Many Ginis indeed. The World Bank puts America's Gini Coefficient at 41.8 and rising; China's at 38.1 and falling. (and China's 98% home ownership gives it a wealth Gini of 0.547 vs USA's 0.801)
"The paper finds that fiscal policy in China achieves a considerable reduction in inequality, measured at about 10.3 Gini points, placing the country around the median when compared to other upper-middle-income countries. Education and health spending, which are both highly progressive, play a pivotal role in this reduction".
«China's 98% home ownership gives it a wealth Gini of 0.547 vs USA's 0.801)»
That 98% home ownership will pretty much destroy the chinese economy and political system: it means that the main sources of wealth and income of party and government officials and their families are their (often large) property portfolios and therefore the chinese economy and political system has become rentier dominated (like in China-HK and China-Taiwan) and is becoming thoroughly thatcherized.
It is very sad for the world too, because a dynamic industrial chinese economy and political system would have generated immense benefits in new technologies and knowledge.
«That 98% home ownership will pretty much destroy the chinese economy and political system [ ...] become rentier dominated (like in China-HK and China-Taiwan)»
According to Zhao Ziyang's memoirs it was him who initiated the policy of basing development on land speculation (without I think realizing the long term political and economic dire effects of that) and that was done as suggested by a famous China-HK property speculator:
“It was perhaps 1985 or 1986 when I talked to Huo Yingdong [a Hong Kong tycoon better known as Henry Fok] and mentioned that we didn’t have funds for urban development.
He asked me, “If you have land, how can you not have money?”
I thought this was a strange comment. Having land was one issue; a lack of funds was another. What did the two have to do with one another? He said, “If municipalities have land, they should get permission to lease some of it, bring in some income, and let other people develop the land.”
Indeed, I had noticed how in Hong Kong buildings and streets were constructed quickly. A place could be quickly transformed. But for us it was very difficult.
I thought that what he had said was reasonable, so I suggested that he go to Shanghai and talk to the mayor and Party committee secretaries. I don’t know whether he went or not. His view did inspire my thinking. We had land but no funds, while the Hong Kong government auctioned off a piece of land every year, not only bringing in income for the government, but also allowing the area to develop quickly.
I thought about this later when visiting Shanghai. The Pudong area was right across the river from Shanghai’s city center. In order to develop Shanghai, building up this area would require less investment and be more efficient. It was an extremely good location. However, in order to develop this area, we needed a huge amount of funds to build infrastructure and then attract foreign businesses.
It was around 1987 when Shanghai referred a Chinese American, Lin Tung-Yen [the founder of T. Y. Lin International], to speak with me in Beijing. He asked whether it was possible to rent Pudong. The term of the lease had to be long enough: thirty to fifty years. After leasing the land, he would need to have transfer rights. Investors could then get mortgage loans from the banks. I asked him if he thought foreigners would be willing to invest after such a land transfer and what else was needed. He said it was easy and that the conditions of the SEZs were not needed; the conditions for Shanghai’s Minhang economic zone were sufficient. I had thought that the conditions offered could be even more preferential than Minhang’s, approaching those of the SEZs, so I was indeed interested. Since this Chinese American had been referred by [Shanghai Party chief] Comrade Wang Daohan, I asked Comrade Wang Daohan to take charge of this matter.
[...] This was an important matter, because when we had earlier thought about opening up Shanghai, Chen Yun had expressed concerns. He said that in dealing with regions such as Shanghai and Zhejiang, one must proceed with caution, because people in these areas were especially skilled and familiar with capitalist behavior. [Chen Yun himself was a native of Shanghai.]”
«98% home ownership will pretty much destroy the chinese economy and political system [...] becoming thoroughly thatcherized»
A little known "detail" which is actually the most important political fact of the past 50 years is that in the 1970s an UK think tank did a voting study and discovered that:
* People who owned a house, a car, a share-based personal pension voted for right-wing rentier-oriented policies more than people who rented, used public transport, had a defined benefit pension; which seems obvious but...
* Most importantly this did not depend much on income and status, and in particular people on a low income or status who owned a house, a car and a share-based personal pension, however modest, still voted for right-wing rentier-oriented policies.
