Features; Opinion

CHINA: A new paradigm in the current basic income debate

Furui Cheng

 

In the discourse of global basic income debates, China provides the most recent example of a social dividend-style basic income, similar to the Alaskan model. In discussions surrounding Nixon’s welfare reform in the 1970s, which was a quasi-basic income proposal, four different anti-poverty paradigms competed for influence. None of them can well explain today’s social dividend examples. We need a new paradigm in the current round of worldwide basic income debates.

China’s new facts

In November of last year I introduced the Huaidi case from China, in which villagers cooperated in urbanization and received high levels of welfare from their collectively owned land. This is not the only such case in China, however. The Chinese Famous Villages Influence Ranking was published in 2016, and 300 villages were selected from thousands in a joint effort by the Working Committee of Chinese Village Development Association, the Modern Village and Town Development Research Center of Tongji University, the Chinese Council of APCRD (the Chinese Association for Rural Community Development) and the Chinese Reputation Center (CPPC). The evaluation of the influence of Chinese villages in 2016 was mainly based on the comprehensive evaluation of the following factors: the village development index, people’s livelihood index, management index, charm index, green index and reputation index. In this way, the evaluation depends not only on per capita GDP or income, but also on living conditions, security conditions and interpersonal relationships, as well as the temperament of the villagers, including their mental state, sense of ownership and so on. This evaluation incorporates the well-being of the people and promotes the comprehensive development of further villages. The Zhejiang province has 37 villages in the ranking list, the most of all the provinces. Huaidi is one of the Hebei province’s 15 ranking villages, which ranks 77th of the total 300.

In addition to the regional welfare from land, China’s fiscal contribution by national state-owned enterprises (SOEs) has increased in recent years. In the past, Chinese SOEs only paid tax to the budget, but kept all their after tax profits. Since 2007, SOEs have increasingly paid part of their net profits to the national budget. This proportion will rise to 30% of total profits in 2020. There are four different categories of SOEs. The first type includes tobacco, petroleum and petrochemical, electricity production, telecommunications, coal and other resource monopoly industries and enterprises, which pay 20% of their net profits to the state. The second type includes steel, transportation, electronics, trade, construction and others in the competitive industries, paying a proportion of 15%. The third category includes the military and scientific research institutes, contributing 10%. The fourth category encompasses policy companies, including the Chinese Grain Reserves Corporation and the Chinese Cotton Reserves Corporation, which are exempt from turning over their net profits. Of interest, the proportion of the China National Tobacco Corporation’s net profits to be paid to the state has increased to 25%, singling the corporation out as a fifth category of its own. Part of the revenue from SOEs’ profits has been injected into the national social security system to benefit the majority.

Regardless of the origin of the social dividend – whether public land or SOEs – it is similar to Alaska’s Permanent Fund Dividend (PFD) model.

A new paradigm?

What are the key elements in the current global discussions about basic income? Is it simply an anti-poverty strategy, just like any other kind of social assistance program in operation? Or is it a comprehensive overhaul of the welfare system, like the New Deal transformation was in the 1930s, which came to form the very basis of the current social security system? The most controversial elements of debates surrounding present public welfare systems and basic income proposals include work ethic, fiscal affordability, a culture of desert and civil rights, among other aspects. The latter has been reviewed in detail in recent history, especially since Nixon’s Family Assistance Plan (FAP) legislation. The main characteristic of FAP is that people can receive the benefit without work requirement, and independently of their family structure. This is very similar to today’s unconditional basic income definition, although FAP is not universal.

At the outset of the Nixon administration, proponents of four fundamentally different anti-poverty paradigms, each of which contained a different causal story, competed for influence. Three of these paradigms supported Guaranteed Annual Income (GAI) plans. Proponents of an economic citizenship paradigm identified the economic system, especially structural unemployment and the wage structure, as the source of poverty. For proponents of this view, the objective of GAI policy was to alleviate poverty and provide citizens with basic income security.

The family stability paradigm identified the social system, especially changing family structures within poor, typically black communities, as the source of poverty. Proponents of this view hoped that GAI policies would decrease poverty by providing additional support for maintaining two-parent families, since rates of marital breakup appeared to be correlated with poverty rates.

The laissez-faire paradigm, which GAI supporters with a libertarian orientation invoked, identified the welfare system and its alleged perverse incentives against work as the root of the problem. Laissez-faire proponents felt that GAI plans would rationalize the welfare system by creating stronger incentives for labor market participation while also granting the poor greater freedom.

The main opposition to GAI proposals within the administration came from officials who saw the behavior of the poor themselves as the primary cause of poverty and believed that welfare reform should rehabilitate the poor by exposing them to the discipline of the labor market. This rehabilitation paradigm argued that limiting eligibility for social provisions and requiring recipients of government benefits to work would be the best path to eliminating poverty.

Is Alaska’s PFD or China’s current social policy context embedded in any of the above paradigms? I don’t think so. At least, that is to say, the four paradigms that undergirded this decade-long debate half a century ago are not sufficient to underpin a new round of worldwide debates on basic income. For example, many countries are considering levying a tax on various kinds of resources, including land, minerals, oil and gas, internet infrastructure, etc. (1). But if we want to justify these different kinds of taxes for financing basic income, the world need a new paradigm. As Philippe Van Parijs says: “It needs to recognize fully that the bulk of our real incomes is not the fruit of the efforts of today’s workers (let alone of the abstinence of today’s capitalists), but a gift from nature increasingly combined with capital accumulation, technological innovation and institutional improvements inherited from the past.”

 

Notes:

(1)      Karl Widerquist and Michael W. Howard (edited), “Exporting the Alaska Model: Adapting the Permanent Fund Dividend for Reform around the World”, Palgrave Macmillan, 2012

More information at:

Furui Cheng, “Cooperative Society and Basic Income: A Case from China”, Basic Income News, November 10th 2016

Brian Steensland, “The Failed Welfare Revolution: America’s Struggle over Guaranteed Income Policy”, Princeton University Press, September 2007

Philippe Van Parijs, “Basic Income and Social Democracy”, Social Europe, April 11th 2016

[in Chinese]

The editor, “The Chinese Famous Villages Influence Ranking”, The Orientation News, December 16th 2016

HEB101, “Famous Villages in Hebei Province”, Hebei News, December 14th 2016

 

About the author: Cheng Furui is undertaking a post-doctoral program in the Institute of American Studies of the Chinese Academy of Social Sciences. She got her PhD from Tsinghua University and her research interest is public policy. “Social Assistance and Poverty Alleviation Divergence: A Capability Approach” is her first published book based on her doctoral dissertation, which explores the Chinese social safety net in detail. She is now a voluntary news editor of BIEN, and also one of the organizers of China Social Dividend/Basic Income Network: bienchina.com.

Article reviewed by André Coelho and Genevieve Shanahan.

About Furui Cheng

Furui Cheng has written 5 articles.

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