Global Economic Crisis and China's Challenge to Global Hegemony: A Neo-Gramscian Approach

Abstract

This paper considers the question of whether the collapse of the global economy in 2008 and subsequent uneven national recoveries constitute an existential challenge to the legitimacy of hegemonic neoliberal globalization. Neo-Gramscian international political theory is reviewed, and its application to globalization and then the critical insights provided are used to describe China's embrace and subsequent rejection of neoliberalism to conclude that the near future of the global economy is likely to be one of ideological heterogeneity and thus unlikely to spawn a new hegemonic system of globalization.

Notes

¹ Ha-Joon Chang, “Breaking the Mould: An Institutionalist Political Economy Alternative to the Neo-Liberal Theory of the Market and the State,” Cambridge Journal of Economics 26:5 (2002), pp. 539–559; “The Market, the State, and Institutions in Economic Development,” in Ha-Joon Chang (ed.), Rethinking Development Economics (London: Anthem Press, 2003), pp. 41–60.

² Werner Baer, William R. Miles, and Allen B. Moran, “The End of the Asian Myth: Why Were the Experts Fooled?,” World Development 27:10 (1999), pp. 1735–1747.

³ Joseph Stiglitz, Freefall: America, Free Markets, and the Sinking of the World Economy (New York: W.W. Norton, 2010).

⁴ Robert Cox, Production, Power and World Order: Social Forces in the Making of History (New York: Columbia University Press, 1987).

⁵ Undoubtedly, the most dramatic moment of realization about this point came from the high priest of neoliberalism in the United States, former Federal Reserve Chair Alan Greenspan. According to the October 24, 2008, New York Times, under questioning from Representative Henry A. Waxman Greenspan admitted that his anti-regulatory ideology and belief in rational markets was, at least in part, wrong. See: < http://www.youtube.com/watch?v = PWen53eqmJo>.

⁶ Catherine Kingfisher and Jeff Maskovsky, “Introduction: The Limits of Neoliberalism,” Critique of Anthropology 28: 2 (2008), pp. 115–126.

⁷ Catherine Kingfisher, “Globalization as Hybridity,” in Catherine Kingfisher (ed.), Western Welfare in Decline: Globalization and Women's Poverty (Philadelphia: University of Pennsylvania Press, 2002), pp. 49–62.

⁸ Oran Young, “Regime Dynamics: The Rise and Fall of International Regimes,” International Organization 32:2 (1982), pp. 277–297; Robert O. Keohane, “International Institutions: Two Approaches,” International Studies Quarterly 32:4 (1988), pp. 379–396.

¹¹ Andreas Bieler and Adam David Morton, “A Critical Theory Route to Hegemony, World Order, and Historic Change: Neo-Gramscian Perspective in International Relations,” Capital and Class 28 (Spring 2004), pp. 85–118. These three realms are not deterministic or linear. The base and superstructure tend to reinforce each other in hegemonic systems but they cannot be reduced to each other. Conditions of production set limits on ideological and juridical activity but do not determine them. It is important to keep in mind that the elements of the superstructure enjoy a level of relative autonomy and serve as a venue for the expression of a plurality of interests, not all of which move in lockstep with the interests of economic elites. For a fuller discussion of this point, see James Martin, “Hegemony and the Crisis of Legitimacy in Gramsci,” History of the Human Sciences 10:1 (1997), pp. 37–56.

⁹ Stephen Gill and David Law, “Global Hegemony and the Structural Power of Capital,” in Stephen Gill (ed.), Gramsci, Historical Materialism and International Relations (Cambridge: Cambridge University Press, 1993), p. 93.

¹⁰ Antonio Gramsci, Selections from the Prison Notebooks, Quintin Hoare and Geoffrey Nowell Smith (eds and trs) (New York: International Publishers, 1971), p. 263.

¹² The struggle over distribution of gains from within a hegemonic system takes on the color of Gramsci's class compromise. For a more complete discussion of this phenomenon, see Adam Przeworski, Capitalism and Social Democracy (Cambridge: Cambridge University Press, 1985), pp. 205–211.

¹³ Robert Cox, “Gramsci, Hegemony, and International Relations: An Essay in Method,” in Stephen Gill (ed.), Gramsci, Historical Materialism and International Relations (Cambridge: Cambridge University Press, 1993), pp. 57–58.

