Chinese Capitalism: Putting Profits Before Human Lives

By Gabor Steingart

China’s communists have long since given up on true communism. In the interests of profit and wealth, property is respected more than human life and workers are exploited more than in any other country. Their cheap labor is an attack on our civil societies.

Rescuers at work following an accident in a Chinese mine: This kind of unbridled capitalism hasn't existed since the Wild West days of the industrial revolution.

Rescuers at work following an accident in a Chinese mine: This kind of unbridled capitalism hasn't existed since the Wild West days of the industrial revolution.

Editor's Note: The following essay has been excerpted from the German best-seller "World War for Wealth: The Global Grab for Power and Prosperity" by SPIEGEL editor Gabor Steingart. SPIEGEL ONLINE is publishing a series of daily excerpts from the book.

When it comes to redistributing power and wealth, the state plays an important -- one could argue a decisive -- role. In the West, governments ensure that the most productive members of the economy help the whole of society. Companies keep most of the profits. But not all.

The result is beneficial to everyone, and not just to those directly involved in producing wealth. The social welfare state facilitates the transfer of money from the sphere of production to those sectors of society where no wealth is produced, only consumed. Wealth created in society's economically productive core thus reaches those people on the perimeter not directly involved in a country’s economic activity. Take pensioners as an example. They were once part of the productive core, but now are not -- they have meandered from the hot core to the cold crust. The money these retirees need to survive is now earned by those working today.

This linking of the working world with those who have already retired is called a generational contract. It is a system characteristic of most countries in the West where the core and the crust are connected.

Children are also on the non-productive fringes of society, though they are moving in the opposite direction of the pensioners. Eventually, children will enter the society’s economic core and will begin to make their contribution to the production of wealth.

It is important to understand the role of the Western state in all this: The state ensures that the productive sphere is linked to the unproductive sphere -- that capitalism and the welfare state work together. It is a cooperation that reaches back as far as 100 years in some instances and has developed into a number of stable pacts known as the social safety net. It is a system that cannot be cancelled -- indeed it is one of the inalienable characteristics of Western economic systems.

A departure from the welfare state

Around one-third of the wealth created in Europe is transferred from the wealth-creating core to the non-productive fringes of society. Thus, on average in 2003, each of the 82 million Germans -- from the youngest to oldest -- received around €8,400 ($10,500). The social budget -- the money pulled from the economy and transferred to the social net -- comes to around €700 billion in Germany and almost €3 trillion across Europe.

In Germany, the obligation to redistribute wealth is explicitly stated in the constitution. It stipulates that society must use energy created at the productive center to warm those who might otherwise be freezing at the margins. The United States is similar: The government, together with the respective companies, provides a social net for the firms' current and former employees. Indeed, the biggest pension funds in the world are to be found in the United States.

In China, the state has another function entirely: It acts as a firewall between society’s center and those at the fringes in order to ensure that nothing from the boiling core is ever allowed to cool at the outer edges. The retreat of state-controlled industry meant bidding farewell to the social net -- a notion Karl Marx would have despised.

When Deng Xiaoping took over leadership of China's Communist Party in the mid-1970s, he described the country as being in an "advanced state of socialism." But he didn't like what he saw and instead decided to set the country back a step to what he described as the "first stage of socialism." The reforms he pushed through ensured that virtually all of the country's social pacts were broken.

Life-long employment contracts were replaced with temporary contracts, and firing workers became a possibility. If employees refused to buy the apartments their companies had provided for them, they were simply forced out. In the private sector, social welfare was ignored right from the outset. It was left up to the family -- or nobody at all -- to take on the social responsibility the government and companies had abandoned. Since then the state has stood ready to defend the separation of the haves from the have-nots with force. And the China of today is home to the ugliest labor market practices in the world.

Giving property more rights than people

Still, the Chinese Communist Party listens to the desires of its subjects and even pays lip service to them. In its 11th five-year plan, which provides an economic and social blueprint for China from 2006-2011, Beijing laid out its goal of building "a harmonious socialist society" by 2010. But the truth is that the Communist Party has just set up the biggest subsidy program for capitalists the country has ever witnessed. Such support existed before, but in secret, almost conspiratorially. It is now part of the government’s stated goals.

The Chinese communists are making no secret of their shift in mentality. The constitution has even been amended -- a message to everyone that this is no reform, but a revolution. Until March 2004, the state had been responsible for the "guidance, control and regulation" of the private sector. The state was the big brother that disciplined and badgered private companies -- it carried the carrots and sticks. The new constitution has, for the first time, declared private property to be a private matter.

Property is now defined as inviolable. Even inheritance will be protected in China in the future. Article 11 of the recently approved constitution even calls on the state to serve the private sector and to provide "encouragement and support" to the capitalists. The redistribution of privately earned wealth for the good of society, as the German constitution stipulates, is thus transformed into a state responsibility for protecting the private sphere. Capitalists are the new ruling class and property in China is now bestowed with more rights than the people. Indeed, no other country in the world courts its entrepreneurs to the extent that China does.

Death has even been accepted as an unpleasant but inevitable side-effect of rapid Chinese economic growth. According to Western estimates, there were around 100,000 fatal workplace accidents in China in 2005 -- some 10,000 of those the result of mining accidents. These are the largest such fatality figures that any country has ever reported. Another dimension often brushed off as a side effect is child labor. To promote exports, a significant part of the economic boom, around 7 million Chinese children are sent out to work. In Asia as a whole, that figure is around 130 million. They weave carpets, carry heavy loads, build plastic toys -- but most of all, they drive down prices.


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