Mao’s proletariat paradise lost

The communist dream of equality for all in China has completely failed. It has one of the lowest rates of social mobility in the OECD.

Peking University is one of the most prestigious institutions of higher education in China, dating back to the 19th century when the last Manchu dynasty decided to set up a higher education institution modelled after Western universities.

It is not an exaggeration to say that most school children in China crave a place at Peking University.  Needless to say, competition for a much sought-after place is fierce. However, your chance of admission is much better if you come from the right background.

Nearly one in three Peking University students come from families of the communist party cadres, the highest proportion since 1952, according to a comprehensive survey of student admission data between 1952 and 2002.

Back in 1952, children of party cadres only made up one in ten admitted students at the university. In comparison, the proportion of students from farming backgrounds has been in decline since 1972, from 30 per cent to only 15 per cent in the late 1990s.

These admission statistics shine a light on China’s worsening social mobility, which is one of the most important contributing factors behind China’s growing chasm between haves and have nots.  So just how bad is the problem?

Miles Corak from University of Ottawa has the latest answer from his international comparative study of the elasticity of inter-generational income, which is economist’s parlance for measuring the impact of your dad’s income on yours.

In Australia the impact is 26 per cent, so there is an advantage of being born into a high-income family, but not that significant and we compare well with Scandinavian countries such as Denmark and Norway, which are known for their social equality.

Though the United States maintains a national myth that anyone can get ahead, the reality is that the US has one of the lowest social mobility rates among OECD countries and comparable to class ridden Britain. Over there, the children of the higher income dad will earn 47 per cent more.

Then comes the shocker: the nominally communist China has one of the worst socially mobility rates of the 23 countries surveyed, including basket cases of socially inequitable countries like Brazil and Argentina. In China, children of the higher income family will earn 60 per cent more.

So what happened to Mao’s classless proletariat paradise?

David Dollar, senior fellow at the Brookings Institute, and a former US Treasury representative in Beijing explains why.

The first issue is China’s hukou registration system, which operates more or less like an economic apartheid system that separates the population into urban and rural residents (China must end its economic apartheid, December 17.) Hukou makes it difficult for people to move around, especially from countryside to cities. If you were born into a farming family, a relatively low income occupation, it limits your opportunities significantly. Many good jobs in Beijing and Shanghai specify local hukou registration.

Secondly, China’s educational resources are skewed toward major urban centres. Shanghai schools stood out on recent tests as among the best in the world. Famous British private schools like Harrow even boast campuses in Beijing.

In China, schools are usually locally funded, which means prosperous areas can afford to lavish more resources on education while poor and especially rural areas lack the necessary resources.

Thirdly, the country’s growing corruption is hurting social mobility and generating widespread resentment.  It is easier for elite families to pass on status and income to their children. 

For example, many of China’s top leaders send their children to exclusive schools such as Harvard and Oxford for education. President’s Xi Jinping’s daughter is an undergraduate at Harvard and the son of the disgraced former senior party leader Bo Xilai went Harrow (Winston Churchill’s old school), Oxford, Harvard and Columbia law school.

Chinese princelings are also hogging senior positions in the commercial world.  Former premier Li Peng’s daughter runs the largest state-owned electricity company and his colleague Zhu Rongji’s son is in charge of the country’s largest domestic investment bank.

China’s low social mobility is ironic given the party still pays lip services to communist ideology.  It is not only unjust but also hurting the legitimacy and efficiency of a market economy.  China’s ability to innovate is hampered if a large part of its population is not able to utilise their talents.

There is a glimpse of light after the bold reform package announced at the Third Plenum of the recent party congress. Beijing understands the need to address the growing chasm between the poor and rich and boost the social mobility of the bottom half. 

Translating words into actions is a different proposition altogether.

Follow Peter Cai on Twitter: @peteryuancai

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