Defend China Against Imperialism, Counterrevolution!

Chauvinist Uproar over Chinese Steel

As layoffs and plant closings stalk the steel industry internationally, an ugly chauvinist furor against imports of Chinese steel is being whipped up by governments, media, steel companies and union officials in the U.S. and Europe. In the presidential election campaign, Republican Donald Trump and Democrat Hillary Clinton (and earlier, Bernie Sanders) have pushed for an anti-China trade war, with the steel industry serving as poster child. In May, the Obama administration slapped astronomical tariffs of over 500 percent on imports of Chinese cold-rolled flat steel (used for car bodies, appliances and construction) and 451 percent on Chinese stainless steel. Shortly afterward, the U.S. International Trade Commission agreed to consider U.S. Steel’s call for a total ban on steel imports from China, with a decision expected early in the next president’s term.

Allied with the steel bosses are the trade-union misleaders, who have long waved the flag of “America first” protectionism. Under that banner, the labor fakers have continually surrendered gains won through the militant battles of the working class—black, white and immigrant. Leo Gerard, International president of the United Steelworkers Union (USW), called last spring for Washington to “outlaw” Chinese steel. Meanwhile, the USW tops settled for new contracts with major steel firms containing wage freezes, benefit cuts and a no-strike pledge, while plants closed and hundreds were laid off.

In Europe, several unions joined a February 15 rally of some 5,000 in Brussels called by the steel bosses’ federation Eurofer to demand that the European Union (EU) enact its own protectionist measures. On April 11, the German IG Metall union and German steel bosses joined forces to bring out tens of thousands of steel workers in similar chauvinist, anti-China protests.

The capitalist owners of steel giants like ArcelorMittal, U.S. Steel, Nucor, ThyssenKrupp, Nippon Steel, Tata Steel, Posco, etc., have wrung enormous profits from steel workers over the decades at the expense of jobs, wages and benefits. To this end they have broken strikes and locked out workers.

Just as the American labor bureaucracy has presided over the massive shrinking of unions in the U.S., their European counterparts have undercut the fight against austerity. It is obscene that the heads of potentially powerful unions such as the USW, IG Metall, British UNITE and GMB, and the French union confederations (CGT, CFDT, FO) join with the class enemy in demanding that the capitalist state take economic measures against China. In the global economy that capitalism has brought about, the proletariat is an international class. What’s needed is workers’ unity against the capitalist rulers, both within each country and internationally.

The trade-union bureaucrats calling for a reactionary trade war with China claim to be protecting the livelihoods of workers against “unfair competition” and “dumping.” The “save American jobs” chauvinism of the bureaucrats in this country promotes the lie that workers in the U.S. have a common “national interest” with their exploiters. Such class collaboration undercuts the prospect of waging the class-struggle fight that is needed to preserve and increase jobs, pay and benefits. By blaming workers abroad for jobs lost in the U.S., protectionism also serves to foment bigotry against Asian and Latino workers here and to poison the possibility of international labor solidarity.

What the steel barons are “protecting” above all is their monopolist rate of profit. The imperialists’ anti-China campaign has wider political goals as well. First of all, it aims to scapegoat China for the continued stagnation and decline of the capitalist world economy. We debunked such claims a year ago in an article titled “China and the World Economy: Fact vs. Fiction” (WV No. 1076, 16 October 2015).

The burgeoning trade war with China is but one part of a broader offensive, centered on military pressure combined with capitalist economic penetration, that aims ultimately to restore capitalism in China and reopen that country to untrammeled imperialist exploitation. The peasant-based 1949 Revolution overthrew capitalist-landlord rule in China and led to the establishment of the economic foundations of workers rule—collectivized ownership of the productive forces and economic planning. However, the workers state that emerged was deformed from birth by the rule of a parasitic bureaucratic caste that excluded the working class from political power. Nevertheless, the collectivized economy made it possible to free China from imperialist domination, lift hundreds of millions out of poverty, bring about mass literacy and provide unprecedented opportunities for Chinese women, who, in prerevolutionary times, were barely recognized as humans.

