Originally published at: 凯恩斯主义在中国——兴起、“繁荣”与幻灭 – 曙光
Editorial Board of the League of Struggle for the Emancipation of the Proletariat
Keynesianism is a school of bourgeois vulgar economics. It proposes a set of theories and programs to stabilize the capitalist economy, advocating for measures such as expanding the money supply and increasing public investment to strengthen monopoly capitalism, attempting to overcome crises, eliminate unemployment, and save the dying capitalist system. It once caused a sensation throughout the capitalist world and gradually became the foundation of economic policies in capitalist China. The farce of “eliminating crises” by Keynesianism has been staged in China for nearly thirty years. Its rise, “prosperity,” and disillusionment are precisely a brilliant microcosm of the entire process of China’s capitalism heading towards an inescapable total crisis.
Poison to Quench Thirst — The Rise of Keynesianism in China
After the restoration of capitalism in China, the ruling class that previously followed the socialist system seized power through a coup. The bureaucratic group of “reformists” with the logic of “seizing power to sit on it” desperately sought to realize “monetization of power,” dividing the socialist red territory. They expanded enterprise autonomy, implemented the responsibility system for factory directors, and took a series of retrogressive measures, allowing managers of state-owned enterprises to ignore the true needs of the state and the people, and fully promote a reactionary line of “profit first”—“Make big profits, do big things; make small profits, do small things; no profit, no work”—ultimately leading to the全面复辟 (complete restoration) of private ownership of the means of production in all fields. Since then, production in society has no longer been guided by a unified plan, and all of China has fallen into a state of unorganized, unplanned production—an anarchic state. As production gradually recovered and developed, the contradictions between socialized production under capitalism and private ownership of the means of production became increasingly acute, and the possibility of a capitalist economic crisis re-emerged in China.
Entering the 1990s, capitalism had been restored in China for over a decade. A large number of peasants went bankrupt and moved to cities; “state enterprise restructuring” shattered workers’ livelihoods; the bureaucratic monopoly bourgeoisie exploited the people cruelly with “dual-track pricing,” and inflation soared. While a tiny minority of bloodsuckers prospered, tens of millions struggled on the brink of death. At this time, the relative reduction in the purchasing power of the working people led to an intensification of the contradictions between production and consumption under capitalism. Even after a large-scale “average” redistribution by the bourgeoisie, by 1995, the per capita annual income of urban residents was only 3,893 yuan [1], and the price of a standard 21-inch color TV at that time was nearly 3,000 yuan—more than a worker’s annual savings! The extreme poverty of the working people severely limited China’s domestic market. The industrial sector, especially the light industry producing daily consumer goods, generally fell into a state of relative overproduction. According to the main industrial sector’s operating rates that year, most enterprises in the secondary industry operated below 60%, with the home appliance sector (such as TVs, air conditioners, and washing machines) even below 50%, only a few luxury industries like watches and cigarettes reached over 70%. In a survey of 104 major industrial products in 1995, only 30% had an operating rate above 80%, mainly energy and raw materials industries in the primary sector. Just one year later, by 1996, 60% of enterprises had an operating rate below 50%. The relative overproduction worsened further in subsequent years. In 1997, the Ministry of Domestic Trade reported that among 613 major commodities, only 1.6% were in short supply, with at least one-third in relative surplus [2]. It is evident that the extreme lack of consumer purchasing power had seriously damaged China’s capitalist economy. The nervous National Bureau of Statistics even dared not publicly disclose the industrial profits from 1995 to 1997 [3], which also partly reflects the poor economic situation of China in those years.
