Tuesday, 19 March 2019

China’s plans for Green Growth

By John Ross

‘People centred development’, including special emphasis on ‘green growth,’ was a central theme of this year’s annual China’s National People’s Congress (NPC) – its legislative body. The focus of the NPC, together with the Chinese People’s Political Consultative Conference (CPPCC) which is held simultaneously, is always primarily domestic. However, China’s domestic agenda necessarily impacts on its international relations. Such international impact, in turn, reciprocally affects China itself – it is important for China that other countries do not pursue protectionism, that other countries pursue policies congruent with China’s in problems that can only be solved internationally etc.

Key policies at this year’s ‘two sessions’ will particularly have a major international impact due to the current international situation – which is seeing a slowdown in the Western economies, increasing concern within Western countries about poverty and social inequality, and increasing international anxiety and public agitation about climate change. China’s economic growth, its policies on poverty, and the policies adopted by China on the environment in general and climate change in particular will therefore have international impact. This correspond to a reality that China, in correlation with its growth target, and its poverty reduction, has set internationally leading targets for dealing with climate change and environmental issues. In this framework, this article, therefore, analyses this interrelation between China’s domestic priorities and international trends.

To avoid the suggestion of using sources excessively favourable to China all economic data used here, unless otherwise stated, is not taken from China but from the IMF. As the data for 2019 are projections if the differences they showed between China and other countries were small no great reliance could be based on such figures. However, as will be seen, the differences are not small, but the outperformance of China compared to the Western economies is extremely large – therefore, during 2019 small variations of economic performance from the IMFs projections will not affect the fundamental situation. For reasons analysed in my book Don’t Misunderstand China’s Economy, while in the past IMF projections for the Western economies have been too optimistic the current ones by the IMF are in general realistic – with one key exception noted below.

China’s growth rate

China set its economic growth target for 2019 at 6.0%-6.5%. To understand the global impact of this it is important to give an international comparison for the word’s three largest economies – the US, China and EU. China is expected to grow this year approximately two and a half times as fast as the US and more than three times as fast as the EU.

China’s performance is of particular significance as it will be set against the background of an overall slowdown of the Western economies. The IMF in its latest forecast in January projects that growth in the advanced Western economies as a whole will fall from 2.3% in 2018 to 2.0% in 2019, in the US it will decline from 2.9% to 2.5%, and in the Eurozone from 1.8% to 1.6%. Even if the IMF’s projection of China’s growth, of 6.2% in 2019 were accurate, and that is towards the bottom end of the government’s target range, this means the IMF projects that not only will China be growing two and a half times as fast as the US but the economic slowdown in the US will be more severe in relative terms than in China. Compared to this year the US economy would slow from 2.9% to 2.5%, or by 14% of the previous figure, while China would slow from 6.6% to 6.2%, that is by only 6% from the previous figure.

China’s growth target

These comparative international trends can be seen even more clearly if they are considered in per capita terms. China’s population growth is slower than other major economies – China’s population grew in 2018 by 0.5% compared to 0.7% in the US and 1.3% in India. Therefore, a part of US and Indian total GDP growth, compared to China, is simply due to more rapid population growth. However, the increase in the wellbeing of any country’s population is determined not by total GDP but by per capita GDP.
Even if India’s official growth figures are accepted, which many experts even in India would not do, then in per capita GDP terms, as shown in Figure 1, China’s growth in 2018 was the fastest for any major economy – 6.1% compared to 5.9% in India and, considering Western economies, far faster than the 2.4% in the US, 1.8% in Germany, and 1.4% in Japan.

