This week China became the world’s second largest economy, eclipsing Japan, and it is expected to surpass the US in about a decade. You need only to spend a day in one of its cities to be overwhelmed by the vibrancy of this colossus. Shanghai makes New York feel like a lumbering old giant while this Chinese city sprints ahead into the future.
Underneath China’s remarkable economic development, however, is an unsettling fact: the wealth discrepancy between its thousands of super-wealthy and millions of poor gets wider each year. The top 10% of urban Chinese earn almost 25 times that of the poorest 10%. The average urban worker earns about $3,000 per year while in the countryside average income is less than $1,000. The wealth gap is probably greater than the statistics indicate since better-off families typically understate their wealth.
Although incomes are rising everywhere in China, there is a drop in life satisfaction and an accompanying declining in confidence in the country’s future. This is worrisome because China’s Gini coefficient (a statistical measure of inequality of distribution) is now above the point that researchers say is potentially destabilizing.
One reason for the growing gap is that rural migrant workers don’t have access to health care benefits, education and pensions.
China’s predicament should sound familiar to Americans. We know that our unemployment is stuck at about 10%, but that figure reflects only those actively seeking work. Those who have given up aren’t included in the count. The real unemployment rate is probably about double.
As in China, the gap between the top and bottom grows deeper. The top 1% in the US owns more than 90% of all other Americans combined. Four hundred people have as much wealth as half of the population. The combined net worth of the Forbes 400 wealthiest Americans in 2007: $1.5 trillion. The combined net worth of the poorest 50% of American households: $1.6 trillion (From the Working Group on Extreme Inequality)
The gap continues to grow deeper for several reasons, not the least of which is that those at the bottom, as in China, don’t have access to adequate health care benefits, a good education or pensions. Beyond this, the rich get to pass on their wealth to the next generation and the accumulation of wealth gets bigger and bigger.
I can’t find any moral justification for this continued state of affairs. Any monetary or fiscal policy proposal that doesn’t address this is morally bankrupt and flirting with a potentially destabilizing situation, as economists have warned China.
A democracy can’t be sustained in the long run with such yawning gaps in wealth. No society can call itself ethical when its rules and regulations are skewed in favor of the super well-to-do, people who if they receive a 1% return on their money and spent a million dollars a day still have more at the end of the year and then ask everyone else to make sacrifices in education, health and pensions to pull the economy out of the dumps.
The grossness of the distortions, the enormity of the unfairness is so obvious that it is astonishing that it even needs to be commented upon.
But it does.
So I do.