Chinese leadership meeting points to social tensions amid economic problems

Nick Beams

The Chinese Communist Party (CCP) leadership is becoming increasingly concerned that significant economic problems, reflected in much lower growth rates compared to previous years, will lead to increased social tensions and political opposition.

Chinese President Xi Jinping at a session of the National People's Congress in Beijing, Tuesday, March 7, 2023. [AP Photo/Ng Han Guan]

This is evidenced by the issues raised in the communiqué from the Third Plenum of the central committee, comprising some 199 members and 165 alternates along with a number of policy experts, held in Beijing this week.

The meeting was convened to chart a course for future economic development and to confront significant problems. The official growth target is around 5 percent—the lowest in around three decades—and the problems were underscored by the fall in the growth rate for the second quarter to 4.7 percent, down from the 5.3 percent recorded in the first.

Amid the vague calls in the initial statement—more specific plans may be released in coming weeks—there was a reference to the problems caused by the ending of the previous growth model based on real estate and infrastructure development which had been responsible for up to 30 percent of GDP.

The collapse of this orientation, due to mounting debt and the threat to financial stability this poses, has led Chinese President Xi Jinping, who is also CCP general secretary, to implement the development of “high quality productive” forces based on new technologies.

That orientation will continue. There was no reference at all to the need to expand consumption, as advocated by numerous Western economists as well as some in China, in order to raise the economic growth rate. But the plenum statement did acknowledge the problems arising from the end of the old growth model.

It said the leadership would “implement various measures for preventing and defusing risks in real estate, local government debt, small and medium financial institutions and other key areas.”

The problems are not small. It has been estimated that the total debt of local government funding vehicles (LGFVs) is anywhere between $7 trillion and $10 trillion. The LGFVs raised debt to finance infrastructure projects by selling land for housing development. But with the downturn in the real estate sector, evidenced by the collapse of major firms such as Evergrande along with many others, this form of financing is increasingly unviable.

It was significant that the same paragraph that pointed to the debt problems raised the need for tighter social and political controls by the state.

“We will strengthen the network for preventing and controlling public security risks so as to safeguard social stability. We will improve public opinion guidance and effectively deal with risks in the ideological domain.”

The significance of these statements is that they express the great fear of the CCP leadership that as growth slows and economic and social tensions rise, the regime, having long ago abandoned any real commitment to social equality, loses any remaining political legitimacy and faces an oppositional movement from below.

The long delay in convening the meeting—it is 17 months since the previous plenum in February 2023, one of the longest intervals since the days of Mao—also points to possible conflicts within the central leadership.

Besides the fear of opposition in the working class, it also fears the emergence of cracks within the leadership of Xi’s Bonapartist regime, lest this provides an opening through which broader opposition could start to flow.

This concern was expressed in a lengthy paragraph which “stressed that the Party’s leadership is the fundamental guarantee for further reform.”

“We must acquire a deep understanding of the decisive significance of establishing Comrade Xi Jinping’s core position on the Party Central Committee and in the Party as a whole and establishing the guiding role of Xi Jinping Thought on Socialism with Chinese characteristics for a New Era…”

The regime of Xi Jinping is in no way socialist. In early 2018, Xi and the Chinese leadership scrapped the 30-year practice that presidents serve for two terms and established him as the leader for life in an endeavour to defend the interests of the capitalist ruling class.

His Bonapartist regime has sought to balance between the competing interests of the Chinese oligarchs—China’s levels of social inequality are among the highest in the world—the pressure exerted by the imperialist powers, led by the US, while seeking to defend the interests of the capitalist class as a whole against the working class, now numbering more than 400 million.

Socially it has rested on a growing but narrow stratum of the Chinese upper middle class which was able to advance itself in conditions of consistently high levels of economic growth. But this base is under threat.

In the past six years the pressures on the regime have intensified. Growth has fallen below the 8 percent level, which the CCP regime once declared was necessary to maintain social stability, never to return.

The hopes of the regime that it would be able to peacefully integrate itself into the global economy have been shattered. Starting under the Trump administration and deepened under Biden, US imperialism has launched an economic war against China aimed at crushing its economic development through ever-expanding sanctions and export bans on vital high-tech components.

This has now been coupled with tariffs against Chinese exports, particularly in the area of high-tech green technology such as electric vehicles.

The economic offensive has been increasingly joined by the European powers while the preparations for military conflict develop apace.

Without going into any detail, the introduction to the plenum statement noted that the regime faced a “grave and complex international environment and the arduous tasks of advancing reform and development and ensuring stability at home.”

The response in the Western media to the plenum is that it has done little or nothing to solve the mounting problems of the Chinese economy.

This conclusion was summed up in comments by China expert Eswar Prasad of Cornell University to the Financial Times.

“The plenum has re-articulated the government’s economic objectives and acknowledged some keys risks but inspires little confidence that the government has a strategy for effectively managing the economy’s cyclical and structural problems,” he said.

