Below the radar in Russia and China

Oligarchic-Capitalism and Party-State Structure: Same or Different?

Published by Marylou Strickland

China’s Provincial 2020 GDP compared with nearest other country (Sources: HSBC, CEIC, IMF, CIA)
URL for images http://slideplayer.com/slide/4889288/ http://image.minyanville.com/assets/FCK_Jan2011/Image/china2.png

Kumar David-November 18, 2017

Superficially they look similar. Both issued from Communist revolutions; polity and society still carry birthmarks of their separate but similar origins and arduous but different puberties. The most striking current similarity is a powerful new Tsar in Russia and a grand new Emperor in the Middle Kingdom. Of course, analogy with Tsarism and Chinese Empires is facetious, not a shred of the politico-economic fabric is the same as centuries ago, but the authoritarian totalitarianism of the two new masters is similar. Other similarities include scant regard for democratic and human rights, arbitrary misuse of judicial power, lock-down on press freedom, and people’s general fear of the state. Likeness notwithstanding, I will argue, after an initial descriptive account, that the social-economic architecture of the two states is different. To foretell whether the systems will converge to something akin decades from now, I leave to soothsayers.

In the economic domain, if you take a long view, both are doing well. China’s rise in the generation to date is described as the most spectacular transformation in history; a slowdown in the last three years notwithstanding - just a pause to catch its breath. The breakdown after the 1989-91 counter-revolution in Russia defies adjectives; starvation, decline in population, economic collapse, and drunkenness were frightening and omnipresent. The Putin period was a turnaround heralding stabilisation of society and economy. Russia’s inclusion in BRICS, a group of fast growing large economies - though the first and the last, Brazil and South Africa, have fallen off a cliff - and its advent as a potent political player in the Middle East and the Ukraine are remarkable. Its aviation, military and information technology are classy and the last named has been a game-changer in Donald Trump’s backyard and backside. To insert a corollary; Chinese technology too is striding on, though like Russia, not on par with America in avant-garde innovation.

It is richer in natural resources than any other country – the Soviet Union of course was even richer. Russia has 30% of the world’s natural resources including the largest gas, second largest coal and seventh largest oil deposits. It has valuable minerals; copper, lead, zinc, bauxite, diamonds, nickel and tin, mercury, gold and silver – mostly in Siberia and the Far East. But not as much is extracted as rich deposits elsewhere. Her vast forest and timber resources dwarf those of even Canada and Brazil by 60%. It is intrinsically a rich country whose citizens should enjoy a high standard of living.

China is resource starved compared to both Russia and the US and carries a population four times that of the US and nine times Russia’s. Its gross land area is the same as the US but arable acreage is much less. Since for two thousand years prior to 1800 India and China dominated world output (together about 60%), it would take a brave clairvoyant to prophesy the shape of the world economy at the end of this century, except that it will be a four-sided game – China, India, and the two new boys on the block, Russia and America. That’s enough star gazing; now for more prosaic stuff.

Oligarchic-Capitalism

The Russian economy was usurped by oligarchs who grabbed the nation’s assets when the Soviet Union collapsed. In the greatest robbery of material wealth in all history, upstarts under the guidance of the IMF and American economic gurus, grabbed coal and mineral mines, oil fields, factories and financial assets. Some Communist Party apparatchiks cement ownership of profitable banks, oil, natural gas and precious metals. Fortunately, western raiders (companies and investors) were not able to appropriate much and those who did were seen off in a surge of Putin nationalism. The Russian economy is owned by oligarchs. An oligarch is a member of a small group of oil and coal mine robbers, industry grabbers and finance captains who became fabulously rich during the Yeltsin years - the 1990s. Organised crime was also a player in cementing this process. Bread-lines, population decline and devastation of society were the other side of this process.

Putin’s ascent to power brought this mayhem to an end and the state regained control of production and trade of oil and gas. He detained rebellious oligarch Mikhail Khodorkovsky, nationalised his Yukos conglomerate, and brought the oligarchs to heel. There is symmetry with China in that the nouveau-riche, though filthy-rich, survive only by the grace and goodwill Party and/or President. There is no confusion whatever in China or Russia about where power lies.

Interestingly, 70% of the Russian state budget is met directly or indirectly from gas and oil revenues. The private sector and non-mineral output fell to just 10% of GDP at one stage but there has been some recovery recently and 25% of GDP is now in its hands. Though inflation is running at 6% to 7% and GDP growth low (below 3% much of the time after 2008), real wages have been rising at 11% thanks to Putin’s social policy. I have collected data from many sources since official data blanks out a lot; finicky readers are invited do their own research.

