Simple Arithmetic
Jeff Faux writes about the superrich of China "with [assets of] more than US$128.2 million [i.e., RMB1 billion]" of whom "90%... are the children of senior officials." How many of them are there? 200? With a total net worth less than that of Bill Gates? Divide their total incomes among the people of China, and you boost China's average income by $7 a year.
By contrast, economic growth since 1990 has nearly tripled China's average income, carrying it to $3,000 a year.
It is the people whose parents lived on $500 a year in the bad old days of the Cultural Revolution are the overwhelming beneficiaries of the rise of China, which is still a far less unequal society than the United States, according to the estimates of Thomas Piketty and Nancy Qian.
If it were just the commissars-turned-capitalists who benefitted, things would be easy. We don't like the distributional consequences for America of the fact that American consumers are buying Chinese--and thus what used to be demand for products of American factories shows up instead as demand for new houses and investment goods and high-end consumption funded by tax cuts for the rich and home equity loans. We could fix it by curbing the growth of international trade, and we could do so with a clear conscience.
As it is, the principal beneficiaries aren't commissars-turned-capitalists. So any other policy aimed at fixing America's income distribution--cheaper colleges and more progressive income taxes and better social insurance benefits and fairer procedures for private-sector unions--is a much better bet for America and for the world.
But when Jeff Faux rolls into town, he does not do so with a scream-and-leap attack on governors and legislatures who won't fund expanded community colleges or presidents who love tax cuts for the rich or senators who won't fund Medicaid at current levels. Instead, his scream-and-leap attack is directed at "the Party of Davos," the "business partnership between Chinese commissars who provide the cheap labor and American and other transnationals who provide the technology and financing--and whose lobbyists in Washington provided access to the US market..."
Jeff Faux wants you to see in your mind's eye the superrich children of high party officials and the infamous commissars-turned-capitalists driving a new Rolls-Royce every day. He's terrified lest you see, instead, the people whose parents lived on $500 a year in the bad old days of the Cultural Revolution and who now have $3,000 a year, and who can think about maybe buying a TV someday.
I understand the temptation: a little economic nationalism and a lot of China-bashing--drum beating about the threat from powerful, sinister, different-looking people from across the ocean and their agents at Goldman Sachs--adds some high-octane explosive power to what is otherwise watered-down political soup.
But it's not going to help us think about what we as a nation ought to do.
Comments (9)
Even though DeLong is completely on point here, and no offense to him, but is there anyway we can get James Galbraith back to post on this? He's a very left economist who's contributed to TPM cafe before and would be useful in combating some of Jeff Faux's nautious musings regarding China with the compounded bonus of being less susceptible to the ridiculous argument that everything he says is wrong because he wears exclusive Davos brand navy blue socks.
February 28, 2007 9:14 PM | Reply | Permalink
The way this diary is written, it appears you guessed the number 200 and then used it to make a calculation. Is that correct? (If not, sorry, but it would be better to give a source and use a period.) Shouldn't you use real statistics, not made up ones?
March 1, 2007 5:27 AM | Reply | Permalink
I am not sure how you can get good statistics from China. First, the population of China is 1.3 billion people and collecting any statistics has proved to be difficult and more often than not, inaccurate.
Many government officials do not hold a Master of Business Degree from America and it is difficult to train the Chinese to present statistical data comprehensive to the American readers. They may have many talented Chinese individuals but their communist ideology tend to confuse with their understanding of capitalist behavior.
China is a communist county but allows Chinese to have a taste of the capitalist system. In other words, China allows its citizens to own business, properties and shares, whereas in the past, nobody in China was allowed to own any property at all. Also, In the past, everybody was treated equally poor, now everybody is free to own big cars and houses. This does not mean the Chinese is completely free, the government still maintains a centralized control of the economic and its people.
Finally, I am not sure how many America would really understand China because it is a different world altogether. The Chinese may be driving American or European made cars or flying American made planes, they are still regarded as a different species in its own rights. They have their own calendar, arts and crafts, holidays, music, food and behavior patterns that contradict western culture.
March 1, 2007 6:38 AM | Reply | Permalink
Soak those fat cat thousandaires.
March 1, 2007 6:46 AM | Reply | Permalink
One of the oldest tricks in the book (the greed is good book) is to use average figures. Bill Gates and I have an average wealth of $32 billion. Bill Gates and the 10,000 or so people of my town have an average wealth of about $4 million (it's a rich town). No one cares about average figures, they are used as a way to obscure the huge disparities in wealth. If you want to make a meaningful comparison use median figures or better still give figures broken down by quintiles.
Just today a report is out about the 200,000,000 Chinese migrant workers who are living in the cities without rights because they don't have the proper residency permits.
Migrants Face Abuse
To put that in perspective that is about 2/3 of the size of the entire US population. This is a sign of improving economic conditions in China? I think not.
Those who favor unrestrained (western) capitalism always have to resort to such statistical misdirections because their underlying premise can't be sustained by the actual facts.
--- Policies not Politics
Daily Landscape
March 1, 2007 7:16 AM | Reply | Permalink
i fail to understand why the call to use our trading power to leverage a ratcheting up of standards in developing countries elicits such wails from our economic brahmins. while i'll admit to not having read the book, i don't see conceptually how faux's attack on the 'party of davos' is mutually exclusive of a critique of systemic underinvestment in our nation's development.
March 1, 2007 7:52 AM | Reply | Permalink
I hate to cross-post from one article to the other, but somehow this idea that capitalism and an increased living standard for China will transform into a good thing for the US and the world seems too simplistic. Capitalism is the "high-octane" fuel that is funding their explosive political agenda. My comment on the "Two Thin Reeds" post of Mr. Faux's follows:
Mr. DeLong, given a dialog on our policy towards China should happen before we stumble any further, what policies do you feel should be applied to our own companies with regard to doing business in China? Do you feel that "market forces" will win out over political repression?
Alphonse ( Al ) Kada
Iranians are fighting the Americans in Iraq so they don't have to fight them on the streets of Tehran
March 1, 2007 7:52 AM | Reply | Permalink
Corvid
The governors and legislatures that Brad says Jeff Faux should be focusing on ARE the Party of Davos. Ordinary people have no say on economic issues; the folks with money and the ability to bundle it (or exercise whatever is the latest means of legal bribery that inevitably accompanies huge concentrations of wealth) are the only players when it comes to economic issues. But even setting that aside, better community colleges and job training are no solution. You have only to read Louis Uchitelle's new book to know that.
March 1, 2007 7:53 AM | Reply | Permalink
Apparantly you missed the post about how just how wealthy (or rather not) the top 1% of Chinese are. The economic growth China has experienced recently has indeed substantially contributed to their increased standard of living.
Read this post from Brad Setser
http://www.rgemonitor.com/blog/setser/180636/
March 1, 2007 8:20 AM | Reply | Permalink