Commentary on Political Economy

Tuesday 30 April 2019


Shares in Chinese drugmaker Kangmei Pharmaceutical plunged by their daily limit on Tuesday after the company said it overstated its cash holdings by more than $4bn, highlighting risks for global investors who are piling into China stocks via passive vehicles. Kangmei, a manufacturer of traditional Chinese medicines, blamed an accounting error for overstating its cash balances for 2017 by Rmb30bn ($4.5bn). Kangmei, which had disclosed late last year that it was being probed by the securities regulator over suspected disclosure violations, is one of more than 200 Chinese companies included in MSCI’s flagship emerging markets index, a benchmark tracked by many global fund managers.
Critics have argued that MSCI’s recent decision to increase the weighting for Chinese stocks in its EM index will lead to continued upsets for investors — sometimes with bizarre explanations attached. In 2015, for example, Hong Kong-listed China Animal Healthcare told the market that five years of accounting records had been lost when a truck carrying them was stolen.
 Kangmei, based in China’s southern Guangdong province, also revised down its operating revenue for 2017 on Tuesday, by Rmb8.9bn. The company’s Shanghai-listed shares fell 10 per cent and were then halted, after reaching the daily maximum for rising or falling. By the end of this year MSCI’s China weighting will rise to 3.3 per cent of its EM index, up from less than 1 per cent at the start of the year — and none before Chinese shares were included for the first time in the first half of 2018. The reshuffle of the benchmark, which is tracked by about $1.9tn in funds around the world, is expected to lead to an inflow of more than $100bn as investors are obliged to allocate more to China. Kangmei, which has a market capitalisation of more than Rmb47bn, narrowly averted a default on bonds earlier this year. Local media reported that the company received assistance from the local government in the city of Guangzhou to avoid a missed payment on debt.
Other Chinese companies tracked by indices have hit trouble too. In March, Hong Kong’s securities regulator froze the shares of China Ding Yi Feng after they rocketed more than 5,000 per cent, gaining them entry to MSCI’s EM index in 2018. The inclusion led to BlackRock holding 2.29 per cent of the Shenzhen-based company, which was later accused by the regulator of market manipulation. BlackRock held more than 1m shares in Kangmei as of last August, according to the annual report from iShares, the firm’s family of exchange traded funds.

FILTHY CHINESE RATS! You Will Die Under A Pile Of Rubble!

China developers’ dollar debt spooks investors

Mounting US bond issuance and risk of wider market downturn bring pressure to deleverage China’s property market is slowing down just as developers are rapidly accumulating dollar debt © Bloomberg Share on Twitter (opens new window) Share on Facebook (opens new window) Share on LinkedIn (opens new window) Share Save Save to myFT Topic Tracker Don Weinland and Sherry Fei Ju in Beijing 11 HOURS AGO Print this page2 China’s Evergrande was supposed to scale back its towering debt pile this year, leading the country’s property sector in a much needed deleveraging. But a surge in US dollar borrowing has investors worried the burden will actually grow. Local developers have doubled their US dollar bond issuance to $32bn since the start of the year, according to data from Dealogic, as they seek to refinance higher-cost and shorter-term debt. Some investors have welcomed the wave of issuance as a sign the companies are focused on paying down more costly bonds onshore, where repayment pressure has mounted with Rmb267bn ($39.7bn) still to mature this year.
Yet as China’s property market cools, there is a growing risk the sector will end up with unmanageable debt. Evergrande is China’s most highly indebted property developer, owing a total of more than $100bn, while the industry faces a wall of more than $300bn in maturing debts in the next two-and-a-half years. With official concerns rising about unsustainable debt growth, a number of developers have pledged to reduce their overall leverage, led by Evergrande and its billionaire chairman Hui Ka Yan. The company cut its debt by about Rmb70bn in 2018 and is aiming to chop another Rmb80bn this year, according to CreditSights. Its total debt to equity ratio fell to 219 per cent at the end of 2018, down from 303 per cent a year earlier, according to S&P Capital IQ. Alaa Bushehri, head of emerging markets corporate debt at BNP Paribas Asset Management, said her company saw Evergrande’s leverage levels “remaining stable or even going down” over the next few years. But the company has led this year’s charge into US dollar debt in Asia, raising $6.6bn as of mid-April — the most of any company in the region excluding Japan. Its total US dollar and renminbi-denominated debt stands at just over $100bn, according to S&P Capital IQ. Demand for the company’s bonds has at times proved feeble, with Mr Hui in November forced to prop up a $1.8bn bond issuance with $1bn of his own money even after offering a high interest rate of 13.75 per cent on the notes.

The only solution for [Chinese developers] is to keep borrowing more and more every year Kevin Lai, Daiwa Capital Markets Evergrande’s US dollar debt of about $18bn puts the country’s second-largest developer by sales in the top tier of the world’s most indebted private companies, according to Dealogic. Among non-state-run groups in emerging markets, Evergrande has the seventh-highest outstanding dollar debt. “There aren’t that many companies in the world with that much outstanding dollar debt,” said Paul Lukaszewski, head of Asian corporate debt and emerging markets credit research at Aberdeen Standard Investments. Rivals Country Garden and Dalian Wanda, among China’s top five developers, are not far behind with $14.7bn and $13.9bn in dollar debt respectively. Evergrande, Country Garden and other developers have justified their high leverage by citing the need to expand in what has often appeared to be a market with limitless demand for homes. China’s politburo, the country’s highest decision-making body, sent a strong signal this week that regional housing controls, which hold back demand, were unlikely to be loosened. It said regulators would focus on curbing speculation, which has fuelled property market growth and high house prices over the past decade. Analysts say that if developers do not move quickly to deleverage before a sharper downturn in the property market, they could be caught out with little ability to continue raising capital. Chinese developers face a wall of $325bn in maturing debts by the end of 2021, most renminbi-denominated. US dollar maturities are set to peak at about $39bn in 2021, according to Dealogic. “The risk is for developers with high gearing not to use this opportunity for deleveraging before the market cools” even further, said Philip Zhong, a property analyst at Morningstar. Otherwise, the combination of a slowdown in mainland China and a build-up in dollar debt threatens to end badly for some developers, economists say. Repaying US dollar bonds could become a problem in the event of strong currency outflows from China, said Kevin Lai, Daiwa Capital Markets chief economist for Asia excluding Japan. Beijing carefully controls its capital account and guards against outflows that put downward pressure on the renminbi. The inflows from developers that are using US dollar bonds to pay off renminbi debt have boosted demand for the country’s currency, so have been encouraged by China’s foreign exchange watchdog. But paying interest and principal on the offshore debt could prove much more difficult. “They will have trouble converting it back because that will put a lot of pressure on the currency,” Mr Lai said. “The only solution for them is to keep borrowing more and more [offshore] every year. But they can’t go on like that forever.”