Similar to the persistent underutilization of enterprises, the long-term existence of mass unemployment is also a feature of modern capitalism. China, practicing the so-called “socialist market economy,” cannot exist outside the laws of any capitalist society. Compared to other capitalist countries, the crisis of unemployment in capitalist China, which has been restored from socialist rule, is even more severe. During the “state enterprise reform” process in the 1990s, factory directors who originally owned the enterprises gained complete control over workers’ lives and deaths. Some adopted “buyout of seniority” [4], dismissing workers who did not meet standards with very low compensation; others simply sold off factory equipment and forced workers to lay off. Between 1995 and 1998, 30% of the former “son of the republic” Shenyang’s state-owned enterprises went bankrupt, with 58% of the employees laid off [5]. The situation nationwide was even more tragic. According to a report by the Ministry of Labor and Social Security in February 2002, from 1998 to 2000, 21.37 million state-owned enterprise workers were laid off nationwide, and by the end of 1999, 8.01 million had not found re-employment. The official urban unemployment rate was 3.1%, but in reality, it exceeded 10%. The enormous unemployment caused by “state enterprise restructuring” has extraordinary significance for China’s capitalist production. As Marx pointed out, “The surplus proletariat is an inevitable product of accumulation or wealth development on a capitalist basis, but this surplus population in turn becomes a lever for capitalist accumulation, even a condition for the existence of the capitalist mode of production. Once a surplus army of industrial reserve workers is formed, they are absolutely subordinate to capital, as if they are bred and maintained by capital.” [6] It is an inevitable product of the capitalist mode of production and the basis for its maintenance. However, the contradiction of unemployment also contains a negation of the capitalist system. The large number of unemployed workers intensifies class struggle and shakes the foundation of capitalism. In late 1990s China, the increasingly severe relative overproduction, stagnating international trade, and tens of millions of unemployed workers who could find no shelter, all reflected the deepening crisis. Although these unemployed workers had lost leadership of revolutionary organizations, they still resorted to scattered protests, such as mass petitions and even killing local officials, under brutal repression, forcing the bureaucratic monopoly bourgeoisie to launch “crackdowns” again, attempting to force the people to submit through violence. A servant of the American bourgeoisie, Philip Mairé, once said: “5 million unemployed is a threat, 7 million unemployed is a depression, 10 million unemployed is rebellion and bloodshed.” [7] This somewhat reveals the contradictory attitude of the bourgeoisie towards maintaining a large industrial reserve army. The Chinese bourgeoisie is no different; they want to keep a certain number of reserve workers to reduce variable capital costs but also fear that unemployment might shake the roots of capitalism, so they want to reduce the unemployed to a level that does not trigger revolution. When social contradictions are sharply intensified by unemployment, and China’s ruling class faces the same dilemma as their bourgeois predecessors, they urgently need a “stimulant” to save their shaky rule.
It was during this period that Keynesianism officially appeared on China’s stage. At that time, China had a series of favorable conditions for implementing Keynesian policies. The bourgeois dictatorship in China was established on the basis of seizing socialist power, resulting in highly concentrated production and capital from the start. After the failure of the 1989 student movement, bureaucrats representing private bourgeois interests, such as Zhao Ziyang, were expelled from the leadership of the revisionist group, further strengthening the state monopoly capitalism. In 1994, China implemented a tax-sharing reform, significantly increasing the proportion of local government taxes transferred to the central government, which then provided transfer payments to provinces the following year. This greatly enhanced the state monopoly capitalism, significantly increasing the financial power of the central government. A series of factors enabled and compelled China to imitate its imperialist predecessors by adopting a series of policies promoting lower interest rates and large-scale public investments—core ideas of Keynesianism—to sustain its fragile rule. Since the late 1990s, the Chinese government has adopted Keynes’s “General Theory of Employment, Interest, and Money” as the core of “macro-economics” for “regulating” the market economy, preparing to introduce a series of policies based on Keynesian principles.
The 1997 Southeast Asian financial crisis became the first opportunity to implement Keynesianism. At that time, China’s capitalism faced severe internal and external crises: domestically, the serious relative overproduction showed no signs of easing; internationally, the impact of the economic crisis severely affected international trade, and China’s exports also suffered. From that year, the serious crisis prompted the bureaucratic monopoly bourgeoisie to begin practicing the so-called “miraculous” Keynesian theory that claims to “eliminate crises.” They used their control over major banks to first implement Keynesian policies in finance—expanding the money supply, with lowering interest rates as a key measure. In the eyes of Keynesians, lowering interest rates has a “rescue” function. They believe that excessively high interest rates prevent many enterprises from borrowing from banks to expand production, so lowering interest rates can encourage capitalists hesitant to invest to boldly invest, thereby improving the economy and boosting employment. How to handle the surplus of goods caused by expanded production? They believe that once interest rates are lowered, people will withdraw deposits from banks for consumption, thus expanding social consumption capacity. Chinese economists also began their “Keynesian revolution” in finance, hoping that lowering interest rates would encourage capitalists to borrow and invest to solve unemployment, while also forcing people to reduce savings and expand consumption to “stimulate domestic demand.” From late 1997 to 1998, China’s central bank repeatedly lowered deposit and loan interest rates, with reductions of 2.25% and 3.72% respectively in less than a year and a half—more than the current annual deposit and loan rates. Subsequently, to provide more credit to capitalists, the central bank sharply lowered the reserve requirement ratio from 13% to 8% [8], allowing commercial banks to significantly reduce the reserves held at the central bank, thereby greatly increasing the money supply available for loans. Among these financial measures aimed at expanding the money supply, there lurked a more sinister purpose of Keynesians—implementing inflationary policies, which are more cunning and harder to detect. Whether lowering interest rates or reserve requirements, these measures do not immediately flood the capitalist market with money, causing inflation and significant price rises and public dissatisfaction. Only after the economy improves and investment gradually recovers will this part of the money enter the market as credit, causing “moderate” price increases, forcing the masses to withdraw their shrinking savings for consumption, ultimately realizing the so-called “expanding domestic demand” advocated by Keynesians.
