Egalitarian Inequity

Just like India, the Chinese economy has registered a robust growth in the past three decades but just like India, the Chinese development model seems to have created an increasing chasm between the rich and the poor where the former have grown at the cost of the latter. The assumptions of increasing affluence for all sections of society have been belied by contrary results.

Chinese economic wisdom has been based on the same premise as Indian planning, that is, the trickle-down effect. This assumption is based on the acceptance that some would get rich faster than others but this wealth will trickle down to the lower strata and would pull up the underdogs too.

The secret of China’s new-found wealth is the amassing of a huge pool of savings by a nascent middle class combined with low levels of personal debt. But the subtext of such headlines is that economic growth has been more advantageous for a handful while amplifying disparities between rich and poor. This fact puts China in a vulnerable position vis-à-vis its rapid growth. The ideological challenges and tensions implicit in this trajectory of growth put the legitimacy of leaders in the red.
The most contradictory development in China’s growth story has been the rapid rise and expansion of private wealth under the aegis of the Communist Party. Despite its ‘Red’ pretensions, China has created conditions for the rise of a powerful and wealthy bourgeois to work as the ‘vanguard’ of growth in terms of averaged indicators as gross domestic product (GDP) and per capita income which do not reflect ground realities like equity in society. The Communist Party has presided over privatisation of state enterprises and extended privatised sector privileges such as housing and social benefits. Chinese hinterland and rural areas have seen conversion of arable and agricultural land into industrial or commercial estates and the boom in the construction sector – often referred to as the construction bubble that might be on the verge of bursting – have created avenues for amassing huge personal wealth.

The levels of disparity in China can be gauged from the fact that the 2010 Credit Suisse Global Wealth Report pegged average wealth per Chinese citizen at $ 17,126 – this is almost double than of other erstwhile high growth economies like neighbouring India – the median wealth was just $6,327 which suggests that wealth created has not been evenly distributed. 

The 2010 Credit Suisse Global Wealth Report observed that these sources of wealth creation were extremely important for China and accounted for much of the assets per adult (per capita adult income) in China which stands at a high $9,600. The report also suggested that this wealth creation has exacted its cost too. The levels of disparity in China can be gauged from the fact that the report pegged average wealth per Chinese citizen at $ 17,126 – this is almost double than of other erstwhile high growth economies like neighbouring India – the median wealth was just $6,327 which suggests that wealth created has not been evenly distributed.
The poor in China have been hit by privatisation in the sense that on the one hand privatisation of State assets has favoured the emerging middle class, while the poor will have to buy goods and services that were previously produced by State from their limited personal savings.
Others markers of inequality too show the downside of the Chinese growth story. GINI Co-efficient, which is a measure of how wealth is distributed across the societal spectrum of classes, stands at a meager 0.47 for China, on a scale where 0 indicates perfect equality in distribution while a value of 1 suggests extreme forms of inequality. So, though China has come to a stage of development where it has started challenging the United States, its inequality has surpassed that of the United States in the last decade. Internationally, it is considered that the 0.4 GINI mark suggests dangerous levels of inequality.
Despite clocking impressive urbanisation, China still remains a predominantly rural economy with 50.3 per cent people in mainland China living in villages. In 2010, the average annual disposable income of the rural population ($898) stood at a third of what it was for the urban population ($2,900). Thus the economic figures show that not only is the gap between the rich and poor getting deeper and wider, the gaping rift between urban and rural too is on the rise.
As in India, the poor in China have had to spend larger and larger sums of their incomes on food grains, a fact that is reflected in Engels Co-efficient. But even on this parameter, the urban households spend less on food grains than the rural households reflecting the former’s affluence and the impoverishment of the latter. (It has been established that the poor spend more on food grains because that is what makes up most of their food basket while the rich spend less on food grains as their food basket gets diversified by including meat, eggs, milk, etc. which is a marker of their affluence.)
The penetration of banking is another marker of development or underdevelopment as the case may be. In 2009, the Chinese banking regulator noted that three of the most poor provinces – Tibet, Yunnan and Sichuan – had more than 50 non-banked counties, which suggests that large number of people do not even have access to basic financial services.

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