Monday 29 April 2019


Just as Mao began his March to Beijing from the impoverished Western Provinces of China, so now another March is looming as those provinces grow poorer. Read and celebrate! Xi will hope to die before this prospect takes shape – better than hanging from a lamp-post in Tiananmen Square! Ha ha ha…

Bond investors beware: the Middle Kingdom is splitting down the middle. Increasingly, international investors are being drawn to China’s debt markets, the third biggest in the world behind the US and Japan, as issuance soars and as central-government bonds start to be included in global benchmarks. But any fund manager venturing beyond these safest assets should consult a map before taking a plunge into provincial government debt. It is not unusual for local governments to run big deficits in China. The latest official figures show that only the wealthy urban municipalities of Beijing and Shanghai posted a funding surplus in 2017. Revenues collected by the other 29 provincial governments fell short of spending. But Moody’s, the credit rating agency, has found that the regional differences between provincial funding gaps are widening. Where eastern provincial governments faced an average revenue shortfall of 27 per cent compared with spending, those in central and western China saw gaps averaging 50 and 77 per cent, respectively.
 Much of the extra spending out west is by design: China’s central government in Beijing has sought to iron out regional inequalities by encouraging big infrastructure projects, for example. But Amanda Du, senior analyst for sub-sovereign debt at Moody’s Investors Service, said differences between regions had worsened since 2015 and were expected to widen further. Since inland provincial governments already have higher debt burdens from previous rounds of spending, she said, their ability to issue further bonds was limited. Instead they would continue to use off-the-books funds raised largely through special financing vehicles. This has the effect of piling on more risk. “As long as they have that gap they will have to rely on off-balance sheet funding channels,” said Ms Du. The upshot is that international debt investors may need to learn the difference between the provinces of Shanxi and Shaanxi. The former has a funding gap equal to about 20 per cent of its total revenue. Neighbouring Shaanxi, to the west, has a gap equal to 130 per cent.

Sunday 28 April 2019


We have said it before, we will say it again: the Chinese Dictatorship and the Chinese people who have benefited in large part from its absorption of Western capitalist investments over the last forty years have grown so maniacally greedy and nationalistic as to pose the gravest threat to human democracy and enlightenment this sorry Earth has ever seen. It is simply pathetically outrageous when it is not lunatically absurd to insist on drawing a distinction between Dictatorships and "the people". Ain't no such thing! The Chinese people are accomplices and abettors in the attempt to populate the planet with a culture that is bestial at best and astronomically destructive and insane at worst.
We shall have no peace until this imminent threat is defeated, and we shall apply every fibre of our being to defeat the new Huns of the 21st Century - the Han Chinese!

WANGQINGTUO, China — This farm grows bikes, by the looks of it. Hundreds of blue and mint-green bicycles stand in rows on this field in Wangqingtuo, the small community that calls itself “bicycle town.” Only the occasional caretaker and a pen of bleating goats watch over them as they rust.
Just a year ago, global investors were throwing money at Chinese companies that rented those bicycles to consumers. Bicycle start-ups became “unicorns,” or new companies worth more than $1 billion. This town, home to factories that made many of the bikes, prospered.
Now the boom has become China’s latest investment bust. Too many bikes litter the streets of Chinese cities. Some start-ups hit financial trouble. Wangqingtuo now has closed factories, a work force that’s leaving and too many bikes.
“They came very quickly,” Ye Rongqing, who runs a business in town painting bicycle frames, said of the start-ups, “and they left very quickly.”

Booms and busts punctuate the Chinese internet scene in a way that even Silicon Valley would see as extreme. From shopping to ride sharing to bike sharing and even truck sharing, deep-pocketed investors have turned new businesses into billion-dollar companies in a matter of months. Last year, China minted a new unicorn roughly every four days, according to Hurun, a research firm in Shanghai.
“You had investors that were after the next big thing or afraid of missing it,” said Dan Wang, an analyst at Gavekal Dragonomics, a research firm.
Then many collapsed. While thriving new industries are created and many investors profit, the flameouts still take a toll. Small investors and suppliers can be wiped out. Customers lose money or start paying higher prices. Workers lose jobs.
Bike-sharing swept through Chinese cities over three short years, giving millions of commuters a way to get from the subway stop to the office. Today there are more than 23 million of these bikes on the streets of major Chinese cities like Beijing and Shanghai, according to the firm iiMedia Research.

