Friday, January 23, 2009

Social Costs of China's Prosperity

by Wenran Jiang
(Jan 23, 2006)
The Standard

China continues to impress the world with its high GDP growth, staggering trading volumes and surging consumption appetite. Most figures out of Beijing look remarkable, indicating a momentum that the Middle Kingdom is reclaiming its great power status at a speed faster than most forecasts.

Yet evidence is mounting that the high-GDP-centered development paradigm is too costly to sustain: rural, urban and environment-related protest movements are moving from being localized and isolated events to becoming a widespread and serious social crisis.

Some may point to Beijing's newly revised GDP figures as proof of China's successful modernization: its national strength is now 17 percent more than previously thought, allowing China to leap over Italy, France and Britain to become the fourth largest economy in the world; its economic structure seems to be more balanced with a much bigger service industry than previously reported; and China's foreign trade grew by nearly a quarter last year while its foreign reserves tripled.

Yet other recently released numbers, which have received less coverage, indicate a troublesome trend.
As revealed by the China Human Development Report 2005, regional disparities are threatening the country's growth potential, and the widening urban-rural income distribution gap has reached a dangerous level.

Compiled by a group of Chinese researchers for the United Nations Development Program, the report demonstrates that in all major categories of the human development index - from per capita income to life expectancy to literacy rate - regional imbalances are severe and growing.

It concludes that China's Gini coefficient, a measurement of a country's income inequality, has increased by more than 50 percent in the past 20 years, with urban dwellers earning nearly four times that of rural residents.

At 0.46, the mainland's Gini coefficient is lower than in some Latin American and African countries, but its urban-rural income inequality is perhaps the highest in the world.

The new GDP numbers only make the inequality worse, and when systemic factors biased against the rural population are included, the urban-rural income ratio is as high as six to one.

The UNDP report also shows that the inland regions lag behind in education, especially among the female population.

Only two decades ago, China was one of the most equal societies on earth. Today, it ranks 90th in the UNDP's 131-nation human development index.

It is ironic that while 250 million people have been lifted out of poverty in record time - a proud achievement that no one denies - the mainland is also leading the world in creating one of the most unequal societies in history.

The Chinese government has repeatedly told the world that it needs social stability to develop its economy, and Beijing claims to value economic and social rights more than political rights.

The question is whether China's traditional political control plus the new economic and social exclusion of the majority of its population can be accepted as a model of development by those who are now excluded from China's growing prosperity.

Newly released reports from the central government cite 87,000 incidents of public order disturbances last year, up 6.6 percent from the 74,000 figure in 2004; the number of events that interfered with government functions jumped 19 percent, while protests seen as disturbing social order grew by 13 percent in 2005.

Some say that the figures are not surprising and that these may not even be new developments: they show that Beijing now allows more reporting of these protests that have existed for a long time.

Beijing even puts its spin on reports of social disorder, claiming that it is now more democratic by allowing the protests to occur and then informing the public about them.

Despite the differences in assessment, the emerging consensus is that various grassroots protests are increasing in numbers, are better organized, and often turn violent when local officials are no longer seen as working to solve ordinary people's legitimate grievances.

Again, the UNDP survey of Chinese public perception of income distribution gaps reveals popular demand for social justice and potential support for radical actions: more than 80 percent of those surveyed believe that China's current income distribution is either not so equitable or very inequitable.

Meanwhile, a recent global study by the Pew Global Attitude Project seems to contradict such pessimism.

Around 72 percent of Chinese, the highest among 16 countries polled, expressed satisfaction with national conditions. Although the survey acknowledges that the sample is disproportionately urban and is not representative of the entire country, it does convey one important message that the pollsters failed to recognize: mainlanders have extremely high expectations about benefiting from the country's ongoing economic expansion; if such high expectations are not met in the near future, their frustrations may turn to demands for equity and social justice.

Between the 1950s and 1970s, most mainlanders were very poor, but relatively equal; thus social protests were rare and the Chinese Communist Party asserted control with little concern for large-scale grassroots unrest.

Today's China, after more than two decades of reform, is much more prosperous but, at the same time, a very unequal society.

Historical experiences show that when a country is embarking on rapid economic growth, social mobility accelerates and people's expectations for their own share of the prosperity increase. Yet, at the same time, income distribution gaps widen and, with a few exceptions, only a small portion of the population enjoys the benefits of the country's modernization drive.

Such a paradoxical process often results in rising resentment among the populace and leads to large-scale protests for a more equitable distribution of wealth.

China today is at such a crossroads of unprecedented prosperity, high, unmet expectations, and growing frustrations with perceived social injustice.

The current leadership, headed by President Hu Jintao and Premier Wen Jiabao, is keenly aware of the growing disparity and its serious consequences. After years of promoting Deng Xiaoping's famous call - to get rich is glorious - the harmonious society seems to have become a central pillar of the Hu-Wen approach to easing China's social tensions.

Despite a number of measures - ranging from investment in remote regions to elimination of agricultural taxes to campaigns against corruption - social unrest is on the rise. With some of the recent bloody confrontations between peasants and local authorities, many wonder if some kind of a tipping point for a social crisis will arrive soon.

Revolutionary change, most evident in Russia in 1917, is precipitated by three conditions: first, the masses can no longer be governed; second, the ruling elites can no longer govern; and third, the social forces are fully mobilized under the leadership of a revolutionary party to overthrow the existing regime. By these standards, China is nowhere close to the tipping point.

Yet it would be a profound mistake to take comfort from such abstract conclusions. The first two conditions have been progressively deteriorating in recent years: widespread social protests are increasing; and the corruption of government and party officials, and the plight of ordinary citizens at the hands of abusive local officials, have weakened the governance structure.

A deadly combination of these two elements could lead to a widespread belief that the majority of the population is not left behind because of its own weakness in competing with others for a better life; rather, it is the corrupt officials and the privileged few who have enriched themselves through exploitation and at the expense of the masses.

This perception may foster pressures that fundamentally reconfigure the existing social, economic, and political order.

This process may well be accelerated if the inevitable economic slowdown in the coming years and natural, environmental and other human-made disasters occur simultaneously.

An externally-imposed, alternative political mechanism is unlikely, if possible at all, given China's tightly controlled conditions. Yet a governance crisis of such magnitude is likely to trigger an internal split within the party ruling elites, with reform-oriented forces openly confronting hardliners who advocate total control by force.

The most challenging task for China and the world today is how to avoid such dangerous showdowns with reforms that effectively address the issue of income inequality, social injustice and lack of democratization.

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