January 13, 2008


Myth of China's new middle class (Rowan Callick, January 14, 2008, The Australian)

MANY people looking from outside at China's development, especially in this pivotal Olympic year, are searching for a floor of familiarity. They want to be able to find the middle class in China's contemporary social change, David Goodman says in his own chapter of The New Rich in China: Future Rulers, Present Lives, which he edited recently and is to be issued soon. [...]

But Goodman insists China's "new rich categories of entrepreneurs are less the new middle class than a future central part of the ruling class". They are quite unlike the 19th-century European bourgeoisie in the extent to which they have emerged from and retain close relationships with the established political system.

For this is not China's first wave of modernisation, as often presumed by those who believe Deng Xiaoping conjured this remarkable industrial machine from an imploded peasant nation.

Goodman points out that in the Republican era (after 1912) there were sustained attempts at modernisation in various parts of China under both warlord rule and colonial influence.

Much of this economic activity was externally owned or sourced, so parts of the economy were considerably better integrated into the world economy by the early 1920s than they would be again until the 1980s.

The establishment of the People's Republic of China in 1949 then underwent renewed and sustained modernisation and industrialisation.

And managerial and professional jobs multiplied, so that during the 1950s the people who filled them became "the backbone middle classes" of the new party-state in China.

Many in these classes were purged during the Cultural Revolution of 1966-76, but as they and their families were then restored, "so, too, middle-class reputations rose again".

Some of this group transformed themselves into new-style entrepreneurs during the 1980s, especially as opportunities loomed large to gain from their privileged access to assets.

And what of the entrepreneurs who have emerged more recently?

Goodman highlights "the close associational links between the new entrepreneurs and the party-state; they are neither independent of nor excluded from the political establishment, which on the contrary seeks actively to incorporate them if there is no pre-existing relationship".

This was the chief innovation of Jiang Zemin, who retired as leader five years ago.

He opened the doors for capitalists to join the party.

Many observers wrongly interpreted this as meaning they would take over the party. Instead, of course, the situation is the reverse.

Goodman says the reallocation of state assets over the past couple of decades "sometimes left less than clear distinctions between ownership and management".

In Hangzhou, an entrepreneur was asked if the state assets he controlled had been paid for.

The response was clear: "There's no need. These were previously the assets of all the people, and we are the people."

Goodman believes that even the massive income differentials now being officially conceded (the Asian Development Bank describing China as having one of the biggest wealth gaps in the world today) are understated because of the extent to which business people in China, who tend to be incorporated in the party-state apparatus, enjoy "cost-less (to them personally) access to resources and effectively subsidised income not available to others".

The pattern of economic development in the People's Republic fits more closely that of Germany, Japan and Russia during the late 19th century than that of Britain or the US, he says.

"In those countries, the state played a central role in industrialisation, as opposed to the laissez-faire capitalism of the earlier European experience based on the protection of the individual outside the state."

All three of which not only ended up too enfeebled by their own misdevelopment to contest with us successfully but are now dying even more quickly than the other secular states of the West.

Posted by Orrin Judd at January 13, 2008 9:39 AM

Soooo...all my money DOES go straight to the Commies whenever I buy Made In China!

Posted by: KRS at January 14, 2008 12:43 AM


Said product costs 9 cents to make, is sold for 10 cents to Walmart and resold for $1.99. All in all, $1.89 goes to Walmart, its employees and its stockholders.

1 cent goes to the communists.

- Randall

Posted by: Randall Voth at January 14, 2008 3:39 AM

Whew, thanks for letting me sleep better at night, Randall.

Posted by: KRS at January 14, 2008 1:23 PM