Microsoft Windows outage causes global infrastructure shutdown

Kevin Reed

Computer systems were shut down at major corporations, small businesses, government offices and organizations around the world on Friday when two commonly used information technology infrastructure components failed simultaneously.

Screens show a blue error message at a departure floor of LaGuardia Airport in New York on Friday, July 19, 2024, after a faulty CrowdStrike update caused a major internet outage for computers running Microsoft Windows. [AP Photo/Yuki Iwamura]

Airports, banks, ground transportation, healthcare service providers, hotels, media and TV stations, retail businesses and more were brought to a halt by a digital catastrophe that began on Thursday night when Microsoft’s Azure cloud platform experienced a widespread outage.

The cloud services failure was followed on Friday morning by a flawed update to a security software provided by CrowdStrike, impacting computers running the Microsoft Windows operating system. A software update that was pushed out to CrowdStrike’s Falcon monitoring software sent Windows computers into a perpetual reboot cycle.

Microsoft spokesperson Frank X. Shaw confirmed that “a CrowdStrike update was responsible for bringing down a number of Windows systems globally.” Shaw said the company was supporting and assisting customers to recover from the disaster.

The global shutdown is being referred to as the largest IT outage in history. Examples of the impact are:

• The FAA reported that the airlines United, American, Delta, Spirit and Allegiant had been grounded. Thousands of flights were cancelled well into the evening on Friday. The outage also cascaded instantly around the world. At Sydney Airport in Australia, travelers encountered delays and cancellations, as did those in Hong Kong, India, Dubai, Berlin and Amsterdam. More than 70 flights were canceled by 7:00 a.m. at Los Angeles International Airport. The Los Angeles Times reported that passengers were stuck in hours-long waits to get through security or to try to rebook their flights. At Chicago’s O’Hare Airport, many flight information screens, including those at boarding gates, were stuck on the blue Windows “recovery” screen as of Friday afternoon.
• Tens of thousands of desktop computers at 150 hospitals in 24 states at CommonSpirit Health were displaying a blue screen on Friday morning bringing the healthcare system to a halt. Daniel Barchi, CIO at CommonSpirit, told CNBC, “We were all stunned by the fact that if a computer gets this blue screen lockup, there’s no way to push a software patch to fix it. You literally have to go up to it, log in as an administrator, a technology person, and then delete a line of code and make that enabled to come back online.”
• Tesla shut down production lines at its manufacturing facilities in California and Nevada on Friday. Tesla’s IT teams told employees that there was a “Windows host outage,” and systems including “servers, laptops and manufacturing devices” were affected. The IT teams informed Tesla employees that they may see a “blue screen” on their various devices. Some reports said managers were telling workers to prepare for cancellation of shifts or to go home early.
• Mobile ordering at Starbucks was halted during the crisis. Starbucks spokesperson Jaci Anderson said in a statement emailed to NBC News that there was a temporary outage of the company’s “mobile order ahead and pay features.” However, on a Starbucks subreddit, where customers and employees post information and comment, store closures were reported because local managers did not want to deal with the outages.
• US border crossings were put into gridlock on Friday morning by the outage. People seeking to enter the US through Canada and Mexico found long delays at the crossings.
• The San Ysidro Port of Entry was bogged down Friday morning with pedestrians waiting three hours to cross, according to the San Diego Union-Tribune. People approved for the US Customs and Border Protection “Trusted Traveler” program for low-risk passengers waited up to 90 minutes. The San Diego Metropolitan Transit System posted on Twitter/X that some of its employees who live in Tijuana, Mexico, were unable to get to work Friday. Meanwhile, at the US-Canada border, Windsor police reported long delays at the crossings at the Ambassador Bridge and the Detroit-Windsor Tunnel.
• The Texas Department of Public Safety closed all of its driver’s license offices at most of the state’s 254 counties across the state, and New York’s Department of Motor Vehicles was unable to process transactions either online or at its offices on Friday morning. In Texas, the department said in a statement that “there is no current estimate” as to when the offices will reopen. In New York, the DMV said that by Friday afternoon, some systems had been restored and that it could begin performing online transactions. News reports said at least three of its DMV offices closed for the day because of the outage, according to the agency’s website.

The serious and potentially deadly impact of the tech failure was revealed especially in the healthcare industry. Associated Press (AP) reported that the outage caused the cancellation of emergency heart surgery in Paducah, Kentucky. The AP report said, “Alison Baulos, the executive director of the Center for the Economics of Human Development at the University of Chicago, said her 73-year-old father’s emergency open heart surgery was cancelled Friday morning due to the global tech outage, leaving her family scared and worried.”

Baulos told AP, “It’s an emergency surgery so if anything happens, it would be as a result of not having the surgery this morning. It does really make you just realize how much we rely on technology and how scary it is.” The report continued, “Her father was waiting at Baptist Hospital in Paducah, Kentucky, to find out what will happen next, she said. Her father was expecting surgery after he received a call from his doctor on Wednesday saying he had eight blockages and an aneurysm. But the family was told the operation had to be postponed due to the outage.”

