SOCIALISM, CAPITALISM AND INEQUALITY IN CHINA
                             Efraín Gonzales de Olarte
Pontifical Catholic University of Peru

China is characterized by being a country with two systems (socialist and capitalist) that coexist in a subordinate manner. However, since Deng Xiaoping initiated the reforms 40 years ago, it has had impressive economic growth, so much so that today it is the second world economic power. Its per capita income has increased from 120 euros in 1978 to 1000 euros in 2015, however inequality has increased almost as in the more developed capitalist countries. These data are from the famous French economist Thomas Piketty, who studies the relationships between growth, accumulation and inequality, who has just published an interesting article in the American Economic Review, according to which China at the same time as the average income per person has increased and poverty reduced, inequality has also increased. The income of the richest 10% of the population increased from 27% of total income in 1978 to 41% in 2015 and the poorest 50% fell from 27% to 15% in the same period. This means that egalitarian and equalizing socialism enters into contradiction, with capitalism as an inequitable and unequal essence.

In the 70s of last century inequality in China was very close to the very egalitarian Nordic countries, today it is very close to the United States very unequal. At the same time, poverty has decreased on average, although much of China is still poorer than the average of Latin American countries. But we must not forget that this economic dynamic occurs in a country with 1,300 million inhabitants, whose 10% population is equivalent to 130 million Chinese who have income from Western levels, in fact in 2018 the number of Chinese billionaires was of 476 versus 585 of the United States.

The Chinese economic model is based on the assumption that the capitalist sector is a function of the Chinese socialist project, consequently it could be inferred that the taxes collected from capitalist activities would be used for investment and spending projects favorable to the Chinese majorities. Consequently, the more capitalist accumulation, the greater the socialist future and the greater redistribution. This sounds interesting and even innovative as a capitalist way to reach socialism, although a special system that does not incorporate democratic institutions in making investment or redistribution decisions.

This from the perspective of the theoretical-political model, but on the other hand we could assume that Chinese capitalism has and will have the same tendency of any of our capitalist countries, that is to say that by the law of capital accumulation it will generate greater inequality whenever there is a sustained growth, as has happened in Peru in the last fifteen years.
However, I believe that in the Chinese case, other variables must be incorporated to try to understand their model of society and economy. The fact that it is the most populous country in the world gives some advantages to its proposal: the first is that its possibilities of growth depending on its internal market are very large, given that only 20% of the population is on the developed side and there is 80% (one billion Chinese) as a future potential market, the second is that with the level of wealth, wealth and income achieved, it is emerging as the world’s first economic power in some years, which makes it an actor worldwide in pursuit of uncontested leadership, the third is that economies of scale are indispensable for its internal growth, which gives it an additional advantage relative to other developed countries.

However, not everything is rosy. The Chinese are aware that the industrialist model that has made them grow at very high rates already has several limitations, because to continue growing at rates lower than their historical rates, even 6%, they require more energy sources, more raw materials, more qualified professionals and technicians and, above all, to have global primacy requires leading the development of science and technology, without which it must be difficult to move from growth based on industrialization to growth based on knowledge management and human capital. This is a big problem for Chinese aspirations. Additionally, they have in their liabilities to be one of the most polluting countries in the environment, which is forcing them to increase clean energy.

It is clear that the accelerated development of Chinese capitalism is a geopolitical necessity of a country and a government with hegemonistic aspirations, and the existing inequalities allow to legitimize the Chinese government with its redistributionist policies, that is to say inequalities are functional to the political project, after the Deng Xiaoping reforms. What is yet to be clarified is whether socialism will really subordinate its capitalist development or if the latter will generate a socio-economic dynamic that will drive changes in Chinese politics. Time will tell. What seems to be a threatening reality is that, being a very large and modern country, it will become the next imperialism.

Sep. 25.2019