The result of that study is that the major parties of many "western" countries in particular the UK and the USA started to undermine the rented housing sector, public transport, defined benefit pensions. Of the other three over the decades it turned out that the crucial one for turning low income voters into right-wing rentier voters was a by large margin house ownership (more precisely big capital gains accumulating over time: nobody sensible wants to put all their saving and get in debt for 5-10 times their gross income to own a single asset that does not generate big profits).
«Is it true that when Clegg suggested there needed to be more social housing, Cameron told him it only turned people away from the Tories? “It would have been in a Quad meeting [the committee of Cameron, George Osborne, Clegg and Danny Alexander], so either Cameron or Osborne. One of them – I honestly can’t remember whom – looked genuinely nonplussed and said, ‘I don’t understand why you keep going on about the need for more social housing – it just creates Labour voters.’ They genuinely saw housing as a Petri dish for voters. It was unbelievable.”»
«[a carpenter] bought his council house in Devon in the early 80s for £17,000. When it was valued at £80,000 in 1989, he sold up and used the equity to put towards a £135,000 fisherman’s cottage in St Mawes. Now it’s valued at £1.1m. “I was very grateful to Margaret Thatcher,” he said.»
It is a good article indeed and the distinction between rural and urban China/India/... is a rare case of attention being paid to disaggregation, as overall averages in countries that large have huge variance (and looking at averages or other statistical measures without looking at variance is often not so meanigful).
That disaggregation probably does not go far enough: someone wise once said that Brazil is like Belgium joined with Sudan, where "Belgium" is Sao Paolo state and "Sudan" is the Amazon region. The same is largely true of India, still partially true of the PRC and USA too, with very large regional differences.
Great article, thank you
Thank you.
Many Ginis indeed. The World Bank puts America's Gini Coefficient at 41.8 and rising; China's at 38.1 and falling. (and China's 98% home ownership gives it a wealth Gini of 0.547 vs USA's 0.801)
data.worldbank.org/indicator/SI.POV.GINI
"The paper finds that fiscal policy in China achieves a considerable reduction in inequality, measured at about 10.3 Gini points, placing the country around the median when compared to other upper-middle-income countries. Education and health spending, which are both highly progressive, play a pivotal role in this reduction".
https://documents1.worldbank.org/curated/en/099330409032435139/pdf/IDU10014cce11a4c9147bb1b1e71bd3600115fda.pdf?_gl=1*15a33uh*_gcl_au*OTQ1NjE2ODQ2LjE3MjU4ODI0MTk.
«China's 98% home ownership gives it a wealth Gini of 0.547 vs USA's 0.801)»
That 98% home ownership will pretty much destroy the chinese economy and political system: it means that the main sources of wealth and income of party and government officials and their families are their (often large) property portfolios and therefore the chinese economy and political system has become rentier dominated (like in China-HK and China-Taiwan) and is becoming thoroughly thatcherized.
It is very sad for the world too, because a dynamic industrial chinese economy and political system would have generated immense benefits in new technologies and knowledge.
«That 98% home ownership will pretty much destroy the chinese economy and political system [ ...] become rentier dominated (like in China-HK and China-Taiwan)»
According to Zhao Ziyang's memoirs it was him who initiated the policy of basing development on land speculation (without I think realizing the long term political and economic dire effects of that) and that was done as suggested by a famous China-HK property speculator:
“It was perhaps 1985 or 1986 when I talked to Huo Yingdong [a Hong Kong tycoon better known as Henry Fok] and mentioned that we didn’t have funds for urban development.
He asked me, “If you have land, how can you not have money?”
I thought this was a strange comment. Having land was one issue; a lack of funds was another. What did the two have to do with one another? He said, “If municipalities have land, they should get permission to lease some of it, bring in some income, and let other people develop the land.”
Indeed, I had noticed how in Hong Kong buildings and streets were constructed quickly. A place could be quickly transformed. But for us it was very difficult.
I thought that what he had said was reasonable, so I suggested that he go to Shanghai and talk to the mayor and Party committee secretaries. I don’t know whether he went or not. His view did inspire my thinking. We had land but no funds, while the Hong Kong government auctioned off a piece of land every year, not only bringing in income for the government, but also allowing the area to develop quickly.