The full extent and impact of the outage around the world will not be known for days or weeks. Microsoft CEO Satya Nadella issued a statement on Twitter/X that said, “Yesterday, CrowdStrike released an update that began impacting IT systems globally. We are aware of this issue and are working closely with CrowdStrike and across the industry to provide customers technical guidance and support to safely bring their systems back online.”

CrowdStrike has 29,000 customers with approximately $4 billion in annual sales and a current stock market value of $74 billion which is down 20 percent from a recent all-time high reached last month. It is a cloud-based cybersecurity platform with software used by industries around the world to protect against hackers and outside breaches.

The CrowdStrike Falcon antivirus software operates deep within network “endpoints,” such as desktops, servers and routers, to detect malware and other cyber threats. Due to the proliferation of hacking, ransomware and other evolving technology attacks, CrowdStrike enables its software to be configured for regular automatic updates of new antivirus responses.

It is ironic that a technology company devoted to protecting computers from being infected with viruses and malware has itself shut down a significant number of computer systems on a world scale.

A statement from CrowdStrike said the company was actively working with customers to fix the problem and that it was not a cyberattack. The statement continued, “The issue has been identified, isolated and a fix has been deployed. We are referring customers to the support portal for the latest updates and will continue to provide complete and continuous public updates on our blog.”

Two recent studies on Long COVID underscore the dangers posed by the “forever COVID” policy

Benjamin Mateus

Two recent studies on Long COVID—a chronic disabling condition that afflicts many after infection or reinfection with SARS-CoV-2—provide important context to the anti-scientific abandonment of public health internationally. These reports lend further empiric evidence to the well-established fact that no one is safe from COVID-19 and that appropriate measures must be instituted immediately to protect people from future infections.

The first of these two studies was led by Dr. Ziyad Al-Aly and published in the New England Journal of Medicine (NEJM) Wednesday under the title, “Post-acute Sequelae of SARS-CoV-2 infection in the pre-Delta, Delta, and Omicron eras.” The purpose of the study was to address the real incidence of the condition given the broad estimates that have been mentioned in the media. The authors sought to understand how the different strains of SARS-CoV-2 that have emerged throughout the pandemic afflict people, both the unvaccinated and vaccinated.

Dr. Al-Aly [Photo: Dr. Al-Aly]

Al-Aly is director of the Clinical Epidemiology Center and chief of research development at the Veterans Affairs St. Louis Health Care System and has been leading clinical studies on COVID-19 throughout the pandemic that have provided critical insights into Long COVID, also known as Post-acute Sequalae of COVID-19 (PASC). In particular, they have demonstrated that considerable health detriments persist even three years after a COVID-19 infection, underscoring the chronic nature of the debility.

Utilizing the Veterans Affairs’ vast medical database, they found that the cumulative incidence of PASC at one year after SARS-CoV-2 infection was 10.42 percent for unvaccinated persons in the pre-Delta era. This remained essentially unchanged during Delta, with Long COVID afflicting 9.5 percent of those infected. It declined very slightly to 7.76 percent of those infected with the Omicron strain, which first emerged and spread globally in November 2021.

Among vaccinated persons, the risk of Long COVID was dramatically lessened by comparison. Only 5.34 percent of these individuals during the Delta era developed PASC after infection, a nearly two-fold lowered risk. For the Omicron era, the risk of Long COVID among vaccinated individuals had declined to 3.5 percent. Al-Aly noted, “[Although] the decline is welcome news, the remaining risk is still substantial. Multiplied by the number of people who continue to get infected and re-infected, these rates would add considerably to an already high toll of people already impacted with Long Covid.”

In response to the question of how vaccines protect against Long COVID, Dr. Al-Aly explained to the World Socialist Web Site, “There is no mechanistic data to explain the data. [But] there are a couple of hypotheses. Vaccines reduce risk of severe disease which correlates with risk of long covid—but long covid can happen after even mild disease. So, this hypothesis may or may not be valid. Another hypothesis is vaccines may reduce viral load and enhance ability of the immune system to achieve viral clearance earlier—which may probabilistically lead to less chance of viral persistence and potentially less long covid. As you know, we need empiric data to evaluate these.”

Indeed, when one reviews the critical analysis made by data scientists who have modeled COVID wastewater concentrations and calculated estimates of daily infections, since the Omicron era, on average well over 500,000 people are being infected every day or over 180 million cases per year. Assuming every person has been vaccinated, a rate of 3.5 Long COVID cases per 100 persons infected means that over 5 million people can expect to develop Long COVID each year on top of the massive burden that already exists.

The authors of the NEJM study corroborated these back-of-the-envelop estimates when they wrote, “[Even] after this substantial decrease, the cumulative incidence of PASC at one year among vaccinated persons during the omicron era was not negligible. The large number of infected persons during the omicron era, the large numbers of ongoing new infections and reinfections, and the poor uptake of vaccination may translate into a high number of persons with PASC.”

