On Debating the China Model and its Middle Class

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by Kartikeya Dwivedi

Introduction

This essay argues that the China Model is one that is a combination of economic freedom and political oppression The Chinese Model refers to a dichotomy of political and economic situations in the country where growth has broken the traditional complementary nature of liberal economy and political freedom. This traditional understanding of a political economy had been around for centuries but had only begun once the Renaissance had its impact on new nations and old empires. This understanding has strong foundations in geography, institutions and interaction with other similar economies leading to an economic system, widely known as Capitalism. It is only in the 21st century that this understanding has been broken, as no country could replicate a successful economic model in terms of growth without incurring political reforms in the direction of freedom. China in a nutshell is the first outlier which has stunned the global economy with its growth in terms of material power both of hard and soft nature. Thus, it is worth studying the operational/functional nature of China.

Research Objective

The objective of this essay is to argue that the China model indeed is a combination of political oppression and economic freedom. It argues that there exists a middle class in China which are attributing their growth to the Communist Party and hence are calculating the tradeoff to economic well being against political oppression to be a beneficial one. Therefore, it is important to empirically analyse as to how is this paradox functioning in China.

Sociological and Quantitative Underpinnings

A group of people forming common relations to labour and means of production can be defined as a class. Traditionally, Karl Marx has classified people into two distinct classes i.e. bourgeoisie and proletariats, i.e., those who control the means of production and those who do not, respectively. In layman’s language, this can easily be understood in terms of an upper and lower class, black and white so to speak. Logic, thus, dictates that a middle class has to be somewhere in between these two classes. If the bourgeois can be identified as the rulers and the proletariats as the workers, who are the people that form the population of the middle class? Socially, they cannot be workers and they cannot be rulers and consequently they cannot be wealthy but also cannot be called poor. If there exists a group of people that fit this domain of socio-economic existence and break the bicameral definition of class designed by Marx, they should be called middle class.

In contemporary times, middle class can be defined in relative and absolute terms. Homi Kharas defines middle class in absolute terms from The Organisation for Economic Co-operation and Development (OECD) perspective, he defines the middle class as as those households with daily expenditures between USD 10 and USD 100 per person in purchasing power parity terms. The lower bound is chosen with reference to the average poverty line in Portugal and Italy, the two advanced European countries with the strictest definition of poverty. The poverty line for a family of four in these countries is USD 14533 (USD 9.95 per day per capita in 2005 purchasing power parity terms). The upper bound is chosen as twice the median income of Luxembourg, the richest advanced country. Defined in this way, the global middle class excludes those who are considered poor in the poorest advanced countries, and those who are considered rich in the richest advanced country.  

Thus, one concept of consumption emerges as a need for spending income and creating a circulation of money from producers to consumers in the form of wages, salaries and bills paid for work done and price by consumers for buying finished goods and services. There is a great overlap in these transactions as most of these people are either/both of them. Regardless, the point to be noticed here is that money runs in a circular pattern when considering the working of an economy. This model gets complicated once other actors are introduced such as financial institutions like commercial banks, governments and other economies of the world. Together they form a nexus which in modern days is almost synonymous to capitalism.

To further this concept of consumerism, the house of Nomura holdings argue in their analysis of the global economy that there is a kink in consumer demand curves around USD 6000 per capita. Above this level, the income elasticity for items like consumer durables as well as for services like insurance rises well above one. This remains the case until income levels surpass USD 25000. At that point, the income elasticity drops again. The aspect of a class of people earning a particular level of income and spending it has its historical roots connected to the origins of a middle class, as discussed later.

However, the emergence of this stratum of society is one story, its growth and sustainability is another. The middle class may be identified successfully in economic terms but there are many more factors that define their status as neither workers nor rulers. According to Francis Fukuyama, the important marker of middle-class status would be occupation, level of education, and ownership of assets that could be threatened by the government. Extending the aforementioned logic of the middle class being in between bourgeoisie and proletariats, a middle class person must be educated more than a worker and less than a ruler, similar to the ownership of assets and the kind of occupation a middle class person should be engaged in must be more sustainable and income yielding than that of a worker and less than that of a ruler.

However, it is at this juncture where the boundaries of the middle class start to blur. It is possible that the three factors that I just mentioned are not in the same situation. A ruler with high income may be less educated and a person with relatively less income may be more educated than any ruler. Also, if concepts like social capital, cultural capital and intellectual capital are taken into account, the boundaries start to blur even further. The problem experienced in determining the middle class from the ruling class is the fact that in the pursuit of anonymity generated by the insecurity of a ruling class status, the rulers can easily mask themselves as members of the middle, despite not fitting the broad economic criterion.