¹⁴ Mustapha Kamel Pasha, “Return to the Source: Gramsci, Culture and International Relations,” in Alison J. Ayers (ed.), Gramsci, Political Economy, and International Relations Theory: Modern Princes and Naked Emperors (New York: Palgrave Macmillan, 2008), p. 161.

¹⁵ Bieler and Morton, “A Critical Theory Route,” pp. 87–88.

¹⁶ Bieler and Morton, “A Critical Theory Route,” pp. 87–88

¹⁷ Bieler and Morton, “A Critical Theory Route,” pp. 87–88

¹⁸ Robert Cox, “The Way Ahead: Toward a New Ontology of World Order,” in Richard Wyn Jones (ed.), Critical Theory and World Politics (Boulder, CO: Lynne Rienner Publishers, 2001), p. 50.

¹⁹ Bieler and Morton, “A Critical Theory Route,” p. 87.

²⁰ Gramsci, Prison Notebooks, p. 210.

²¹ Martin, “Hegemony and the Crisis of Legitimacy,” p. 48.

²² Gramsci, Prison Notebooks, p. 185.

²³ Alfredo Saad-Filho and Alison J. Ayers, “Production, Class, and Power in the Neoliberal Transition: A Critique of Coxian Eclecticism,” in Ayers (ed.), Gramsci, Political Economy and International Relations Theory, p. 121.

²⁴ Alfredo Saad-Filho and Alison J. Ayers, “Production, Class, and Power in the Neoliberal Transition: A Critique of Coxian Eclecticism,” in Ayers (ed.), Gramsci, Political Economy and International Relations Theory, 110.

²⁵ Alfredo Saad-Filho and Alison J. Ayers, “Production, Class, and Power in the Neoliberal Transition: A Critique of Coxian Eclecticism,” in Ayers (ed.), Gramsci, Political Economy and International Relations Theory, 125.

²⁶ An historical illustration of this road to crisis is the nineteenth century age of panics. For a complete discussion of these shocks leading to the crisis of 1914, see Karl Polanyi, The Great Transformation: The Political and Economic Origins of Our Time (Boston: Beacon Press, 1944/1957).

²⁷ Crises of production and accumulation are the precipitating events that lead to hegemonic crises in this model. However, the model is not rigidly deterministic. Recall that the factors of hegemony are interrelated and self-reinforcing. It is conceivable that a spectacular failure of any one of these factors would be sufficient to spark a hegemonic crisis. Having said that, for the purposes of this limited analysis and sensitive to the reality that even in a dialectic one must jump onto the merry-go-round at a defined point, I will be using the collapse of the global system of finance and trade in 2008 as a point of entry into the crisis that challenges neoliberal globalization.

²⁸ Jonathan Anderson, “Is China Export-Led?,” USB Investment Research, USB Securities Asia (2007), < http://www.allroadsleadtochina.com/reports/prc_270907.pdf>.

²⁹ This took the form of Milton Friedman and Edmund Phelps's innovation of the “natural rate of unemployment” that took on the Keynesian assumptions about the ability to manage economic growth with demand-based drivers, particularly a policy of full employment, and its willingness to “buy” a full employment with a bit of inflation. In order to “squeeze” inflation out of the system, the Federal Reserve under Paul Volker adopted a tight monetary policy. For the extent to which these ideological and policy moves ushered in the era of domestic neoliberalism, please see the analysis by Philadelphia Federal Reserve economist Sylvain Leduc, “How Inflation Hawks Escape Expectations Traps,” Business Review, Q1 (Federal Reserve Bank of Philadelphia, 2003), < http://www.philadelphiafed.org>.

³⁰ Raw and chained data set available from Bureau of Economic Analysis, National Economic Accounts, < http://www.bea.gov/national/Index.htm>.

³¹ Raw data available from the US Census Bureau, < http://www.census.gov/hhes/www/income/histinc/f04.htm>.

