A Comparison: Wealth Polarization in China and America

In a recent U.N. report on the polarization of wealth within societies worldwide, Chinese countries and regions were the top three places with the largest gap between the rich and the poor. Hong Kong topped the list, Singapore tailed in second and mainland China was third, with America coming in fourth. However, Hong Kong and Singapore, both being cities, represent no commonality, as we aim to study nation-states. The real value of this report lies in the study of China and America, and China in particular, as it experiences the most severe polarization of wealth not only among larger countries, but also among developing countries.

Although both societies experience great wealth polarization, China and the U.S. are actually quite different in terms of the cause of this phenomenon and public opinion about the issue.

Generally, wealth polarization is a natural result of development. Those with more skills achieve more and those with weaker skills achieve less. The demand for absolute property equality, as under communism, proved to be disastrous; the so-called “fair and just” welfare socialism in certain parts of Europe also led to sluggish economies and declining living standards. Therefore, polarization in itself is not the problem. The real question is how this polarization came into being, whether as a natural outcome of relatively and reasonably free competition, or as a deficiency of a flawed and arbitrary system.

94% of Americans Don’t Hate the Rich

Let’s take a look at America first. According to 2006 statistics, 1.14 million Americans and 9 million American families possessed fortunes of over $1,000,000. At the same time, around 30 million others, or 12 percent of the population, were earning less than $25,000 annually and were identified as “the poor.”

Despite the enormous rich-poor gap, most Americans aren’t really “anti-rich.” Members of the wealthier class got to where they are today either by sweating their way up the social ladder with talent and diligence, or by inheriting big bucks from their rich grandfathers. It should also be noted that American society has upheld the values of democracy and market trade over the past 200 years or so. Supervision of the market comes not only from the law, but also from the media. Inefficiencies are quickly detected and solved, and fair competition is protected as a result. In 1992, NBC aired a survey asking what Americans thought of the “big rich guys.” 79 percent said they didn’t care, 15 percent said they admired them and only 3 percent said they hated these guys.

Those who become rich simply through inheritance are very rare in American society. Most people on the Forbes Fortune list made it there with nothing more than their own intelligence and dedication. The world’s richest three people all come from the States; long-time front-runner Bill Gates, the founder of Microsoft, held the title for 14 years and owns assets estimated to be worth more than $50 billion. He’s richer than some nation-states in the world, but his enormous wealth doesn’t seem to arouse bitterness in fellow Americans; instead, they are grateful that he invented the operating system that not only changed their lives forever, but also immensely benefited the entire human society.

Closing the Gap Shouldn’t Be the Government’s Responsibility

Following the depreciation of technology, the Walton family, which owns the supermarket mega-chain Wal-Mart, once surpassed Gates to become the richest family on the planet, owning more than $60 billion in assets. The facts that Wal-Mart owns roughly eight thousand stores worldwide (including 3,800 in the U.S. and 163 in China), sells $400 billion worth of merchandise every year (a number equivalent to the annual U.S. national military expenditure) and employs two-hundred million people (more than the 143 million employed by the U.S. army), don’t really make Americans “jealous” or “hateful.” Rather than being overwhelmed by Wal-Mart’s empire-like nature, most people actually appreciate what the Walton family has done for consumers in America and around the world. They started from scratch 40 years ago and built everything with their own bare hands.

Although the world’s second richest man, Warren Buffet, began his business in the stock market, he is not known as merely a lucky “gambler,” but as a sharp investor with an eye for companies with “high potential.” His keen judgment of up-and-coming businesses makes his investment activities an important indicator of the health of the American economy. His recent $13 billion funding of railroads, for example, has been viewed as a signal of the revival of the American economy. The Wall Street Journal once commented on the hanging of merchants who took advantage of tumultuous times in revolutionary France, but said nothing like that would happen in America. Americans are neither interested in, nor fond of class clashes. They all hope that they themselves may graduate into the capitalist division one day.

Jacobs and Page, two American scholars who co-wrote the recent book Class War?, quoted public opinion, saying that over 75 percent of the population believes it is possible to become rich even if you have nothing to start with. Those surveyed agreed that wealth polarization is indeed severe in America, but also noted that it shouldn’t be up to the government to close that gap. More specifically, they thought this polarization should not be erased by “robbing the rich” through means such as high tax rates, but by individual ambition and commitment. According to a poll in 2002, even after the fall of technology stocks and 9/11, 81 percent of American college students still believed they would become richer than their fathers; 59 percent even said they would become millionaires.