Unlike bikes with sharing services in New York and other places, Chinese bikes didn’t need to be parked in a dock. Instead, each bike had its own lock that could be unfastened with a smartphone app. Politicians trying to tackle nasty pollution and urban congestion problems found them especially appealing.
Billions of dollars in venture capital money flooded in, creating opportunities for other entrepreneurs to copy. Soon there were too many bikes. Instead of consolidating, more start-ups cropped up. The start-ups, focused on growth, charged riders little or nothing. Mobike, one of the companies, still charges around 20 cents for a 30-minute ride.
“Even the companies that grew so big still haven’t figured out how to make money,” said Fu Yifu, a researcher with Suning Financial Research Institute, an organization attached to a Chinese internet finance company.
Bikes in every color of the rainbow were made in Wangqingtuo and shipped to cities near and far. Yellow bikes became synonymous with Ofo, orange bikes with Mobike, blue with Bluegogo.
Wangqingtuo, which began putting together two-wheeled rides in the 1970s, became a bicycle hub during China’s economic rise, the way other places became centers for making lighters or zippers. A sign at the town entrance proclaims, “China’s bicycle industrial base: Wangqingtuo welcomes you.” It suffered as increasingly affluent Chinese turned to cars and scooters, and it turned to making bicycles for other countries.
Then the bike-sharing boom hit. The Shanghai Phoenix Bicycle factory in town took on so many orders for Ofo’s bright yellow and black bikes that by 2017 it was churning out 10,000 bikes a day, according to Gao Yuntian, an employee from Shanghai. Most, he said, were for Ofo.
Then money slowed.
Then money slowed.
Ofo “had ordered so much that they started to have problems with a cash squeeze,” Mr. Gao said. “Then they paid us less and less.”
Ofo, which has faced a flood of demands from customers who want their deposits back, says it has been hit by industrywide problems. “Under such circumstances, Ofo is one of the few companies in the industry that still strives to survive on its own,” Scarlett Zhao, a spokeswoman for Ofo, wrote in an email.
New apartments, built during the bike-sharing boom, sit unoccupied in Wangqingtuo.
Fan Duan, who moved to Wangqingtuo in 2014 to lead the sales department of a bike company, had his own run-in with Ofo. Leigesasi, Mr. Fan’s company, began making Ofo bikes in early 2016. But soon Ofo got big and wanted more.
“They started to demand deliver first and pay later. We stopped manufacturing for Ofo,” Mr. Fan said.
By 2017, things started to go wrong. Factories were making so many bikes that there was a surplus. Some start-ups could no longer pay for their orders.
Bluegogo, China’s third-largest bike-share company, went bankrupt in November 2017. A year later, Ofo suddenly faced mounting financial pressures. Its founder was placed on a government blacklist for a growing pile of unpaid bills. Riders lined up to collect their $15 to $30 in deposits each.
Ofo will “be responsible to our users and responsible for every debt,” Ms. Zhao wrote.
Many factories in Wangqingtuo were forced to sell their bikes at big discounts, according to Mr. Ye, who runs the frame-painting business. It set off a domino effect. Bike suppliers tried to sell unwanted orders of bicycles, finding limited success because the specifications were often particular to a company’s design.
From there, the town’s bike factories had little chance of recovering. “To put it in one sentence,” said Zhang Yi, chief analyst at iiMedia Research, “it really messed up the bike factories.”
Today, parts of Wangqingtuo look like a ghost town. Many factories are locked tight, and the signs that once showed their names and specialties have been removed. Storefronts stand empty on the street where many of the bike factories used to run shops. A stack of bicycle wheels sits beside a storefront. Nearby, someone has piled unwanted bicycle forks in a haphazard row.
“I am going back home for Chinese New Year,” read a sign written on the metal garage door of one empty factory. “Will restart on the 18th of Chinese New Year,” it said, referring to Feb. 22. More than a month later, the person had yet to return.
The bicycle manufacturer Tianjin Fuji-ta Group managed to stay in business. When its factory started working with bike-sharing start-ups like Ofo and Hello Bike in late 2016, it took around 400,000 orders. The next year, that number jumped to eight million.
The orders have since halved again, but Fuji-ta is still working with start-ups that survived the industry culling.
Some in town are still looking for the silver lining. In recent months, Mobike and Bluegogo, which Didi took over last year, have raised prices.
“This is in order to go back to market prices,” said Mr. Zhang, who believes that this could mean “a second spring” for sharing bikes.
Fang Hui, a 25-year-old from Wangqingtuo who makes bikes and sells them online, recently bought hundreds of yellow Ofo bike frames. On a recent visit, they were stacked in a pile on the floor of his makeshift factory. He paid just over $2 for each one, and he said he planned to find a way to put them to use.
Mr. Fang recalled how much his hometown had changed in the past few years. During the boom, delivery trucks caused daily traffic jams, he said, and factories couldn’t get enough workers.
“Before, there were many people coming from outside this town to work here,” Mr. Fang said, adding, “We seldom see anyone from outside anymore.”
Alexandra Stevenson is a business correspondent based in Hong Kong, covering Chinese corporate giants, the changing landscape for multinational companies and China’s growing economic and financial influence in Asia. 

