real-world economics review, issue no. 71 subscribe for free China’s Communist-Capitalist ecological apocalypse Richard Smith [Institute for Policy Research and Development, London] Copyright: Richard Smith, 2015 You may post comments on this paper at http://rwer.wordpress.com/comments-on-rwer-issue-no-71/ A ship sails across the junction of the polluted Yangtze River (left) and the Jialin River in Chongqing, China, September 7, 20121 Abstract This article seeks to explain why China’s evironmental crisis is so horrific, so much worse that “normal” capitalism most everywhere else, and why the government is incapable of suppressing pollution even from its own industries. I begin with an overview of the current state of China’s environment: its polluted air, waters, farmland, and the proximate causes: overproduction, overdevelopment, profligate resource consumption, uncontrolled dumping and venting of pollutants. I then discuss the political-economic drivers and enablers of this destruction, the dynamics and contradictions of China’s hybrid economy, noting how market reforms have compouned the irrationalities of the old bureaucratic collectivist system with the irrationalities of capitalism resulting in a diabolically ruinous “miracle” economy. I conclude with a précis of the emergency steps the country will have to take to take to brake the drive to socio-ecological collapse, with dire implications for us all. The first time Li Gengxuan saw the dump trucks from the nearby factory pull into his village, he could not believe his eyes. Stopping between the cornfields and the primary school playground, the workers dumped buckets of bubbling white liquid onto the ground. Then they turned around and drove right back through the gates of their factory compound without a word. In March 2008 Li and other farmers in Gaolong, a village in the central plains of Henan Province near the Yellow River, told a Washington Post reporter that workers from the nearby Luoyang Zhonggui High-Technology Co. had been dumping this industrial waste in fields 1 Daily Mail. More photos of same at http://www.dailymail.co.uk/news/article-2199800/The-river-DID-run- red-Residents-Chinese-city-left-baffled-Yangtze-turns-scarlet.html#ixzz31PbZtLfZ 19 real-world economics review, issue no. 71 subscribe for free around their village every day for nine months. The liquid, silicon tetrachloride, was the byproduct of polysilicon production and it is a highly toxic substance. When exposed to humid air, silicone tetrachloride turns into acids and poisonous hydrogen chloride gas, which can make people dizzy and cause breathing difficulties. Ren Bingyan, a professor of Material Sciences at Hebei Industrial University, contacted by the Post, told the paper that “the land where you dump or bury it will be infertile. No grass or trees will grow in its place ... It is ... poisonous, it is polluting. Human beings can never touch it.” When the dumping began, crops wilted from the white dust which sometimes rose in clouds several feet off the ground and spread over the fields as the liquid dried. Village farmers began to faint and became ill. And at night, villagers said “the factory’s chimneys released a loud whoosh of acrid air that stung their eyes and made it hard to breath.” “It’s poison air. Sometimes it gets so bad you can’t sit outside. You have to close all the doors and windows,” said Qiao Shi Peng, 28, a truck driver who worried about the health of his one-year-old. Reckless dumping of industrial waste is everywhere in China. But what caught the attention of the Washington Post was that the Luoyang Zhonggui High-Technology Co. was a “green energy” company producing polysilicon destined for solar energy panels sold around the world. Indeed, it was a major supplier to Suntech Power Holdings, then the world’s leading producer of solar panels, and Suntech’s founder, Shi Zhengrong, topped the Hunrun list of the richest people in China in 2008.2 Silicon tetrachloride is an unavoidable byproduct of polysilicon production. But reckless pollution of farm villages is not unavoidable and today China is the only country in the world where such criminal behavior and cynical disregard for the health and lives of farmers and workers has become standard practice on a national scale by governments at every level, even as the government’s own environmental agencies decry such behavior and struggle, mostly in vain, to stop it. As one Chinese researcher told the Post, “If this happened in the United States, you’d be arrested.” But in China environmental regulations are regularly flouted by state-owned and private industries with the connivance of government officials at all levels while protesting farmers, workers, and environmental activists are arrested, jailed, beaten or worse and their