And increasing the money supply is only the first step of China’s “Keynesian revolution.” An obvious fact is that simply lowering interest rates cannot cause a “boom” in investment during economic crises. When capitalism is booming, with smooth sales and profitable production, capitalists are even willing to borrow at high interest to expand production. But during crises, when many enterprises go bankrupt and the market becomes a bottomless pit of no profit, no matter how low the interest rate, capitalists will not invest in expanding production. The purpose of Keynesianism is to maintain the capitalist system. Faced with this reality, Keynesians are unwilling to explore the root causes of economic crises or seek fundamental solutions— they attribute the low investment during crises to subjective psychological issues of capitalists, believing that fear of the future causes them to hold cash rather than invest. Therefore, Keynesians place “confidence” in a crucial position. Keynes himself said: “Confidence is the driving force behind people moving forward; it is a treasure more important than gold” [9], seemingly as long as capitalists are confident about the future, social investment will flow endlessly, and all stagnation in production, consumption, and employment will be saved by this magic weapon. How to boost confidence? Keynes believed that merely tinkering with financial policies was insufficient; more direct economic intervention was needed—namely, the government adopting “deficit fiscal” policies, borrowing heavily to carry out large-scale public investments. The production and consumer goods needed for public projects provide huge government orders to industrial capitalists. In the minds of Keynesians, such measures can make relevant industrial capitalists see profits, expand production, and thus boost the depressed confidence of private capitalists in the economy. For society, government-led public investments can translate into income for related sectors’ capitalists and workers, stimulating further investment and generating more income for capitalists and workers: thus, society’s demand for consumer goods greatly increases, solving the crisis of overproduction, and unemployed workers can achieve the so-called “full employment.” For China at that time, since the bureaucratic monopoly bourgeoisie still controlled key sectors of the national economy, China’s highly monopolized public sectors had the capacity for such large-scale public investments. This Keynesian measure quickly became a key part of China’s economic policy. The Chinese bureaucratic monopoly bourgeoisie, like a drowning person clutching at straws, placed all hopes of reducing unemployment and rescuing overproduction on public investment. In the 1998 “Draft Plan for National Economic and Social Development,” “expanding infrastructure” and “boosting domestic demand” were tightly linked, with “railways, roads, and other large infrastructure” rapidly becoming a popular term in official documents. In 1998 alone, China planned to increase fixed asset investment by 15-20%, with actual investments in agriculture, forestry, water conservancy, housing, and roads reaching 220 billion yuan—an increase of 90.7% over the previous year, accounting for about 40% of the central government’s total revenue that year [10].
The huge public investments by the Chinese government in certain sectors provided a highly profitable market for capitalists in related production material sectors. The related primary industries such as cement and steel suddenly found broad markets, temporarily alleviating the previous severe overproduction. Capitalists in these sectors, seeing profits, expanded production. As production gradually recovered, the financial measures of lowering interest and reserve requirement ratios further increased investment and reduced household savings, expanding related consumer markets to some extent. The tide of the Asian financial crisis receded, and foreign trade, which had been declining, gradually revived, further benefiting China’s capitalist economy. Relying on brutal exploitation of the working class, “Made in China” costs were extremely low, and the revived foreign markets rapidly absorbed China’s expanding capacity, causing a sharp increase in exports. In 2000, China’s export growth rate reached 27.8%, with a total of 249 billion USD [13], which at the then exchange rate exceeded China’s annual fiscal revenue. After China joined the WTO at the end of 2001, tariffs on Chinese imports were lowered by various countries, and the problem of overproduction seemed to vanish instantly. “Made in China” gained unprecedented broad markets, and Chinese daily necessities quickly occupied the global market. In the following years, China’s annual export growth rate exceeded 15%, even reaching nearly 35% in 2004. When China joined the WTO in 2001, exports accounted for 20% of GDP; by 2006, it had risen to 36% [14]. The enormous foreign trade market freed China’s industrial sectors from overproduction, turning losses into profits, with total industrial profits once exceeding 80%. In the eyes of the bourgeoisie, China’s first experiment with Keynesianism can be said to have been a great success; it “saved” China’s economy and led it into an unprecedented boom phase. But even then, Keynesianism had secretly planted the seeds of a greater crisis in China.
