#91 - The "emerging economies" - myths and realities in the capitalist crisis

Oct 2011


Just as much as the PIGS (Portugal, Ireland, Greece and Spain) are stigmatised, these days, as the "bad" guys, the BRICS (Brazil, Russia, India, China and South Africa) - otherwise known as the "emerging" economies - are hailed as the "good" guys of capitalism.

According to today's economic pundits the BRICS are living evidence of the fact that, after all, despite being increasingly crippled by its chronic contradictions and recurring crises, the capitalist system has a future. These countries are celebrated for what is said to be remarkably high economic growth rates and, because of these rates, they are deemed to be capable of pulling the world out of its present crisis, thereby providing capitalism with a new lease of life.

As a corollary, the BRICS also get their hands slapped by the same pundits for not doing enough - i.e. not as much as they could allegedly do - to help in bailing out the capitalist system and, in particular, the richest imperialist economies. Worse even, they get blamed for many of the ills which are affecting the rich world - which is a bit... rich!

So, for instance, the unending rise in gas and petrol prices here, is blamed on the BRICS' growing thirst for fuel. Never mind the fact that China gets a large and increasing part of its oil from Iran, which is boycotted by most western countries. Or that China's petrol consumption per head is only 10% that of the US and India's, is only 3%! In reality, the BRICS' economic expansion is used as a convenient cover up in this case. If oil prices keep going up, it is due to on-going speculation in commodities and to the oil majors' policy of boosting oil prices artificially in order to maintain their profits while reducing their productive investment to a bare minimum.

And much the same is true of the meteoric rise in prices of commodities like copper and other metals which have industrial use - which, again, has been blamed on the BRICS' allegedly inordinate appetite for these commodities.

It is ironical that the imperialist capitalist classes so bitterly accuse the BRICS of being unhelpful in the present crisis. Because wasn't it by looting the BRICS, among other countries, for centuries, that these capitalist classes built their wealth in the first place? And aren't they still deriving a very large part of their astronomical incomes from the on-going exploitation of the BRICS' natural and human resources?

The question remains, however: are the BRICS - the so-called "emerging economies" - evidence that capitalism retains some sort of dynamism, as it is claimed? And can their economic growth really pull the world economy out of its present crisis?

The BRICS of yesteryear: from Japan...

In fact, the BRICS are not exactly a new phenomenon. Whenever, in the past, the capitalist system found itself in any kind of serious trouble which put its future into doubt, there was always someone to pull an economic "success story" from his sleeve, to show that against all evidence, the profit system did have a future.

For instance, in the late 1960s, at a time when unemployment was becoming a serious problem in the rich countries, as the so-called postwar consumer "boom" was slowly grinding to a halt, Japan began to be hailed as a symbol of capitalist dynamism as well as a "model" for its future. This "model" was based on the over-exploitation of a working class which was cowed into obedience by strong-handed management and whose cost was all the lesser, as it enjoyed none of the state-guaranteed benefits of the European working class, whether in terms of welfare, health provision, or free education.

The hard landing of the post-war "boom", which took place in the first part of the 1970s, resulting in a full-scale world recession with a sharp drop in production and trade, allowed Japanese capital to increase its share of the world market, thanks to its lower production costs and more modern industrial facilities. Throughout the 1970s, this reinforced the illusion peddled by the promoters of capitalism, that the "Japanese model" was the way forward - a model which was capable of protecting the capitalist economy from future crises, once and for all. Attempts were made to blackmail British and other workers into accepting "Japanese work discipline". This didn't go down too well and the bosses had to resort to other tricks to boost their profits.

From the late 1970s, however, the "Japanese model" began to show numerous cracks. Having only a limited domestic market, Japan's huge industrial conglomerates were heavily dependent on exports. In the middle of another recession in the western countries, which tightened international competition and threatened their exports, they had to change tack. In order to cut costs, they resorted increasingly to subcontracting their production to joint ventures located in the much poorer South-East Asian countries. This allowed them to tap a labour force whose cost was guaranteed to remain cheap, thanks to their more or less dictatorial regimes.

But Japan's success in overcoming the competition of its international rivals was short-lived. Although it was the world's second largest economy, it did not have the economic, let alone the political clout, to stand up against the joint pressure of its imperialist rivals. In 1985, the Japanese government was strong-armed by the US into revaluing its currency against the dollar by 50%. This brought Japan's competitiveness to an abrupt end. Its capitalists switched their investment from the productive sphere to more profitable areas - from financial gambling to real estate. By the end of the 1980s, the so-called "Japanese model" turned into a gigantic speculative bubble which finally exploded in 1990. Share prices dropped by 65% in Tokyo while real estate prices were halved. Japan entered an era of economic stagnation from which it still has to recover. The "Japanese model" was dead.

... to the Asian "Tigers"

But never fear, another so-called "model" was already emerging - the famous ""Asian Tiger" - including this time, South Korea, Taiwan, Malaysia, Singapore, Hong Kong - and followed by the lesser "Tiger Cubs", of Indonesia, Vietnam, Laos, etc. Having benefited from a combination of heavy state investment, investment from Japanese companies and, subsequently, from their US rivals, despite Japan's woes, the industry of the "Asian Tigers" went on to live a life of its own - or so it seemed.

However, just as with Japan, the US was able to force the "Tigers" to revalue their currencies very early on, which in turn forced their industries to operate on very low profit margins.

Besides, their alleged "hi-tech" industry was very far from what it was said to be. By the late-1980s, the "Tigers" already produced a majority of the world's VCRs and colour TV screens. But 85% of the value of the colour screens, for instance, came from components that had to be imported from Japan. Likewise, in the early 1990s, Taiwan became the world's largest producer of home computers. But not only had 50% of the machines to be imported from Japan or the US, but 65% of the profit made on each one of them had to be returned to these countries, mostly in the form of payments for patents.

In an attempt to escape from the grip of western capital, South Korea had tried to boost its heavy industry through large-scale state investment. Some of the world's largest heavy industry companies were thus formed, like Posco Steel or Hyundai Heavy Industries, in shipbuilding. But the size of the international contracts needed for these companies to survive were such that they could only be agreed at government level. And South Korea being what it was, a small country which could not impose its terms on its bigger customers, many contracts had to be agreed below cost, in order to attract other, more profitable future contracts. As a result these companies, and in fact increasingly the whole South Korean economy, had to resort to heavy borrowing.

Borrowing was easy for companies, not just in South Korea, but in every other "Tiger" country. This was because enormous amounts of floating capital were now roaming the world in search of a quick buck, especially after the 1987 stock market crash in the western countries and the subsequent 1990 implosion of Japan's speculative bubble.

The slashing of interest rates in Japan after 1990, caused a new speculative whirlwind. For financial operators all over the world, the new game in town became something called "carry trade": they borrowed huge amounts of yen from Japanese banks, paying an interest rate of 1% or so, and lent that money to banks in South Korea, Taiwan and other "Tiger" countries at three or four times this rate. The profits were guaranteed, of course.