lawyers with them. Polysilicon production produces about four tons of silicon tetrachloride liquid waste for every ton of polysilicon produced. In Germany, where Siemens produces solar panels, pollution recovery technology is installed to process the silicon tetrachloride waste and render it harmless. But such environmental protection technology is expensive. In 2008 the cost to produce polysilicon safely was about $84,500 a ton in Germany and would not have cost much less in China. Chinese companies have been producing it for $21,000 to $56,000 a ton, saving millions of dollars a month, by just dumping the toxic waste in rural areas on helpless village communities. Gaolong village is a mirror to China. It illustrates how the marriage of capitalism and Stalinist bureaucratic collectivism has created a diabolically destructive hybrid economic system, a rogue economy that is ravaging China’s environment, ruining the health of Chinese, rendering more and more of the country unlivable, driving the country to ecological collapse, and threatening to bring the whole planet down with it.3 2 Ariana Enjung Cha, “Solar energy firms leave waste behind in China,” Washington Post, 9 March 2008. All quotations are from this article. 3 There’s no better illustration of this government-industry collusion and pollution’s catastrophic impact on the health of China’s people than journalist Chai Jing’s sensational new documentary on China’s smog Under the Dome—Investigating China’s Smog (Wumai diaocha: qiongding zhixia) which went online in late February and is being rightly hailed as China’s Silent Spring https://www.youtube.com/watch?v=T6X2uwlQGQM. 20 real-world economics review, issue no. 71 subscribe for free I. China self-destructs For more than three decades, China’s “miracle” economy has been the envy of the world or at least the envy of capitalist economists for whom wealth creation is the highest purpose of human life. Since 1979, China’s GDP has grown by an average of just under 10% per year. Never, the World Bank tells us, has a nation industrialized and modernized so quickly or lifted so many millions out of poverty in such a short time. From a backward, stagnant, largely agrarian socialism-in-poverty, Deng Xiaoping brought in foreign investors, introduced market incentives, set up export bases, turned China into the light-industrial workshop of the world, and renovated China’s huge state-owned enterprises (SOEs). Three and a half decades of surging economic growth lifted China from the world’s tenth-largest economy in 1979 to No. 1 by 2014. What’s more, after decades of export-based growth, China’s 12th Five-Year Plan 2011-2015 sought to refocus the economy on internal market demand to realize Xi Jinping’s “Chinese Dream” of national rejuvenation and turning China into a mass consumer society on the model of the United States. As China sailed right through the global near-collapse of 2008-9, hardly missing a beat, while western capitalist economies have struggled to keep from falling back into recession, even the Thatcherite Economist magazine had to concede that China’s state capitalism may be in certain respects superior to capitalist democracies and is perhaps even the wave of the future. But China’s rise has come at horrific social and environmental cost. It’s difficult to grasp the demonic violence and wanton recklessness of China’s profit-driven assault on nature and on the Chinese themselves. Ten years ago, in an interview with Der Spiegel magazine in March of 2005, Pan Yue, China’s eloquent young Vice-Minister of China’s State Environmental Protection Agency (SEPA) told the magazine that “the Chinese miracle will end soon because the environment can no longer keep pace”: We are using too many raw materials to sustain [our] growth... Our raw materials are scarce, we don’t have enough land, and our population is constantly growing. Currently there 1.3 billion people living in China, that’s twice as many as 50 years ago. In 2020 there will be 1.5 billion ... but desert areas are expanding at the same time; habitable and usable land has been halved over the past 50 years... Acid rain is falling on one third of Chinese territory, half of the water in our seven largest rivers is completely useless, while one fourth of our citizens do not have access to clean drinking water. One third of the urban population is breathing polluted air, and less than 20 percent of the trash in cities is treated and processed in an environmentally sustainable manner... Because air and water are polluted, we are losing between 8 and 15% of our gross domestic product. And that doesn’t include the costs for health... In Beijing alone, 70 to 80 percent of all deadly cancer cases are related to the environment. And criticizing western economists who reassure