Figure 1

 
Making a comparison to major Western economies for 2019, the IMF projects China’s per capita GDP growth will be 5.7% compared to 1.9% in the US and EU, 1.8% in Germany, and 1.3% in Japan. That is:
  • China’s per capita GDP growth will be three times as fast as the US.
  • China’s per capita GDP growth will be three times as fast as the EU, and more than three times as fast as Germany
  • China’s per capita GDP growth will be more than four times as fast as Japan.
To summarise, the conclusions of this are evident:
  • First, even at the level of total GDP growth, the attempt by sections of the Western media to claim that China’s economy is in ‘deep crisis’ is pure nonsense – China’s economy will grow two and a half times as fast as the US and three times as fast at the EU.
  • Second, the contrast in per capital terms is even greater – China will grow three times as fast as the US or EU.
  • Third, as the Western media is at present full of false propaganda about ‘severe slowing’ and ‘deep crisis’ in China’s economy, the slowing of the Western economies, which is already receiving increasing attention, will provide a very favourable opportunity to show once again the falsity of claims about China
Finally, from the point of view of explaining this situation internationally, it is likely to be very useful, and objectively correct, for China to emphasise per capita trends as well as total GDP trends – as the fact that China’s population growth is significantly slower than other major economies conceals some of the real international contrasts in development.
Contributions to world growth
From the viewpoint of the standard of living of China’s population per capita development is the most important. However, from the viewpoint of other countries’ trade and investment, and therefore their objective interest in interaction with China, it is the total size of China’s economy and growth which is decisive. In order to assess the international impact of the NPC decisions, therefore, it is necessary to analyse the projected contribution of China to world growth in comparison to other countries.
Calculated in PPP terms, which reflects the real increase in the number of sales of goods and services, the IMF projects that China will account for 27.2% of world growth in 2019 compared to 12.3% for the US and 11.8% for the EU. That is, China’s contribution to world growth in these terms will be more than twice that of the US and EU – or put in other terms, China’s contribution will be as large as the US and EU combined. This is, of course, vital for companies aiming to sell into China’s market.
Calculations in current exchange rates by the IMF are unclear as, for reasons which it does not justify, the IMF makes the extremely strange assumption for 2019 that the RMB will undergo a significant devaluation against the dollar. To be precise, the IMF projects that while China’s GDP in constant price terms will increase by 6.2%, and in current RMB prices will increase by 8.6%, in current dollar terms China’s GDP will only increase by 5.3% – which could only be explained by a significant RMB devaluation. This exchange rate projection is neither in line with current trends nor with reports of an exchange rate agreement between China and the US in current trade negotiations. However, this appears to be an anomaly for 2019 in that the IMF estimates that over the whole five-year period 2018-2023 at current exchange rates China will account for 26% of world growth and the US and the EU will each account for 17%. This is over the next period as whole China’s contribution to world growth at current exchange rates will be more than 50% greater than either the US or EU.
In summary, in terms of sales over the next period, China’s economy will grow more than twice as fast as the US or EU and even at current exchange rates it will grow more than 50% more rapidly – providing a firm basis on which to attract other economies to increasing economic interaction with China.
Total GDP growth is not the target
But while it is significant to note projected growth rates, China has rightly emphasised that GDP growth cannot by itself be the target of policy. The correct goal is ‘people centred development’, that is the improvement of the overall living conditions of its people – including in relation to problems that by their nature can only be solved internationally.
China has long led the way globally in speed of increase of living standards, which for the last 40 years have been by far the fastest in any major economy, and in poverty reduction – since 1978 China has accounted for almost three quarters global fall in the number of those living in World Bank defined poverty. China’s pledge to entirely eliminate absolute poverty by 2020, repeated at this year’s NPC, remains an inspiring goal for all humanity.
These issues also illustrate the link between economic development and human well-being – growth of per capita GDP is not just a question of ‘concrete and steel’, i.e. physical production. Economists know that average life expectancy is the best indicator of overall human living conditions as it sums up in a single figure all positive (reduction of poverty, education, good health care, environmental protection) and negative (poverty, bad health care, lack of education, environmental damage) trends. Internationally more than 70% of differences in life expectancy between countries are explained by differences in per capita GDP.
Regarding China its life expectancy has continued to increase steadily – an indicator of its overall improving average social conditions as well as the success in poverty reduction. But it is therefore an extremely disturbing trend that in the US life expectancy has now been falling for three years and in the UK life expectancy has also started to decline – such a situation has not existed in these countries for decades. This clearly can only reflect a deteriorating social situation which, in turn, underlies heightened social and political conflict in these countries – the political turmoil continuing to surround the Trump administration, the economically irrational Brexit decision in the UK etc.
Some people in the West now argue that changes in distribution of income within advanced economies, particularly the US and UK, where this is extremely unequal, could ensure the maximum social progress even without economic growth. But whatever position is taken on this regarding the West, where it is becoming a hot debate in some circles, in developing countries such as China this is impossible. Continued development of per capita GDP, in the framework of ‘people centred development’, is therefore vital for the well being of China’s population and its growth target maintains this.
China’s methods of poverty reduction are of direct concern in developing countries. But even in advanced economies, with a higher per capita GDP, the difference of methods used by China at different stages of development for eliminating poverty are of interest – and likely to win widespread support.
To lift more than 800 million people out of World Bank defined poverty, as China did after 1978, China necessarily relied on overall economic growth – no targeted measures would have been powerful enough. But even with economic growth the last few tens of millions of people living in absolute poverty in China could be left there – because they are in very inaccessible parts of the country or for other reasons. Therefore, for final success in eliminating poverty, China has to rely on targeted measures – which require conscious directed state policy as set out by the NPC. In both the US and UK, which rely overwhelmingly on the ‘invisible hand’ in the economy, key measures of poverty have actually increased in the last period.
China’s achievements in poverty reduction are so overwhelming ahead of the rest of the world that this should be a central part of its public image and presentation – in the West even anti-China politicians are forced to praise China for its unparalleled success in poverty reduction.
Ecological civilization
But in addition to immediate struggles to raising living standards, to provide social protection, to extend health care, and to eliminate poverty, in the present world ‘people centred development’ must also centrally include the fight against environmental degradation and against climate change. The latter, in particular, is a literally deadly threat to the whole future of humanity. These goals require building an ‘ecological civilization’, as President Xi Jinping has put it.
The effects of global climate change are already clear. The world is already seeing record-breaking temperatures, extreme heatwaves, storms, floods, and wildfires leaving a trail of death and devastation – and this situation will become progressively worse as global temperatures rise. As the UN’s Antonio Guterres has said, scientists have warned about global warming for decades, but ‘far too many leaders have refused to listen [and] far too few have acted with the vision that science demands.’
This extremely dangerous threat to the whole of humanity is therefore being increasingly reflected in generating social and political movements internationally. In the US recognition of the danger of climate change is extremely widespread with those concerned on this issue ranging from multi-billionaires such as former Mayor of New York Michael Bloomberg, through entire US states such as California, to the ‘Green New Deal’ put forward by many political figures which calls for concerted action on climate change and commands widespread popular support. Young people, who will face the worst consequences of climate change during their lifetimes, have started to become increasingly active – with in Europe an international movement of school strikes against climate change. Leaders in Pacific Islands term have termed this threat a literal genocide – their countries will physically disappear beneath rising sea levels if action is not taken.
The effective fight against climate change requires both correct policies and huge technological and industrial capacities and the objective situation is that China alone possesses both. The emphasis on ‘ecological civilization’ at the NPC is therefore particularly important given that, unfortunately, the Trump administrations in the US is continuing to undermine the Paris Climate Agreement and has made clear that the US will withdraw from it when the rules allow President Trump to do so in 2020.
The NPC decisions go in exactly the opposite direction to the regrettable US deeply irresponsible policies. They are therefore both in the interests of the Chinese people and in line with majority, and an increasing majority, of international opinion. More specifically, in a key target the work report projects China’s energy consumption per unit of GDP to continue to fall by about 3% in 2019. Regarding key forms of environmental pollution sulfur dioxide and nitrogen oxide emissions will drop by 3%, and the concentration of fine particulate matter (PM2.5) will continue to decline in key areas. This year’s chemical oxygen demand and ammonia nitrogen emissions will drop by 2%.
Progress made by China in tackling pollution in the last years is also regarded internationally as striking. A few years ago, as was recognised not only in China but internationally, major Chinese cities had very serious problems of smog and pollution – with Beijing being the most widely cited case internationally. But in 2018, as even Ian Bremmer, head of the Eurasia Group, the leading Western ‘risk evaluation’ company, and a severe critic of China noted, Beijing is no longer even in the top 100 most polluted cities in developing countries – regrettably seven out of the ten most polluted cities are now in India. This is not at all to underestimate how much still much remains to be done to fight against climate change and tackle pollution, but China is making a decisive turn to environmentally favourable policies while other countries, notably the US, are retreating from them. Furthermore, China is having measurable success. This will necessarily have an impact on international opinion.
Convergence with international forces
On the issue of climate change, therefore, China’s policies are objectively aligned with an extremely wide range of forces internationally, ranging from billionaires to school children, on what an increasing number of people in the West consider the most important issue facing humanity. This creates important possibilities for China to create alliances with very broad groups – even some who are normally hostile to China but who consider such differences less important than dealing with what they see as a fundamental threat to humanity.
The context for this is that the 2020 international climate talks are supposed to agree new national commitments consistent with constraining global temperature rise ‘well below two degrees’. This is given greater emphasis by the recent conclusion of the United Nation’s Intergovernmental Panel on Climate Change’s (IPCC) that the only science-based target to tackle the climate crisis is to constrain global average temperature rise below 1.5 degrees above the pre-industrial average – although this is not yet accepted officially as an international target.
Overall, while China’ comprehensive national strength is rising it cannot yet play an all-round leading role on international issues – views such as that China’s comprehensive national strength is already equal to the US are incorrect, and views such as that the dollar can be replaced as the leading international currency in any short/medium term period are also unrealistic. But as China’s comprehensive national strength increases it will be able to take a leading international role on certain issues. Climate change is one of them – most developing countries would welcome China playing such a role and it may be possible for China to come to an agreement with the EU, leaving the present administration in the US relatively isolated on this issue.
This trend directly coincides with increasing concern in the West about climate change and an increasingly open support for China’s policies in several fields related to this. Western experts note that China is already ahead of its target of reaching peak emissions by 2030 – recent Western estimates are that this will be achieved in 2025 or even slightly earlier. Interestingly the target date that would be required to meet a global target of 1.5 degrees is only slightly earlier – 2022.
To take specific areas, China is already by far the world leader in electric vehicles for public transport. Shenzhen is world’s first city to have a 100% electric bus fleet and this is extremely large – almost 16,000 vehicles. The next nine cities in the electric bus global top ten are also all in China and have thousands of vehicles. To show the scale of China’s lead, the next highest cities in the world after China are London and Santiago in Chile with roughly 200 each. China is also by far the world leader in urban cycle hire.
Similarly, the ‘C40 Cities – Climate Leadership Group’, which joins together 90 leading cities internationally, representing more than 650 million people and including one quarter of the global economy, asks all its cities to commit to all new buildings being zero carbon by 2030. China can technically achieve that.
There are numerous ‘hot’ issues to be considered in the coming international climate change discussions – – regarding which a strictly objective dialogue is crucial. For example, emissions from China’s own coal powered electricity generation is scarcely rising – it went up only one percent last year, but pro-China Western experts, who are overall strong supporters of the Belt and Road initiative, are worried about the effect of new coal power stations that are part of the Belt and Road initiative.
On the other hand, twenty years ago, under Clinton and Gore, the US forced the UN to adopt a method of measuring climate emissions that favours western countries – by measuring emissions at the point of production within a state boundary (so a country’s emissions are calculated from adding up pollution from power stations, vehicle emissions etc). A more accurate measure is to calculate based on what is consumed within a country and follow the emissions back down the supply chain (so looking at the materials that make up a washing machine and how they were produced, what it took to feed the pigs that are turned into bacon, the process of manufacturing clothes and how they are transported to the point of retail sale etc). The latter is more accurate in attributing real responsibility for emissions and climate change. The US’s measured emissions would rise by minimum of 20%, probably more, if such a consumption methodology was used – while China’s would fall substantially. This would of course be a good but radical change.
Serious negotiations therefore lie ahead in which both economic and environmental factors must be considered. But what is clear is that China already has the leading position among the largest states in dealing with climate change and this is increasingly recognised by other countries and international environmental organisations. This issue is not only vital for China itself but also vital for the whole world and for international perception of China.
China’s framework is, of course, its ‘national rejuvenation’. A ‘vanguard’ of clear-headed people in other countries can understand that China’s national rejuvenation is in their interests as well. But the mass of people judge things by whether they benefit from them – that is agreements must be ‘win-win’. This is a central part of Xi Jinping’s concept of a ‘common future for humanity’. China’s policies on its economic growth and climate change precisely create ‘win-win’ solutions for itself and other countries.
Conclusion
The need for ‘people centred growth’ adopted at the NPC, which centrally includes integrating economic growth with environmental concerns, flows from China’s own domestic needs. But it also provides a key basis for China’s international agreements – which in turn are significant for China’s own development. They are also a key part of China’s ‘soft power’. These policies have been adopted for implementation in China to correspond to China’s domestic development but, as shown, they also fit with current trends globally. It is therefore greatly to be hoped that China’s diplomacy and public relations will skilfully project these issues internationally.
This article was previously published on Learning from China and the Chinese language version of this article first appeared at Guancha.cn on 15 March 2019.

