Legatum Prosperity Index, Ethiopia, Zimbabwe and the Central African Republic are the only three countries worse off than Pakistan. Their “Safety & Security Sub-Index” points out that Sudan is the only country worse off than Pakistan. Their “Education Sub-Index” shows that the Central African Republic, Mali, Sudan, Ethiopia and Nigeria are the only five countries worse off than Pakistan. According to the 2011 Failed State Index, even countries like Rwanda, Burundi, Ethiopia and Burma are now better off than Pakistan.
Four out of every 10 Pakistanis have fallen below the poverty line: an estimated 47.1 million Pakistanis are living in extreme poverty. Over the past three years, an average of 25,000 Pakistanis per day—every single day of the past three years—has fallen into extreme poverty.
Malnutrition rates are high and ominously climbing, and are often linked to 50 percent of infant and child deaths; there is one doctor—of unknown credentials—for every 1,183 people. Pakistan’s literacy rate stands at 57 percent, which, despite official exaggerations, is amongst the lowest in the world. Pakistan is ranked 142 out of a 163 country index when it comes to the percentage of its budget allocated to education.
Washington needs the support of Islamabad for its war in Afghanistan. But it does not trust the leaders of Pakistan—neither the political or military ones. It has pushed the Pakistan army into a bloody war in the border areas, which have never been under the control of the Islamabad government. It sends its unarmed drones to bomb the tribal areas inside Pakistan, and kills many civilians who have nothing to do with the terrorists. It did not inform the Pakistani government or army of the raid that killed Bin Laden. In short, it treats Pakistan and its government with the same imperialist arrogance that the British displayed in the days of the Raj.
The fatal involvement of Pakistan in Afghanistan has served to destroy whatever semblance of political stability existed before. The state is deeply fractured and undermined by corruption, drug dealing and internecine conflicts between different sections of the army and the ISI. The murder of Bin Laden by the Americans on Pakistan territory brought all these simmering conflicts to the surface immediately.
Zardari is an obedient stooge of the Americans, but he is obliged to walk a very shaky tightrope to stay in power. The PPP government, corrupt and venal, is extremely unstable. Zardari is trying to balance between the different elements in the state apparatus and U.S. imperialism. It is hated by the masses, but they can see no alternative. The military, which in the past would have intervened, are divided and afraid to take power under these circumstances. This peculiar combination of circumstances is the reason why the present situation has been prolonged. How long it can continue is another matter.
The extreme social instability reflects a huge growth of discontent, which is seething beneath the surface. This presents big opportunities for the Marxist tendency, which, despite all the frightful objective difficulties is growing steadily in numbers and influence. The situation is extremely explosive and can change very suddenly. A new edition of 1968 is implicit in the whole situation. This will present our organization with big challenges but also huge opportunities.
Ten years of American occupation in Afghanistan have achieved nothing, except to destabilize the entire region. And what has it achieved? The real intention was to make South-Central Asia an American sphere of influence. Instead, they have created a chaotic situation not just in Afghanistan, but also in Pakistan.
This has sucked in all the neighbouring states: Pakistan, India, China, Russia and Iran. All are intriguing, manoeuvring and jockeying to take over when the Americans leave. In his recent pronouncements on the war, President Obama, in a phrase frequently heard around Washington, was presenting Afghanistan as a victory. In practice, the USA is bogged down in a conflict that they cannot win.
Once the U.S. has completed its fall-back in Afghanistan, Washington hopes that some semblance of military and economic equilibrium can be restored, so that progress toward a political solution can be made. But this is a Utopian dream.
On 1 November 2011, President Hamid Karzai thanked General Stanley McChrystal, the U.S. former commander of NATO troops in Afghanistan, for a mission he called sincere and courageous and for all his efforts and services during his command. Karzai knows that once the U.S. army leaves his days are numbered. But at the same time as he tries to ingratiate himself with the Americans, he is also secretly engaged in negotiations with the Taliban and the Iranians. This shows the completely unviable nature of the situation.
Although the USA will be forced to leave Afghanistan with its tail between its legs, they will have to retain sufficient military force to prop up the Kabul regime and prevent a new Taliban takeover. They will also want to retain their ability to strike at terrorist bases on either side of the Durand Line. This is a recipe for further instability in both Afghanistan and Pakistan. Events in Pakistan and India will in turn affect the situation in Afghanistan. These countries are now completely interdependent.
The whole of Central Asia has been destabilized by the fall of the Soviet Union and the interference of the USA in Afghanistan. The colossal turbulence in the region was shown by the popular uprising in Turkmenistan and above all the strike wave in Kazakhstan, which shows the revolutionary potential of the proletariat even in the most difficult conditions. Above all, the fate of the whole region will be determined on the perspective of revolution in Iran and China.