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Qiushi Journal: Capitalism Is Dying

[Editor’s Note: Recently, Chinese state media have frequently commented on the global financial crisis. An increasing number of articles are even claiming outright that the current crisis portends the end of capitalism. Their arguments range from the greediness of capitalism to how politicians sell their souls and from the loss of public trust to how U.S. hegemony has transferred the crisis to the rest of the world. The “fake democracy” in the U.S. and the “collapsing political/democratic system” in the U.S. are also hot topics. Such claims lead to an implied but unstated conclusion that China does not need to take the path of democracy that the U.S. promotes. They also support China’s new drive toward cultural system reform – increasing its “soft” power and striving to control the international discourse power. The following are excerpts from two articles that appeared in the Chinese Communist Party’s (CCP’s) prestigious theoretical publications that make such statements.]

Article 1: Qiushi Journal: The West Is Going through a Profound Systemic Crisis [1]

A series of shocking events have recently occurred in Western countries: the U.S. credit rating was downgraded for the first time in the past century, the European sovereign debt crisis has continued to worsen, a shooting and bombings in Norway caused severe casualties, and the U.K. saw massive street riots unheard of for several decades. All this chaos indicates that, in the international financial crisis, Western countries’ foundations are undergoing a profound crisis.

I. Economic Hardship

It has been three years since the outbreak of the financial crisis. The Western countries’ economies have not only failed to recover, but are also in deep trouble. To make things worse, they can’t solve the problem and emerge from their difficulties.

The foremost issue is the debt trap. Moody’s, the rating agency, has done a study which shows that, from 2007 to 2010, the global public debt increased by about $15.3 trillion, of which 80% comes from the G7 countries. In May of this year, the U.S. debt reached its $14.29 trillion ceiling. Currently, the U.S. fiscal deficit is 10% of its total GDP and its total debt is about 100% of what its GDP was in 2010. President Obama signed a bill to increase the debt ceiling and reduce the deficit, which resolved the “short-term worry” of defaulting on the debt, but earned the market’s “long-term concern” of whether the U.S. can really reduce its fiscal deficit. More than half of the state governments in the U.S. have huge debts. Some are on the verge of bankruptcy and only survive by borrowing. The financial distress in California forced the state government to grant 40,000 misdemeanor prisoners an early release. Some cities in Michigan have cut one third of their police force to reduce expenses. In the euro countries, the sovereign debt crisis has continued to spread. Following Greece, Portugal, and Ireland, Europe’s third and fourth largest economies, Italy and Spain, also face the possibility of defaulting on their debt. The French debt risk is likewise worrisome.

“Unemployment” recovery is another “aftermath of the crisis” that troubles the Western countries. The U.S. second quarter GDP this year grew only 1.3%. Personal consumption expenditures shrank 0.2% in June, and the growth rate of personal income fell to 0.1%. Some scholars have pointed out that the actual unemployment rate in the U.S. is much higher than the official number because the official statistical model is not scientific and doesn’t reflect reality. The EU unemployment rate is still at 9.4%; it is 7% in Germany and 21% in Spain. The Portuguese economy is still showing negative growth. The slow economic recovery can hardly improve employment and consumption, while the low consumption in turn affects the economic recovery. Introducing austerity measures designed to overcome the debt crisis has further exacerbated this vicious cycle. This is the challenge the Western economies face.

Former Federal Reserve Chairman Alan Greenspan admits that, although big banks and those in high-income brackets did enjoy the benefit of “economic recovery,” the mid-sized and small enterprises in the real economy and a large part of the workforce still struggle with tough economic conditions. The phenomena that Greenspan pointed out reflect the nature of the Western economic system.

II. Deep Political Impasse

One fact that has become obvious in recent years is that, in almost every Western country, support for the government has declined.

In the U.S. debt ceiling debate, the “pain, differences, and disorder” between the Democratic and Republican parties have shocked the world. The downgrades of the U.S. sovereign credit rating caused a worldwide uproar. President Obama has said the U.S. has no problem as a country; it is U.S. politics that is problematic. He urged the U.S. Congress to save the economy and called for political leaders to focus on the next generation rather than the next election. Standard & Poor’s said in a statement that the basic reasons for downgrading the U.S. credit rating was the increased uncertainty in the U.S. political decision-making process and decreased confidence in the U.S. political decision-making mechanism. The international community has reacted strongly to the performance of the U.S. political parties. Public opinion believes that what happened in Washington was not just an economic crisis but, rather, a political crisis. The two U.S. parties put their political infighting before the safety of the world economy and the nation’s interests. This has damaged the U.S.’s reputation and shaken the world’s confidence in the U.S. political system.