But, by the same token, while this inflow of cash maintained the "Tiger"' companies afloat somewhat artificially, and at a substantial cost, because they had to pay interest on their debt, it also fuelled a speculative bubble, in real estate in particular. The developments which had hit Japan in 1990 were re-enacted across the much weaker economies of South-East Asia, finally resulting in the 1997 financial crash, which stopped the development of their industries.

Through the 1997 crisis, the "Asian Tigers" suddenly aged so much that afterwards, they were limping along just as much as the rich imperialist countries, while the vast majority of their populations had never seen the benefits of this frenetic economic growth which was supposed to "filter down" to all levels of society. As to the "Asian Tiger" model of development for capitalism which was considered proof of its dynamism, this was now discreetly swept under the carpet.

The lie which underpinned, all along, the myth of the "Tigers" is possibly even more strikingly highlighted by the case of Ireland - the "Celtic Tiger" as it was called. The mere fact of creating a niche designed to attract financial speculators and companies in search of a low-tax, low-wage environment within Europe, was enough to justify the fabrication of the "Celtic Tiger" myth. But as we know that myth didn't last long. It was shattered well before the outbreak of the present crisis and, since then, it has imposed an intolerable cost on the Irish working class, while leaving behind the visible ruins of its past "affluence".

Politics and the BRICS

Those who took over from the "Asian Tigers, after the 1997, were the BRICS. Well, not quite in fact. Only two of the BRICS, i.e. China and India can be considered as the successors of the "Asian Tigers" in this lineage of failed symbols of capitalism's dynamism.

In reality, the BRICS was a diplomatic grouping which was formed in 2006, initially under the name of BRIC (without an 'S' as South Africa only joined up later on, in 2010) during a conference held in New York between Brazil, Russia, India and China.

The purpose of this new body was never very well defined. It included governments which were all firm advocates of the capitalist market. Some, like the Chinese and Russian, had the economic means and the political clout to put up some degree of resistance against the diktats of the imperialist countries - but the others were either too weak economically or too weak politically, if not both.

Ostensibly, although it was never said in so many words, the BRICS grouping was meant to be seen as an attempt to put the domination of the dollar over the world financial system into question by championing a new financial order, in which "emerging economies" like the BRICS members would be able to play a more prominent role in international institutions.

Participation in BRICS was obviously designed to be seen as a symbolic statement of independence towards the imperialist countries - which is probably why both Brazil's president Lula, in 2006, and South Africa's president Zuma, in 2010, were only too pleased to join in. But it was not a statement that seemed to bother the US leaders too much, since, after all, New York did host the launch of the new group.

As for Russia's involvement, it was an obvious attempt by Putin to restore Russia's standing as a major power which developing countries could turn to, as an alternative to the US and its closest allies - a role that Russia has been unable to play since the demise of the Soviet Union and the Cold War, except to some extent, with some of the states born out of the implosion of the USSR.

Beyond these political aspects there is, in reality, very little in common between the five member countries. On the basis of statistics alone, Russia and Brazil could appear to be close - their populations are comparable, between 150m and 200m, and so is their production per head, etc.. However, Russia has built a self-contained industry without having to depend on imperialist investment, even if this industry is now ageing, and it has a highly-skilled population. This is far from being the case for Brazil, where industry, particularly in manufacturing and mining, was shaped and remains dominated by imperialist capital, and both poverty and illiteracy are endemic. South Africa is yet in another category, with a relatively small population of 49m, among which a very large proportion lives in squalid conditions, with a production per head somewhere half-way between China and Russia, but with an industry which is heavily skewed towards mining. Finally, unlike China and India, neither of the other two countries has experienced a massive increase in industrial production over the past 15 years or so.

So, from now on, we will confine ourselves to the discussion of the evolution of China and India.

Asian "Mammoths"?

To some extent, at least, the economic process that led to the emergence of China and India as symbols of capitalism's new lease of life is quite similar to the one which saw the transition from the Japanese "model" to the "Asian Tiger".

Even before 1997, "Asian Tiger" companies had been seeking new sources of cheap labour in order to offset rising labour, financial and currency exchange costs. One direction in which they looked was towards Tiger cubs. But these countries were short of skilled workers and lacked the infrastructure needed by industrial facilities, whether in terms of roads, railways or energy.

Japan and Taiwan, on the other hand, had already made some inroads into China, using either direct investment or "mirror investment" (one country investing in the other and vice-versa). Shortly after, the tightening up of international competition, especially in electronics in the run-up to the 2000 "dotcom" stock market crash, resulted in a growing number of western countries seeking to cut costs by using Chinese, but also Indian, subcontractors.

So the scene was now set for a new expansion in these two countries, driven by factors which were, initially at least, similar to those which had produced the "Asian Tigers".

There was, however, a major difference between the "Asian Tigers" and their two emerging successors - the size of their populations. And this has all sorts of consequences. Taking today's figures (but the proportion hasn't changed much over the past decade), China has 1.3bn inhabitants and India 1.2bn inhabitants, compared to 48m for South Korea, the most populated among the "Asian Tigers". Besides, at the time and even more so today, the average standard of living was much lower in both China and India than in the "Asian Tigers". Not only did this open the possibility of tapping a colossal pool of impoverished labour, but it also meant that even a relatively weaker central state like that of India, had at its disposal huge financial resources that western companies would be able to parasitise one way or another.

Far from helping with the harmonious industrial development of these two new "Asian Mammoths", what happened next was the systematic plunder by Western companies of the human and material resources that the size of their populations made available.

China versus India, different histories

Before going any further, it is worth looking at the different histories of China and India, because they explain the different impacts that the imperialist plunder has had on the two countries up to now.

When India was granted independence by the British in 1947, this came at a considerable cost for its population. Among other things, the political settlement resulted in the partition of the country, ultimately into three independent and largely rival entities - leading to three wars over Kashmir and one over Bangladesh. It resulted in mass communal pogroms in 47-48, which kept re-emerging again and again, whenever politicians chose to whip up communal tensions. It also resulted in the artificial partition of Bengal and Punjab, regardless of the obvious material interests of their populations. And these are only some of the many aspects of the poisonous legacy left by colonialism.

But above all, the independence settlement left India entirely under the control of western capital, with a few extremely wealthy local capitalist cliques which acted as intermediaries in helping western, and especially British, shareholders to pocket the surplus-value produced by India's industrial workers and agricultural labourers. Of course, occasionally, some Indian governments resorted to nationalisations, which were described as "socialist". These were sometimes designed to placate a popular electorate which was getting increasingly restless due to the parasitism of the profiteers, but always aimed at shoring up the profits of the same profiteers. In any case, these nationalisations never reduced the looting of India by western capital.

