“ President Xi spends 364 days of the year showing mankind the right way they should go.” ” What about the rest of the day?” ” Turn around, and point opposite way. ”
Introduction
There are a lot of similarities and differences I found between US and China, except all of their products are made in the same place and both love winnie the pooh, and I will talk about that on 3 topics, economy, politics(sociology), and culture. This post is going to be a little long, because I'm going to have to write some shit history like how Grandpa told those stories…
I believe except good at stealing technology and making virus, we, China provide the most successful ever model that capitalism dictatorships should learn from: an authoritarian government, capitalist market economy, and making illusion that the government is doing socialism so people won’t complain.
Socialism with Chinese characteristics - “Let’s see who the ghost really is!.jpg”
The KGB was ordered to go into the forest without rabbit to catch a rabbit, and in a few moments there came out a bear with a bloody head, and as the bear walked away, he said, "Don't fight, I'm the rabbit you're looking for.” - Soviet Union Joke
There is always a saying you can hear from any kind of social media or textbook in China that The nowadays China’s prosperity is the result we follow a path of Socialism with Chinese characteristics, and at its core is the leadership of the Communist Party of China. It is true that in the CCP play a very important role in the past decades development of Chinese economy, but it’s not fully rely on Socialism way as they tell you.
Types of Socialism vary based on the role of markets and planning in resource allocation, so we could make it simplified into two economic system — the planned economy or the market economy. The former can be simply understood as government-led economic activities (in China, social organizations play an insignificant role in this process actually, I will explain that latter), while the latter is market regulating itself. Thus, the debate about whether it is Socialism or not also focuses on whether there is a market and, if there is a market, what the role of the market should be.
As Deng Xiaoping said, the architect of the Chinese economic reforms, the market economy was synonymous with capitalism or that planning was synonymous with socialism. It is true that we have to leave the discussion of ideological issues in abeyance treating it as a “neutral tool”, and also I don't want to get into the debate between the classical and Keynesian schools of economics here because of it is not only about economy but politics. So I will now first wrote some tedious history and numbers to show how the Chinese economic model has changed in the past, and also would like to emphasize that even this "instrumentality" or “neutrality” of the market economy does not change the fact that it is not a Socialism in terms of values we all agree — Equality. Socialism should not be so unequally distributed like China.
Before: Command Economy
A simple and understandable (for US) explain to the planned economy is The New Deal, which means that government, rather than the market, plays the leading role in regulating the economic activities through the plan made by order of a superior. However, unlike the aim of solving the crisis in short run or only work in some field, the CCCP(Soviet Union) version of Planned Economy plays an extremely important role in the whole nation without resistances from congress or supreme court.
It was initially characterized by a harsh collectivization and a major advance in industrialization and infrastructure to make the modernization as soon as possible, and gradually evolved into a dominant system that state enterprises which follows the guide from planning ministries control economic input. It also means that the people cede undivided private rights, willingly or unwillingly, to the government so that it will have more responsibility and power to allocate social resources other than production, like education etc.
It must be admitted that this system does make it possible to mobilize enormous resources to accomplish certain goals in a short period of time, which also could not be solved by other forms of organizations or individuals. However, in many cases, it cause the lack of qualified products, forced labor and exploitation and high accident rates, overall, low efficiency and waste. ( It also creates bureaucratic problems that I would like to explain in next chapter which explains why there is political apathy in both CN and USA. ) For example, in the Fig 3., I visited the historical archives of what used to be China's largest state-run steel mill, and according to the records, it was in 1989 that the steel produced at the mill was first evaluated against international standards — Most of the time, like other enterprises in the planned economy, they focused on quantity and (the lowest) standards quality to meet almost only indicator set by top decision makers.
Yes, the significant drawback of this mode is the government is not as effective as the market in allocating resources, which can easily tell from demand side rather than production side. Even if, as a few economists have argued, it is wrong to measure the economy of a socialist country as a planned economy using market-based GDP because of its collective ownership without market trade, we can still see what economic policy really looks like in the final deliver. Take an extreme and perfect example, North Korea, a so-called "communist" country that do not have free market. You could see they could even make atom boom and wonderful infrastructure in Pyongyang, but most of people are suffering shortage of food. Same thing happened in China before the 1978 market-oriented reforms in economy field. The planned economy of the Maoist period is also known as the Great Leap Forward (1958-1962). The policy attempted to collectivize and industrialize the countryside in the short term, it did do some miracles, like developing nuclear bombs. But due to problems such as information asymmetry and misrepresentation of data, it led to severe food shortages, famine, and economic dislocation, resulting in the deaths of trillions of people occurred between 1959 and 1961.