us that more growth is the key to repairing the environmental damage done from growth, Pan said: And there is yet another mistake ... It’s the assumption that economic growth will give us the financial resources to cope with the crises surrounding the environment, raw materials, and population growth. [But] there won’t be enough money, and we are simply running out of time. Developed countries with a per capita gross national product of $8,000 to $10,000 can afford that, 21 real-world economics review, issue no. 71 subscribe for free but we cannot. Before we reach $4,000 per person, different crises in all shapes and forms will hit us. Economically we won’t be strong enough to overcome them.4 Pan Yue’s searing honesty got him sidelined but if anything, he understated the speed, ferocity and scale of China’s ecological destruction, a destruction that extends far beyond China itself. A. Consuming the planet to support unsustainable growth Photo: The Economist 13 May 2008 As China’s growth took off in the eighties and nineties, the industrial boom rapidly depleted the country’s resources, especially lumber, oil and minerals, forcing Beijing to turn outward to feed its voracious engines of growth. The manic and thirsty industrialization boom in China’s northern industrial cities drained China’s northern fresh aquifers leaving some 600 cities including Beijing facing dire water shortages while severely polluting most remaining reserves. Profit-hungry loggers cut down most of what was left of China’s forests, recklessly denuding mountains and precipitating such extensive flooding and loss of life in 2009 that the government banned domestic logging. Chinese loggers then turned to plundering Siberia, Malaysia, Indonesia, even New Guinea and parts of Africa. China had little oil to begin with so industrialization and automobilization quickly turned China from a modest oil exporter into a net importer in 1993 and the world’s leading oil importer by 2013. China’s iron ore, copper and other critical industrial mineral reserves have also been rapidly drawn down forcing the country to import growing quantities of minerals. In result, today, with 20 percent of the world’s population, China is now by far the world’s largest consumer of marketed primary industrial raw materials (cement, metal ores, industrial minerals, fossil fuels, and biomass). 4 “The Chinese miracle will end soon,” Der Spiegel 7 March 2005: www.spiegel.de/speigel/0,1515,345694.html. 22 real-world economics review, issue no. 71 subscribe for free China consumes more than 32 percent of the world’s total of these resources, nearly four times as much as the U.S., the second largest consumer. China consumes just over half the world’s coal and a third of the world’s oil. China is the leading producer and consumer of steel with 46 percent of world output and now relies on imports for 77 percent of its iron ore. 5 China has become the world’s largest consumer of lumber and forest products leveling forests from Siberia to Southeast Asia, New Guinea, Congo, and Madagascar. Greenpeace concluded on current trends “future generations will be living on a planet without ancient forests.” 6 Of course China has the world’s largest population and is industrializing from a comparatively low level just three decades ago so it’s hardly surprising that it would consume lots of resources to build infrastructure and modernize. But the fact is, most of these resources have been squandered on a stupendous scale and for all the waste and pollution, most Chinese have gotten surprisingly little out of it all. The disposables revolution and “The Great Acceleration” of global consumption For a start, look at the export bases that have powered China’s rise. When China launched its “reform and opening” (gaige kaifang) in the early 1980s and invited foreign investors to set up joint-ventures and Special Economic Zones, China’s combination of ultra-cheap labor plus few-to-no environmental restrictions attracted many of the world’s dirtiest and least sustainable industries. Steel, coke, aluminum, cement, chemicals and petrochemicals, metal plating, leather tanning, plastics, paints and finishes, synthetic fibers and textile production, fabric dyeing, paper production, along with auto battery and electronics recycling -- most of the toxic and smokestack industries facing increasingly tough environmental restrictions at home in the U.S. and Europe, relocated to China after 1980.7 Seventy percent of the world’s e-waste is dumped in China. On top of this, China’s masses of cheap migrant workers were a magnet for the world’s most labor-intensive manufacturing and assembly industries. By the 1990s China had more than 104 million manufacturing workers, about twice as many as the United States, Canada, Japan, Germany, France, Italy, and