By JOHN RICHARD SCHROCK
“Common Prosperity” is now the strategy being followed in China to achieve more economic equity across the Chinese population. When Deng Xiaoping took over soon after Mao’s death, China had been a country where everyone was relatively equal, as in equally poor.
Deng modernized the China economy in the 1980s by allowing the most motivated people and regions of China to get rich. Under his explanation that it did not matter whether the cat was black or white, as long as it caught the mouse, this market and education expansion dramatically sped up economic growth. But as many Chinese moved into middle and upper class status, this caused increased income inequality.
On Oct. 2, 2012, the United Nations presented Chinese Premier Wen Jiabao with a top United Nations award for China’s significantly reducing the number of people around the world suffering from extreme poverty. China’s actions were responsible for over 70 percent of the global reduction in poverty since the late 1970s, lifting nearly 800 million Chinese out of extreme poverty. And by the end of 2020, China had lifted their remaining 98.99 million citizens out of extreme poverty.
But Deng also realized back in 1985, that “we will fail if these policies lead to rich-poor polarization, and we will be on an evil path if a new super rich class rises.” Time has now arrived where the leadership is working to spread China’s growing prosperity, slowed by the pandemic, to develop a bigger middle class. Han Wenxiu, an economics official, explained in August 2021 in Beijing that “common prosperity means doing a proper job of expanding the pie and dividing the pie… We will not ‘kill the rich to help the poor.’”
So how will this work?
Zhejiang, a wealthy province, has a program designed to narrow their income gap by 2025. Other regions that vary in agriculture or tech factory work have a variety of programs. China now has a middle class larger than the U.S. and more of its factory production will go toward serving its own people. This movement looks at taxation to “adjust” excessive incomes, expand the number of middle-income citizens, raise incomes of the poor and end illegal incomes. Other strategies include improving public services, increasing the social safety net by expanding social security, and bringing down the cost of medical care.
Beijing is also encouraging high-income companies and individuals to provide more support to charities. Property and inheritance taxes are also under discussion but face more opposition.
There is a stark contrast of these actions with the United States, where the income disparity is growing because the poor are getting poorer. According to the World Inequality Report (WIR), the top ten percent of U.S. rich earn on average 17 times more than the bottom half. And this income gap is growing, nearly returning to the 1930s levels when our super-rich contrasted with the poor masses we viewed in “The Grapes of Wrath.” WIR finds that “income inequality in the U.S. is among the highest among rich countries.”
In China, the top ten percent earn 14 times more than the bottom half. Their “common prosperity” movement is aimed at closing that gap, but not returning to an equal pay egalitarianism! China has the second largest economy in the world, but is now the largest based on purchasing power parity that adjusts for differences in domestic currencies.
There was an early 1900s song that said “the rich get richer and the poor get poorer…ain’t we got fun!” That song doesn’t play in China.
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World Inequality Report is at: https://wir2022.wid.world/download/
PPP or Purchasing Power Parity: https://www.globalfirepower.com/purchasing-power-parity.php
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John Richard Schrock has trained biology teachers for more than 30 years in Kansas. He also has lectured at 27 universities during 20 trips to China. He holds the distinction of “Faculty Emeritus” at Emporia State University.