Saturday 27 April 2019


    As a young woman in one of China’s most economically stagnant cities, Ma Yingge has adopted what she calls a “Buddhist” attitude. The word she uses, foxi, literally means Buddhist, but has recently been embraced by young people to express a “generalised attitude of apathy toward career, society and even themselves”, according to China’s (disapproving) state media. Ma explains that the expression means “not forcing anything”. “My character is like that,” she says. “I don’t set my goals too high. That would be tiring.”The attitude is a helpful one in China’s north-east, also known as Manchuria, a region of 100 million people that is squeezed between North Korea, Inner Mongolia, Russia and Japan. While China enjoys a reputation for world-beating economic growth, Ma’s home city, Qiqihar, and dozens of others like it in the north-east have seen growth slow to a trickle and in a few cases experienced outright recession.
    The downturn is more painful as the north-east was the country’s wealthiest area from the 1950s to the 1970s. China’s then-leader Mao Zedong channelled resources into a programme of rapid industrialisation that built on a legacy of factories left behind by the Japanese empire, which had annexed the region in the 1930s. From the early 2000s, nationwide infrastructure and property investment allowed heavy industry to expand and produced strong growth, a process intensified by a massive government stimulus following the global financial crisis in 2008.But by 2015 even official statistics — widely thought to exaggerate the country’s performance — showed growth below 5 per cent in the north-east. One of the region’s three provinces experienced a 1 per cent contraction, virtually unheard of in contemporary China. The problems afflicting the region — unproductive companies, weakening consumer demand and overinvestment in heavy industry — reflect challenges China will face more broadly as it attempts to make the transition from middle-income to developed-country status. Corruption is another issue. The ties between officials and state-run companies which emerged in the planned-economy era mean the north-east enjoys an almost unparalleled reputation for graft, deterring private investment.Qiqihar in turn is a microcosm of the region’s shifting fortunes. It was given its melodious name by one of the nomadic groups that accounted for most of the north-east’s sparse population until the 19th century, when tens of millions migrated from poverty-stricken areas elsewhere in China, attracted by fertile soil and burgeoning industries. Now, though, the direction of travel has reversed. The city was hit hard in the regional downturn, its economic growth rate falling to 2 per cent a year from 2013 to 2017, barely above inflation (and compared to a national average of 7 per cent). That has prompted an exodus of young people. Like many north-easterners, they are now found across China working in service jobs such as food delivery. Since 2014, Qiqihar’s population has dropped from 5.5 million to 5.3 million.
    “Most of my classmates have left to look for higher incomes. Many won’t return,” says Ma, who works as a nurse. We are sitting in a Qiqihar restaurant, chatting over a plate of juicy grilled pork — typical warming fare in a place where winter temperatures are often around -20C.Despite the received wisdom about China’s inexorable urbanisation, the country now has more than 900 cities that are shrinking like Qiqihar, most of them in the north-east. The demographic consequences, in the form of an increasingly elderly population, offer another preview of tomorrow’s China. As the birth rate continues to fall — in spite of the abandonment of the “one-child” policy — Beijing predicts that the country’s population will peak by 2030, pushing the proportion of young people into rapid decline.Such demographic shifts are making themselves felt in the property market, another area where the north-east may hold out a warning for the rest of China.
    In Qiqihar, investment in property — a pillar of economic activity — began to fall in 2015 as the population diminished and a surplus of houses became apparent. Nationwide, property sales are believed to have reached a historic peak last year. Since investment chases those sales, economists believe housing will dwindle as a source of growth for upstream industries from steel to cement. If a team of economists were tasked with finding an example of the problems afflicting China’s economy, they could not do much better than Qiqihar’s Fularji district. Home to about 300,000 people, in recent decades it has had a near-total dependence on four state-owned companies.Chief among them was China First Heavy, a steelmaker and machinery manufacturer founded in 1954 as part of China’s first “five year plan”. A 10m-tall stainless-steel statue of Mao Zedong — the largest statue of him anywhere in China, weighing more than 33 tons — still stands at the entrance to its vast factory. In the early 2000s, the company’s ambitious chairman encouraged a massive debt-funded expansion of production. As demand for its products surged, wages soared, tripling to Rmb6,000 (£688) a month — above the national average — in the decade to 2012, say staff. The district’s other large enterprises — a steel plant, a chemical factory and a coal-fired power station — also flourished. Car ownership, once a rarity, became commonplace. Kentucky Fried Chicken opened an outlet in 2008. Then in 2014, the recession arrived. A nationwide glut of steel production, which had more than trebled in a decade, and a cyclical downturn in the property market tipped steel prices so low that some varieties became as cheap as cabbage. China First Heavy’s chairman, Wu Fusheng, was forced to cut wages and began the difficult task of laying off management.
    According to Stefan Schwaab, a German who Wu hired to be the company’s first foreign board member, the company cut wages for nearly all staff by 30 to 40 per cent from 2014 levels. “They started with top management. Later on they expanded it to the workers,” he says. “Many had no choice than finding another job to survive.” Soon after, two of the other four pillars of industry in Qiqihar collapsed. Beiman, the steel plant, defaulted on a series of bonds and was declared bankrupt by a local court, with Rmb7.3bn in liabilities. The chemical plant also went under — the site is now overgrown with weeds — while the electricity plant laid off hundreds of staff.Those years saw unrest throughout the north-east. In the city of Shuangyashan, almost entirely dependent on a single coal mine, thousands of locals filled the streets for days in 2016, demanding unpaid wages. The previous year in Qiqihar, according to several of the participants, workers gathered outside the gates of China First Heavy to demand assurances that they would receive their pensions. As officials sought to allay their fears, police detained dozens of workers before the protests ended, say locals. Later that year Wu took his own life. More than three years on, Fularji’s streets are filled with empty shops and offices. Apartment blocks are mainly old and visibly crumbling. The only businesses displaying recruitment signs are those that cater to the elderly, selling wheelchairs and hearing aids.

Thursday 25 April 2019

THE DOMAIN OF FREEDOM - Work and Labor between Nature and Society

This Part of "The Concept of Freedom in Arendt and Weil" was meant as an Easter gift to all our friends - but we never made it in time. Still, I truly hope you all enjoy this contribution to the Auf-er-stehung ("Resurrection") of Europe, America, and the enduring quest for Freedom!

To act, in its most general sense, means to take an initiative, to begin (as the Greek word archein, "to begin," "to lead," and eventually "to rule," indicates), to set something into motion (which is the original meaning of the Latin agere). Because they are initium, newcomers and beginners by virtue of birth, men take initiative, are prompted into action. [Initium] ergo ut esset, creatus est homo, ante quem nullus fuit ("that there be a beginning, man was created before whom there was nobody"), said Augustine in his political philosophy.2 This beginning is not the same as the beginning of the world;3 it is not the beginning of something but of somebody, who is a beginner himself. With the creation of man, the principle of beginning came into the world itself, which, of course, is only another way of saying that the principle of freedom was created when man was created but not before. (H. Arendt, Human Condition, p.177)