Tuesday, 5 March 2019

Corbyn's Labour - part of the new international movement against climate change

By Ken Livingstone

We are quickly running out of time to make the necessary steps required to prevent global warming exceeding the critical point of a 1.5 degree celsius rise. The International Panel on Climate Change has argued we have just over a decade to take the decisive action to reduce the amount of carbon in the atmosphere. We face a direct existential threat if we do not rapidly switch from fossil fuels by 2020, and a failure to do so will mean runaway climate change.

Already we are seeing record-breaking temperatures, extreme heatwaves, storms, floods, and wildfires leaving a trail of death and devastation. As the UN’s Antonio Guterres has said, scientists have warned about global warming for decades, but "far too many leaders have refused to listen [and] far too few have acted with the vision that science demands."

When it comes to having both the vision and policies needed to address these severe dangers, it is only voices from the left that can put forward the radical changes to the economy needed, and it is the globally resurgent extremeright that is instead forming an international axis of climate change denial. Specifically, Donald Trump's administration is continuing to undermine the Paris Climate Agreement and has made clear that the US will withdraw from it when the rules allow him to do so in 2020.

He is joined in this by the far-right president of Brazil Jair Bolsonaro, who has issued an executive order to facilitate the acceleration of deforestation in order to open up the Amazon rainforest for further exploitation by agribusiness, mining and construction companies. This move could destroy the ‘lungs of the planet’ by reducing the planet’s ability to absorb and store carbon.

While Bolsonaro and Trump claim these devastating policies are in the economic interests of their countries and populations, in reality they only advance short-term profits for a tiny elite. In the medium to long term they will have a devastating impact on the living standards of the overwhelming majority, especially the poorest, who are impacted by climate change the most.

This reactionary agenda faces stiff resistance from climate justice campaigners. Importantly we are also starting to see the seeds sown of an international political movement demanding a new, socially and environmentally sustainable model of political economy.

This movement understands that we need a fundamental transformation away from neo-liberalism, and that it is impossible to tackle climate change without simultaneously reducing inequality, and vice versa.

In the belly of the beast itself, the Green New Deal resolution put before the US Congress by Alexandria Ocasia-Cortez coherently melds action to tackle climate change with measures to counteract the obscene inequality and wage stagnation that has built up over decades of neo-liberalism.

The resolution starts with the Intergovernmental Panel on Climate Change’s conclusion that the only science-based target to tackle the climate crisis is to constrain a global average temperature rise below 1.5 degrees. But it also takes as its evidential starting point “hourly wages overall stagnating since the 1970s… the third worst level of socio-economic mobility in the developed world before the Great Recession…[and] the greatest income inequality since the 1920s”, including a specific focus on the racial and gender wealth divide.

To overcome this, it advocates the US government launches at least a trillion dollars in state investment to eliminate fossil fuels and switch to 100% renewable energy in the next decade, which would inevitably boost growth and create quality jobs.

Labour’s proposed green jobs revolution, creating hundreds of thousands of jobs and recently elaborated by Rebecca Long-Bailey, also shows that Jeremy Corbyn-led Labour is a central part of this international movement for change.

