The relentless revolution: a history of capitalism (58 page)

The trajectory of China and India has thus far developed in more compelling ways than that of Russia and the countries in the old Eastern bloc that have also deserted command economies. The vigorous multiparty democracy of India was in its sixth decade when the people elected a leader to revive its sluggish economy. The Chinese Communist Party kept a firm hand on the rudder of the ship of state as it sailed into the choppy waters of free enterprise in the 1980s. The United States is the major customer for both countries. Were American consumers not willing to run up large debts, India and China would have developed much more slowly. Building free market economies on a socialist base, both India and China insist that they will not tolerate for long America’s large income gap or its lack of universal health care and cheap education. This will be a tall order for them to fulfill considering that they have levels of poverty unknown in the West and that economic development has brought them both a much wider disparity between rich and poor than exists in the United States.

Moving into its second decade, the twenty-first century has already been packed with stunning changes. In the 1980s the center of world trade shifted from the Atlantic to the Pacific Ocean, just as it had moved from the Mediterranean Sea to the Atlantic Ocean in the seventeenth century. With half the world’s population accessible through the Pacific and that half endowed with growing purchasing power, the move was sure to come as the two sleeping giants, China and India, made their economic power felt worldwide. In a way they are coming back to a former position. In 1820 China and India together contributed nearly half of the world’s income; by 1950 its proportion had dropped to one-tenth. This slide has decisively stopped. Expectations are that by 2025 their share will be one-third in a vastly richer world. Both China and India are societies of ancient lineage with impressive achievements in science, religion, and the arts. As their potential for economic growth has burgeoned in the last two decades, their voices have grown louder in international meetings.

The World Trade Organization and Its Critics

China and India refused to accept the 2008 round of trade negotiations conducted at Doha, capital city of Qatar, under the umbrella of the World Trade Organization. The breakdown in the Doha round looked a lot like Yogi Berra’s “déjà vu all over again.” The sight of nations jockeying for special privileges to the neglect of shared concerns brought back scenes from the 1920s. The depths of the Great Depression and the horrors of World War II had convinced Western nations to give up protective tariffs and accept restraints imposed by the Bretton Woods agreement. Fast-forward sixty-one years, and the snake of national interests has reappeared in the global Garden of Eden.

A lot has happened since 1947, when twenty-three nations agreed to meet regularly to facilitate multilateral trade agreements and promote international economic development under the General Agreement on Tariffs and Trade, the WTO’s predecessor. Probably the most portentous of that “lot” are the waning hegemony of the United States and the waxing power of China and India. The WTO’s persistent and intrusive summons to reform has made many countries restive. WTO members outside the advanced capitalist nations are balking at the West’s distressing tendency to talk up free trade while protecting interest groups at home. Their leaders resent Congress’s doling out billions of dollars to growers of corn, cotton, sugar, soybeans, and wheat to shield them from Third World competition. Some point with incredulity to the fact that the European Union subsidizes every cow grazing in its members’ fields by more than nine hundred dollars.
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Even more censurable were the measures the International Monetary Fund took to force developing countries to accept foreign investment and short-term flows of foreign capital without restriction even though such policies increased the volatility of their already fragile economies.

In the Cancún round of negotiations of 2003, India and China had joined Brazil in turning the tables on the European Union and the United States when they demanded the removal of agricultural subsidies and other barriers to trade. Then, in 2008, India and China broke with Brazil and other developing nations by rejecting the new Doha agreements. China, eager to get its textiles into the United States, had initially favored free trade, but since 2001 a new problem has appeared on the horizon for both India and China. Oil shortages and high food prices have pushed to the fore concerns about nurturing an already pretty destitute group of subsistence farmers. Both countries wanted permission to throw up a wall of protective tariffs should there be a surge of farm exports. For the post-World War II free traders this sounded very much like moving backward. For other developing countries it seemed like a fracturing of their solidarity. Resistance to this request will be strong because most analysts realize that behind the walls of legislative protection flourish inefficiencies and corruption.

India was one of the original nations in the World Trade Organization. Since 1947 another 126 countries have joined the first 27, with an additional couple of dozen negotiating to enter. China did not belong to the WTO until 2001. It wanted to join so badly it agreed to eliminate most of its trade barriers, a deal that forced other countries to follow suit by cutting tariffs on Chinese exports. When China entered this global club, it signed on to allowing foreign banks to enter its economy by 2006, but with lots of conditions. Still simmering is the contentious issue of intellectual property rights. China gets enormous heat for its infringements of them, a sore point with the music industry of the United States and Europe. Just how difficult protecting them can be gleaned from the fact that pirated copies represent 30 percent of all DVD and CD sales in Spain, a WTO member in good standing. Perhaps history can give us some perspective. When Charles Dickens visited America in 1842, he found to his dismay unauthorized copies of his works spilling off the shelves of American bookstores.
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Sadly the big losers from the failure to ratify the Doha round were those nations at the bottom of the world trade universe, poor, smaller countries desperate for the Western nations to stop subsidizing the crops that they want to export to them. Proponents of a new agreement had hoped that high food prices might entice protected farm blocs in the West to back off. Even America’s Democratic Party, now in power, has embraced the rhetoric of protection. Progress won’t come to a halt with the failure of the Doha round. Bilateral trade agreements will replace this multilateral one, and a new round of talks will surely begin. When it does, it will become obvious that it is no longer a joust between the West and the rest, but rather a game with at least three contending groups: the developed West and Japan; the Four Little Tigers, China and India now enjoying enough economic progress to make their own demands heard; and other developing countries like Brazil and Chile threatened by their former friends India and China, whose enormous markets and accelerating exports are changing the playing field once again.