On the issue of the current state of vaccination in the US, the Centers for Disease Control and Prevention (CDC) reported that as of May 11, 2024, only 22.5 percent of adults have received an updated COVID vaccine since September 14, 2023. However, for children six months of age through 17, that figure is a deplorable 14.4 percent. Including the complete abandonment of all mitigation measures, the ongoing surge of infections is being driven by the waning immunity in the population.

This raises to the fore the next important study, “Post-acute cardiovascular outcomes of COVID-19 in children and adolescents: an EHR [electronic health records] cohort study from the RECOVER project.” Conducted by the RECOVER (Researching COVID to Enhance Recovery) consortium and posted as a pre-print on medrxiv on May 15, 2024, the study exposes the lie that children are immune to the debilitation caused by COVID, specifically as it relates to their cardiovascular system.

Figure 1: Relative risk of incident post-acute COVID-19 cardiovascular outcomes in children [Photo by RECOVER consortium study. Bingyu Zhang et al. / CC BY 4.0]

Analyzing the data for over one million children and adolescents, nearly 300,000 with COVID and over 900,000 without COVID, those with documented infection exhibited increased risks for a host of post-acute cardiovascular outcomes that include high blood pressure, heart rate problems, heart inflammation, heart failure and heart enlargement, shock from heart failure, blood clots, chest pains, and palpitations. The elevation of these risks ranges from 26 percent to three-fold.

The results are worth reviewing. The authors note,

[The] absolute rate of any post-acute cardiovascular outcome in this study was 2.32 percent in COVID-19 positive and 1.38 percent in negative groups. Patients with congenital heart defects (CHD) post-SARS-CoV-2 infection showed increased risks of any cardiovascular outcome [63 percent increase], including increased risks of 11 of 18 post-acute sequalae … Those without CHDs also experienced heightened cardiovascular risks after SARS-CoV-2 infection [63 percent increase], covering 14 of 18 cardiovascular conditions…

Furthermore, the authors added,

Risks were consistently observed regardless of age, gender, race/ethnicity, obesity status, severity of acute COVID-19, or virus variant. Even children and adolescents without a history of any cardiovascular outcomes before SARS-CoV-2 infection showed increased risks, suggesting a broad potential impact on those previously considered at low risk of cardiovascular disease.

Subgroup analysis of relative risk of incident post-acute COVID-19 composite cardiovascular outcomes. [Photo by RECOVER consortium study. Bingyu Zhang et al. / CC BY 4.0]

To suggest that COVID-19 is no more harmful than the flu is utter quackery. It remains a serious airborne pathogen that demands global attention.

Summer COVID wave develops in Germany

Tamino Dreisam

A wave of COVID infections has been emerging in Germany for weeks this summer, debunking claims that the pandemic is supposedly over. Despite the warm season, the number of infections is constantly increasing and is now at the same level as at the beginning of the wave last autumn.

Medical staff wait for people at a local vaccination centre as the spread of the coronavirus disease (COVID-19) continues in Ebersberg near Munich, Germany, Monday, March 22, 2021. (AP Photo/Matthias Schrader)

As a result, more people were ill at the beginning of July than ever before at this time of year. According to figures from the Robert Koch Institute (RKI), 5.1 million people in Germany are currently suffering from acute respiratory diseases. This means that the number of new respiratory infections is around 150 percent higher than before the pandemic.

According to Christian Karagiannidis, Head of the Intensive Care Register of the German Interdisciplinary Association for Intensive Care and Emergency Medicine, the evidence is “clear”: “A coronavirus summer wave is currently building up.”

This can be seen, for example, in wastewater monitoring. The infection radar of the Federal Health Ministry indicates a constantly rising viral load in all reported sewage treatment plants in recent weeks. While it was still at 42,000 gene copies at the beginning of May, it is now almost three times as high and stands at 119,000 gene copies. At the same time, the Health Ministry is also recording an increase in visits to the doctor due to COVID-19 infections.

Thomas Rhein, head of the North Rhine Pharmacists’ Association, told the Rheinische Post newspaper: “Respiratory infections are well above the usual level in the summer months. Pharmacies are also feeling the effects. ... In general, the population’s defence mechanisms no longer seem to be as efficient since coronavirus. In addition to rhinovirus, RSV and influenza viruses, the coronavirus is a fourth new major challenge for the immune defence.” Coronavirus tests are in high demand in pharmacies.

Matthias Blum, managing director of Krankenhausgesellschaft NRW, explained that hospitals were also feeling the effects of the wave. “We are currently experiencing a surprising increase in coronavirus infections for the summer season.” The increase was “moderate,” but “this development” was “naturally also reflected in inpatient cases in hospitals.”

In recent weeks, the hospitalisation incidence level due to COVID-19 cases rose from 0.4 per 100,000 in May to 1.4 in July. This corresponds to around 1,170 hospitalisations per week. The number of hospitalisations is therefore more than three times higher than at the same time last year.