In fact, the economic prosperity of China in the early 21st century was entirely built on the stability of the international capitalist market. Although the Chinese government, which adheres to Keynesianism, has always bundled the policy of public investment with “boosting domestic demand,” the trend of a relatively shrinking domestic market has not changed. This is because the Keynesian approach of relying on increasing public investment to raise residents’ income and thereby expand the consumer market is fundamentally wrong in theory. Adam Smith divided the source of commodity value into wages, profits, and rent, all of which are transformed into income, effectively denying the existence of the transfer of constant capital within commodity value. Keynes also inherited this mistaken “Smithian doctrine,” believing that public investments made by the government would all be transformed into the income of capitalists and workers. In reality, each investment must be divided into two parts: one for constant capital used to purchase means of production, and the other as variable capital to buy labor power; only the latter can truly generate income and employment. In the late 1990s, when the Chinese government carried out large-scale public investments to build infrastructure, most of these investments merely consumed the already overstocked means of production that had accumulated due to excess supply, merely realizing the value of these surplus goods, with only a small portion transforming into new income for workers and capitalists compared to the massive scale of investment. After the temporary alleviation of excess supply, increased investment by capitalists in related sectors led to further growth in production capacity, which further intensified the contradiction between production capacity and market demand. The relative shrinking of the domestic consumer market can be inferred from the ratio among China’s “Three Driving Forces” (investment, consumption, and exports) in the gross national product at that time—while the proportion of foreign trade was increasing, the share of consumption was decreasing, dropping from over 62% in the 1980s to 52.1% in 2005. Removing the portion of production materials consumed by government investments, the actual consumption share is even lower. Meanwhile, the growth rate of average nominal wages lagged far behind the growth of social investment, not to mention that most income growth was concentrated among a small elite of workers and the bourgeoisie, while the vast majority of working people still struggled in poverty and lacked the purchasing power to buy more goods produced by expanded production. The series of Keynesian policies in the late 1990s, especially the large-scale increase in capacity brought about by public investments, only avoided severe overproduction because of the expansion of international trade. The domestic market was simply unable to bear the increased capacity. Once the entire capitalist world faced an economic crisis, it would rapidly impact China’s economy, which heavily depended on foreign trade.
What is the result? Due to the anarchy of production under capitalism, the opposition between urban and rural areas is extremely severe, with the entire population and resources concentrated in cities, and resources in second- and third-tier cities further flowing into first-tier cities. The Chinese government, guided by Keynesianism, has carried out public investments in remote areas that have failed to stop this process at all, leading to increasing decline in townships and rural areas, while large cities remain overcrowded as usual. Ultimately, these “dazzling” infrastructure projects built through borrowing have become face-saving projects, mostly meaningless to the working people. Guizhou has invested tens of billions of yuan in skiing facilities, but these places can usually only maintain snow for one month a year. Seventy percent of highway projects and ninety percent of railway projects exceeded their budgets, and two-thirds of transportation projects never reached their expected traffic volumes[26]. The high-speed rail system benefits only a very few people, with almost no real value for workers and peasants, and even causes greater losses after completion. The huge fiscal deficits caused by these projects can only be offset by new methods—relying on “land finance.” Local governments continuously transfer state-owned land use rights and promote “shantytown renovation” to inflate housing prices and obtain huge income, further expanding the Keynesian policy of building large-scale public works. The result is soaring housing prices and increasing poverty among the people; after implementing the so-called “housing reform monetization” policy in 2015, displaced residents no longer had corresponding resettlement housing but were compensated with cash, which they could only spend on new commercial housing, further creating an atmosphere of supply and demand imbalance in the real estate market. Housing prices in large and medium-sized cities nearly doubled again over the next two years, with soaring prices causing total household debt to increase ninefold over ten years, reaching 55.3 trillion yuan[27], with debt-to-GDP ratio close to that of the United States; on the other hand, due to the increasing scale of public investment, the massive fiscal deficit not only was not offset during the high-growth period after the 2008 financial crisis but also soared at an unprecedented rate. In just ten years, debts owed by local governments through various financing platforms and urban investment companies have multiplied several times, reaching 55 trillion yuan by 2022[28]. Many local governments need three to five years to repay even all their annual revenues.