When evaluating policies made in response to the crisis, a former top European politician pointed out that European politics has been hijacked by electoral politics. When formulating and implementing economic policies, governments place too much emphasis on the political and electoral factors and ignore the objective economic laws and national needs for long-term development. German media have commented that government leaders view “being re-elected as more important than fulfilling their responsibilities as government officials.” Before the debt crisis, European countries blindly increased welfare benefits in order to please the voters and win votes, which resulted in a higher debt. When the debt crisis occurred, those countries’ domestic political problems and the conflict between the European countries and the E.U. political decision-making mechanism dragged them down, and the European countries couldn’t resolve the debt crisis quickly. This has caused public mistrust of the governments and doubt concerning the efficiency of the political system. Because of political deadlock, Belgium was unable to form a new government for more than a year.

Here is an example from a few years ago. In 2009, California’s budget deficit reached tens of billions of dollars. To ease the financial crisis, on May 19 of that year, California held a referendum on seven proposals, six of which involved tax increases and one related to freezing public servants’ wages. The result was that voters rejected all six tax increase proposals, but passed the proposal to freeze government employees’ wages. People wonder what problem this kind of “democracy” can really solve. We hope the U.S. will not use such a referendum to decide whether to repay its debts to foreigners.

III. Social Unrest

Similar to the U.S. government living on debt, most U.S. households also live for long periods with consumer debt. The lack of savings makes Americans vulnerable when there is an economic depression. Economic recession will quickly evolve into social discontent. The fact that the economy has not recovered makes 70% of Americans think their country is on the wrong path and nearly two thirds of Americans think their country is declining.

In Europe, the financial crisis and the resulting austerity measures have also highlighted and intensified the existing problems with social welfare, employment, immigration, etc., leading to regular public demonstrations and impacting European social stability and multi-cultural assimilation. For many years Europe has faced pressure to reform its welfare system. The financial crisis has made the system even more unsustainable. Many countries have introduced measures to cut welfare, causing public discontent. Since 2010, large-scale public demonstrations have included anti-austerity demonstrations and riots in Greece, hundreds of thousands of people parading against increasing the retirement age and multi-industry strikes in France, people protesting tuition increases in Britain, protests against high unemployment in Spain, and all Europeans protesting large cuts in social welfare. One after another, protests and demonstrations have opposed not only welfare cuts and falling living standards, but also social injustice and “making people pay for capitalists’ greed and government’s incompetence.”

Employment has long been a major issue for Western society. A French scholar asserted that, if there were no solution to the unemployment problem, capitalism would collapse by itself. Austerity policies to counteract the fiscal crisis have led to sharp increases in unemployment, especially in the lower social strata and among young people. According to German media reports, in June 2011, the total number of unemployed young people between the ages of 15 and 24 in EU countries was more than five million, with an average unemployment rate of 20.5%. For Spain and Greece, the unemployment rates among the young ran as high as 45.7% and 38.5%, respectively. A large number of unemployed young people are dissatisfied with society, disappointed in their governments, and confused about their futures. They can easily become a factor in social unrest. The recent large-scale riots in the UK shocked all of Western society.

The financial crisis and the economic difficulties have also highlighted immigration problems. European society has been trying to achieve social integration of diverse and multicultural groups in order to reflect the superiority and inclusiveness of the European social model. In recent years, however, due to rising unemployment and reduced social welfare, anti-immigrant sentiment has increased. France openly expelled Roma people in French territory, Belgium and other countries passed legislation forbidding wearing Muslim clothing in public places, and German Chancellor Angela Merkel declared that Germany’s efforts to build a multicultural society were “a complete failure.” Norway’s shooting and bombing incident indicated that the social conflicts in Western countries are worsening and that radicalism and xenophobia are rising, which provides opportunities for extremism and the violence of terrorists.

