Fine line between welfarism and common prosperity

Is common prosperity just another name for welfarism? Does collective wellbeing mean I can repose passively on the shoulders of others who have to toil and sweat and share their gains with me?

No, these are misunderstandings that put common prosperity in a false light, said a senior government official on February 17.

"Common prosperity comes from common efforts," said Ha Zengyou, director-general of the National Development and Reform Commission's (NDRC) employment department. "Benefits for all depend on everyone working at his or her best."

He made the remarks at a NDRC press conference in Beijing to introduce the experience of east China's Zhejiang Province in advancing common prosperity. Last year, the central government designated the province as the country's first and only pioneer zone to explore ways toward common prosperity in which no one would be left behind in society's pursuit of progress.

To the uninformed mind, common prosperity could indeed be bent to mean something equivalent to da guo fan (literally "rice cooked in a large wok") – a metaphorical reference to a past planned economy practice in which everyone gets the same pay despite differences in their efforts or efficiency.

A casual browse on the Internet would lead to a discovery of many discussions about what common prosperity exactly means. That's why Ha gave a detailed explanation at the request of a reporter who asked for NDRC's comment on certain prevalent notions that mistook common prosperity for welfarism.

"Even if we develop better and have more financial resources in the future, we will guard against the pitfall of welfarism that feeds lazybones," Ha said.

A key in promoting common prosperity, he further explained, lies in creating a fair chance for everyone to excel through unswerving efforts. A more just education system and a fairer career platform, for example, will work to that effect.

Expanding middle class

Perhaps a few words from Edmund Phelps, a Nobel Prize winner in economics, help illustrate Ha's point. In his book titled "Mass Flourishing: How Grassroots Innovation Created Jobs, Challenge, and Change," Phelps made a case for "a just economy" by saying: "Bill Gates' new products could not have made him 50 billion dollars without millions of end-users. Thus, high earners benefit from cooperating with others and could subsidize others without going into the red. Yet it does not follow ... that everyone ought to be paid the same hourly wage."

As Zhejiang's plan shows, common prosperity aims at expanding the middle-income group through such measures as employment promotion and financial support so that everyone can compete on a level field for the common good of society. It's not about randomly taxing those who improve their lives through hard work just to feed those who "lie flat" and idle their time away.

Xie Xiaobo, an official responsible for Zhejiang's development and reform, said at the press conference that by 2025, 80 percent of families in the province are expected to have a disposable annual income ranging from 100,000 yuan (US$15,625) to 500,000 yuan, paving the way for an olive-shaped society supported by a stable middle class. About 70 percent of Zhejiang households currently fall within that income range.

Wang Yong / SHINE

But how exactly will Zhejiang "bake" a bigger "cake" of wealth while better catering to such vulnerable groups as poor farmers and the elderly? Here's where a latest book on this topic comes in. Compiled by Zhejiang's provincial Party school, the book – "Common Prosperity: A Zhejiang Perspective" – provides a theoretical framework and practical guide to common wellbeing experiments of local characteristics and their possible implications for the rest of the nation.

The book does a good job explaining why China's drive for common prosperity does not mean that everyone will have to eat an equal share of "rice cooked in a large wok" whether they work hard or not, and why a well-regulated market economy lends itself to common progress.

By defining Zhejiang's common prosperity as a practice that combines market and regulatory forces and balances efficiency and fairness, the book describes a status of collective wellbeing neither neoliberalism nor welfarism can achieve.

Given the high-level academic background of the authors and Zhejiang's role as a national pioneer zone for common prosperity, the book is a must-read for anyone who wishes to understand "Chinese-style common prosperity" and what it means for global efforts to reduce inequality.

No crude leveling

The book cites Friedrich Engels (1820-1895) as saying the principle of fairness should not be mistaken for crude leveling. Indeed, the authors note, such crude leveling, which inevitably reduces people's performance appraisal to one level despite their differences in capabilities and contributions, once hurt the enthusiasm of many workers and enterprises.

"An overemphasis on fairness at the expense of efficiency may result in common poverty, while an overemphasis on efficiency at the expense of fairness can lead to extreme inequality," the authors said. In their view, high-quality economic development powered by innovative forces is a premise for common prosperity.

At the same time, income gaps should be narrowed by expanding the middle class through increased economic viability and labor productivity on one hand, and helping low-income groups receive better benefits through reasonable transfer payments on the other. Moreover, the authors argue, public expenditures in education, health care and affordable housing should be enhanced, and a unified nationwide labor market should be established to boost equal access to job opportunities.

With this theoretical call for efficiency-fairness balance in mind, one can more easily understand some of Zhejiang's new policies announced at the Beijing press conference to promote employment (to create a bigger "cake") and improve redistribution (to help vulnerable groups).

For example, a college graduate who starts an elderly care business in Zhejiang can get a government subsidy of 100,000 yuan, said Chen Zhong, a senior official responsible for the province's human resources and social security affairs, at the press conference. This single and simple policy allows the province to simultaneously promote the employment of college graduates and improve home care of a vulnerable group.

Role of the market

In the above case, Zhejiangs' new policy boils down to achieving common prosperity through market forces whenever possible – the province finances students' business ventures which in turn take care of elders. This market behavior, though supported by government funding, is a necessary supplement to direct public expenditures on home-care services.

"Marketization is an important propeller of economic growth and a necessary path toward common prosperity," the authors say. "However, marketization per se does not automatically lead to common prosperity. It needs the guide of a socialist system."

A convincing example given by the authors concerns Yiwu, home to the world's biggest small commodities market. According to the authors, the Yiwu market is highly accessible and absorptive. Even less-abled people in remote rural areas have a chance to work with and benefit from the market. It works this way: The market, which thrives on various businesses including processing with supplied materials, often parcels out some materials to those in remote areas for processing or assembling. This in effect enables these traditionally "marginalized people" to be involved in a market economy right at their doorsteps.

"As marketization deepens in Yiwu, people's overall income has risen while wealth inequality and the urban-rural gap have narrowed," the authors note.

In conclusion, the book says that capital, left to its own logic, cannot provide a fundamental solution to polarization of wealth. This somehow echoes the view of Nobel Prize-winning economist Joseph Stiglitz.

In his book "The Price of Inequality: How Today's Divided Society Endangers Our Future," he says: "Markets by themselves often fail to produce efficient or desirable outcomes, and there is a role for government in correcting these market failures – that is designing policies (taxes and regulations) that bring private incentives and social returns into alignment."

In another book – "The Great Divide: Unequal Societies and What We Can Do About Them" – he further explains: "The truth is most of the individual mistakes boil down to just one: a belief that markets are self-adjusting and that the role of the government should be minimal."

Zhejiang's experience, in contrast, shows it's realistically possible for a socialist market economy with Chinese characteristics to nudge people toward common prosperity in a gradual and orderly way.