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Editor's note: As the US election campaign approaches its climax, US presidential candidates are focusing their attention on China and Sino-US relations. As early as February this year, Trump said that if he won the election, he would not start a trade war with China, but would continue to impose high tariffs, at least 60% tariffs on all goods imported from China. Not long ago, he claimed that in addition to this, tariffs of up to 200% would be imposed on some Chinese electric vehicles and other goods.

During his current term in office, US President Biden has taken the decoupling of high-tech between China and the United States a big step forward; Harris, who will take over after Biden's withdrawal from the election, has not yet expressed her intention to proactively reduce tariffs.

In the face of potential future tariff challenges, the US's groundless accusations of China's overcapacity and the sustainability of the US economic development model, Observer.com had an in-depth discussion with Professor Remi Herrera, a famous French Marxist scholar.

【Text/Observer.com Tang Xiaofu】

Guancha.com: After Trump took office in 2016, the United States continued to wage a trade war against China on the pretext of reducing the trade deficit with China. However, the US trade deficit with China has not declined significantly in recent years, and even created the second-highest trade deficit record in history at $419.4 billion and $382.9 billion in 2018 and 2022, respectively. Why did this happen? Is there what the United States calls "unequal trade" between China and the United States?

Herrera:The US trade deficit with China has been expanding almost continuously for decades. This is not good for the US economy as a whole and has become an excuse for Washington to launch a trade war against Beijing. According to the US, the deficit in the US-China service trade record proves the correctness of Trump's claim that China "squeezes hundreds of billions of dollars" from the US every year and injects it into China's economic development.

It is undeniable that there is indeed a phenomenon of wealth transfer from deficit countries to surplus countries. But is the truth really that simple? Is this logic solid? What exactly is the so-called "wealth"?

Here, I question not only the view that China benefits from its trade relationship with the United States, but also the “fairness” of these exchanges. This is also a question that Marxists and other non-mainstream economic theorists have long raised.

Unequal exchange measured by various methods reveals a fact: for a given amount of trade in services, the total working hours of workers in one economy may be higher than the total working hours that workers in its partner country can provide, which will result in value transfer from the former to the latter. Only by taking into account the transfer chain of international value corresponding to the socially necessary labor time required to produce goods can the real wealth redistribution effect between the two countries' trade be reflected.

Anshan Iron and Steel workers are working on the blast furnace iron production process. Xinhua News Agency

Fortunately, in a scientific study that I conducted with my Chinese professor colleagues, we calculated the unequal exchange between the United States and China very rigorously. These calculations used several different methods, but they came to very similar results: there has been an unequal exchange between the United States and China over the past four decades; this unequal exchange has benefited the United States at the expense of China.

Because research shows that the labor content contained in the products exchanged between the two countries is different: the total working hours contained in the service trade products exported by China to the United States are much greater than the total working hours contained in the service trade products exported by the United States to China.

We calculated that before the pandemic, Chinese workers exchanged an average of 6.5 hours of labor for one hour of labor from American workers. Over the past four decades, this figure was 121 hours. Overall, over these four decades, we can observe a clear decline in the level of unequal exchange, although the latter has not completely disappeared.

This unequal exchange reflects the transfer of value from China to the United States and covers most areas of economic activity in China and the United States, including the textile, clothing, leather products industries, furniture and other supplies, electrical equipment and machinery, air transportation, wood products, rubber and/or plastic products, chemicals, and even accounting and management consulting activities.

So we believe that the unequal exchange that is unfavorable to China still exists, but the United States' advantage in the exchange is also decreasing. Or more precisely, it is precisely because the United States' advantage is decreasing that the Trump administration launched this trade war.

In fact, a trade war is nothing more than a commercial crisis initiated by a state. The US-China trade war is clearly an attempt by the administration led by President Trump to prevent the gradual erosion of the US's trade advantage over its emerging competitor China. However, this solution may lead to more serious consequences than the erosion of trade advantages, such as a further increase in the US trade deficit after stabilization.