Proletarian democracy is essential for the rational operation of a collectivized economy. But that is incompatible with the bureaucratic regime of the Chinese Stalinists. Instead, the Beijing Stalinists have, for the last several decades, sought to correct the waste and inefficiency of bureaucratic central planning through the discipline of the market. By encouraging the growth of a domestic capitalist class and relying heavily on foreign capital investment, the market “reforms” have greatly increased the threat of internal counterrevolution. Alongside the economic expansion that has increased living standards for a large portion of the population, the market reforms have brought about an enormous increase in social inequality. Nonetheless, the core elements of the Chinese economy remain collectivized.

Just as workers in capitalist countries must defend their unions against the bosses despite the present sellout labor leadership, so they must defend the Chinese workers state against capitalist counterrevolution despite the ruling Stalinist bureaucracy. The U.S. trade-union bureaucrats are devoted to the capitalist profit system and politically tie workers to the class enemy through allegiance to the Democratic Party. They must be tossed out of their positions at the head of the unions through political struggle and replaced by a class-struggle leadership committed to the overthrow of the capitalist order. In China, the bureaucratic caste must be ousted by a proletarian political revolution to preserve and extend the working-class property forms established by the 1949 Revolution.

Steel: Lies and Realities

Steel production is essential for a modern industrial economy, and is critical for military defense. China has a right to protect its industry from capitalist competition and to export steel for the world market, including to charge less than the cost of production. The demand by the imperialists that China abandon “state subsidies” to its steel industry is in fact a demand for complete privatization, i.e., the overthrow of collectivized property forms.

The China-bashers conjure an image of steel pouring from Chinese mills “glutting” the world market, driving down prices and driving other producers out of business. The Wall Street Journal (25 April) spoke of “the flood of Chinese steel weighing on the American industry,” while Dave Hulse, national officer of the British GMB union, declared: “This dumping has to stop otherwise UK jobs in the steel industry will simply melt away.” China is getting blamed for “Why the world has too much steel,” in the words of the Economist (4 May).

In fact, the world needs plenty more steel, as a glance at the decaying infrastructure in the U.S. or the enforced economic backwardness of the neocolonial world shows. There is a “glut” of steel on the world market only relative to the stagnation and decline of the capitalist economies following the 2008 global financial crisis.

That meltdown and the recession that followed were the result of the anarchic capitalist profit system, as are the layoffs and plant closings in the steel industry today. By one measure (so-called true steel use), the consumption of steel in the U.S. dropped 3 percent between 2007 and 2014. It fell 11 percent in Japan and a whopping 30 percent in the EU. As a Chinese commerce ministry spokesman said in April, “Steel is the food of industry, the food of economic development. At present, the major problem is that countries that need food have a poor appetite so it looks like there’s too much food.”

During that same period, true steel use in China rose 175 percent as Beijing launched an ambitious infrastructure expansion. Today, China produces about half the world’s steel, up from 15 percent in 2000. The Chinese economy is now growing at an annual rate of over 6 percent, while advanced capitalist countries struggle to do better than 2 percent and remain under constant threat of crisis and contraction. Replying to demands by the U.S. commerce secretary that China drastically cut its steel capacity, at a June 6 press conference, Chinese finance minister Lou Jiwei pointed out that China’s excess capacity is a result of infrastructure investment during the global economic crisis of 2009-11, when China was responsible for over half of the world’s economic growth. He went on to note, “At that time, the world applauded for China and thanked China, but now they say China’s production overcapacity has encumbered the world. What did they say at that time?” (cctvplus.tv).

Until recently, almost all Chinese-produced steel was used in China itself. For the past few years, Beijing has been attempting to reorient the economy toward the domestic consumer market. This has entailed a cutback in exports and in infrastructure projects, which means less domestic demand for steel. If China were a capitalist country, the solution would be straightforward and brutal: mass layoffs of steel workers. However, while the Chinese government has announced plans to reduce steelmaking capacity and eliminate some coal mines, it fears mass workers’ protests and strikes sparked by major firings. Hence, the government is hesitant to cut back production too precipitously, and is selling surplus steel on the world market. So-called “zombie factories,” largely state-owned enterprises in steel and other affected industries like cement, keep workers on the payroll while continuing to run up losses and debt—something inconceivable in the capitalist world.

