Final Exam
Economics 5420/6420, Spring 2009
Answer any two of the following three questions (40 points in total):
1. As the Communist Party came to power in China in 1949, it was confronted with three
major challenges. What were the three major challenges? Briefly discuss how successful
the new revolutionary regime in China was in its effort to meet the three challenges.
Explain the basic contradiction of the Chinese socialism.
Answer Keys:
(a) Three challenges: reverse China’s economic and geopolitical decline and catch up
with the west; provide the necessary material and ideological conditions to meet
the working people’s basic needs; bring about a fundamental transformation of
the economic, political, and social relations in China and in the world (6 points).
(b) Capital accumulation: relative success (2 points).
(c) Basic Needs: (2 points).
(d) Social Transformation: heroic attempt but failed (2 points).
(e) Basic contradiction: the Chinese socialism was the historical product of a great
revolution and would necessarily reflect the interests and aspirations of ordinary
working people; on the other hand, China remained a part of the capitalist world
economy and was under constant and intense pressure of military and economic
competition against other big powers (4 points). Surplus product had to be
extracted from the workers and peasants and concentrated in the state, providing
opportunities for bureaucratic and technocratic elites to advance their individual
interest and power (4 points).
2. From the 1980s to the early 2000s, global capitalism was under the dominance of
neoliberal institutions and policies. What is neoliberalism? Give some examples of
neoliberal policies. What were the structural contradictions of the neoliberal global
economy? The expansion of the global economy in the early 2000s was characterized by
major imbalances in the US and the Chinese economy. Comparing the macroeconomic
imbalances in the US and in China and explain why these imbalances were unsustainable.
Answer Keys:
(a) Neoliberalism: A global capitalist counter-offensive against the working class
gains in previous decades (2 points). Examples: monetarism; labor market
flexibility; trade and financial liberalization (3 points).
(b) Structural Contradictions: under neoliberalism, all components of global effective
demand are being depressed, threatening to lead to a global economic downward
spiral (5 points).
(c) US: economic growth led by debt-financed consumption; large and rising current
account deficits (5 points).
(d) China: economic growth led by investment and exports; excessive investment led
to excess capacity and massive demand for energy and materials (5 points).
3. Over the history of the capitalist world system, the United Provinces of Holland, the
United Kingdom, and the United States, have been the hegemonic powers over different
historical periods. Explain why the successive hegemonic powers have played an
indispensable role in the operation and expansion of the capitalist world system.
Many argue that the US hegemonic power is in decline. Discuss the evidence and
arguments that the US hegemonic power is in decline. Can China replace the US to
become the world system’s next hegemonic power? How about other big powers (India,
Russia, European Union)? Discuss each big power’s advantages and disadvantages.
If the US hegemonic power is in decline but no other big power can realistically
replace the US to become the next hegemonic power, what could be the implications for
the future of the capitalist world system?
Answer Keys:
(a) Hegemonic power: The capitalist world system must be an interstate system; but
unregulated interstate competition undermines the system’s long-term common
interest; hegemonic powers are required to regulate the systemic interest (6
points).
(b) US Hegemony: relative decline of GDP; finance; military; lack of ability to
promote systemic interests (4 points).
(c) China; India; Russia; EU; advantages and disadvantages (8 points).
(d) Systemic chaos or a post-capitalist world government (2 points).