IV. Increased Pressure for Reform

Facts have shown that the financial crisis brought to the whole Western world not only economic issues, but also political and social problems and issues related to the direction of national development. With the financial crisis, the economic, political, and social development model that Western countries have always been proud of and have tried to sell to other countries has lost its glamour.

The financial crisis has fully exposed the shortcomings of the Western economic and political system. More and more people have pointed out that the capitalist system has deviated further and further away from equilibrium; that the structural crisis will lead to economic, political, social, and cultural turmoil; and that the current system cannot continue. The financial crisis unseated the “Washington consensus” from its dominant position. The inherent instability of the capitalist system has shown clearly that American-style capitalism has fallen down from its altar. The capital accumulation model of capital pursuing profit maximization has been gradually stalled, and the five “escape routes,” including neo-liberalism, globalization, debt, fiscal deficits, and military expansion, have not only failed; they have also aggravated the contradictions in the capitalist countries. Capitalism has reached its limit to some extent, and the Western political model and ideological hegemony have ended. The rise of China and other emerging countries represents not only the rise of new economic and political powers, but also the international competition of new (political and economic) concepts and models. The fact no one can deny is that the Western countries’ system and institutions are facing increasing pressure to reform.

Article 2: Finance Capitalism [2] Has Lost All Grounds for Its Existence [3]

The “Occupy Wall Street” protests that started in mid-September have demonstrated people’s anger at the U.S. financial system favoring those who have either power or money and people’s desire to go after those who caused the recent financial tsunami. The protests spread rapidly to many cities. In less than a month, protests involving varying numbers of people occurred in more than a thousand cities, including Washington, DC; Los Angles; San Francisco; Denver; Chicago; and Boston. Protests also spread to Germany, France, Italy, Spain, the U.K., Japan, and New Zealand. … Globally, the recent international financial turmoil, along with global economic, social, and political turmoil, has been escalating. It makes the world that already lacks belief, trust, and order even less balanced. International financial turmoil is becoming the norm. Global economic performance will remain low for a long period. These phenomena are an indication that Keynesian and economic liberalism have reached their end. The foundation of capitalism – the spirit of the contract – is shaken, and the premise of capitalism – trust and credit – is diminishing. Capitalism is losing every reason it has to exist legitimately.

I. International Financial Turmoil Has Become the Norm (this section is not included)

II. The Shattered Myth of a Free Economy

Capital’s expansion and its global circulation have dragged every positive element, including the natural environment, morality, and the social order, into the “Satan’s mill” and crushed them mercilessly. Hence, capitalism’s foundation (the ability to adhere to contractual arrangements) has been shaken and its premise (trust and credit) is losing ground. The two major contemporary capitalist policies, Keynesian and economic liberalism, are coming to an end.

III. The Western Democratic Political System Itself Has Become a Problem

Society is currently focused on capital. Capitalism uses money to acquire and control authority and thereby drive and exploit the public. In a society that is primarily based on the capitalist relations of production, the main source of conflict is between labor and capital or between investor and financier. In current Western society, money controls government. The marriage of power and money will inevitably lead to a crisis of government legitimacy and make the democratic political system precarious.

1. Western Democracy Does Not Represent the General Public

Economic globalization and liberalism have intensified social polarization. Not only have the poor been cut off from access to wealth and freedom, but they have also found democracy out of reach. It is the ferocity of economic liberalism that caused the expansion of sub-prime loans and the outbreak of the financial crisis. “The democratic government” openly harbors and abets those who created the crisis and has used the taxpayers’ money to help the “criminals.” This has grievously irritated the people who hold “sovereignty.” [4] Not only are there a lot of people sarcastically cursing politicians on the web, but there are also actual movements to “occupy” Wall Street; Washington, DC; and other cities in the U.S.

When dealing with the private debt crisis, the government has used the Keynesian approach in dealing with the rich and has assumed private companies’ debts. This is what caused the sovereign debt crisis. Then, in dealing with this crisis, the government has cut basic expenditures on social security instead of increasing the taxes on the rich. This is a serious turnaround of the government’s role: taking money from the poor to give to the rich. This led to the outbreak of social unrest in Philadelphia, San Francisco, Athens, London, and Paris.