Despite the many obvious hidden dangers left by Keynesianism, capitalism in China can no longer stop this “emergency plan” that was supposed to be used only during economic crises. Having developed chronic illnesses of capitalism, it now lives like an addict who has become addicted to the stimulant of Keynesianism—initially, the injection seemed to have miraculous effects in “saving the sinking,” but whenever old ailments recur, it cannot maintain its rosy appearance without this stimulant. As a result, it keeps piercing countless needles into its own arm, using larger doses to maintain its superficial glow. But with increasing injections, it inevitably destroys its own body, succumbing to poisoning and death. For the entire capitalist society, Keynesianism has planted a ticking time bomb from the start. Its core policy of expanding public investment, while providing some monopoly capitalists with a high-profit niche market and temporarily alleviating the contradictions of production and consumption under capitalism, is only a short-term measure. It can at best delay the arrival of overproduction crises for a limited time, but cannot ultimately prevent their outbreak and will inevitably lead to deeper crises. As previously mentioned, beneath the superficial “prosperity” brought by Keynesianism to China, the seeds of a greater crisis have already been buried: inflation policies have lowered the real wages of the broad masses of workers, plunging them into even greater poverty; the demand for affordable goods among the people has shrunk; large-scale investments in public works and certain industrial sectors have consumed excess production materials, even turning some sectors profitable and expanding production, but will inevitably cause larger-scale overproduction crises in the future. More importantly, all increased investments ultimately become a heavy burden on the shoulders of the working people. Although on the surface it does not directly translate into taxes, the soaring housing prices have drained the last drops of blood from the workers. The complete bankruptcy of Keynesian economic theory has finally confirmed its foundation—the fiscal deficit policy cannot be sustained indefinitely, and the mounting debt will eventually lead to collapse. The illusion of “perpetual prosperity” created by Keynesianism for China’s bureaucratic monopoly bourgeoisie has finally come to an end.
The Path to the Underworld Approaching—The Disillusionment of the “Perpetual Prosperity” Myth in China
Debt must be repaid. The main economic program of Keynesianism is to expand public investment. When the expanding scale of investment exceeds the government’s fiscal revenue, the only way to finance public investment is through increased deficits—borrowing. When Keynesian advocates defend the “sustainability” of their deficit fiscal policy, they always claim that the large deficits incurred during crises will be fully made up during boom periods, thus preparing for the next possible crisis. But the reality is completely contrary to their wishes. As previously mentioned, because excess production capacity was not eliminated during the crisis but increased due to expanded public investment, the relative balance of production and consumption under capitalism has not been established. To delay the overall outbreak of overproduction crises, bureaucratic monopoly bourgeoisie can only keep increasing public investment, resulting in the fiscal deficits of Chinese capitalism not only failing to shrink during relatively prosperous periods but actually expanding.
Of course, this annual deficit predicament is not new; the old imperialists in modern China have encountered it long ago. When the old Keynesians faced rising debts that were nearly impossible to repay, they invented a “national debt philosophy” to patch their bankrupt theory. Keynesian economist Ellis once said, “The amount of national debt is irrelevant for this reason: if society is a debtor, then society is also a creditor of equal amount”[29]. In their view, capitalist society has become a unified entity with a common action and will; no matter how large the government debt, it is just “our own money owed to ourselves,” and the conclusion drawn from this is: the possibility of using government borrowing to implement large-scale government spending to “cause prosperity” is endless. Chinese Keynesian economists also fully inherit this view. When faced with enormous government debt that cannot be repaid even during boom periods, they are forced to draw a shocking conclusion: internal debt is not debt! After all, according to their logic, the borrowed money is just owed to oneself, and can be borrowed forever. Local governments can continue to expand public investment through urban investment companies, financing platforms, and other means, endlessly borrowing and pushing Keynesian policies forward.
But is that really the case?
