Common prosperity

The world is going through a crisis of a dwindling middle class where income gap and wealth disparities have come to reflect tendencies towards down spiral economic and social development. Developed nations have for the last century managed to sustain their economies through a strong middle class that served as a buffer between the super-rich and those living on the poverty line.

However, as a strong middle-class is threatened into oblivion of poverty, these economies are no longer stable as income disparities pervade previously strong economies.

China as the new economic leader with 1.4 billion citizens has to fight the scourge of a dwindling middle-class. How will China manage to close the effects of huge income gaps and disparities between the rich and poor as witnessed all over the world?

“Since the 18th CPC National Congress held in 2012, the Central Committee has kept a firm grasp on new changes in our stage of development, and given greater weight to gradually achieving the goal of prosperity for all…Only by promoting common prosperity, increasing urban and rural incomes, and improving human capital, can we raise total factor productivity and build a strong base of momentum for high-quality development. We are now living in a world in which income inequality is a glaring problem.”

These remarks are part of a speech by President Xi Jinping during the 10th meeting of the Central Financial and Economic Commission on August 17, 2021.

As China marches towards the Second Centenary Goal, the country has spared no efforts in preventing polarization and promoting common prosperity in order to safeguard social harmony and stability. The Second Centenary Goal refers to “building China into a great modern socialist country that is prosperous, strong, democratic, culturally advanced, harmonious and beautiful by 2049, the centenary of the People's Republic of China.”

During the speech, President Xi added that the latest round of scientific and technological revolution and industrial transformation has not only given a strong push to economic development, but also exerted a profound impact on employment and income distribution. These circumstances present an array of negative tendencies and impacts that the government needs to take effective steps to address.

Efforts towards common prosperity in China are meant to benefit both material and non-material needs of every member of society. It is not prosperity aimed at enriching a select few, nor is it rigid egalitarianism. In fact, it consists of an important feature of Chinese-style modernism.

China has undertaken thorough research in its implementation of achieving common prosperity for all. It has planned out targets in different stages and aims to advance common prosperity in phases with the aim to make solid progress toward common prosperity for all.

President Xi has pointed out that by the end of the 14th Five-Year Plan period (2021-2025), China will have made solid progress toward bringing prosperity to all. Xi also reiterated that China will ensure that gaps between individual incomes and actual consumption levels are gradually narrowed. By 2035, China will have made more notable and substantive progress toward common prosperity, and equitable access to basic public services will be ensured. In order to achieve these goals, China promises to promptly formulate an action plan for promoting common prosperity, and devise rational and workable systems of targets and methods of evaluation that suit China’s national conditions.

President Xi pointed out that there are four principles aimed at the delivery of common prosperity for all. The first principle is to encourage people to pursue prosperity through innovation and hard work. China is in the process of creating more inclusive and equitable conditions for people to further their education and enhance their capacity for self-development. China regards education as part and parcel of common public goods and a foundation for establishing robust and long-term common prosperity. The aim is to ensure a boost in human capital and improvement of specialized skills throughout society, build up people’s capacity to find jobs and start businesses, and make people better able to achieve prosperity.

Xi has urged leadership throughout the country to prevent rigidified social strata by maintaining clear channels for upward social mobility and creating opportunities for more people to become better-off. By doing so, China will foster a development environment that encourages everyone to participate and dissuades them from getting lost in the ideas of “lying flat” and “involution.”

The second principle aims to uphold China’s basic economic system, that is, socialist market economy. Xi reaffirms China’s commitment to the development of both the public and non-public sectors of the economy as a means to allow common prosperity for all. He reiterated China’s pledge to uphold the predominance of public ownership while also allowing various forms of ownership to develop side by side, so as to leverage the important role of the public sector in advancing common prosperity.

Meanwhile, China should also promote healthy growth of the non-public sector of the economy and of people working in this sector. While allowing some people to become prosperous first, China should lay more stress on pushing these people to give a helping hand to those following in their wake.

In particular, China ought to encourage people to inspire others to pursue prosperity through diligent work, entrepreneurship, and legitimate business activities. Improper means of acquiring wealth must not be encouraged, and breaches of laws or regulations must be handled in accordance with the law.

The third principle was defined by Xi as people’s need to do their utmost while working within their means. He expressed the need to set up a rational public policy framework and form a reasonable pattern of distribution in which everyone gets a fair piece of the pie. China needs to make greater efforts and adopt more effective measures to see that the people have a greater sense of fulfilment.

However, China must also be aware of the gap between China and developed countries in terms of level of development. President Xi warned that the government cannot take on everything. Instead, its main responsibility should be strengthening the development of projects related to public well-being that are fundamental, inclusive, and focused on meeting basic needs.

He concluded by stating that China must not aim too high or go overboard with social security, and steer clear of the idleness-breeding trap of welfarism.

South Africa has fallen into some of the lacunas that President Xi warns against. Despite the majority support for a type of state ownership based on primordial African traditions of ubuntu, South Africa has insisted on applying a type of economic system that only benefits a few members of society.

In turn, the majority has been left at the periphery of economic gain. It would serve South Africa well to adopt and apply a type of economy that has a “people first approach” as a rationale for development and establishment of common prosperity as was promised at the dawn of South African democracy.

Second, attempts at welfarism in the form of social grants has had an adversary effect than intended. President Xi warns against the “idleness-breeding trap of welfarism”.

Proactive stance and willingness for South Africa to learn from China during the anti-Covid fight would also serve it well in regards to establishing a robust framework for common prosperity for all as enshrined in the Freedom Charter, a blueprint for the envisaged South African equal society.

Launching of the National Development Plan 2030 beyond the perpetual research stage would benefit the country and lead to common prosperity for all.

Xi has defined the fourth and last principle towards establishing common prosperity for all in China as pursuit of incremental progress. He points out that as a long-term goal, achieving common prosperity will take time. China must have a full picture of the long-term, complex, and onerous nature of this goal, and recognize that to realize it we can neither wait around nor be too hasty. Xi points out that some developed countries began industrializing centuries ago, yet as a result of deficiencies in their social systems, they have not only failed to crack the problem of common prosperity, but are facing increasingly severe disparities between rich and poor.

China has identified Zhejiang Province as a demonstration zone for common prosperity. He urged that other areas of the country must be encouraged to explore effective paths tailored to their own conditions. These experiences will later be drawn together to gradually apply further in order to establish and promote the establishment of common prosperity around the country.

The general guidelines in this regard are to adhere to the people-centered philosophy of development, promote common prosperity through high-quality development, and properly balance the relationship between equity and efficiency.

China is set to establish basic institutional arrangements enabling coordination and complementarity between primary, secondary, and tertiary distribution. China aims to intensify its efforts to regulate distribution through taxation, social insurance, and transfer payments while also working to make these efforts more precise.

The exercise is aimed at expanding the relative size of the middle-income group, raising incomes among low-income earners, properly adjusting excessive incomes, and prohibiting illicit income, so as to create an olive-shaped distribution structure that is larger in the middle and smaller at each end.

The concrete and final stage of establishing common prosperity in China consist initial stages towards a bigger goal of building a community with shared future for mankind.

Paul Tembe is a South African expert on China.