China  is conducive to this phenomenon, the transition of Chinese sociology from ancient to imperial to then modern and postmodern is a story which holds the secrets of why the Chinese behave the way they do, and more importantly why do they behave the way they do with foreigners. But for the purpose of this essay I would surmise that there exists an extremely unique socio-economic identity of a nation-state named China extending to its citizens. The ideological state apparatus of China has been purposefully made strong owing to the political system, run single handedly by the Communist Party of China. Thus,  this unique identity is reinforced time and again to its 1.4 billion people in all possible ways.

The reason that it is worth noting is that we are witnessing a time where the regularly reinforced Chinese values are meeting the Western model of a market economy with growing urbanisation and personal disposable income. The two civilisations have some fundamental differences in their value systems, which in a superficial attempt can be categorised as philosophically individualistic for the West, and philosophically collectivist for China. It has an economic reform model similar to that of what happened in the West, and particularly England a few centuries ago. The notion to consider is that those politico-economic reforms formed the foundation of the individualistic values of the West and a repetition of that could mean the super-imposition of the Western model of societal values to an already existing Chinese way of life.

The Atlantic Economy and Middle Class

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Image Source: Westchester University

In the 16th and the 17th century, the commercial revolution was in full swing and England was at its centre. Agriculture still provided a majority of the population with their livelihood, but the nature of farming was changing.

Due to the the stimulus gained from the wool trade, commercialized agriculture became the trend. With an emerging profitable trade in wool, and later in grain, many of England’s landlords were themselves responsible for the commercialization of agriculture. The raising of sheep required large tracts for pasture, and the capitalist farming of grain also required large tracts of land. This led, already in the 16th century, to the enclosure of ever larger pieces of land, including village commons by manor lords as well as their tenant farmers, as a result of which ordinary peasants lost their customary rights to the village commons, as well as to their small strips of land on the landlord’s estate.

These lands were traditionally village commons where the population had common rights or which were in the open arable fields. During this period of time approximately 500,000 acres of land were enclosed leading to a change in the notion of land as a means of production and not merely a symbol of status. The peasants being landless went to the cities to sell their labour and labour also became a commodity. Both land and labour could now be sold in the market as commodities. The monarch Charles I tried to stop this destruction of the peasantry by attempting to prevent the lords who largely constituted the Parliament from bringing about these enclosures. Upon opposition, he tried to rule without the Parliament leading to the outbreak of the English Civil War of 1642.

In a feudal system, a king raises an army by combining the troops pledged to him by different Lords of his kingdom. Since this was a Civil War, he was pitted against a united resistance of the very Lords who he relies on. As a result, Charles I lost and the Lords had their way, this system of commercial agriculture and exports initiated an economic system with 4 niches. The discovery of the New World was the key to this economy. The Americans were proving increasingly complementary to the cause of the Lords as raw materials would go to England, and consequently the rest of Europe, to get processed. Manufactured and other finished goods would then be exported to the rest of the world including Africa, Asia and the America. The African population would be sent as slaves to the Americas in order to work at the plantations and other sites for extracting raw material. This cycle of activities continuing and getting sophisticated along centuries can be understood as the bedrock of Capitalism. The reason was geographical and one can extend the claim to call it even natural. Hence, the capitalism or free international trade is the economics of nature. England was the first to represent it.

However, Eva Bellin claims that the middle class chooses to align themselves with whatever they think is the best possible system to support stability and economic growth. This is how we arrive at the story of China. China had a revolution fuelled by the peasantry of 1949. In the then agrarian society, one can understand them as the proletariats of their time. They came to power but did not choose democracy taking important cue from the French model of revolution. Rather, a communist state was created to keep a large population at bay from revolting back. Soon into governance, industrialisation started coming about. It is not until Deng Xiaoping that this discussion comes to a connecting point, as under him, the harcore proletarian emotions were discarded and some people were ‘chosen’ to become wealthy and eventually the wealth was supposed to percolate down to everybody.

The evidence for calling this plan a success is mixed. Today China has urbanised 50% of its population but the quality of life still needs to catch pace with the rapid urbanisation. A majority of the urban population are under the title of ‘migrant workers’ and live without state sponsored rights and welfare systems in the hope of social and inter-class mobility. The gini coefficient remains close to 0.47 and rightly so. Therefore, in contrast to England, the emergence of this class of people in China is not natural but has been incubated by the Communist Party. Hence Eva Bellin is on point because the people of China see the reason of their escape from abject poverty in the Communist Party.

Almost everybody who is in a service sector job in China identifies as a part of the ‘middle stratum’. The term is extremely ambiguous and suggests of a conspiracy in the Marxian utopia that maybe it is all a farce. Just like the Lords in England in order to pacify the other merchants and traders purposefully associated themselves with the latter under the combined banner of middle class so as to diplomatically consolidate their position, the Chinese elite have also successfully created the ambiguity that they are the part of the same class as anybody else who is doing well for themselves.