These developments refute the claims of politicians and the media that the coronavirus has gone from a pandemic to an endemic state. No serious scientist would ever describe the spread of a virus as endemic when over 10,000 people per week are hospitalised every year during the peak phase in winter and the virus does not disappear even during the “low phases,” with many hundreds still having to be admitted to hospital every week.

The consequences of the virus go far beyond immediate hospitalisations and deaths. In contrast to acute respiratory diseases such as influenza or RSV, one in 10 COVID-19 infections leads to long-term effects that can have devastating consequences and severely restrict the ability to work, move or see.

At the same time, new and more infectious mutations emerge every year due to the unhindered spread of the virus. The current summer wave is being driven by the Omicron sub-variants KP.2 and KP.3, which account for 13 percent and 52 percent of infections, respectively. Both variants are extremely contagious.

Furthermore, because of the dismantling of all health protection measures by all government parties, it is only a matter of time before a more deadly variant develops or another pandemic breaks out. The risk of a devastating H5N1 bird flu pandemic is currently growing as well.

Regarding H5N1, Christian Drosten, chief virologist at Berlin’s Charité hospital, called the situation “confusing and worrying,” in the Süddeutsche Zeitung newspaper. Although it was possible to get H5N1 under control, he said, he could “also imagine that we will soon be caught up in the next pandemic with H5N1.”

Global Wealth Report 2023: An orgy of enrichment for the super-rich

Andy Niklaus & Carola Kleinert

Multimillionaires around the world have benefited from the inflation year 2023, while the German super-rich alone increased their wealth by 10 percent to more than €2.1 trillion. This money could be used to finance thousands of new hospitals, schools, universities, housing estates, etc., modernise Germany’s entire rail and road network and end world hunger.

Champagne on ice [Photo by Harald Bischoff / CC BY 3.0]

The global wealth produced by the international working class is concentrated in the hands of 73,000 super-rich people, the so-called “ultra high net worth individuals,” as financial market analysts call them.

These “individuals” stand in contrast to hundreds of millions of workers who barely know how to meet the ever-increasing costs of basic necessities such as food, energy and rent each week or month.

In a press release from Zurich, the analysts behind the Global Wealth Report 2023 by the Boston Consulting Group (BCG) celebrate: “After a weak year in 2022, global net wealth rose significantly again last year.”

The NATO war against Russia in Ukraine, which is devouring immense monetary, economic and human reserves, and the slaughter of the Palestinian population in the Gaza Strip, have not affected the profit margins of the super-rich in the slightest. Quite the opposite!

The net wealth of the ruling classes in all nation-states rose by more than 4 percent to over €400 trillion in 2023, as the Global Wealth Report reveals. Worldwide financial assets (cash, account balances, bonds, shares and investment funds as well as pensions) rose by 7 percent to €231 trillion. The largest increases were in North America (€8.7 trillion), Western Europe (€1.8 trillion) and Asia-Pacific excluding Japan (€2.5 trillion). Global tangible assets (real estate, precious metals and other physical assets) rose by 2 percent to €220 trillion.

The BCG report is intended to show the capitalist financial aristocrats and oligarchs, “in times of geopolitical uncertainty, such as recently during the conflict in Ukraine ... clear trends in trans-border asset flows, the so-called cross-border assets.” Michael Kahlich, BCG partner in Zurich and co-author of the study, praised last year as “another significantly better year on the international financial markets. Investors in North America and Western Europe in particular benefited from this.”

As the leading financial power, North American financial capital once again increased its wealth the most in both absolute and percentage terms. At €100 trillion, it is still clearly at the top of the global ranking of financial assets.

Last year, North America’s financial capital increased by just under 9 percent or €8.4 trillion. Compared to its German rival on the global market, the report states that the “increase in financial assets in the USA last year was equivalent to more than half of the total net assets in Germany.”

The US is home to the most super-rich individuals (26,000), with Elon Musk ($251 billion), who is notorious among workers worldwide, at the top of the list, followed by Jeff Bezos ($218 billion) and Mark Zuckerberg ($189 billion). With 8,300 super-rich people, China ranks second in the global comparison. Some 3,300 super-rich people now live in Germany (an increase of 300 compared to 2022), which puts Germany in third place in the global ranking—with a much smaller population.

In-depth research by the Netzwerk Steuergerechtigkeit (Tax Justice Network) has identified over 237 billionaires by name, although there are no official wealth statistics in Germany and assets can therefore only be estimated.

In first place, the Netzwerk Steuergerechtigkeit lists the Boehringer and von Baumbach family (Boehringer Ingelheim company), whose assets are believed to be between €50 billion and €100 billion. In second place is the Quandt and Klatten family (BMW) with an estimated €40.5 billion, followed by the Schwarz family (Schwarz Group, Lidl) with €39.5 billion, the Merck family with €32 billion, the Kühne family (Kühne & Nagel) with €28.5 billion, the Albrecht and Heister family (Aldi Süd) with €26.5 billion, the Porsche family (VW/Porsche) with €23.8 billion, the Albrecht family (Aldi Nord) with €18.5 billion, the Henkel family with €15.2 billion and the Otto family with €13.7 billion, to name just the first 10 super-rich “families” on the network’s list.

