It was not only the output of export-directed consumer goods that tended to get out of hand. "Investment in many sectorsincluding property, cement, steel, cars and aluminum" was "being overdone", Chinese government officials complained.49 In a system constructed around the goal of accumulation for the sake of accumulation and then left to run itself, top managers measured their success by the speed at which their firms grewand the government-run banks then rewarded those that grew fastest by allowing them to accumulate debts.50
A third problem, which exacerbated the previous two, was that the ratio of investment to workers employed-and to output-was rising, despite the abundance of labour. While investment was increasing by about 20 percent a year, employment growth throughout the economy as a whole was only about 1 percent-and even in urban areas it was only about 3.5 percent. Total manufacturing employment fell from 98 million in 1997 to 83.1 million in 2001,51 despite the massive rate of accumulation. The fall was due to large-scale redundancies in the old state-owned heavy industries, but it was not compensated for by the increased employment in the newer manufacturing enterprises-and employment in the "secondary sector"52 as a whole remained more or less static at round 157 million. In other words, the organic composition of capital rose. Researchers for the IMF reported, "The increase in investment" from the mid-1990s to the mid-2000s had led to "a rise in the capital output ratio and a fall in the marginal product of capital" .53
The effect was bound to be downward pressure on profitability. Phillip O'Hara calculates the rate for the economy as a whole as declining from 47 percent in 1978 to 32 percent in 2000.54 Jesus Felipe, Editha Lavina and Emma Xiaoqin Fan point to the same trend, but with different absolute figures, from 1 3.5 percent in the 1980s to 8.5 percent in 2003. They quote results from Lardy and from Lin which show the same trend-with some of Lin's figures showing very small profit rates indeed for some industries (0.2 percent for bicycles, -0.3 percent for buses, 2.9 percent for washing machines, 2.5 percent for beer).55 A Chinese study by Zhang Yu and Zhao Feng seems to contradict these conclusions, showing the overall rate for manufacturing as falling continually for the 20 years up to 1 999, but rising considerably after that.56 The discrepancy could be explained by the way the massive onslaught on jobs in the state enterprise sector cut into its operating costs. The great counteracting factor preventing a catastrophic fall in profit rates was the continual fall in the share of output going to wages. But this necessarily prevented domestic consumption from absorbing the growing industrial output, further increasing the dependence of accumulation on further accumulation and on exports.
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The New Age of Global Instability