As Rebecca said, “We believe that together we can transform the UK through a green jobs revolution, tackling the environmental crisis in a way that brings hope and prosperity back to parts of the UK that have been held back for too long.”

After decades of neo-liberalism, our economy is structurally weak and deeply unequal. Whole communities have been de-industrialised, insecure and low paid work has soared, our infrastructure is underinvested and crumbling, and our society's fabric is being pulled apart by austerity. In direct contrast to this failed approach, Labour’s green jobs revolution can improve the living standards of millions.

Jeremy Corbyn understands that only a total transformation of the failed neo-liberal model can change this, protecting both people and planet. This not only offers hope for a better life here, but is also part of a new international alternative to ensure humanity has a future.

» Follow Ken at www.twitter.com/ Ken4London and www.facebook.com/ KenLivingstoneOfficial

The above article was previously published here by Labour Briefing.

Thursday, 21 February 2019

Despite himself Trump admits the superiority of China’s socialist economy to capitalism

By John Ross
Major events, such as the Trump administration launching tariff aggression against China, inevitably ruthlessly cut away hollow rhetoric and allow the objective facts of a situation to be seen – including revealing how the different forces in a situation really judge it. A particularly striking example of this principle, with deep implications not only for China but for all countries, is that the reasons given by the Trump administration for launching its trade war against China in fact entirely destroy that administration’s own propaganda that socialism is ‘inefficient’ in promoting economic development compared to capitalism. In reality the Trump administration is forced in practice, as will be shown, to acknowledge that China’s socialism is more effective as a path of economic development than capitalism.
It is certainly deeply ironic that President Trump, an avowed supporter of capitalism, is forced in practice to acknowledge the superiority of China’s socialist system – he is certainly not himself aware he is making this admission! But this reality is immediately demonstrated by the Trump administration’s own claim that China has an ‘unfair’ economic advantage due to the consequences of China pursuing a socialist economic path of development. It is therefore equally ironic that neo-liberal commentators in China attempt to claim capitalism is more efficient than socialism at the time when the Trump administration is forced by economic reality to admit the exact opposite.
This fact that the Trump administration, and large parts of the Western media, are themselves unaware that they are stating the superiority of China’s socialist economic system has no bearing on the objective content of what they are admitting. But examining this contradiction between the Trump administration’s propaganda claims, and the reality it is forced to recognise, casts an important light on the superiority of a socialist economic system compared to a capitalist one.
This article, therefore, examines this gap between what the Trump administration is forced to admit in reality and its propaganda. Given such a contradiction, analysing the logic of Trump and Western media statements, and their internal contradictions, also therefore confirms the practical correctness of China’s socialist choice of development.
But, as will be seen, the issues involved in this economic choice between socialist and capitalist paths of economic development, and of the outcome of the Trump administration’s trade aggression against China, are crucial not only for China itself but for all countries – indeed for humanity as a whole. Furthermore, they give a particularly striking and direct confirmation of one the most important principles of Marxism. Therefore, the internal contradictions in Trump’s and similar claims merit examining in detail – after all, when an opponent of socialism is forced in fact to admit the economic superiority of the socialist system this is something worth analysing and thoroughly understanding!
Slowing China
That the aim of the Trump administration’s tariffs against China is to slow China’s economic development is now either scarcely concealed, or is openly admitted, by both that administration and by anti-China sections of the Western media. Numerous examples could be used to illustrate this so simply two especially prominent ones will be taken for examination here – all similar claims have the same logic.
Taking first a leading example from the media, on 18 October, The Economist carried a long cover story ‘The End of Engagement’ that noted: ‘America fears that time is on China’s side. The Chinese economy is growing more than twice as fast as America’s and the state is pouring money into advanced technology, such as artificial intelligence, quantum computing and biotech. Action that is merely daunting today… say… to challenge China in the South China Sea—may be impossible tomorrow.’
Speaking in August, President Trump himself declared: ‘When I came [to office] we were heading in a certain direction that was going to allow China to be bigger than us in a very short period of time. That’s not going to happen any more.’
However the reality is that facts show, as analysed earlier in Trump’s Economy – Cyclical Upturn and Long Term Slow Growth that the Trump administration has failed to significantly accelerate the US economy’s growth rate. In fact, the opposite situation exists:
Peak growth under Trump is the lowest under any US president since World War II.
US growth during the whole of the current business cycle is the slowest during any business cycle since World War II.
As the Trump administration has been unable to substantially accelerate US growth, therefore the only method available to it to prevent China being ‘bigger than us in a very short period of time’ is to slow China’s development. This is, of course, the reason for the Trump administration launching trade aggression against China.
What Trump is in reality admitting
To achieve this goal of slowing China’s economy the common core demand that President Trump’s administration makes is that China’s state should not intervene in the economy – seen notably in its call for China to abandon SOE’s, the attack on state economic priorities in ‘Made in China 2025’ etc. All these are claimed to give China an unfair advantage in competition with the US.
It is, indeed, perfectly true that China’s state strategically intervenes more in its economy than the US state does in the US economy. That is, as Xi Jinping put it, China uses both the ‘visible hand’ and the ‘invisible hand’ to develop its economy. In contrast, the modern US economy attempts to rely almost exclusively on the ‘invisible hand’. China’s preparedness to use both visible and invisible hands is indeed, of course, a feature flowing from its socialist economic system.
But the contradiction between the Trump administration’s verbal propaganda claims of the efficiency of capitalism, and its actual practical positions regarding the trade war, becomes evident the moment the actual content of Trump’s claims is thought about. Because Trump’s claim that China has an unfair economic advantage simply completely contradict the US propaganda claim that socialism is less efficient than capitalism! For if state enterprises and state intervention in the economy, as part of a socialist system, were less efficient in promoting growth than private capitalism their use would not be an unfair advantage for China – on the contrary state intervention and state enterprises would be a serious disadvantage for China.
If state intervention in the economy, including state enterprises, were really less efficient than capitalism then in fact the best way for the Trump administration to slow China’s economic development would be to call for China to maintain its state intervention in the economy, or even to increase it – not for China to abandon its unfair advantage of state intervention! If state intervention in the economy were really less efficient than private capitalism the greater the state intervention in the economy the slower China’s economy would grow – SOEs, for example, should be a disadvantage for China’s economy not an unfair advantage.
The fact that Trump/The Economist etc claim that state intervention gives China an unfair advantage is therefore in fact an admission that such socialist policies are an economic advantage, not a disadvantage, for China. Naturally Trump and The Economist cannot state this openly, as this would entirely overturn their argument that socialism is less efficient in creating economic development than capitalism. Indeed, so confused are Trump/The Economist, and lacking in self-awareness and understanding of their own arguments, that they certainly do not understand themselves that they are admitting the superiority of socialism in creating economic development. But that is the inevitable and inescapable conclusion of their argument that China is obtaining an unfair advantage by state intervention in the economy – that is, of China’s willingness to use both the visible and the invisible hands in economic development.
The implications for the US
Furthermore, the implications of this de facto admission that socialism gives an advantage in economic development compared to capitalism for the US are obvious and, if considered rationally, produce the exact opposite conclusion to the one the Trump administration advocates. Their logic is that rather than asking China to abandon the unfair advantage of state enterprises and state intervention in the economy, if state intervention in the economy and state-owned enterprise gives China an unfair advantage, allowing its economy to grow more rapidly than the US, then it is urgent for the US to establish SOEs and undertake state intervention in the economy – thereby allowing the US economy to gain the same advantages as China and grow more rapidly! The reasons why the US will not do this are analysed below but, in turn, this allows the real choice facing not only China and the US but all countries to be clearly understood. For what Trump/The Economist, and similar arguments, are in fact admitting is:
1. As they claim state enterprises and state intervention give China an unfair advantage, they are therefore are in reality admitting that a socialist economic system has an unfair advantage compared to a capitalist one – that is why Trump/The Economist demand that China abandon this unfair advantage of its socialist economic system.
2. But if countries adopt a capitalist system, and therefore do not make use of the unfair advantage of a socialist economy, they will grow more slowly. Therefore, what Trump/The Economist are asking is that countries do not adopt the unfair advantage of a socialist economy but instead that they should have a capitalist economy and therefore accept to develop their economy more slowly – i.e. in fact Trump/The Economist argue that the issue of maintaining a capitalist economic system should take priority over the most rapid possible course of economic development.
Speed of China’s economic development
To understand this issue in practice, it is certainly factually true that the admission by Trump/The Economist of the advantage for speed of development of China’s socialist system, compared to a capitalist one, is accurate – as is easily shown by international comparisons.
To summarise the results of the period of development of China’s economy during the construction of a socialist market economy compared to capitalism, from 1978 to the latest available data there are 155 countries, regions or income groups for which there are GDP and per capita GDP data for the period 1978-2017 by standard World Bank classification. As shown in Table 1, during the period 1978-2017, that is the period of China’s socialist market economy, China’s economic growth ranked number one internationally among all countries, regions or income groups. In terms of international comparison China’s GDP growth was:
  • Almost 13 times greater than the US.
  • Over 12 times greater than the EU.
  • Almost 16 times greater than Japan.
  • Almost 7 times faster than the average for developing economies – the overwhelming majority of which are capitalist.