In fact, this kind of Keynesian logic is extremely absurd. In capitalist society, creditors and debtors are obviously not the same people. A slight investigation into the sources of these debts reveals this fact. Since the “Four Trillion Plan” in 2008, the Chinese government has further promoted Keynesianism mainly through a series of financing platforms like urban investment companies, whose debt scale is counted in trillions. In just a few years, their debt has exceeded the total debt of local governments. These urban investment companies have no assets of their own; they rely on government fiscal subsidies to gain credit, then sell bonds to raise social funds, and invest in real estate and infrastructure to earn a part of the monopoly rent to repay their debts. The most important role of urban investment companies is to collect social funds with government credit guarantees. Even according to legal regulations, government subsidies in their funding sources can account for at most 30%, with the remaining 70% needing to borrow from society[30]. Clearly, the large debts generated by the Chinese government through urban investment companies are mainly owed to private capitalists or speculators who buy urban investment bonds. Once these bonds mature, they will demand repayment of principal and interest, and then take a share of the residual value. After the “Four Trillion Plan” and the ten years of “shantytown renovation” that caused soaring housing prices, these urban investment companies relied on dividing land transfer fees to earn huge income, coupled with government credit guarantees and high-interest rates attracting speculators. Once issued, urban investment bonds are often snapped up by speculators immediately. However, the ability of urban investment companies to continuously expand their borrowing scale depends on the premise that they can repay their debts on time, which requires stable large income from land transfer rights. If real estate market downturns reduce the monopoly rent obtained by urban investment companies and a large number of bonds mature simultaneously, these companies will be unable to repay their debts, leading to defaults. Real estate has pushed Keynesianism to its peak in China but will also become the first domino to cause its collapse.
The complete failure of Keynesianism in economic theory will inevitably lead to its ultimate failure in practice. Although the building erected by Keynesianism in China over twenty years appears magnificent on the surface, it is built on a very fragile foundation. The prosperity in China is achieved through double exploitation of the people, but the greater the exploitation, the more unstable the foundation becomes. Under capitalism, as capital accumulation grows, social wealth increasingly concentrates in the hands of the bourgeoisie, while the vast working people who create social wealth become impoverished. This is reflected not only in the increasing wealth extracted from the proletariat by the bourgeoisie, leading to their relative impoverishment and declining share in national income, but also in the intensifying labor exploitation, with real wages constantly falling, causing absolute poverty. The role of Keynesianism is to accelerate this process. The policies of Keynesianism in capitalist China have provided massive subsidies to a group of monopoly capitalists in related industries, opening highly profitable markets. The bureaucratic monopoly bourgeoisie also siphons off huge profits from public works projects; just opening a public project announcement of a local government and calculating the huge difference between total investment and actual equipment purchase prices reveals shocking corruption[31].
The bourgeoisie and bureaucratic monopoly bourgeoisie in capitalist China have absorbed the blood of the people through Keynesianism, and the gap between them and the proletariat has expanded at an unprecedented speed, with the wealth gap reaching astonishing levels. For the broad masses of workers, the enormous “internal debt” brought by Keynesianism is not only debt but also an invisible tax, nominally belonging to urban investment companies or local governments but actually shifted onto workers through rising housing prices and other means. Increasing exploitation has caused the absolute impoverishment of China’s proletariat at a rate far exceeding that of any other imperialist country. Their debt ratio is comparable to that of the most developed imperialist countries, yet their income is not much higher than that of colonial subjects. Marx long ago pointed out: “The fundamental cause of all real crises is nothing but the poverty of the masses and their limited consumption. Capitalist production, disregarding this situation, strives to develop productive forces as if only the society’s absolute capacity for consumption were the limit of productive development.”[32] Keynesianism not only failed to address the real causes of economic crises but also continued to intensify the plunder of the working people, weakening their consumption capacity. Relying solely on the luxury waste of a small parasitic class cannot solve overproduction problems. When the broad masses can no longer bear taxes, inflation, housing prices, and other burdens, Keynesianism will lose its foundation for continued implementation, and the illusion of “perpetual prosperity” it created for China will also shatter.
The pandemic ultimately became the last straw. After the outbreak of COVID-19 at the beginning of 2020, the whole country plunged into a standstill of work and production. The bureaucratic monopoly bourgeoisie, under the banner of “protecting people’s lives,” intensified fascist dictatorship with measures like city lockdowns and health codes. This also became an opportunity for them to further implement Keynesian policies. At the start of the pandemic, they used the excuse to build a batch of Fangcang hospitals in Wuhan, then expanded nationwide to build prisons for suspected cases and centralized infections. After the so-called vaccines were developed, they provided large subsidies to related medical enterprises and forced mass vaccination. By 2022, China’s capitalist economy entered a period of “pandemicization,” with bureaucratic monopoly bourgeoisie nurturing a large number of medical testing companies, turning nucleic acid testing into a normal part of daily life through violent means. Only when workers could no longer tolerate fascist dictatorship and rose up in rebellion did this farce end. In just three years, the nominal expenditure on health alone reached 23.2 trillion yuan, nearly doubling the 17–19 years before the pandemic, with fixed health asset investments like Fangcang hospitals growing at over 25% annually[33]. However, this large-scale public investment did not bring any economic prosperity; fascist measures like city lockdowns caused mass bankruptcies among small capitalists and soaring unemployment. After the pandemic, the “recovery” and “revenge consumption” that bourgeois economists fantasized about did not materialize. The “free” vaccines and nucleic acid tests, even when distributed to every Chinese, cost nearly 20,000 yuan per person, draining the last penny from workers’ pockets. Nominal wages continued to decline, unemployment became normal, and workers had to continue living paycheck to paycheck. Already heavily in debt, the Chinese people took on even heavier burdens; in just three years, their total household debt increased by 53%! Even including infants and students with no income, every Chinese is burdened with at least 60,000 yuan of debt[34].
