Abstract: The essence of common prosperity is the shared development of all. It is not equalitarianism measured by the level of wealth equality, but characterized by a narrower gap between the ability of various groups of people. In China’s context, the key to realizing common prosperity is to promote the urbanization and development of farmers.
Sharing the dividend of development and promoting common prosperity is both an economic issue and a political issue. Poverty is not socialism; nor is polarity. Socialism is premised on the liberation and development of productivity, during which polarization shall be prevented. This is the leading principle China upholds in pursuing socialism with Chinese characteristics.
China remains a developing country with its per capita GDP passing the 10,000USD threshold only recently. Development is still of paramount significance for the Chinese economy. At the same time, China’s Gini coefficient is higher than that of many other countries, indicating a wide household income gap which has not shown major sign of narrowing. Closing the gap will be a key task today and going forward. But the two missions cannot be completed overnight.
Common prosperity is not equalitarianism measured by the level of wealth equality; instead, it features people’s modernization that is characterized by the narrowing of the ability gap of various groups of people. In China’s context, rural revitalization and development is a fundamental developmental issue. That’s true in the past, today, and in the future. Currently, China mainly navigates the challenge by urbanizing the rural population, while narrowing the ability gap between them and other groups. As such, the key to common prosperity is the urbanization of rural population with a people-oriented approach.
I. HOW TO UNDERSTAND “COMMON PROSPERITY”
Common prosperity is a long-standing challenge to which no country has come up with a perfect solution. From an economic perspective, common prosperity is about the production and distribution of material wealth including properties and incomes; but from a social development point of view, it is essentially about the development of human beings. If we only work on wealth creation and distribution without promoting people’s shared development, we would be narrowing the concept down to distribution policy alone with short-lived impacts.
Developed countries’ experience indicates that it’s impossible to narrow the wealth gap with distribution policy only, because it does not address the root cause of wealth gap, which is the diverging ability of different groups and social classes. Proper wealth creation and distribution in a certain period of time does not necessarily mean that people, all people, are enjoying good development. That logic would be too simplified and rigid. Material wellbeing is only one condition for people’s development, but not all. A person will be more proactive, creative and civilized when he or she is at a higher stage of development; material improvement is not necessarily associated with a higher level of qualities and abilities of an individual—not to mention all people.
The core of modernization is the modernization of people. China seeks to create equal opportunities for individual development of all, and the basic equality in terms of material life is only a means to that. Therefore, common prosperity in essence is the shared development of all people, not the absolute average distribution of wealth.
History shows that wealth equality may not be able to enable shared development of all; it could even stagnate development. Past social experiment with equalitarianism has proved that. Back in the age of material deprivation, productivity growth to meet subsistence needs did play an important part driving human progress; but as income grows, wealth creation and distribution will be increasingly deviated from people’s development; in other words, material development has outpaced people’s development, not to mention shared development of all. The biggest risk China seeks to prevent amid modernization is the alienation of people as material wealth accumulates, where money becomes the master rather than the servant of people. Such alienation will push the development of people’s ability toward two extremes. As capital concentrates amid the market economy boom, most people could be plunged into income poverty as a result of “ability poverty”.
Boosting common prosperity and people-oriented modernization are mutually reinforcing and integral as one long-term aspiration. We cannot look at the Gini coefficient alone when assessing the progress toward common prosperity.
II. THE LOGIC OF COMMON PROSPERITY
History shows perpetual logical clashes between efficiency and fairness in promoting common prosperity.
Equal sharing between the rich and the poor used to be fundamental to common prosperity in the era of polarization. Distribution was the theme from peasant revolts to labor movements. The transition from the distribution of production outcomes to the distribution of production conditions reflects the depth, breadth, and intensity of social revolution. These are all explorations in pursuit of common prosperity in the process of human civilization.
By denying private ownership, Karl Marx envisioned the ultimate vision of common prosperity and the common development of mankind. It is a profound theory, but the reality could be tortuous and full of uncertainty, especially in the primary stage of socialism when the insufficiently developed productivity and poorly distributed social wealth fail to eliminate private ownership or achieve wealth equality, not to mention the free and all-around development of human beings.
Drawing lessons and inspirations from labor movements and Marxism, Capitalism provides a legal structure to defend the rights and interests of the working people, such as the social security system, which enhances livelihood and accommodates it with the expansion of productive forces.
To put in the perspective of human civilization, the development of capitalism has promoted common prosperity within a country, but it has encountered a historical ceiling. The root cause is the "Matthew effect" derived from the capital logic embedded in the market economy. The government's redistribution is effective in the short term but ineffective in the long run, because the "Matthew effect" always recurs in the same way, but with greater force, with the cycle of social reproduction. What’s worse, as a historical progress, welfarism falls into the trap of materialism and deviates from human self-development. People, society, and politics are enslaved by capital, and material-based rules dominate the operation and development of the entire society. This is the source of capitalism's development jam. Once people are at odds with things, social development and progress will come to an end.