Those who argue for “anti-dumping” tariffs often claim that foreign producers are selling below cost—whether it’s true or not. The basis on which the imperialists estimate China’s cost of production of steel is a so-called “proxy method”: they calculate the production cost in a country with a similar average level of income (like Poland, Thailand or South Africa) and simply declare that cost to be equivalent to China’s. Even an imperialist mouthpiece like the New York Times (3 May) conceded: “The proxy countries often have higher costs than China, which has greater economies of scale.”

Given its huge production volume, China now exports about as much steel in a year as the total output of the world’s second-largest producer, Japan. However, China’s steel exports account for only about 12 percent of its total production. That is a substantially smaller fraction than Japan and South Korea (each of which exports around 40 percent of its output), or even Brazil, Turkey and Russia.

The supposed “flood” of Chinese steel into the U.S. and Europe is actually a relatively modest stream. The main exporter of steel to the U.S. is Canada (accounting for 19 percent of the total), followed by Brazil, South Korea, Mexico, Turkey and Japan. China contributes less than 3 percent of U.S. steel imports, representing less than 1 percent of the total U.S. steel market. As for the EU, imports of Chinese steel, while greater than in the U.S., still amount to only some 4 percent of total demand. Nevertheless, since August the EU has hit a variety of Chinese steel products with tariffs as high as 73 percent.

It is particularly absurd to blame the decline of British steel on Chinese imports. When the British Steel Corporation was formed through the nationalization of the industry by the Labour government in 1967, it employed 268,500 workers. Two years after Margaret Thatcher became prime minister in 1979, the workforce was slashed to only 88,200. Thatcher proceeded to sell off the company in 1988 and the workforce continued to shrink. As steel demand has been driven down by the austerity pushed by successive governments, Tata Steel, owner of remnants of British Steel, has threatened to shut down much of its British operations.

In Germany, the steel workforce was slashed beginning in the 1980s and productivity soared, resulting in an overall increase in output. In the west, the industrial Ruhr area was devastated by plant closings and restructuring. Those job losses took place without any serious fight by the trade-union misleaders. When the East German deformed workers state fell to counterrevolution in 1990, the new capitalist masters enforced mass layoffs and plant closures in the east as well. Far from China causing German economic problems, general exports to China have been a substantial factor underlying Germany’s economic success compared to rival capitalist powers. With many firms also reliant on Chinese suppliers, a considerable section of the German bourgeoisie—as well as the working class—has much to lose from a trade war with China.

The lion’s share of Chinese steel exports are going to Asia. This results largely from the policy of the Chinese government to build up infrastructure in the region as part of its “One Belt, One Road” project. Aiming to counter U.S. (and Japanese) imperialism’s efforts at containment, China says it will invest $4 trillion in this project (also known as the New Silk Road), which comprises multiple trading networks linking Asia and West Europe, including pipelines, railroads and highways.

Dumping and Monopoly Capital

The Chinese steel industry, like the Chinese economy as a whole, operates in a way that is fundamentally different from capitalism. The main purpose of production in China is not to maximize profit or seize a larger share of the world market. The “unfair trade practices” of which China is accused actually typify the monopoly practices of the trusts and cartels that dominate industry in the capitalist countries. Robber barons like U.S. steel magnate Andrew Carnegie were masters of such techniques as selling below cost to drive out their competition—which they deployed at the same time that they massacred striking workers. Today’s steel barons are cast from the same mold. When they hope to seize a bigger market share by selling cheaply abroad, they demand “free trade.” When they find themselves undercut by lower-priced competitors, they enlist the strong arm of their government to give them an edge with trade barriers and subsidies.