Superficially, Russia’s macro-economy looks like China. The similarity stretches to counting billionaires! This time my data is from Wikipedia and more reliable. There are about 100 US$ billionaires in Russia. Alexey Mordashov said to be worth $18 billion is number one and Vladimir Lisin ($16 billion) number two. There are alleged to be seven others worth $10 billion or more. It’s not that different in China which has about 200 US$ billionaires. Wang Jianlin and Alibaba’s Jack Ma are numbers one and two; each worth about $30 billion. I am not quite sure, but there may be another 20+ worth $10 billion or more. For comparison there are 540 billionaires in the US and the top two, Bill Gates and Warren Buffet, are worth $85 and $75 billion, respectively, says Wikipedia.

China’s 2017 GDP is estimated at $11.8 trillion and Russia’s at $1.56 trillion. Per capita nominal GDP: China $8,550 and Russia $10,800; PPP figures are about double this in both cases. Sri Lanka’s per capita nominal GDP is a shade below $5,000.

Party-State Architecture

The appellation State-Capitalism is misleading when applied to China. It denotes Capitalism as the principal noun with an adjectival status conferred on the State. In truth, in China, the Party-State leads and capitalism and the capitalist class are subordinate. Chinese economic architecture has six cardinal features that do not denote socialism, but not capitalism either.

*Management and decision making dominated by the Party-State

* Power monopolised by the Party which dictates to Central and Provincial governments.

* Basic factors - land, banks, finance, energy, mining and large industry, state owned.

*Village land de-facto peasant owned, but nominally administered by county/village entities.

* A dynamic, technically vibrant, capitalist sector driving growth and dominating exports.

*Rich and super-rich classes devouring economic riches but wanting of political power.

Russia’s socio-economic architecture does not fit this description. Putin and Xi Jinping’s power, the preponderance of the state in the economy, and billionaire counting games aside, the absence of a CPC-like entity underscores that they belong to different species.

The CPC is an 80-million-member web that penetrates and determines every pore of society; there is no foreseeable prospect of anything like that in Russia.

Hence, the superficial similarities outlined in previous paragraphs notwithstanding, I opine that the socio-economic architecture of China and Russia are different; the former a non-capitalist genus, the latter a variant of capitalism. Capitalist states can be dictatorships or democracies, non-capitalist ones may be authoritarian or relatively free; that’s beside the point. What one admires or abhors is a matter of sentiment; socio-economic structure (Marx called it "mode of production") a matter of theory and precision; never mix the twain.

Still, it must be conceded that proof of the pudding is in the eating; will Russia and China, one day, converge to like-systems or will they not? I cannot see China turning into a state of the type we habitually call capitalist; that is, extracting and reinvesting surplus value at the discretion of a property-owning class which also holds the reins of finance capital, and runs foreign affairs and directs global investments like the New Silk Road. Such a transformation would require a counter-revolution as in the USSR in 1989-91. There is nothing like it on the horizon. The Chinese Party-State looks rock solid; of course, frills, trimmings and substantive features will evolve. Recall the momentous changes in China in the last generation while the sway of the Party-State remained secure!

I am less sure whether Russia will evolve into a conventional type of capitalist state - leaving aside entirely the question of democracy. It may not; it may go chasing other rainbows. In both cases post-Xi, post-Putin succession talk has political observers agog. But, in truth, in China whether Xi gets another chance to play top-dog after 2022 matters little to the structure of the state. What does it matter if it’s Xi, Yi, or Zi? The Yangtze will still pour into the East China Sea.

In Russia things are dicier. Post-Putin directions are harder to foresee; Putin’s victory for a second second-term in the March 2018 elections is of course certain. After that whether his successors are like-minded will matter because the Russian apple-cart is less stable. Another cohort of Qutin, Rutin or like-minded zombies will cement an unorthodox state-system in Russia alongside China and less formidable Vietnam, Ethiopia, the Central Asian Republics, Cuba and god-willing, a democratic version in Sri Lanka. The government has made a sharp turn to economic neo-liberalism in the new budget. The left has no place in this government apart from the effort to enact a hopefully half-decent new constitution – if it ever materialises!

Reference: Relevant and interesting essays can be found in a trilingual volume released by the Communist Party (Sri Lanka) on 7 November 2017 celebrating the centenary of the October Revolution: Oktober Viplavaya Idiriyatama edited by Michael Fernando, Premadasa Dissanayake and Wilfred Jayasinghe.