Bolivians vote in a general election on October 20th. Evo Morales has been the President since
2006, winning three successive terms as President.
A victory for him would continue the development of the
economy and the rise in living standards since he took office. It would be a considerable boost to the left
across Latin America, which otherwise faces the impositions of Bolsonaro, Macri
and Moreno, backed by the US and in some cases the IMF. Socialists internationally have every reason
to support a Morales victory.
The success of the project begun by Morales and the MAS
(Movement for Socialism) can be shown in 2 charts. The first below shows the level of Bolivian real
per capita GDP since 1976. In the 30 years before Morales came to power, real
GDP per person effectively stagnated. In
1976 it was US$1,687 and was only $1,692 in 2006, barely altered. Since then it has risen to US$2,506,
according to World Bank data. This
represents a rise in average living standards of 48%.
Fig. 1 Bolivia Real GDP
However, it is possible that average living standards rise
but that the bulk of this increase is claimed by the rich and the upper
classes. But this is not the case in
Bolivia. Chart 2 below shows the
proportion of the population below the poverty headcount rate of US$5.50 per
day, adjusted for inflation and PPPs (purchasing power parities).
Fig.2 Bolivia, % of Population on Incomes Below US$5.50
Once again, this measure of poverty shows there was little
progress before Morales. In 1997 52.6%
of the population were subsisting on incomes equivalent to below US$5.50 a day
in real terms. By 2006 that rate had edged down to 48.1%. But the fall since then has been dramatic,
with the poverty rate at 24.7% in 2017 (the latest available data). As the
population of the country is now over 11 million, this means that literally
millions of people, about one-quarter of the population, have been lifted out
The success of
There are a number of factors which have contributed to
Morales’ success. Initially, like many
countries in Latin America and beyond, Bolivia benefited from the rise in
global commodities’ prices, which were spurred on in particular by the rapid
pace of China’s industrialisation. There
was too a major shift in the population from the countryside to the towns and
cities, which rapidly expanded the workforce available for more advanced
production, including manufacturing.
But these factors were common to many countries, especially
in Latin America, but unlike Morales they failed to maintain their gains, or
even to hold onto office. That
commodities’ price boom has since faded as the Chinese economic model has
adjusted, and the pace of the migration into the urban centres has slowed in
many countries. The world economy is also slowing, so none of the previously
favourable conditions is likely to return in the foreseeable future.
To explain Morales’ success, one key area where the Bolivian
economic project stands apart, certainly in Latin America, is that the gains of
rising prices and output were not simply used to boost consumption, but also to
increase investment. Chart 3 below shows
the proportion of GDP directed towards investment, or GFCF (Gross Fixed Capital
Fig. 3 Bolivia, GFCF as % of GDP
In 2006 GFCF as a proportion of GDP had fallen to a 14.3%
and had been even lower in the preceding period. It has since risen to 21.4% in 2015,
although it has softened a little in following years. The urban population is now 70% of the total,
so there is diminishing scope to increase the workforce available for more
advanced manufacturing or industrial production. Further gains will require the return to
previous high levels of investment, and even their extension.
The stakes are very high.
The insurrection in Ecuador against enormous price hikes, imposed by the
Moreno government acting on the instructions of the US and IMF, shows what the
likely alternative to Morales will be.
This includes both huge attacks on living standards, and severe state
repression to carry it out.
Morales’ political background is as organiser and then
general secretary of the peasant farmers, which experienced fierce repression
from the large landowners and the state forces, and forced the farmers into
guerrilla warfare, Morales included.
This is a political formation which creates an understanding of the role
of the state, which classes it defends and the brutality of it attacks, all
supported by the Unites States. It also
teaches the need for collective discussion, unity of action and strong
discipline among the resistance fighters.
It is clear too that, through this experience and his own ethnic
identity, Morales enacts a highly advanced policy towards the indigenous
Despite or because of all this, here in the West there is a
campaign of slander against Morales, led by the ‘liberal’ press. So, the Guardian repeatedly runs entirely
distorted arguments and outright lies, including describing Morales as ‘the
murderer of Nature’ in the Amazon.’ The
reality is that it is the far right poster boy Bolsonaro in Brazil, an ally of
Trump’s who is destroying the Amazon, and Morales is using every mechanism to combat it.
The stakes are also high for the planet as a whole. The Bolivian elections will not decide that
fate, but they are an important battle in the struggle.
Despite the claims of the Tory party and other supporters of
a No Deal Brexit that a new golden age of trade awaits with the US, the Trump
administration has just imposed new trade tariffs on British producers.
This is important for two reasons. It reveals the falsehoods
underlying the entire No Deal project. It also sheds light on the global
perspective of Trump, and how he aims to address the US economic crisis at the
expense of the rest of the world.
The US Treasury has issued a series of new 25% tariffs on UK
producers and others in the EU (pdf). This list is 8 pages long and includes a wide
range of goods, from aircraft, to whiskies, to woollens to pipe cutters and
many more goods besides. The tariffs are
due to come into effect on October 18.
The tariffs are allowed under the WTO rules (which are
themselves skewed towards the US) because it has found that the EU’s Airbus
production receives state subsidies.
However, experts suggest that a similar finding will be made against
Airbus’s big rival Boeing in a matter of weeks.
Both entities receive state support. In fact, it is
inconceivable that any private corporation would undertake the vast investment
required for large-scale aircraft production without state financing and
subsidies. Inadvertently, the free
market ideologues of both the US and the EU make the case for socialised
investment. In the case of the aircraft
makers, the investment would simply not take place without state intervention.
Airbus is also partly owned by European governments.
Boeing and Airbus are the two main global rivals for the
demand of airlines’ new carriers. They are at each other’s throats for decades,
and the cases against each other at the WTO have rumbled on almost as
long. This has taken a new twist with
Trump’s aggressive imposition of tariffs on a number of countries (including
‘allies’ in Europe,
as well as Canada
and Mexico). There is too the issue of the disastrous roll-out
of the Boeing Max 737, which has led to crashes, huge numbers of fatalities,
lawsuits and a threat to the company.
The imposition of the tariffs has received very little
coverage in the mainly Brexit-supporting press. Tariffs on existing production
destroy jobs and raise prices. If they are sustained these sanctions will raise
prices for US consumers (and EU tariffs will do the same in the EU) and destroy
jobs in the sectors concerned.
The sanctions have a strategic aim and reveal Trump’s
approach to the problems of the US economy.
economy is slowing – and the Presidential election is now little more than
12 months away. GDP growth in the 3rd quarter slipped to 2.1%, from
3.1% in the 2nd quarter. But the US is also experiencing a long-term
slowdown. As John Ross has shown
elsewhere, the medium-term trend in the US economy, removing the effect of
business cycles, is towards slower growth.
Therefore Trump has two problems. The immediate issue is to
raise the growth rate to a level that gives him a better chance of re-election.
recent poll shows his approval rating at -16, which is normally far too low
for an incumbent to be re-elected. But he also has a strategic task in his role
as the representative of the general interests of US big business as a
whole. This is to ensure that the US
growth rate can recover over the medium-term, or at the very least that other
countries do not continue to gain ground on the US.
China is clearly the main target of Trump’s trade policy but
is certainly not the only target. Taken together, and making no judgement on
its likely success, from Trump’s perspective this amounts to an entirely new
trade policy for the US in the post-World War II era. Historically the superior
productivity of US industry and agriculture meant that it was an advocate for
free trade. While there were general benefits, the US would always be the
Trump has turned that outlook on its head. The US slowdown
will be addressed by a re-ordering of the global trade system in US interests.
Specifically, other countries will be subordinated to the US, providing it with
unfair advantages and crimping the growth of non-US industries where they are
in direct competition with major US companies.
In this light, the attack on Huawei (which
leads on 5G telecoms technology) should be seen as driven by the same
policy as the attack on the makers of Airbus (Boeing’s sole global rival).
Airbus had sales of €31 billion the first half of 2019. It
employs 136,000 people worldwide, 14,000 of them in the UK, where production of
the high value-added wings and part of the engines takes place.
Because of the integration of production across Europe, Airbus
has already publicly stated that any Brexit outcome which includes leaving
either the Single Market or a customs union would pose the company with
enormous challenges, which could require relocation in the EU.
The Trump/Johnson No Deal project does mean leaving both the
Single Market and the customs union.
This is also true of the latest Johnson proposal, which means that
Britain would leave both. The major
Airbus plant is based in North Wales.
There is clearly an advantage to the US from severely
disrupting the production of Boeing’s only global rival. But it should be
equally clear that there is no advantage to producers in the UK to accepting
such a deal. Unions
and business groups here have been right to highlight this.
This country will have to operate under WTO rules if it
crashes out without a deal. Under those rules, the trade tariffs are allowed
once an unfavourable ruling is made. In fact, there are few other mechanisms
available under WTO. But, until recent
years, the US was the by far the largest economy in the world. So, any system allowing
bilateral trade tariffs massively favoured the US. That will still be the case between the UK
and the US, with Trump holding all the cards in any negotiations or in any
subsequent trade dispute.
At the same time, it is futile to protest that Trump should
have targeted other countries instead, if he wants to get a US-UK trade deal. This is the approach of some business groups
in this dispute.
Trump’s aim is firstly to attack Airbus so that it does not gain an insurmountable advantage over Boeing. But he also rejects any soft-pedalling in his aggressive trade policy, even for ‘allies’. Outside of the EU’s Single Market and customs union, Britain will have to accept whatever Trump offers. And what he offers, or at least intends, is a complete restructuring of the global trade system in US interests.
Socialism’s aim is to improve the well-being of humanity. And
nothing in history has remotely improved the condition of such a large part of
humanity in such a small period of time as the development of the People’s
Republic of China since 1949 – the 70th anniversary of the founding
of which occurs on 1 October 2019.
China’s was one of the two greatest socialist revolutions of
the 20th century – the other was the October 1917 Russian
revolution. The international impact of the Russian revolution, overthrowing
the weakest link in the imperialist system, among its other enormous
achievements, played a decisive role in smashing to pieces the colonial empires
which had oppressed the great majority of humanity for centuries. China’s was
the greatest revolution within the developing countries, those oppressed by
imperialism, within which the great majority of humanity still live.
In 1949 China, oppressed by a century of foreign invasion in
which around 100 million Chinese people were killed, was almost the world’s poorest
country – the details are in the article below. Angus Maddison, former head of
statistics of the OECD, and the world’s most renowned analyst of long term
growth, calculates that at the time of the creation of the People’s Republic of
China (PRC) its per capita GDP was not only lower than 130 years previously but
far lower than Western Europe or England in 1500 – that is lower than in the late
European Middle Ages and far lower than at the time of Shakespeare. Reflecting
this fact average life expectancy in China was only 35. But by 2019 China’s
people, almost 1.4 billion or nearly a fifth of humanity, had been lifted from
poverty to a living standard to the verge of becoming a high-income economy by
international standards. Nothing approaching such a rapid improvement of the
life of such a large proportion of humanity has ever taken place anywhere else
in human history. That is the measure of the literally incredible achievement
of the PRC since 1949.
The article below examines that improvement in the life of
China’s people via the most direct of all measures – life expectancy, which is
well known to be the most sensitive measure of overall social well-being. The
figures are staggering. Leaving aside China itself, China’s life expectancy has
increased by more than that of 99.2% of humanity! This is in addition to China
being responsible for lifting over 850 million people out of internationally
defined poverty – three quarters of the reduction of world poverty. China has
lifted out of poverty far more people than the entire population of the
European Union or the entire continent of Latin America.
Capitalism naturally lies regarding China
To anyone who can think seriously about the well-being of
humanity what is reflected in these ‘dry statistics’ about China is such a gigantic
improvement in the lives of people that for anyone understanding it they must
almost be moved to tears. Therefore, naturally capitalism does everything it
can to make sure such realities are known to as few people as possible in the
world. Nothing else is to be expected from capitalism, because if such
realities were widely known it would be a gigantic blow to the standing and
hegemony of capitalism. As China becomes still more successful, and the life of
the 1.4 billion Chinese people improves further, all that will happen from
capitalists and the media they control is that the amount of distortion and
lying will increase – because it is vital for capitalism to prevent the rest of
the world knowing how much the life of the Chinese people has improved in the
70 years since China’s socialist revolution. Because if that truth is known
more people, particularly at present in developing countries, would want to
follow that route.