I thought about this later when visiting Shanghai. The Pudong area was right across the river from Shanghai’s city center. In order to develop Shanghai, building up this area would require less investment and be more efficient. It was an extremely good location. However, in order to develop this area, we needed a huge amount of funds to build infrastructure and then attract foreign businesses.
It was around 1987 when Shanghai referred a Chinese American, Lin Tung-Yen [the founder of T. Y. Lin International], to speak with me in Beijing. He asked whether it was possible to rent Pudong. The term of the lease had to be long enough: thirty to fifty years. After leasing the land, he would need to have transfer rights. Investors could then get mortgage loans from the banks. I asked him if he thought foreigners would be willing to invest after such a land transfer and what else was needed. He said it was easy and that the conditions of the SEZs were not needed; the conditions for Shanghai’s Minhang economic zone were sufficient. I had thought that the conditions offered could be even more preferential than Minhang’s, approaching those of the SEZs, so I was indeed interested. Since this Chinese American had been referred by [Shanghai Party chief] Comrade Wang Daohan, I asked Comrade Wang Daohan to take charge of this matter.
[...] This was an important matter, because when we had earlier thought about opening up Shanghai, Chen Yun had expressed concerns. He said that in dealing with regions such as Shanghai and Zhejiang, one must proceed with caution, because people in these areas were especially skilled and familiar with capitalist behavior. [Chen Yun himself was a native of Shanghai.]”
«98% home ownership will pretty much destroy the chinese economy and political system [...] becoming thoroughly thatcherized»
A little known "detail" which is actually the most important political fact of the past 50 years is that in the 1970s an UK think tank did a voting study and discovered that:
* People who owned a house, a car, a share-based personal pension voted for right-wing rentier-oriented policies more than people who rented, used public transport, had a defined benefit pension; which seems obvious but...
* Most importantly this did not depend much on income and status, and in particular people on a low income or status who owned a house, a car and a share-based personal pension, however modest, still voted for right-wing rentier-oriented policies.
The result of that study is that the major parties of many "western" countries in particular the UK and the USA started to undermine the rented housing sector, public transport, defined benefit pensions. Of the other three over the decades it turned out that the crucial one for turning low income voters into right-wing rentier voters was a by large margin house ownership (more precisely big capital gains accumulating over time: nobody sensible wants to put all their saving and get in debt for 5-10 times their gross income to own a single asset that does not generate big profits).
http://www.theguardian.com/politics/2016/sep/03/nick-clegg-did-not-cater-tories-brazen-ruthlessness
«Is it true that when Clegg suggested there needed to be more social housing, Cameron told him it only turned people away from the Tories? “It would have been in a Quad meeting [the committee of Cameron, George Osborne, Clegg and Danny Alexander], so either Cameron or Osborne. One of them – I honestly can’t remember whom – looked genuinely nonplussed and said, ‘I don’t understand why you keep going on about the need for more social housing – it just creates Labour voters.’ They genuinely saw housing as a Petri dish for voters. It was unbelievable.”»
https://www.theguardian.com/society/2022/jun/29/how-right-to-buy-ruined-british-housing
«[a carpenter] bought his council house in Devon in the early 80s for £17,000. When it was valued at £80,000 in 1989, he sold up and used the equity to put towards a £135,000 fisherman’s cottage in St Mawes. Now it’s valued at £1.1m. “I was very grateful to Margaret Thatcher,” he said.»
It is a good article indeed and the distinction between rural and urban China/India/... is a rare case of attention being paid to disaggregation, as overall averages in countries that large have huge variance (and looking at averages or other statistical measures without looking at variance is often not so meanigful).
That disaggregation probably does not go far enough: someone wise once said that Brazil is like Belgium joined with Sudan, where "Belgium" is Sao Paolo state and "Sudan" is the Amazon region. The same is largely true of India, still partially true of the PRC and USA too, with very large regional differences.
Thanks for this comparative assessment. Hope the rural urban divide in China grows smaller and disappears eventually.