Americans Enjoy the Highest “Happiness Index”

The fact that almost none of the American rich are government officials, nor have they used prerogative to accumulate wealth, might explain why Americans don’t hate rich people; the American society is one that values democracy and law. Another contributing factor would be individualism, a culture unique to the U.S. Americans believe in their own powers to create and achieve instead of depending on other means, such as revolution or class war.

This American characteristic was exemplified in a 2004 public poll involving 44 countries. When asked whether success depended on personal devotion or external circumstances, 65 percent of Americans agreed that it all comes down to personal commitment, a percentage twice as high as in Germany and Italy, and 2.5 times the percentage in China. Americans believe that they have potential. “Even the poor in the USA believe they can become millionaires, it’s just not the right time yet.”

This sense of accomplishment rooted in individual struggle makes Americans the happiest in the world. A 2002 social survey in 35 countries indicated that 56 percent of Americans felt “extremely happy” about their lives, while only 35 percent of French nationals and 31 percent of Germans felt the same.

Individualism Guides America

A public survey carried out by the Washington Post and ABC in 2003 revealed that 92 percent of Americans were “proud to be American,” while only 2 percent said the opposite. A poll by the famed Pew Research Center also confirmed that “92 percent of Americans are proud to be American.”

Japanese-American scholar Francis Fukuyama, known in the academic field for his books, The End of History and The Last Man, suggested in his book on cultural comparison, Trust, that the greatest trait of American culture is its “strong individualism.” He observed that “Americans don’t see individualism as a flaw, rather, they view it as a near perfect virtue, symbolizing creativity, pioneer spirit, initiative, and confidence in the face of authority. Therefore individualism usually produces pride. And Americans believe it to be the most attractive, distinctive part of their civilization.”

The Chinese Rich Own 32 Times as Much as the Poor

Let’s shift our attention to China now. Globally, wealth polarization is the most severe in China. According to official Chinese reports, there are now over 13,000 Chinese owning more than $100 million in assets. The “extremely poor” division however, which is categorized by a daily income of less than $1, includes 260 million Chinese and accounts for 20 percent of the population. Another survey conducted by the Chinese National Statistics Bureau revealed that the richest 10 percent of people owned 45 percent of the total national wealth, while the poorest 10 percent owned merely 1.4 percent of national wealth. The Chinese rich own 32 times as much as the poor!

In contrast to the situation in America, the Chinese public generally dislikes rich people. This may be explained by the fact that many Chinese suddenly became rich by maneuvering tactics, or even through collusion between bureaucrats and businessmen. Communist officials in particular, as well as their friends and families, can directly take advantage of loopholes in the administrative system and use their prerogatives to steal from the national wealth to such an extent that some Western scholars call the Chinese economy a “theft economy.” In this sense, the Chinese are actually anti-prerogative and anti-illegal actions when they say they dislike the rich.

According to a 2006 report named “An Investigation of the Salaries and Family Assets of Government Personnel in National and Local Administrative Branches” by the Chinese Academy of Social Science, 9,700 party officials and their families owned assets exceeding $100 million, accounting for 86 percent of the total number of Chinese who own more than $100 million. Government officials of numerous ranks now earn 8 to 25 times as much as their local city people, and 25 to 85 times as much as their local peasants!

The above report revealed that in Guangdong, Shanghai, Zhejiang, Jiangsu, Fujian, Shandong and Liaoning, party officials owned far more assets and real estate than average citizens. In Guangdong, a party official owned RMB 8 to 22 million on average. Shanghai officials owned about RMB 8 to 25 million each. The average assets of officials in these seven regions exceeded RMB 8 million, making all of them millionaires in U.S. dollars.

0.4 Percent of the Rich Hold 70 Percent of China’s Wealth

Not only do these officials themselves own enormous amounts of wealth, but their offspring usually land lucrative jobs as well. The previously mentioned publication indicated that 87 to 95 percent of the children of officials in these seven regions work in financially advantageous departments, for example, in finance, real estate and trade branches.

A World Bank report in 2006 said that 0.4 percent of the rich hold 70 percent of China’s wealth. In America, the highest percentage ever recorded was 5 percent of the population owning 60 percent of the nation’s wealth. What is more, this 5 percent not only earned their success by hard work, but also contributed 51 percent of national tax revenues. Most American government officials, on the other hand, are ordinary members of the middle class.

The grave wealth polarization caused by greatly unfair competition in China is unprecedented in human history. In the 1950s, the Communist Party eschewed people’s properties through the rural cooperation movement and nationalization of urban businesses; now, in the name of “Chinese socialism,” they split the loot among their own members and officials. Chinese society may seem stable for now, but it is doubtful whether the situation will remain so.