Any serious progressive individual or media, let alone
socialists, would, of course, hail the gigantic step forward for humanity which
has taken place in China – while doubtless making whatever were their liberal qualifications
or critiques of it. But capitalism and liberals long ago ceased to be
progressive. If you read newspapers such as the Guardian or the New York Times around
the 70th anniversary of the PRC you will see not analysis of what a
huge step forward for humanity this is but suppression of the real facts
regarding China’s development – liberals long ago ceased not only to be
progressive but to pay any attention to the truth.
In addition to the overall lies against China there are of
course specific ones which any examination of the facts disproves. One is
related to the gigantic support for Mao Zedong in China. Supposedly this is
inexplicable given that it is claimed by capitalism Mao Zedong was a vile
oppressor. In reality in China during
the period of Mao Zedong, despite the huge mistakes of the Great Leap Forward
and Cultural Revolution, China experienced the most rapid improvement in social
conditions, reflected in increase in life expectancy, in human history – a
reflection of China’s emphasis on health care and education. As the article
notes: ‘In the 27 years between the establishment of the People’s Republic of
China in 1949, and the death of Mao Zedong in 1976, life expectancy in China
increased by 31 years – or over a year per chronological year…. Far from being
negative, China’s record in this period was one of history’s most extraordinary
‘Instead of engaging in factual falsification and myth
making, foreigners can more accurately understand the support for Mao Zedong in
China, even leaving aside other issues, such as the achievement of real
national independence, merely by the lived experience of this fact. If someone
leads you to live an extra 31 years it is unsurprising you hold them in esteem!
The fact that capitalism systematically lies about China of
course makes it incapable of understanding the real dynamic in that country.
Confusion in parts of the left
But if rejection of reality is to be expected from
capitalism and its apologists what is ridiculous is that sections of the left
refuse to face such a gigantic reality as China’s social achievements – these
‘left’ criticisms in fact only repeat capitalist propaganda. At the most absurd
they spread capitalist lies such as that Chinese workers life in ‘slave like’
conditions – something which is refuted in 1 second by looking at the figures
on China’s life expectancy dealt with in this article. The idea that a
‘sweatshop’ produces a more than 40 year increase in life expectancy, more than
every major country in the world, is an absurd joke, or more precisely ‘leftist’
repetition of capitalist propaganda.
Illustrating even more lack of seriousness about socialist
and Marxist theory is left repetition of the claim that China is capitalist. This
is refuted by any Marxist analysis of China’s economic structure – see ‘Why China is a socialist country – China’s theory is
in line with Marx (but not Stalin)’. For those who claim China is
capitalist it is then necessary to explain why these gigantic and measurable steps
forward for humanity took place in a country which declares itself socialist
and no such step forward was taken in countries which declare themselves
capitalist. But it is also necessary to understand the profound consequences.
If ‘capitalism’ is capable of lifting more than 850 million people out of poverty
then capitalism is not reactionary but is a profoundly progressive system. This
foolish so called ‘left’ criticism of China therefore turns out to be…. a
justification for the progressive role of capitalism!
But the practical consequences of confusion on the left on
this issue are extremely serious. China has an economic system which
demonstrably delivers in practice, not merely in theory, enormous improvements
in the living conditions for the overwhelming majority of the population and in
particular the poorest sections of society. It is based on the socialisation of
the dominant sectors of China’s economy – that is the ability of the state to
control the level of investment in China. As it was stated at the 3rd Plenum of
the Central Committee of the 18th Congress of the CPC, the latest comprehensive
statement of China’s economic policy: ‘We must unswervingly consolidate and develop
the public economy, persist in the dominant position of public ownership, give
full play to the leading role of the state-owned sector.’ Any study of how
China’s economy is regulated confirms that decisive role of the state sector.
The left should be using this model to explain that it is
the most effective method to raise living standards and eliminate poverty. In
Latin America, for example, where the left was unable to deal with the
consequences of the downturn in commodity prices after 2014, this is decisive.
As Brazilian socialist Elias Jabour put it recently: ‘The rise of
China means that Brazil and Latin America has a real alternative to
neo-liberalism. It provides the possibility for greater economic integration
outside the orbit of imperialism. It is impossible to imagine the existence of
progressive governments in Latin America without the existence of socialist
China.’ This applies both to the support that economic interaction with China
can give to Latin American, and other developing, countries and to how the
Chinese economic model provides a proven practical alternative to
neo-liberalism within Latin American countries.
The left in China
But also, internationally, it is necessary to understand
that the biggest left in the entire world is in China. The best way to
understand that is to read Weibo, the Chinese equivalent of Twitter, or to
follow websites such as Guancha.cn – something it is entirely
possible for anyone who does not read Chinese to do with modern translation
software. And for those who do not trust anything produced in China, or find it
too tiring to use translation software, they can get a distorted but not wholly
inaccurate vision by reading Jude Blanchette’s China’s New Red Guards. No where else but
China do you find obviously left-wing leaders who have 3 million, 5 million, 6
million followers on social media. And these huge left-wing forces are
unequivocal in their support of the overall path, naturally not every specific
policy, of the CPC. They are ‘Maoist’ in their overall world outlook. The
Fidelista left in Latin America is undoubtedly the other mass socialist/Marxist
current in the world, but even that is much smaller than the left in China.
Understanding the actual reality of China, and the impact
this has on its population, will immediately lead to realities the ‘Western
left’, in particular the left in Europe and North America, finds very hard to
immediately understand. But they are based on the social realities analysed
below. For example, this is the evaluation of Fidel Castro, the greatest
Marxist/socialist leader ever to have lived in the Western hemisphere, of
China: ‘If you want to talk about socialism, let us not forget what socialism
achieved in China. At one time it was the land of hunger, poverty, disasters.
Today there is none of that. Today China can feed, dress, educate, and care for
the health of 1.2 billion people.
‘I think China is a socialist country, and Vietnam is a
socialist nation as well. And they insist that they have introduced all the
necessary reforms in order to motivate national development and to continue
seeking the objectives of socialism.
‘There are no fully pure regimes or systems. In Cuba, for
instance, we have many forms of private property. We have hundreds of thousands
of farm owners. In some cases they own up to 110 acres. In Europe they would be
considered large landholders. Practically all Cubans own their own home and,
what is more, we welcome foreign investment.
‘But that does not mean that Cuba has stopped being
Of China’s current president Xi Jinping this was the evaluation of Fidel
Castro: ‘‘Xi Jinping is one of the strongest and most capable revolutionary
leaders I have met in my life’. The left in China clearly supports Xi Jinping –
naturally not without abandoning their specific views but clearly as regards
the overall course of China. For exactly the same reason the capitalist press
in the West is particularly full of bile and hatred against Xi Jinping –
innumerable articles spewing out attacks on him as the 70th
anniversary of the creation of the PRC approached.
It is not necessary for the Western left to become involved
in detailed assessment of China’s leadership – although for China this is
extremely important. What the international left does have to understand is
that the greatest rapid improvement in the condition of the greatest proportion
of the world’s population in human history has taken place in the 70 years of
The role of the socialist left
For the mass of the population who live in Europe or North America it is difficult for them to imagine what it meant to make a socialist revolution, and to commence constructing a new society, from an economic starting point lower than their own countries in the Middle Ages and in only 70 years to achieve a standard of living and a life expectancy that is on the verge of high incomes economies. Only China’s continued development will convince the mass of hundreds of millions of people. That is why there is a much wider and more understanding of China’s stupendous achievements in Africa, developing Asia, and Latin America than there is in Europe or North America. But what there is no excuse for is that parts of the so called ‘intelligentsia’, who are supposed to understand the course of human history, do not grasp such facts.
The following article, written for China for the 70th anniversary
of the creation of the People’s Republic, focuses not on the data on GDP but on
the most important factor or all – the impact of the 70 years of the Peoples
Republic of China on the life of the Chinese people.
* * *
‘The Chinese people have stood up,’ the title of this famous
speech by Mao Zedong in 1949 embodied a promise made by the Communist Party of
China to the people of China. This promise was that if China adopted the
socialist programme and methods of the CPC the Chinese people would be
progressively lifted from more than a century of poverty, foreign invasion,
foreign oppression, and humiliation by foreign powers to regain a position in
which no country or people in the world was superior to China.
Measuring China’s social progress
There are numerous ways to measure whether the promise by
the CPC was kept. A number specifically relate to China’s specific national
identity and its situation in 1949. For example, in a total transformation of
China’s position from the preceding century, no country any longer dares
militarily attack China – due to the strength of the People’s Liberation Army
(PLA) and the economic and technological power that now sustains it. China has
now also completely regained its territorial integrity – all former foreign
concession territories in China have been abolished, Hong Kong and Macao have
reunified with China, only US controlled Taiwan province still remains to be
regained practical control of and that is only a matter of time. Numerous
foreign countries now seek friendly and equal relations with China. That the
socialist path of the CPC has delivered its 1949 promise on the field of
China’s national integrity is beyond doubt.
But it is also legitimate to make international comparisons
by more universal and less specifically national criteria – those regarding the
development of the overall social position of the Chinese people compared to
other countries. Fortunately, since 1949 the situation of humanity as a whole
has advanced – the old colonial empires have been destroyed, living standards
have improved, life expectancy has increased. How has China developed in
comparative terms? Has China improved its social conditions more rapidly than
other countries – justifying the CPC’s promise that its programme and methods,
based on Marx-Lenin-Mao Zedong, were the best to achieve China’s rejuvenation –
or do the facts show that other countries have achieved superior social
progress in the 70 years since the creation of the PRC?
Why life expectancy is the most sensitive measure of social progress
Among the different potential criteria that could be used to
measure China’s relative social progress compared to other countries one is in
reality decisive. The declared aim of the CPC is to ‘Serve the People’. In
policy terms its framework is ‘people centre development’ – which is
necessarily integrated with China’s national rejuvenation because China’s
people are overwhelmingly its greatest power and resource. How much, therefore,
in overall terms has the overall condition of the ordinary people of China
improved since 1949? Has the CPC delivered on its promise that its methods
would deliver improvement in the conditions of the ordinary people of China in
a way superior to any other?
One single criterion is in reality sufficient to
dramatically demonstrate the superiority of the socialist path China embarked
on 1949 compared to alternatives. This is the increase in the life expectancy
of the Chinese people compared to other countries. This fact also entirely
adequately demonstrates that the slogan of the CPC, ‘Serve the People’, is not
empty words but is the precise result of the party’s activity.
The reason the criterion of life expectancy is decisive and
chosen for analysis is not simply, or even primarily, that increase in life
expectancy is a universal wish of human beings – although it certainly is! It
is because it is well known to economists that life expectancy is the most
comprehensive and sensitive measure for judging the overall impact of changes
in social and environmental conditions. This is due to the fact that average
life expectancy summarises in one single figure the effect of all positive
social developments (high quality consumption, good health care, improvements
in education, environmental protection etc.)
and subtracts the negative ones (poverty, poor health care, lack of
education, environmental degradation etc. Life expectancy is therefore a more
adequate measure of social well-being than purely per capita GDP – significant
as the latter is, and despite per capita GDP being the single biggest
determinant of life expectancy. As Nobel Prize winner Amartya Sen summarized
regarding the relation between these variables:
‘Personal income is unquestionably a basic determinant of
survival and death, and more generally of the quality of life of a person.
Nevertheless, income is only one variable among many that affect our chances of
enjoying life… The gross national product per head may be a good indicator of
the average real income of the nation, but the actual incomes enjoyed by the
people will also depend on the distributional pattern of that national income.
Also, the quality of life of a person depends not only on his or her personal
income, but also on various physical and social conditions… The nature of health
care and the nature of medical insurance – public as well a private – are among
the most important influences on life and death. So are the other social
services, including basic education and the orderliness of urban living and the
access to modern medical knowledge. There are, thus, many factors not included
in the accounting of personal incomes that can be importantly involved in the
life and death of people.’
