Prosperity and Poverty in China

China's development at a critical point--common prosperity or half in poverty? From People’s Daily Online

The critical point mentioned here is the point the United States experienced in 1929. An inappropriate comparison is that, nations that cross this point are today's European and American countries, and those who fail to cross the point are today's Latin American countries. When statically observing the Latin American economy, one always wants to ask--what is the cause of continuous fluctuations in Latin-American economies? To these questions there exist various answers, but most of them being explanations made from the economic point of view. In fact, however, this is a political question.

It can be seen that the biggest difference between Latin American nations and European and American countries is that the latter's economic advancement resulted in the whole society's common prosperity, while that in the former plunged nearly half of the population into poverty. What are the relations between Latin America's extreme poverty and its economic stagnation and fluctuations? It seems the answer can be found from the history of economic development.

The United States before October 1929 enjoyed successive years of economic boom. In the face of the optimistic sight of slow coming of an economic crisis, the media and economists believed the US economy had got rid of the rule of economic crisis, so they never stopped giving publicity to permanent prosperity. Government officials promised a rosy future to the public in which each household would possess two cars. The conclusion was based on these facts--in a decade the US economic scale grew by over 50 percent, and the average annual industrial growth rose nearly 4 percent (the situation was quite similar to that of Latin America before 1998).

But some discordant economic figures and phenomena were neglected--the proportion of agricultural income to the gross national income was 16 percent, and by the end of the 1920s farmers began going bankruptcy in large numbers, with their income declined sharply (about one-third of the per-capita income of the country). The gap between the rich and the poor was thus widened noticeably. Meanwhile, the unemployment rate rose continuously to hit a record of 25 percent. Behind the economic prosperity, 60 percent families were merely having enough to eat and wear. At the same time social mores were going downhill rapidly.

Then there fell the black Thursday, a day that will remain forever in the memory of Americans. The then President Herbert Hoover, a follower of liberal economics who believed in the role of the invisible hand, was at a loss what to do in the face of the crisis.

When a pure market economic mode develops to a certain stage, it will reach a critical point, and that was the crisis point experienced by the United States in 1929. The history of economic development seems to have proved that those that have crossed this critical point are today's Euro-American countries; while those that have not done so are today's Latin American countries.

In a period before the critical point, normally there is a fairly big raise in industrial efficiency. The explanation on this is that the integration of the internal industrial structure and the information about material circulation that brings about a smooth connection of the chain of product mix, a low cost of supply-demand relationship and a gradual improvement of technology and technique, has led to increase in profits. This, when manifested in micro-economy, is aimed to pursue efficiency and gradually remove personnel from their work posts, thus generating a huge army of unemployed population. Increase in the unemployment rate is a direct cause of the gap between rich and poor, this is the root cause of social injustice resulting from the connotative growth of capital. Economic development benefits some people, while elbowing another sector of the people out of the ranks of the beneficiaries.

Under a certain market capacity, the widening of the rich-poor gap means no way out for products; this is the very economic crisis described by Karl Marx. The economic development mode characterized by pure pursuit of efficiency would winnow a part of social members from the circle of economic development, which would intensify the trend of increased capital profit rate and decreased salary for workers. This is the principle explaining why economic development purely pursuing efficiency in divorce of social responsibility will inevitably entail polarization between rich and poor.

That's why it is said that polarization is a by-product of capital in pursuit of efficiency. Thinking in line with this idea seems making it possible to prove the relationship between efficiency and polarity being a kind of necessary and sufficiency relationship, conversely, application is also workable. For example, 'allowing some people to get rich first' is a method of striving for efficiency, and the method of dual urban-rural structure also conforms to this principle. Efficiency can be generated by the method of whether artificially or naturally restraining some people from entering into the economic cyclic circle. Liberalists confined economics to the scope of economic activities and neglected the fact that economic development is a part of the social system. They refused man-made rational interference and the result of allowing capital to pursue profit is the creation of numerous social problems resulting from the polarization of high efficiency.