As a result, instead of the value produced by the Indian proletariat being re-invested into the economy or into collective facilities designed to improve welfare conditions or education, a large part of this value went straight into the coffers of London's City and, later on, those of Wall Street. And this is what mostly accounts for the differences which exist between India and China.

Because, by contrast, by imposing complete economic isolation on China, to punish Mao tse-Tung for his victory over Chiang kai-Shek in 1949, the US leaders shot themselves in the foot. Mao had never wanted this isolation. Once in power he had done everything possible to regain the favour of the US, but to no avail. The new regime had, therefore, to make do with its isolation, using the limited help it could get from the Soviet Union. But at least, and this proved decisive, it did not have to pay for the western shareholders' fat dividends, nor to abide by the economic diktats of their companies, for whom there was never any point in investing in infrastructure unless it boosted profits.

These two decades of isolation from the world market came at a very high price for the Chinese masses, who had to use their hands as a substitute for the machines that could not be imported. Tens of millions died in the regime's efforts to build a self-sufficient economy, capable of feeding its population, and a basic infrastructure - in a country which, outside a few areas, was among the poorest in the world.

Whether the bloody cost of China's forced economic development was higher than the cost of the brutality of "normal" exploitation in India, is an open question. But eventually, by preventing western capital from taking its cut out of all this labour for two decades and forcing China's state to play a central organising role in the economy, the imperialist blockade resulted in a substantial advantage for China over neighbouring India. And this, despite the fact that both countries started from more or less the same level of poverty at the end of the colonial era.

Nearly four decades after China finally returned to the imperialist fold, in the early 1970s, this comparative advantage remains very prominent, as was illustrated, for instance, by statistics compiled in October by The Economist. Just to take three measures of social development, they show that while life expectancy is now 73 in China, it is still 65 in India - a level that had already been reached in China in 1975! Likewise, 19 children under-5, per thousand, do not survive in China, as opposed to 66 in India - a level that had been already achieved in China in 1978. Likewise, again, for the adult literacy rate among the over-15s, which is 94% in China as opposed to 63% in India - a level that had been reached in China in 1986.

Today, against all historical evidence, western commentators' still complain that "too much state", as they say, is the cause of all the problems experienced by both countries. Nevertheless, it is precisely the economic intervention of the state which prevents the total destruction of these countries' social fabric by the parasitism of capitalism - although, again, this is far more the case in China than in India.

This being said, the levels of child mortality in both countries show clearly that, despite their growing GDPs, they are still poor countries. So, for instance, the population living on less than $2.00 a day (£1.26) is 36% in China and 76% in India! If the international definition of poverty is used (an income under $1.25 or 80p a day), the 42% of Indian poor and the 16% Chinese poor make up together 49% of the world's poor, whereas the two countries account for just 35% of the world population!

What numbers can and can't say

Last August, newspapers headlined the fact that China's GDP had overtaken that of Japan, making it the world's 2nd largest economic power - although it was still nowhere near 1st place, with only one-third of US GDP. Nevertheless, this was hailed as no less than an "historic breakthrough" for the Chinese economy. But what does this mean, exactly?

If the size of the population is taken into account, China's total GDP may well be larger than Japan's, but its GDP per head of population is still just over one tenth of Japan's, and even less than that when comparing to the USA's GDP per head, despite the large size of the US population. To put things differently, it means that China's GDP per head today is equivalent to what it was in Japan 50 years ago and in the USA a century ago. Talk of a "historical breakthrough"!

As to India, it remains very far behind China both in terms of its GDP, which is 28% that of China, and its GDP per head, which is 30% that of China.

That being said, as usual, GDP figures should be taken for what they really are: numbers which do not mean very much from the point of view of the population.

GDP figures are supposed to measure the wealth produced by a given country over a year. The economists of the capitalist class use two main ways of calculating this measure. One is to add up the prices in dollars of all the goods and services produced, using the current currency exchange rate - this is what they call "GDP at market prices". The other is a more complex calculation, which adds up the prices of the same goods and services, but each is priced according to what it would cost if it was produced in the US - this is what economists call the "GDP at parity purchasing prices" or "PPP-GDP". For instance, instead of pricing a haircut at 50 cents (its cost in India expressed in dollars and cents), it would be priced at $15, its cost in the US, for the purposes of PPP-GDP.

This PPP-GDP, which is always significantly higher than the "market prices-GDP" in the poor countries, was invented to back up the claim that the poor countries are actually richer than they seem. But in fact, it conceals the differences in labour costs between the rich and the poor countries and, by the same token, the fact that the populations of the poor countries get very little in return for their labour.

Whichever way GDP is calculated, it is an aggregate of all the new value produced, from the point of view of the market. So everything counts. Products which are dumped, because they are faulty, are counted, because between the time when they were produced and the time when they were found to be faulty, they had a market price and represented a new value. Socially useless or even lethal products are counted just as much. So is the value gained by houses when they are sold compared to the price for which they were bought - even though, this value is purely abstract and corresponds to no actual labour. More importantly, in the case of countries such as China or India, with large export industries, products which are exported are counted in GDP. So that in the end, changes in GDP cannot give a measure of the change in the conditions of the population, let alone of each one of its sections.

So what do the 2-digit annual rises in GDP which have been the norm for China and India over the past years really mean? Because a rise in GDP does not necessarily mean the same thing everywhere or in all circumstances. For instance, in the smaller rich countries, where a sizeable section of the population lives on a reasonable income and benefits, in addition, from the wealth accumulated by the previous generations (in the form of housing, in particular, like in Britain), production for domestic consumption represents a large part of GDP. So, in such countries, a rise in GDP is more likely - but not certain - to reflect an increase in the well-being of the population, or at least of that better off section of the population. But in China, where production for export and infrastructure make up over 67% of GDP, a rise in GDP is far less likely to reflect an increase in the well-being of the population, especially if it happens at the same time as an increase in exports - except, of course, for the tiny minority of very rich capitalists who benefit from the export economy.

The "market of the century"?

In the 1990s, the use of Chinese or Indian subcontractors by western companies was still exceptional. The great game of the time was still to lend money to real estate developments, in Shanghai and Mumbai, earning attractive interest rates in return, or to gamble on the Hong King stock market - the financial entry point into the Chinese economy. However, the gamblers got cold feet after the 1997 south-east Asian crash and pulled out as quickly as they could.

By the early 2000s, subcontracting really took off, but the main craze was still to try to tap the Chinese and Indian domestic markets, at a time when there was slack in demand in Europe. France's Carrefour, Europe's largest supermarket chain, moved into China during that period, while western car manufacturers set up shop in the largest cities. Car sales soared from 750,000 in 2001 to 2.1m in 2003, but the following year they fell, without anyone being able to say why. At the time, it was estimated that China offered a potential 50-million strong market for cars, which, of course, was enough to attract companies whose western markets were clobbered with rival brands. Whether this estimate was accurate, was another question, though.

