Qin Hui
There are usually two views regarding China’s place in the process of globalization. One says that the Chinese system is not suited to globalization and that it is certain to develop problems in the globalization process. This is the so-called “China’s Collapse Theory.” The other, more positive theory holds that globalization will transform China, that the world will use comparatively advanced rules to change China, and that China will be integrated into the world by integrating first into the market economy and then into the democratic system, although the latter has not been clearly spelled out. In my view, as I look at it now, there is, I’m afraid, a third possibility.
Isn’t it possible that China might alter international rules, instead of the world changing China? Of course, in the past we often spoke of liberating all humankind and of rescuing our suffering brothers in two-thirds of the world with the whole socialist shebang. Now, of course, we are not talking about transformation in this sense. I think there is a possibility that a market economy with special characteristics, shaped under the premise of China’s unchecked power, will transform certain rules of the global market economy that have taken shape over the course of more than a hundred years.
Lodged in the sound of joint praise from the circle of international economists faced with the rapid growth of the Chinese economy is their resignation at not being able to explain this phenomenon in theoretical terms. China’s economic model is neither the laissez-faire model of liberal economics nor is it the welfare state model. This situation ought not to satisfy either the “left” or the “right” of the world, but currently both the “leftists” and the “rightists” want to use China’s rapid growth to explain their theories. As a result, the “left” praises China because free competition is still underdeveloped there, and the “right” praises it because its welfare standards are very low.
As global capital pours into China and China’s cheap consumer goods flow out to the world, the Chinese economic model has increasingly become an assault on the world’s two mainstream market economy models—the laissez-faire model and the welfare state model. A world trend has already taken shape: the welfare states are obliged to reduce their welfare standards, and the free trade nations, too, it seems, will finally have no choice but to re-erect trade barriers, or else none of them will be able to cope with China. And this is only the beginning, which really deserves to be studied.
This phenomenon has set off criticism both internationally and at home. Internationally, as everyone doubtless knows, the so-called demand for the appreciation of Chinese currency is merely one such initial critical response. If this phenomenon persists, the “left’s” praise of China’s substandard freedoms and the “right’s” praise of China’s substandard welfare will before long become the “left’s” criticism of China’s substandard welfare and the “right’s” criticism of her substandard freedoms. This is a trend that will emerge sooner or later.
We have also seen that China’s sudden rise is not just a function of low wages. I feel that a mere discussion of China’s low wages cannot fully explain the current economic situation in China. Currently, all key prices in China are very low. If wages in China were low because of an abundant supply of labor, then why is the cost of land also low? China clearly does not have a surplus of land. And why is it that China can use resources and the environment at low cost? China is clearly not a country of abundant resources either, nor is its environment particularly good. Furthermore, the use of public funds is exceptionally cheap, especially since we have now long been using add-on public funding as a way to attract business and investment, probably something that no other country in the whole world with a free market economy has done (that is to say, whatever money you can attract, we will match the amount with public funds, or add a certain percentage to the investment). In fact, the use of public funds, resources, land, and labor is all cheap, but when you put all these factors together, they have not amounted at all to a good bargain in the interest of the current Chinese system: civil society has made very little progress and the unchecked power has been able to keep prices of everything abnormally low. As a result, the development of this trend has made the welfare state trend unsustainable, and furthermore, the worldwide labor union movement has been affected.
I think as the mechanisms of globalization disperse some Chinese social contradictions to the whole world, this phenomenon is currently not only causing social tension in China, but actually in other countries as well. I use the term disperse here rather than diffuse, because it would be hard to call this kind of phenomenon diffusion. Previously, the so-called left or right in democratic or developed countries were basically functions of a kind of bargaining between the welfare state and laissez-faire trends. But what one often saw among the welfare states was that those with greater responsibility also held more power, while those so-called laissez-faire countries with restricted state powers also had smaller responsibilities. In other words, with limited state power came limited responsibilities, and with greater state power came greater responsibilities. Very few have advocated greater power with limited responsibility. But we have recently seen that this trend is beginning to emerge.
French President Nicolas Sarkozy has shown this peculiarity: on the one hand, he is trying to make the country stronger by expanding state power, which is completely different from the past laissez-faire policies; on the other hand, he insists on unloading the welfare burden—namely, he wants to compromise in the area of responsibility. This demand for increased power with reduced responsibility, that is, wanting it both ways, is a trend unprecedented in the politics of Western powers.