These enormous fortunes contrast with the rapid impoverishment of working people. The poverty rate in Germany is now more than 20 percent. Single parents, those with large families, people with low educational qualifications and a large proportion of senior citizens are particularly affected by poverty. Child poverty is also at a record high: one in five children in Germany is affected by child poverty, which means that almost 3 million children and young people under the age of 18 are living in poverty.

While in the early 1990s, according to broadcaster ZDF, “the average wealth of the richest 10 percent [of the population] was 50 times higher than that of the poorer half,” “it is now 100 times higher.”

Over 20 years ago, the anti-working-class policies of the Social Democratic-Green Schröder/Fischer coalition (1998-2005) laid the foundations for the widespread impoverishment of the working class and the financial elite’s orgy of enrichment with its “Hartz” welfare and labour “reforms” (today’s “Citizens Allowance”) and its creation of a nationwide low-wage sector. Margaret Thatcher in the UK and Ronald Reagan in the US had implemented similar measures in the mid-1980s. In Germany, the spread of low-wage labour contributed to the rise of the German economy to become Europe’s leading economic power.

Significantly, the Schröder government did not reintroduce the wealth tax abolished in 1997 by the Christian Democratic (CDU/CSU) government under Helmut Kohl. Instead, the top tax rate was reduced from 53 to 42 percent. In fact, the richest financial oligarchs still pay just 1 percent tax today, as Jochen Breyer found out in his research for ZDF, “In the world of the super-rich.”

Meanwhile, the bottom half of the population only owns 1.3 percent of total wealth. The top 10 percent, on the other hand, own two-thirds of total wealth. Among these 10 percent, the top hundredth of the rich elite concentrate 35.3 percent of total wealth in their hands, and among them the super-rich (0.1 percent of the population) hold nearly a quarter (23 percent) of Germany’s total wealth.

According to the BCG report, the distribution of wealth in Germany is “disproportionately unequal.” And in its latest article on the subject, Der Spiegel warns that this extreme concentration of wealth in the hands of the few will “reinforce the above-average level of inequality.”

Maintaining this “above-average inequality” is not possible by democratic means. Since the beginning of the 2020s, strikes and class struggles against low wages, speed-up, poor working conditions and the risk of infection in the coronavirus pandemic have been increasing worldwide.

Chinese leadership meets amid mounting economic problems

Nick Beams

Significant problems are confronting the Xi Jinping regime as the third plenum of the Central Committee of the Chinese Communist Party meets this week to discuss the direction of the economy.

The meeting, which began on Monday and concludes on Thursday, did not get off to a good start, with the release of data showing that growth had slowed in the second quarter compared to the first three months of the year.

Chinese President Xi Jinping walks to cast his vote during a session of China’s National People’s Congress (NPC) in Beijing, March 12, 2023. [AP Photo/Andy Wong]

China’s GDP rose by 5.3 percent in the first quarter and economists had predicted it would increase by 5.1 percent in the second, but the figure came in at 4.7 percent.

A breakdown of the data underscores some of the key issues confronting the Chinese political leadership. Industrial production was up by 5.3 percent in June, beating expectations and reflecting the official policy to promote the development of “new productive forces” but retail sales rose by only 2 percent for the month, well short of predictions.

In a sign of deflationary pressures, consumer prices rose by only 0.2 percent in the year to June. In housing and real estate, which has been a mainstay of Chinese economic growth, the downward pressure was clearly evident.

New home prices fell by 4.5 percent in the year to June which, according to calculations by Reuters, was the largest decline in nine years. New construction starts were down by 23.7 percent in the first half of the year while property investment fell by 10.1`percent over the same period.

The latest data express deep going structural problems in the economy which now confront the government as it tries to change the course of policy under intense financial, economic and social pressures, both internally and externally.

In the wake of the global financial crisis of 2008, which had a major impact on the Chinese economy leading to the loss of an estimated 23 million jobs, a massive housing and infrastructure program was initiated such that real estate and property development, and its related industries, accounted for as much 25-30 percent of the Chinese economy.

While stimulus was provided by the central government, this expansion was financed in the main by local government authorities which borrowed large amounts of money through so-called local government financing vehicles (LGFVs).

The debt used to fund major infrastructure projects was financed through the sale of land for real estate and housing development.

The sharp slump in the property market, which began three years ago and has seen a host of companies go under—the most well-known of which was the collapse of the property giant Evergrande—meant that local governments and their LGFVs lost a major source of revenue.

A recent article in the Wall Street Journal highlighted the extent of the financing of LGFVs. It said economists had estimated the size of their debts at between $7 trillion and $11 trillion, about twice the size of central government debt.

“The total amount isn’t known—likely not even to Beijing, say bankers and economists—because of the opaqueness surrounding the financial arrangements that allowed the debt to balloon,” it said.