Guanchazhe.com: What do you think of Western accusations that China has an overcapacity problem? What differences between the Chinese and Western models are reflected in these accusations?

Herrera:It is true that in recent decades, China may have experienced the so-called "overcapacity" problem in some economic fields, but "socialism with Chinese characteristics" itself means that this is not the ideal form of the communist cause. There are definitely some imbalances and many shortcomings, and it still faces huge challenges.

I think it is not time to ask whether China's "counter-model" (socialist, not capitalist) can be replicated elsewhere, but to try to understand the original core of China's political and economic system as humbly and objectively as possible. It is very common in the West to denigrate, beautify or simplify the path taken by the Communist Party of China in leading China, but this is not correct.

In fact, because China’s public ownership economy excludes private capital owners and holders from the most strategically important areas of production, and because these capital owners and holders have not conquered and disciplined the party and state institutions, I believe that China’s current system is not capitalism, but a kind of market socialism, or a socialist market economy, in which central planning still has a decisive influence.

China's inclusion of the concept of the primary stage in its concept of socialism shows that they also recognize that current socialism is far from perfect and that there are many contradictions that need to be resolved in the operation of the long-term socialist transformation.

The Kunlun completed the first high-speed railway beam laying mission. Photo by Xinhua News Agency reporter Song Weiwei

Here, I would like to list several important roles played by large state-owned companies in China's economy: they can provide more income to employees in the primary distribution; the state can more freely adopt the most suitable management model; and finally, public power can more easily participate in collective project services.

In addition, the state can directly participate in the distribution of state-owned assets and profits through direct participation in institutional management to support the public entities it needs. At the same time, state-owned enterprises can also enjoy many advantages, including credit lines and interest rates from state-owned banks. These, as we have seen, are part of the socialist development path.

One explanation for the strength of Chinese state-owned enterprises is that their management model is different from that of Western ones. The latter's management logic is completely guided by the logic of stock value, that is, the need to maximize dividend distribution, increase stock valuation and investment returns. And achieving these goals usually requires squeezing domestic or relocated sub-contractors.

If Chinese state-owned companies act in such a greedy way, they will cause serious damage to local small and medium-sized enterprises and even the entire Chinese industrial layout. If that happens, China will have a wild form of "state capitalism" that the Western media often refers to when smearing China, and we will not see such dynamic economic growth.

In fact, most of China’s public companies are (or already are) profitable again because their growth path is not to enrich their private shareholders but to prioritize productive investment and service to customers.

If they are at least partly motivated by the desire to stimulate other parts of the domestic economy and go beyond the immediate profit, it does not matter that their ultimate profits are lower than those of Western competitors, because these companies have higher priority strategic interests, which may be determined by the long-term interests of the company or the country.

SASAC data map

In my opinion, none of China’s state-owned enterprises should be managed like private groups. The establishment of a “socialist market economy with Chinese characteristics” is based in part on maintaining a strong public sector that is vital to the overall economy. All evidence suggests that maintaining this public sector is one of the fundamental explanations for China’s good economic performance, although I mean no offense to those neoliberal ideologues who advocate asset privatization and personal profit maximization.

Guancha.com: The Western economy is in trouble. Since the end of the last century, financial capitalism has dominated the economic development of Europe and the United States, while creating huge debts and inflation. As a Marxist scholar, do you think this debt-driven development is sustainable? What impact will it have on the economic development of Europe and the United States? How do you view the impact of this round of inflation on the future economic development and social inequality in the West and third world countries?

Herrera:The capitalist world is experiencing a half-century-long deep crisis. This round of debt crisis (or many debt crises) is just one of the multiple manifestations of this deep crisis. In fact, due to the intensification of the structural crisis caused by capital expansion and the extreme financialization of contemporary capitalism, one of the many publicly visible manifestations of the capitalist crisis has already appeared on its "financial surface". So what we are dealing with is a systemic, multidimensional crisis.