the UK combined. And they worked 8-16 hour days, often 7 days a week, for an average of $0.57 per hour in 2002, by one estimate, less than the handloom operators earned in the early Industrial Revolution in England. This “China Price” set the global floor for high-volume light-industrial manufacturing from the 1980s.8 The price collapse spurred the biggest boom in global consumption in history and this in turn accelerated global resource plunder on an unprecedented scale. The sudden availability of such a huge pool of ultra-cheap workers also spurred a minor industrial revolution enabling producers to annihilate most of the remaining categories of durable goods and replace them with cheaper, disposable replacements. With the disposables revolution, local tailors and alteration shops, shoe repair shops, appliance repair shops, TV repairmen and the like all but vanished in the West as it became cheaper to toss it and replace it than repair it. Take clothes: “Fast Fashion” (aka “Trashion Fashion”) from H&M, Target, Zara’s and others, now 5 Elizabeth Economy and Michael Levi, By All Means Necessary, Oxford 2014, chapters 3 & 4. 6 Craig Simons, The Devouring Dragon, New York, 2013, p. 9 and chapters 7&8. 7 Joseph Kahn and Mark Landler, “China grabs west’s smoke-spewing factories,” New York Times, 21 December 2007. William J. Kelly and Chip Jacobs, The People’s Republic of Chemicals (Los Angeles: Vireo 2014). 8 Alexandra Harney, The China Price, New York, 2008, pp. 8-9. 23 real-world economics review, issue no. 71 subscribe for free rules the women’s apparel market with clothes so cheap it’s often not worth the cost of dry- cleaning them. As Elizabeth Kline relates in her recent book Overdressed: the Shockingly High Cost of Cheap Fashion “seasonal shopping patterns have given way to continuous consumption.” Zara delivers new lines twice a week to its stores. H&M and Forever 21 stock new styles every day. In Kline’s words: “Buying so much clothing and treating it as if it is disposable, is putting a huge added weight on the environment and is simply unsustainable.” To say the least. The U.S. cotton crop requires the application of 22 billion pounds of toxic pesticides every year. Most fiber is dyed or bleached, treated in toxic chemical baths to make it brighter, softer, more fade resistant, water proof, or less prone to wrinkles. Upholstery fabrics and children’s pyjamas are treated with ghastly chemicals to make them stain resistant or fireproof. These toxic baths consume immense quantities of chemicals and water and it goes without saying that in China, the chemicals are routinely just dumped in rivers and lakes, untreated, just like that silicon tetrachloride poured out on Li Guangxuan’s cornfield. Then after all the chemical treatments, the fabrics have to be dried under heat lamps. These processes consume enormous quantities of energy. The textile industry is one of the largest sources of GHG emissions in the world, and it’s growing exponentially. In 1950, when there were about 2.5 billion people on earth, they consumed around 10 million tons of fabric for all uses. Today, we are 7 billion, but we consume more than 70 million tons of fabric annually, nearly 3 times as much per person as we consumed in the fifties. Producing 70 million tons of fabric consumes astounding quantities of resources including more than 145 million tons of coal and between 1.5 and 2 trillion gallons of fresh water, every year. Synthetic fibers like polyester and such (now 60 percent of the market) are the worst: They consume between 10 and 25 times as much energy to produce as natural fibers. In short, “fast fashion” is speeding the disposal of planet Earth.9 And what’s true for China’s garment industry is true for most of the rest of China’s export industries. From cheap disposable shoes and clothes, toys, tools, housewares, Christmas junk and flimsy plastic appliances to meticulously made and expensive but nevertheless designed-to-be-obsolesced iPhones and 60 inch flat-screen TVs, most of the world’s light industrial goods are Made in China and they are, for the most part, deliberately designed-to- be-obsolesced, unrepairable, mostly unrecyclable. After they’re short life, they all end up piled on the world’s ever-growing garbage mountains, sent back to China in containers filled with E- trash to be “recycled” by children melting the plastic off mother boards over open fires, or left floating around the world’s oceans in giant plastic gyres over vast stretches of oceans, hundreds of feet deep.10 Scenes of planetary destruction from the 12th Five-Year Plan When we turn to China’s domestic economy, the waste is breathtaking. As China’s economy opened to the West and China’s exports began returning billions of dollars in foreign exchange, Beijing launched wave after wave of gargantuan development projects: dams, airports, rail systems, roads, subways, sewerage systems, new industries, new housing, new cities, new ports, and more. China’s supercharged government planners have been showcasing China’s engineering prowess and economic might by building the world’s biggest 9 Overdressed, New York 2013, pp. pp. 3, 124-125. Energy consumption: FAO, cited in “Fabric and your carbon footprint, O Ecotextiles, 10 March 2013, at http://oecotextiles.wordpress.com/2013/10/03/fabric- and-your-carbon-footprint/. 