China has unveiled a new plan to fight the inequality gap in their country. This announcement comes amid a wave of public outcry against government elites exploiting their titles for personal gain. The goal of the package is to try and narrow the gap between the extremely rich and those in poverty. The package was backed by the National Development and Reform Commission and proposes 35 goals. One of the more interesting ways China is trying to approach redistribution is by raising the the minimum wage to 40% of average urban wages. This eliminates much of the overhead of government run redistribution programs, and more efficiently allocates the money. I found this article interesting as the United States has seen similar backlash about the growing income inequality.
This article was found on The Economist.
I found this article really interesting because it offers a different perspective of China than the one we are used to. It seems that China is recognizing its weaknesses and searching for a solution, even if, up to this moment, what is concrete is only the proposal.
Liberalizing interest rates is a necessary condition to make the market work. Keeping them artificially low could also have negative consequences in terms of speculation, if an excessive liquidity is created. This is what happened in USA in 2001, when FED cut interest rates to 1% to push investments. Excessive liquidity, in that case, lead banks to extend mortgages to unreliable creditors and contributed, in this way, to the subprime bubble creation. Moreover, in a benefit-cost perspective, pushing investment at the price of reducing savings for consumption doesn’t seem a good deal for the economy of a country.
Along the same lines is the decision to consistently raise minimum wages and, above all, to increase government spending in education. This last point is the key element to pursue a long-term development and increase equality.
It is possible that this plan has been approved mostly for populist reasons and it is not said that it will effectively be applied. But a redistribution in equality would be really important in a country that is first in the world for GDP but still backward in quality of living, guarantee of rights and political freedoms.
The article you chose I think relates very well to the issue of income inequality in the U.S. as you pointed out. The decline of government federally run agencies and increase of minimum wage can certainly aid in the assistance of inequality gaps. We can also see the issue of economic inequality is often due to supply and demand within labor markets. Competition among workers for employment can drive up or down a wage depending on the required need and supply of service for a job. This in turn can effect income distribution.