2. The Conflict between Western Freedom and Democracy Is Intensifying

Western freedom and Western democracy are fundamentally at odds. The conflict between economic freedom and political democracy is more pronounced under finance capitalism. This is because capitalism promotes “one dollar one vote” (such as with shareholders), but the essence of democracy is to uphold the public’s rights, i.e., “one person one vote.”

One cannot, therefore, have both economic freedom and political democracy. If the public truly operated in a political democracy, interest groups wouldn’t have economic freedom. Therefore, capital expansion and economic globalization sacrifice the public’s interests. The unemployment rate remains high, profit is distributed more to the capital owners instead of the laborers, and the standard of living for laborers continues to worsen. In the U.S., the status of labor unions, such as the AFL-CIO, continues to decline.

Because of the fundamental conflict between political democracy and economic freedom, the capitalist democratic political system has only an illusion (of democracy) on the surface, but the system’s essence is free economy. The interest groups that have large amounts of capital can get anything they want. The public is fed up with this empty form of democracy and has lost interest in voting. Their dissatisfaction with political parties and politicians is increasing, leading not only to heated rhetoric, but also to drastic action. The legitimacy of Western governments is in question.

3. Western Democracy Is Becoming a Problem in the U.S.

It is a politician’s job to tell lies. Western democracy is full of political lies and exaggeration. Politicians try hard to please voters to get their votes. They sacrifice the interests of future generations, long-term interests, and the interests of the whole to satisfy the public, to obtain short-term interests, and to satisfy local interests. The people smile when the government spends money on their behalf and frown when the government taxes them. The marriage of political democracy and economic freedom has created a heaven for capital. Capital controls the government inside the country and brings in money from the rest of the world. However, an increase in private wealth doesn’t translate into an increase in national taxes, because economic freedom and globalization makes it a piece of cake for companies to avoid taxes. The government has limited income but no cap on spending, which leads to a higher and higher “river” of debt. Delaying a solution will only mean that one day the levy will collapse, with the flood destroying everything.

The collusion between power and money is the eternal theme in a market-driven economy or capitalism. Western democracy increasingly represents group interests and minority interests. Ballots can’t win over money. “One person one vote” can never win over “one dollar one vote.” Those with money can easily control candidates through public elections, resulting in politicians who “speak for the public but work for those with money.”

Interest groups are exercising increasing control over the Western system of democracy. The government’s ability to govern, especially its ability to respond to crises and emergencies, is decreasing. The three major credit rating companies—Moody’s, Standard & Poors (S&P), and Fitch—used to list the democratic political system as a major criterion. Now one of the major reasons that the S&P lowered the U.S. credit rating was the uncertainty of the U.S. political system, which increased the risk that the U.S. would be unable to pay back its debt. This is an indication that the U.S. democratic political system can no longer effectively solve problems. Rather, the U.S. system has become the reason for the creation or deterioration of the problem, or has even become the problem itself.

4. Western Democracy Has Become a Worldwide Problem

Without exception, the expansion of finance capitalism undermines and suppresses social power, public power, and ordinary taxpayer’s power to the extreme, exacerbating social conflicts. As people lose their interest in politics, they are increasingly annoyed by party squabbles, and become indifferent to elections, thus the lure of democracy quickly fades. For many years, the U.S.-led Western countries have held high the banner of “democracy” and regarded Western-style democracy as the necessary condition for adopting capitalism and the market economy. They have even asked multinational companies to shoulder the responsibility for promoting freedom and democracy. Democracy has become a tool for the U.S. to fulfill its national interests and maintain its hegemony. However, in the past several decades, many of the countries that sought to implement a U.S.-style of democracy failed miserably. Implementing democracy has become the root cause of world disaster, social division, and national turmoil.

IV. The End of an Era

When the Cold War was over, seeing the dramatic change in Eastern Europe and the collapse of the Soviet Union, U.S. scholar Francis Fukuyama asserted, “What we may be witnessing is … the end of history as such: that is, the end point of mankind’s ideological evolution and the universalization of Western liberal democracy as the final form of human government.” The young Fukuyama got excited too early. Twenty years have passed. Liberal democracy and (U.S.) capitalism are going south. At this point, it is hard for us to predict “this is the end of history” (of the U.S. democracy and capitalism), but we can prudently conclude – this is the end of an era.