³² James Crotty, “Structural Contradictions of the Global Neoliberal Regime,” paper presented at Union for Radical Political Economics at the Allied Social Science Association meetings, Boston, MA, January 7–9, 2000, p. 2, < http://www.people.umass.edu/crotty/assa-final-jan00.pdf>. Ironically, although the period of 1974–1980 is highly unstable, the average annual global growth rate reached a level of 3.4%, well below the Keynesian average but nearly equal to the best decade of the neoliberal period.

³³ Yuri Dikhanov, “Trends in Global Income Distribution, 1970–2000, and Scenarios for 2015,” Human Development Report 2005/8 (United Nations Development Programme, 2005), < http://hdr.undp.org/en/media/globalincometrends.pdf>.

³⁴ Yuri Dikhanov, “Trends in Global Income Distribution, 1970–2000, and Scenarios for 2015,” Human Development Report 2005/8 (United Nations Development Programme, 2005), < http://hdr.undp.org/en/media/globalincometrends.pdf>, 3.

³⁵ Yuri Dikhanov, “Trends in Global Income Distribution, 1970–2000, and Scenarios for 2015,” Human Development Report 2005/8 (United Nations Development Programme, 2005), < http://hdr.undp.org/en/media/globalincometrends.pdf>

³⁶ Quoted in Crotty, “Structural Contradictions of the Global Neoliberal Regime,” p. 6. Crotty argues that real global interest rates for the neoliberal era are actually higher in the neoliberal era due to the “inflation obsessed” monetarist central banks (Yuri Dikhanov, “Trends in Global Income Distribution, 1970–2000, and Scenarios for 2015,” Human Development Report 2005/8 (United Nations Development Programme, 2005), < http://hdr.undp.org/en/media/globalincometrends.pdf> ibid., 3). However, his data ends in 1994 before the full wage-suppressing effects of the entrance of an additional 1.5 billion workers to the global labor force, effectively doubling the number of available workers worldwide. See Richard Freeman, “What Really Ails Europe (and America): The Doubling of the Global Workforce,” The Globalist: The Power of Global Ideas, March 5, 2010, < http://wwwtheglobalist.com/StoryId.aspx?StoryId = 4542>. Federal funds rates in the period from 2001 to 2007 averaged to around 3%. This is similar to the average rates of the 1950s and 1960s. Historical federal funds rates charts are available from the Federal Reserve at < http://www.federalreserve.gov/releases/h15/data/Annual/H15_F_O.txt>.

³⁷ For a cogent analysis of why neoliberal policies lead to a crisis of overcapacity and the destructive competition that it entails, see Crotty, “Why do Global Markets Suffer from Chronic Excess Capacity? Insights from Keynes, Schumpeter and Marx,” (2002), < http://www.people.umass.edu/crotty/Challenge-drft-Jn18-02.pdf>.

³⁸ By 2005, the distinction between FCs and NFCs, both in terms of strategies of accumulation and reliance on globalized chains of productions and finance had become indistinct at best. As Greta R. Krippner notes in her analysis of American corporations, the two kinds of corporations had effectively merged into a single form with a global reach. See Greta R. Krippner, “The Financialization of the American Economy,” Socio-Economic Review 3:2 (2005), pp. 173–208.

³⁹ John Bellamy Foster and Fred Magdoff, The Great Financial Crisis: Causes and Consequences (New York: Monthly Review Press, 2009), p. 54; James Crotty, “Markets on Nonfinancial Corporation Performance in the Neoliberal Era,” in Gerald A. Epstein (ed.), Financialization and the World Economy (Northampton, MA: Edward Elgar Publishers, 2006), p. 85.

⁴⁰ Historical data on target rates are available from the Federal Reserve Board at < http://www.federalreserve.gov/fomc/fundsrate.htm>.

⁴¹ Historic data on US GDP are available from US Bureau of Economic Analysis, < http://www.bea.gov/national/index.htm#gdp>.

⁴² Mark Weisbrot et al., IMF-Supported Macroeconomic Policies and the World Recession: A Look at Forty-One Borrowing Countries (Washington, DC: Center for Economic and Policy Research, 2009), < http://www.cepr.net/documents/publications/imf-2009-10.pdf>.

⁴³ Historical data available from the USDA Economic Research Service, < http://www.ers.usda.gov/Data/Macroeconomics/htm>.

⁴⁴ Full text available at: < http://georgewbush-whitehouse.archives.gov/news/releases/2008/11/20081115-1.html>.