The officials attribute it to “Natural Disasters”, intentionally or unintentionally trying to clear the air or cover up one's own responsibility. It reminds me Walter Duranty who as later criticized for his subsequent denial the famine in the CCCP (1930-1933) caused forced grain procurement from farmers to accomplish the goal of agriculture collectivization in the Five Year Plan brutally. Same excuses they used without any apology and make up to the public, because they are busy with preparing the upheaval of the Cultural Revolution (1966-1976), another sociopolitical movement my grand father once suffered.
I wrote why my grandfather was convicted of political crime with a very ridiculous reason in that period of time, while that is not want I want to extend here about the struggle of ideology or class. One of common misinformation is that no matter what happened in the Culture Revolution and the Great Leap Forward, the planned economy is actually bring more equality and wealth to the society, it is partly true. However, in fact, In 1978, just after the end of the Cultural Revolution, China became one of the poorest countries in the world with GDP $156 per capita. It’s all blame to the system self, because Mao Zedong put forward the slogan of economic construction, "Prepare for war, prepare for famine, prepare for the people", and during this period, investment in national productive construction, including the national defense industry, accounted for 82.8% of total investment, far exceeding investment in infrastructure construction and consumer spending.
Again, the system I blame is actually not called the planned economy from my perspective. I would rather call it as Command Economy, which is an economic model that submits to the will of superiors who want to achieve some impossible miracle rather than rational planning. Because of this "romantic" character. I think it is necessary to separate it from the bureaucracy of the planned economy, which depends on technologization and professional division of labor. In contrast to bureaucracies, which can expand the scope of administration but cannot guarantee the unanimous implementation of will due to the expansion of the hierarchy, they are often organized like militarized campaigns which are not responsible or unable to react to the market signals but politicized goals. And it is these characteristics that allow everyone in society to be mobilized as a resource. The actually inequalities in social development created by this model are often obscured by well fabricated grand narratives. And this pattern has not disappeared with the market reforms mentioned below, but has even grown stronger and more silent in every aspect of people's lives in China.
Just like the documentary on China shot by Michelangelo Antonioni (Fig 4.), even though the itinerary and content of the program were strictly monitored, it was still blocked by the authorities for "smearing" China. When I first watched this documentary, I couldn't make any connection between the tranquil scenes in the movie and the era in which it was filmed - the Cultural Revolution. It's as if, from my personal point of view, maybe this system did create great nations but you can't always be sure that the top leader is always right, and his wrong decisions give people like my grandpa a lifetime of indelible pain. And that pain has not been met with an apology from authority, as silent as tears in the rain.
After: Market economy
As it shown in the Fig 5. China's GDP growth is not so significant before the free market economy officially introduced in China in 1987, because, as I listed above, limited contribution of planned economy to GDP. The abolition of individual ownership, relying only on state industrial enterprises and the collective agricultural economy, has not been at all inclined to investment on people's livelihood-related areas, as the communists always promised. I would quote Regan’s soviet joke as the perfect example:
In Soviet Russia a Man Goes to Buy a Car... He goes up to the owner and asks for a car, to which the owner responds: 'You know there is a 10 year waiting list?'
The man then answers, 'OK,' and after some time he then agreed to buy a car.
So he pays for the car in advance, and just before he leaves he asks the owner,
'Can I pick the car up in the morning or afternoon?'
'It's 10 years away, what does it matter?'
'The plumber is coming in the morning'.
I want to clear that inequality in China is not only brought about by the free market, as many fundamental communists criticize, but the government's bizarre role in it is even more impossible to ignore - They are not only regulators of the market in the traditional sense, but also participants. At the beginning of China's market economy reforms, the government adopted the same tactics as the Soviet Union's market-oriented reforms - ‘shock therapy’, in other words, a complete shift to neo-liberalism without safeguards, just like the current Argentinean reforms. In this process, in order to solve a large number of undesirable state-owned assets, including various types of enterprises, not only millions of workers were forced to be laid off without subsidies, but also various types of collectively owned enterprises were sold at low prices and illegally sold to the former factory managers or party secretaries without supervision. That's when my mother was laid off from the state-owned textile factory, in the same way, her former factory manager was transformed into a famous local entrepreneur without any effort. Likewise, it was a time of silence.
