World-renowned scholar Walden Bello on the financialization of the Chinese economy, the middle-class roots of far-right movements, and the urgent need for a radical alternative to capitalism's crises.
Once described by Naomi Klein as the “world’s leading no-nonsense revolutionary,” Walden Bello is one of the great critics of imperialism and corporate-led globalization.
A prolific writer and dogged activist, Bello has authored or coauthored more than twenty books since 1978 and stared down death threats and imprisonment for resisting human rights abuses in his native Philippines. Bello, a representative in the Philippines congress from 2009 to 2015, is currently a professor of sociology at the State University of New York at Binghamton.
In his two new books, Bello confronts two of the most pressing questions in global politics today: what’s spurring the rise of the far right, and where is China heading? CounterRevolution: The Global Rise of the Far Right, published earlier this month, is a comparative study of six cases “where counterrevolutionaries successfully gained political hegemony,” from Mussolini in the early 1920s to Duterte today. Paper Dragons: China and the Next Crash, released in August, looks at the financialization of the Chinese economy and argues that the ascendant superpower is a “prime candidate” for the next financial crash.
Ben Wray, a Scotland-based freelance journalist, recently sat down with Bello to discuss the middle-class roots of far-right movements, the crisis of capitalism in both its neoliberal and state-led forms, and the prospects for post-capitalist alternatives around the world.
Counter-Revolution and Middle-Class Revolt
What do you mean by counterrevolution, and why do you use the term to describe the far right?
WB
Far-right movements are oftentimes described as populist, but populism doesn’t give you a sense of what these movements really represent. Populism is a political style that means a direct contact with “the people,” and it’s something that can be associated with the Left as well as the Right. Counterrevolution is, I think, a more appropriate term because it signifies a strong reaction — a rejection — that is the basis of a mass movement.
There are two types of counterrevolution that I look at in the book. The first is the classical one, which is a reaction to an insurgent movement from the lower classes, usually based on the middle class, though of course involving elites. I look at the cases of fascist Italy in the 1920s, Indonesia in 1965, Chile in 1973, and Thailand in 2001–2014, which ended in the overthrow of Thaksin Shinawatra by a middle class–based movement.
The second case of counterrevolution is a movement that is a rejection of liberal democracy for its failure to achieve popular empowerment as well as the equality that had been promised. This deserves the term counterrevolution because it’s almost a total rejection, politically and ideologically, of the values of due process, of diversity, of protection of the rights of minorities, etc.
It’s very similar to the kind of sentiment expressed by Joseph Goebbels, the Nazi propaganda minister, who said the Nazis were about “erasing 1789 from history.” Although modern counterrevolutionaries don’t necessarily express it that way, the sentiment they express is really against the values of the Enlightenment and liberal democracy. I look at the rise of Rodrigo Duterte in the Philippines, who took power in 2016 — clearly he rejects the values of liberal democracy. I look at Narendra Modi in India, who became prime minister in 2014 — he also represents a revolt against secularism, against diversity, and against the idea that democracy must protect minorities, like Muslims, for instance.
This also links with movements in the Global North. These movements basically are racist, nativist, and involve attacks on the rights of minorities, which is a central tenet of liberal democracy. Of course there are differences among these movements, each one is unique in their own way, but there are similarities.
What’s the class base that animates counterrevolution today?
WB
Whether you look at Chile in 1970–73 or at Thailand 2001–2014, you have the middle class very prominently involved in the process. They were not just being manipulated, they had a dynamic of their own. They were actors constructing a counterrevolution. If you look at Modi, if you look at Duterte, you cannot understand them unless you look at the role of the middle classes in actively supporting these people, and a growing synergy between the charismatic individual and the middle-class base. Fear fuels it, and aspiration fuels it too.
My emphasis on the middle class does not mean that other classes are not involved. Certainly in the case of the Philippines and India the lower classes are also involved, but more in a passive way.
In the introduction to the book, you say that you are interested in how the counterrevolution “gets the upper hand and crushes the left politically.” What conclusions do you draw about that?
WB
In the examples that I use, there is oftentimes a theoretical failure. The theoretical failure is to see the middle class as just responding to the initiatives of the Right or the Left — that basically it is just a reactive class.
So in the case of Chile in ’73, the Left thought that so long as we can provide economic gains to the middle class, there can be a political unity between the working class and the middle class because they both share in the expansion of economic benefits. That strategy failed to appreciate that the middle class has a dynamic of its own. That is, when the working class was rising, the middle class saw the rights of the working class as a threat to its own position in society and therefore it became very open to an alliance with the Right instead of the Left.
It’s very important to engage with this theoretical failure, because right now the tendency is to believe that there is this passive mass and it’s just the charismatic personalities of the right wing that is manipulating them. I think that is a mistake. Without understanding that this is an active class on its own, that the base has its own dynamics, we may be falling into the same trap.
Can you explain how “the dialectic of revolution and counter-revolution” unfolds, perhaps using some examples?
