“Peak China” – a new low in Western attempts to persuade China to commit suicide / By John Ross

Image credit: The Economist, May 11, 2023

Posted in MR Online on May 23, 2023

One of the latest covers of the magazine The Economist carries a headline “Peak China”. This, as its name suggests, is a claim that while during the last seven decades China’s has enjoyed a peaceful “rise”, specifically in relation to the U.S., this has now ended:

Whereas a decade ago forecasters predicted that China’s GDP would zoom past America’s during the mid-21st century (at market exchange rates) and retain a commanding lead, now a much less dramatic shift is in the offing, resulting in something closer to economic parity… One view is that Chinese power will fall relative to that of its rivals… The Peak China thesis rests on the… observation that certain tailwinds are turning to headwinds… All of this is dampening long-run forecasts of China’s economic potential. Twelve years ago Goldman Sachs thought China’s GDP would overtake America’s… and become over 50% larger by mid-century. Last year it revised that prediction, saying China would… peak at less than 15% bigger. Others are more gloomy. Capital Economics, a research firm, argues that the country’s economy will never become top dog, instead peaking at 90% of America’s size in 2035… the most plausible ones [of these projections] seem to agree that China and America will approach economic parity in the next decade or so—and remain locked in this position for decades to come.

| Will China be next | MR Online

The first reaction, was really to literally laugh at what, as will be seen, was the latest of decades long wildly inaccurate predictions by The Economist regarding China. Indeed, the record shows that probably a good working guide to what will happen in China is to take what The Economist says and assume that the opposite will occur! Second, to reflect on what are the deep reasons for such a combination of ignorance and arrogance that it leads to a refusal to make any balance sheet of entirely wrong analyses repeated for these decades but when it still claims to be taken seriously on an issue on which it has such a provenly lamentable record. As the latter applies not only to The Economist but to many other Western publications that make similar claims it will be returned to at the end of this article.

The Economist on China and the Asian Financial Crisis

First, however, in order to avoid any suggestion that we are misrepresenting The Economist, let us factually establish its prolonged inaccuracies on China. Similarly, to avoid any suggestion of seizing on incidental or secondary remarks, taken out of context, which do not represent the central views of the publication, only front pages, and special supplements, that is the journal’s most important publications, on China will be used.

| Out of Puff | MR Online

A suitably distant starting point is to go back 25 years to The Economist’s analysis of China and the Asian Financial Crisis of 1997-98. The Economist’s front page on 24 October 1998, referring to this, was “Will China be next?” Inside it posed the question: “whether China’s growth is slowing or even grinding to a halt… yes”. It then posed the question:

whether the resulting unemployment will prompt political unrest, or a power struggle among the leadership… yes.

In fact, as is well known, China was fundamentally economically stable during the Asian financial crisis. There was no unemployment leading to political unrest, let alone a “power struggle”. In short, The Economist was completely inaccurate.

The Economist “out of puff”

Moving ahead four years, on 15 June 2002 The Economist published a a special supplement on China. This had the title “A Dragon Out of Puff”—a self-explanatory analysis. Its conclusion on China was the following:

the economy still relies primarily on domestic engines of growth, which are sputtering. Growth over the last five years has relied heavily on massive government spending. As a result, the government’s debt is rising fast. Coupled with the banks’ bad loans and the state’s huge pension liabilities, this is a financial crisis in the making… In the coming decade, therefore, China seems set to become more unstable. It will face growing unrest as unemployment mounts. And if growth were to slow significantly, public confidence could collapse, triggering a run on banks.

| How India | MR Online's growth will outpace china's

Turning from The Economist’s analysis to reality, what actually happened in the decade that followed was simple. China’s economy from 2002-2012 expanded by a total of 173% or an annual average of 10.5%. For comparison, in the same decade world GDP grew by a total 37%, or an annual average 3.2%. The U.S. grew by 21% or an annual average of 1.9%. In summary, China’s GDP grew 4.7 time as much as the world average and 8.4 times as time as much as the U.S.

And this is supposed to be China “out of puff”? It is just known as The Economist being hilariously wrong.

The Economist wrong on China and India

Let us now turn to another major sortie of The Economist into analysing China. Its front cover headline of 2 October 2010 was “How India’s Growth Will Outpace China’s”—also self-explanatory. The analysis this headline referred to stated: “Chetan Ahya and Tanvee Gupta of Morgan Stanley, an investment bank, predict that India’s growth will start to outpace China’s within three to five years… For the next 20-25 years, India will grow faster than any other large country, they expect. Other long-range forecasters paint a similar picture.” The Economist approvingly quoted that India would “outpace” China because socialist “China’s growth has been largely state-directed. India’s, by contrast, is driven by 45m entrepreneurs.”

Once more, turning from a comparison of what The Economist predicted to what happened, the reality was clear and is shown in Figure 1. Taking the data from the Economist’s prediction in 2010 up to the present, that is to the end of 2022, China’s economy grew by 116.0% and India’s by 94.6%. Far from India “outpacing” China, China’s total economic growth in this period was 23% greater than India’s. China’s annual average GDP growth was 6.6% compared to India’s 5.7%.

Figure 1

| Figure 1 | MR Online

Regarding the supposedly negative features of China’s socialist “largely state-directed” economy even more striking, because it is an index of overall economic efficiency, was the result in terms of per capita GDP growth. From 2010-2022 China experienced an average annual population increase of 0.4% and India of 1.2%. So, China’s more rapid growth of total GDP than India was despite the fact that India had significantly more rapid population increase.

In terms of per capita GDP, as Figure 2 shows, China’s total growth from 2010 to 2022 was 105% and India’s 69.6%. That is, China’s per capita GDP growth was 51% higher than India. China’s annual average per capita GDP growth was 6.2% compared to India’s 4.5%. It turns out that China’s socialist “state directed growth” was far more effective at producing per capita GDP growth than India’s “45 million entrepreneurs”. Once more The Economist was not wrong on details but got the entire course of events wrong.

The significance of population trends in China’s economic growth will be considered in more detail below.

Figure 2

| Figure 2 | MR Online

The current claims by The Economist

Having established the successive previous errors of The Economist on China let us now turn to its claims in its most recent issue. This, as already noted, is summarised in the front cover issue with the headline “Peak China?”—that is the claim that China’s rise has stopped. Regarding the details of this inside we read supposedly regarding the “certain tailwinds are turning to headwinds” that:

The first big gust comes from demography. China’s working-age population has been declining for about a decade. Last year its population as a whole peaked… Wave goodbye to the masses of young workers who once filled ‘the world’s factory’.

The Economist then goes on to claim: “China has this year liberated its economy from the lockdowns, quarantines and other strictures of its ‘zero-covid’ regime. But it has not freed itself from longer-term worries about its growth prospects. Its population is shrinking. Its epic housing boom is over.” Supposedly China has problems from “a regulatory crackdown on e-commerce firms.” Regarding comparison with the U.S.: “Some ask how much longer China’s economy can grow faster than America’s.” Quoting works which it considers notable, and which coined the “peak” claim:

Hal Brands and Michael Beckley, two American political scientists, argue that China’s rise is already coming to a halt. The age of ‘peak China’, as they call it, is upon us.

As already noted, The Economist justifies these claims in particular with reference to population trends—the bogus claim, promoted for several years, that “China will grow old before it grows rich.” More precisely: “What accounts for the lower expectations for China’s economy?… Start with population. China’s workforce has already peaked, according to official statistics. It has 4.5 times as many 15- to 64-year-olds as America. By mid-century it will have only 3.4 times as many, according to the UN’s ‘median’ forecast.” It then goes on to discuss issues such as productivity—which are analysed below.