I am not a believer in neoliberalism. Like the financial crisis of 2008, the market is not a panacea. But as the official narrative often uses the "pains of reform" to cover up its actual responsibilities, I don't think the people should have to bear the burden of this kind of suffering, and the government is just wiping the slate clean, considering the publicly owned economy (especially the state-run economy) accounts for more than 90% of total industrial output value before the reform. Also, In the process, the reform abolished the collectivization of agriculture, but a large number of high-quality state-owned enterprise assets were retained, most of them are energy-related monopolies, such as PetroChina. Now, after three decades of change, the State-owned enterprises (SOE) accounted for over 60% of China's market capitalization in 2019 and estimates suggest that they generated about 23-28% of China's GDP in 2017 and employ only between 5% and 16% of the workforce.
The above data suggests that SOE does not directly distribute wealth to the general public through direct employment relationships, even though officials boasted that SOE provide goods or services to the public. The fact is that the growth in wealth that the average person can perceive is through the China's world trade economy has indeed been growing at a rapid pace for more than a decade since its accession to the World Trade Organization in 2001. Not only have factories sprung up all over the country thanks to the unregulated low-privilege advantage and the industrial scale effect, but also accelerated by the Chinese government generating a steady stream of revenue through land-oriented Finance, which, on the one hand, continues to supply a large amount of industrial land at low prices to attract investment; on the other hand, restricts the supply of commercial and residential land to reap the benefits of land monopoly from the ever-rising land prices. The industrial and commercial economic activities attracted after land development, leading the transformation and upgrading of the economy, bring in value-added tax and other tax revenues, and can also create employment.
There are two significant drawbacks. On the one hand, it has pushed up housing prices and the debt burden of the residents, widened the gap between rich&poor, urban&rural, and led to a lack of domestic demand. It roughly account for 20% GDP, 40% Fiscal Income, and 60% Household Assets. That’s why most Chinese, especially young people, spend their entire lives trying to buy a house in the urban area which are easy to access more resources. Of course, due to the existence of the household registration policy, which divides citizens into agricultural and non-agricultural and is linked to the corresponding social welfare, adding to the cost being civilized.
On the other hand, in the process of such urbanization, production has been overstress and consumption has been neglected. It can be seen from the above that even in a free market, since the government actually holds a large amount of resources, the aggregation of capital has led to a situation where the government's investment decisions are made in sectors that tend to receive more social resources. This creates a situation of inequality where some areas are over-supplied and others are under-supplied. The excess capacity could not be absorbed domestically, resulting in low prices being dumped overseas, exacerbating trade frictions.
China is proud of the electric car industry, for example, over the past ten years, the central government not only issued laws and regulations and a large number of subsidies, local governments also attracted a large number of production enterprises through policy and investment, thus creating a variety of new energy industry chain, including electric vehicles, in the world far ahead. But, if you look at China's general industrial capacity utilization ( a metric that measures the percentage of production that is being actually used ) rate was 75.1 percent in 2023, however, according to the Chinese National Bureau of Statistics, a number below the internationally recognized normal threshold of around 80 percent. Among that, the level for new energy vehicles including EVS, which is recognized by Chinese officials as one of the several drivers of future economic growth, is averagely only around 50% in China ( BYD is only one above 80%, but I highly doubt about that ). So as you can see, the command economy issue is still in play. But if you consider that it is more technologically advanced and at the same time can monopolize the international market with a form of low-priced dumping, it's a different story.
Faced with a large amount of surplus labor and social instability, the Chinese government adopted not a liberal but a Keynesian approach, continuing to invest in infrastructure and production to sustain economic growth on the one hand, and maintaining a dominant position in international trade through exchange rate and capital controls on the other. This is in fact a far cry from the promises made at the time of WTO accession to build up a free market.
On the other hand, the rapid development, however, has resulted in insufficient supply of public services and welfare with huge inequality, or I would say dilemma made caused by the market and administration. But I would critic government rather than market because the role they play is actually “doppelganger” - they play the game as player and judges at same time, but take few responsibility. Well, some would argue, like most Chinese been told that, we have more social welfare compared with other capitalism countries. It depends.