10 Niu Yue, “China No 1 dumper of plastic into ocean,” China Daily, February 19, 2015. 24 real-world economics review, issue no. 71 subscribe for free dams, the tallest skyscrapers, biggest airports, longest and highest bridges, longest rail and road networks, longest tunnels, etc. Since Deng Xiaoping launched his “Four Modernizations of agriculture, defence, science and technology” and reform and opening up, the country has been in perpetual Great Leap Forward mode: Five-Year plans have set annual industrial growth rates of 8 percent and promoted successive sets of “pillar” industries -- autos, electronics, petrochemicals, clean energy and so on. In the current 12th Five-Year Plan (2011- 2015) the State Council calls for development of “seven strategic emerging industries” including (1) energy efficient and environmental technologies like “clean coal,” (2) next generation IT and cloud computing and the “Internet of Things,” (3) biotechnology, (4) high- tech manufacturing of vehicles and aircraft, expanding high-speed rail service to 45,000 kilometers, expanding motor expressways to 83,000 kilometers, (5) new-generation nuclear power, more solar and wind energy systems, (6) new materials including development of rare earths, special glass and ceramics, high-performance fiber and composite materials, (7) new- energy vehicles: motor batteries, drive motors, electronic controls, plug-in hybrid and electric vehicles, low-emissions vehicles.11 No doubt, the Chinese have benefited from new housing, new infrastructure, new schools, hospitals and so on. But the government has also squandered astounding quantities of resources building entire industries China does not need, building useless vanity projects, superfluous housing, redundant infrastructure and more. From the start this investment boom has been characterized by uncontrolled overproduction and out-of-control pollution. Scene 1: The “car craze” China and planet Earth did not need The 12th Five-Year Plan calls for “enhancing China’s independent capacity to manufacture automobiles, domesticating production of all key parts,” for “large-scale commercialization” of energy efficient and hybrid vehicles, for “building ... world-famous brands and core competencies” and so on. Hybrid or not, this is an industry the Chinese do not need. Up to 1979 China produced around 160,000 motor vehicles per year with trucks and buses accounting for 90 percent of the output. People got around on bicycles, busses and trains. In 1990, China had just 5.5 million cars, trucks, and buses on the road. By 2013 China became the world’s largest auto assembler cranking out 18.7 million cars and light vehicles, more than twice the number produced in the U.S. in that year. By 2013, China had 240 million cars on its roads, almost as many as in the United States and estimates are that China could have 390- 532 million cars on the road by 2050. The question is, why does China need anything like such a huge auto industry? The lead headline of Bloomberg News for April 9, 2014, citing the latest IPCC report, was “Cars become the biggest driver of greenhouse-gas increases.” What’s wrong with this picture? The automobilization of China has brought three profound changes. First, it has dramatically lengthened the time it takes to get anywhere in China’s gridlocked cities (average speed on Beijing’s ring roads is 9 mph) and created epic, world-historic traffic jams on highways feeding 11 State Council Decision on Accelerating the Development of Strategic Emerging Industries, October 2010 at http://www.gov.cn/zwgk/2010-10/18/content_1724848.htm. State Council 12th Five Year Plan (FYP) on Development of Strategic Emerging Industries, July 2012 at http://www.gov.cn/zwgk/2012-07/20/content_2187770.htm. MOF and NDRC Interim Measures for the Administration of Special Funds for Strategic Emerging Industries, December 2012 at http://jjs.mof.gov.cn/zhengwuxinxi/zhengcefagui/201301/t20130124_729883.html. 25 real-world economics review, issue no. 71 subscribe for free into Beijing and other cities. One jam-up near near Beijing in 2010 stretched over 100 kilometers and lasted for two weeks. Secondly, it has added a dense new layer of smog on top of the already thick layers