Today, depending on whom you believe, the size of the Chinese "middle class" ranges somewhere between 150 and 300 million - i.e. at most 23% of the population. However all the so-called "experts" seem to agree on one thing - that, by 2020, this "middle class" will represent 48% of the population: 700m out of 1.5 billion.

But what does this so-called "middle class" really consist of? A study published in July this year, is useful in providing some insight into this class despite its title ("the extraordinary challenge of the Chinese middle class") which betrays its rather starry-eyed approach to the subject. This study explains that "a Shanghai couple living on a £1,000/month income, has a 2-bedroom flat with western furniture, a Volkswagen Bora. They go out for supper twice a week, use an air-conditioner throughout the summer and take regular holidays in China - although they can afford to go from time to time to go to Thailand or Europe on a package tour".

However, the same study has to admit that such a couple really belongs to the upper-crust of the so-called "middle class". It goes on to describe the average "middle class" household as people like "university professors, small entrepreneurs and functionaries, whose wages are still modest, but who have been promoted to a high level of responsibility. They live in tiny, low-rent, state flats, furnished in a haphazard, old fashion way. They devote a large part of their expenditure to the education of their children and the rest is spent on household appliances. In most cases, a car or a holiday abroad is beyond their means. They sometimes improve their income by doing the odd job for the 'grey economy' or taking the odd bribe".

In other words, the average standards of living of this so-called "middle class" are actually much lower than for the average British working class household in full-time employment. This is confirmed by official income tax figures, which show that 88% of the Chinese population lives on an income below £300/month. At that level, anything beyond basic household consumer goods is just unaffordable.

So much for the consumer "market of the century", as it was described some years ago by The Economist. Leaving out the consumption of a few million Chinese millionaires, only supermarket chains and manufacturers of cheap consumer goods are likely to sell to the Chinese public for the foreseeable future.

The "workshop of the world"

In 2003, long after opening its borders to foreign investment, China finally became the largest single destination in the production sphere. The country turned into what came to be known as the "workshop of the world" thanks, among other things, to the setting up of gigantic "Special Economic Zones", in which foreign companies could benefit from ready-made infrastructure, loose labour regulations, low taxes and low wages.

Chinese exports surged. But over 50% of these came from foreign-owned factories - and that proportion has remained more or less the same ever since. In other words, the resulting profits were mostly recycled in the West with only a tiny fraction of the value created by Chinese workers remaining in China.

One example illustrates this point - Apple's 5th generation video Ipod, which is assembled in China. Its most expensive elements include a hard disk made by Japanese giant Toshiba, electronic chips made by US companies Broadcom and PortalPlayer, a memory card made by South Korean company Samsung and, of course, the software made by Apple itself. All these elements have to be imported into China. Only the Ipod's LCD screen and its casing are actually manufactured in China, where the final assembly takes place. Once the finished Ipod reaches the US market, it is sold for $299 a piece. Out of this, only $4 remain in China, of which just $1.50 goes for Chinese workers' wages. The remaining $295 go into the pockets of the various giant companies involved, with the lion's share ($80) going back to Apple.

The primary objective of imperialist countries' companies, small and large, operating in China was to take advantage of the very low cost of labour. So many of China's foreign factories were set up by firms which specialise in contract work. For instance, on its own, Taiwanese subcontracting firm Foxconn employs 900,000 workers across China. They work on contracts with giant imperialist firms like Hewlett-Packard, Apple, Sony, Motorola, Nintendo, etc. These subcontractors, together with a much smaller number of fully-owned subsidiaries of imperialist giants, make up most of China's foreign-built industrial infrastructure and account for the largest proportion of China's exports.

But imperialist companies have found other ways of parasitising the Chinese economy, which are just as, if not more profitable, by turning themselves into subcontractors of the Chinese government and local authorities for large-scale infrastructure projects, selling their technology and expertise for an exorbitant price. This has led to many costly "white elephants", all very profitable for western contractors, but with a very questionable usefulness.

A typical example is the Shanghai Maglev Train, the 18-mile high-speed magnetic-levitation line linking Shanghai's International airport to the town's underground system. It was contracted from German giant Siemens at a much higher cost per mile than any of the other high-speed lines built in the country since. But the Maglev is hardly used by Shanghai's 23m inhabitants. It has been running at around 25% of capacity and remains empty most of the day. Finally, last year, the initial plan to use the Maglev to provide a link for the 8m inhabitants of Hangzhou, which is 100 miles away, was shelved and the future of the Maglev is now in serious doubt.

In what way does the Chinese population and economy benefit from such parasitical contracts?

Taking the crumbs left by imperialism

Not that there are no powerful Chinese companies. Almost 10% of the world's 500 largest companies are Chinese and much has been said about the dark motives they are supposed to have when they dare to venture into the rest of the world. Of course, this is rather ironical given the way in which the rich countries' companies have been preying on China for more than a century!

In their attempts to expand their activities, the large Chinese companies come up against a whole series of obstacles. The first of these is due to their history. These Chinese giants are partly or totally privatised former state enterprises, whose activity had always been focused on the domestic market. Unlike their imperialist rivals, they are not the result of successive mergers, in which one company takes over the market of another in some other part of the world. So the Chinese companies have to fight every inch to establish themselves in an already overcrowded world market.

But another limitation arises when they try to set foot in the rich countries. More often than not, they have been stopped from doing so, especially when it came to so-called "strategic" industries. For instance, when CNOOC (China National Offshore Oil Corporation) tried to buy the US oil major Unocal, which was virtually bankrupt, in 2005, it caused a huge uproar in the US Congress and was eventually blocked by the Bush administration. In the end it was Chevron which bought Unocal, and at a lower price than CNOOC's offer to Unocal's shareholders! Ultimately, the Chinese giants have to satisfy themselves with marginal assets, such the MG car manufacturer - what is left of the Rover Longbridge plant, near Birmingham - which, in Britain's finance-dominated economy, is hardly considered "strategic".

In other words, rather than "conspiring to take over the world", the Chinese companies have no option but to take the crumbs that imperialism condescends to leave for them.

China in Africa and vice versa

This is why Chinese companies have succeeded in increasing their profile in Africa. And all the more so, as Chinese businessmen and petty traders, keeping links with their homeland, have been established for a very long time on the African continent. Some may even have been descendants of semi-slaves or indentured labourers who came to Africa in previous centuries. So Chinese trade with Africa is nothing new.

If Chinese direct investment in Africa has grown on such a scale, however, it is also because China lacks the raw materials that can be found in Africa, while, over the past 2 or 3 decades, the big western mining companies have chosen to increase market prices rather than production. This left a growing vacuum of investment in all but the oil-rich African countries.