So it’s very difficult to say if Sarkozy is a leftist or a rightist in the traditional sense. If you call him a leftist, he also advocates lowering welfare benefits; if you call him a rightist, he also stands for big government, so it’s very difficult to categorize him. As the combined factors of the imbalance in the relationship between labor and capital, increased unemployment, immigration issues, and the predicament of public finances cause social contradictions in the U.S. and some European countries to build up, some people may in the end find that China’s way is actually not bad. Of course, Sarkozy has taken the first step. If we continue down the path taken by Sarkozy—increasing state power and reducing government responsibility—in the end (and what I will say may not be pleasant to hear) it is not impossible that the world will become China-like. But making the world China-like is not a socialist gospel, nor is it a liberal one; rather it is a scenario that neither the socialist nor liberal wants to see. However, I don’t think this phenomenon can go on for a long time.
I think it would be quite simple to change this trend. Chiefly, China has to make an effort on two fronts: limiting the power of authorities for the sake of freedom—unchecked power has to change during China’s future reforms; and accountability for the so-called welfare, that is, China’s substandard welfare conditions would have to be transformed too. Indeed, we should continue to expand the freedoms that, as the whole world has confirmed, promote economic development while also contributing to the well-being of the people. At the same time, we should also expand the public service functions that a modern nation ought to assume, and especially ensure that these public service functions constitute genuine “regular welfare.”
For a long time, our country has been engaged in secondary distribution of income [i.e. government perks and social benefits]. We had tremendous problems in the past with secondary distribution frequently turning into “negative welfare,” i.e., those with power earn high income and receive large benefits, while those without power earn low income and receive few benefits. After secondary distribution, not only did the Gini coefficient [commonly used as a measure of inequality of income distribution] not drop from its primary distribution levels, it actually increased somewhat.
If we now want to talk about establishing a modern welfare system, we must first refrain from secondary distribution, which favors those with power and influence due to flaws in our system. For example, some companies have recently started resuming the construction of subsidized housing, which has caused much controversy. I think that when it comes to subsidized housing, it depends on what company is the builder. If a private business or a state-owned company that is completely open to competition builds subsidized housing for its employees on its own initiative free of external pressure, that is of course a good thing. But if an industry monopoly, a company that acquires high profits by its monopolistic market dominance, adds high benefits to its already unfairly high income, then I think it is a huge problem. In my opinion, what China must avoid in its future development is the “caterpillar effect” (“尺蠖效应”); that is to say, avoid the situation in which, regardless of whether it’s implementing a policy of opening or one of tightening, there are always few who benefit, while a fairly large number of others gain relatively little from the process.
For example, there were immigrant riots in France in 2005. Actually, strictly speaking, those were not immigrant riots, but the riots of second-generation immigrants. After the riots, a friend of mine asked two French friends what lessons China could draw from this rioting. Dumbfounded, the two French friends didn’t know how to reply, and finally said that one shouldn’t build too much subsidized housing for the poor concentrated in any one area. But China has never contemplated building any sort of subsidized housing for its new migrants. Exactly the opposite: we don’t build housing for them, so they have to build it for themselves, and then we call it “illegal construction.” In the past, we neither built subsidized housing for new migrants nor did we allow them to form so-called shantytowns. We only permitted them to take up single residences in the so-called workers’ shacks. And as long as they live in the workers’ shacks, they will never be able to settle in the cities.
This situation is, I think, very dangerous. Frankly speaking, with more freedom these people would build whatever they want and form shantytowns; with more welfare, vast subsidized public housing districts would appear. But China has never had either one of these. It’s all been single workers’ shacks, with over 200 million people living in them as singles. I think that this presents an enormous hidden danger for China’s future development, and that it could produce a deformed generation. China’s many children who are left behind have seen their parents only during Chinese New Year and other holidays, and many are growing up in a rather abnormal atmosphere. Traditional Chinese ethics, culture, value judgments, and even patterns of human behavior have all been distorted. It is hard to imagine what this may lead to if it continues. I think that giving migrants more freedom to build illegal structures, or having the state provide them with subsidized housing (China has recently been expending considerable effort to change this situation), could be very significant in preserving the family life of 200 million people and to China’s future development.
Translated by J. Latourelle