It is estimated that around $800 billion of the LGFV debt is classified at high risk of default.

The Journal article cited analysis by the Rhodium Group, a research firm, which found that only a fifth of nearly 2,900 LGFVs it reviewed last year had enough cash to cover their short-term debt obligations and interest payments.”

The prescription offered by economists, internationally and some within China, is that the government should initiate a stimulus package to boost consumption spending in order to maintain economic growth.

As Cornell University economics professor Eswar Prasad, a long-time analyst of the Chinese economy, noted in a recent comment piece in the Financial Times: “The government is resisting the clamour for monetary and fiscal stimulus, for fear of creating financial risks and adding to its debt burden.”

Some measures had been taken by the government and the central banks but “getting households [mainly in the middle classes] to consume more, when their confidence is at a low ebb and they see their homes and stock market investments falling in value, has proven a tougher proposition,” he wrote.

The main thrust of government policy is the development of what Xi has called “highly quality productive forces.” The focus is on the manufacture of high-tech products, of which a major component is so-called green technology goods such as electric vehicles, solar panels and batteries as well as medical equipment.

China is already a world leader in many of these areas, both in regard to technical efficiency, able to draw upon a vast pool of graduates from scientific institutions, and in terms of cost because of innovations in production methods.

Here the perspective of the Xi regime has run into a major obstacle—the determination of the United States to crush Chinese economic development which it regards as the greatest threat to its continued economic hegemony.

Starting under the Trump administration and continued and deepened under Biden, it has imposed a series of sanctions and constrictions on the export of high-tech components as well as imposing tariffs on its exports of electric vehicles and other green technology products which the European Union has joined.

The claim is made that so-called state subsidies are the reason for Chinese dominance in these areas and so its exports must be restricted on the grounds that they are “unfair competition” in global markets. Such claims are shot through with hypocrisy given the massive subsidies being provided to corporations by the Biden administration under the Inflation Reduction Act and the CHIPS Act.

For the Xi regime, the development of a new economic paradigm is an existential question. It sits atop a massive working class, estimated to be 400 million strong, and a vastly expanded urban population.

Having long ago abandoned any commitment to socialism, its sole basis of political legitimacy among the broad mass of the population is that it can continue to provide economic growth and an increase in living standards.

The turn to a new economic model and its impact on older industries, particularly construction, and the refusal of the government to lift spending on social welfare measures, which Xi has criticised in the past as a trap leading to “lazy people,” is generating major social tensions.

Some of these were reported in a major article in the FT this week entitled “Can Xi keep a lid on social strains?”

It noted that across the country “multiple indicators of social stress are flashing red as weakness in parts of the economy takes its toll. Official and unofficial data show rises in everything from labour market stress and housing foreclosures to labour protests, suicides, crime and random violence.”

Ever since the Tiananmen Square massacre of June 1989, it noted, the Xi regime had suppressed social unrest while economic growth gave the regime so-called “performance legitimacy.”

That is now being called into question. The downturn in property and construction is already having an impact with about 10 million workers leaving the construction industry in 2022 and 2023.

The article reported on a conference in China last year comprising delegates from municipalities and provinces which heard that perceptions about inequality “between rich and poor, cadres and the masses, have become general beliefs.”

The China Labour Bulletin in Hong Kong, which provides a limited coverage of labour unrest, has reported that there were almost 1,800 “incidents” in China last year, more than double that of 2022 and exceeding levels before the pandemic, with the construction industry the major source followed by manufacturing.

The article cited the results of a survey in social attitudes pointing to the shift from optimism to pessimism.

Survey results in 2004, 2009 and 2014 noted that most ordinary people were not “overly concerned” with income gaps, most were optimistic about their family prospects and many believed that upward mobility depended on merit.

The 2023 survey showed a marked change with respondents seeing “non-merit-based features of the social order, such as unequal opportunities, discrimination, and relying on connections, as relatively more important determinants of whether one is poor or rich.”

The authors of the report said the results did not suggest that popular anger over inequality was “likely to explode in a social volcano of protest activity.”

“They do suggest, however, that the performance legitimacy accumulated by the leadership through decades of sustained economic growth and improved living standards appears to be beginning to be undermined.”

Minxin Pei, a professor of governance at a California college and the author of a book on the surveillance and social control methods of the Xi regime, told the FT these measures had worked so far in a relatively tranquil environment, but that could change and there will be “lot more incidents of instability or unrest.”

He said if there was a prolonged period of low economic growth the CCP would enter uncharted waters with few precedents since Deng Xiaoping opened China up the market development at the end of the 1970s.

Rising unemployment and poverty in New Zealand

Tom Peters

There are numerous indications of deepening social inequality and collapsing living standards in New Zealand, as tens of thousands of people lose their jobs and the National Party-led coalition government imposes a drastic program of austerity to make workers pay for the economic crisis.