In 2008, China replaced the USA as Africa's largest trading partner with £67bn worth of trade, while Chinese investment reached £62bn the following year. It also became South Africa's largest trading partner and bought 20% of the South-African-based Standard Bank, which is Africa's largest lender. Most often though, Chinese companies provide services or build infrastructure for which they request to be paid in raw materials.

So, in Angola, which is China's second most important source of oil today, Chinese state banks and private capital have provided credit for the Angolan regime, when the IMF was not willing to do so, after the country's devastating civil war. Reconstruction in Angola has been financed by 3 oil-backed loans from Beijing under which Chinese companies have built, or are in the process of building, roads, railways, hospitals, schools and water systems. Nigeria has had similar loans, to build gas fired power stations. A hydro-power project in the Congo will be paid back in oil and another in Ghana in cocoa beans.

There are significant issues about which Africans complain. Undoubtedly, existing shady practices in China, especially as regards mining health and safety, have been exported. For instance, China has bought mining interests in Zambia, which is now its main source of copper. But Chinese companies have made little investment in the mines. They are only interested in extracting the copper. So there have been many accidents and deaths. New President Michael Sata thus came out with a lot of anti-Chinese rhetoric during his election campaign although he has since eaten his words. Nevertheless Zambian copper miners have seized the opportunity to strike for better wages and conditions.

Cheap textile production facilities have also been set up by Chinese companies in Africa. Along with cheap Chinese imports, they have sometimes wiped out local production. This is especially the case in South Africa where import-substitution factories manufacturing most commodities had been set up during the era of sanctions against apartheid. These have mostly shut down in the last 10 years.

But is China taking over Africa? Of course not. The bulk of Africa's most profitable production - upmarket flowers and fruit, which is flown every day to Europe, plus diamonds, precious and rare metals, oil, coffee, rubber gum, cocoa, tobacco, etc.., remain firmly in the hands of a small number of big imperialist companies dating back to the colonial days. Their interests are protected by their monopoly position in maritime transport and by "friendly" regimes. The Chinese newcomers are certainly not in any position to threaten their long-standing takeover of Africa!

However, China's latest entry into Africa does make the world a smaller place in the very best sense. As South Africa's China Monitor journal (from Stellenbosch University) noted recently - Africa is in China as well: "In the past decade, tens of thousands of African traders have arrived in Guangzhou (...) They gather around several major wholesale markets near the old railway station in the city and purchase Chinese manufactured goods in bulk for shipping back to West Africa. Many traders manage to open their own shops and become middlemen in the lucrative global business. Due to the large African population, districts of Sanyuanli and Xiaobei have become known as 'Chocolate City' and 'Little Africa'".

China's dependency on imperialism

The huge increase in Chinese industrial exports is usually said to prove that China is becoming one of the world's major powers. But instead, as we have seen, it has only increased China's economic dependency on the capitalist market. But what about the claim that, due to its colossal stockpile of foreign currency reserves, the Chinese government has more leverage over the world financial system than any others, or even that it has the financial means to bankrupt the US economy?

China huge currency reserves are due to the big surplus of China's exports over its imports, which reflects, at least in part, the very low level of consumption of the population. And since they are prevented from investing this surplus outside China into something really profitable, the Chinese authorities choose the least wasteful option: they buy foreign government bonds with their currency surplus - which, unlike cash, at least pays some interest, even if it is very low.

As for the "Chinese anti-American conspiracy" theory peddled by some of the most reactionary (or demagogic) US politicians, if Beijing is piling up large quantities of US government bonds (or Treasuries, as they are called) it is simply because the US has, by very far, the world's largest public debt. In fact, the composition of China's currency reserves follows the standard pattern used by the main countries' central banks: 60% in US dollars and Treasuries, 30% in euros and euro-bonds, and 10% in yen, pounds and other minor currencies.

What makes China's US dollars and Treasuries stockpile so huge, at $2.6 trillion (£1.64 trillion) is the very size of its exports. But does that stockpile give China any leverage over the US? Not much, as the sorry tale of its failed takeover of Unocal shows.

In fact, the reverse is the case. China pays an inordinate price for the dubious privilege of stockpiling dollar assets. Whenever the dollar goes down against other currencies, as has been the case since 2007, and several times before, this automatically reduces the wealth piled up by China. Of course, this mechanism has always allowed the US economy to use its dominant economic position to export its inflation to every other country. But it affects China more than any other because the size of its dollar assets, at almost 50% of its GDP, is so large compared to the size of its economy.

As the story goes: if Jack owes a small to medium sum to Paul, then Jack has a problem; but if Jack owes a very large sum to Paul, then it is Paul who has a problem. This summarises the relationship between China and the US. Because the US owes such an enormous amount of money to China, due to China's holdings in Treasuries, it is China which has a problem, not the US.

To claim that Beijing could blackmail the US by threatening a fire sale of US Treasuries assumes that the Chinese leaders are suicidal. Even if enough buyers could be found, which is hardly likely for such an enormous amount, not only would such a move reduce considerably the wealth accumulated by the Chinese state, but it would catapult international finance into such a mighty storm that the turmoil of the past four years would look like a mild shower - and it would bring international trade, and therefore also China's exports, to a standstill.

Far from being a danger to the US economy, the huge quantities of Treasuries bought and stored by the Chinese government helps - whether it likes it or not - to keep down the interest rate that the US government has to pay on its debt. As former IMF economist Kenneth Rogoff puts it, "this enormous subsidy to American taxpayers is, in many ways, the world's largest foreign aid programme".

This does not mean, however, that the US government is grateful to China for helping it with its public debt. Just as with Japan and the "Asian Tigers" in the past, the US keeps putting pressure on China to revalue the renminbi (the Chinese currency) against the dollar, so as to allow more US products to be sold on its market. And in this case, one can really talk about blackmail, since China has been threatened repeatedly with the imposition of duties on Chinese goods which were considered "uncompetitively priced" in US dollars. And so, since 2005, China has had to increase the exchange rate of the renminbi against the dollar, by 24% so far, with the result that an even smaller proportion of the value incorporated by Chinese workers in exported products remains in China.

The impact of the world crisis

One major consequence of the collapse of Lehman Brothers, at the end of 2008, was an overall 8% fall in the volume of international trade over the following 18 months or so - a fall which is continuing, albeit at a reduced rate. But China's and India's drop in exports has probably been even more drastic - with all the consequences this may have in terms of job cuts and factory closures.

In the case of China, the figures speak for themselves. Between March 2008 and March 2009, exports dropped by more than a third. At the time, says a report published this month in the Financial Times, "thousands of factories closed and 23m migrant workers poured out of cities". Although the fall did not carry on at the same rate after that, the fact is that between their 2008 peak and 2010, Chinese exports have fallen by 25% as a proportion of the country's GDP. And things are not improving, judging from same report, which gives the example of the eastern town of Wenzhou, where factories specialise in cheap consumer products, like glasses, lighters, shoes, etc.. : "Dozens of factory owners in the city have absconded in recent weeks, leaving workers unpaid and mountains of debt (..) In one tragic case, the owner of a Wenzhou shoe factory who owed more than £40m committed suicide."