WB
When I talk about the dialectic of revolution and counterrevolution, I use it mainly for the first type of counterrevolution, and I use the examples of Italy, Chile, and Thailand to illustrate it. There is an insurgent lower-class movement that is seen as a big political threat, because it is now able to win positions of power — say, parliamentary power. And the response to that is, “Oh my god these people are going to capture the state pretty soon, and they are going to do it through elections.” So the counterrevolution is a movement against that perceived threat.
It’s important to understand that this threat usually is not armed, it’s very reformist. The movement of the masses in Thailand that was represented by Thaksin Shinawatra was able to win and was going to be a permanent electoral majority. And it’s precisely because of this threat of a permanent electoral majority that you had the middle class in Thailand move and work together with the elites to provoke a military coup. Both Chile in 1970–1973 and Thailand in 2001–2014 are classic examples of a movement that appears as revolutionary to the middle class, which provokes a counterrevolution.
China, Financialization, and Post-Capitalism
In Paper Dragons you argue that “the greatest threat to China’s rise is financialisation.” Can you explain this?
WB
When you look at China today you have many of the same traits that New York and London had in 2008, which is that it is becoming a very heavily financialized economy.
First of all you have a real estate boom that has run out of control. Prices of land in the big cities are just skyrocketing. They haven’t reached the situation yet in Japan in 1989, where the Imperial Palace East Gardens’ land valuation was greater than the valuation of land in all of California, but it is heading in that direction. Japanese economists who have looked at China say, “Oh my god this is the same kind of dynamic that we had before our financial crisis in 1989.”
If you look at China’s stock market, it’s a rollercoaster. It’s bigger than the Japanese stock market, and you have the same kind of speculative dynamics that are likely to lead to a crash in the short term.
Then you have the shadow banking system. The shadow banks are basically non-regulated entities that emerge because the official banking system cannot provide the cash needed by many enterprises. The shadow banking system has grown and grown and grown. It is very much linked to the speculative boom in real estate, and if there is a property crash, the shadow banking system also is going to go down. The assets caught up in the shadow banking system are around 50 percent of China’s GDP — which is not as high as in the West in 2008, but it’s fairly high.
Although it’s true that there is not that much foreign exposure in China’s financial system, a financial crash would be very damaging globally. Why? Because a financial crash is always followed by a real economy crash. And China is at the center of global trade, both as an importer and exporter.
What are the broader dynamics behind the fragility of China’s financial system?
WB
First, this is no longer China the big dragon of the early 1990s. China’s growth rate has gone from 10 to 11 percent per year to around 5 percent per year. So it is now moving towards stagnation.
The second thing is China has this terrible over-capacity problem. Since over-capacity affects profitability, you now have a situation where Chinese officials, in desperation, would like to export that capacity outside by lending to different countries so their demand revs up Chinese industries.
But I don’t think that solution is going to work, because many of these countries that China is lending to are not very good credit risks. So basically you are going to create a situation where to prop up your state enterprises — which are tremendously indebted to the state banks — you are going to create a whole new set of customers which are also going to be highly indebted to your state banks. So that is a major point of crisis.
The third thing is the trade war. Trump is serious about this trade war, and whether you like it or not, it is having a very serious effect on China’s income and growth. The knock-on impact of lower export income will mean taxation is going to increase and depositors are going to have less earnings from their deposits so the state banking system can subsidize the massively indebted state enterprises.
And then finally, Trump and his cohort are quite militaristic. Trump and the Pentagon now have a similar point of view: the source of US problems is China. The Pentagon has long held this view. The thinking of Trump and his economic advisors, like Peter Navarro, is that it’s not just about increasing tariffs on China, it’s about having China change its economic system, so that the state stops subsidizing the rest of the economy. That’s a fairly radical position.
Trump and his people do not distinguish between economic and military power — they see it as one continuum. So that dangerous gray zone is there, and it’s especially dangerous at a time when tensions are rising in the South China Sea, where I come from. That place is so tense at this point. You have the military power of the US ringing China, and any kind of small incident, like a ship collision, could immediately escalate to a major conflict. It need not necessarily be a nuclear conflict, but a conventional conflict, especially with the Pentagon and Trump now thinking alike about containing China.
The image that China is somehow bent on global hegemony with its Belt and Road Initiative is, I think, really off. The Belt and Road Initiative is not really a blueprint for Chinese hegemony, it is an effort to solve the overcapacity problem. The recent seventy-year celebration of the People’s Republic of China gave the wrong image as to where China is at. It may display outward confidence, but it is an economy and a society in crisis.
Doesn’t the Chinese state have some tools that give it more flexibility in dealing with the threat of financial crisis than most Western states? I’m thinking of its ability to use expansionary fiscal policy, but also the deep relationship between the state and finance.