The Economist then goes on to conclude:

It also seems safe to say that China and America will remain in a position of near-parity for decades. In Goldman Sachs’s scenario, China maintains a small but persistent lead over America for more than 40 years… in Capital Economics’s projection, China’s GDP will… be over 80% of America’s as late as 2050…. if China’s peak is more Table Mountain [a flat-topped mountain in South Africa only slightly over 1,000 metres high] than K2 [Qogir Feng, the world’s second highest mountain at 8,611 metres] its leaders will have little incentive to rush to confrontation before decline sets in.

Leaving aside that China’s leaders have not shown any desire whatever to “rush to confrontation” let us dissect this evaluation of The Economist.

Elementary reality checks

Because no angle should be ignored in dealing with this analysis by The Economist, we will discuss below its assertions using technical methods of economic “growth accounting”. But actually, elementary reality checks and calculations, which can be understood by almost anyone (apparently apart from The Economist’s writers), shows their falsity.

Start with the question of population, on which The Economist lays such emphasis. China’s average annual population growth from 1978-2022, that is since the start of “Reform and Opening Up” is 0.9%. China’s annual average GDP growth in the same period is 9.0%. So, 8.1% a year GDP increase, that is 90% of the growth, could not possibly be accounted for by population changes. In summary, even before doing detailed growth accounting, it is clear that population growth could have played only a very small role in China’s economic development. This will be fully confirmed by the growth accounting data.

Turn to the second feature. According to The Economist we ae entering “the coming age of superpower parity”. What this means in GDP terms is that China and the U.S.’s economies will be roughly the same size—one possible a little bit bigger than the other. Let us analyse the implications of this claim.

Of course, no one doubts that after the “century of humiliation” China’s economic starting point was far behind the U.S. In 1950, in purchasing power parities (PPPs), on the calculations of Angus Maddison, who was the world’s leading expert on long term economic growth, China’s per capita GDP was slightly under 5% of the U.S.. By 2022, measured in PPPs by the IMF, China’s per capita GDP was 28% of the U.S.. That is, since the creation of the People’s Republic in 1949, China has improved its per capita GDP position relative to the U.S. by more than five times.

What is the overall implication of this? In 2022 Mainland China’s population was 4.24 times that of the U.S.—put in other terms, the U.S. population was less than 24%, approximately a quarter, that of China. That means, in turn, that for China to remain having the same, or a smaller, GDP than the U.S. its per capita GDP would have to remain less than one quarter of the U.S..

Why should China be incapable of reaching anything more than one quarter the per capita GDP, with therefore roughly one quarter the living standards, of the U.S.? Is it some xenophobic illusion that the average Chinese person is only one quarter as smart, or only works one quarter as hard, or cannot work out a way to achieve more than a quarter of the living standard of an average American? Or to put it the other way round, that the average American works more than four times as hard, or is four time as smart, or can work out a way to remain living more than four times as well as the average Chinese person?

That type of thinking is delusional and is also leaving the U.S. open to a terrible shock not only in regard to China but a second one later in this century when it finds out that the average member of the more than 1.4 billion Indian people is just as smart, just as hard working and just as capable of working out how their country can develop as the average American.

In fact, China’s development has come from successful policies by the Communist Party of China (CPC) and work by the Chinese people—not from economic “miracles”. China is perfectly aware that, given its extremely low economic starting point after a century of foreign intervention in 1949, it has set its goal of becoming a “strong, democratic, civilized, harmonious, and modern socialist country” to be achieved only by 2049. In the more immediate term, at the 20th Party Congress, its goal was stated as reaching the level of a “medium-developed country by 2035”. Slightly earlier, in 2020’s discussion around the 14th Five Year plan, it was concluded that by 2035 for China: “It is entirely possible to double the total or per capita income”. These two goals are essentially the same. This target requires an average annual growth of GDP of at least 4.6% a year by 2035. That this target can be achieved will be shown in detail below.

But the size of China’s population, and the speed of its economic development, does have an inevitable consequence. Those who believe that China will never significantly exceed one quarter of the per capita GDP of the U.S. and therefore that China’s GDP will never become significantly greater than the U.S., are deluding themselves. It is only necessary to be able to multiply by four to know what will be the final result.

Growth accounting

So far only issues that can be understood by anyone, whether or not they are an economist, regarding the elementary errors of the thesis of “peak China” have been dealt with—that is, the facts that the very slow growth of China’s population compared to its GDP growth shows that increase in labour supply plays only a very small role in its economic growth, and the consequences of the fact that China has over four times the population of the U.S. Actually, these are quite sufficient to understand why the theory of “peak China” is false. The fact that these false arguments can ignore such elementary realities shows how blinded people can be by their own propaganda. But nevertheless, it is also useful to analyse more detailed issues of economics—it should not be thought that any questions are being avoided. Therefore, more detailed issues of economic growth will now be examined. Analysing these, furthermore, does cast a light on important questions and further clarifies the fundamental errors of the theory of “peak China”—and what lies behind it.

Turning from the most fundamental trends to detailed growth accounting the most recent data will be examined in order to avoid any accusations that what is really being analysed is the effects of the period immediately after 1978—which almost no one would dispute brought gains but which some claim have now disappeared. Figure 3 therefore shows the latest 10 years, 2011-2021, for which detailed growth accounting data exists—it is not yet available for 2022.

Changes in labour inputs in China

As labour is the aspect most concentrated on in the theory of “peak China” it will be dealt with first. Initially, to get these out of the way, some elementary conceptual mistakes of the “peak China” brigade will be dealt with and then their most fundamental fallacy will be shown.

The detailed data on labour inputs in Figure 3 immediately shows one of the first elementary arithmetical fallacies of the old “China will get old before it gets rich” argument—which is essentially the same as that of “peak China”. This is that this fails to distinguish between the “quality” of labour inputs (that this their level of education, training etc) and the “quantity” of labour inputs—that is simply the number of hours worked.

Figure 3

| Figure 3 | MR Online

This fallacy can be easily illustrated for non-specialists in economics. Take an hour of labour in South Korea—this country is chosen because today it has one of the highest levels of higher education in the world. In 1945 85% of South Korea’s population lived in rural areas and Illiteracy was 88%. Today 85% of South Korea’s population lives in urban areas and enrolment in tertiary education is equivalent to the entire population of the relevant age groups. China’s is passing through the same historical process from its own extremely rural past—with urbanisation reaching 65% by 2021, and enrolment in higher education reaching 60% by 2022.

The value produced by an hour’s labour by someone with a university degree in Korea, very possibly a PhD in engineering or computing, in 2022 is obviously far higher than that of a peasant who was illiterate in 1945. Similarly, as China’s population becomes more and more highly educated and trained the inputs of “labour quality” (to use the technical economic term) will rise even if “labour quantity” (the total number of workers and therefore the number of hours worked) goes down.

This is precisely what occurred in China from 2011-2021. As Figure 3 shows, the total number of hours worked (labour quantity) fell, reducing GDP growth by 0.4%. But the contribution of labour quality, that is better training and education, increased GDP growth by 0.4%. Therefore, the actual change in total labour inputs was zero. (As a side note for technical economists, calculating labour inputs simply by hours worked, without taking into account labour quality, was an error in Solow’s original formulation of growth accounting which has been replaced in modern growth accounting. For non-technical economists the difference between the value created by an hour of labour by someone who is illiterate with someone who has an engineering PhD makes the point clear).

But even leaving aside this basic distinction, actually regarding labour quantity itself China’s position is not remotely as bad as claimed by “peak China”. For example, approximately a quarter of China’s working population is still in the countryside—the passing of a substantial part of this into urban areas, as will occur over the coming decades, will increase productivity, China’s current retirement age, of 60 for men and 50-55 for women, is extremely low by international standards and is bound to gradually increase given China’s great increase in life expectancy—which will produce an increase in available labour quantity compared to if the retirement age had not been raised .