Taking the criteria of per capita GDP growth, as well as total economic growth, China equally ranked number one. In 1978-2017 China’s total per capita GDP growth was:
  • Almost 13 times that of the US.
  • Over 12 times that of the EU.
  • Almost 12 times that of Japan.
  • Almost 9 times that of all developing countries.
In summary, China’s socialist path of economic development showed overwhelming superiority in generating economic development to that of capitalism – whether capitalism is considered in advanced or developing economies.
The Trump administration/The Economist are therefore quite correct to acknowledge the superiority of the results for economic development of China’s socialist system compared to capitalist alternatives. But then it is entirely illogical for them to argue that China should abandon a socialist system, delivering more rapid economic development, and instead adopt a capitalist one which produces slower economic development. The logical choice is for countries growing more slowly to switch to the system producing the most rapid economic development, not for countries enjoying rapid economic development to switch to a system which produces slower growth!
Consequences for humanity
Finally, in order to understand the significance of these issues, and this choice, not only for China but for the whole of humanity it should be clearly grasped that the question of the rate of economic development is not simply, or even primarily, important in terms of ‘concrete and steel’ – that is physical indicators of output. Economic development has overwhelming implications for the social conditions of every country, for national well-being, and for humanity as a whole. Economic development remains the decisive issue confronting most countries – only 17% of humanity currently lives in ‘high income’ economies by World Bank international classification, that is economic development remains the decisive issue for 83% of humanity, and the consequences for the overall well-being of human beings, and of national wellbeing, of economic development is overwhelming.
Taking simply average life expectancy, which is known by economists to be the most significant indicator of overall living and social conditions:
  • The difference in average life expectancy between a high-income economy and a low-income economy by international standards is 18 years.
  • The difference in average life expectancy between an upper middle-income economy by international classification, such as China, and a high income one is over five years.
Therefore, achieving economic development is the key to improving social living conditions. For countries to abandon, or fail to adopt, the unfair advantages of a socialist economic system is therefore literally a life or death question for their citizens. What Trump is demanding by attempting to slow China’s economy is not simply that China should not achieve economic development, but that China should literally condemn its citizens to die earlier than is necessary. Equally, those who claim that countries should not make use of the unfair advantage of socialist development, or attempt to force countries to abandon them, are in fact condemning the majority of humanity to needless backwardness, suffering, and an unnecessarily early death.
Implications for other countries
These real social implications of economic development therefore show why the consequences of the choice of a socialist path of development is of decisive significance not just for China. It is why in defeating the US trade aggression against China the interests of humanity are on the side of China because:
  • China’s rapid economic development creates a stronger global economic dynamic which in turn aids other countries development – while, equally, US success in slowing China’s economy would therefore make it harder for other countries to pursue their own economic development.
  • China has created the world’s most successful path of economic development. No other country can mechanically copy China’s development, but they can learn from it. Success by the Trump administration in blocking China’s socialist path of development would therefore be a setback for every country.
Indeed, the implications of the outcome of the US trade aggression against China go further even that straightforward economics. The US has repeatedly shown that it is prepared to use military force against weaker countries (Iraq, Libya) to engage in de facto military threats even against powerful countries (expansion of NATO up to the borders of Russia, supply of arms to the separatist leaders of Taiwan Province), and to use the unilateral imposition of economic sanctions (Russia, Iran). Success of the US in trade aggression against China would therefore undoubtedly strengthen such US military and geopolitical threats. Detailed analysis of this, however, would take a further full article so here merely the economic logic of the Trump administration’s positions are considered.
The relation of national development and business development
Returning to this purely economic aspect, if those such as Trump/The Economist cannot see that by their claim that China has an unfair economic advantage that they are in reality acknowledging the superiority of the socialist system why are they blind to the logic of their own argument? Because in reality they place class values, those of the capitalist class, above those of the nation or of humanity. Thereby, despite their own wishes, they are in fact forced to confirm one of the most important arguments of Marxism.
This is shown clearly in a criticism of China such as The Economist‘s claim that:
‘Mr Trump is… right that America needs to reset expectations about Chinese behaviour. Today’s trading system fails to prevent China’s state-backed firms from blurring the line between commercial interests and the national interest.’
This alleged confusion by China between ‘national interests’ and ‘commercial interests’ is part of The Economist’s criticism of China’s SOEs. Therefore a criticism that China’s SOEs allow the ‘national interest’ to influence the ‘commercial interest’, and that when there is a conflict the SOE’s place the national interest above the commercial interest. By this, obviously, there is an acknowledgement that in certain situations there may be a conflict between national interests and purely commercial interests.
But if there is a distinction between the ‘national interest’ and the ‘commercial interest’, and The Economist admits there may sometimes be conflicts, which should take precedence? What most people, including in China, would want is that when such conflicts occur the national interest is placed first. The Economist, however, on the contrary makes it a criticism for the national interest to come before the commercial interest. That is, for The Economist the ‘commercial interest’ must come before the ‘national interest’.
But what is this ‘commercial interest’ The Economist is so concerned with? In the West it is, of course, the interest of private capitalist companies – which dominate the Western economies. Therefore, what The Economist is arguing is that the capitalist interest of companies, that is the interests of the capitalist class, should come before the ‘national interest’.
This concept is precisely why the Trump administration/The Economist argue China must not use the unfair advantage of utilising both the visible hand and the invisible hand, that is both the market and state intervention in the economy. The Economist, in line with the Trump administration, are criticising China from the point of view of a framework that in the event there is any conflict between the ‘national interest’ and the ‘commercial interest’, that is between the national interests and the interests of the capitalist class, then the interests of private capitalism must come before the national interest. It is precisely because it has the opposite framework, that the national interest must take precedence of the interests of private capitalism, that allows China’s economy to develop more rapidly than a capitalist economy. The Economist however, in line with the Trump administration, argues capitalist class interests come first – even if this produces slower economic development.
Ironically therefore, although they certainly do not intend to do it, the Trump administration/The Economist in fact prove Marx’s famous formula classically expressed in his Preface to the Critique of Political Economy: ‘At a certain stage of their development, the material productive forces of society come in conflict with the existing relations of production, or – what is but a legal expression for the same thing – with the property relations within which they have been at work hitherto. From forms of development of the productive forces these relations turn into their fetters.’
By arguing that the ‘commercial’, that is the capitalist, interests must come before the national interest, the unfair advantage the Trump administration/The Economist claims that China has is precisely its socialist economy – and its advantages compared to a capitalist economy. What the Trump administration/The Economist are in fact arguing is that countries, starting with China, should not use the advantages of a socialist system but should reduce their rate of economic development to a level compatible with the interests of the capitalist class. In summary the Trump administration/The Economist are, without understanding it, expressing in a completely classical form the contradiction between the class interests of capital and the interests of humanity.
Conclusion
To summarise. From the point of view of China this link between its socialist path of its development and its national rejuvenation concerns the well being of the Chinese people and the Chinese nation. Despite the People’s Republic of China’s gigantic achievements, China started its development from a position where in 1949, after a century of foreign intervention, China was virtually the world’s poorest country – less than 10 countries had a lower per capita GDP than China and its life expectancy was 35. With such a low starting point even the internationally and historically unparalleled economic development created by China’s socialist reform and opening up takes a prolonged period to achieve prosperity for the Chinese people – it will still be two years before China achieves ‘moderate prosperity’ by its national standard and around five years before it achieves the status of a ‘high income economy’ by international World Bank standards. Even with the speed of development of its socialist market economy it will be several decades before China’s living standards reach the highest in the world. The abandonment of the socialist path of development, the acceptance of the demands by the Trump administration, or anyone else, that China abandon its more economically successful path of socialist development, and adopt the slower one of capitalism, would therefore be a catastrophe for the Chinese people and the Chinese nation. It would, as in the former USSR when it adopted capitalism, inevitably lead to the growth of separatism and other deadly threats to the Chinese nation. Experience shows that the weakening of China would encourage the most militarist and other dangerous forces within the US.
But while this issue of the path of development will, of course, be determined by the issue of China’s own national development its consequences will affect every other country. That is why the interests of other countries, and of humanity, coincide with those of China in countering the trade aggression of the Trump administration.
In summary the advantages of China’s economic system only appear ‘unfair’ to the US because the US refuses to embark on a socialist path and clings to the slower path of economic development of capitalism. But in that case why should China abandon a more successful path of economic development – as the deeply illogical demands of the Trump would result in?
There is indeed a deep irony. In its empty rhetoric and media propaganda the Trump administration proclaims the superiority of capitalism and the inefficiency of socialism. But in its practical actions the Trump administration is forced to acknowledge the economic advantage of socialism. Which of these two should be taken more seriously?
As the wise English method of judging says – actions speak far louder than words.
* * *
This article was previously published on Learning from China and originally published in Chinese at Guancha.cn on 28/11/2018.

