No one mentioned the economic law behind this yet.
The fact that “everything is made in China” is often framed like a China win, because China managed to turn it that way, but that’s a recent development. Historically it’s a consequence of decades of unequal exchange to the benefit of the imperial core. China lost unimaginable amounts of value because of this. But let’s start from the beginning.
Marx discovered the tendency of the rate of profit to equalize across industries with differing organic compositions of capital. All value comes from human labor, so capital flows first into labor intensive industries. This increases supply and lowers prices of goods produced with lots of labor below their value (think clothing from sweat shops). In turn, capital is slow to flow into industries with lots of constant capital (machines etc.). The initial investment is a barrier and machines don’t produce value, only humans do. The prices of goods from industries with lots of constant capital rise above their value. In the end, profits equalize by means of prices. Otherwise, if one industry were more profitable, capital would flow there, until it’s equal again.
But for profits to remain equal, value has to flow constantly in the direction of high concentrations of constant capital.
In the context of globalization, the same thing as for different industries, also goes for countries. Countries with high concentrations of constant capital, like the imperial core countries, sell commodities above their value. Countries in the so called global South with labor intensive industries sell commodities below their true value. In this way, the poor countries subsidize the rich. This is unequal exchange.
China was the “workbench of the world” for a long time and lost enormous amounts of value to the US and Europe by selling commodities produced in labor intensive industries below their true value (which is their socially necessary labor time). In turn for this period of servitude, they got left alone. The cold war focused on the Soviet Union and China mostly stayed out of it. They were little more than useful vassals of the empire and toiled away to fill the shelves of Walmart and the homes in the suburbs with cheap goods. But at least they had peace and time to develop. Now they have developed and they rightfully want out of this disadvantageous deal.
That’s why US relations to China deteriorated the moment China started building up capital intensive industries like for semiconductors. It wasn’t just about wanting China to do “cheap labor”, but about restricting China to labor intensive industries and keep the unequal exchange via the equalization of the rate of profit going.
China was the “workbench of the world” for a long time and lost enormous amounts of value to the US and Europe by selling commodities produced in labor intensive industries below their true value (which is their socially necessary labor time). In turn for this period of servitude, they got left alone.
None of this was an accident on China’s part. Their losses were an investment in developing their productive forces, including technology transfer and domestic partnerships, which were strings attached to the deals China made and still makes with the imperialist bourgeoisie[1].
Technology transfer was critical, and it lowers the barrier to constant capital heavy industries, but doesn’t remove it completely. You still have to get the physical machines. Also not all technology serves capital heavy industry. A lot of it is also needed for labor intensive industries just to keep up with the overall development of technology and demand. It’s hard to quantify how much of the technology transfer served to break out of the trap and how much just kept it going.
No one mentioned the economic law behind this yet.
The fact that “everything is made in China” is often framed like a China win, because China managed to turn it that way, but that’s a recent development. Historically it’s a consequence of decades of unequal exchange to the benefit of the imperial core. China lost unimaginable amounts of value because of this. But let’s start from the beginning.
Marx discovered the tendency of the rate of profit to equalize across industries with differing organic compositions of capital. All value comes from human labor, so capital flows first into labor intensive industries. This increases supply and lowers prices of goods produced with lots of labor below their value (think clothing from sweat shops). In turn, capital is slow to flow into industries with lots of constant capital (machines etc.). The initial investment is a barrier and machines don’t produce value, only humans do. The prices of goods from industries with lots of constant capital rise above their value. In the end, profits equalize by means of prices. Otherwise, if one industry were more profitable, capital would flow there, until it’s equal again. But for profits to remain equal, value has to flow constantly in the direction of high concentrations of constant capital.
In the context of globalization, the same thing as for different industries, also goes for countries. Countries with high concentrations of constant capital, like the imperial core countries, sell commodities above their value. Countries in the so called global South with labor intensive industries sell commodities below their true value. In this way, the poor countries subsidize the rich. This is unequal exchange.
China was the “workbench of the world” for a long time and lost enormous amounts of value to the US and Europe by selling commodities produced in labor intensive industries below their true value (which is their socially necessary labor time). In turn for this period of servitude, they got left alone. The cold war focused on the Soviet Union and China mostly stayed out of it. They were little more than useful vassals of the empire and toiled away to fill the shelves of Walmart and the homes in the suburbs with cheap goods. But at least they had peace and time to develop. Now they have developed and they rightfully want out of this disadvantageous deal.
That’s why US relations to China deteriorated the moment China started building up capital intensive industries like for semiconductors. It wasn’t just about wanting China to do “cheap labor”, but about restricting China to labor intensive industries and keep the unequal exchange via the equalization of the rate of profit going.
None of this was an accident on China’s part. Their losses were an investment in developing their productive forces, including technology transfer and domestic partnerships, which were strings attached to the deals China made and still makes with the imperialist bourgeoisie[1].
Technology transfer was critical, and it lowers the barrier to constant capital heavy industries, but doesn’t remove it completely. You still have to get the physical machines. Also not all technology serves capital heavy industry. A lot of it is also needed for labor intensive industries just to keep up with the overall development of technology and demand. It’s hard to quantify how much of the technology transfer served to break out of the trap and how much just kept it going.