In short, because they make the elementary mistake of failing to distinguish between labour quantity and labour quality, because they do not take into account the consequences of shift of labour from the countryside to urban areas, and because they do not note that China’s very low retirement age is bound to gradually increase with growing life expectancy, claims about the reduction of labour inputs in the theory of “peak China” are greatly exaggerated even in their own terms.

The small role of increases in labour inputs in China

But actually, even all the above issues are secondary to the main one which was already analysed in fundamental terms above—the point that China’s average annual population growth from 1978-2022 is 0.9% and China’s annual average GDP growth in the same period is 9.0%. Therefore, 8.1% a year GDP increase, that is 90% of the growth, could not possibly be accounted for by population changes. What this shows is that the increase in labour inputs has played a very small role in China’s economic growth.

Turning to analyse this in detail, it was already noted that in 2011-2021 the contribution of labour inputs to GDP growth was zero—a 0.4% annual increase in GDP due to improvements in labour quality, offset by a 0.4% of GDP fall caused by a reduction in labour quantity (hours worked). Even if the longer period from 1990-2021 is taken, the contribution of labour inputs to GDP growth was only 0.7% a year out of an average of 8.7% annual GDP growth—that is 92% of GDP growth was due to factors other than increase in labour inputs.

The reason that a slowdown in labour inputs will not produce a very sharp fall in China’s economic growth is therefore very simple. Because the detailed growth accounting data naturally confirms what was already obvious from the most fundamental facts on China’ population and GDP changes since 1978. That population and labour input changes have only played a very small role in China’s economic growth!

The fundamental factors which really do affect China’s economic growth, and their consequences, will be analysed below.

The reasons for China’s rapid economic growth

Turning from what has not made a large contribution to China’s economic growth, labour inputs, to those which have made a big difference, again the latest period 2011-2021 will be taken. China’s annual average GDP growth in that period was 6.7%. The detailed contributions to growth of the different inputs are shown in Figure 4. This chart is simply a different way of presenting the facts given in Figure 3—which showed the relative weight of different inputs into China’s economy. Figure 4 is merely more convenient for present purposes because by showing how much of China’s GDP growth is due to different inputs it makes it easy to see which changes would, and which changes would not, seriously affect China’s economic growth. That is, what would, and what would not, create a real situation of “peak China”. It also allows an easy calculation of whether China can or cannot achieve the 4.6% annual average economic growth necessary to achieve its target of doubling per capita GDP by 2035.

Figure 4

| Figure 4 | MR Online

The role of labour inputs

The first reality from these facts which is obvious, as already noted, is the relatively small effect that changes in labour supply will make. Assume that no changes are made to offset the decline in labour quantity, for example there is no increase in the retirement age, and this continues to deduct 0.4% a year from GDP growth. Assume also that the increase in the beneficial effect of increases in labour quality is eliminated and therefore this deducts the 0.4% a year from GDP growth due to this factor—there is no justification for making such an assumption as China’s education and training growth will continue, but it is hypothetically assumed here just to analyse a “worst case” scenario. What then happens? It means that China’s GDP growth would fall from 6.7% a year to 6.3%—easily enough to surpass the 4.6% a year growth required to achieve the doubling of per capita GDP by 2035.

The role of Total Factor Productivity

Now consider productivity, more precisely Total Factor Productivity (TFP)—for non-economists, TFP measures all processes raising the output of the economy which are not due to increases in capital or labour (for example, improvements in technology, the benefits of larger scale of production, improvements in management techniques, scientific discoveries, benefits of increased specialisation in production etc). Assume a catastrophic case that China’s rate of TFP increase fell to zero—once again there is no justification for such an assumption and China’s rate of TFP growth is one of the fastest in the world, but it is analysed here just to demonstrate the effects of the most extreme negative assumptions. What then happens is that China’s GDP growth would fall by 1.5% a year—from 6.7% to 5.2% a year. China would then still achieve the 4.6% a year target to double per capita GDP by 2035.

Even if the ludicrous assumption is made both that China achieved no increase in labour quality, deducting 0.4% of GDP growth a year, and that its rate of TFP growth collapsed to zero, deducting 1.5% a year from GDP growth, then the combined slowdown of 1.9% a year would still leave China growing at 4.8% a year—enough to achieve its 2035 target.

These negative assumptions are of course themselves ridiculous—there is no reason China’s improvement in labour quality will fall to zero, on the contrary it is pouring resources into education and training, and there is equally no reason why its TFP growth will fall to zero. But these extremely unrealistic assumptions have the benefit that even with them the thesis of “peak China” will not work.

Cutting China’s investment

It is factually clear that only one assumption would justify the argument of “peak China”—i.e. that a drastic slowdown in China’s economy will occur. This is that there is a huge fall in China’s level of investment in GDP—that is, in technical terms, in capital inputs into the economy (it should be understood that by “capital” in this sense is simply meant fixed investment—it is irrelevant whether this investment is carried out by the state, private capitalists, or any other form of ownership). This is, indeed, an inevitable result of the fact that 78% of China’s economic growth is due to capital/investment inputs—or in other terms that these account for 5.2% annual GDP growth out of a total of 6.7% growth. China’s dependence on capital inputs for economic growth is furthermore fairly standard, the average percentage contribution of capital inputs to economic growth of the world’s 20 largest economies in 2011-2021 being 81%. This is indeed why reductions in the level of investment in GDP do produce very large slowdowns in economic growth. This was analysed in the earlier article 它曾成功“谋杀”了德国、日本、四小龙,现在想要劝中国“经济自杀” and is dealt with in detail below.

In reality, although they spend large amounts of space discussing other issues which would have no great effect even if true, the statistics of those arguing for the theory of “peak China” show that they arrive at their claims because they assume that China will drastically cut the percentage of its economy devoted to investment. The reasons this claim is made will be analysed below, but first, to clarify the issue, the arithmetic of those who present serious quantified justifications for the “peak China” arguments will be examined—although, it is striking, that some who makes such claims don’t even bother to attempt to quantify them.

Taking first, among those studied by The Economist, an analysis by Roland Rajah and Alyssa Leng for the Lowy Institute with the self-explanatory title “Revising down the rise of China”. This concludes regarding China that: “our projections suggest growth will slow sharply to roughly 3% a year by 2030”. This analysis precisely assumes a huge fall in the percentage of China’s economy devoted to fixed investment/capital inputs:

total investment falls from the current 43% of GDP to 33% of GDP on average over the coming decades.

The same assumption is made by Goldman Sachs, which projects that China’s GDP growth will fall from an annual average 6.0% in 2013-2022 to 3.4% in 2023-2032—that is a decline of 2.6%. The reason for this alleged slowdown is because of the overwhelming effect of a single fact that the annual increase in GDP growth created by capital investment is projected to fall by 2.4%—from 4.8% to 2.4%. As this fall in capital investment accounts for 92% of the decline in the GDP growth rate, only 8% of the decline the Goldman Sachs report projects, or 0.2% GDP growth a year, is attributable to factors other than the decline in investment. Without the investment decline, the Goldman Sachs report’s data shows that China’s annual GDP growth would only fall from 6.0% to 5.8%—a level which would easily allow China to exceed its own targets for 2035. In short, Goldman Sachs shows that only the decline in investment makes a decisive difference to China’s growth rate, and therefore, to use The Economist’s terms, accounts for “peak China”.

Of course, these calls for, or predictions that, China will cut the level of investment in its economy are put forward in a concealed way. They are presented as calls for China to increase the percentage of consumption in its economy. But as consumption and capital creation/investment combined necessarily add up to 100% of China’s economy the call for China to increase the percentage of consumption in its economy is necessarily to call for it to reduce its level of investment. This would indeed, of course, for the reasons already given, lead to a drastic slowdown in China’s economy—to “peak China”. But it would simply be a case of China deciding to commit economic suicide.