By studying the development of life expectancy during the 70
years of the People’s Republic of China therefore in fact what is being studied
is the overall development of the Chinese people’s standard of life compared to
trends in other countries.
The conclusion of such comparative study of international
facts is simple and clear. The CPC has delivered on its promise that its
methods and programme would create results superior to any other – in
particular China’s socialist path of development has achieved results which are
superior to any capitalist alternative. These are not empty boasts, or purely
nationalist rhetoric, but are simply the objective results of the study of
global development since 1949.
Resolving historical debates on China’s development
Carefully establishing the facts on this question also casts
a clear light on key issues in China’s own history, on international discussion
regarding China’s success, on understanding of China’s perception of itself,
and in grasping the role of the CPC and the socialist path of development that
flows from it.
It is extremely important internationally to establish this
fact regarding the unparalleled increase in China’s life expectancy compared to
other countries and the conclusions that flow from it. While, as will be seen,
the scale of China’s economic and social development in the 70 years since the
establishment of the PRC is unequalled this is frequently not shown in China’s
research in presentation of its own
achievements – particularly as presented internationally. Too often systematic
comparison of China’s achievements compared to other countries is not carried
out, which allows excessive international circulation of slanders against China
and also even allows the spreading of false analyses within China.
To attempt to contribute to a more widespread understanding
of the truly enormous scale of China’s social achievement this article
therefore carries out a systematic study of the development of life expectancy
in China compared to other countries since the establishment of the PRC. This
establishes clearly that the increase in life expectancy since 1949 shows that
China’s is by far the greatest social miracle in any country in the last 70
years, and probably the greatest social miracle in the entire history of
humanity. It will be shown that such a conclusion is not overheated nationalist
rhetoric, but simply follows from an objective and impartial study of the
China’s extraordinary achievement in life expectancy
Turning to the overall comparative results of China’s
increase in life expectancy compared to other countries these are summarised in
Ideally a comparison would be made of life expectancy for all countries
starting in 1949, but systematic World Bank data is not available before 1960 –
a specific study of China for the period 1949-1960 is given below. However,
from 1960 to 2017, the latest available data, systematic World Bank data
covering 189 countries exists, accounting for 99.3% of the world’s population.
That is, from 1960 entirely comprehensive international comparisons can be made
– systematic international comparative data therefore exists for 57 out of the
68 years of the existence of the PRC. Furthermore, as will be demonstrated,
there is no indication of countervailing data for the period 1949-1960. There
is, therefore, no doubt as to China’s performance compared to other countries.
The comparative international results are overwhelming and
In 1960-2017 China’s average life expectancy increased by 32.7 years – from 43.7 years to 76.4 years.
By 2017 China’s 1,386 million people had enjoyed a higher increase in life expectancy than 6,027 million people, living in countries with a lesser increase in life expectancy than China, and only 46 million people living in countries with a greater increase in life expectancy than China.
China’s increase in life expectancy was therefore higher than that of 99.2% of the population of the world’s countries excluding China.
Only 0.8% of the world’s population, excluding China, lived in countries with a longer increase in life expectancy than China – this was purely in six small countries, Bhutan, the Maldives, Tunisia, Timor-Leste, Nepal, Oman.
To show clearly how overwhelming is China’s increase in life
expectancy compared to other countries, Figure
shows graphically the percentage of the world’s population living in countries
with higher and lower increase in life expectancy than China in 1960-2017-
including China in the calculation.
shows the percentage of the world’s population living in countries with higher
and lower increase in life expectancy than China in 1960-2017 excluding China.
The social impact of China’s increase in life expectancy
This fact that China’s increase in life expectancy exceeded
that of almost all other countries, and far exceed that of all other major
countries, is itself a decisive vindication of the superiority of China’s
socialist path of development. There are today literally hundreds of millions
of people in China alive because of China’s far superior performance in
increasing life expectancy. But in addition to this direct effect on China
itself this overwhelming comparison is also is decisive in deciding other issues.
The claim made in rabid anti-China Western media that the
people of China live in ‘misery’ is entirely laughable – the life expectancy
data shows the Chinese people have experienced a greater improvement in their
overall social conditions than countries representing over 99% of the world’s
The claim that China has pursued economic development at the
expense of its people is evidently untrue. On the contrary, as seen, China’s
increase in life expectancy is superior to all except 0.8% of world’s
population excluding China.
It is well known that China’s achievement in world poverty
reduction is completely unequalled – as is confirmed by the latest World Bank
data shown in Table
Taking the World Banks’ extreme poverty criteria of expenditure of $1.90 a day,
measured in 2011 PPPs, China was responsible for 74% of the reduction in the
number of people in the world living below this level of poverty in 1981-2015
(the latter year being the latest available data). Taking the alternative,
slightly higher, World Bank criteria of poverty of expenditure of $3.20 a day,
measured in 2011 PPPs, China was responsible for 138% of the reduction in the
number of the people in the world living at this level of poverty – i.e. the number living below this level in
China fell by 889 million while in the rest of the world it increased by 245
million. But while data for poverty shows the improvement in life conditions
for the poorest in society, the data for life expectancy are, of course, an
average – with the dramatic increase showing that the improvement in China’s
social conditions applied to the overwhelming majority of China’s population.
Having established the overall framework of the development
of China’s life expectancy the light this throws on resolving some specific
issues of controversy will now be analysed in more detail
China in 1949
As a starting point for analysis it is crucial to understand
China’s position in 1949. After more than a century of foreign invasions China
was almost the world’s poorest country. Systematic international data does not
exist for 1949, which was the last year of China’s civil war, but it does for
1950 – the PRC’s first year of peace. This will therefore be taken as the
comparative starting point for analysis.
Of systematic international analyses that have been made,
Maddison, former head of statistics of the OECD and the world’s most renowned
analyst of long term growth, concludes that in 1950 only 10 countries in the
world had a lower per capita GDP than China – two in Asia (Myanmar and
Mongolia), eight in Africa (Botswana, Burundi, Ethiopia, Guinea, Guinea Bissau,
Lesotho, Malawi, Tanzania). The Conference Board, using a slightly different
method of analysis, concludes that only six countries in the world in 1950 had
a lower per capita GDP than China – two in Asia (Cambodia, Myanmar), four in
Africa (Burkina Faso, Ethiopia, Malawi and Mozambique). On Maddison’s data, in 1950 only 2.4% of the
world population lived in countries with a lower per capita GDP than China.
These detailed differences in conclusions are clearly entirely insignificant
compared to the overall finding. At its starting point the PRC was established
in a country which was almost the world’s poorest.
As would be expected, China’s extreme poverty in 1949 was
reflected in very low life expectancy. As already noted, comprehensive
comparative World Bank data on life expectancy is not available for 1950, it
begins in 1960. However, the most relevant comparison is to India, which with
China is the other largest developing country. This is because India is the
only country comparable in size to China in terms of population, because India
achieved independence from Britain in 1947 at almost the same time as the
creation of the PRC, and because India’s life expectancy at that time was close
to China’s. Studying not only the 1950-1960 period but also the pre-1978 reform
period in China’s history compared to India therefore casts a clear light on
In 1947, the year India achieved independence, its life
expectancy was 32. China’s life expectancy in 1949, the year of the creation of
the People’s Republic of China, was 35 – a gap of three years compared to
India. By 1978, the last year of pre-reform China, China’s life expectancy was
67 and India’s 55 – a gap of 12 years. This is shown in Figure
This sharply growing difference was not because India had a
bad record – as an increase of 22 years in life expectancy over a 31-year
period graphically shows. It is simply that China’s performance was sensational
– life expectancy increasing by 32 years in a 29-year chronological period.
This means that in pre-reform China life expectancy increased by more than a
year for every chronological year that passed – an annual average increase of
To understand the true scale of such an achievement in
comparative terms, it need simply be noted that China’s rate of increase of
life expectancy in the three decades after 1949 was the fastest ever recorded
in a major country in human history. For comparison:
The US in the thirty years
after 1880, a period of sharp increase due to recovery from the Civil War,
saw a 0.9% annual increase in life expectancy.
Life expectancy in the UK
after 1871, a period of rapid growth, was under 1.0% a year.
Japan, a country
considered to have an outstanding record in increasing life expectancy,
and enjoying a rapid increase due to recovery from World War II, raised
life expectancy by 1.3% a year in the 29 years after 1947.
China’s 2.3% increase in life expectancy in 1949-78,
therefore, far outperformed all these countries whose records, by normal
standards, are considered exceptional.
When did life expectancy increase?
The period in which this spectacular increase in life
expectancy was concentrated is highly interesting and casts a strong light on
debates concerning the continuity of the PRC’s development – and in particular shows clearly the falsity
of ‘historical nihilism’, the claim that trends in China only became favourable
after 1978. During the 1950s China made very creditable progress – life
expectancy increasing by an average of slightly over nine months in each
chronological year. India’s performance in this period was comparable – between
1947 and 1960 its life expectancy increased by slightly less than nine months
for each chronological year. India continued this progress in the period up to
1978, with life expectancy rising by slightly under nine months for each
chronological year. But after the 1950s China’s life expectancy began to rise
extremely rapidly. Between 1960 and 1970 China’s life expectancy increased by a
dramatic one year and nine months per chronological year. Over the entire
period 1960-78 China’s life expectancy grew by an average one year and three
months per chronological year.
This spectacular, indeed historically unprecedented, social achievement during 1949-78 does not overturn any analysis of economic developments in this period, nor of political judgements concerning the Great Leap Forward and Cultural Revolution. But it shows clearly that attempts to present the pre-1978 period in an overall negative social light, as ‘historical nihilism’, and as represented in the West by a series of books attempting to present pre- reform China as socially disastrous, is, to put it straightforwardly, a blatant falsification. In the 27 years between the establishment of the People’s Republic of China in 1949, and the death of Mao Zedong in 1976, life expectancy in China increased by 31 years – or over a year per chronological year. In comparison, in the 27 years after India’s independence average life expectancy increased by 19 years. Far from being negative, China’s record in this period was one of history’s most extraordinary social achievements.
Instead of engaging
in factual falsification and myth making, foreigners can more accurately understand the support for
Mao Zedong in China, even leaving aside other issues, such as the achievement
of real national independence, merely by the lived experience of this fact. If
someone leads you to live an extra 31 years it is unsurprising you hold them in
Historical accuracy certainly means clearly noting that
China’s economic growth was superior after 1978, but this should not lead to
underestimation of the astonishing social achievements of the preceding
pre-reform period. Xi Jinping put it precisely on these two periods of China’s
post-1949 development, that is from 1949-1978 and 1978 to the present:
The two phases – at once related to and distinct from each
other – are both pragmatic explorations in building socialism. … Although the
two historical phases are very different in their guiding thoughts, principles,
policies, and practical work, they are by no means separated from or opposed to
each other. We should neither negate the pre- reform-and-opening-up phase in
comparison with the post-reform-and -opening-up phase, nor the converse.
Systematic international comparison
While India is the most relevant single comparison for China
there could be an accusation that it is selectively chosen. From 1960 onwards
however, as already noted, such an accusation cannot be made as systematic
World Bank data exits and leaves no doubt as to China’s performance. It is therefore useful to expand further on
the overall results after 1960 noted above.
Due to China’s very low starting point in life expectancy in
1949, by 1960, despite the progress made in the 1950s, it was still the case
that 55% of the world’s population lived in countries with a higher life expectancy
than China and only 23% in countries with a lower life expectancy than China.
The astonishing transformation is that by 2017, due to the very rapid increase
in China’s life expectancy, only 19% of the world’s population lived in
countries with a higher left expectancy than China and 62% of the world’s
population lived in countries with a lower life expectancy than China. This is
shown in Figure
To understand the significance of this still more clearly,
it may be noted that in 2018 only 15.6% of the world’s population lived in
countries which were high income, that is advanced, economies by World Bank
classification. Therefore, less than 4% of the world’s population lived in
developing countries with a longer life expectancy than China – out of 84% of
the world’s population which lives in developing countries. In short, from
being one of the world’s poorest countries in 1949, with a low life expectancy,
in 1949 China has already achieved a longer life expectancy than almost all
every other developing economy.
