Chonqing city in central China (2010).

Market logic and China’s new tax scheme

Taxes provide state funding. They also redistribute social wealth. Very importantly, they articulate, maintain, further, and depend on particular logics of what society is or should be. They structure and are structured by specific political and economic logics.

China plans to introduce a new taxation scheme that can serve as a particular example of such a case. Also, it can be generalised in order for us to understand political approaches to social relations in any contemporary economy.

There’s supposed to be a new system of tax refunds introduced for Chinese nationals. As of 1 January 2019, the South China Morning Post claims that individuals should be able to deduct a portion of “housing, education, health care and aged care” costs from personal income tax. The newspaper article states that the change is a “bid to get consumers spending more”.

The scheme rests upon the predominance of market exchanges, focusing on individuals’ role as consumers to regulate access to products and services. The more money is available to the individual, the more they can purchase on the market. This is a basic logic of capitalism, and it stands in contrast to the country’s professed adherence to communism. Under communism, private money power and wage income are not supposed to determine anyone’s access to goods and services. Commodity markets are not supposed to retain a role in the distribution of such necessities as housing and health care. Labour power is not supposed to be a commodity to be bought by the owners and controllers of the means of production.

The proposed tax refunds presume money as a product of commodity relations, furthering the logic of capitalist discrimination. The relative wealth of private individuals is used as a basis to calculate money power access to commodified goods and services, as well as a way of stimulating economic activity via individualised consumption. This assumes that services such as health care costs and necessities such as housing are in significant part provided for via the medium of the market. It assumes a commodity society. Individuals must have an income from which to pay for their needs. Needs are in great part delivered as commodities via a market. Financial compulsion is organised by this method, by which wage-workers are compelled to accept their lack of control over the political economy. They must sell their labour power to those who do control the means of production in order to survive.

To quote Adam Smith, “Many workmen could not subsist a week, few could subsist a month, and scarce any a year without employment. In the long run the workman may be as necessary to his master as his master is to him; but the necessity is not so immediate.” (from An Inquiry into the Nature and Causes of the Wealth of Nations)

The use of tax breaks emphasises distribution and redistribution as a principal method of political and economic regulation. This is the wrong approach to guaranteeing social wellbeing. The underlying conditions that generates inequality of power and wealth, and that systematically conclude in a lop-sided regime of distribution should be the main focus.

Karl Marx points to this in his Critique of the Gotha Programme:

The capitalist mode of production, for example, rests on the fact that the material conditions of production are in the hands of nonworkers in the form of property in capital and land, while the masses are only owners of the personal condition of production, of labor power. If the elements of production are so distributed, then the present-day distribution of the means of consumption results automatically. If the material conditions of production are the co-operative property of the workers themselves, then there likewise results a distribution of the means of consumption different from the present one.

Redistributive taxation may provide short-term relief, but it’s no way to promote a structural transformation that replaces the underlying social relations that have resulted in the necessity of intervention. In the best instance of this otherwise flawed approach, intervention may be used because the system fails from the perspective of the mass of people. Perhaps it occasionally alleviates material distress in the short-term yet it retains the subjugation of the same people by a small class of commanders. A gross inequality of power is generated by reliance on market systems. So, relief is valid for just that, relief of symptoms. An entirely different process must be taken in order to transform the system as such.

Karl Marx has been a rather fair analyst of markets and capitalism. In Capital, he analyses capital in its ideal form. He assumes all is working perfectly well, that there’s no corruption, that the system functions perfectly and without the need for intervention: that the neoliberal dream is made reality. His rigorous study of the system very precisely traces why and how inequality of power is inherent to it, and why a market economy articulates inequality of power among divided social classes. The volumes of capital can be daunting to read because they’re very detailed studies of a complex structure. For that reason, I recommend starting with David Harvey, a faithful reader and critic of Marx, whose own in-depth analysis is easier to grasp for those new to the field. He has a good video lecture series on Capital available online as well as accompanying books. The audio is free, the books must be bought (you can find his introduction to the companion for Volume 1 here). An overall and contemporaneous Marxian analysis of capitalism is also available in his Marx, Capital and the Madness of Economic Reason.

The gap in power is partly exemplified in contemporary China through long-term growth in income inequality. This embodies a disparity of power over the production process and a disparity of access to goods and services via market exchange. Promoting consumption, even if such a scheme is successful, is merely increasing market access for people that are otherwise systematically disadvantaged. Additionally, the tax scheme’s intended beneficiaries are urban ‘middle income’ people. This is a narrow band of the population and, if it isn’t compensated for, inequality of wealth and incomes between these particular urban centres and China’s other regions could grow. The goal should be to do away with the gross disparity of power rather than manage the redistribution of material wealth within an inherently unequal system.

China is not unique, this is a general condition in the world’s economy and is found in countries throughout the world. Over the long-term, the situation gets worse then better then worse over time as societies are threatened with collapse even if some of the well-intentioned within the ruling class as well as the mass of people push back against gross injustices, social and economic instability, and deadly destitution. Regular intervention into market economies are made in order to stabalise society and unblock circulating capital (such as ‘quantitative easing’ during a recession). The problem is not simply a moral one. It can’t be solved by good intention and constant intervention. The problem is fundamental. Therefore, solutions should likewise address fundamental relations in order to go beyond the treatment of symptoms.

Socialism is not a society of benevolence, nor is it a utopian society based on the goodness of man as man. Socialism is a system that arises historically, and that has as its pillar the socialization of the basic means of production along with equitable distribution of all of society’s wealth, in a framework of social production.

The above statement is made by Che Guevara, quoted in the bookChe Guevara, Economics and Politics in the Transition to Socialism, by Carlos Tablada. That book is a serious attempt to think through the practical application of a socialist system that does away with the market economy. The book is critical and transparent, leaving itself open to debate while it concretely critiques the works of others. It’s a good book to think alongside, and serves as a rare methodical approach to the practical application of a new social and economic order.

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