While the studies published by the Lowy Institute and Goldman Sachs at least have the virtue of being clear, others don’t—so these will be examined below.

A leader is certainly different

There is no doubt that from the facts already given that if China drastically cuts its level of investment its rate of economic growth would indeed substantially fall—as capital inputs account for 78% of China’s economic growth that is inevitable. But why should China make such a drastic cut in its level of investment in GDP?

The alleged reason for this is because China is different from other “Western” economies. For example Capital Economics, which unlike the Lowy Institute or Goldman Sachs studies, does not even properly quantify its findings, but is nevertheless cited by The Economist as a source, argues: “we expect China’s trend rate of economic growth to fall to around 2% by 2030.” It notes:

China… has an unusually large capital stock…. If China’s capital stock to GDP ratio were to continue to rise at the rapid pace of the past decade, it would soon be much higher than in other major economies.

Similarly, Goldman Sachs argues that China’s level of investment in its economy will fall sharply: “Investment as a share of GDP is forecast to decline from 42% in 2022 to 35% by 2032.” The reason that this will happen is apparently because China is at present an upper middle-income economy, although approaching the level of a high-income economy by World Bank standards, and:

Investment as a share of GDP in upper-middle-income countries is 34%.

Well certainly China is different from other economies. Why? For the simple reason that its economy is growing much more rapidly than they are! Therefore, it is producing a more rapid increase in average living standards than they are, it has produced a more rapid reduction in poverty than they have etc. Naturally the leader is different to those who are further behind£ The economy with the most rapid economic development is different to the countries with slower economic development.

Why should the more rapidly developing copy the less rapidly developing

But then it is a completely bizarre logic that says that the economy which is most rapidly developing should change to become like the less successful ones! What would a client of Goldman Sachs, or any other bank or consultancy, say if it argued “We notice that you are developing more rapidly than your competitors—so you need to stop that and reduce yourself to their level.” Or if they said to a company: “We notice that in this field one company is developing much more rapidly than the others. Therefore, you should ignore that company and copy the less successful ones. Incidentally we are advising this most successful company to abandon its advantages and instead accept the approach of its less successful competitors.” Anyone who made such a proposal would be laughed at—in the few seconds before the contract with them was immediately terminated.

But that is exactly what those who are arguing the case for “peak China! are doing. They are saying: “We note that China’s economy is developing more rapidly than others. Therefore, it should abandon the reasons for this success and adopt the methods of the less rapidly developing.” Instead, of course, what any sensible person would argue is: “China is different because it is the most rapidly developing. Therefore, other countries should learn from the reasons for China’s success (which is not, of course, to pursue the impossible course of mechanically copying it).” This entirely logical argument is, of course, what other countries are doing. It explains the increasing international interest in China’s socialist development strategy.

Instead, what those arguing the case for “peak China” propose is that China should voluntarily commit economic suicide. That it should abandon the methods that have made it the most rapidly developing economy in the world and adopt the methods of the less successful. If China decides to commit economic “suicide” then that certainly would produce “peak China”—if someone decides to commit suicide they will undoubtedly be dead. But it would be very bizarre for China and the CPC to adopt such a logic! Why, having brought China from almost the poorest country in the world in 1949, after a century of foreign intervention, to achieve the most sustained rapid economic growth of any major country in world history should the CPC decide to adopt a less successful approach? Gorbachev may have decided that the USSR should commit suicide, bringing ruin to his country, by adopting Western approaches, but the CPC has shown no similar inclination.

The reasons for blind arrogance

Turning from these specific economic points to more general considerations, these factual issues are so obvious to anyone who thinks about them seriously, that it takes us back to a point made before the discussion of detailed analysis of growth accounting. That is, what is the explanation of the blindness to reality, to facts, that is created by unconscious arrogance?

The Economist, Goldman Sachs etc note that China’s economy differs from their capitalist ones. But instead of drawing from the more rapid development of China’s economy than theirs the conclusion that China’s system shows its superiority, they conclude that necessarily China must be wrong—and that they are right! The reason is because to accept the facts would be to overturn their, conscious or unconscious, arrogant way of looking at the world. It is worth looking at just a few of these implications to understand the reasons for the blindness.

The first is the role of CPC. It is the CPC, no other political force, which created the socialist market economy, an economic system which had never before existed in history, which has created the most rapid economic growth of any major country in human history, which has produced the most rapid increase in living standards or any country, which has produced the greatest reduction in poverty in any country in human history, and which overall has produced the most rapid sustained improvement in the living standards of any country in human history. The idea that such gigantic achievements could occur by “accident”, that is without thought or theory leading it, is laughable. What it means is that the CPC not only produced better practical results for its people than any other political force but that the CPC out thought every other political force.

Second, it means that China has achieved what every country that was once dominated by imperialism dreams of—that China, and China alone, will decide its destiny. This is indeed the greatest of all the CPC’s national achievements. That after a “century of humiliation”, in which China was simply trampled on by other states, only China will now decide its own fate. If China takes wise decisions it will prosper. If China takes foolish decisions it will suffer. But no one else will decide the outcome. In a fundamental sense that is precisely the basis of the “great rejuvenation of the Chinese nation”..

Third, China’s success, brought by the CPC, brings to an end an entire centuries long epoch in human history—perhaps this is particularly to be commented on by someone from Europe? During approximately the last 500 years, “white” European countries, and their offshoots, became the most powerful in the world. That 500 years is certainly a short period in the approximately 5,000-year history of human civilization. For most of that time it was Asia’s people—China, India, West Asia/parts of North Africa (falsely labelled the “Middle East” in Eurocentric worldviews) who were the most advanced. But, of course, 500 years is far longer than the life of anyone alive today. And during that 500 years these “white” countries built into the foundations of their capitalist system the vile dregs of racism—this is a point particularly emphasised in recent material produced by the Tricontinental Institute for Social Research which should be regarded as of fundamental importance. Slavery, the treatment of non-“white” people as not equal in order to justify colonialism, were built into the foundations of that European originated capitalist system.

China’s rise, that of almost one fifth of humanity, which it should be remembered is more than the population of all “advanced” economies in the world put together today, not only creates a socialist society but completely destroys the entire cultural basis and assumptions of that 500-year-old epoch in human history. A long time Afro-Caribbean friend of mine, knowing I followed China as closely as I could, once said to me “but what does China’s rise mean for the rest of us?” I said: “Well among other things it destroys the myth of the ‘superiority’ of the white race”. To which their reply was “well that’s a victory for everyone.”

Indeed, in terms of the entire moral dignity of humanity, China’s success is playing an indispensable role in putting an end to the shameful traits of an entire period of human history. It is in large part because of that entire 500 year history that those proclaiming “peak China” can continue to write views that are so completely out of touch with the facts and with reality and why they refuse to draw any lessons even when they are repeatedly shown to be wrong—as was shown with the test case of The Economist at the beginning of this article (and many more examples could be taken). The stubborn blindness of the refusal of Western reporters and analysts to face the fact they have repeatedly been proven entirely wrong reflects not only bad journalism or a love of capitalism. It reflects the blindness to reality produced by 500 years of an unconscious cultural arrogance produced by a system which is fortunately now progressively disintegrating.

Xi Jinping noted carefully at his first press conference after becoming General Secretary of the CPC that China directly sees its own national rejuvenation as a part of the overall progress of humanity:

Throughout 5,000 years of development, the Chinese nation has made significant contributions to the progress of human civilization… Our responsibility is… to pursue the goal of the rejuvenation of the Chinese nation, so that China can stand firmer and stronger among the world’s nations, and make new and greater contributions to mankind.