The crisis has affected the power centers involved in huge sums of money and complex financial transactions (so-called “high finance”), which have controlled more than 40 years of neoliberal accumulation, resulting in an overproduction of marketable products. This overproduction is not due to a lack of consumers, but to the excessive concentration of wealth, which means that more and more people cannot afford to buy the goods they need.

Moreover, instead of observing an overproduction of commodities, we are now seeing an explosion in credit and financial markets that allow capital accumulation in an increasingly abstract way and with “virtual” money. So it is important not to confuse money with financial operations on bonds and securities. Bonds and securities are not real money, but monetary capital.

Introducing the concept of "virtual capital" helps us better understand the current capitalist crisis. The principle of "virtual capital" is to capitalize future surplus value income. This "virtual capital" can be formed through bank credit and public debt, or in securities in the stock market, pension funds or speculative funds. As a result, capitalists have complete control over capitalist countries, which is also the logic of money making money in the current capitalism.

Even in this case, economic growth in the West can only be maintained by piling up debt, using credit lines and boosting consumption, but it is still weak. This credit expansion has led to a modern version of the crisis of overaccumulation of capital. Of course, this situation cannot be maintained forever. Sooner or later, there will be an inevitable and cruel "return to reality" time point.

The US national debt has exceeded 35 trillion US national debt clock website

After the 2008 crisis, the exhausted Federal Reserve had to undergo a recapitalization. The most decisive step the institution took to plug the collapsing monetary system was in October 2008 the “unrestricted” expansion of swap lines to central banks of other Northern countries and certain Southern strategic allies (including South Korea) to ensure their access to dollars and thus their relative stability.

In the United States, monetary policy has become "unconventional", with the central bank purchasing large amounts of private and public debt and securities from banks and multinational corporations through quantitative easing to ensure the liquidity and solvency of these companies. With the outbreak of the COVID-19 pandemic in 2020-2021, there was a large-scale resurgence of asset repurchases, interest rate cuts, special credit lines and corporate aid measures. Therefore, we see that the current mechanism gives the central bank the possibility of unlimited money printing, which obviously also maximizes the credit lines of private banks.

But in reality, there are limits to how much money a central bank can create. Private bank credit and the convertibility of central bank currency and domestic currency into foreign currency create problems that limit unlimited money printing; and these limits are also related to the creditworthiness of the authorities and the confidence of agents in these institutions. As the recession deepens, these constraints become stronger, which will lead to the risk of falling into a "debt trap" against the backdrop of rising interest rates.

Now, quantitative easing has been stopped due to the severity of inflation. Inflation has a disproportionate impact on the poorest sections of society. Inflation has become one of the manifestations of the class struggle within society: inflation reflects the intensity of the conflict between owners of the means of production and workers in all industries over the distribution of added value.

At present, the balance of power between capitalists and workers in the West is very clearly tilted towards the former, especially as many trade union leaders and left-wing parties (including the Communists) have become pro-system, or pro-capitalist and pro-imperialist. In times of severe crisis, inflation levels also reflect contradictions in the level of profit distribution among capitalists when the crisis intensifies and the profit rate falls.

Therefore, the combination of these two phenomena has led to the current inflation, which is caused by capitalists arbitrarily and unreasonably raising the prices of goods and services and speculative behavior in the market. Of course, other realities (such as epidemics and even wars leading to shortages of materials) can also exacerbate inflation. But the main cause of the current inflation is still speculation. The problem with capitalists is that they take too much profit without engaging in any production activities.

This article is an exclusive article of Guancha.com. The content of the article is purely the author's personal opinion and does not represent the platform's opinion. It cannot be reproduced without authorization, otherwise legal liability will be pursued. Follow Guancha.com WeChat guanchacn to read interesting articles every day.