The twenty years of Keynesianism in China ultimately plunged the working people into extreme hardship, intensifying the contradiction between the ever-expanding capitalist production and the declining demand for workers’ ability to pay, reaching an unprecedented level in human history. The broad masses of workers, even if overdrawing future income, can barely maintain their livelihoods, let alone expand consumption or continue to sell their labor at high prices. After the pandemic, China fell into a deep depression. Severe overproduction forced many capitalist enterprises, from automakers to daily necessities, to engage in price wars. Foreign trade showed no signs of recovery compared to the most severe 2022 crisis. The land finance that supported Keynesianism for more than a decade also collapsed. In 2023, local governments’ revenue from land transfer rights was only 5.8 trillion yuan, down 31.8% from 2021[35]. The huge fiscal gap of nearly three trillion yuan is impossible to fill. Measures like loosening restrictions on home purchases and lowering down payment ratios, which once stimulated the real estate market, now only cause small ripples in the pond and quickly return to calm. The bureaucratic monopoly bourgeoisie is frantic, like ants on a hot pan, but objective laws do not change with their will. They can no longer squeeze more from the working people through real estate. The collapse of land finance has plunged urban investment companies and local governments into serious fiscal crises. Most urban investment companies can only rely on raising interest rates to attract speculators and borrow new debt to repay old debt, while some in relatively underdeveloped regions like Guizhou and Heilongjiang are unable to repay and have declared default. Similarly, local governments also face severe fiscal crises—“a mud Buddha crossing the river—unable to protect themselves.” Wage arrears are common, and they are powerless to subsidize urban investment companies, only letting them perish on their own. This year, despite the bourgeoisie’s continued attempt to use their trusted Keynesian methods—cutting interest rates, expanding public works, and providing high subsidies—the expected economic recovery has not arrived. Two rate cuts this year, but capitalists are busy repaying loans, and total loans are declining; public investment hits new highs, but the economy remains rotten, consumption sluggish, and investment stagnant; the so-called “new three” myth—solar energy, new energy vehicles, and lithium batteries—has faced anti-dumping investigations from several imperialist countries, with tariffs blocking exports, and domestic markets have peaked while foreign markets shrink. The truth surpasses all the eloquence of bourgeois economists: the giant bubble of “perpetual prosperity” blown by Keynesianism in China has burst, and no next bubble can be blown again.
Poverty, oppression, mounting debt—this is the entire legacy Keynesianism has left to China. But is this the end of Keynesianism in China? Even though theory and practice have already condemned Keynesianism to death, China’s bureaucratic monopoly bourgeoisie is unwilling to wake up from this “perpetual prosperity” dream, because they are the most rotten and reactionary among the bourgeoisie. They refuse to admit the complete failure of Keynesianism, just as they cannot accept their own demise. They will continue to struggle, still attempting to use Keynesianism to save their rule, not only in China but also abroad. Today, reactionaries in China still advocate expanding foreign investment to promote the export of goods and capital, turning China into the world’s largest capital exporter over ten years, building roads and bridges to resource-rich third-world countries for plunder. To deceive the world, they also mask this genuine imperialist policy of foreign economic expansion with the so-called “Belt and Road” and “Community of Shared Future for Mankind” slogans. But it is clear to see that under the banner of “Community of Shared Future,” there is a face of fierce, ferocious invaders. Chinese imperialism’s ruthless plunder of colonies has intensified the fierce struggle with Western imperialism for colonies, pushing forward militarization of the national economy, aiming to seize “lands under the sun” with their sword, even risking launching a world war to save their own demise.