This is not simply a goal for the future. This is a process that is underway today. It is a part of China’s great achievement, brought about by the extraordinary struggle of its people for national rejuvenation, that the rest of humanity benefits from it. That certainly involves economics. But it goes far beyond it.

[This article was originally published in Chinese at Guancha.cn.]

John Ross is a senior fellow at Chongyang Institute for Financial Studies, Renmin University of China. He was formerly director of economic policy for the mayor of London.

The Condition of the Indian Working Class / by The Tricontinental

Birender Kumar Yadav, Erased Faces, 2015. Brickmakers’ thumbprints stamped onto their portraits on archival prints.

Originally published in the The Tricontinental on May 2, 2023

Two facts shattered the appearance of calm in contemporary India. First, COVID-19 exposed the decades-long evisceration of India’s health system and the utter incompetence of a central government that was keener to ask the public to bang pots than to offer scientifically based, calm leadership. Second, Indian farmers and peasants held a year-long protest during the pandemic against three bills put forward by the central government that threatened the existence of farming in India. Their protest, which received support from the working class and from large sections of the middle class, was able to prevail against a government that does not have the habit of retreat.

Theories that emanate from the government and from think tanks that have grown to eclipse the democratic role of public universities could not explain either the impact of the virus or the political resilience of the farmers and peasants. The façade of their fine theories cracked open to display a history of naked avarice. Phrases such as ‘labour market liberalisation’ and ‘trade liberalisation’ did not produce an efficient, modern society. Instead, decades of cuts to the public health system, the use of underpaid ‘volunteers’ to provide care during the pandemic, and the promotion of unscientific ideas by elected officials resulted in a massive COVID-19 death toll. Meanwhile, these phrases – out of the textbooks of neoliberal theory – provided the intellectual cover to hand over the control of agricultural commodity markets to large corporations, many with intimate ties to the ruling party.

The cracks in this façade shone a light on the anti-social impact of the neoliberal era in India, which began in 1991. This light burned bright, refusing to be dimmed by media conglomerates and holy men, who began to praise the government for preventing even more deaths. But that light did shine through, and it made an impact on mass consciousness, even if it did not result in immediate electoral gains for the opposition parties.

Birender Kumar Yadav, Walking on the Roof of Hell, 2016. Khadau (wooden sandals).

In June 2021, Tricontinental: Institute for Social Research published our assessment of the farmer’s protest in dossier no. 41, The Farmer’s Revolt in India. That dossier provided an understanding of how neoliberal policy has undermined Indian farmers and landless peasants, increasing inequality and misery in the countryside. This dossier, The Condition of the Indian Working Class, offers a broad analysis of the living and working conditions of India’s large and diverse working class.

The Lockdown

On 24 March 2020, India’s Prime Minister Narendra Modi announced – without notice – a ‘total lockdown’ for the country’s population of 1.4 billion. Small and medium-size businesses, which employ most of India’s workforce, pulled down their shutters. Due to the lockdown, at least 120 million workers, or 45 percent of India’s non-agricultural workforce, lost their jobs. Employers were under no moral or legal obligation to pay their workers, many of whom did not even receive their back wages. Some workers only had a few days’ worth of food in hand while others found themselves with no money or food at all, and many were expelled from the shantytowns where they lived. Faced with public pressure and the possibility that hundreds of millions of people would starve because of this unplanned lockdown, the government announced a meagre support package on 26 March that totalled less than 1 percent of India’s gross domestic product.

The lockdown demonstrated the fragility of the Indian working class: only a small push was needed to throw vast sections of the workforce into homelessness and hunger. Workers in cities, almost all of them migrants from far-away towns and villages, had neither any significant support from the government nor the security of community and family networks.1

Tens of millions of desperate migrant workers defied the curfew and walked thousands of kilometres to their home villages. For them, the villages represented shelter, security, and some form of dignity. Some flocked to railways and bus stations in search of transportation while others took to the national highways on foot. Millions of other workers, including those whose villages were too far to brave such a journey, remained in the cities and depended on the kindness of strangers. Trade unions, left political parties, employees on salaries (mainly bank workers and internet technology workers), sensitive individuals, and others hurriedly formed groups to provide food and water to the workers and help them to return their villages. The reaction from the state was characteristic: the police stopped workers at state borders; sprayed industrial bleach at them through water cannons, allegedly to sanitise them; confiscated their bicycles; and beat them as they violated the curfew. No corporations stepped forward to bear responsibility for the workers’ welfare, their attitude as callous as that of the government.

Trapped in cities, hundreds of millions of workers had to face the pandemic in the worst possible conditions. The majority of the urban working class – nearly half of urban India and ­– lives in slums, where the air is fetid and the surroundings squalid. Light barely penetrates the narrowly packed brick boxes and sheds, a few inches separating each dwelling from the other. Families are packed tightly into narrow rooms, where privacy and breathing space are alien. Migrant workers pile on top of each other in single rooms with their meagre belongings. In most of these slums, which do not have proper drainage systems, the surroundings becoming toilets. The social catastrophe is hard to describe: workers fall into collapsed septic tanks, drowning in filth; gas cylinders, the main form of cooking energy, explode because their production is effectively unregulated; neighbourhoods turn into swamps during the heavy monsoon rains, with dysentery, dengue, malaria, and typhoid given free rein. The pandemic was just one more burden for the workers. Confined to claustrophobic slums, where social distancing is impossible, they watched as the virus swept through their communities. Out of sight, out of mind: that was the attitude of the Indian government and elite.

The scale of the terror invoked by COVID-19 could not be concealed. Corpses of the working class and the poor were seen floating down the Ganges River and piling up in crematoria and graveyards across the country. The government began to bury the numbers, underestimating infections and casualties despite the clear evidence and first-hand knowledge in working-class areas of high rates of infection and death. A government that had overseen the evisceration of the public health system and that had turned over the pharmaceutical industry to the private sector certainly seemed more invested in the health of the ‘market’ and of the billionaires than in the health of the workers.

Two Indian pharmaceutical companies had a duopoly in the country’s COVID-19 vaccines. Even as the pandemic spiralled out of control, the government procrastinated bringing in the more than capable public-sector companies to increase the production of vaccines. Given that one of the vaccines was developed by government research institutes, the public sector could easily have been tasked with ramping up the production and delivery of vaccines. What was clearly in the public’s best interest was not in the best interest of capital. Rather than intervene in the worst public health crisis seen in the country’s history, the Indian government stood by as private firms made enormous profits and neglected to vaccinate India’s working class. One of these two pharmaceutical companies made a profit of up to 2,000 percent per a single dose while the other made a profit of up to 4,000 percent.2 From March 2020 to March 2022, the profits of India’s big businesses doubled, as did the wealth of the country’s billionaires.3

Workers in the Era Before Liberalisation

In 1944, four years before the British imperialists were ejected from India, a group of Indian capitalists drafted a text called the Bombay Plan. These capitalists acknowledged that in an independent India, the industrial sector would need to be protected from international competition and given resources to flourish. This protectionist theory is called the ‘infant industry’ thesis. Drawing from the Bombay Plan, the new Indian state developed an industrial policy (1948), set up a planning commission (1950), produced the first Five-Year Plan (1951–1956), crafted the Industrial Policy Resolution (1956), and passed the Monopolies and Restrictive Trade Practices Act (1969). The new Indian government’s policy – drafted alongside private-sector industrialists – was to carve out some areas for the private sector and to ensure that no private-sector conglomerates could dominate any one sector. However, there was no democratisation of the Indian economy through land reforms or through the provision of workers’ rights, allowing the bourgeoisie to benefit greatly in the early years of independent India. In 1960, Prime Minister Jawaharlal Nehru conceded that his government’s policies had intensified social inequality:

Large numbers of people have not shared in [the increase in the nation’s wealth] and [they] live without the primary necessities of life. On the other side you see a smaller group of really affluent people. They have established an affluent society for themselves anyhow, though India as a whole may be far from it… I think the new wealth is flowing in a particular direction and not spreading out properly.4

Unlike in socialist countries, the public sector in India was built for a limited purpose – to facilitate the growth and accumulation of the private sector. The raison d’être of the Indian public sector was not to maximise profits, but to provide a sustainable ecosystem for private industry – hence the investments in infrastructure and inputs like heavy machinery and steel, which in the absence of the public sector would have had to be imported from Western countries at very high costs.