The increase in human well-being and real human rights which
is reflected in those simple figures is truly staggering – precisely because
average life expectancy is the best overall indicator of overall social and
living conditions. It means the Chinese people, almost one fifth of humanity,
has enjoyed by far the greatest improvement in social conditions, reflected in
their average life expectancy, of any major country in the world. Literally
over a billion people have enjoyed a greater improvement in their standards of
life than that by any other means. It precisely means that Marxism in China has
delivered its promise, made in 1949, that its programme and methods would
achieve the national rejuvenation of China in a way superior to any
alternative. The facts show that what was a promise in 1949 was delivered as a
reality in the 70 years that followed.
In conclusion, the fact that after 1949 China’s increase in
life expectancy outperformed any other major country is of course of the
greatest significance to China’s people – it shows the unparalleled increase in
living and social conditions that has occurred due to China’s socialist path.
But it also decisively settles a number of other issues.
Those in who apologize for capitalism are simply wrong – it is clear China’s socialist path has achieved a greater improvement in overall living conditions, reflected in the increase in life expectancy, than any capitalist path of development over the last 70 years.
Attempts to essentially counterpose the two periods of development of the PRC, between 1949-78 and 1978-2019, are wrong. The fundamental task in both periods was to ‘serve the people’, to achieve ‘people centred development’ – which was successful achieved as shown in the sharp increase in life expectancy in both periods.
The theory of ‘historical nihilism’, the claim that China’s development prior to 1978 was negative is the purest nonsense. Economic growth was faster after 1978 but the increase in life expectancy, reflecting the overall improvement in social conditions, in 1949-78 was unparalleled in human history. Therefore, the attacks made on Mao Zedong in the West simply mean that those making them cannot accurately understand China or understand its dynamic. The period of Mao Zedong saw an increase in life expectancy which was unparalleled in human history – which in no way contradicts negative judgements on the Great Leap Forward or the Cultural Revolution. What is involved is the overall course of China during the Mao period, which the data on life expectancy proves saw an unprecedented step forward in the overall social conditions of the China people. By denying the facts of this reality the West, among other things, renders itself incapable of understanding China and its dynamics.
The facts on the development of life expectancy in China since the founding of the PRC confirm in a single decisive and verifiable figure that the CPC delivered on its promise that its socialist methods and programme would be superior for the rejuvenation of China to any other method. They show that the improvement in the conditions of the Chinese people since 1949 is the greatest ever achieved in a major country in a 70-year period in the whole of human history.
These are the
fundamental facts of the truly staggering scale of China’s ‘social miracle’
during the last 70 years.
Japan remains an important economy, the third largest in the
world behind China and the US. If the EU Single Market is considered as a
single economy it is the fourth largest in the world, although considerably
smaller than each of these.
But it is a much less important economy than it used to
be. A period of extraordinary growth in
real GDP in the post-War period gave way to recession and then virtually
complete stagnation from 1990 onwards. From 1950 to 1990 the Japanese economy
increased by over 13 times, much faster than the world economy (Angus Maddison
data). But in the 28 years since the Japanese economy has expanded by less than
a third (OECD data).
In 1990 Japan accounted for 8.6% of world GDP (Maddison). By
2018 this had fallen to 4% of world GDP (World Bank). This period of economic stagnation
was first known as ‘Japan’s lost decade’. But it has dragged on to become the
This period bears closer scrutiny, being the most recent
period when an advanced industrialised country stagnated over such a prolonged
period, not least because the G7 economies as a whole have been effectively
stagnating since the crash of 2008.
This Thatcherite morality tale is very widely repeated. But
it is completely untrue.
What is true is that the Japanese governments frequently
announced large new public works spending, often
with great fanfare. But it is not true that they increased public sector
Chart 1. below shows both Japanese total Gross Fixed Capital
Formation (GFCF) as a percentage of GDP, as well as the private sector’s GFCF
as a percentage of GDP. There is a clear
downtrend trend in total Investment, or GFCF.
The decline in the contribution of Investment to GDP is
exactly as would be expected in a period of outright stagnation, given the
decisive contribution of Investment to GDP growth. In 1990 (not shown in the chart) total
Japanese GFCF amounted to just over 34% of GDP.
This was not massively below the post-World War II peak of 38.7% in
1973. But by 2010 total GFCF had fallen
to just 21.3% of GDP. From accounting for just over a third of Japanese GDP,
GFCF slipped to little more one-fifth of GDP and has not recovered fully since
To be clear, this is quite separate from the Consumption of
the Japanese public sector which did rise sharply in response to the crisis.
This is shown in Chart 2. Below. Government Consumption rose throughout most of
the crisis period, at least until 2010. But increased Consumption cannot
sustainably lift production because it provides no new means of production.
That requires Investment to create new productive capacity. Put another way,
attempting to use Consumption to drive GDP higher over a sustained period will
end in failure on both counts.
Chart 2. Japanese Government Consumption, % GDP
Returning to Chart 1 once more, it should be noted that the
decline in Investment was not driven solely by the private sector. In 1994 (the
earliest available date for the disaggregated private sector data), private
sector GFCF accounted for 20.4% of GDP.
By 2015 (latest available data) this had slipped to 18.3% of GDP.
This is highlighted in Chart 3. below. This shows the calculated level of general
government GFCF as a percentage of GDP, arrived at by subtracting private
sector GDP from the total GFCF.
Chart 3. Japan
General Government GFCF as % of GDP
Over the period general government GFCF as a percentage of
GDP fell from 9.1% in both 1994 and 1996 to a low-point of 4.8% of GDP in 2007
and 2008. It has only recovered to 5.5% in 2015. Therefore the total loss in
terms of public sector Investment has been 3.6% of GDP, while the total cumulative
loss in private sector Investment has been 2% of GDP over the same period.
Far from Japanese government assertions, echoed by a wide
array of analysts and pundits, that public Investment was increased but it
proved useless in reviving the economy, the opposite is the case. The Japanese
public sector slashed its own Investment, almost cutting it in half. The cut in public sector Investment was
mainly responsible for the decline in total Investment.
This cut in public Investment was much greater than the
simultaneous cut in private sector Investment – despite being a much smaller
initial value. Throughout the process,
it was the fall in public sector Investment which also led the way, and private
sector Investment did not reach its own low-point until three years after the
public sector (spurred on by the fall in the level of profits in 1992, which
have never properly recovered).
A public investment
As noted above, the change in Japanese public Investment was
a fall of 4.3% of GDP from its 1994 (and 1996) level to its low-point in 2007.
Even the most strongly growing economies would struggle if any factor was
reduced by 4% of GDP. But the decisive
role of Investment in accounting for GDP growth means that slump and stagnation
was effectively unavoidable.
What caused the Japanese public sector to choke off
Investment, slow the economy to stagnation and lead the Japanese private sector
into cutting its own Investment? According to US Treasury data (pdf) Asian
holdings of US Treasuries (government bonds) rose from $84 billion in 1984 to
$283 billion in 1989 and upwards to $418 billion in 1994. As the US Treasury notes, these are
overwhelmingly held by Japan.
Low levels of Asian (mainly Japanese) US Treasuries’
holdings in 1984 ballooned fivefold in just 10 years. In relation to Japanese GDP, total Asian
holdings were less than 1% in 1984 and approximately 10% in 1994, even taking
into account the surge in the value of the Yen over the same period.
That surge in the Yen did not occur simply as a result of
market mechanisms. In 1985 the Reagan Administration, struggling with the
accumulated debt of the Viet Nam war and recession of the early 1980s, insisted
that other countries, Japan, West Germany, France and Britain sell US Dollars
to engineer a depreciation which would make US industry more competitive. The
US allies were also obliged to cut their own Investment and increase
Consumption, partly to boost US exports. This agreement was formalised in the Plaza
Accord of 1985. It also allowed the US to maintain very large budget
deficits as it pursued the Cold War arms race to destruction.
The effect on Japan and Japanese industry was profound and
dramatic. In February 1985 there were 260 Japanese Yen to the US Dollar but by 1987
the exchange rate had fallen to 121. This was excruciating for Japanese
industry, which now struggled to compete internationally because of this
more-than-doubling in the exchange rate value of the Yen.
The Japanese government in particular was obliged to sharply
increase its purchases of US Treasuries, under threat of hollowing out Japanese
industry via the exchange rate. This demand was later reinforced under the
separate Louvre Accord. The author of the policy was the US administration
The widely-repeated claim that Japanese public Investment failed to rescue the Japanese economy is no more true for repetition. The opposite is the case. The cut to public Investment was decisive in causing the slump, being both earlier and deeper than the cut in private Investment. Instead, the Japanese government followed US demands to ‘stimulate demand’, that is increase Consumption in its own economy.
Both of these policies, the cut in Japan’s public Investment
and the increase in public Consumption were the effects of the US measures to
support its own economy, fund its budget deficit and hugely increase its
military spending. But it has hobbled
the Japanese economy for almost three decades now.
Currently, but for different reasons the US is once more
looking to overseas sources of capital to maintain current US living standards
and increase spending. How it is
attempting to engineer that inflow this time around will be examined in a
There are widespread claims that the government is ending austerity. The reality is that it is engaged in a pre-election spending spree, just as Osborne and Cameron did in 2014. Subsequently, it should be clear that the small-state right-wing ideologues in Johnson’s Cabinet intend to use a No Deal Brexit as a platform for another huge assault on living standards, workers’ rights and the public sector. They also have no intention of tackling the climate crisis. It is only the Labour Party of Jeremy Corbyn which has a plan to end austerity, with clear commitments to increase public investment, restore public services and tackle climate change.
What are the Tories promising?
The government and their faithful supporters in the press
are touting the real terms increase in both current spending and in public
investment. Current spending is set to rise by 2.0% in real terms and public
investment set to rise 5.6% on the same basis.
But the first point to note is that this is a promise almost
certainly for the next parliament as an election now seems inevitable. If the Tories win the new government will not
be bound by the promise of the last one.
It is also a one-year promise, to get through an election. The
widespread consensus is the government departments and all their agencies
require a minimum of three years funding so that they can plan ahead.
Claims that this is the biggest spending spree for decades are
false. This plan is similar to the Osborne/Cameron one in 2014/15. Under them public sector gross investment was
increased 8.7% in real terms in 2014/15 compared to the previous financial
year, in time for the 2015 general election. The rise in public sector current
spending was far more modest, perhaps because Osborne understood the importance
of investment to spur growth. But if we
take the whole of increased government outlays together, both consumption and
investment in Total Managed Expenditure, the current plan is to raise TME by 2.4%
in real terms, while Osborne/Cameron increased TME by 2.3% on the same basis.
The cynicism of the Tories was such that these totals were
actually cut in real terms once they had won the 2015 election. There is no
reason to suppose that the current Tory Cabinet, which occupies a political
position even further to the right, will be any different.
But the Tory perspective is not determined by the outlook of
its key members. It is the objective conditions that will determine their
choices. The British economy remains in a crisis. The austerity project has
failed it its own terms – which is the transfer of incomes from workers and the
poor to business and the rich in order to revive a business-led expansion of
The transfer of income has been real, and real wages have
fallen and the social surplus has been redirected from social security to tax
cuts. But the profit share has not risen. In 2008 the Gross Operating Surplus
of firms was 39.3% of GDP. In 2018 it had fallen to 37.9% of GDP. Profitability
has not revived.
As a result, investment has not revived either. In 2008 it was plummeting and accounted for
just 17.2% of GDP. In 2018 it was 16.9%.
For a sustainable business-led expansion, a decisive defeat
of the working class and its allies is required. That has not been achieved.
Now, the extremists in the Tory Cabinet, orchestrated by the Trump administration,
believe that crashing out with a No Deal Brexit is the opportunity they need to
impose that decisive defeat.
This will entail not just a fall in living standards, and
loss of well-paid jobs in advanced manufacturing sectors such as cars and
pharmaceuticals. But, as British-based businesses will be obliged to compete
more directly with US rivals, they will in turn demand far lower union rights,
health and safety standards, lower pensions and other entitlements. There will
be an Americanisation of the British working conditions.
