Unequal Wealth, Inflation, and Harmonization

President Hu’s policy of a harmonious society, which encourages a move toward slower, more manageable economic growth informed by environmental awareness and greater concern for the poor could be seen as a great leap forward for the Chinese toward a sustainable development model. However, the policy has increasingly resulted in greater degrees of “harmonization” (read about it and see a bizarre chinese video HERE) and suppression of free speech as the society grows increasingly challenged to appeal to ever-diverse interests.

In order to ensure harmoniousness in the face of unique challenges to China’s future, its leadership (and HERE for a more indepth look at the leaders’ CV’s) might be forced to take drastic measures to contain stresses originating from China’s rapid, but inequitable economic growth.

China’s economic progress continues at a rate of greater than 10% for the past several years, and despite cyclical shocks and a worldwide economic downturn, the Chinese economy appears strong enough to expand. This growth rate and the growth rate of other developing countries brought exuberance to the Shanghai stock market, with stock prices up to an average of 42 percent of valuation over earnings as of July 2007, according to Bill Powell of TIME Magazine. Although the Shanghai stock exchange was down 21% in 2008 by February, and was down nearly 50% in April from its high of 6,124 points reached in October 2007, the Chinese economy is still on pace to grow a bit over 9 percent, according to the World Bank.

With such high and constant growth rates over the past decade (where nearly all years recorded over-ten percent economic growth), inflation is becoming a problem. Even worse, food prices are rising higher than China’s overall rate of inflation. As China’s inflation grows, wealth disparity and purchasing power parity becomes a greater source of social instability as people lose access to amenities they once could easily purchase.

China’s Gini coefficient, used to measure income disparity, is now above .45, according to the 2003 UN Human Development Report, a number above which demonstrates a potentially dangerously unequal society on par with many economically imperiled Latin American states. In comparison, China in 1980 boasted a .33 Gini coefficient (higher numbers indicate greater disparity), according to AsiaTimes. The United States boasts a .47 Gini coefficient, up only eight points from 1970, according to Arthur Brooks in the Wall Street Journal.

Seeking a balanced economic growth rate was a major goal of President Hu Jintao’s first term. However, Hu’s “Go West” campaign to develop poorer interior regions failed to spread wealth as rapidly as was hoped– much more work needs to be done. This lack of development, and increase in rising foodstuff and transportation prices risks increasing the amount and vehemence of public protests.

Interestingly, (and ignoring for the moment the mass T1b1tan unrest) the reported numbers of protests has actually declined, but China is notorious for ordering newspapers not to report embarrassing stories. Jonathan Watts of Britain’s The Guardian discusses China’s press crackdown against “negative stories” in detail, and the Hong Kong-based South China Morning Post and other media outlets routinely provide evidence of some Chinese officials’restrictions on individuals, and of the country’s greater crackdowns on the free speech of the press. (Staff Reporter. “Free media for Games = media free of bad news, one city says.” South China Morning Post. March 20, 2007.); also see an April 30, 2007 report on: “The Olympics countdown – repression of activists overshadows death penalty and media reforms” and of course the newest info on curtailing press freedoms in coverage of the Sichuan earthquake.

As worries about rising inflation and unbalanced economic growth increase, China becomes increasingly secretive, restricting press freedoms. Today makes me recall something that happened at the end of the decade of the 1980s; a time of widening press freedoms, rising inflation, exhuberance of the future and many people gaining wealth while others were left out. This led to protests and marches that were eventually suppressed to international disdain– a suppression that was partially modelled on how President Hu, then Provincial Secretary of T*b*t cracked down on social unrest there.

If economic inequalities lead to greater citizen unrest, it is likely President Hu will look to his past experience and party ‘successes” and enact increasingly draconian restrictions, rolling back much of the late-20th Century’s increased journalistic openness- with a goal of preserving stability and maintaining a harmonious society.

The question is, though, when will these economic inequalities come to a boiling point? It isn’t going to happen before or during the Olympics, but depending on what happens with China fuel subsidies, food prices, and inflation, the protest-barometer could be interesting to watch sometime after February or June 2009.

-An earlier version of this article was written in October 2007