Just as Freedom is the abyss of Thought, so Thought is the abyss of Being – and hence also of Life. Thought is the only human activity whose content we cannot detect – and therefore can neither evade nor control without eliminating it altogether. Thought is the arche’ , the “origin” that was the quest of the earliest philosophers, the pre-Socratics. We can observe all kinds of human actions, but it is impossible for us to observe what someone is thinking. The peculiarity of thought is that it is an activity that initiates spontaneously, that is, in a manner that is not traceable to a material origin other than itself. The origin and source and content of thought are inscrutable and ineffable. It is impossible to trace the origin of thought because thought is accessible only by thought – and that through introspection and reflection. Reflection is not the direct object of thought; but thought is inconceivable without its own ability for introspection and reflection. Thought is reflexive in itself.  It is impossible to conceive of thought except as an inner dialogue of thought with itself – whence arises the delusion of “self”. As it was said of Seneca, “never was he less alone than when he was alone”. Cruel was the god Apollo that enjoined all who consulted it at Delphi “to know thyself” – because the god must have known that thought cannot have a self, an ego, an I. Just as it does not have an origin outside itself, Thought does not individuate because it is inclusive and universal – whence the experience of empathy (or Schopenahuer’s “sym-pathy” [Mit-leid]). Above all else, thought is volition, it is a commencement, a beginning – it is the faculty that decides where the de-cision is literally a “cut”, an in-cision in the flow of time.

(This section is an excerpt from “The Philosophy of the Flesh”.)
The decision the will arrives at can never be derived from the mechanics of desire or the deliberations of the intellect that may precede it. The will is either an organ of free spontaneity that interrupts all causal chains of motivation that would bind it or it is nothing but an illusion. In respect to desire, on one hand, and to reason, on the other, the will acts like "a kind of coup d'etat," as Bergson once said, and this implies, of course, that "free acts are exceptional": "although we are free whenever we are willing to get back into ourselves, it seldom happens that we are willing." In other words, it is impossible to deal with the willing activity without touching on the problem of freedom. (Arendt, Lectures, p.4)

Arendt is magnificently right. The bourgeoisie is always torn between promulgating the scientific necessity of capitalism with its “economic laws” and, in contradiction, championing the “freedom” that this objectively necessary system bestows on all of society. We have thus an authoritarian economy and a liberal society. How social freedom can be guaranteed objectively, that is, in the absence of participatory democracy, is the great Arcanum of liberal-capitalist society. Thus, the bourgeoisie always totters between the necessity of the allocation of social resources to production and distribution according to capitalist laws – and the “freedom” of consumer choice that supposedly drives production. But as Arendt reminds us, it is the irreducibility of the communicability of human thought – even when thought is supposedly the innermost and most “ineffable” element of human existence – that is the insuperable obstacle of scientism. Thought is intrinsically communicable not because we can relate our experiences to “others” – indeed, Arendt is wrong in presuming that any human experience is “communicable” in her sense, because, as Nietzsche stressed, all human concepts are mere signs. But what is “communicable” about human thought is precisely the fact that all thoughts are inconceivable without a “dia-logue”, a splitting up, of the thinker into a dialogue with its own “self”. The “self” therefore can no longer be seen as “one” but involves an ineluctable duality. This is consistent with Merleau-Ponty’s “phenomenology of perception” on which Arendt based her Life of the Mind.

It is surprising and a little disappointing therefore that Arendt failed to go deeper than Kant in her amplification of the great philosopher’s notion of sensus communis as ontogenetic instead of phylogenetic – as is amply revealed in this quotation from her editor:

In the present context, the most important section of Kant's work is § 40 of the Critique of Judgment, entitled "Taste as a kind of sensus communis." Kant writes that

by the name of sensus communis is to be understood the idea of a public sense, i.e., a critical faculty which in its reflective act takes account (a priori) of the mode of representation of everyone else, in order, as it were, to weigh its judgment with the collective reason of mankind.... This is accomplished by weighing the judgment, not so much with actual, as rather


with the merely possible, judgments of others, and by putting ourselves in the position of everyone else, as the result of a mere abstraction from the limitations which contingently affect our own estimate.

Kant specifies three "maxims of common human understanding," which are: (1) Think for oneself; (2) Think from the standpoint of everyone else; and (3) Always think consistently. It is the second of these, which Kant refers to as the maxim of enlarged thought, that concerns us here, for it is the one that, according to Kant, belongs to judgment (the first and third apply to understanding and reason, respectively). Kant observes that we designate someone as a "man of enlarged mind ... if he detaches himself from the subjective personal conditions of his judgment, which cramp the minds of so many others, and reflects upon his own judgment from a universal standpoint (which he can only determine by shifting his ground to the standpoint of others)." Kant concludes that we can rightfully refer to aesthetic judgment and taste as a sensus communis, or "public sense." This particular discussion issues in the definition of taste as "the faculty of estimating what makes our feeling in a given representation universally communicable without the mediation of a concept." (pp.121-2)

Again, Arendt seemed to go along with Kant’s definition of sensus communis or “enlarged thought” as what a human does “if he detaches himself from the subjective personal conditions of his judgment”. But this is precisely the point! That “judgement” does not pertain to “the subjective personal conditions” of a single human being but rather judgement is the one condition that is essential to the very conception of a human being – because judgement (thinking) is the very essence of being human! The expression of a judgement may well be subjective and personal – but that is not what is important about the faculty of judgement. What is quintessential about judgement is precisely its being the human faculty kat esochen, par excellence! Thinking is judging: the voice of conscience, the vox interioris, is the most public voice of all. Just how little even the insightful Arendt penetrated this reality is shown in the Lectures – and in the Postscript by her editor:

But what renders this concept of considerably wider application is the idea that thinking in public can be constitutive of thinking as such. This insight runs counter to widespread assumptions about the nature of thinking, according to which thought can operate privately no less well than publicly. (p.122)

No. Not “thinking in public” can be “constitutive of thinking as such”. It is in fact the other way around: thinking as such is in reality constitutive of thinking in public! Arendt and Kant start from the false premise that thinking is “private”, in fact the most private reality of all! But it is not! Thinking is ineluctably “public” in embryo and in nuce. Failure to capture this phylogenetic element of human experience leads to the dead end of Kantian “sociability” (Geselligkeit) – a bourgeois concept if ever there was one – which is why Colletti (From Rousseau to Kant) correctly paused on Kant’s description of bourgeois society as ungesellige Geselligkeit (unsociable sociability) to highlight his inveterate liberalism. Communicability is central to thought. All thought, qua thought, is communicable. Thus, freedom is not to be understood as vapid decisionism, as a “spiritual” entity, but as the most materialistic, immanent aspect of human being, of being human. The emancipation of human society must be based on this fundamental realization:

And this is of some relevance to a whole set of problems by which modern thought is haunted, especially to the problem of theory and practice and to all attempts to arrive at a halfway plausible theory of ethics. Since Hegel and Marx, these questions have been treated in the perspective of History and on the as-

Postscriptum to Thinking 5

sumption that there is such a thing as Progress of the human race. Finally we shall be left with the only alternative there is in these matters. Either we can say with Hegel: Die Weltgeschichte ist das Weltgericht, leaving the ultimate judgment to Success, or we can maintain with Kant the autonomy of the minds of men and their possible independence of things as they are or as they have come into being. (Arendt, op.cit., pp.4-5)

As with Schopenhauer and predestination, for the bourgeoisie success or the accumulation of capital is its own justification. Even Marx, in seeking to historicise social antagonism, came close to turning his critique of capitalist society into a teleology or indeed (as Bobbio [Da Hobbes a Marx] says about the Paris Manuscripts) even into an eschatology, just like Hegel’s (again, Arendt’s judgement in the Lectures on Kant is impeccable, as is her reference there to Kojeve’s famous study on the Phenomenology).

Thought is not opposed to matter. Thought is material, but not in the same manner that rocks are material. We conceive of thought immanently. (For a full exposition of this immanentist approach, see our “The Philosophy of the Flesh”.) The opposition of thought and matter – this chorismos (separation) that has plagued Western civilization from its inception, can arise only in a human community where humans view their Life-world, and thence Nature, as an Object, as a hostile environment to be used and abused for human consumption. Capitalism is the civilization of labor and consumption, where consumption serves (a) to perpetuate human living activity as labour-power (by reproducing the working class) and (b) to expand the necessity of labour-power through the overpopulation of the proletariat (which includes the working class and the reserve army of the unemployed), - which expansion is required for the purpose of end-less capitalist accumulation (that is, power over human living activity reduced to labour-power). Hence, the end or goal of work as living activity which was to emancipate human beings from the necessity of labor-as-reproduction has been turned by capitalism into a means – the end-less (aimless) accumulation of capital as power over living labor through the endless expansion of labour-power (the proletariat’s overpopulation) requiring ever-greater consumption of un-necessary “goods”. This endless accumulation is the ne-cessity (no turning back) of capital.

This vital distinction between production for reproduction and production for accumulation of capital, and thence for expanded consumption is one of the key points on which Hannah Arendt improves on the reflections of Simone Weil. It seems evident that – sadly without acknowledgement – Arendt based her exceptional work on The Human Condition on her further reflections and considerations over the earlier work by the French social theoretician. Arendt advances on Weil’s reflections by distinguishing between “labor” and “work”. Whereas “work” is the human activity of objectification whereby human beings exercise the freedom inherent in the act of thinking by putting into action the projects and judgements formed through thought, labor is the reduction of work to the mere objective of consumption. In this case, the original end of work, which was to expand and give material shape to human freedom becomes a mere means without end in view because consumption becomes an end in itself. And once consumption becomes an endless process, it loses all meaning, purpose and worth.
Truly, then, capitalism is “the civilization of labor” and in this regard alone it poses the greatest danger to humanity – the crushing of the domain of freedom that lies between the necessities imposed by nature at one pole and by society at the other. Arendt gives due credit to Marx for piercing through the delusional capitalist promise of a future of “leisure” for humanity under its search for profits:
The danger that the modern age's emancipation of labor will not only fail to usher in an age of freedom for all but will result, on the contrary, in forcing all mankind for the first time under the yoke of necessity, was already clearly perceived by Marx when he insisted that the aim of a revolution could not possibly be the already-accomplished emancipation of the laboring classes, but must consist in the emancipation of man from labor. (P.130)

This transformation of a means – “labor” – into an end in itself at the expense of “work” is, as it were, a transliteration of Marx’s distinction between living labor and labour-power, between the use value of human work whereby it is possible for the capitalist to extract surplus value and then realise it as profit, and the exchange value that the capitalist pays to the worker in wages for labour-power. Of course, Marx did distinguish between living labor and its capitalist commodification and reification as dead labor or labour-power through the alienation of the worker from the means of production. So much so, that the reflection on alienation and reification has become the biggest focus of Western Marxism from Lukacs to the Frankfurt School. Yet, it is possible to agree with Arendt on the rebuke that Marx did not sufficiently stress the difference between living labour as objectification for the purpose of production-for-consumption and the idea of work as the objectification of human freedom! (In an interesting parallel, Marx’s main criticism of Hegel was that he confused objectification with alienation. And Lukacs himself confessed that his own con-fusion of Marx’s notion of alienation [Ent-fremdung] with Weber’s Ent-zauberung [dis-enchantment] was the gravest error in his elaboration of the concept of reification [Ent-ausserung]. Arendt too, in The Human Condition, adopted the unwise habit of using the word “reification” to refer to objectification!)
Marx’s grave error of omission was to think that all human living activity is ultimately for the purpose of the reproduction of society, and therefore for consumption; and that consequently capitalism’s mortal sin is simply its failure to distribute equitably the products of human living activity reduced to mechanical labour-power (the “theft of labour time”). Arendt is right to assail this biologism implicit in all Western social theory, especially so in economic theory:

It is surprising at first glance, however, that the modern age— with its reversal of all traditions, the traditional rank of action and contemplation no less than the traditional hierarchy within the vita activa itself, with its glorification of labor as the source of all values and its elevation of the animal laborans to the position traditionally held by the animal rationaleshould not have brought forth a single theory in which animal laborans and homo faber, "the labour of our body and the work of our hands," are clearly distinguished. Instead, we find first the distinction between productive and unproductive labor, then somewhat later the differentiation between skilled and unskilled work, and, finally, outranking both because seemingly of more elementary significance, the division of all activities into manual and intellectual labor. 14

By insisting on the identification of human freedom with “emancipation from necessary labor intended as toil” – an emancipation that both Simone Weil and Hannah Arendt correctly insist is not possible! –, Marx relegated his “communism” to the utopian status of an “opium of the people”, - indeed, of an eschatology. For if we accept that human beings will never “free” themselves from Nature, as if Nature were a yoke to be discarded and jettisoned, then it becomes immediately evident that the liberation from the yoke of capitalism must not be confused with or reduced to liberation from the ineluctable necessity of Nature.