The World Trade Organization is a favorite target for protesters who sometimes ignore the fact that its 153 members and 28 observers (Russia among them) represent almost all the countries on the globe from China to Liechtenstein. Though dismissed as a tool of the United States, the WTO has taken in members like Cuba that the United States opposed. Still, as a trade organization working through a capitalist world, it often conforms to the law of the jungle, where lions get to throw around the most weight. With the lion’s share of wealth, experts, and hubris, the movers and shakers of the WTO have tried hard to ignore the demands and needs of those down the food chain. Some criticize the outsized clout in the WTO of the multinational corporations in agribusiness, pharmaceuticals, and financial services.
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The WTO exercises too much caution, others say, in its enforcement of quarantines designed to protect humans, animals, and plants. Caution seems to abound; many of the WTO’s accords for cutting tariffs won’t go into effect for another twenty years.

Within the European Union and the United States there are plenty of critics of the World Trade Organization as well. Organized labor resists heartily having to compete with low-wage labor around the world. The race to the bottom by international corporations has prompted a vigorous campaign to include labor standards in future WTO accords. Opponents to this campaign say that the WTO can’t take up every good cause supported by Westerners. Considering that labor is central to all production, its concerns hardly seem peripheral. Libertarians resent the active role given to a highly bureaucratized international organization (France alone has 147 people working at the WTO).

As corporations have become international and now multinational in the lexicon of globalization, so supranationalism is replacing internationalism, with more and more agencies, commissions, and international treaties dictating terms of behavior to nations. Activists in the West want international organizations to combat labor exploitation and protect the environment while national leaders and business interests in developing nations tend to view these as sham concerns meant to restrict trade in their goods. The WTO refuses to act against tuna nets that might trap dolphins or to place restrictions on hormone-fed beef, but it has worked to suppress protective tariffs and subsidies.
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The universal benefit of global access to goods and information may well triumph over protective impulses. All the more so now that the world’s countries, including India and China, realize that they are in the same boat whether it sinks or floats.

Dramatic Change for Each Generation in China

Generations, important everywhere, are particularly so in China. When a cohort of men and women comes of age, its members will share the common growing-up experiences. This has become apparent in modern times, when mores, practices, and technology change rapidly enough to separate parents’ worlds from those of their children. Historians don’t pay a lot of attention to generations because the continuous birth of babies makes it hard to tell when a particular generation arrives on the scene. They tend to treat differences in a thirty-year time period without thinking much about the specific perspective of young adults making their way. In China each new cohort has been marked by a violent eruption beginning in 1949, when Mao Zedong and his Communist forces successfully pushed the Chinese Nationalists across the Strait of Taiwan, then called Formosa. This brought to an end years of civil war that included the disruptions from the Japanese invasion and occupation of Manchuria in the 1930s and early 1940s.

Within seven years, Mao had launched the Great Leap Forward, his program to modernize the Chinese economy. He organized the countryside into communes of roughly five thousand families. Within two years seven hundred million people were living in more than twenty-six thousand communes. Eschewing Stalin’s push for a large, heavy industrial sector, Mao wanted to start with small units like his communes. His principal goal was a sound one: to provide incentives to keep farmers in place and to improve their output so they could feed more industrial workers. Mao championed rural manufacturing with large electrification projects to fuel rural factories.
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As the government slogan went, “Leave the farm, but not the countryside.” Most innovative in Mao’s grand scheme (and the most mocked) were the backyard furnaces to which people brought their metal cooking utensils and tools to be turned into steel. Through a mix of bad luck, bad weather, and bad planning, the Great Leap Forward ended in disastrous famines, possibly killing as many as twenty million people. This clearly marked the generation coming of age in the mid-1950s.

In quick succession came the Cultural Revolution of 1966, which turned upside down the lives of China’s youth. The Communist Party mobilized students as Red Guards to work alongside the People’s Liberation Army to root out reactionary elements found among teachers, former officials, and intellectuals generally (possibly their own parents). Youngsters tramped across the country, denouncing people and staging mock trials, which led to thousands of suicides. At the same time, former businessmen were sent to labor reform camps. By mid-1970 Mao had turned on his Red Guards. He renamed them “educated youths” and dispatched them to the countryside to live with peasant families for reeducation. This was a lexical switch that turned millions of young enthusiasts for Mao into pariahs of the state. Many young men and women stayed in the country for five or six years. It’s hard to measure the psychological impact of such experiences, but it is certain that very few people living on this planet have ever been so closely watched and capriciously manipulated as the Chinese under Mao.

China’s Economic Reformer

Mao died in 1976, leaving a society dispirited, poor, and entangled in layers of party control. He had subjected the economy to politics in two senses, oversight and a push for industrialization to the exclusion of consumption to keep out foreign influence. He also presided over great leaps in life expectancy and literacy, which were going to stand the country in good stead later.
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Two years after Mao’s death, Deng Xiaoping came to power and soon put in place a program to breathe life into the stagnating economy. In 1971, President Richard Nixon had traveled to China after an unusual diplomatic rapprochement conducted across the Ping-Pong table. By 1978 the United States had formally recognized its Cold War enemy. The State Department now maintains that it never wants to see bilateral relations with any nation become so sour that it must appeal to Ping-Pong players to carry an olive branch. Deng also presided over a popular confrontation that affected the generation coming of age in 1989, a standoff between protesting students and Communist Party officials that took place in Beijing’s Tiananmen Square.