China: The Income Gap is the Medication, not the Disease

Ooi Kee Beng | 05 Jun 2020

Most analysts looking for weaknesses in the steamroller that is the Chinese economy today would agree that the income gap and corruption are the parts most likely to cause the machine to break down in the near future. From what was fundamentally a society that strove to be egalitarian and classless, i.e. one without any millionaires, China has not only become a country of rich and poor, but also of the super rich and the super poor.

What was wrong with the Maoist egalitarian society was that it tended to stagnate and to regress. Power, instead of being exerted from the top on the bottom as in the case of class societies, was misused at close range by one's own neighbours and even relatives in the almighty name of whatever happened to be politically correct and expedient for the time being.

In leaving egalitarianism behind, China under Deng Xiaoping and his followers also gave up on ideology as the uniting and modernising factor in national renewal. Instead, these pragmatists decided to press for economic wealth as motivation and the pursuit of money as the glue that would hold the country together.

Since the demon of Mammon was released within an egalitarian society, the appropriation ofopportunities for quick wealth had to occur unequally and unfairly, at least in the initial stages. Deng's plan was to make the coastal regions rich first, and then move the wealth inland, both through policy measures and through the rationale of the market to seek cheaper labour further inland.

The income gap can therefore be rightly seen as the solution to egalitarian stagnation, and not as a problem caused by the reforms. But with it also came corruption that now extends from top to bottom. This state of affairs seems paradoxically stable because with it came the mass belief that the sky is now the limit, and all that is required to succeed is hard work, luck, and the ability to recognise opportunities. This new faith continues as long as the whole economy is perceived to be growing in all directions, and into new areas of value-add. Understandably, those outside the coastal regions have either moved to where wealth grows fastest, or continue watching fearfully for signs of governmental abandonment of the original plan for regional redistribution over time.

The capitalist road that Mao Zedong so vehemently tried to destroy involved exactly the strategy of allowing some to get rich first. The evils of the income gap and corruption were necessary to the strategy of "capitalist roaders" to avoid stagnation and political radicalism. Once a class society is rebuilt and is chugging along steadily, the role of the state becomes one of controlling the infrastructure of investment, growth and finance, and limiting pollution. Nationalism is essentialised into the ability to host the World Expo, the Olympic Games and the football World Cup.

The trick facing China's government in the not too distant future, however, is to keep the patient from dying from an overdose of the income gap and corruption. The necessary evils needed to create capitalist fervour among the population have a best-before date, and the leadership has to keep its fingers on the social pulse to know when too much medication has been administered.

However, when that time comes and the dosage needs to be reduced even for the sake of the rich and the corrupt, it becomes a roll of the dice whether the right persons will be in the right place and wielding the right powers to do it.

One could say that the Marxist revisionists of old, nowadays known as social democrats, chose to put capitalism on a leash from the start in order that the income gap and corruption could be kept in check while the economy grew. More often than not, this balancing act tended over time to end up in many European countries with capitalism being held back too tightly, and the dosage of the income gap being administered at ineffective levels.

In this sense, the transformation act from Communism to Capitalism that China is going through is much more market-friendly than had been the case with the revisionists. The time and resources wasted by China's experiment with Communism makes it all the more necessary for the present leadership to rush the rate of development. Thus, the income gap is administered close to the point of causing an overdose. Once signs of overdose appear, the state steps in and announces measures to lessen the effects of the income gap and corruption on the sociopolitical body. This is exactly mirrored in the constant fear of economic overheating and the constant measures taken to keep things just below boiling point. The occasional trials and harsh sentencing of high-level officials and even ministers for corruption are part of the dosage reduction.

The income gap and corruption are therefore not China's disease at this point in time. They are the medication for the overdose of egalitarianism the country suffered from since 1949. Indeed one could argue further and consider egalitarianism as the medication for the overdose of the income gap and corruption in the decades before.

Whichever way one looks at it, the fate of China's economy, and that of the world, will depend on whether the socialist soul of the Chinese Communist Party – the Chinese characteristics in the rampant capitalism released today – that is now either dead or in hibernation, will be resurrected long enough to stop the medication when the time comes.

For outside of this sociopolitical scenario looms the problem of excessive pollution that can easily doom the whole Dengist enterprise.

Ooi Kee Beng is a Sinologist and Fellow at the Institute of Southeast Asian Studies (ISEAS), Singapore. His latest book is, Continent, Coast, Ocean: Dynamics of Regionalism in Eastern Asia (ISEAS, 2007). He is presently a visitor at the Shanghai Institute for International Studies.

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