Poverty alleviation efforts must foster self-reliance
The Royal Swedish Academy of Sciences recently announced that Abhijit Banerjee, Esther Duflo and Michael Kremer have been awarded the 2019 Nobel Memorial Prize in Economic Sciences for their outstanding contributions to the research into the “daunting issue” of global poverty.
In terms of poverty alleviation studies, I have always believed that economics is a “science that benefits the people”, and China’s practical achievements in poverty alleviation are unparalleled. Not to mention that the country has left behind the economic poverty and educational and cultural backwardness that existed in the early days after the people’s republic was founded in 1949. Even in 1978, when the reform and opening-up policy was initiated, China’s impoverished population in rural areas was about 250 million under the 1978 poverty threshold, with a poverty rate of 30.7 percent.
According to the 2008 standard, there were still 40.7 million rural people living in poverty in China in 2008, with the figure falling to 26.88 million by 2010. Based on the 2010 poverty standard, namely 2,300 yuan (2010 constant price) per person per year, by 2018 the number had dropped to 16.6 million.
It is based on the above achievements that as far as the contribution to poverty reduction by experimental methods is concerned, the Nobel prize for poverty alleviation should have been awarded to those Chinese people who have made much bigger contributions in this field.
For our poverty alleviation achievements to be sustainable, however, we need to make timely and steady adjustments to our poverty alleviation policies, in particular to the transfer payment practice.
Chinese and foreign practices both show that just like anything else, the social security and welfare system, while helping to lift people out of poverty and acting as a safety net to stop people sliding into poverty, also has a flip side. At both the micro and macro level, the implementation of an excessive social security and welfare system can seriously undermine the motive force for a country’s economic and social development and even simmer social unrest.
Since the 1990s, China has practiced more and more transfer payments of various kinds, which have played a positive role in extending to people in economically underdeveloped regions a helping hand. But the practice has cultivated a habit of “laziness” among some people, making them lose the motivation to work harder. This trend needs to be reversed.
For some Chinese whose motivation for work has already gone beyond the “hunger discipline”, higher taxes, as a byproduct of an excessive social security and welfare system, are bound to undermine their enthusiasm for work. Given that social security and welfare expenditures, including on poverty alleviation, are ultimately financed by current and future taxes on workers, such kind of spending, if excessively inflated, will inevitably lead to excessive taxation.
From the perspective of economic and fiscal growth prospects, the all-inclusive poverty alleviation model is already difficult to sustain. Poverty alleviation expenditures consist of a number of spending items, such as spending on infrastructure, education and other areas, and as one of these items, the spending on individual “social security and employment” has brought an increasingly heavy financial burden to the country. The evergrowing share of the country’s total fiscal expenditures and social security expenditures in GDP has even caused some to believe that we are on the verge of strangling the nation’s economic vitality.
At the time of national economic growth deceleration, if impoverished regions and people continue to rely on assistance from others, that will risk fueling contradictions among different regions and even ignite broader social contradictions.
While conducting their poverty alleviation work, non-poor areas should give priority to helping impoverished areas and impoverished individuals cultivate a sense of self-reliance and an aspiration to work for a better life. Poor areas receiving large-scale assistance should be alert to the undesirable side effects of excessive welfare. It is estimated that by the end of this year, more than 90 percent of poverty-stricken counties will take off their “cap of poverty”, and the country will finish building a moderately prosperous society in all respects by 2020.
This may offer a window of time for the country to adjust its poverty alleviation policies. The author is a researcher at the International Trade and Economic Cooperation Institute of the Ministry of Commerce. The views don’t necessarily represent those of China Daily.