As previous Premiere Li said in 2020, about 600 million Chinese, whose average monthly income is, still, only about $140. As Fig 8. shows, you can tell, my family actually can be located in the top part of income population, even it’s only about $2700 per month and my father is a lawyer but not public counsel as you might imagine (LOL). That's why I rarely speak from personal experience about what life is like in China, because I don't speak for the vast majority of Chinese people, or I would say not as a “typical Chinese” who living in the area where few social resources are accessible and lack of industrialization. Most of them are subsistence farmers. Although the central government abolished the agricultural tax in 2006 and received a certain amount of subsidies from the government, in practice, all kinds of invisible social burdens still exist. For example, as a result of marketization, farmers are now required to obtain the necessary necessities through monetary transactions, and at the same time pay a share of grass-roots administrative costs. The low price of agricultural products does not result in an excessive balance in the annual income. This is exactly how colonization sounds like right?
On the other hand, apart from “typical Chinese” mentioned above, there are other about 900 millions people living in the urban area could enjoy better infrastructure and welfare, but still with great inequality, not only income. Among that, there is 300 million people living in the township where , while other are actually living in the city like Shanghai or Beijing. And in the city, average population density is 0.8/ft², which is a great test for the government's ability to provide social resources and services. But, unfortunately, they aren’t.
On Going: State Capitalism
Take social insurance system as an example. Roughly, everyone is almost forced to pay because of the law and get refund and some subsidies from government when you retired, go to the hospital, buy house etc. In 2021, the number of elderly people aged 60 and above in China amounted to 267 million, which is 18.9% of China's total population, while the government's pension gap exceeded $ 100 billion, even allowing many commercial and business insurances to enter this game. People might argue that the government had a good will to do that, but they didn’t notice life expectancy is much longer than expectation. Like the social security program initiated at the age of New Deal, which subsidize old people directly from tax they charged not deposited but won’t expect number of the old soared from 7.5 millions (6% of all) to 54 millions (16% of all in 2019), which actually adds tremendous burden on young people where the subsidies actually coming from, if it would continue.
I see a lot of people bragging about how China's health insurance system covers 99% of the population, and that public hospitals offer amenities that private doctors in the U.S. cannot. In reality, however, many ordinary families still cannot afford the high cost of medical care. Indeed, China's health care system has made great strides, providing the same life expectancy at 1/21 the cost of the United States. However, because the system tends to be a "guaranteed minimum", many major illnesses still leave the average family struggling to make ends meet. It also means that people have to spend more time and money to access limited health care resources, just like the drawback of NHS.
If Obama's Care was a failure, it is because it does not have the facilities to support public hospitals like what China did, which have to keep expanding in size and amount to cope with the yearly increase in costs. Then here is another story everybody knows but not on the table about the system itself is actually making inequality in the way they distribute to different targets, which people work for the state-owned company or government could benefit a lot visibly or invisibly. I have to say another story about my mother side grandparents, because retired from state-owned company, their retirement pension are even more than my parents’ incomes, about $2000 per month per person fully subsidized by the government. While my father side grandma only can get $500 per month pension because she retired from normal company as a worker and hardly cover her medical expense beyond medicare-covered part. But that's not the worst of it, in 2022, basic pension insurance recipients for rural residents, such as rural seniors, will receive only about $30 per month, 1/15 of the amount for enterprise employee retirees and 1/30 of the amount for retirees who work for the government owned institution. Also not the best of it, like one of my grand-uncle was a provincial minister, who can actually get about $5000 per month subsidized invisibly and visibly and access to special wards in the best hospitals regardless of waiting times. It is important to note that the so-called medicines reimbursed by the Chinese health insurance system mainly refer to about 2,500 Class A medicines, which cover common medicines such as cold and flu medicines, painkillers and so on. It is important to note that, unlike in the United States, Chinese people are accustomed to taking medication for minor colds, and the medications often contain large amounts of antibiotics. The 190,000 Class C medicines, which are imported or special drugs that are needed for major medical conditions, have to be purchased at your own expense.
