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America’s real adversaries are its European and other allies

by Michael Hudson 

Part 4 - U.S. dreams of a neoliberalized China as a U.S. corporate affiliate

America has de-industrialized as a deliberate policy of slashing production costs as its manufacturing companies have sought low-wage labor abroad, most notably in China. This shift was not a rivalry with China, but was viewed as mutual gain. American banks and investors were expected to secure control and the profits of Chinese industry as it was marketized. The rivalry was between U.S. employers and U.S. labor, and the class-war weapon was offshoring and, in the process, cutting back government social spending.

Similar to the Russian pursuit of oil, arms and agricultural trade independent of U.S. control, China’s offense is keeping the profits of its industrialization at home, retaining state ownership of significant corporations and, most of all, keeping money creation and the Bank of China as a public utility to fund its own capital formation instead of letting U.S. banks and brokerage houses provide its financing and siphon off its surplus in the form of interest, dividends and management fees. The one saving grace to U.S. corporate planners has been China’s role in deterring U.S. wages from rising by providing a source of low-priced labor to enable American manufacturers to offshore and outsource their production.

The Democratic Party’s class war against unionized labor started in the Carter Administration and greatly accelerated when Bill Clinton opened the southern border with NAFTA. A string of maquiladoras were established along the border to supply low-priced handicraft labor. This became so successful a corporate profit center that Clinton pressed to admit China into the World Trade Organization in December 2001, in the closing month of his administration. The dream was for it to become a profit center for U.S. investors, producing for U.S. companies and financing its capital investment (and housing and government spending too, it was hoped) by borrowing U.S. dollars and organizing its industry in a stock market that, like that of Russia in 1994-96, would become a leading provider of finance-capital gains for U.S. and other foreign investors.

Walmart, Apple and many other U.S. companies organized production facilities in China, which necessarily involved technology transfers and creation of an efficient infrastructure for export trade. Goldman Sachs led the financial incursion, and helped China’s stock market soar. All this was what America had been urging.

Where did America’s neoliberal Cold War dream go wrong? For starters, China did not follow the World Bank’s policy of steering governments to borrow in dollars to hire U.S. engineering firms to provide export infrastructure. It industrialized in much the same way that the United States and Germany did in the late 19th century: By heavy public investment in infrastructure to provide basic needs at subsidized prices or freely, from health care and education to transportation and communications, in order to minimize the cost of living that employers and exporters had to pay. Most important, China avoided foreign debt service by creating its own money and keeping the most important production facilities in its own hands.

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