China needs to take note of these lessons in its pursuit of socialism with Chinese characteristics. Once social progress becomes materialistic, China's innovation-driven development will face huge headwinds, and the risk of falling into the "middle-income trap" will rise. The majority of market economies around the world are experiencing stagnation or even setback as a result of this.
Therefore, China must turn to a people-oriented approach, as it is highly consistent with the political philosophy of the Chinese Communist Party (CPC) and the current strategy of shifting to high-quality and innovation-driven development.
The essence of humanistic logic is to demonstrate human free will, creativity, and civilization, so as to form a new upward spiral of social development: “human development—material development—human development”. In this way, the development formula under the materialistic logic that features “material development—human development—material development” can be replaced, allowing human development to become the means and purpose of social development.
III. THE BASIC PATH TO COMMON PROSPERITY: ENSURING THAT EVERYONE HAS ACCESS TO FUNDAMENTAL ABILITIES
When focusing on people-oriented social development, economic concerns must be taken into account in the context of the entire society. Economic imperialism muddles the connection between the economy and society by allowing decision-making thinking to unintentionally block out observations of society as a whole. The economy is the physical cornerstone of society, yet it is only one aspect of society and is influenced by how society as a whole is doing. With the advent of the "risk society" that is distinct from all prior social situations, the broad context in which economic activity takes place has changed. As a result, economic theories are no longer self-consistent or suitable for explaining and directing present and future practice. It would be risky to use well-known traditional theories to analyze reality and plan China's development.
The basic logic of the political philosophy of the CPC is not compatible with traditional political economy and popular economics. Human growth and the free, complete, and equal development of every individual can only be clearly understood in the context of the entire society, and only a portion of it can be comprehended if it is placed in the context of the economy. When viewed from the perspective of the entire society, the creation and distribution of material wealth provide a necessary but not sufficient condition for the growth of humans and the free, equal, and all-inclusive development of all people. It cannot be argued that common prosperity has succeeded even if the Gini coefficient is reduced to a reasonable level because it might only be a transient phenomenon. In the early stages of socialism, ensuring that all people acquire fundamental abilities through reform and innovation as well as the combined efforts of the state and society, particularly the enhancement of farmers’ abilities, is the necessary and sufficient condition for achieving common prosperity. Income is not a replacement for ability. Money and ability are not the same. The ability gap has not closed despite the narrowing of wealth disparity. If you consider the medium and long terms, it becomes even more true. The ability difference is frequently hidden by the narrowing of the income divide over time. For instance, the money disparity between urban and rural areas has closed in comparison to the past, but the ability gap has not.
Ability comes from social consumption, that is, the process of human production and reproduction. For one thing, consumption is related to income, that is, whether people have money and how much money they have. For another, the availability of consumption depends on consumption objects, conditions and abilities. One may not have the condition or the ability to consume, or consume safely even if s/he has the money to spend. The consumption risks caused by the high level of socialization bring about great uncertainty and risks to human production and reproduction, which cannot be resolved merely by increasing people’s income.
Consumption, as a social concept corresponding to the economic concept, refers to the process of human production and reproduction, the process of human development, the accumulation of human capital, and the improvement of human abilities, as well as the process of providing purpose for the economy and creating important conditions, e.g. labor and talent. Consumption includes private consumption and public consumption. The two should work together to meet the basic consumption demand for the whole population, including satisfying the needs for basic nutrition, education, medical care, and housing, so as to ensure that everyone obtains basic abilities. When private consumption is insufficient for people to acquire basic abilities, public consumption should make up for the gap so that no one is left behind. This is more important than redistribution such as government transfers to households. If public consumption is converted into government transfer spending and incorporated into income redistribution, it plays down the direct effect of public consumption on ability enhancement, while income redistribution has no such direct effect.
When people’s basic ability has been generally improved, they will enjoy a fair chance or stand at the same starting point to participate in the economic cycle. It also provides a broad social foundation for innovation and entrepreneurship, and provides impetus for future sustainable development. The integration of efficiency and fairness is thus achieved. To promote common prosperity, China must resolve the dilemma between efficiency and fairness—"making the cake" and "dividing the cake". Only by shifting from goods to people, and from property and income benchmarks to consumption benchmarks, can we truly shift from the materialistic logic to humanistic logic. With this logic, China can gradually and continuously move towards common prosperity.
IV. MAJOR PROBLEMS FACED BY CHINA IN PROMOTING COMMON PROSPERITY DURING THE STAGE OF HIGH-QUALITY DEVELOPMENT
The reality is, in China human development is obviously constrained by the economy, or more specifically, wealth and income issues; but at the current stage, it is more constrained by the state of social development and social structure, especially the dualistic social structure, because of which the rural residents can hardly improve their social distribution status.