The days when free competition prevailed have been gone since at least the beginning of the 20th century, when capitalism entered its epoch of imperialist decay. Decades earlier, Karl Marx showed that free competition gives rise to the concentration of production, which, in turn, at a certain stage of development, leads to monopoly. A handful of giant firms become able to manipulate production and prices in order to maximize profits over the capitalist boom-bust business cycle. In his 1916 book Imperialism, the Highest Stage of Capitalism, Russian revolutionary leader V.I. Lenin demonstrated that by the early 1900s, monopoly finance capital had become dominant in the most advanced capitalist countries.

The big corporations compete with each other to dominate the market. Those that cannot compete are ruthlessly driven out of business. As Lenin observed, “Monopoly hews a path for itself everywhere without scruple as to the means, from paying a ‘modest’ sum to buy off competitors, to the American device of employing dynamite against them.” It is the same today. In 2014, U.S. Steel, ArcelorMittal and other steel firms were compelled to settle a lawsuit for collaborating to cut production in order to drive up prices, in fine robber-baron tradition.

With the advent of imperialism, money capital became concentrated in the hands of a few giant banks, which exercise immense leverage over the economy. Global finance capital is dominated by the most advanced capitalist countries, which seek to control natural resources, markets and sources of cheap labor around the world. This leads to the relentless cycle of neocolonial wars as well as constant efforts to restore capitalism to China and the other deformed workers states: Cuba, Laos, North Korea and Vietnam. Ultimately, when economic competition between the imperialist powers can no longer be mediated by peaceful means, the world is thrown into interimperialist war, as happened twice in the last century.

There is no more apt example of imperialist monopoly capitalism than the steel industry. The United States Steel Corporation was formed in 1901 when banking magnate J.P. Morgan bought out Carnegie Steel in the culmination of a drive to establish a nationwide steel trust, encompassing the whole production process from mines to finished products. At its outset, this monopoly produced two-thirds of the country’s steel. German steel was then dominated by the Krupp and Thyssen empires, which have since become ThyssenKrupp. Japan’s steel industry was intertwined with the zaibatsu, huge state-sponsored monopolies whose modern descendants are known as keiretsu. Recent consolidation has reduced big Japanese steel producers to three, the largest being Nippon Steel, third-largest in the world in 2015. ArcelorMittal, the world’s largest steel company, is the result of a series of mergers of companies with operations across North America, Europe and Asia.

The U.S. made half the world’s steel in the 1920s, and emerged from the carnage of World War II as the overwhelmingly dominant imperialist power. In the 1950s, its defeated adversaries, Germany and Japan, rebuilt their devastated industries using new, more productive technologies such as continuous casting and the basic oxygen process. Meanwhile, the U.S. steel cartel invested little in modernization. Out-competed on the world market by the 1970s, the top U.S. firms could no longer generate sufficient profits to satisfy their capitalist investors. Abandoned steel mills began to dot the Midwest Rust Belt. Today the U.S. share of global steel production is less than 5 percent.

Much U.S. steel production moved to smaller, heavily non-union, low-cost mini-mills that use more efficient electric arc furnaces to make steel, mostly from scrap. By 2005, the industry produced as much steel as it did in the early 1960s, but with one-fifth the workforce. The huge profits extracted from steel workers went into the pockets of wealthy capitalist stockholders, as retirees’ pensions were slashed and real wages and benefits stagnated or declined. Meanwhile, the USW tops have made no serious effort to organize the non-union plants. Today, several economic downturns later, the industry has once again become concentrated through bankruptcies and mergers. The five top firms—the largest of which is the virulently anti-union mini-mill operator Nucor—now produce more than two-thirds of national steel output.

The destruction of steel workers’ livelihoods is rooted in the capitalist system of production for profit. In the face of the constant immiseration of the proletariat, labor’s power must be mobilized in a class-struggle fight for a series of transitional demands that challenges the property rights of the capitalist rulers. Such demands include a sliding scale of wages and hours—reducing the workweek with no loss in pay to end layoffs; a massive program of public works to restore and expand decaying infrastructure and provide jobs for all at union wages; and, where necessary, retraining workers at full wages and capitalist expense. This fight poses the need for the working class to seize industry and transport from the capitalists and establish a workers government that will rebuild society on the foundation of a socialist, planned economy.