But Chairman Mao long ago pointed out the ultimate outcome of all these dying struggles: “The stubborn always get results opposite to their wishes. They always start by harming others and end up harming themselves.”[36] The bureaucratic monopoly bourgeoisie blindly believing in Keynesianism is no exception. They keep changing forms of exploitation, which precisely demonstrates that the ruling class can no longer rule as before. The Chinese proletariat, already exhausted and robbed of everything, cannot and will not live as before, gradually moving from spontaneity to self-activity. The time bomb tied to capitalism in China by Keynesianism will inevitably explode in the near future, destroying the Chinese bourgeoisie clinging to it and turning them into dust of history.
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National Bureau of Statistics: "Statistical Bulletin of the 1995 National Economic and Social Development". ↑
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Chinese Academy of Social Sciences Institute of Industrial Economics: "Research on China's Industrial Production Capacity in the 40 Years of Reform and Opening Up". ↑
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The National Bureau of Statistics only resumed publishing profits of industrial enterprises above designated size in 1999. ↑
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During the early period of the restoration, state-owned enterprises often forced workers to lay off based on their seniority within the enterprise, providing a small severance pay to terminate the labor relationship. ↑
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Peking University Department of Sociology: "Changes in the Northeast Unit System Society from a Historical Sociological Perspective". ↑
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Marx: "Das Kapital", Volume I, People's Publishing House, 1975. ↑
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Biaoru: "What is Keynesianism", People's Publishing House, 1974. ↑
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Calculated from "Chronicle of Major Events of the People's Bank of China 1998". ↑
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Keynes: "The General Theory of Employment, Interest, and Money". ↑
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Ministry of Finance: "Report on the Implementation of Central and Local Budgets in 1998". ↑
-
Statistics from the "Statistical Bulletin of National Economic and Social Development" for the three years 1998-2000. ↑
-
Statistics from the "Statistical Bulletin of National Economic and Social Development" for the three years 1998-2000. ↑
-
State Council: "Implementation of the 2000 National Economic and Social Development Plan". ↑
-
World Bank Group: Trade volume (as a proportion of gross national product), https://data.worldbank.org.cn/. ↑
-
Calculated from Shandong Provincial Department of Commerce: "Review of China's Economy in 2008 and Outlook for 2009", etc. ↑
-
Central Government Website: "Return of 20 Million Unemployed Migrant Workers - Survey of Four Provinces of Sichuan, Henan, Shandong, and Anhui". ↑
-
Ministry of Foreign Affairs: "Speech by Wen Jiabao at the Royal Society of the United Kingdom". ↑
-
Production-based Value-Added Tax = (C+V+M) * tax rate, while consumption-based VAT is only (V+M) * tax rate, generally 13%. ↑
-
Renmin University of China: "Explanation of the Rapid Growth of China's Tax Revenue from 1997 to 2012". ↑
-
Calculated from TRADING ECONOMICS, https://zh.tradingeconomics.com/. ↑
-
Ministry of Finance: "Implementation of Central and Local Budget in 2008". ↑
-
National Bureau of Statistics: "Operation of the National Real Estate Market from January to December 2009". ↑
-
Ministry of Finance: "Implementation of Central and Local Budget in 2010". ↑
-
Calculated from TRADING ECONOMICS, https://zh.tradingeconomics.com/. ↑
-
Xinhua News Agency: "Bridge" sees China | Continuous setting of world records conveys development confidence. ↑
-
Atif Ansar, et al. Does infrastructure investment lead to economic growth or economic fragility. 2016. ↑
-
50 People’s Forum on Economics: "Estimation of China's Resident Asset and Liability Statement: 1978-2019". ↑
-
Yuekai Securities: "Comprehensive Review of Urban Investment Platforms: Definition, Transformation, and Implicit Debt Measurement". ↑
-
Biaoru: "What is Keynesianism", People's Publishing House, 1974. ↑
-
National Development and Reform Commission: "Notice on Further Standardizing the Issuance of Bonds by Local Government Financing Platform Companies". ↑
-
All local government websites have a section called "Construction Project Approval and Implementation", which publicly discloses some public engineering project costs. ↑
-
Marx: "Das Kapital", Volume III, People's Publishing House, 1975. ↑
-
Calculated from "Health and Wellness Development Statistical Bulletin" 2019-2022. ↑
-
Calculated from People's Bank of China: "Promoting Debt Structure Optimization to Support Real Economy Development". ↑
-
Caixin: "China Land Finance Report 2024". ↑
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Mao Zedong: "Constitutional Government of New Democracy", in "Selected Works of Mao Zedong", Volume II, People's Publishing House, 1967. ↑