Therefore, observing the grey area that a middle class is in China, one can understand how the Party officials can consolidate wealth and power and still wear the mask of the middle class to keep themselves and their kin secured in the position they are. In doing so, they are unapologetically restricting social mobility of the working class and personifying nepotism. The irony is that despite such a modus operandi, they are known as the members of a Communist Party. In the respect of the gargantuan range of the middle class, David Goodman’s argument is well worth noting, namely, that the pervasive use of the term ‘middle class’ in contemporary China is an essential part of the state-sponsored discourse that is instrumental in hiding from view the considerable social polarization and increasing economic inequalities. Chinese engineers and scientists are the most skilled at reverse engineering technology from the West such as stealth planes, aircraft carriers and other pieces of cyber technology; who knew that this trait exists pan China as the Communist Party has reverse engineered Capitalism itself and has applied it to over a billion people as per convenience.

While it is completely hypocritical to carry out such a grand strategy domestically, it is also commendable because some people who are seeing a rise in their living standards are not at the risk of the free market collapsing in on itself like 1929 or 2008, because capitalism, though natural and fair, functions on a cycle of boom and bust. For instance, to compete in the free market, credit rating agencies like Moody’s and Standard and Poor’s inter alia gave all loans a AAA rating even if they were not deserving. The banks in order to keep competing with other commercial banks kept giving loans to anyone and everyone who came asking, prime and subprime alike. The second quarter of 2007 on Wall Street proved to be the end of this facade and millions of otherwise middle class people went homeless, jobless and worldwide depression followed. The banks were just too big to fail and the average American taxpayer has paid the price.

Such a phenomenon is not possible in China as the large banks and other companies that are competing are all competing amongst themselves technically as they are all state owned. The Communist Party has ingeniously curtailed the risk of capitalism and is reaping its benefits. But is it the perfect model? Can such a system go on forever? It is hard to calculate how sustainable this model is because once the growth stops, the people of China would have to face the fact that the Communist Party is no longer useful to the purpose of social development. At that point, all the human rights rhetoric and authoritarian allegations, that China faces but ignores due to its gigantic growth, won’t prove to be helpful in terms of regime survival.

Conclusion

China and its people are a USD 11.2 trillion economy. The number would be much higher if the hidden income of its people were to come out into circulation. But it still puts China as a nation-state close to its past glory of being the foremost economy of the world. But the resurrection of this historic civilisation is not the natural course of events we have witnessed in the West that brought about Capitalism and social development as pointed out by Ian Morris, but a carefully and surgically drafted economic experiment by the Communist Party to alleviate the living conditions of its people. Hence, the alleviated class or the middle class is not at odds with the authoritarian rule unlike 16th century England. The modernisation theory and the promise of bringing about democracy at the behest of a middle class is not an idea applicable to the Chinese middle class, yet. Once the growth comes to stagnation, the middle class realises that their interests aren’t met, one can expect another revolution. However, it is wishful thinking at best to expect a revolution to change the politico-economic status quo of China. If and when the middle class realises their interests aren’t being met by the current model, it by default means the masked ruling class, and the members of the Communist Party themselves would realise that the current system needs to be changed as they did at the time of Deng Xiaoping. Hence, realistically the next reform, whenever it may come, would originate from within the Party and will prove to be another brilliant piece of propaganda. In the spirit of democratisation, it would be useful and quite tactful if the Party chooses to introduce a rule of law to keep the situation stable and maintain the fine balance of this wonderful society. Thus, on the final note, I believe that there exists a middle class in China but it is unlike any other that has ever existed. It is an sociologically artificial phenomenon and is the mascot in the narrative Chinese exceptionalism.

References:

    1. Bellin, “Contingent Democrats”.
    2. Definition of Class (Cl): Encyclopedia of Marxism, Glossary of Terms. Available at https://www.marxists.org/glossary/terms/c/l.htm
    3. Fukuyama, Political Order and Decay, 418.
    4. Goodman, Class in Contemporary China.
    5. Kharas H, The Emergence of Middle Class in Developing Countries, OECD Development Centre: Working Paper no. 285.
    6. Shefali Jha, Western Political Thought, 86.
    7. The definition of West is similar to the one presented by Ian Morris in Why the West Rules for Now.

Kartikeya works as the Director Assistant at Centre for India China Studies at O.P. Jindal Global University. He is pursuing a Masters in International Relations from Tsinghua University, Beijing and is a graduate from the Jindal School of International Affairs.

Featured Image Source: Chinese Daily Europe

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