Kindness Collective Foundation appeal billboard in New Zealand, July 2024 [Photo: Instagram/kindnesscollectivefoundation]

The economy is barely expanding at a rate of 0.3 percent in the 12 months to March, and most people’s purchasing power has gone backwards. On a per capita basis, gross domestic product (GDP) contracted 2.3 percent in the past year and 4 percent since September 2022.

Unemployment was officially 4.3 percent in the March quarter, up from 3.4 percent a year earlier. The underutilisation rate—which includes unemployed people and those who cannot find enough work—rose by about twice as much, from 9.1 to 11.2 percent.

The situation is worse for young workers. For people aged 15 to 19, unemployment increased from 17 percent a year ago to 23 percent. For 20- to 24-year-olds, unemployment increased from 6 to almost 10 percent.

Stuff reports that in the week ending June 30, there were 113,415 people receiving the Jobseeker unemployment benefit, an increase of 14.9 percent or 14,709 from a year ago.

ANZ Bank is forecasting another 40,000 job losses nationwide by 2025. According to credit bureau Centrix, “There were 269 company insolvencies in May 2024—compared to 161 in May 2023.” Nearly a quarter of these were in the construction industry, which has shed thousands of jobs in recent months.

Significantly, the number of people receiving Jobseeker Support Health Condition or Disability benefits also increased by 11 percent in the past year, from 73,836 to 82,482—a sharp rise in the number of people who are too sick to work. This undoubtedly includes many suffering from long-term illness due to COVID-19, after the removal of all public health measures to stop the spread of the virus in 2022.

Roughly one in five children—more than 200,000—are living in poverty. The Kindness Collective, one of the country’s biggest charities, told the New Zealand Herald on June 23 it was aware of many children and teenagers “resorting to stealing to meet basic needs such as food and clothing.”

Food prices fell 0.3 percent in the 12 months to June 2024, but this negligible drop follows increases of 12.5 percent in the previous 12 months and 6.6 percent the year before that.

With about half a million people, 10 percent of the population, now dependent on food banks to survive, the government is cutting funding for these charities. One major provider, the Salvation Army, said on July 4 that it could no longer keep up with demand and has been forced to cut its food bank services by 25 percent. Auckland City Mission recently reported it would have to slash the number of food parcels it provides, from 50,000 to 20,000 a year.

The cuts to food banks were a particularly vicious component of the government’s austerity budget in May, which also chopped funding for the school lunches program, resulting in lower-quality meals for hundreds of thousands of children.

Along with funding cuts for healthcare and education, the government has so far slashed more than 6,200 public sector jobs across dozens of departments, fueling the rise in unemployment. These redundancies are being imposed with the crucial collaboration of the trade union bureaucracy, which acts as the enforcers for big business and the state, insisting that workers have no alternative but to sacrifice their jobs and living conditions.

Growing numbers of people now face crippling levels of debt, made worse by the Reserve Bank’s repeated increases to official interest rates, which have risen from 0.25 percent three years ago to 5.5 percent. The central bank’s aim was to trigger a recession, drive up unemployment and put downward pressure on wages. According to credit bureau Centrix, in May there were 474,000 people in debt arrears—more than 1 in 10 adults—which is 8.2 percent more than last year and 25.9 percent more than in 2021.

While mortgage rates have increased, so has the national median rent, which rose 6.2 percent in 2023 to reach $600 a week. Two percent of New Zealanders, about 100,000 people, are either homeless or living in severe housing insecurity.

Another sign of the financial crisis facing working people is the sharp increase in emergency withdrawals of retirement savings from the national KiwiSaver scheme. In April alone, 3,700 people withdrew savings for financial hardship reasons, compared with 1,820 such withdrawals last April.

Workers are making drastic spending cuts to make ends meet. According to Stats NZ, retail spending has fallen by 4.9 percent in the past year. Radio NZ reported on July 4 that, according to Infometrics, official figures show that since the last peak in the June 2021 quarter there has been a 12.6 percent decline in quarterly sales volumes per capita, seasonally adjusted. This is greater than the 10.3 percent drop in spending that followed the 2008 global financial crisis.

Consumer NZ estimates that in 2023, 40,000 households, about 2 percent of the population, had their electricity disconnected for non-payment. According to the New Zealand Herald, the four biggest power companies made a combined net profit after tax of $520 million in the same period.

Dr Kimberley O’Sullivan of the University of Otago told the newspaper that her research had found that between 16 and 30 percent of households cannot afford to properly heat their homes during the winter, depending on the measure used. This is far higher than the government’s official finding that 110,000 households, 5.8 percent, suffer from “energy hardship.”

All the parliamentary parties bear responsibility for the worsening social disaster. The opposition Labour Party lost the October 2023 election by a landslide after leading the government for six years, with the support of the Green Party, and overseeing an increase in child poverty. Labour’s 2017 pledge to solve the housing crisis by building affordable homes was exposed as an utter fraud.

Labour repeatedly refused to raise taxes on the super-rich, who benefited from billions of dollars in subsidies, low interest rates and quantitative easing during the first years of the COVID-19 pandemic.