1. The U.S. Hegemony Is Unavoidably Declining

The U.S. is a “religious country,” or “a nation with a God-given mission.” Once the U.S. was established, its elites started creating the “American dream,” claiming that they had a “God-given mission” and (that they were) building a “city upon a hill” to “spread God’s light to the world.” For a long time, freedom and democracy established the main theme for the American elite to create the “American dream.” They are written clearly on the hegemony banner that the U.S. holds. For a long time, the “American dream” has been a warm, sweet word full of imagination and fascination. However, today, inadvertently, the “American dream” has suddenly been shattered.

Technological innovation and system innovation were once the keys enabling the U.S. to establish its hegemony, which is different from the Netherland’s and the U.K.’s hegemonies. It brought vitality to the American Empire. In the 1990s, the U.S. industrial center moved from the manufacturing industry based in Detroit and other Midwestern cities to the financial industry on the east coast and the information technology industry on the west coast. Dominated by the finance capitals and executed by Wall Street, the U.S. set out on a path of financial expansion. However, the path of financial expansion is an irrational path, and also the road to death. The Netherlands and the U.K., which went that route in history, both eventually lost their positions of leadership in the capitalist world. Today, Wall Street’s irrationality surpasses that of the Netherlands and the U.K. This means that the U.S. hegemony won’t last as long as the Netherlands or the U.K. The American Empire, built on a financial bubble, is actually just a mirage. When the sun comes out, the clouds clear, and the fog disappears, the mirage is destined to disappear.

2. The Positive Role of the U.S. Decreases as Its Negative Role Increases

Keynesianism has come to an end. Liberalism has come to an end. At the same time, the U.S. does not have the courage to embrace socialism. Therefore, the U.S.-led Western world has come to a dangerous place of “no-doctrine” or no direction for development. The international financial crisis made investors, organizations, taxpayers, governments, and countries lose basic trust. “No-trust” means that commodities and services cannot be traded, the market is unable to operate, and countries are unable to cooperate with each other.

During the rise of the U.S. supremacy, protecting international financial stability and promoting world economic growth are the hegemonic responsibilities that the U.S. shouldered while it obtained its hegemonic benefits. This is a main reason that U.S. hegemony was accepted or supported worldwide. The U.S. thus established its leadership image. However, the U.S.’s super power status let it develop many bad habits such as gaining (something) without exerting an effort, taking more, and being pampered. Now, as the U.S. status slides downward and its hegemonic abilities decline, the U.S. has not been able or willing to shoulder its hegemonic responsibilities. Yet it still wants to enjoy its hegemonic interests. Thus, the U.S. uses more and more terrorism measures to coerce the world instead of using positive measures to manage the world. Before, if a country followed the U.S., it would gain something, but today, if that country leaves the U.S., it will be punished and suffer a severe loss. The U.S. is trying to use its advantages in military, technology, network information, and finance to indulge or even create a volatile world, so that it can profit from the turmoil.

Under the flag of democratic politics and a free economy, the U.S. increased its national debt, local debts, company debts, and household debts to unsustainable heights. In 2008, the sub-prime crisis triggered the international financial crisis. The U.S. and other developed countries gradually quelled the crisis by nationalizing the private debt. However, the flames of the crisis weren’t extinguished. Instead, fueled by the politicians, they burst into a conflagration. During late July and early August of 2011, the two political parties fought over raising the debt ceiling and reducing the deficit. S&P’s lowering the U.S. debt rating reignited the international financial crisis. The crisis went from the first half’s “nationalizing the private debt” (before2008) to the second half’s “internationalizing the national debt.” The U.S. will utilize all tools that give it an advantage over other countries to transfer the risk to the rest of the world, shift the crisis to the rest of world, and dump its heavy debt burden on the rest of the world.

[1] Qiushi Journal Online, “The West Is Going Through a Profound Systemic Crisis,” September 1, 2011.
[2] Finance capitalism is a term in Marxian political economics defined as the subordination of processes of production to the accumulation of money profits in a financial system.
[3] Red Flag Manuscript, “Finance Capitalism Has Exhausted All the Grounds for Its Existence,” October 26, 2011.
Reprinted by Qiushi Journal Online at:
[4] Refers to the idea “sovereignty belongs to the people.”