For Proletarian Internationalism!

The Chinese steel industry encompasses both the massive, relatively advanced state-owned enterprises (SOEs) controlled by the central government and a plethora of dispersed, small-scale, generally more backward private or local government-owned plants. Companies that are nominally privately owned produce more than half of China’s steel—up from 5 percent in 2003. Beijing exercises effective control over the steel industry, not only through big state-owned “national champions” like Baosteel and Hebei Steel (both among the world’s top five producers), but also indirectly through control of the financial system and other levers of central government power. Both the small firms that sprang up to cash in on Beijing’s infrastructure push and the market-based operations of the big SOEs have exacerbated China’s excess steel capacity as infrastructure spending has tapered off.

Beijing has announced plans to cut at least 10 percent of steel and coal capacity over the next few years, which would eliminate at least 1.8 million jobs. Many private companies have simply shut down, often after failing to pay their workers for months. These actions, as well as cutbacks by SOEs, have led to an upsurge in strikes and other workers’ protests, which reportedly more than doubled in 2015 compared to the previous year. In Hebei province alone, where one-fourth of Chinese steel is made, there were 300 strikes between January 2015 and March 2016. While frequently repressing protests, the Xi Jinping regime has pledged 100 billion yuan over two years (more than $4,000 per worker per year) to aid displaced workers. It has also set aside billions of dollars for welfare payments and retraining.

Despite its spectacular economic gains over the past generation, on average China remains poor relative to the imperialist powers. The perspective of China’s bureaucracy to move from an economy based on export-driven manufacturing to one focused on domestic demand for consumer goods and services would ultimately require transforming China’s vast rural population into modern consumers. Such a plan underscores the fundamental long-term challenge of closing the economic gap between urban China and the more backward and impoverished countryside.

To narrow that gap will require a massive redistribution and reallocation of economic resources. China’s farms, consisting of more than 200 million small peasant holdings averaging less than one acre, scarcely provide a livable income, let alone savings that could be invested in agricultural modernization. Social and economic modernization requires that China move from peasant smallholding to large-scale mechanized farming, including the voluntary recollectivization of agriculture.

The introduction of modern technology in the countryside requires a qualitatively higher industrial base than now exists. In turn, an increase in agricultural productivity would raise the need for a huge expansion of industrial jobs in urban areas to absorb the vast surplus of labor no longer needed in the countryside. The ultimate realization of that perspective necessarily hinges on the aid that China would receive from a socialist Japan or a socialist America.

That reality underscores the need for international proletarian revolution. The leaders of the ruling Communist Party falsely believe that they can modernize China and transform it into a great world power—indeed, the global superpower of the 21st century—in the face of the imperialists’ more powerful armies and advanced technology. This policy is an expression of the Stalinist, nationalist dogma of “socialism in one country” that goes together with the vain quest for “peaceful coexistence” with imperialism. That anti-Marxist fantasy has constantly undermined the defense of the workers states, not least through the betrayal of proletarian revolutions internationally.

The rise of imperialism at the dawn of the 20th century ushered in the epoch of capitalist decay, wars and revolutions in which we still live. That decadent system must be swept away through international socialist revolution. Only the establishment of an international planned economy can unleash the productive forces necessary to abolish want worldwide and lay the foundation for a socialist society in which class division and exploitation will be a thing of the past.

To bring that consciousness to the proletariat and provide leadership in struggle requires an international revolutionary party, with sections in countries throughout the world. Such a party must be based on the lessons of the victorious 1917 Russian Revolution, led by Lenin and Trotsky’s Bolsheviks. The International Communist League, of which the Spartacist League is the U.S. section, is dedicated to the struggle to reforge the Fourth International, worldwide party of socialist revolution.