Monday, 18 February 2019

AOC’s Green New Deal is exactly what’s needed to save the planet

By Fiona Edwards

“Many people ask what a Green New Deal entails. We are calling for a wartime-level, just, economic mobilisation plan to get to 100% renewable energy ASAP.”
AOC tweet, 2 January 2019 

Alexandria Ocasio-Cortez (AOC) is proposing that the United States become a global leader in the battle to stop climate change by undertaking a rapid and thoroughgoing economic transformation to drastically reduce US greenhouse gas emissions in the next 10 years. The plan being put forward by AOC calls for the US to launch a massive programme of state investment to bring about a ‘Green New Deal’ and the necessary transformation of the economy away from a reliance on fossil fuels to 100% renewables. It is an approach that directly challenges US President Donald Trump who is currently leading the US in precisely the opposite direction. Under his Presidency the exploitation of unconventional fossil fuels has massively expanded which is causing US carbon emissions to rise at a time when they should be rapidly falling.     

As AOC’s resolution to Congress points out, the US has “historically been responsible for a disproportionate amount of greenhouse gas emissions” and continues to contribute enormously to the problem of climate change. The US has a moral responsibility to play a leadership role in resolving the international climate crisis, a crisis that poses an existential threat to human civilisation and which the US has played a major role in creating. In addition to being a responsibility, leading a global effort to decarbonise the world economy does also present the US with a “historic opportunity” to break out of “a 4-decade trend of economic stagnation, deindustrialisation and anti-labour policies” to create millions of good, high wage jobs and “provide unprecedented levels of prosperity and economic security for all people of the United States.”  

The scale of the planetary emergency the world is facing was underlined by the International Panel on Climate Change (IPCC) ‘Special Report’ of October 2018 which outlined the disastrous impact a 2 degrees Celsius rise in global temperatures would cause: widespread increase in famines, cities and entire countries submerged in water, deadly heatwaves, forest fires, floods and hurricanes. Global temperatures have already risen by approximately 1 degree Celsius since pre-industrial levels and on the current trends the world is on track for 3.3 degrees Celsius of warming by the end of the 21st century. Humanity is currently losing the battle to stop catastrophic climate change. Urgent and massive action is needed to limit global warming to a ‘safer’ 1.5 degrees Celsius rise and major strides forward are needed within the next decade.