Perhaps many young people were born in many cities in the South or I would say big city known for most people, where the market economy is well developed. They are having many resources or other funding advantages form policy, more market-oriented, and their governments are more efficient and professional, so they can generate more tax revenue through enterprise as well as development. But like in my hometown, a city/county in northern China, where most of Chinese live in, about 60% of population works for the government owned or government-related companies, no clear advantage. Not only is there a huge inequality in the distribution of wealth not made by market as I wrote, but also low expense on the public social welfare. According to a date published by local finiancial department this year, as a result of declining public revenues, government subsidies for public health care and education, as well as for agriculture, have been cut by 20-40%.
Therefore, I would like to point out that the fact that China's economic system emphasizes investment and production over social welfare is contrary to the so-called socialism that it promotes - it results in the Gini coefficient in China is always around 0.5, even higher. The funniest thing I know is that in some areas, the Gini coefficient has even increased rather than decreased after the secondary distribution, i.e., when the government invests in public welfare through tax revenues.
So, the wealth, is significantly more concentrated than income at 2022 after the so called common prosperity policy made by Xi, which want to reduce the disparity between the rich and the poor. In fact, The income of the richest 20% of urban households is already 6.3 times that of the poorest 20%. Moreover, the income of the top 20% of rich households in 2022 increase by 4.5% , whereas the income of the poorest 20% of urban households will only increase by 1.3% year-on-year, thus widening the gap between the rich and the poor. The richest 1% of China's population still holds more than 31% of the country's wealth. Government redistribution in China has had a limited impact on inequality, resulting in a reduction of the top income decile of only 4% in China, relative to 25% in France and 19% in the U.S.
It's very strange, isn't it? On the one hand the existence of a market economy widens the gap between the rich and the poor, on the other hand the government has taken some measures to intervene in the economic process but it seems that things are not getting better - it is neither neo-liberalism, nor socialism. Of course, the Chinese government calls it socialism with Chinese characteristics.
If we recognize it as state capitalism, or a selfish company, then it make sense why they can give bonuses to its own "employees" instead of those "outsourced workers". It is a system changing national mechanisms for extending Chinese Communist Party (CCP) authority over the economy and a proliferation of new financial institutions underpin a CCP Inc. ecosystem with a unique internal logic and new adaptability to respond to policy shifts. The strength of this ecosystem allows CCP Inc. to compete internationally as a well-resourced group of coordinated actors. Especially since Xi Jinping came to power, he has emphasized the importance of state-owned enterprises and the public economy, and there have been more and more policy interventions of various kinds.
In general economic activity, if we understand all production-related elements as factors of production, then capital is actually a scarce resource in any market. This also implies that the inputs for obtaining revenue and competition/risk are disproportionate. It is thus understandable why the those public hospital have been able to expand like enterprises in a market economy, while ignoring operating losses - On the one hand, they are responsible for the provision of social services to the general public, while on the other hand, treated unequally as capital investors, which break the competition balance of the free market.
On the other hand, my argument in this chapter is focusing on how the social resources be distributed by government. According to Marxism, in a privately owned society, workers lose their ownership on instruments of production, while those who do not work take possession of the instruments of production and exploit them by virtue of the instruments of production. The fact that the instruments of production are owned by those who do not work is the root cause of the exploitation and oppression of the masses of workers. He promotes only in a society of public ownership can workers become the masters of the production materials they need for their labor, and exploitation and oppression can be completely eliminated. In practice, the ownership are not under the control of public, without common sense or law protection, but “collective” which are actually run by a small group of people even they don’t own the property. Especially, when we consider capital as a sort of instrument of production which could be involved into reproduction, due to the ambiguity of ownership, there is one thing we couldn’t ignore that who would like to burden the risk of capital loss.
Hence, we need welfare, social inequality persists, and relying on a free market economy will not improve the situation. But many (left-wings) have misinterpreted and criticized Hayek's libertarianism, but have overlooked the fact that his "Road to Slavery" still advocates bailing out the poor without destroying market competition. So we need to be wary of whether these welfare are really a good things? As with the bad legacy of President Johnson's Medicaid program in the Great Society movement, once welfare, which should be optional, is wrapped up as a right that has to be claimed and unable to be debated by voters, then the "governing" becomes "administrate" inflexible and wasteful. In the ultimate sense, undemocratic. This is what I will discuss in the next section, about the political and governmental organization of China behind this "Frankenstein" type of economy.