In the case of India, things are no so clear. At first, exports began to fall just like for China. But then, in late 2009, they began to recover mysteriously, baffling economic commentators. Eventually, the only explanation that economists could come up with, was that companies were "over-reporting" the prices of trade transactions in order to conceal illegal transfers of large amounts of cash. So, it is likely that Indian exports did fall, although no-one can tell by how much.

When it comes to industrial production, the picture is somewhat different. In China, it has been stagnating more or less at the same level as a proportion of GDP over the past two years - which means that a larger share of this production is being used in China, or possibly mothballed, waiting for better times. In India, meanwhile, industrial production has also more or less followed GDP increase, although rather less lately, so that by now, industrial production per head of population is actually lower than it was 2008.

Another serious consequence of the crisis in both countries has been inflation and, in the case of India, monetary havoc. While in China, overall inflation has been hovering around the 6-9% range, inflation on staple food prices has been much higher. Over the past year, for instance, all food prices taken together have increased by almost 15%, but pork meat - which, with chicken, is the meat most often eaten in China - has increased by 57%! This appears to be due to the removal of state subsidies to pig farming and, also, to municipalities selling land previously used by pig farmers. But these sales of municipal land are themselves an indirect consequence of the crisis, as they reflect the municipalities' attempts to raise cash to make up for losses in other areas, especially in their small-scale industrial activities.

In India, not only has the inflation rate been above 10% ever since 2008, but the exchange rate of the Indian Rupee - which is floating freely unlike the Chinese renminbi - has fallen by over 25% against the dollar so far - which is fuelling inflation even more.

India: inflation and attacks against the poorest

At the end of 2008, just as in the industrialised countries, but in different ways in each case, the governments of both China and India have mobilised their resources to help out their respective capitalists.

In India, the official policy has been to focus on trying to stop the exchange rate of the Indian rupee from falling even further - of course, at great cost to the Treasury, and therefore the working class and poor. Initially, the government just tried to use its currency reserves to prop up the value of the rupee. When this proved a complete failure, it resorted to another age-old trick: it increased interest rates. Except that so far, over the past 18 months alone, the Central Bank has had to increase its rates 12 times in total, reaching the 10% level by now - which is also another factor pushing inflation up in India itself and reducing the standards of living of the population.

At the same time, Indian ministers have done what can be expected from any bourgeois politician: they have distributed state money to companies and therefore to their shareholders (in the form of various tax handouts, which add up to a total tax cut of around 20%), while cutting public expenditure. The irony is that these handouts were made at a time when the Indian capitalists had embarked on a huge binge of borrowing and real estate speculation. Obviously, seeing the US housing crash from a distance was not enough for them, they seemed to want to feel the thrill for themselves!

As to the austerity measures, probably the most outrageous is the slashing of food subsidies for the poorest. Those spending more than the equivalent of 40p/day in urban areas or more than 33p/day in a rural area, will no longer be classified as being "Below the Poverty Line" or BPL in official parlance, and therefore, they will lose any assistance with food - despite the fact that by the time they reach such a low level, they'll probably be starving and sick, if not dead! In addition, there is a plan to dispose of the network of depots which distribute food aid (to save money, of course) and to provide this aid in the form of coupons, supposedly convertible in all shops - but, of course, depending on shopkeepers' goodwill, not to mention the risk of their taking a cut out of the food subsidy!

China: bailout and speculative bubble

In China, state intervention took a very different form. Of course, Beijing did not have to deal with the problem of a floating currency, since the renminbi is kept artificially within a fixed range against the dollar. In addition, Chinese leaders have a trump card that the Indian government does not - a massive state-controlled banking system that can be used to put money wherever they need it.

As a result, when things began to look really ugly, in 2009, Beijing just ordered the state-controlled banks to increase total bank lending by a third. At the same time, municipalities were given new powers to sell more of their land, quicker and with fewer controls - as well as to borrow more from the banks for large-scale developments. And real estate developers were presented with a trimmed down planning system. The aim of the exercise was to help the capitalists to make up for the fall in exports, by creating a construction boom.

The problem was that the medicine turned out to be, if not more dangerous, at least as dangerous as the disease. Within a year, bank lending had got completely out of hand. There were construction sites all over the place, which helped to absorb some of the workers laid off as a result of the international trade slump. But everything was done on an ad hoc basis, without any plan, neither short nor long-term - no plan on a national or regional scale, of course, since this would have smacked far too much of the "bad old days" for foreign investors, but no plan, even on a local level, either.

In October, a Chinese building trade journal estimated that the total apartment floor space available in Chinese cities was equivalent to 570 square feet for each existing city dweller, and that another 40 square feet per head will be completed by next year. It concluded that, even if a hundred million migrants moved into the cities over the next year, that would still leave a massive number of these flats empty, especially as most are totally unaffordable for the vast majority, anyway. The government has "invited" real estate developers to build affordable homes and new rules have been introduced preventing individuals from buying several flats and leaving them empty. But will this convince developers that they should build decent flats for rent rather than expensive flats for sale, and flat landlords that they should demand reasonable rents? This is somewhat doubtful.

In order to avoid a banking meltdown, the government first ordered the banks to increase their core capital - no less than four times in less than a year. Finally, last year, when it became evident that the increase in bank lending was not even slowing down, drastic conditions were introduced for companies and individuals to borrow money from the banks. But it did not stop the craze. Only the borrowing binge shifted to the unofficial banks - in opposition to the state, or private unregulated banks - that Chinese commentators call "underground" or "grey" banks. These "grey" banks were initially designed for short-term loans, to make up for the length it took - not to mention the conditions required - to get a loan from regulated banks. To reward themselves for this service and for the risk involved in operating illegally, they demand much higher interest rates - for instance 4.5% a month, which may not sound much, but actually works out at 70% a year! These "grey" banks were so successful that they began to take deposits, at a much higher rate than the 3.25% offered for regulated deposits, of course. And dozens of billions flowed into the "grey" banks' coffers.

So the limitations put on regulated lending only resulted in an explosion of "grey", unregulated banking. Everyone seems to be using it, including businesses and municipalities. There were numerous stories about the enormous debts which were built up as a result. The Financial Times reported the case of Jin-Libin, a millionaire, who set himself on fire, last April to escape his creditors: his business owed £15m to the regulated banks, but an additional £123m to "grey" banks.