Although China has deepened its reforms, the reforms are not comprehensive yet. When it comes to the fundamental issues, the planned system still prevails, which fundamentally restricts China’s further development and its efforts towards common prosperity. This is mainly reflected in the three "dualistic structures".
First, dualistic structure of ownership. The dualistic structure featured by ownership by the whole people and collective ownership was formed historically. Being the economic foundation, it dramatically restricts further reform progress in the economic and social systems. Although the differences in ownership no longer matter financially, they still prevail in the land market and housing market, as well as people’s social identities. Apart from the household registration identities, rural residents are members of the collective economy. The division of urban and rural areas is based on the dualistic structure of ownership. The reform of property rights such as those of rural land, homesteads, housing, and forests has been aimed to break through the constraints brought about by the dualistic structure of land ownership. Despite the achievements made so far, the reform still struggles. Breakthroughs are needed in both thinking and theory.
Second, economic dualism which refers to the coexistence of backward traditional agriculture and advanced modern industry. The dualistic economic structure is a common phenomenon in developing countries, which can be gradually eliminated in the process of market-based reform and industrialization. However, the dualistic economic structure in China is not only resulted from productive forces, but also ownership relations, in which case market-based reforms and industrialization won’t resolve the issue, as a unified urban and rural national market has not yet been formed. The separation of urban and rural markets leads to a huge disparity in the status of farmers and citizens in social reproduction, as they have completely different distribution status and wealth accumulation mechanisms.
Third, dualistic society. Based on dualistic ownership, a dualistic structure of social identities and basic rights come into being. In the process of market-based reform, social factors that cause inequality of starting point and opportunity also lead to group disparity during social distribution, resulting in ability disparity among different groups. Family poverty among certain groups also becomes an intergenerational phenomenon, providing the initial condition for class solidification. Breaking this condition is thus an urgent task for the reform.
The three “dualisms” fundamentally constrain China’s pursuit of common prosperity. This is also the underlying obstacle to China’s shift towards people-oriented development, standing in the way of China’s transition towards high-quality development, and its efforts to build a new development paradigm and realize the goal of modernization. From the perspective of China’s society as a whole, this is still an issue related to rural residents since the reform and modernization, only taking on different forms and requiring different solutions.
V. PROMOTING COMMON PROSPERITY THROUGH CONTINUOUS AND THOROUGH DEEPENING OF REFORM
Promoting common prosperity is the fundamental goal of adhering to and developing socialism with Chinese characteristics, and is a basic symbol of pursuing China’s own path. From the perspective of development process, improvements in realizing common prosperity today are the conditions for further development. The development of all people is the guarantee for achieving China’s goal of sustainable development, and is also the key to securing the second Centenary Goal.
But the task cannot be rushed, nor can it be delayed. It cannot be rushed because common prosperity depends on development, including material development and human development, which cannot be achieved overnight. The reason why it cannot be delayed is that expanding domestic demand, building a new development pattern and promoting innovation-driven development all rely on the marginal improvement of common prosperity. Closing the consumption gap among different groups is the top priority at the moment. To that end, it is critical to create a synergy between private and public consumption, and expand short-term domestic demand while enhancing human abilities and changing social expectations. It is even more crucial to form positive expectations of distribution related to abilities, innovation and entrepreneurship, and employment. Society's expectations of redistribution need to be dialed down, while the expectations of primary distribution that requires everyone's participation and effort need to be strengthened.
To promote reforms from the perspective of equal development of all people, it is necessary to address the three “dualistic” structures to improve the top-level design and link different reform areas including economic and social ones. Only by establishing the links can the overall design identify and determine priorities. Otherwise, segmented reforms tend to turn into siloed processes, making it difficult to coordinate and integrate different reforms as required.
Promoting people-oriented urbanization is the key to integrating economic and social reforms for the moment and beyond. It is also the key to the success of China’s reform, the strategy of expanding domestic demand, and high-quality development.
The actual progress of common prosperity should be measured by the substantial progress in the citizenization of migrant workers. To achieve that, migrant workers and urban residents who live in the same city should be treated equally in terms of education, medical care, pension, housing, etc., which will lead to integrated development of farmers and citizens. Whether from the perspective of employment, social status, or living condition, only by promoting citizenization and reducing the number of farmers can "farmers" become agricultural workers and rural residents, so that they will not be left behind in the modernization process and truly enjoy the fruit of common prosperity.
If the goal of the proletarian revolution is to eradicate proletariat and pursue prosperity, so is the goal of the farmers’ revolution. When farmers no longer consist of a huge group and class in China and become the minority, the objective of fully building a modern socialist country will be achieved.
This is the preface of the book Common Prosperity and People’s Development: China’s Logic and Choice authored by Liu Shangxi. It is published on CF40’s WeChat blog on August 27, 2022. This is translated by CF40 and has not been reviewed by the author himself. The views expressed herewith are the author’s own and do not represent those of CF40 or other organizations.