The scope of the Corbyn-McDonnell project makes the Tories’
pre-election bribe look like the chicken feed it is. Using the same TME
measure, which combines both government current spending and public investment,
the Labour plan increases it by 3.4% of GDP. Crucially, this is not a one-off,
but a sustained increase over each and every year of the next 5-year
This is about 7 times what Johnson’s Cabinet promises. And
it does not include the additional effects of the National Investment Bank on
raising investment, nor does it include the probability of some businesses
being obliged to increase their own investment, to provide the inputs
for the increased investment from the public sector.
The Corbyn-McDonnell plan is a sustained effort to raise the
growth rate of the economy, contribute to the global effort to tackling climate
change and genuinely ending austerity.
What the Tories plan is not an end of austerity. Instead
they plan a whole new attack on workers and the poor.
I have witnessed three coups and attempted coups – two in
Russia and one in Britain. One was ended politically, one with tanks, the
present coup attempt is still not settled. There are decisive lessons on how to
deal with them which precisely apply to the present attempted coup by Johnson.
These three coups were in March 1993 in Russia – ended by
political means, October 1993 in Russia – ended by tanks. August 2019 in
Britain – which will be ended by political means. But each had the same key lessons.
To summarise the events in these three coups each of which I
witnessed first hand.
In March 1993 Yeltsin attempted to overthrow the
Russian constitution, in order to concentrate power in his hands and continue
the implementation of economic shock therapy. He was successfully defeated in
this by the Russian Congress of People’s Deputies and ministers in the
government. However, having defeated the coup, the Congress of People’s
Deputies then made the disastrous mistake of compromising with Yeltsin to hold
a referendum, in which Yeltsin used his control of the courts and electoral
fraud to determine the outcome of. This gave to Yeltsin the political
initiative to prepare the coup of October 1993.
In the October 1993 coup Yeltsin
unconstitutionally declared the dissolution of the Congress of People’s
Deputies – the highest authority of the Russian state. This was opposed by
massive street mobilisations of Moscow’s population. Yeltsin then ordered the
Parliament to be surrounded by armed police which were under his control. The
armed police were prevented from taking control of the Parliament by armed
resistance by numerous people inside the Parliament building, some with sub-machine
guns and similar weapons. The police action was simultaneously opposed by even
larger mobilisations of Moscow’s population until the police blockade of the
Parliament was broken after several days – the armed police had been
demoralised by the steadfast opposition of the Moscow population. But then,
instead of consolidating this victory, the leadership of the Parliament made
the disastrous decision to launch an attempt to take control of the main
television station. Pro-government armed forces stationed there, who had not
been subject to popular pressure, obeyed orders to open fire on the crowd
carrying out a massacre. Following that the Parliament was attacked by heavy
weapons, notably tanks, which the defenders of the Parliament were not able to
resist. Yeltsin therefore was successful in this coup d’etat.
In August 2019 Johnson attempted to force
through a No Deal Brexit through suspending Parliament. The outcome of this
struggle remains to be determined.
Each of these coups, however, has the same key lessons which
totally apply to Johnson’s attempted coup.
In a coup the issue of state power is what is ultimately decisive – not
The first key lesson is that in confronting a coup it is the
issue of state power which is decisive – everything else has to focus on this or
it is ineffectual. Everyone who opposes the coup is on the right side and an
ally, but there is confusion. As an example on this at present, for example in
Britain faced with Johnson’s coup various MPs have proposed so called ‘alternative
Parliaments’, MPs occupying
Parliament if it is suspended etc. These are beside the point and are in
reality to accept Johnson’s coup. MPs have to do something much
more powerfu and important than this – simply vote legislation that there
will be no prorogation of Parliament, and then, in the present situation, there
will be no prorogation and Johnson’s coup will be blocked for the reasons
clearly outlined below.
Similarly, writers such as Owen Jones and Paul Mason have
called for ‘protests’. Momentum has said it will block streets and bridges. Mason
has even made a supposed arithmetic
calculation on the percentage of the population that has to be involved in
protests for them to stop the government: ‘What we need now is a mass peaceful
movement of civil disobedience. Protest theory tells us that if around 4
percent of the population simply refuses to comply with the powers that be, we
But Mason’s look at the possible steps does not even mention
Parliament legally blocking its prorogation: ‘The parliamentary options are now
limited. Phase one is for MPs to take control of the parliamentary agenda… Phase
two – being prepared right now – is to publish legislation stopping No Deal.
Phase three is preventing Johnson and his allies from filibustering or
sabotaging that legislation.’ Mason declares: ‘Parliamentary options to protect
democracy are limited, but we can use mass civil disobedience to create a
situation politically unbearable for the Tories.’
The truth is the exact opposite. Protests will not stop
Johnson’s coup, only action by the state will – which in the present situation
(not all situations) means laws passed by Parliament.
Protests must demand changing the law
The largest possible popular protests are indeed very necessary.
They will influence the political dynamics. But in defeating a coup protests
cannot be sufficient to decide it. Bluntly, demonstrations so far in Britain
are very small compared to the enormous ones in Moscow to confront Yeltsin’s coup of October 1993. But protest
demonstrations will not stop a coup – only something which affects the state
In Moscow there were there truly gigantic demonstrations
against Yeltsin’s October 1993 coup, there were hundreds of armed people many
of whom were willing to die, and a significant number of whom did die, to
defend the Russian Parliament. But they were simply overwhelmed by the greater
power of the state – in this case by tanks.
In Britain neither people with machine guns nor tanks will
be involved in the fight to block Johnson’s coup. But the state, whether using
the police, the riot police, or even the armed forces if necessary [which won’t
be in the present situation] can overwhelm by force any protests which
challenge its power. The strongest possible protests are necessary to put
pressure on the state power, and to determine the political situation, but they
cannot defeat the state power – which in the present situation will be
expressed in the law.
These decisive points are not meant in any sectarian sense.
To use the Chinese formula, because it is the most precise, it is necessary to
carefully distinguish between contradictions among the people and
contradictions between the people and the enemy. The ‘enemy’ in the present
situation are all those who support Johnson’s coup, the ‘people’ are all those
who oppose it. MPs proposing occupying parliament/alternative parliaments etc
are unequivocally against Johnson’s coup, part of the ‘people’. It is necessary
to stand with them shoulder to shoulder in fighting this coup. But because they
do not understand the issue of state power, which is what is decisive in a
coup, they have tactics for fighting against it which are not sufficiently
effective. Therefore, it is necessary to show the conditions which can stop the
coup – which in the present circumstances can only be legal action by
Parliament. Protests are absolutely necessary and important, but they must aim
at securing that legal change.
Why preventing proroguing Parliament is vital
Blocking Johnson’s No Deal Brexit is certainly vital but it
is also absolutely crucial to prevent the proroguing of Parliament – which is
entirely possible legally. Johnson cannot be trusted on anything. Under the
British constitution Parliament is the supreme authority – but if Parliament is
not in session the highest authority will be the government and the Prime
Minister. For example, once Parliament is prorogued there is nothing legally
which prevents Johnson advising the Queen to extend the prorogation beyond 31
October, the date for Brexit. No assurance by Johnson/Cummings this will not be
done can be relied upon one inch – they have already shown they are prepared to
disregard any of their previous statements.
Three government ministers – Johnson in his interview with
Times, Gove and Gavin Williamson – have already taken the unprecedented
step of saying that the government will not necessarily obey a law passed by
Parliament (which could include advising the Queen not to sign a law) – an
unprecedented violation of Britain’s constitution. Any such step by the
government would normally be countered by a vote of No Confidence and removing
the Prime Minister with a replacement who would carry out the law including
advising the Queen not to refuse to sign Acts of Parliament or prorogue
Parliament. But if Parliament is not sitting, if it has been prorogued, this
cannot be done. There would, therefore, be no way to overturn the advice given
to the Queen.
If legislation is passed Johnson will set about
‘discovering’ ‘loopholes’ in it.
There are also numerous other steps which Johnson/Cummings
could doubtless dream up.
In short to allow Parliament to be prorogued would create an
ultra-dangerous situation removing control of the situation.
Therefore, while measures to prevent a No Deal Brexit must
certainly be passed by the House of Commons over this coming week it is also
absolutely essential to pass a law blocking the proroguing of Parliament. It is
imperative that, in addition to any measures on No Deal, Parliament remains
sitting – that is it is not prorogued. This can be done by Parliament passing
short legislation preventing it being prorogued in the present situation.
Defeating a coup
Defeating a coup means starting off by understanding that the
outcome of this will be determined by state power, and determining this means a
precise analysis of the relation of forces.
The first key step was been taken by Jeremy Corbyn and the
joint statement by opposition parties when the said they did not accept the
prorogation of Parliament. For reasons outlined below there has to be a laser
like focus on maintaining this.
August Jeremy Corbyn stated:
‘Suspending Parliament is not acceptable, its not on. What the Prime
Minister is doing is a sort of smash and grab on our democracy in order to
force through a No Deal Brexit… So when Parliament does meet, on his timetable
very briefly next week, the first thing we’ll do is to attempt legislation to prevent
him doing what he’s doing and second we’ll challenge him with a motion of
confidence at some point.’
On 29 August
Jeremy Corbyn repeated: ‘We’re back in Parliament on Tuesday to challenge Boris Johnson on what I think is
a smash and grab raid against our democracy where he’s trying to suspend
Parliament in order to prevent a serious discussion and a serious debate the
prevent a No Deal Brexit.
‘What we’re going to do is try to politically stop him on
Tuesday with a Parliament process in order to legislate to prevent a No Deal
Brexit and also to prevent him shutting down Parliament during this utterly crucial period.’
Later on 29 August there was the joint
statement by the Labour Party, SNP, Lib Dems, Plaid Cymru, For Change Now,
and the Green Party.
‘We condemn the undemocratic actions of Boris Johnson
following his suspension of Parliament until 14 October….
‘In our view there is a majority in the House of Commons
that does not support this prorogation, and we demand that the Prime Minister
reverses this decision immediately or allows MPs to vote on whether there
should be one.’
This statement had only one ambiguity which should be
removed. It is not necessary for Johnson to ‘allow’ MPs to vote on prorogation.
Parliament is supreme. It can decide, but this is just an ambiguity in the
statement not a wrong position.
Reliance cannot be placed on the courts. In Russia in March
1993 one of the disastrous mistakes made by Congress of People’s Deputies was
to attempt to compromise with Yeltsin by stating that a referendum supporting
him had to receive support of 50% of the electorate and not just 50% of those
voting. Yeltsin used his control of the courts to overrule this.
Parliament, the law and the monarchy
In Britain at present, as Chris Daw QC reminds us: ‘The
first thing they teach in law school – The Queen-in-Parliament is sovereign.
Not the Government, not the Prime Minister.’
That means it is the action by Parliament which is decisive because it
determines the law. Protests are extremely important but will only prevail if
they help influence the decisions of Parliament.
As for the Queen, naturally socialists have no illusions in
the monarchy. If what was threatened was the end of capitalism she might well
act illegally and outside Parliament. But Brexit, either way, will not end
capitalism and in these circumstances she will act in a way to strategically
preserve the monarchy. And that means not going outside the law set by
Parliament because to do so would for the first time endanger the monarchy.
The decisive issue is therefore that Parliament pass
legislation preventing itself being prorogued. That legislation is the key
issue, not challenges in court. If Parliament has not passed legislation to
stop itself being prorogued the Queen will act on the Prime Minister’s advice
as she has done so far. But if Parliament passes legislation she will act in accord
with that law in order to preserve the monarchy from strategic threat. And if a
Prime Minister advises her not to sign an Act of Parliament that Prime Minister
can be removed, and the advise reversed, by Parliament – but only if Parliament
Johnson cannot be trusted – therefore Parliament must remain in session
Jeremy Corbyn’s statements on 28 and 29 August, and the joint statement by opposition parties on 29 August, were spot on regarding the impact of a coup. But a broader picture is that a number of people cannot rapidly adjust to standing up to power and they accept the framework of the coup while ‘protesting’ about it. This is inevitable because as Marx says the ruling ideas of society are the ideas of the ruling class. It takes a serious struggle for people to break with obeying authority. Therefore, the first reaction of many people to a coup is to accept its framework and only attempt to take measures within its framework.
