People Before Profits: Economic stimulus in China and the U.S.

(Part 1)

On Nov. 9, China announced a two-year, $586 billion program to address domestic dislocations arising from world capitalism’s unfolding crisis. Lower prices in China make this worth more than $1 trillion in the United States. Thousands of factories have closed in China, and hundreds of thousands of workers have lost their jobs because of the sudden collapse of demand from capitalist countries.

The new program carefully builds on China’s 11th Five-Year plan (2006-2010) — few people realize China has maintained such plans. It allocates added billions to improve education, health care and environmental protection. It expands plans to build affordable, environmentally-conscious housing and repair or upgrade existing housing. It allocates billions to improve electrical service and roads in the countryside. This should help raise agricultural productivity and reduce the inequality between city and countryside, and slow the migration of agricultural workers to the cities. In addition, the plan allocates additional billions to accelerate recovery in areas devastated by May’s huge earthquake. This is in sharp contrast with the U.S., where hundreds of thousands of people – mainly low-income workers and their families — have been abandoned, many driven out of New Orleans and the other Gulf regions hit by Hurricanes Katrina and Rita in 2005.

China’s new program calls for building 10,000 more kilometers of rail lines by the end of 2010. (One kilometer is about 0.62 mile.) According to Yang Zhonming of the rail ministry’s Development and Planning department, rail construction will employ 6 million workers and require 20 million tons of steel and 120 million tons of cement. The 11th Five-Year Plan had called for expanding China’s rail network from 70,000 km to 90,000 km. Rail is usually the most efficient and environmentally sound way to transport people and goods between cities. The state can also direct the banking system to expand lending to meet desired goals.

Labor productivity in China has been climbing 15 percent or more annually in recent years. This makes it possible to cut shift hours without loss in pay, and hire additional workers to reduce urban unemployment. While no such program has been announced, in the past China has reduced the workweek and lengthened holidays with similar goals in mind.

China’s response to the crisis stands in sharp contrast with that in capitalist countries, where a few central bankers have undemocratically handed over trillions to cover the billionaires’ losses. At the same time, capitalist governments around the world are generally slashing education, health, housing, mass transit, infrastructure and environmental programs, while employers lay off millions and head to bankruptcy courts.

Workers in America should welcome China’s stimulus program for two reasons.

1. U.S. workers will be employed making the construction equipment, electrical generators, locomotives and other capital goods China will need for its massive infrastructure program. The U.S. will also gain jobs indirectly – for example, providing mining equipment or oil production services for other countries that are exporting to China. And China’s own productive capacity, both in primary goods (steel, cement) and consumer goods will be directed more to meet internal demand instead of directed toward export. Steelworkers in the U.S. will be glad to know, for example, that 20 million tons of Chinese steel will be staying in China to build up their rail system.

2. The incoming Obama administration is committed to an economic stimulus package that includes some of the same elements as China’s plan. But there will be fierce resistance from free market ideologues and reactionary corporate interests. And there will be debate on the size and scope of the U.S. stimulus plan. China envisages spending between 7 percent and 8 percent of its GDP each year on the program. With our larger economy, the US would have to spend about $1 trillion per year to have the same impact. If a developing country like China can react to the global economic crisis by making such a big commitment to meeting the needs of its people and environment, its example can help the U.S. to do so as well.

(Next week — Part 2 contrasts China’s response to the crisis with the response in capitalist countries)