⁴⁵ Raymond J. Ahern and Paul Belkin, “The German Economy and U.S.–German Economic Relations,” Congressional Research Service (CRS) Report for Congress (2010), < http://www.fas.org/sgp/crs/row/R40961.pdf>.

⁴⁶ Pingyao Lai, “External Demand Decline-caused Industry Collapse in China,” China and the World Economy 18:1 (2010), p. 55.

⁴⁷ Pingyao Lai, “External Demand Decline-caused Industry Collapse in China,” China and the World Economy 18:1 (2010), p. 55

⁴⁸ A similar conclusion is found in Anderson, “Is China Export-Led?”

⁴⁹ Wayne M. Morrison, “China and the Global Financial Crisis,” CRS Report for Congress (2009), p. 4, < http://www.fas.org/sgp/crs/row/RS22984.pdf>.

⁵⁰ Data available from the World Bank, World Bank Developmental Indicators (2010), < http://datafinder.worldbank.org/about-world-development-indicators>.

⁵¹ Data available from the Chinese National Bureau of Statistics, < http://www.stats.gov.cn/english/statisticaldata/Quarterlydata/t20100416_402635039.htm>.

⁵² National Bureau of Statistics of China, “The Contribution of Three Major Demands to GDP Growth in 2009,” (2010), < http://www.stats.gov.cn/was40/gjtjj_en_detail.jsp?searchword = three+major+demands&channelid = 9528&record = 1>.

⁵³ Fulong Wu, “How Neoliberal is China's Reform? The Origins of Change During Transition,” Eurasion Geography and Economics 51:5 (2010), p. 624.

⁵⁴ Fulong Wu, “How Neoliberal is China's Reform? The Origins of Change During Transition,” Eurasion Geography and Economics 51:5 (2010), p. 624

⁵⁵ Jeffrey Sachs and Wing Thye Woo, “China's Transition Experience, Reexamined,” Beyond Transition: The Newsletter about Reforming Economies (The World Bank Group, 2001), < http://www.worldbank.org/html/prddr/trans/m&a96/art1.htm>.

⁵⁶ Jeffrey Sachs and Wing Thye Woo, “China's Transition Experience, Reexamined,” Beyond Transition: The Newsletter about Reforming Economies (The World Bank Group, 2001), < http://www.worldbank.org/html/prddr/trans/m&a96/art1.htm> Perhaps the most dramatic moment suggesting this ideological and institutional change came about on Deng's southern China tour where he is reported to have announced “poverty is not socialism; to get rich is glorious.”

⁵⁷ For example, see Jeffrey Sachs and Wing Thye Woo, “China's Transition Experience, Reexamined,” Beyond Transition: The Newsletter about Reforming Economies (The World Bank Group, 2001), < http://www.worldbank.org/html/prddr/trans/m&a96/art1.htm>ibid.; Dic Lo, “China's Quest for Alternatives to Neo-liberalism: Market Reform, Economic Growth, and Labor,” The Kyoto Economic Review 76:2 (2001), pp. 193–210; Donald M. Nonini, “Is China Becoming Neoliberal?,” Critique of Anthropology 28:2 (2008), pp. 145–176.

⁵⁹ Wang Hui, “The Historical Origin of China's Neo-liberalism,” in Tian Yu Cao (ed.), The Chinese Model of Development (New York: Routledge, 2005), 80.

⁵⁸ Wang Hui, “The Historical Origin of China's Neo-liberalism,” in Tian Yu Cao (ed.), The Chinese Model of Development (New York: Routledge, 2005), pp. 74–75.

⁶⁰ Gautam Jaggi, Mary Rundle, Daniel H. Rosen, and Yuichi Takahashi, “China's Economic Reforms: Chronology and Statistics,” Working Paper 96-5 (Institute for International Economics, Peterson Institute for International Economics, 1996), < http://www.iie.com/publications/wp/96-5.pdf>.

⁶¹ Alvin Y. So, “Beyond the Logic of Capital and the Polarization Model: The State, Market Reforms and the Plurality of Class Conflict in China,” Critical Asian Studies 37: 3 (2005), pp. 481–494.

⁶² Gautam et al., “China's Economic Reforms.”