Strong workers’ movements fought to build key trade unions that intervened to ensure that legislation regarding work hours, wages, benefits, and collective bargaining would be implemented, strengthened, and expanded to include more and more of the workforce. There are three reasons why public-sector workers were able to make these gains: first, because the capital-intensive nature of the public sector and subsequent concentration of workers in large factories allowed strikes to inflict rapid damage on profits; second, because the largely undereducated and underfed population meant that the reserve army of labour to undercut the skilled public-sector workers was not always available; and third, because of the tradition of struggle and the trade union culture that developed in these factories, the public-sector workers developed high levels of class consciousness. However, the restriction of the public sector to capital-intensive industry and the proportionally small number of its workers in the labour force ensured that only a small segment of the Indian working class could access these rights. Nevertheless, the rights of public-sector workers set a benchmark for the rest of the working class, which fought, alongside the highly class-conscious public-sector workers, to extend labour legislation to cover all workers.

This is significant given that in India, 83 percent of the workforce is in the informal sector, consisting of a multitude of small, unincorporated enterprises alongside household and precarious work. Even in the formal sector, a significant percentage of employment is informal in nature (such as subcontracted work), bringing the total of informally employed workers to more than 90 percent of the labour force.5 For these workers, laws and rights are a fantasy: most of them do not even earn the minimum wage, despite the fact that it is set just above hunger levels. Due to the lack of protections, these workers are forced into irregular and seasonal contracts, including daily wage contracts, which deprive them of reliable sources of income. The informal and unregulated nature of work has meant that – even before liberalisation – unionisation has long been alien to these workers. Only in states where the Left is or has been in power – such as Kerala, Tripura, and West Bengal – have workers been able to attain legislation that has improved their working conditions and allowed them to unionise. In these states, workers have had a higher share of income.

Labour Market Reform Since 1991

In 1991, the Indian government made an agreement with the International Monetary Fund to liberalise the economy in exchange for short-term financial assistance. This included the government’s commitment to ‘reform’ the labour market and further open up the partly protected Indian economy to foreign capital. The era of the Bombay Plan was over.

India was attractive to foreign capital not only because of the size of its internal market, but also because of its large pool of workers who were being paid criminally low wages. Over the years since independence, workers remained underpaid and underfed, but there was a significant change: a large section of them had become literate. This technically skilled and more ambitious workforce emerged by the 1980s and continued to expand due to the government’s investment in vocational and technical training, the fight for increased educational opportunities for children, and the agrarian transformation that produced new aspirations among the children of farmers and peasants. However, there was no expansion of employment to accommodate them. It was this large army of underpaid, underfed labour, accustomed to working in what are likely some of the worst working conditions in the world, but now with new aspirations and literacy, that awaited the exploitation of international capital on the eve of liberalisation.

The corporate sector pushed a full-spectrum media campaign against workers, making the argument that they were entitled and lazy and that there needed to be ‘flexibility’ in this new age of globalisation. Many academic and policy institutions jumped on the bandwagon to make the case for ‘labour market flexibility’. The general orientation of this argument is that labour must work at the whim of capital, which should not be ‘captive’ to regulations about employment and wages and must be allowed to pay wages according the simple principle of supply and demand, uninfluenced by any responsibility to maintain workers’ living standards. Such a scenario – despite the social costs to workers – would bring in foreign investment, they argued, which would allegedly raise the general technological level of industry and further increase labour productivity, thereby increasing both growth rates and wage levels in the long term.

Two impediments lay before this golden road to growth: public-sector trade unions, which continued to resist the doctrine of ‘flexibility’, and the existence of labour laws. One important illustration of the resistance of trade unions is the fight at the Visakhapatnam Steel Plant, led by workers and joined by the public, who, together, have staved off multiple privatisation attempts over the course of a decade.6 Faced with challenges from the unions, the government moved towards a comprehensive solution not to fight the unions factory by factory, but to change the law in its favour, assisted, since 1991, by a judiciary aligned with the neoliberal agenda. In the early years of liberalisation, the Supreme Court ruled that contract workers at Air India could become permanent workers in certain cases. But in 2001, the court reversed this judgement following an appeal from the Steel Authority of India and other public-sector firms, thereby nullifying the gains that workers had made through decades of struggle. This assault on contract workers came alongside other industrial disputes, such as a concerted attempt to ban strikes. Then, on 6 August 2003, the Supreme Court ruled in favour of the Tamil Nadu state government’s dismissal of 170,000 employees on the grounds that they had been on an ‘illegal strike’. Only if the workers offered an unconditional apology, the Supreme Court said, would the government have to rehire them. Crucially, the Supreme Court concluded that ‘there is no question of [government employees] having any  fundamental, legal, or equitable right to go on strike’, further stating that trade unions do not have ‘a guaranteed right to an effective collective bargaining or to strike’ and that ‘[n]o political party or organisation can claim that it is entitled to paralyse the industry and commerce in the entire state and is entitled to prevent the citizens not in sympathy with its viewpoints from exercising their fundamental rights or from performing their duties for their own benefit or for the benefit of the state or the nation’.7 This judgement not only went against Indian laws: it also violated a range of International Labour Organisation conventions that the Indian government had signed over the years.

Over the course of the past few decades, there has been a change in the higher judiciary’s approach towards disputes between workers and management as well as the working class’s right to collectively protest and go on strike – a change that favours market principles and the sanctity of the contract. The judiciary’s views have allowed capital to open up a ruthless campaign against workers, but this has not stopped them from fighting back, as is evident from workers’ struggles, from the Maruti Suzuki factory in Manesar (Haryana) and the Volvo Buses factory in Hoskote (Karnataka) to the anganwadi (crèche) workers of Gujarat and the ASHA (Accredited Social Health Activist) workers of Punjab. Workers’ attempts to form unions have nonetheless been treated as criminal actions. As Maruti Suzuki’s Management Executive Officer S. Y. Siddiqui put it in June 2011, ‘The problem at Manesar is not one of industrial relations. It is an issue of crime and militancy’. Furthermore, the firm, he said, would not ‘tolerate any external affiliation of the union’, warning the unionised workers that any attempt to find political allies amongst the national labour federations to help their fledgling struggle would be met with retaliation from the company.8 In the face of continued worker struggles, the government has turned to using anti-terror legislation to arrest workers and subdue their right to strike. For instance, in 2017, when contract workers for Reliance Energy unionised and went on strike for a few hours demanding compensation for the death of a worker, five of them were arrested on terrorism charges.Furthermore, violence against union organisers along the Gurgaon-Manesar-Dharuhera-Rewari stretch (in northern India) is mirrored in the Coimbatore-Chennai belt (in southern India). The immanent violence in both of these zones led to industrial actions that resulted in workers’ deaths, such as the 2012 murder of Awanish Kumar Dev at the Maruti Suzuki plant and the 2009 murder of Roy George of Pricol Limited in Coimbatore (in the state of Tamil Nadu). In 2009, after the uprisings in Coimbatore, Jayant Davar, the president of the Automotive Component Manufacturers Association of India, put it bluntly: ‘We can’t be a capitalist country that has socialist labour laws’.10

Proponents of ‘labour flexibility’ argued that this approach would attract foreign capital and increase labour productivity and economic growth. Decades after its implementation, however, the data contradicts the theory. Instead, growth has slumped and so has employment – especially full-time, formal employment – as the workforce has increasingly shifted to a model of short-term contracts with minimal regulatory oversight and benefits. Due to deteriorating working conditions, the share of profits and wages has diverged significantly: from 1999–2000 to 2018, the share of profits increased from 17 percent to 48 percent while the share of wages decreased from 33 percent to 26 percent.11 Profits are now the national interest, and struggling workers are terrorists.