Once again, this novel yet formidable approach to the critique of capitalism – the transformation of means into ends and the necessity of work as part of “the human condition” – is too close to Simone Weil’s own critique to absolve Arendt from the imputation that she ought to have acknowledged the source of this reflection in Weil’s work: 

Productivity and creativity, which were to become the highest ideals and even the idols of the modern age in its initial stages, are inherent standards of homo faber, of man as a builder and fabricator. However, there is another and perhaps even more significant element noticeable in the modern version of these faculties. The shift from the "why" and "what" to the "how" [cf. our emphasis on the change from “knowing” to “doing” in the rise of European science, in our “Descartes’s World”] implies that the actual objects of knowledge can no longer be things or eternal motions but must be processes…. Nature, because it could be known only in processes which human ingenuity, the ingeniousness of homo faber, could repeat and remake in the experiment, became a process,61 and all particular natural things derived their significance and meaning solely from their functions in the overall process. In the place of the concept of Being we now find the concept of Process… Here, from the standpoint of homo faber, it was as though the means, the production process or development, was more important than the end, the finished product…. The full significance of this reversal of means and ends remained latent as long as the mechanistic world view, the world view of homo faber par excellence, was predominant. (Passim, at par.42.)

Indeed, and furthermore, we could be entirely justified in reproaching Arendt also for her failure to look more closely, as Weil certainly did – especially in La Condition Ouvriere – not just at the overall sociological transformation of the nature of work to mere “labour” under capitalism but also and above all else at the effect this has had on workers themselves in terms of the existential meaning of work and their outright alienation from their living activity. (We shall examine this aspect of Weil’s work in the next section.) The actual experience of work by workers is paid very scant attention by Arendt in her overriding preoccupation to dissect the broader philosophical, phenomenological aspects of work in capitalist industry and society. It may seem harsh, but this failure vitiates Arendt’s critical work, turning it once again – as was the case also generally for Weil – into a generic “cri de coeur” against the evils of “modern society”.

Nevertheless, Arendt’s own enucleation of these concepts constitutes a huge step forward not just with respect to Weil’s earlier analysis, but also in the critique of capitalism in that (a) it historicizes the critique by focusing on concrete capitalist social relations of production rather than on a vague trans-historical “human condition” as does Weil; and (b) by improving even on Marx through the valuable distinction between “work” and “labour” and thus, (c), by placing appropriate emphasis on the capitalist reification of human living activity and forced abandonment of the essential goal of turning work as much as possible into an expansion of the sphere of human freedom. It is the very hypnotic mirage and delusion fostered by capitalism of the attainability of the earthly Eden of effortless end-less consumption that serves to entrench and perpetuate on an expanded scale the triumph of work-as-labor in the pursuit of production-for-consumption and, tragically, the depletion of the ecosphere.

As both Arendt and Weil quite correctly impetrate upon us in the works we are reviewing, the incontrovertible and undeniable reality remains that human beings will never emancipate themselves from the necessity of working for their reproduction (“labour”). Nor will they be ever be able to eliminate the constraints on freedom posed by the very existence of society – by the inter homines esse. So that what Marx was proposing as the eventual emancipation of humans from the necessity of work-as-labor leads merely to the end-less accumulation of products for consumption and thereby to the reduction or compression of all human living activity (“work”) to labour-power (“labour”), of “Being into Process” – the reduction of homo faber to the animal laborans. Unless human beings come to recognize the necessity of work for sustainable reproduction, the Marxist and bourgeois-capitalist utopia of the total emancipation from “labor” will lead to the destruction of the ecosphere, of Nature, through the wasteful exasperation of overpopulation and consumption!

It is indeed the mark of all laboring that it leaves nothing behind, that the result of its effort is almost as quickly consumed as the effort is spent. And yet this effort, despite its futility, is born of a great urgency and motivated by a more powerful drive than anything else, because life itself depends upon it. The modern age in general and Karl Marx in particular, overwhelmed, as it were, by the unprecedented actual productivity of Western mankind, had an almost irresistible tendency to look upon all labor as work and to speak of the animal laborans in terms much more fitting for homo faber, hoping all the time that only one more step was needed to eliminate labor and necessity altogether.17

Once again, Arendt is right to state that Marx “looked upon all labor as work” (and not “upon all work as labor”) because labor (the part of work necessary for reproduction) is not “work” (which encompasses all human living activity): it is this Marxian reduction of all “useful” human activity to “productive labor” by confusing the two concepts of work and labor and, much worse, by promoting labor as necessity as “productive” and that part of “work” that is not labor because it is dedicated to free not-necessary activity as “unproductive” that is almost unforgivable in the thinker who most comprehensively and critically penetrated the workings and contradictions of capitalist industry and society. In contrast, this critical insight into a fatal contradiction in Marx’s critique of capitalism, buried in a work of vast intellectual acuity highlights the unjust neglect that Arendt’s socio-theoretical work has received.