In light of this reality AOC’s assertion that the ‘Green New Deal’ is “going to be the Great Society, the moonshot, the civil rights movement of our generation” is not over-blown rhetoric but entirely, as she has put herself, “the scale of the ambition that this movement is going to require.”   

In the FAQs section of her draft ‘Green New Deal’ published at the end of 2018 AOC made clear the scale of the investment required to bring about a massive transformation to decarbonise the US economy, citing that “at least $1 trillion” would be needed. She is also made clear about the fact that the state will need to play a “big role” in driving and making such investments. 

On how to raise the funds required, her draft proposal stated:

"Many will say, "Massive government investment! How in the world can we pay for this?" The answer is: in the same ways that we paid for the 2008 bank bailout and extended quantitative easing programs, the same ways we paid for World War 2 and many other wars. The Federal Reserve can extend credit to power these projects and investments, new public banks can be created (as in WW2) to extend credit and a combination of various taxation tools (including taxes on carbon and other emissions and progressive wealth taxes) can be employed. In addition to traditional debt tools, there is also a space for the government to take an equity role in projects, as several government-affiliated institutions already do."

AOC’s widely publicised proposal to increase tax on the super-rich to help fund the ‘Green New Deal’, by raising the top marginal tax rate to 70% for those that make above $10million, has been very well received by the US public.  

Some have dismissed AOC’s ‘Green New Deal’ as unrealistic. On the contrary, the ambition of the ‘Green New Deal’ – to make a rapid transition to 100% renewable energy and abandon fossil fuels – is entirely consistent with the what the IPCC says is necessary. The world’s carbon emissions must collectively start decreasing now and half from current levels by 2030 and this can only be achieved through the rapid phasing out of fossil fuels which must be replaced by an enormous expansion of renewable energy. And as Dean Baker points out, China is delivering its own Green New Deal right now through enormous, on-going state investment in renewables and electric cars.

It is Donald Trump’s approach that is completely unrealistic and out of step with what the international scientific consensus states is required. The US is now the number one producer of oil and gas in the world as a result of the “fracking revolution” which has seen production of unconventional fossil fuels soar. It’s a trend that the International Energy Agency is anticipating will deepen, with expectations that the US will be responsible for 75% of global oil growth and 40% of global gas growth over the next 6 years. The result of Trump’s policies on climate change has been to increase US carbon emissions, which rose by 3.4% in 2018.   

Trump and the fossil fuel industry argue that aggressive exploitation of fossil fuels is necessary for economic development and that green policies are damaging to prosperity. 

In reality massive state investment for a ‘Green New Deal’ could get the US economy out of its stagnation and provides a route to improving living standards as well as tackling climate change. As AOC put it in a public event on the climate change in December 2018:

“The idea that we are going to somehow lose economic activity… As a matter of fact it’s not just possible that we will create jobs and economic activity by transitioning to renewable energy but it’s inevitable that we are going to create jobs. It is inevitable that we are going to create industry and it’s inevitable that we can use the transition to 100% renewable energy as the vehicle to truly deliver and establish economic, social and racial justice in the US. That is our proposal.”

AOC’s ‘Green New Deal’ proposal is exactly the ambitious approach needed to save the planet and achieve a decent standard of living for all and it is the type of approach that Jeremy Corbyn and the Labour Party front bench are also pursuing in Britain.

Tuesday, 12 February 2019

Jeremy Corbyn is right to demand Britain is in a Custom’s Union with the EU

By Tom O’Leary

The importance of Britain being in a Customs Union with the EU is highlighted by the recent exchange of letters between Jeremy Corbyn and Theresa May. Jeremy Corbyn has focused on blocking a ‘No Deal’ outcome, which would be extremely negative for jobs and living standards. He has also set out his support for being in a customs union with the EU. Theresa May continues to threaten No Deal and rejects being in a permanent customs union, it being one of her key red lines.

Although there is much else in the exchange of letters which is also important to note, the principal issue examined here will be the one that Jeremy Corbyn raises, which is the vital necessity of being in a Customs Union with the EU.

Corbyn’s letter demands significant changes to the Political Declaration (which offers an outline of the future relationship with the EU) and insists that these changes need to include, “A permanent and comprehensive UK-wide customs union. This would include alignment with the union customs code, a common external tariff and an agreement on commercial policy that includes a UK say on future EU trade deals. We believe that a customs union is necessary to deliver the frictionless trade that our businesses, workers and consumers need, and is the only viable way to ensure there is no hard border on the island of Ireland. As you are aware, a customs union is supported by most businesses and trade unions.”  

The full text of Corbyn’s letter is here. May’s letter rejects this, and falsely claims that the Political Declaration continues the same benefits as the customs union. This is blatantly untrue, as the Political Declaration says only that those same benefits are desired, without any mechanism to achieve that. May’s letter is here.

The nature of the EU

There is no useful purpose, either for serious analysis or promoting the interests of the working class, to suggest that the European Union is anything other than a capitalist club. It is not, as Will Hutton and other propagandists claim a repository of Enlightenment values. First these so called ‘Enlightenment values’ were used to create the greatest colonial Empires the world has ever seen. In the famous words of Gandhi when asked what he thought of Western civilization he replied ‘it would be a good idea’. Today it remains a sickeningly bad joke in light of the EU’s treatment of refugees fleeing across the Mediterranean, its treatment of Greece, the imposition of austerity across the Eurozone and much more besides. The false claims as to the EU Enlightenment project also acts increasingly as a cover for an intensification of vile Islamophobia, antisemitism and other forms of racism within Europe.

The purpose of the EU is to enhance and develop the interests of capital, most powerfully German capital, across the continent of Europe. But this development is multi-faceted in the way that the development of capitalism is in general. So, a new factory will usually entail increased labour exploitation and environmental degradation. Yet socialists do not stand against the construction of the new factory and do welcome the jobs, but instead argue for the best possible pay and conditions for all the workers in it, for environmental protections, other safeguards, and so on. Where and when it is possible, socialists are in favour of the factory passing into the hands of the workers. 

The nature of a customs union

All goods and services operate in a market, irrespective of whether the producers or consumers understand that as such. For the most advanced manufactured goods in particular that market is increasingly internationalised, even globalised.  

The internationalisation occurs at three different levels.
· First, there is the production of inputs for final production, which is everything from basic raw materials to the most sophisticated machinery, equipment or software.
· Secondly, there is the production of finished goods themselves which can take place at a number of different locations internationally.
· Thirdly, there is the market for the goods themselves, where the size of the market is decisive for the efficiency of the production and the Investment that is required.

The production of many services is less easily internationalised for many reasons, including language barriers and lack of labour mobility, although some services such as finance, travel etc are highly internationalised and increasingly legal and accounting services are also heading in the same direction. Many others, such as entertainment services, some aspects of design and publishing are developing in the same way.