Divisive labour practices have decimated trade unions in private-sector industry and have created difficulties for the unions of the public-sector industry. This has led to hierarchies of exploitation between formal and contract workers, which most acutely impact the most exploited sectors and cause an atmosphere of resentment between workers on the shop floor. Struggles that largely focus on bargaining over wages are unlikely to rally united mobilisations, except in extraordinary circumstances.

Working-Class Desperation

Employment generated by the neoliberal dispensation is work for the desperate. The promise of large-scale industrial investment and the creation of high-quality industrial jobs did not materialise in a significant way, and both economic and industrial growth have remained at low levels not only because of the lack of investment, but also because of the suppressed demand of the Indian population. This demand was reduced because of the desperately low wages of much of the population as well as neoliberal restraints on public spending, particularly in the agrarian sector.

Since 1991, there have been two periods of significant economic growth in India, but neither of them are due to ‘labour market reforms’ or neoliberal policies in general. The first, from 2003 to 2008, was generated by the spillover from the credit-fuelled demand of US consumers, and the second, from 2009 to 2011, was generated by credit-fuelled spending by Indian corporations as they borrowed vast sums of soon-to-be defaulted loans from Indian public-sector banks to build infrastructure, such as power plants and roadways. These bubbles are not sustainable, since US consumer demand has flattened and since Indian firms are not willing to increase investment in the face of depressed demand, which is reflected in the vastly unutilised capacity of the country’s industry. Private conglomerates continue to borrow from public-sector banks, but they do so to fund acquisitions rather than create employment.

Birender Kumar Yadav, An Axe on One’s Own Foot, 2015. Iron and wood.

These large conglomerates, which are able to borrow astronomical amounts of capital from public-sector banks, employ – at their peak – no more than 2 percent of India’s workforce and no more than 5 percent of the non-agricultural workforce.12 Rather, the majority of India’s workers are hired by small enterprises, which face an entirely different reality. In these firms, which are often strapped for credit, the wage bill takes up the majority of the operational costs, there is little ‘value addition’ during the production process, the profit margins are slim, and there is relatively little access to capital. These small, scattered enterprises have limited market power, which means that they cannot mobilise the political power needed to access public resources at scale. The only way for these small enterprises to accumulate profits and capital, then, is to squeeze workers. In these sectors – almost completely unregulated – workers are overworked and underpaid, with few rights as compared to those in the formal sector. During market swings, these firms perish, as happened during the COVID-19 pandemic. Their reliance on cheap labour limits the likeliness, or even the possibility, that they will improve working conditions, which is why their workers require direct state support during an emergency such as the pandemic.

Meanwhile, the informal sector is mostly made up of a wide array of service workers who are either employed by small businesses or are ‘self-employed’. A large number of these small businesses, such as shops and restaurants, each employ a handful of workers, many of them hired daily and paid in cash or in kind. Another large section of workers in the informal sector sell their labour directly to consumers. This includes auto drivers, domestic workers, electricians, load carriers, manual scavengers, mechanics, plumbers, rickshaw pullers, ragpickers, road sweepers, and security guards. Most of them have neither an employer nor a stable occupation, and many of them hold multiple jobs. For many of these workers, there is a continuum between rural and urban spaces, as they travel to their villages during the sowing and harvest seasons either to work on their family farms or to hire themselves out as agricultural workers. These are the footloose workers of modern India.13

The development of road networks made possible the perpetual circulation of desperate workers, creating a massive reserve army of labour for the informal sector in both urban and rural areas. The expansion of mobile networks and the availability of more affordable mobile phones allow these informal workers to be in constant contact with labour recruiters (known as ‘jobbers’) and with their families and friends who alert them about the possibilities of employment on a daily or seasonal basis. These workers come from the most disenfranchised and oppressed castes of rural India. Some of them chase agricultural seasons across the country while others seek out construction projects in far-off cities. These migrant workers live in temporary dwellings at the edge of the fields or construction sites, often tents made of old sarees and plastic sheets that have no kitchens or toilets – only the open air. Children play in the rubble or are slung onto the backs of their mothers as they carry heavy loads up ladders or into the fields. The food that the migrants grow is not eaten by them, and the homes that they build are not for them. They work, and having worked, move on to new temporary worksites to work some more.

Migration puts distance between families, particularly across generational lines, draining the youngest and most able-bodied sections of communities to far-flung places in search of work that offers no security for their futures. It is not uncommon to see older men and women who were once casual workers now reduced to begging or to early deaths as they face large out-of-pocket expenses in the predominantly private healthcare sector, which push 55 million Indian every year into poverty.14 Furthermore, the Indian pension system is abysmal, dispensing meagre, and often irregularly paid, sums far below the cost of living (as low as Rs. 200 per month for many).15

As road networks developed across the country, regional disparities in industrialisation widened. Much of the industrial production concentrated in peninsular India and in mining regions, attracting private capital to areas where the needed infrastructure had already been developed. Migrant workers travel vast distances to these sites, alienated culturally and linguistically in their new, temporary homes. This alienation also means that they are often unable to mobilise community support for their struggles, from condemning cases of extreme abuse to demanding higher wages and better working and living conditions. As the journalist Siddhartha Deb writes, ‘It is an arrangement that suits employers everywhere well, ensuring that the workers will be too insecure and uprooted to ever mount organised protests against their conditions and wages. They are from distant regions, of no interest to local politicians seeking votes, and they are alienated from the local people by differences in language and culture’.16 A powder keg of conflicting regional, linguistic chauvinism is being filled up for future detonation.

Small businesses and industrial firms face significant challenges, from the disadvantage compared to the economies of scale enjoyed by large conglomerate to the enormous challenges posed both by the Indian government’s demonetisation scheme, which, overnight, withdrew 86 percent of the cash in circulation in the economy in 2016, and by its implementation of the General Service Tax (GST) in 2017.17 Demonetisation was a blow to small business that depended on cash transactions for sales, purchases, and wage payments. The new GST regime, meanwhile, placed a heavy regulatory burden on small firms as it significantly raised their overhead costs by increasing the cost of compliance, while for large firms it improved the ease of doing business across states. These two processes wiped out many small firms, which resulted in a loss of employment for the most vulnerable workers. Furthermore, the firms that were shuttered during the pandemic provide an opening for large conglomerates to expand.

The data on Indian workers is unreliable. The official unemployment rate stands at 8 percent, although some estimates place the actual rate far higher. Work participation rates remain low, at approximately 40 percent, and the income of the median Indian worker is Rs. 10,000, which is below the minimum wage.18 With 410 million workers in a population of 1.4 billion people, every Indian worker needs to earn enough wages to provide for 3.5 people, which means that they must do so on less than the minimum wage.19

The Workers’ Revolt

Class struggle is not the invention of unions or of workers. It is a fact of life for labour in the capitalist system. The capitalist buys the worker’s labour power, seeking to make it as efficient and productive as possible, and retains the gains from this productivity, sloughing off the worker to their slums at night to figure out a way to summon the energy to come back the next day. This pressure for the worker to be more productive and to donate the gains of their productivity to the capitalist is the essence of the class struggle. When the worker wants a larger share of the output, the capitalist does not listen. It is the power to strike that provides workers with a voice to enter the class struggle in a conscious way.