By May this year, it was estimated that "grey" bank loans had reached £400bn and that the total was bound to double within a year. By that time the authorities were confronted with another fast escalating problem - the municipalities' debt mountain, which was already estimated to be somewhere between £1.5 and £2 trillion - a figure close to half of the country's GDP! At that point, as a pre-emptive step, the government decided to write off £300bn of this mountain and the Chinese central bank stepped in to cover the losses of the lenders.

Of course, one may think that with its enormous reserves, the Chinese state can easily deal with all these problems. Well, easily is certainly not the right word, especially as in order to use its reserves, it would have to sell them, or use them as security to borrow money abroad, which amounts to the same thing. Besides, the total outstanding "bad debt" (municipalities, property developers, bankrupt firms, etc..) is most certainly already much larger than China's currency reserves. So, since they won't do anything against the profiteers who are driving the economy to the wall, the Chinese leaders are going to have to print money in some way, just as Obama and Osborne did, but without even the back-up of a rich economy behind them, to cushion the blow. And that can only mean far more poverty for the working class and poor, much like in India.

China's workers: making i-phones and i-waves

What about China's working class? The Pearl River Delta around the cities of Hong Kong, Shenzhen and Guangzhou was China's first successful Special Economic Zone and today is the most densely populated and contains the biggest concentration of industrial facilities in the country, employing around 25 million workers. These workers make every imaginable commodity, including so-called global brands, for both the Chinese and export markets. Most of them are migrants, which in China doesn't mean from other countries, but from other areas, or now less commonly, rural heartlands - either legally, with an up-to-date permit, or illegally, with one which has expired, or without any permission at all. Migrants are given 2nd class citizen-status, with restricted access to medical, accident and unemployment insurance, and no right to settle in the locality they work in. But recently local commentators are speaking about a "new generation" of migrant worker - who is street-wise, more educated and urbanised and plugged into the free QQ messaging community (almost 900m Chinese apparently participate) on the web. And it is this new generation which is said to be responsible for some of the progress in workers' self-organised strike victories, and successful challenges to the state-linked union.

We are going to look at two examples to illustrate different aspects of the current situation.

So first a word about the IT workforce. In the West, many heard about Foxconn's giant 300,000-worker-strong production complex in Shenzhen for the first time in May 2010, when there were news reports of workers committing suicide by jumping from their high-rise dormitories. And it was probably due to the fact that Foxconn workers were making expensive Apple i-Phones and i-Pads that this became a media issue.

Of course, Apple bosses washed their hands of any responsibility for the suicides, just as they did when it came out that 176 workers in one factory had sustained neurological damage due to the use of n-hexane to clean phones. The same went for the chemical fire that killed 3 and injured 15 May this year in the large Chengdu facility also owned by Foxconn. Hi-tech, low safety is no problem if it means hi-profit.

In Shenzhen's so called "Longhua Science and Technology Park" workers not only live on the job in high-rise dormitories, but have the use of libraries, sports and medical facilities in this "park" as well. But this is of necessity, since they are encouraged, if not expected, to spend all their time near the job, with little time off, thanks to their 12-hour shifts and pressure to work overtime. In the factory itself, most work involves sitting at incredibly long benches in stark laboratory-like conditions or standing at fast-moving assembly lines for 8 hours before they can take a break. There is always pressure to work fast, with a stringent disciplinary code and tight security.

The cluster of 10 suicides and 2 failed attempts in 6 months up to the end of May last year was a factor in forcing some improvements in working conditions and pay, since prominent companies like Apple had to be seen to intervene, while pleading ignorance of the poor conditions. Foxconn eventually agreed a pay rise and a reduction in overtime, raising basic pay of £90/month (which can be doubled with overtime) by 70% to £150.

We are told that by "Chinese standards" Foxconn is not a bad employer - it pays social security contributions, offers cheap housing and food and pays overtime at the legal rate! But of course, what it also offers, is an unbearable claustrophobia, monotony, and the constant pressure of work and fear of failure, without let-up and with little or no time to socialise - and all this for little more than the minimum wage. It's really nothing but a high tech sweatshop, on a massive scale. But now it also has psychiatrists and Buddhist monks on hand to offer counselling in a bid to prevent these conditions from driving yet more workers to desperation.

The state trade union ACFTU is present at Foxconn, as an "enterprise union". On 3 November 2010, the head of the ACFTU's "Democratic Management Department" (whatever this may mean!) criticised the company for violating the law and for having serious problems in its management system. But he also said that while Foxconn clearly had a responsibility for the suicides, the primary responsibility lay with government monitoring and supervision of labour relations. Then in March this year the ACFTU Vice Chairman Zhang Mingqi claimed that the ACFTU and the Guangdong Federation of Trade had "helped improve" the Foxconn trade union, allowing it to communicate the wishes and demands of workers to management, and resolve disputes through reasonable and legal channels... ... Sure, and everyone believes it!

China: striking over wages

The second example is about workers in supplier companies for the car industry, also in the Pearl River Delta. Honda and Toyota actually produce cars in factories in Guangzhou in a joint venture with one of the 6 state-owned Chinese car makers, controlled by the local provincial government - as is required by Chinese law.

Honda and Toyota core factories do not rely on labour intensive methods. Their factories feature the latest methods - lean and mean production and "management by stress" as it is known. Their workers are paid £250 basic/month but get bonuses, profit-sharing and overtime - sometimes earning an extra 6-months-worth of wages in a year. Their overtime however, is within legal limits - which proscribe more than 36 hours overtime a month based on a 40-hour week - a lot less hours than workers in car factories in Britain habitually work! However the workers in the supplier factories - which are also clean and air conditioned, get only the legal minimum wage of £70-90/month and are often pushed to work overtime beyond legal limits. But again, their overtime may allow them to double their wages. They are mostly young, new generation migrants.

Last year on 17 May, 2,000 such workers at the Honda gearbox supplier factory in Foshan went on strike after they were not given a rise in pay, in line with an increase in the local minimum wage from £77 monthly to £92. This rise was announced by Foshan city government in response to the rising cost of living - a rise which the central government was pushing local governments to implement.

When the workers who initially stopped the line were suspended, the strike became indefinite and hit the main Honda factories in Guangzhou and Wuhan in central China. 100 thugs in union caps were sent to intimidate the workers - but they refused to budge and stood by their demand for an £80/month raise, a seniority bonus of £10 for every year worked and automatic increases of 15% per year. They also demanded free, elected trade union representatives as opposed to the imposition of representation by the official union (ACFTU) - which exists in most of the state and joint venture factories, administering welfare programs and acting as an adjunct to management, and which existed in this factory unbeknownst to most workers, who first heard of it when it stepped in to negotiate on their behalf after they stopped work!

After the attack by company (or official union) goons the workers wrote a letter outlining the reasons why they were on strike and also outlining their demands - a letter which was widely publicised and published on the internet. Within one week, the boss of the Chinese counterpart of the Honda operation took charge of negotiations and 30 worker representatives were allowed to participate, 5 of whom were allowed to speak. In the end the workers didn't get what they wanted, but they went back to work with a pay increase of £30 on base rate, and another £20 of subsidies and bonuses. This year in March, another raise was obtained - of £50-£80 per month depending on the category of worker.