This was seen in March 1993 and October 1993 in Russia when
Yeltsin, with the full weight of the US behind him, and with US advisers, acted
illegally, rapidly, and decisively.
In contrast was the fatal mistake made by the Russian
Congress of People’s Deputies in March 1993. By the time the Congress had
finished its first session the coup had been decisively defeated. The head of
the so called ‘power ministries’, that is the forces of repression, refused to carry
out Yeltsin’s unconstitutional action. The Congress of People’s Deputies, the
supreme constitutional authority of Russia, not only did not accept Yeltsin’s
unconstitutional steps but voted by 60% for the impeachment of Yeltsin – only
7% short of the necessary two thirds majority to remove him. Yeltsin coup attempt
was stopped dead in its tracks.
But instead of simply consolidating Yeltsin’s defeat,
standing up to Yeltsin having blocked his coup, the Congress instead set about
seeking a compromise with Yeltsin – agreeing to a referendum but attempting to
set its own conditions. Naturally Yeltsin, in contrast, had no intention of
‘compromise’. As soon as the Congress of People’s Deputies was not in session
Yeltsin used his control of the courts to overturn the conditions set by the
Congress and then used his control of the electoral system to falsify the
The present situation in Britain shows a similar dynamic. Johnson
is acting in a centralised, illegal and decisive way. Talk of protests, alternative parliaments and
so on will not stop such actions. Passing of a law which decides that
Parliament cannot be prorogued in the present period is the decisive measure.
This is vital to pass alongside legislation blocking a No Deal Brexit.
The fate of Parliament lies in the hands of the House of Commons – as this House of Lords will not support Johnson on prorogation. If the House of Commons immediately passes legislation, as soon as it sits, that Parliament cannot be prorogued at present Johnson’s will be defeated. If the House of Commons does not pass such a law Johnson’s attack will roll on.
If Parliament is prorogued it will only be due to the wrong
judgement or cowardice of MPs. The fate of Parliament lies entirely in its own
hands not those of Johnson. That is the lesson of three coups.
All good jokes summarise or tell us something new about our
society, or the times we live in, or about human nature. There is a very old,
and very bad joke (repeated by Margaret Thatcher, among others) that, ‘The
problem with socialism is that you run out of other people’s money’. It is a
bad joke because it relies on a number of falsehoods.
There never has been a genuinely socialist government in
Britain, and the largest and most famous economic crashes in this country have nearly
all taken place under Tory or Tory-led governments. These were the depression
of the 1930s and Churchill’s return to the gold standard, the Barber boom of
the early 1970s, the Lawson boom of late 1980s and the imposition of austerity
in 2010. The sole exception to this pattern was the crash under New Labour in
2008, which had adopted the Tory mantras of privatisations,
PFI and bank deregulation.
Now, the new Prime Minister has adopted an economic policy
he describes as ‘boosterism’. Boris Johnson as PM, or even as an architect of
economic policy is itself a joke in poor taste. But the definition of
boosterism under Johnson is simply promising anything in order to gain
This is important to grasp, as Johnson is not simply
continuing Cameron/Osborne austerity. First, he has to get elected and is
willing to scatter promises to achieve that.
Boris Johnson has form in this area. There is no garden
bridge over the Thames, there is no ‘Boris Island’ airport, firefighter numbers
were reduced and fire stations closed despite pledges to the contrary, and
police cuts were only reversed when it threatened his re-election. The pledges
were false, even where significant amounts of public money were spent.
Boris Johnson has effectively come to office after a coup
against the previous Tory leadership. The electorate have not endorsed as Prime
Minister, even indirectly, and pollsters have noted that his ‘bounce’ in the
polls is far lower than Theresa May’s and is already fading – Labour is once
again frequently marginally ahead in national opinion polls.
Under these circumstances, and leading a government which is
supported by a bare majority that is the result of bribes to the DUP, Johnson
does what comes naturally. He lies. He has promised:
£1.8 billion for the NHS. This is a tiny amount
compared to what the NHS needs and it has emerged since that £1 billion is not
new money, and the source of the remainder has yet to be identified
20,000 extra police officers, which is nearly as
many as the Tories have cut since 2010, but says nothing about the similar
numbers of police community support officers, and police admin staff that have
also been cut over the same period
More prison places and longer sentences, even
though there are no new prisons and they would take years to build
Full-fibre broadband across the country by 2025
– but no plan to achieve it, not even in outline, and no suggestion of the
resources it would require
To ‘level up’ per pupil funding in schools
(which is aimed at Tory voters in the shires who complain about the greater
funding for inner cities’ schools). The estimated cost for secondary schools
alone is just £50 million per annum, a pittance compared the £4.6 to 5 billion
needed simply to reverse Tory cuts to schools
A tax giveaway to the higher paid, raising the
higher tax band threshold from £50,000 a year to £80,000 (which benefits
someone earning close to £80,000 or more much more than the benefit to those
just above £50,000). There is no indication of the cuts elsewhere, to fund this
giveaway, or a justification for the higher borrowing it would entail.
Politically, his agenda is aimed squarely at his own base,
‘with law and order’ measures to the forefront. Random stop and search will
certainly increase the number of black and Asian boys harassed by police, but
will do virtually nothing to halt crime, as Home
Office analysis shows.
This string of false promises, untrue claims and distortions
are widely believed to be associated with a planned general election campaign
around the time of the Tories’ central project of a No Deal Brexit. As No Deal
itself and the likely plans of a hard right Tory Cabinet represent a double
blow to living standards, this will be discussed below.
Yet, even before these two new blows to the economy and
living standards, it is important to recall that the British economy is already
in a crisis. The main source of this crisis is highlighted in Fig.1 below, reproduced
from the Office for national Statistics (ONS). It shows that a weak recovery in
business investment following the crisis of 2007 to 2008 has given way to
outright stagnation and even decline. The economy has also begun to contract
once more in the 2nd quarter of this year, in the recently-released
Chart 1. UK Business Investment
One way to illustrate how the weakness of business
investment has been the main brake on growth and prosperity is by comparison. Fig.2
below shows that business investment has been far weaker than GDP growth since
the beginning of the crisis. For illustration, business investment has also
been far weaker than the growth in household consumption.
Chart 2. UK Real GDP, Household Consumption and Business Investment
from Q4 2007 to Q1 2019
Since real Business Investment
peaked in the 4th quarter of 2007 it has risen by just 3.25% to the
1st quarter of 2019. This is much weaker even than the growth in
real GDP, which has risen cumulatively by 13% over the same period. In
addition, it is often incorrectly asserted that the source of the crisis is the
absence of ‘demand’, which is primarily Consumption. But real Household
Consumption, which is the bulk of domestic demand has largely kept pace with
the rise in GDP over the same period, increasing by 12.6%. In simple
arithmetical terms, it is shown that the weakness of Business Investment is the
main drag on UK growth.
But it is also possible to
highlight this point in a more fundamental way. Consumption requires production
– for most of us, even the apples we eat don’t just fall from the trees. They
are commercially picked, processed, transported and sold by retailers. The main
means of sustainably increasing that production is to add to the means of
production through net investment, or to increase the number of hours worked.
Fig.3 below shows the growth rate
in what the ONS calls the level of the capital stock (the means of production)
over time, as well as changes in the net capital stock once the consumption of
capital is taken into account. The consumption of capital is simply the capital
that is used up in the production process, whether that is a rubber washer, a
machine tool or a factory, which are each consumed or depreciated over
different time periods.
Chart 3. Percentage change in
growth rate of capital stock, net capital stock and capital consumption
The ONS summarises these trends as
follows, “The UK’s
net capital stock was estimated at £4.6 trillion at the end of 2017, increasing
by 1.1% compared with 2016. Prior to the economic downturn, net capital stock
increased on average by 2.0% per year, slowing to an average of 1.3% per year
Over the medium-term from 1997 onwards the annual
growth rate of the capital stock has slowed from fractionally under 3% to just
over 1%. As business is responsible for the bulk of the growth in the capital
stock it is this prolonged deceleration in the growth of the means of
production of the private sector that is the decisive factor in the medium-term
slowdown and stagnation of the economy.
To raise the annual growth rate of the capital stock
to 2% would require an additional £46 billion of fixed investment (which would itself
need rise over time as this additional new capital itself depreciates).
Of course, set against this fundamental problem
Boris Johnson’s ‘pledges’ of tax cuts for the rich and more spending on No Deal
are simply another joke in poor taste. Failing to address this problem (unlike
Labour, which promises to increase public investment) means that none of Boris
Johnson’s pledges can possibly lead to economic growth or rising living
standards over the medium-term. That is even without the damage from his
central project, No Deal Brexit.
of No Deal
A No Deal Brexit entails the severing
of Britain’s close economic relationship with the EU, for the assumed benefits
of a closer economic relationship with the US. But this is fool’s gold. In
2016, total UK trade with the EU (goods and services) amounted £554 billion,
compared to £166 billion in total trade with the US (source, ONS).
There is no conceivable
improvement in the trade relationship with the US that could even compensate
for the likely fall in trade with the EU. At the same time, much of the
country’s trade with other countries in the rest of the world is currently
governed by trade agreements with the EU, and many
of those are reluctant to offer the same terms to this country when it
More importantly, production in
many sectors in the UK economy is closely linked through highly intricate
supply chains to output in the EU. For many reasons, including geography these
cannot be reproduced in supply chains connected with the US. Therefore any
sector that has either tariff or non-tariff barriers will be faced with series
of painful adjustments, including closure and relocation, with all the
consequent loss of jobs.
There is too the obvious negative
impact of the terms of any likely trade deal with Trump (and many of his
possible successors). These range on everything from environmental standards to
workers’ rights to food regulations and the accelerated privatisation of public
services, including the NHS. In addition to China, Trump has already imposed
tariffs and trade restrictions on neighbouring Mexico and Canada (effectively
tearing up NAFTA), as well as India and the EU. This is in addition to the
growing list of countries sanctioned for purely political reasons, such as
Venezuela, Cuba, Iran, Syria and Russia.
But it is probably an error to
assume that this government is even mildly uncomfortable with a US trade
agreement that will increase fracking, sell off the NHS, reduce rights at work
and allow US agri-business unregulated access to UK markets.
This is an ideologically hard
right Tory Cabinet, many of whom, for example have explicitly advocated
private health insurance or have financial links to it. Privatisations,
fracking, ignoring the catastrophic risk of climate change and reducing
workers’ rights can all contribute to an increase in labour exploitation and
have the potential to boost profits.
For this government, and a small
number of sectors, Trump’s demands can be seen as an opportunity, not a threat.
The domestic beneficiaries of No Deal can include hedge funds and other
speculative capital, private health insurers, private school owners and
managers, frackers, sweatshop employers and landlords, as well as their
apologists and PR agents.
For the overwhelming majority of
the population a No Deal Brexit would have a very serious negative impact on
living standards. It is also true of large sections of British capital. The
fall in living standards has already been renewed with the fall in the pound
leading to higher inflation and lowering real wages, as well as the job losses
which have already begun simply from the threat of No Deal. No Deal will also
reverse even the limited contribution to date of addressing the climate crisis.
Boris Johnson’s is a political
campaign, where false promises are designed to win an election. They will do
nothing to improve the economy or living standards for the vast majority.
Worse, his central project of a
No Deal Brexit will deepen the economic crisis, by severing the closely
inter-connected production supply chains within the EU. The replacement free
trade deal with the US will only exacerbate the crisis and widen it to include
policies which will add to the climate crisis, worsen public services and
worker’s pay and conditions.
Labour already has the economic
weapons to fight Johnson. Its fully-costed programme of measures to begin
reversing austerity for the 2017 election amounts to £48.6 billion (pdf).
This is massively greater than anything Johnson will ever promise, because it
benefits workers and the poor the most. More importantly, as shown above,
Johnson has nothing to say about raising the growth rate of the economy and
living standards in a sustainable fashion. Labour does, with increased public
investment and the National Investment Bank. It is also possible that Labour
could build on its own successes of 2017, with additional funding for both,
especially as interest rates are so low. But the defeat of No Deal is the next
decisive step in Labour’s anti-austerity fight.
following article was written before the announcement of the latest US GDP
figures, which showed the US economy slowing from an annualised 3.1% growth in
the 1st quarter of 2019 to 2.1% in the
2nd quarter. This new data clearly
confirms the analysis in the article. The Chinese version of this article
originally appeared in Chinese in China Finance.