Fortunately, the United States had the new Roosevelt administration, and the most noted and effective policy of the new administration was 'relief.' In the form of government deficit, the nation made extra-large investment, with the government expenditure rising from 13 billion dollars in 1933 up to 103 billion dollars during WWII. The Ordinary laborers were allowed into economic activities by a work-relief program. The move was followed by a wartime system. These are direct causes that the American economy stepped out of unemployment crisis and became an economic power as it is today.

The practice most worthy of use for reference here is to eliminate polarity; its economic meaning is that it extended economic activities beyond the few people in advanced control of resources and benefited the majority people, for only when the dual role of human resources as consumers and laborers is given full play can it be the base and reason for the ceaseless expansion of the economic scale. Surplus value is man made, so only when man's economic activities effectively increase can it be the cause of the accumulation of social wealth.

The most brilliant achievement of liberalist economics is the supply of a theoretical basis for the privatization action in the times of Thatcher. The process of economic development to which this theory was introduced is a process of increasing efficiency while neglecting economic and social responsibilities, and is an action in opposition to the rational construction of humanity. Thatcher's privatization was workable because it was the result of the many accumulations of social justice. The solution of the question of surplus justice by the use of efficiency in China's reform and opening up process is a also a way, the two have the same meaning in economics.

Liberalist economics can create a short period of economic boom at a time when there is too much fairness, but such prosperity, in most cases, can only last briefly on the basis of the original scale. Some measures adopted in compliance with the nature of selfishness can improve management and stimulate man's enthusiasm for labor. But after this sort of hardware resources is used up, new economic increment would exclude most people from participation in distribution, full expression will be given to the selfish characteristics of capital, and serious losses will be incurred to social responsibility.

In Latin America nearly half of the population are living in poverty, and the economy is plagued by sustained fluctuations--this proves that the critical point has not been got over, contrarily, due to the lack of political measures of remedy, impoverished population has kept increasing and consequently touched off political instability. In the process of the emergence of such predicament, the shadow of liberalist economics can be seen--a group of Chilean economists who had advanced studies in Chicago University learned the whole set of liberalist economics. Their difference from the critical point of the United States is the new problems facing current Latin American economies, that is, international market orientation and international political intervention. The direct cause for the Left-wingers in these countries who began to step on to the stage in recent years was that they have begun to perceptually realize the danger of liberalist economics, attempted to try some new development methods and hoped to take some Left-deviation policies to defuse contradictions.

In crossing the critical point, European countries did not manifest themselves in such pronounced form as the new Roosevelt administration did. But Europe's socialist movements helped countries there to cross the point in a progressive way. For example, they used law to protect laborers' rights and interests and increased social security and welfare. Pure economic means usually turned out to be of no avail in the face of the question, and only political means can be used to express social justice, that's why, in the final analysis, this is a political question.

Now it's easier to understand China's economic question. As one has a look at China of today, one comes to see what a similarity of China's unemployment rate, and the number and income of its impoverished population is to that of Latin American countries. Many places in China are surprisingly close to the United States in its economic and social problems in 1929, such as the proportion of agricultural income to GDP and the proportion of farmer's per-capita income to average social income are almost equal. Take another example. The unemployment rate and the moral issue have become problems of serious concerns to society. These features represent a signal that China's economy is entering the critical point. The point is not 1,000 dollars per capita GDP, for the United States reached the point at 200 dollars per person and Latin American countries at 4,000 dollars. If a large-scale inflation breaks out now and plunge people at the bottom rung into dire poverty, the consequence will, of course, be very serious.

Evidently, the fundamental way to avoid the Latin American style is to build a strong national industrial system to bring more people into economic activities. It requires us to complete reform to the investment system as soon as possible and kick off large-scale economic construction. China's new government made a landmark move in the crucial period of economic development and the Third Plenary Session of the 16th Central Committee of the Communist Party of China (CPC) took a memorable turn in the process of China's economic advancement. The firm grasp of the bottom line of 'putting people first' in the scientific development concept is a political tactic successfully preventing China from falling into the pit of a Latin American mode.

--By People's Daily Online

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