While the chairman of the official factory union, who is a management crony, remains in his position (he earns £26,000 per year!), the provincial government has published a draft directive on "democratic management" which stipulates democratic elections for a factory trade union, plus bargaining rights for the shopfloor. The aim is, apparently, to establish a new framework for labour relations on the Western model, because yes, things do threaten to get out of hand, especially when young workers who have no connection to any bureaucracy are organising strikes.

The Honda strike triggered a wave of over a 100 strikes over wages in auto supply and electronics throughout the Pearl River Delta, in the following weeks, many gaining similar settlements.

In March 2011 the chairman of Guangzhou Automotive proposed new legislation on labour conflicts which would legalise economic strikes and provide a legal framework for wage negotiations. If workers, especially unruly young migrants, are taking struggles into their own hands, a legalised framework where unions help stem this dangerous tide is certainly needed, from his point of view. No doubt the likes of the TUC's Brendan Barber would be pleased to offer advice in this regard.

Indian workers struggling on

In order to talk a bit about the situation the Indian working class finds itself in, we can again only be rather anecdotal because we are not on the ground there, in any sense whatsoever, and cannot give a good overview as a result.

First, therefore, some perspective. Although trade unions in India go back to the 1890s when Bombay mill hands formed a union, today 93% of the total working population of 457.5m is in the so-called unregulated, informal sector of the economy and therefore has no union representation, nor legal right to any kind of employment protection or wage bargaining.

That said, the 6-7% of workers in the formal sector, who are not all unionised anyway, are also in a precarious situation, with the few rights fought for so bitterly over the past century being taken away bit by bit. The Essential Services Maintenance Act allows governments to ban strikes in what they deem to be public utilities and essential services - with 3 years in prison and a large fine if you go against it. But recently private companies in the IT sector have decided that they fall into this category to take advantage of the ESMA, with the excuse that they are essential to India's economic growth strategy!

There is another problem though. Latest figures show that while the percentage of the population of working age goes on rising, the growth in jobs is more or less stagnant. So in the last 10 years, while the number of workers increased by 159m, only 65m of them got any kind of job at all. As for the overall picture of employment, this reflects a typical underdeveloped country - which is obviously not the official image India likes to project: half of all workers describe themselves as "self employed", a third do casual labour and only 16.6% have regular, salaried employment - and as said previously, there are just 6-7% in the organised, state-regulated sector. This is the situation after two decades of manic economic growth which was supposed to turn India into a "rich country" and a "world power"!

There are today probably around 1.4m workers in the IT and business processing (so-called BPO) sector which is seen as India's flagship "sunrise" industry. 65% are in call centres and 35-40% in back office jobs for UK, US and Australian companies. Workers earn an average of £150 per month and that is considered a good salary.

Unions try to organise this sector by forming loose associations which workers from all around the country can join, but they have decided not to try to build enterprise-based unions. It is not easy for the workers in electronics and IT to form unions - they have examples from way back to discourage them - like when workers at Bangalore's British Physical Laboratories (BPL) which makes telephones, medical and scientific equipment and household appliances, tried to form a union back in 1998. 800 of the 10,000 strong workforce who had joined and all the office bearers were promptly sacked. In November 1998 a strike was begun and in the course of this initial dispute a BPL bus was burnt killing two female workers. Accused of being responsible for this incident, 12 union leaders were sentenced to life imprisonment. They are still in jail and fighting this sentence today.

Another example, which is a bit more recent, is the case of Honda Motor and Scooter India (HMSI) in the Manesar, Gurgaon plant. This is one of those obligatory joint ventures with Honda Japan which in 2004 employed 3,000 permanent workers and 1,000 casuals.

After a manager had kicked a worker, then terminated the 4 workers who came to help him and then suspended 50 who protested against this, the workers decided to get organised. They formed a union which was registered in May 2005. HMSI then imposed a good conduct undertaking on the entire workforce - which is and has become, a usual way of trying to break workers' resistance. This undertaking involved signing up to no strikes, no union, and no pay rises until 2008 and if they refused they would all be locked out. On the same day a union official was thrown from the 3rd floor - who luckily survived with several broken bones. The workers refused to sign and were duly locked out. The following month a protest march they organised was attacked by police with many severely wounded by police clubs. Since this was seen on public TV, causing some public outcry, eventually, after 32 days of struggle the locked-out workers were taken back. Afterwards came the much quoted Japanese Ambassador's comment : "This is a disadvantage" said he, "to India's image as an FDI destination".

In October 2009 when 80,000 workers from the same Haryana state, which rather injudiciously calls itself India's Detroit, went on strike over the death of a worker in the Rico Auto company, they were unable even to win the right to form a trade union, though it is a legal right on paper.

On the other hand, Hyundai motors near Chennai was forced to recognise a union that year, and reinstate sacked workers. But this was only after an intensely fought indefinite strike and prolonged campaign through the courts. As to what happens in the current Maruti Suzuki strike in Haryana (ongoing at the time of writing) which is really over the same issues, remains to be seen. So far the workers have never really realised the potential of their collective strength due to the sectional perspective of the union apparatuses which vie to organise them.

It should be said that if the situation is so difficult for the 7% of workers in the organised sector, that is those companies which like Maruti, and all the new IT/BPO companies, come under state regulations, how much worse is it for the 93% of workers who work in the unorganised and unregulated sector?

No "emerging" economies, but a rising working class

So, to go back to the question raised at the beginning of this forum, i.e., whether the "emerging economies" represent, as we are told, the "dynamism" of the capitalist system, and indeed if this is this the best the system has to offer mankind at present.

As we have seen, if anything, they provide yet more evidence of the fact that capitalism has outlived its historical role. A system that can only survive by over-exploiting growing layers of the world population, while generating on-going crises and permanent poverty among the majority, is a system that mankind just cannot afford any longer!

As to whether the "emerging economies" can pull the capitalist system out of its present crisis, even temporarily, this is quite simply ruled out by their total dependence on the economies of the rich countries. If anything, as we saw above, the "emerging" countries are even more drastically affected by the crisis than most industrialised countries.

However, both in China or in India, what has already "emerged" is a working class numbering hundreds of millions, which is showing its militant capacity despite the absence of large militant organisations around which to organise.

Of course, working class militancy, in and of itself, is not enough to express the political interests of the working class and poor. But these militant struggles may be the trigger which will facilitate the realisation, in China and in India, that the working classes of the world can have a common future, free from the chaos and exploitation of capitalism, provided they build it together. Beyond these strikes, or any militant expression of the working class, it is this political collective consciousness which will be decisive for the future, in the "emerging countries", just as much as here.