Federal Reserve’s shift towards cutting interest rates
Federal Reserve’s sharp turn in summer 2019 towards cutting US interest rates
immediately affects China and the global economy via numerous channels. But in
addition to short-term effects, the reasons for the Federal Reserve’s policy
change casts a clear light on the US economy’s medium- and long-term growth
perspectives. Both aspects will affect China-US trade negotiations. This
article therefore examines the fundamental growth trends in the US economy leading
to the presidential election.
did the Federal Reserve make a sharp policy turn?
Federal Reserve’s summer 2019 shift was an abrupt reversal of the Fed’s
previous policy. During 2018 the Fed carried out four interest rate rises,
clearly reflecting an estimation that the US economy had strong upward momentum
and it was necessary to take prudent steps to head off overheating. Even as
late as May 2019
Fed Chairman Powell said weak inflation was transitory – implying there was no
reason to cut interest rates.
2019, in contrast, the Federal Reserve press conference was universally
interpreted as indicating the Fed would cut rates – the Fed funds futures
market pricing in three quarter-point cuts in 2019, including 100% odds for a
quarter-point cut this summer. A 0.25% rate cut was duly carried out at the
July Fed meeting.
are two interpretations of this radical policy change. The first is that it was
a response to temporary non-fundamental trends in the US economy – short-term
effects of the trade war, loss of momentum by US share markets etc. In that
case the US economy may be anticipated to rapidly recover from such problems.
The second interpretation is that the Fed was responding to much deeper trends
slowing the US economy in 2019 – in which case the question becomes how deep is
this slowing likely to be?
difference overlaps with the fact that throughout the recent period two
different perspectives for the US economy in 2019-20 have been put forward. The
first, that of the Trump administration, argued that due to US tax cuts the US
economy would accelerate in 2019. In March 2019, in its official budget
forecasts, the administration projected 3.2% US GDP growth in 2019 and 3.1%
in 2020 – both faster than 2018’s 2.9% and in line with President Trump’s claim
that the US economy would grow at least 3% a year during his presidency.
second perspective, held by the IMF, the present author, and others, was that
the US economy would experience downward pressure in 2019. In that case, of course,
the Fed’s policy shift was a response to deeper more powerful trends in the US
negative trends in the US economy
US data is clearly in line with this second perspective. US total industrial
production, including oil and gas, stalled after the end of 2018 – by May 2019
it was 0.9% below December 2018’s level. The decline in US manufacturing
production, 1.5% in the same period, was sharper. In April 2019 US
manufacturing production was 4.8% lower than its level more than 11 years
previously in December 2007 – Trump’s policy to strongly revive US
manufacturing production had failed.
Taking PMIs, the
US Composite PMI was 51.5 in June 2019 – the second lowest since 2016.
The US manufacturing PMI in the same month fell to its second lowest level
since 2009 – 50.6… By the 1st quarter
of 2019 the annualised growth of US fixed private investment had fallen from
9.9% when Trump was inaugurated to 1.5%.
Trump demands the Fed cuts interest rates
negative economic trends, in addition to direct effects, created strong
political pressure on the Fed – President Trump launching a public campaign to
force the Federal Reserve to cut US interest rates. The reasons for these
attacks were clear. Opinion polls for Trump, leading to the official launching
of his re-election campaign in June, were unfavourable. Leaks of
his internal campaign polling showed the President had for several months been
trailing Democrat Joe Biden. Recent polls showed
President Trump trailing nine percent behind Democrat Bernie Sanders. Given
negative poll ratings the prospects for the US economy in 2019-2020 were
crucial for Trump’s re-election chances.
recession in 2019?
major Western analysts believe that US economic slowing was so severe it
indicated a US recession – two quarters of negative growth. For example, John
Authers, Senior Bloomberg Editor for Markets, analysed under
the self-explanatory headline ‘Markets Are Acting Like a Recession Is
it be possible to explain what is going on in markets without making reference
to the deteriorating U.S.-China trade relations? I am beginning to suspect that
it would. Bond markets may be behaving as though they are bracing for something
terrible to happen because traders are, indeed, scared that something terrible
is going to happen.’
analysis, however, indicates that any view the US economy will enter recession
in 2019 is exaggerated. US growth in 2018 was 2.9%. Since the immediate
aftermath of World War II, the largest deceleration in US GDP in one year
compared to the previous one was 2.5% in 2009, under the impact of the
international financial crisis.
in the 1st quarter of 2019 US GDP growth
was 3.2%. For a recession to occur in 2019, between the 1stquarter and the 3rd quarter US GDP growth would
have to fall from 3.2% to less than zero in only six months – a slowdown worse
than during the greatest economic crisis for 80 years. Such a scale of economic
deceleration is not indicated by domestic or international US economic
2019 will see a US recession are therefore exaggerated, but there are clear
reasons why the US economy will slow in 2019 and US growth will remain low in
the medium/long term. This provides the background to Federal Reserve
claims by the Trump administration
analyse accurately US economic dynamics, merely electoral propaganda claims by
the Trump administration may be dismissed. Trump has claimed that
‘America’s economy is booming like never before’ but the reality is that under
President Trump the US has experienced the slowest peak economic growth during
any presidency since World War II. As demonstrating this casts a clear light on
fundamental US economic trends, Table 1 shows peak growth under all US
Presidents since World War II presented both in the way the US publicises
economic growth, one quarter’s growth compared to the previous quarter
presented at an annualised rate, and China’s method of comparing a quarter in
one year with the same quarter in the previous year. Both show peak economic
growth under Trump is lower than under every previous post-World War II US
President. Taking 21st century presidents:
Using the US method of
presenting data, peak growth under Trump of 4.2% was lower than 5.1% under
Obama, George W Bush’s 7.0%, or Clinton’s 7.5%.
Calculated using real year on
year growth, 3.2% peak growth under Trump was slower than 3.8% under
Obama, 4.3% under George W Bush, and 5.3% under Clinton.
peaks under 21st century presidents were much
lower than under 20th century post-World War II US
presidents. For example, peak growth under Nixon was 11.3% using the US method
of presenting data. Peak post-World War II growth was under Truman at 16.7%
using the US method of presenting data. Slow peak growth under Trump, of
course, helps explain his relatively unfavourable position in opinion polls.
slowing of the US economy
to fundamental US economic trends, accurately analysing these requires
distinguishing short-term business cycle fluctuations from medium/long term
economic trends. The most accurate way to do this is to take a medium/long-term
moving average of US growth – which eliminates effects of purely short-term
fluctuations. Such measures show that taking either a 7, 10- or 20-year moving
average gives the same fundamental result that long term US growth is slightly
above 2% – a 7 year moving average shows annual average 2.3% GDP growth, a 10
year average shows 2.2%, and a 20 year average shows 2.1%.
the longest-term moving average, 20 years, Figure 1 clearly shows that the
fundamental trend of US economic growth in the last 50 years is significant
deceleration. Annual average US growth fell from 4.4% in 1969, to 3.5% in 2002,
to only 2.1% in 2019. In the last fifty years average annual US growth rate has
fallen by more than half, explaining why US growth under Trump is the slowest
under any US president since World War II but also showing that the
deceleration under Trump is part of a longer-term US slowing.
decelerating trend also demonstrates that 2.9% growth achieved by Trump in
2018, while slow by historical standards, was above current US annual average
growth – with business cycle consequences analysed below.
is US slowdown occurring?
this long-term US economic slowdown, to understand US economic perspectives it
is evidently crucial to analyse why this is occurring.
One explanation ascribes
deceleration merely to specific contingent events – trade wars, European
economic slowdown etc. If that is correct action by the US authorities,
such as Federal Reserve interest rate cuts, may prevent any slowing and
create strong US medium/long term growth.
The second explanation is that
US economic slowing is due to deeper structural features. Indeed, that the
US economy in 2018 grew faster than its medium/long term economic
potential, and therefore the business cycle upturn in 2018 would be likely
to be followed by a business cycle downturn. In that case, measures such
as Federal Reserve interest rate cuts might sustain or increase US share
prices, but they would be unlikely to halt downward pressures on US
economic growth during 2019-2020.
determine which perspective is correct, it is necessary to analyse the
fundamental forces determining US economic dynamics.
Trump accelerate the US economy?
ascertain the reasons for the US economic slowing Table 2 shows all major components of US
GDP which are positively correlated with US economic growth during the last
fifty years – i.e. factors which, if their structural weight in the US
increased, would be expected to be accompanied by higher growth. This shows:
US government consumption has a
positive but negligible correlation with US GDP growth – the highest
correlation is 0.09.
US private inventory
accumulation is strongly correlated with economic growth, but this merely
reflects their strong correlation with the US business cycle. Private
inventories are too small a percentage of US GDP to play a key role in US
growth in anything other than the short term – in the 50 years 1968-2018
private inventory accumulation averaged only 0.4% of US GDP.
aside inventories, in the short term no component of US GDP has a strong correlation
with US growth – i.e. in the short-term numerous factors affect US GDP growth
with no single one playing a decisive role. Over a one to two-year period the
highest correlation is only 0.26.
medium and long term, however, a very different picture emerges. There is a
very high correlation between both US the percentage of net fixed investment
(gross fixed investment minus depreciations) in GDP and net saving with GDP
growth. Taking a 10-year period the correlation of the percentage of net fixed
investment in US GDP with GDP growth is 0.69 – a very high correlation. Even
taking a six-year period the correlation between net fixed investment and US
GDP growth is 0.54.
Trump provided the basis for a serious US economic acceleration?
the determinants of US growth, therefore, gives a clear picture:
Medium/long term US growth is
primarily determined by net fixed investment. As Qing Yuan’s article
‘Several Issues That Need to be Further Clarified About Sino-US trade
Frictions,’ noted regarding the US economy: ‘whether it will continue to
prosper depends on the state of capital accumulation,’
In the short term no single
factor is decisive in growth.
standard caveat that correlation is not the same as causation is irrelevant in
the present case – as the high correlation between US economic growth and net
fixed investment means that it is impossible to substantially increase US
economic growth over the medium/long term without increasing the rate of net
data shows that only if President Trump could achieve a structural shift in the
US economy to increase its level of net fixed investment could a substantial
medium/long term US economic acceleration be achieved. But Figure 2 shows this
has not occurred – US net fixed investment has fallen from 11.3% of GDP in 1966
to only 4.8% in 2019. This fall provides no basis for a medium/long term
acceleration of the US economy – and this decline in net fixed investment
explains the long-term deceleration of the US economy.
state of the US business cycle
from medium/long term developments to shorter-term perspectives for 2019-2020
the pattern of the US business cycle flowing from these fundamental trends is
clear. Medium/long term growth, slightly over 2%, is determined by the US
economy’s net fixed investment, with short-term business cycle fluctuations
taking place above and below this long-term growth rate due to numerous
factors. Figure 3 illustrates this short-term pattern of fluctuations. As
shorter term fluctuations are simply oscillations around an average, when US
growth is substantially above the average for any significant period it falls
back towards the average, and when growth is substantially below the average
for any significant period it then rises above the average – this process
producing ‘reversion to the mean’.
is experiencing a normal business cycle
processes determine the short-term shifts in the US economy under Trump. To
illustrate this Figure 4 shows year on year changes in US GDP under 21st century US presidents. This
shows both the slower underlying growth of the US economy under Trump which was
already analysed and fluctuations in the current business cycle. In the 2ndquarter of 2016, the US presidential
election year, US growth fell to 1.3% – this extremely slow growth
significantly contributing to Trump’s election victory. Such growth was far
below the long-term US average – the 20-year moving average of annual average
US GDP growth in 2016 was 2.4%. As 2016 was an extreme downturn of the US
business cycle this was duly followed by a cyclical upturn in 2018. The
increase in US growth in 2018 was not a fundamental growth acceleration but a
normal cyclical upturn. It may indeed easily be verified that this upturn of
the US business cycle under Trump was merely a normal business cycle one. US
growth in the 2nd quarter of 2016 was 1.1% below
its long-term average at that time. By the latest available data, for 1st quarter 2019, US long term
growth had fallen to 2.1%. Merely to maintain a constant long-term average,
therefore, a fluctuation upward of 1.1% would be expected. The 3.2% US growth
in the first quarter of 2019, 1.1% above the US long term growth rate, is
therefore exactly what would be expected for the peak of a normal business
circle upturn – and did not represent an acceleration of medium/long term
response to economic downturn
3.2% year on year growth in the 1st quarter of 2019 indicates the normal expected peak growth in a US
business cycle, however, has the conclusion that the beginning of a normal
business cycle downturn would be expected – an undesirable development for
president Trump given a presidential election in 16 months. The Trump administration
will therefore do everything possible to attempt to delay this slowdown. Given
that it rejects state intervention in the economy, and is already running a
very large budget deficit, the only weapon available to attempt to limit an
economic slowdown in the run up to the presidential election is interest rate
reductions – hence President Trump’s public demand the Federal Reserve cut
shown it is unlikely there will be a US recession in 2019 but that, for
business cycle reasons, the US economy will slow in 2019. Therefore, by how
much will the US economy slow in 2019-2020?
starting point may be taken as the IMF’s projections in Figure 5, which predict
a fall in US growth from 2.9% in 2018 to 2.3% in 2019 and only 1.9% in 2020.