WB
I fully agree with you that the Chinese state has the space, because it is a state capitalist economy, to respond in ways that a Western government cannot. But that space grows increasingly narrow the more these mechanisms are used. I’ll give you an example. The Chinese state enterprises owe state banks around $15 trillion dollars. Now, you can tell the state banks to keep on lending, but a lot of Chinese companies are zombie companies — they are not profitable — so you’re making the system more and more fragile. You can postpone the day of reckoning, but how long you can do that for is questionable.
Second, the state is not in control of the speculation that is happening in real estate. They’ve tried all sorts of measures to bring down the speculative boom — it’s not working. In terms of shadow banking, they’ve tried to clamp down, but these are elusive entities. So as China’s economy becomes more complex, as the private sector has grown, there is less and less ability for Beijing to command the rest of the economy.
Unlike what many people in the West think, China is an extremely decentralized economy. So much of what happens, happens in the provinces — decision-making is at that level. Beijing does have some control when it comes to fiscal and monetary measures, but the ability of the provinces to circumvent central measures is very great.
It’s the combination of these factors — the extreme decentralization of the economy, the growing financial fragility, the over-capacity crisis of industry, the trade war, slow growth — that is very dangerous for China. China’s economists understand that. Many Chinese authorities understand that. This is no longer the command economy of the Mao period. This is an economy that has loosened up, decentralized while maintaining certain central controls, and is part of a global system, so the ability to be able to control the economy in the way that a state capitalist economy can do is gone.
As well as being about China specifically, the book is “an effort to understand the origins and dynamics of financial crises.” What is the long-term trend for financialized economies?
WB
Well, first of all, there has been no reform of the global financial system. The so-called Dodd-Frank reform in the US was a joke. The too-big-to-fail problem has become even worse. The securities that were being traded that caused the crisis are still being traded in the trillions. The fractional reserve banking problem, in which you are trying to get some more discipline in lending by having a healthy ratio of equity to debt — nothing has happened in respect to that. Executive pay, they tried to regulate that; bankers are still the highest paid. Credit rating agencies that had these conflicts of interests and gave assessments of securities that were wrong; they are just performing as usual.
So no reform has taken place. Basically what you have is a global financial system that continues to have the same problems, and it’s just a matter of time before this lack of regulation comes together with other factors to create another crisis. As I say in the book, I’m not predicting that China will be the trigger of financial crisis, but China is one of the candidates at this point.
The second thing, which even people like Larry Summers, the establishment economist, accept now, is that the system is in what they call “secular stagnation.” In fact, it has been in secular stagnation since 2009. There have been times where there has been some growth, but globally speaking we are in a period of stagnation. The reason for that is very Marxist — there is a crisis of over-production. There is so much productive capacity throughout the capitalist world, especially in China, and in a globalized world, the chances for profitability are getting lower and lower and lower.
The more stagnant the global economy becomes, the more temptation there is from finance capital to resist regulation and keep on investing in the financial system, in these toxic securities, because the only source of profit is the financial system. It’s eating itself up, so to speak. The problem with profits that are derived from the financial system is that you can only derive it by creating bubbles, and you can only create so many bubbles before they burst.
That’s the picture at this point: a stagnant global economy, a crisis of over-production, and frenzied speculation in the financial sector that may well trigger another crash, and that will dampen even more the real economy. And we still haven’t factored in the economic impact of climate change, which does not just have ecological consequences, it has economic consequences too.
Why didn’t neoliberal ideology die after 2008? And do you see alternatives emerging around the world?
WB
While many economies and economists still follow the free-market neoliberal ideology, they don’t do so with conviction. The image I use is that the engineer of the train has been shot by the outlaws, but his hand is still on the throttle. That is the way it is right now — neoliberalism clearly doesn’t work, but technocrats and economists know nothing else.
Second, the alternative from China and the East Asian economies of a strong role for the state — that has not worked either. We’re beginning to see that if you have state capitalist systems that get integrated into the international economy, they are caught up in the crisis of the international economy. Look at what happened to the Asian tigers — Thailand, Indonesia, Malaysia, Singapore — who in the 1990s were supposed to be the hot shots. The Asian financial crisis in 1997 just leveled them. China is being leveled by its own integration into the global economy. So the state capitalist model and the free market model are both in tremendous crisis at this point.
What this should be bringing people to is a realization that we have to move to a post-capitalist system, because these two dominant models no longer have dynamism. Unless that happens, the crisis will heighten even more.
There are new ways of thinking about socialism, and in the US, there are younger members of Congress who are openly saying they are socialists. There are people in Latin America that are basically saying that the old growth model no longer works either, so we have to think of new paradigms; they call it “buen vivir: (“to live well”). There is all this flowering of alternatives to capitalist development that is taking place. The big question is, will it develop to become a critical mass? That is the challenge that we have at this point in time.
We will increasingly find a polarization between these movements and the authoritarian right and the kind of fascistic tendencies that they represent — I think that it is inevitable. But everything is contingent. We could win in the end, or we could lose. It really depends on the way we relate objective movements to our subjective intervention in history.
Fonte: Jacobin
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