The alternative to the customs union

Because the British economy already participates in the Customs Union with the EU and the Single Market, refusal to have any Customs Union with the EU amounts to a protectionist measure, a reduction in this economy’s openness to international trade. The Brexiteer fantasy that barriers to trade with the EU economy can be compensated by trade deals with other countries is mathematically unlikely as the EU constitutes approximately half all trade in goods. But it also ignores that fact that over 60 trade deals with third countries will in fact be ripped up by no longer being a Member of the EU. Trade deals with those countries, most especially the US, but also Japan, South Korea and other countries will have to be renegotiated from a relatively weaker position.

The increasingly internationalised production of manufactured goods has also become a hot topic in the United States because of Trump’s trade wars and protectionism. But Trump’s protectionism in favour of the autos sector has foundered precisely because so much of the content of US-marque cars that are finished in the US is from Canada, Mexico and other countries. 

However, these ‘American-made’ cars are actually globally-produced. The 2017 Ford Focus, for example, is built in the United States, but only gets 40% of its parts from the U.S. and Canada, according to Federal data. At the other extreme, only 5% of the parts for 2017 BMW 7 Series Sedan were made in the US. The rest was made in Germany. For some time, the leading automakers in the ‘motor city’ of Detroit have been Japanese, outstripping the production of US marques. 

At most, Trump’s protectionist measures (which have been underpinned by huge tax breaks for companies and the rich) have only deferred the further internationalisation of production. Yet the IMF has noted that they could knock $430 billion off global output

Trump once tweeted that trade wars are easy to win for a country which runs sizeable trade deficits:
 

Of course, if there was one big set of factories in the US producing cars and another set in Canada and Mexico, then his protectionism might possibly have the impact he desires. Instead, his policy simply interrupts the efficient socialisation of production, in favour of a failed attempt to re-organise it on a national basis. By far the most important effect of his policy is to raise the cost of production in the US, which raises prices to US consumers more and therefore increases the competitive threat to US jobs in cars and associated industries.

A key impediment to the development of these fundamental trends is the existence of tariff and non-tariff barriers (which include product standards, local content rules, and other factors which are all subject to inspection regimes). A customs union operates to remove the tariff barriers between two different economies.

Unfortunately, there are romantic notions in left circles in Britain and Europe that would wish away the concrete issues raised by the existence of multinational or even global supply chains. It is unrealistic to believe workers’ control or ‘Lucas plan’ ideas in relation to current, complex manufacturing supply chains that dominate aerospace, cars, pharmaceuticals and other sectors can ignore these realities. As described in a previous article, aerospace and other advanced producers rely on a vast flow of inputs as part of the production process. It would require a vast, entirely unfeasible level of investment to recreate those on national territory, and for a national market that is simply too small to support even the current level of output.

Outside a Customs Union

It is clear that simply to attempt to retain key producers after Brexit, a large increase in public expenditure on subsidies would be required - as this government has already done with Nissan. Even though Ministers attempted to keep the deal with Nissan secret, it was later revealed that is was a subsidy of £80 million. Crucially, with the threat of No Deal still not removed, that subsidy was not enough to get Nissan to meet its commitment to producing new models at its Sunderland plant. As Jeremy Corbyn put it replying to Theresa May in Parliament on 12 February: ‘The Prime Minister has just told members of this House to hold their nerve. Tell that to Nissan workers in Sunderland and the thousands more worried about their job security”.

In the event of No Deal, which means having no Customs Union with the EU, the scale of the compensation needed to offset new tariffs on cars is equivalent to the carmakers’ wage bill. This is untenable over the medium-term as it would be cheaper for government to pay the workers directly. Outside a Custom’s Union with the EU similar these problems would be multiplied in numerous industries.

In general, without the reactionary political interventions from the likes of Trump and the Hard Brexiteers, the underlying economic trends are for greater trans-continental and even global production. A leading Italian transport services provider last year announced the first ever regular roll-on, roll-off route between North America and the Mediterranean. It will be used primarily to connect Turkish to European car production, and then connect the latter to Canada, the US and Mexico. These are the fundamental economic trends the protectionists like Trump and the Hard Brexiteers are attempting to fight.

Marxist theory

Marxism explains these fundamental economic trends. Despite being frequently asserted, it is not the case that Marx begins his analysis of capitalism with analysing only capitalist production. This is for the very good reason that production is not unique to capitalism. It exists in all more primitive societies, feudalism and slavery, and will of course exist under socialism. Production is a given in every form of society.

Marx actually begins ‘Capital’ with what is unique to capitalism, the transformation of commodities into their universal equivalent of money, thus enabling ‘generalised commodity production’. This is decisive in this context if it is recalled that Marx demonstrated that commodities first appear through trade, through exchange. 

So, in concluding Chapter One of Volume 1 of Capital Marx writes,
'As a general rule, articles of utility become commodities, only because they are products of the labour of private individuals or groups of individuals who carry on their work independently of each other. The sum total of the labour of all these private individuals forms the aggregate labour of society. Since the producers do not come into social contact with each other until they exchange their products, the specific social character of each producer’s labour does not show itself except in the act of exchange. In other words, the labour of the individual asserts itself as a part of the labour of society, only by means of the relations which the act of exchange establishes directly between the products, and indirectly, through them, between the producers. To the latter, therefore, the relations connecting the labour of one individual with that of the rest appear, not as direct social relations between individuals at work, but as what they really are, material relations between persons and social relations between things. It is only by being exchanged that the products of labour acquire, as values, one uniform social status, distinct from their varied forms of existence as objects of utility'.

Exchange, of which international trade is one large scale form, is central to the production of commodities. Goods only become commodities through that exchange. Not only is it impossible in the modern era to maintain efficient production on a national basis in an economy of Britain’s scale, it is also impossible to produce efficiently without international exchange. Incidentally, it will be even less possible in an advanced socialist society.

Socialists, and a government pursuing progressive socialist policies, have no interest in the political structures of the EU - which are designed to be as little democratic as possible. But they, and the working class of this country, do have an interest in ensuring access to the markets of the EU. That can be gained either through remaining in the EU, for purely economic and not political reasons, or via a custom’s union and ‘close alignment with the single market’.

As Jeremy Corbyn put it in Parliament on 12 February: ‘In order to stop the UK falling into the backstop you need a permanent customs union and a strong single market deal. That is key to maintaining an open border on the island of Ireland. That is key to protecting jobs, industry and living standards in this country.
‘The Prime Minister says there is no need to negotiate a customs union as her deal provides for the benefits of being in one. I’m afraid… that is simply not the case.
‘The deal the Prime Minister negotiated means there will be barriers to trade in goods and there will not be frictionless trade. Putting manufacturers across the country at a huge disadvantage.’

This is why May’s threat of No Deal and refusing a customs union is a deeply damaging policy, and why Jeremy Corbyn is entirely right to insist on a customs union with the EU.