⁶³ Lo, “China's Quest for Alternatives,” pp. 203–204.

⁶⁴ David Harvey, A Brief History of Neoliberalism (Oxford: Oxford University Press, 2005), pp. 121–135.

⁶⁵ Michael Webber, “Re-emerging China and Consequences for Economic Geography,” Eurasian Geography and Economics 51:5 (2010), pp. 583–599.

⁶⁶ Summary of data, < http://www.wto.org/english/news_e/pres10_e/pr598_e.htm>.

⁶⁷ Gunther Schnabl, “The Role of the Chinese Dollar Peg for Macroeconomic Stability in China and the World Economy,” paper presented at the Center for Economic Studies of Ludwig-Maximillians University, Venice Summer Institute, July 2010, < http://www.cesifo-group.de/portal/page/portal/CFP_CONF/CFP_CONF_VSI/VSI%202010/vsi10_roc_Cheung/Paper/vsi10_roc_Schnabl_neu_1.pdf; On Kit Tam, Sophia G. Li, Zhifan Zang, and Celina Ping Yu, “Foreign Investment in China and Qualified Foreign Institutional Investor,” Asian Business and Management 9:3 (2010), pp. 425–448.

⁶⁸ Data available from the US–China Business Council, < http://www.uschina.org/statistics/fdi_cumulative.html>.

⁶⁹ Takeshi Jingu and Tetsuya Kamiyama, “China's Private Equity Market,” Nomura Capital Market Review 11:3 (2008), pp. 24–39.

⁷⁰ Y. Yu, “China's Policy Responses to the Global Financial Crisis,” Richard Snape Lecture, November 25, 2009, p. 9, < http://www.eastasiaforum.org/wp-content/uploads/2010/01/2009-Snape-Lecture.pdf>.

⁷¹ Author interview in Shanghai, China.

⁷² Hong Kong Trade and Development Council, “Central Economic Work Conference and Its Impact on Hong Kong Businesses,” January 1, 2009, < http://www.hktdc.com/info/mi/a/bacn/en/1X000EEG/1/Business-Alert-China/Central-Economic-Work-Conference-And-Its-Impact-On-Hong-Kong-Businesses.htm>.

⁷³ Schnabl, “The Role of the Chinese Dollar Peg,” pp. 13–14.

⁷⁴ Schnabl, “The Role of the Chinese Dollar Peg,” pp. 13–14

⁷⁵ Jenny Chan, “Meaningful Progress or Illusory Reform? Analyzing China's Labor Contract Law,” New Labor Forum 18:2 (2009), pp. 43–51.

⁷⁶ Even at the height of the stimulus frenzy in 2009 the total stimulus spending among G-20 states, at about 1.1% of global GDP, was well below the 2% of global GDP recommended by the IMF. Only four of the G-20 states, including the US and China, planned similar expenditures in 2010. For a complete overview of stimulus expenditures by G-20 states, see Eswar Prasad and Isaac Sorkin, Assessing the G-20 Economic Stimulus Plan: A Deeper Look (Washington, DC: The Brookings Institution, 2009), < http://www.brookings.edu/articles/2009/03_g20_stimulus_prasad.aspx>.

⁷⁷ The International Monetary, World Economic Outlook: Recovery, Risk and Rebalancing (Washington, DC: The International Monetary Fund, October 2010).

⁷⁸ International Monetary Fund, World Economic Outlook (October 2010), p. 72, < http://www.imf.org/external/pubs/ft/weo/2010/02/pdf/text.pdf>.

⁷⁹ International Monetary Fund, World Economic Outlook (October 2010), p. 72, < http://www.imf.org/external/pubs/ft/weo/2010/02/pdf/text.pdf>, 68.

⁸⁰ Statistical data available from the IMF World Economic Outlook database, < http://www.imf.org/external/pubs/ft/weo/2010/02/weodata/index.aspx>.

⁸¹ As reported by Jeremy Warner, “Davos 2010: China Pledges More Stimulus to Maintain Growth,” The Daily Telegraph, January 28, 2010, < http://www.telegraph.co.uk/finance/financetopics/davos/7094640/Davos-2010-China-pledges-more-stimulus-to-maintain-growth.html>.