of smog from coal combustion smothering China’s cities. And thirdly, it has paved over much-needed farmland and wetlands and wasted enormous resources China, and the world, does not have to waste. This did not have to happen. The Communist Party promoted joint-venture auto production as a “pillar” industry in the 1990s for two reasons: First, once the government embarked on its market-reform strategy, abandoning lifetime employment, it needed to push growth to generate private and state- sector jobs, like capitalist governments everywhere. Speaking in November 2013, Prime Minister Li Keqiang stressed that: Employment is the biggest thing for well-being. The government must not slacken on this for one moment ... For us, stable growth is mainly for the sake of maintaining employment. Auto manufacture and related industries now account for 1 out of every 8 urban jobs in China excluding road-building, another big employer. Secondly, the Party promoted the car craze to bolster status-seeking middle-class political support. In the 1980s, the Party supported a modest consumerism. But after the Tienanmen uprising in the spring of 1989, the government opted for expansive consumerism to placate the middle classes. Hence the car craze, followed by the airline craze, the shopping mall craze, the high-speed train craze, the foreign tourism craze, and so on. It is no small irony that just as the CCP was ramping up auto production and banning bicycles from public roads in the 1990s, European countries were moving in the opposite direction -- barring cars from many central city streets, promoting bicycles and car sharing, and expanding public transit. China didn’t begin expanding its urban subways in earnest until the late 2000s, after two decades of automobilization had gridlocked its cities and dramatically increased air pollution. Beijing 1981, before the car craze. Photo: china-underground.com. 26 real-world economics review, issue no. 71 subscribe for free Beijing 2013: the 3rd ring road in the midst of the car craze. According to the Beijing Municipal Transportation Commission, 44% of the capital’s motor vehicles travel less than 5 km per trip – a trip that one used to be able to make in twenty minutes by bicycle. Photo credit: John Metcalfe, Atlanticcities.com, January 15, 2013 Copenhagen 2011 (after the car craze). Photo: sf:streetsblog.org Scene 2: The roads not taken As China was racing to surpass the U.S. as the world’s largest car market, the Communist Party decided that China should also “catch up and overtake” the U.S. Interstate highway system as well. So by 2010 China built 53,000 miles of intercity expressways, exceeding the U.S. Interstate highway system’s 47,000 miles. But this program, built at huge cost and by tearing through cities and paving over thousands of square miles of valuable farms, wetlands and so on, is yet another ill-conceived boondoggle because except for a few highways near major cities like Beijing or Shenzhen, China’s expressways are often little used. In places, 27 real-world economics review, issue no. 71 subscribe for free farmers dry their crops on empty super highways. McClatchy’s Beijing bureau chief Tom Lasseter writes under this picture: Photo: Tom Lasseter Do you see any cars along this road? One often hears about the traffic jams in the big cities of China. But here’s the flip side of the coin: in rural towns and cities in China, local officials like to build big showcase projects, displaying grandiosity but little utility. I was in the city of Fengzhen in Inner Mongolia yesterday. By Chinese standards, it is a small place, maybe 200,000 people. So imagine my surprise as we leave the downtown to come across this eight- lane highway going past a mammoth new City Hall. Nary a car on it. A passerby could keel over with a stroke on that highway and not risk getting run over for many hours. The city is already in hot water for building a power plant that Beijing says is unneeded. Across China, there are plenty of largely empty hotels, brand new empty highways, modern airports that lose money for lack of traffic, etc. What happens is that unelected local officials, not particularly responsive to local needs, find that pharaonic projects give their municipalities a luster that can attract investment, which is their path to promotion within the one-party system. So for every eight-lane road you see like this, there is a happy bureaucrat pondering a bright career ahead.12 How much cement has been poured, how much iron rebar has been forged, and how much coal has been burned to produce the energy to pave over so much of China – for no useful purpose whatsoever? 12 Tom Lasseter, “Empty highways,” McClatchy News, August 24, 2006, 11:33PM at http://blogs.mcclatchydc.com/china/2006/08/empty_highways.html. 28