“WE ARE HUMANS BEFORE WE ARE CONSUMERS”
Tu Wenwen*
“Why should Premier Wen have to mention that employment is related to one’s dignity?” a university professor was telling me from his armchair, “It is not time to talk about dignity. Right to survival is the basic. And dignity is something that would come naturally in the due course.” But how could one talk about the right to survival without dignity, I wondered.
Chinese are no strangers to belt-tightening. They responded to the call of cutting back on food during 1958-1961 “natural disaster”. Particularly farmers, they belt-tightened for socialist industrialization to allow the transfer of wealth to cities through so-called price scissors. However, this time is peculiar. They scrimped and saved to lend money to the richest country in the world so that they could get low-pay jobs stimulated by the consumers in that country. Thanks to the financial meltdown, one fact begins to sink into minds of many Chinese people: China is the largest creditor of US while Chinese are still poor.
Export, investment and consumption have been touted as three horses to drive the carriage of China’s growth. The horses were sick and carriage shaky even before the economic crisis. Though exports have made China the “world factory”, it is a factory earning meagre processing fees at the cost of laborers and environment. Investment has created roads, rails, and shining cities, as well as a huge real estate bubble. The average housing price-to-income ratio in China was one to 15 in 2007. The figure was as high as one to 23 for Beijing (China Statistics Yearbook, 2008). Most of people are onlookers who could not share the prosperity of cities. Consumption’s contribution to GDP was never above 40 % while that of India is about 60 %. Factories are closing. Migrants are moving to and from villages. Millions of graduates are worried about jobs, although this is nothing new as the signs of economic trouble have been evident in recent years.
When the shadow looms over China’s outward-oriented economy with the financial meltdown, domestic demand becomes the key. Many quickly pointed out in horror: China’s saving rate is nearly 50%, the highest in the world! But they would fail to mention that household saving accounts for just 30 to 40% of the total while the rest is from the government and state-owned enterprises. In another word, insufficient consumption demand is caused by the persistent decrease in the percentage share of household to national disposable income. (He & Cao, 2007). The wealth is with the state not with people and the state uses its savings to reinvest. Hence, double-digit GDP becomes possible. That also shows the domestic demand has been always driven by investment rather than consumption. It is true that Chinese tend to save rather than spend but it cannot be simply explained away by the “traditional virtue” of Chinese people. In a country where the state does not pass on benefits of growth and there’s no social safety net, belt-tightening seems reasonable in spite of de facto negative interest rates.
So the majority of Chinese have been merely surviving, as laborers who hammer out “Made in China”, as on-lookers who see their homes giving way to roads and unaffordable condominiums, and as creditors who are forced to save in their own names and lend in other’s. And now, they are called upon to be consumers.
Would the 4 trillion RMB plus 8% growth rate plus 10 industrial sectors formula upgrade Chinese from cheap laborourers to proud consumers? The makeup of the 4 trillion is: 38% infrastructure, 25% post-disaster reconstruction, 10% construction for urban livelihood (i.e. social housing building and renovations), 9% construction projects for the rural livelihood (i.e. safe water, electricity, roads, etc.), 9% technology upgrading, 4% education, health and culture, and 5% environment protection. Obviously, it follows the old pattern: to turn every city into a construction site. Maybe the difference is that the villages would expect their own construction sites. Apart from the risks of exacerbating the existing structural contradictions in the economy, even if the formula works to stimulate the economy, what would be the use of 8% growth rate without the unbalanced investment and consumption ratio being pulling back to the right track, without GDP being given up as the single most important indicator of development, and without people being humans, enjoying quality health and education? How would people be expected to consume without feeling secure to spend?
At the moment of crisis, it’s understandable to keep the investment rate high to buffer the impact and stabilize the society. But what about after two years when 4 trillion is gone? To boost the domestic demand is not a new banner. It was flagged in the nation’s 11th Five-Year Guideline as early as 2005. But it has always been investment demand that is increasing rather than household demand. If there is any sense of opportunity in this crisis, it is that high-growth, high-investment and high-cost development could not and should not continue any more. Long-term consideration should be to return the wealth to people and thus the household consumption could be possibly stimulated.
China is a country where half of its rural population cannot afford medical services and almost 70% of its people do not have any pension schemes. It is the world’s third biggest economy while the expense on education has yet to reach 4% of GDP-- the average level of developing countries. The public expenditure on health care is also around 4% of GDP and there is no universal health care. The social security system (i.e. pension, unemployment, workplace injury, etc.) is negligible. China has amazed the world with its efficiency, but it is justice that China should strive for. If China has the confidence to tell its people that the country could walk out of the shadow of the crisis soon, it should also have confidence to redistribute the wealth, increase the public expenses on health and education, build social security systems and empower people to be active citizens rather than passive laborers, onlookers, consumers or creditors.
When talking with the professor who separates the right to survival from the dignity, three people came to my mind. I met them in rural Sichuan, in backward southwest China. The first one used to be migrant worker in cities. He came back home to help his parents with their organic farming initiative taken up three years ago in the belief of shifting to “healthy, green and harmonious” life. He does not know how long they can continue because rumors are spreading that his village is going to be “developed” into some kind of zone, which nobody knows exactly. The second is a worker in a cement factory, who works different shifts every day, and in between helps his wife with a food stall in town. His factory is not only polluting but taking his fellow farmers’ lands to expand, which has triggered villagers’ protests. “I was not part of any protest,” he told me with a smile. I saw the third one on a construction site. When I asked what he was doing, he said, “boosting the domestic demand!”. He earns 40RMB (about US$6) per day. Later, I learned the project he was laboring at was planned in 2007, before the stimulus package, but these days all construction is seen as “boosting demand” even though it has been the main sector of investment for years.
To recognize the right to "survival" should not be the pretext for squeezing the last drop of sweat from the Chinese workers. We are humans. If I were given the privilege to add footnotes to Premier Wen’s response, I would say employment is related to one’s dignity, the dignity that empowers people to choose to self-employ and consume the products from their own lands, to refuse working as a cheap laborer in a factory that pollutes the air they breathe, and to know what they work for. This hinges on what kind of economy China is stimulating and what kind of development China is ushering itself into.
* Tu Wenwen is a research associate with Focus on the Global South. She has been doing field research in China for the past two months.
NOTES
1. Premiere Wen of China gave an online interview in central government’s portal on 28 February, 2009. In response to one of questions about the unemployment issue exacerbated by financial crisis, he said “Employment is not only related to one's livelihood but also one's dignity.”
2. Based on an article of People’s Daily dated 22 November, 2006 by Mr. Liu Yuhui who is a researcher of China Academy of Social Sciences (CASS). Xinhua He and Yongfu Cao from Institute of World Economics and Politics of CASS shared the same observation and published their paper Understanding High Saving Rate in China in February 2007 issue of China and World Economy, a journal of CASS.
3. It was usually called Five Year Plan. The Chinese government would like to move away from the sense of planned economy in its five-year blueprint. Therefore, it became the “Guidelines” since 2006.
4. According to 2005 National Demographic Survey, 32.5% Chinese population is covered by old-age security net, of which 39.1% for the urban population and 11.3% for the rural.