Since the late 1990s, Indian trade unions have joined together to call for a general strike against liberalisation almost every year, with roughly 200 million workers participating as of 2022.20 How did so many workers – most of them in the informal sector – join this strike?

As a result of the fights led by informal workers (mainly women workers in the care sector), trade unions have begun to take up the issues of informal workers as issues of the entire trade union movement over the course of the past two decades. Fights for permanency of tenure, proper wage contracts, dignity for women workers, and so on produced a strong unity between all the different sections of workers, whose militancy is now channelled through the organised power of trade union structures. Similarly, women workers do not see issues that pertain to them as women’s issues, but as issues that all workers must fight for and win, as is also the case with issues that impact workers along lines of race, caste, and other social distinctions. Furthermore, unions have been taking up issues impacting social life and community welfare, arguing for the right to water, sewage connections, and education for children as well as against intolerance of all kinds. These community struggles are an integral part of the lives of workers and peasants.

Birender Kumar Yadav, May Day, 2022. Iron, wood, and charcoal on paper.

At the same time, the ideas of the right wing – notably manifested in Hindutva (the core ideology of Hindu supremacists) – have begun to take root in Indian society, including in sections of the working class. The right wing has found fertile ground in the socioeconomic conditions generated by neoliberal capitalism, such as the invisibility and alienation that workers experience in urban areas, the indignities of everyday life, the isolation and toxic socialisation engendered, especially, in men separated from their families, the solace offered by religious gatherings, and the search for community and identity. With the waning influence of secular and rational ideologies in the country and the general narrowness of the working-class movement, there has been no significant force to counter this. A working class high on Hindutva and the hallucinations of a Hindu state (Rama Rajya) turning its misery and humiliation on fellow workers of a different religion or caste and finding empowerment through degrading fratricide is the neofascist prescription to control workers. What delays a united, full-blown neofascist agenda across the country is the presence of regional nationalities, particularly in southern India. Nonetheless, the potential of working-class and peasant resistance to this kind of neofascist agenda was evident in the farmers’ movement, for instance, when farmers and peasants from a range of backgrounds took the fight against big capital to the streets.

The pandemic shed light on the clear incompatibility of the interests of the working class and capital. The former lie in public investment, generating employment, taxing corporations to generate funds for the welfare of the working class, and bolstering agriculture and small industries. Given the structure of the working class and the numerical weakness of organised workers, the confrontation with capital can only be successful when it goes beyond the shop floor and wage bargaining to compel the state on a deeper, and political, level. This is easier said than done, as the left wing of the trade union movement knows well. Yet, the pandemic has the potential to open a window into and expand workers’ class consciousness, countering the ideological and media apparatus of capital which only obfuscates the contradictions facing society.

In August 1992, textile workers in Bombay took to the streets in their undergarments, declaring that the new order would leave them in abject poverty. Their symbolic gesture continues to reflect the current reality of Indian workers in the twenty-first century: they have not surrendered in the face of the rising power of capital. They remain alive to the class struggle.


1 For more, see Tricontinental: Institute for Social Research, CoronaShock: A Virus and the World, dossier no. 28, 5 May 2020, https://thetricontinental.org/dossier-28-coronavirus/.

2 R. Ramakumar, ‘State Governments Can Purchase Only 25% of Vaccines – Belying Centre’s Claim of Equitable Policy’, Scroll, 11 May 2021, https://scroll.in/article/994606/state-governments-can-purchase-only-25-of-vaccines-belying-centres-claim-of-equitable-policy.

3 Mahesh Vyas, ‘Record Profits by Listed Companies’, Centre for Monitoring Indian Economy, 31 May 2022, https://www.cmie.com/kommon/bin/sr.php?kall=warticle&dt=20220531171446&msec=206.

4 Government of India, Problems of the Third Plan: A Critical Miscellany (New Delhi: Ministry of Information and Broadcasting, 1961), 49–50.

5 Government of India, Periodic Labour Force Survey (New Delhi: Ministry of Statistics and Programme Implementation, July 2020 – June 2021).

6 Tricontinental: Institute for Social Research, The People’s Steel Plant and the Fight Against Privatisation in Visakhapatnam, dossier no. 55, 23 August 2022, https://thetricontinental.org/dossier-55-visakhapatnam-steel-plant/

7 T. K. Rangarajan v. Government of Tamil Nadu & Others, Case no.: Appeal (civil) 5556 of 2003 (New Delhi, 6 August 2003),https://main.sci.gov.in/judgment/judis/19215.pdf

8 Vijay Prashad, No Free Left: The Futures of Indian Communism (New Delhi: LeftWord Books, 2015), 218.

9 Jyoti Punwani, ‘How 5 Reliance Workers Fighting for a Better Deal Found Themselves in Jail on Terrorism Charges’, Article 14, 29 July 2021, https://article-14.com/post/how-5-reliance-workers-fighting-for-a-better-deal-found-themselves-in-jail-on-terrorism-charges-61020ec49f652

10 Peter Wonacott, ‘Deadly Labour Wars Hinder India’s Rise’, Wall Street Journal, 24 November 2009, https://www.wsj.com/articles/SB125858061728954325

11 Subodh Varma, ‘Modi’s Rule Is Boosting Profits, Squeezing Wages’, NewsClick, 24 September 2018,https://www.newsclick.in/modis-rule-boosting-profits-squeezing-wages

12 Government of India, Periodic Labour Force Survey (PLFS)– Annual Report (New Delhi: Ministry of Statistics and Programme Implementation, July 2020 – June 2021).

13 Jan Breman, Footloose Labour: Working in India’s Informal Economy (Cambridge: Cambridge University Press, 1996).

14 Taran Deol, ‘India’s Persistently High out-of-Pocket Health Expenditure Continues to Push People into Poverty’, Down to Earth, 22 September 2022, https://www.downtoearth.org.in/news/health/india-s-persistently-high-out-of-pocket-health-expenditure-continues-to-push-people-into-poverty-85070.

15 Express News Service, ‘14 States Give Rs 500 or Less as Pension, Says Report’, The Indian Express, 29 September 2018, https://indianexpress.com/article/india/14-states-give-rs-500-or-less-as-pension-says-report-5378783/

16 Siddhartha Deb, The Beautiful and the Damned: A Portrait of the New India (New York: Faber and Faber, 2011), 170.

17 Shruti Srivastava and Archana Chaudhary, ‘Amidst the Digital Push, GST Transition Will Be Painful for SMEs’, The Economic Times, 23 May 2017, https://ecoti.in/hR_02a.

18 Mrinalini Jha and Amit Basole, ‘Labour Incomes in India: A Comparison of PLFS and CMIE-CPHS Data’ (CSE Working Paper no. 46, Centre for Sustainable Employment, Azim Premji University, Bengaluru, February 2022), https://cse.azimpremjiuniversity.edu.in/wp-content/uploads/2022/02/Jha_Basole_PLFS_CPHS_Labour_Incomes.pdf

19 Mahesh Vyas, ‘Employment and Unemployment Rise in December’, Centre for Monitoring Indian Economy, 2 January 2023, https://www.cmie.com/kommon/bin/sr.php?kall=warticle&dt=20230102130713&msec=290#:~:text=Thanks%20to%20this%20steady%20increase,pandemic%20month%20of%20January%202020

20 Peoples Dispatch, ‘Millions Strike in India Against Modi Government’s Policies’, Peoples Dispatch, 30 March 2022, https://peoplesdispatch.org/2022/03/30/millions-strike-in-india-against-modi-governments-policies/.

Tricontinental: Institute for Social Research is an international, movement-driven institution that carries out empirically based research guided by political movements. We seek to bridge gaps in our knowledge about the political economy as well as social hierarchy that will facilitate the work of our political movements and involve ourselves in the “battle of ideas” to fight against bourgeois ideology that has swept through intellectual institutions from the academy to the media.