This last figure is a whole percentage point below US growth in 2018 and would
represent a major economic slowdown. However, this IMF projection looks
slightly pessimistic for two reasons. First, it implies that US long term growth
slows to only 2.0% by 2020 – there is no indication why this should occur given
that US net fixed investment is low but not falling. Second it may be assumed
that President Trump will do everything possible to prevent such a sharp
slowdown in an election year. For these reasons it would appear reasonable to
assume a slightly higher growth figure in 2019, say 2.5% – although the IMF
figure is not unreasonable. Either trend, however, indicates that the Trump
administration’s claims that US growth will accelerate are false. In summary,
the Trump administration will be under downward economic pressure in the period
leading to the Presidential election.
conclusions are therefore clear.
The US economic upturn in 2018
was merely a normal business cycle and not any fundamental acceleration of
the US economy. The long-term growth of the US economy continues to fall
As 2018 was merely a normal
business cycle upturn it will be followed by a normal business cycle
downturn – that is, while not facing a recession in 2019, the Trump
administration will be under pressure of a slowing economy in 2019-2020.
The abrupt change in policy by the Federal Reserve in summer 2019 was, therefore, not a response to purely peripheral or short-term factors but was a response to deep seated processes slowing the US economy.
The latest surveys from the Purchasing Mangers’ Institute
(PMI) show the British economy slowing sharply.
The manufacturing PMI in June fell to 48.0 (from 49.4), the
lowest level since February 2013, shown in Chart 1 below. According to the survey providers IHS Markit,
this survey reading is consistent with a contraction in output of 4% from a
Chart 1. UK Manufacturing PMI Survey, April 2019
This latest downturn in output represents an acceleration of
the long-term decline of both manufacturing and industrial production (which
includes energy and water supplies). The current reading for the index level of
industrial production was 101.4. This is less than 1% higher than when the
Tory/LibDem coalition took office in May 2010 and is now 9% lower than the
pre-recession peak in May 2007. At the same time, the manufacturing index is
now 102 and has recovered by 5.9% since May 2010, but is still 3.6% below its
pre-recession peak while the survey evidence from the PMI shows it is heading
lower. These medium-term trends are shown in Chart 2 below.
Chart 2. UK Industrial production and Manufacturing Indices,
January 2008 to April 2018.
The global context is a negative one. The global
manufacturing PMI dived in June to 49.4, the lowest level for 6 years (Chart 3). Key regional hubs for international
production and trade such
as South Korea have been badly hit, and the worst-affected country in the June
survey was Germany, one of the largest economies most connected to global
production chains. Slowing world trade and trade tariffs imposed the US are clearly
having a widespread negative impact, with export orders the weakest component
of all in the survey.
Chart 3. Global manufacturing PMI June 2019
But the entire British economy is struggling, not just
manufacturing. The June construction PMI
plummeted to 43.1 (from 48.6 in May) and the services sector PMI and the
services sector PMI slid to 50.2 (from 51), close to stagnation. All three PMI indices are shown in Chart 4
Chart 4. PMIs for manufacturing, services and construction,
Construction is the least internationalised of the three
sectors, and the least susceptible to changes in international conditions as a
result. It is clearly leading the way in the downturn in the British economy.
This is a domestic crisis, within a global slowdown.
Clearly, the domestic aspect is Brexit-related. All three sectors within construction fell,
house-building, commercial construction (shops, factories and so on) and civil
engineering (public and private infrastructure construction), suggesting the
unwillingness to invest is broad-based.
Perhaps the most startling financial market indicator of the
crisis is the fact that the UK government bonds linked to inflation
(‘index-linked gilts’) are all offering interest rates lower than minus 2%.
This means that the UK government can borrow at negative real interest rates,
once CPI inflation is taken into account, for anything between 3 years and 18
US share markets rose sharply on news of the announcement that
Presidents Xi and Trump would meet at the G20 summit – as the Financial Times
simply summarised it ‘Trump plan to meet Xi on trade sends US equities sharply
higher’. This was a welcome piece of goods news for President Trump after a
period during which he had been receiving bad news both on the opinion polls for
his re-election and for the US economy. Naturally there are many aspects of the
planned meeting that only those involved in the negotiations will know, but it
is worth noting the objective pressures which are now bearing down on
Negative polls for Trump at the beginning of the
Presidential election campaign
The first, and probably most important pressure on President Trump, was that opinion polls leading to the official launch of his re-election campaign on 18 June had been unfavourable for several months. Days before his official relaunch event his campaign dismissed three of his five polling advisers after leaks of internal polling showed the president had been trailing former Democrat Vice President Joe Biden in key states which would decide the outcome of the 2020 election – for example in Minnesota Trump trailed Biden 40% to 54% and in Michigan by 40% to 53%. Analysing 17 states, polling taken in March showed Trump trailing Biden by double digits in key swing states such as Wisconsin, Pennsylvania, Florida and Michigan. More recent polls on 9-12 June, released by Fox News, a strongly pro-Trump TV channel, showed Trump nationally trailing nine percent behind Democrat Bernie Sanders (40% to 49%) and ten percent behind Biden (39% to 49%).
In summary as the Presidential election campaign was launched
Trump was trailing badly behind Democratic rivals. In that political situation,
evidently, the prospects for the US economy in 2019-2020 were crucial for
Prospects for the US economy in
Regarding these economic prospects for the US in 2019-2020 two
substantially different perspectives for the US economy in 2019-20 had been put
forward. The first, that of the Trump administration itself, echoed by some
media in China, argued that due to the US tax cuts, or other reasons, the US
economy would speed up in 2019 – which would evidently be good political news
for Trump. In March 2019, in its official budget forecasts, the Trump administration
projected 3.2% GDP growth in 2019 and 3.1% in 2020 – both faster than the 2.9%
in 2018 and in line with President Trump’s claim that the US economy would grow
at least 3% a year during his presidency.
The second perspective, held by the IMF, the present author, and
others, was that the US economy would experience downward pressure in 2019 – not
that there would be a recession but that the US economy would slow. The most
recent US economic data has clearly confirmed this latter perspective.
US total industrial production, including the oil and gas
sector, had stalled since the end of 2018 – by May US total industrial
production was 0.9% lower than in December 2018. The decline in US manufacturing
production, 1.5% in the same period, was sharper. In May 2019 US manufacturing
production was still 4.8% lower than its level more than 11 years previously in
December 2007 – the Trump policy to attempt to strongly revive US manufacturing
production had been a failure.
In terms of Purchasing Managers Indexes (PMI), the US
Composite PMI stood at 50.9 in May 2019 sharply down from 53.0 in April and the
weakest expansion in the private sector since May 2016. The US manufacturing PMI
in the same month fell to its lowest level since 2009 – a manufacturing PMI of
50.5 vs 52.6 in April, while the services PMI slowed to a 39-month low – at 50.9
at vs 53 in April.
US jobs data showed the same slowing trend. In May the US added
only 75,000 non-farm payroll jobs compared to 224,000 in April and an average
144,000 in the three previous months.
Analysts who believe there will be a
Some important Western and US analysts believed that this
slowing was so severe it indicated the US would enter a recession – that is at
least two quarters of negative growth. For example, John Authers, Senior
Bloomberg Editor for Markets and former Chief Markets Commentator for the
Financial Times, made the following analysis on 18 June under the self-explanatory
headline ‘Markets Are Acting Like a Recession Is Unavoidable’ with the
subheading ‘It’s not just the bond market that’s signalling a severe economic
‘Would it be possible to explain what is going on in markets
without making reference to the deteriorating U.S.-China trade relations? I am
beginning to suspect that it would. Bond markets may be behaving as though they
are bracing for something terrible to happen because traders are, indeed, scared
that something terrible is going to happen.
‘Exhibit A is the Federal Reserve Bank of New York’s Empire
State Manufacturing Index that was released Monday. It was terrible, showing the
biggest monthly decline since the last recession… it doesn’t drop this low for
long without presaging a true recession to come.
‘Conditions for the U.S. trucking industry, often regarded as a
leading indicator for manufacturing, look no better…. the FTR Trucking
Conditions Index… combines several different factors about demand for trucking.
Figures below zero show a risk of contraction.
‘Industrial metals provide another strong market-based recession
indicator. The Bloomberg Industrial Metals Subindex suggests that the optimism
on growth that accompanied the first year of the Trump administration has
‘Looking at the U.S. stock market, we see the type of relative
performance that would be expected in the run-up to a recession, even if the
overall market continues to show robust performance… Investors tend not to buy
utilities on the scale that we have seen lately unless they are pessimistic.
There are technical factors in the bond market that have driven the current
deflation scare, but there do appear to be a number of factors pointing toward
an economic slowdown.’
A slowdown not a recession
The analysis of the present author is that the view that the US
economy will move into recession this year are exaggerated, for reasons which
are analysed at length in my book ‘Don’t Misunderstand China’s Economy’.
US growth in 2018 was 2.9% – at the peak of the upswing of a business cycle. It would be an extraordinarily sharp decline, approaching the scale of the international financial crisis of 2008, for the US to fall from the peak of a business cycle to a recession in a single year. Conditions for such a repeat of the greatest financial crisis for 80 years, since the Great Depression, are not indicated at present. Instead a slowdown of the US economy, not an actual recession, will occur in 2019. The IMF itself projects a fall in US growth from 2.9% in 2018 to 2.3% in 2019 – I would estimate that growth could be slightly higher, but the IMF figure is not unreasonable. But what such a trend indicates is that the Trump administration’s claims that US growth would accelerate are false. Instead growth in 2019 would fall. And growth in 2020 would be lower than in 2019 – a serious issue for Trump as 2020 is an election year.
Certainly, information which leaked on the same day that the Xi
Jinping – Trump summit was announced indicated clearly the Trump administration
felt seriously concerned about the state of the US economy. It was leaked to
Bloomberg that, in an unprecedented move, the
Trump administration had explored if it was possible legally to dismiss their
own appointed Chair of the US Federal Reserve Jerome Powell – who had only take
up office in February 2018. This was immediately understood to indicate that
the Trump administration feared the downward pressure on the US economy.
It is important not to exaggerate. It is still 17 months to the US presidential election. This means the bad polling numbers for Trump can still be overcome – but they are clearly a negative for him. While some US analysts project a recession in 2019, for the reasons given here it is much more likely that the US economy will slow in 2019 rather than a recession occur – although if the economy slows significantly in 2019 a recession in 2020 is entirely not impossible, which would clearly be ultra-negative for Trump. But even without an actual recession what this combination of bad polling numbers and economic deceleration does produce is clearly pressure on the Trump administration.
This is not the only factor in the situation, but it is clearly
part of the background to the Xi-Trump summit at the G20.
Author’s Note: This article was finished before it was made
public that the US side requested the phone call with China which led to
agreement on the Xi Jinping-Trump summit. This information is in line with the
analysis in the article.