As we saw earlier in connection with Weil’s critique of Marx, the great thinker most certainly fell into the delusion that the end-less expansion and extension of human production for consumption was not only possible without depleting and destroying the ecosphere, but would also lead to the abolition of human necessity in the communist utopia (“hoping all the time that only one more step was needed to eliminate labor and necessity altogether”). What Marx neglected was that this utopia was founded on the degradation of human ends (freedom as we are defining it here) to means, to end-less production for consumption and, therefore, of all living activity to thoughtless, unfree labour-power or “productive labour” – which, ironically and tragically, is the identical “goal” of capitalist accumulation!
This all-important distinction is made more explicit in Arendt’s elaboration of the notions of productive and unproductive labour that were and are essential in political economy and indeed in all economic theory:

Moreover, both Smith and Marx were in agreement with modern public opinion when they despised unproductive labor as parasitical, actually a kind of perversion of labor, as though nothing were worthy of this name which did not enrich the world. Marx certainly shared Smith's contempt for the "menial servants" who like "idle guests . . . leave nothing behind them in return for their consumption."16 Yet it was precisely these menial servants, these household inmates, oiketai or familiares, laboring for sheer subsistence and needed for effortless consumption rather than for pro- [   86   ] duction, whom all ages prior to the modern had in mind when they identified the laboring condition with slavery. What they left behind them in return for their consumption was nothing more or less than their masters' freedom or, in modern language, their masters' potential productivity. In other words, the distinction between productive and unproductive labor contains, albeit in a prejudicial manner, the more fundamental distinction between work and labor.16 

Let us pause here for an instant to consider the momentous implications of Arendt’s contention – one that we believe is both valid and of paramount importance. What Arendt is saying, in her convoluted way – and perhaps due partly to the fact that she herself who had little or no training in economic theory, did not entirely understand the full import and implications of her critique of Classical Political Economy. Both Smith and Marx, though they differed on the definition and content of the labour theory of value and of capital, believed that the labour that does not end up yielding a profit for the capitalist is “unproductive” whereas the labour that does so is “productive”. The reason for this is that for both Marx and Smith capitalism was, whether one sees it as exploitative (Marx) or market efficient (Smith), the most efficient economic system known to humanity to date for maximizing the accumulation of capital (Marx) or “the wealth of nations” (Smith). It follows that for both thinkers only productive labour was socially “efficient” because, for Smith, it maximized national wealth, and for Marx because it could sustain the greatest “reproduction of society on an expanded scale” through the heightened production of “surplus value”. 

So far, so good. But the problem for Marx immediately arises because, given that productive labour maximises the accumulation of capital, and therefore the exploitative power of the capitalist vis-à-vis the worker, then it is not clear how such “productive” labour could be any better than “unproductive” labour, at least from the point of view of the proletariat so dear to Marx! Arendt’s objection does more than show up a mere contradiction in Marx’s labour theory of value and of surplus value: it goes right to the heart of the nature of the “exploitation” that Marx intended to denounce! Indeed, as Arendt remarks with admirable acuity and perspicuity, if only the labour that increases capitalist accumulation and exploitation is “productive”, then it goes without saying that this labour, however “productive” it might be in terms of value, will only lead to even greater worker exploitation! By contrast, it is extremely difficult to see, where it is not impossible, how such “productive” labour could ever lead to the emancipation of workers from the yoke of capitalists! In other words, Marx’s analysis and prescriptions for capitalist society will lead us to the paradoxical situation where we may well prefer “unproductive freedom” to “productive slavery”!

These certainly are minor points if compared with the fundamental contradiction which runs like a red thread through the whole of Marx's thought, and is present no less in the third volume of Capital than in the writings of the young Marx. Marx's attitude toward labor, and that is toward the very center of his thought, has never ceased to be equivocal.48 While it was an "eternal necessity imposed by nature" and the most human and productive of man's activities, the revolution, according to Marx, has not the task of emancipating the laboring classes but of emancipating man from labor; only when labor is abolished can the "realm of freedom" supplant the "realm of necessity." For "the realm of freedom begins only where labor determined through want and external utility ceases, where "the rule of immediate physical needs" ends.49 Such fundamental and flagrant contradictions rarely occur [   104   ] in second-rate writers; in the work of the great authors they lead into the very center of their work. In the case of Marx, whose loyalty and integrity in describing phenomena as they presented themselves to his view cannot be doubted, the important discrepancies in his work, noted by all Marx scholars, can neither be blamed upon the difference "between the scientific point of view of the historian and the moral point of view of the prophet"60 nor on a dialectical movement which needs the negative, or evil, to produce the positive, or good. The fact remains that in all stages of his work he defines man as an animal laborans and then leads him into a society in which this greatest and most human power is no longer necessary. We are left with the rather distressing alternative between productive slavery and unproductive freedom.

Finally for this section, let us recapitulate with what is perhaps the best summary we could find for this complex jumble of ideas in Arendt’s own words:

The endlessness of the laboring process is guaranteed by the ever-recurrent needs of consumption; the end- lessness of production can be assured only if its products lose their use character and become more and more objects of consumption, or if, to put it in another way, the rate of use is so tremendously accelerated that the objective difference between use and consumption, between the relative durability of use objects and the swift coming and going of consumer goods, dwindles to insignificance. In our need for more and more rapid replacement of the worldly [125] things around us, we can no longer afford to use them, to respect and preserve their inherent durability; we must consume, devour, as it were, our houses and furniture and cars as though they were the "good things" of nature which spoil uselessly if they are not drawn swiftly into the never-ending cycle of man's metabolism with nature. It is as though we had forced open the distinguishing boundaries which protected the world, the human artifice, from nature, the biological process which goes on in its very midst as well as the natural cyclical processes which surround it, deliver- ing and abandoning to them the always threatened stability of a human world. The ideals of homo faber, the fabricator of the world, which are permanence, stability, and durability, have been sacrificed to abundance, the ideal of the animal laborans. We live in a laborers' society because only laboring, with its inherent fertility, is likely to bring about abundance; and we have changed work into laboring, broken it up into its minute particles until it has lent itself to division where the common denominator of the simplest performance is reached in order to eliminate from the path of human labor power —which is part of nature and perhaps even the most powerful of all natural forces—the obstacle of the "unnatural" and purely worldly stability of the human artifice.