Whenever we see china in the news it’s normally for some impressive statistic about building
stuff, or how it is now home to the most millionaires in the world, or maybe it’s even an article
about whatever geopolitical tomfoolery they are trying to pull this week.
But what is often forgotten about this is that behind the somewhat intimidating outward
appearance of economic might and glistening skyscrapers, china is an extremely poor country.
This almost sounds a bit paradoxical given the wealth that is so evident from the outside.
Never the less average incomes in China are still less than $15,000 USD’s per year,
and that’s average, so in a nation that reports a Gini coefficient of 0.47 with some
independent research noting this could be as high as 0.73 that mean’s there are a
lot of poor people at home in this economic miracle.
In plain English, this means upwards of half a billion people in China are living on less
than $10 per day, primarily made up of those still living in rural areas.
Now this fact is not lost on the Chinese government, who know that a growing wealth divide in their
worker’s paradise is not a great look, especially if that divide is between the cities fueling
growth and the farmers feeding them.
That is why in just the last 5 years the government has poured the equivalent of over 800 billion
dollars into aid in area’s where extreme poverty is still commonplace. This is to say
nothing on state-owned enterprises which easily bring this running total to over a trillion
dollars in the same time period.
A trillion dollars in 5 years, that’s more than the entire GDP of 3 quarters of the world’s
countries, on one single welfare project.
Even for a government as wealthy as China’s, this is ultimately not sustainable.
So a new solution was needed to make these systems more efficient at solving core issues
rather than alleviating the symptoms with handfuls of cash.
And there might be a lot to take away from what they have done so as always we need to
understand a few things.
How much poverty is there actually left in china?
Why is this so difficult to measure?
Why does China care so much?
And how might cows be the solution to this whole problem?
Intro Add
Now poverty is one of those things that is surprisingly
hard to quantify which is the first real issue for governments that are trying to address
this issue.
Incomes are the most used metric, and almost every statistic you have likely heard on the
issue will say something like these people live on less than 2 dollars a day, and for
what it’s worth we have done exactly the same thing already in this video.
But there are two problems with this, the first is that some people can be extremely
comfortable with not much income.
Some retirees would be a good example of this. They might own their own home fully paid off
and have a nice pile of cash savings so they are very comfortable, but with interest rates
as low as they are they might technically have an income below the internationally accepted
poverty line.
An asset means test can address this situation but then what if they own nothing live with
affluent children as is commonplace in China.
It’s not impossible to work around but it is difficult, meaning more money is going
to go to auditors and government middlemen rather than the people who really need it,
especially when we are talking about a population as large as china’s, with let’s be honest
a pinch of corruption.
The second problem is purchasing power parity, or PPP.
$20 per day in rural China or most countries in Southeast Asia and Africa would afford
you a pretty comfortable lifestyle, but $20 per day in San Fransisco, Sydney or London
would pretty much make you destitute.
It’s for this reason that measures are put in place to address the relative purchasing
power of a dollar in a region.
For example, a week’s worth of groceries might cost $5 in rural farming villages because
the grocer’s overheads are lower due to lower staff salaries, lower rent or cost to
own a premises, and lower transport costs on account of them being in and amongst where
the food is made.
If we compare that to one of our ritzy global cities where even a similarly modest grocery
trip would cost $50, you can see that a dollar in rural china has 10 times the purchasing
power so even if someone was to earn 1/10th as much money they could live a similar lifestyle
right?
Well that’s the theory, but unfortunately it is a wildly outdated way of thinking
And here’s why
ADD
While it’s true that purchasing power parity can afford similar lifestyles in two totally
isolate economic systems with two totally isolated sets of inputs and outputs this is
just not how the real world works in the age of globalization.
Take something like a phone. These devices have changed how we have lived our lives and
are incredible tools for communicating and having access to information wherever it is
you go.
What’s more, is that not having one of these devices is a serious handicap in the modern
world. Not being able to access the internet to sell goods, or discuss business deals or
even order supplies makes it next to impossible to compete with people that do have phones.
This is part of the reason why there are more people on earth with a smartphone than there
are with flushing toilets.
The thing is though, smartphones are expensive. Even to you or I who statistically speaking
is watching from a developed country, see purchasing a new phone as a pretty serious
investment.
To someone earning less than $10 a day it’s an investment that is almost impossible to
make.
Now phones are just one example, there are also things like electricity, medicine, farming
equipment, fertilizers and clothing that have prices that aren’t heavily influenced by
where they are being purchased.
Most of the cost of making medicine or personal care items isn’t determined by its final
retail location so the low local overheads mean very little. And even if it did alter
prices enough to make a difference that discount wouldn’t last for very long.
People from the cities would just come in and buy up these cheap imported items which
would drive up demand and prices.
If you don’t believe would bother traveling this far to get these rather mundane items,
go and try to buy lip cream or baby formula in a pharmacy here in Sydney.
Anyway you get the idea, poverty is extremely complicated and while there are blanket definitions
like this general guide from the world bank, there is no black and white, which means any
solutions almost need to be expensive to cover everybody that might be in poverty, or expensive
to hire enough manpower to determine who truly is, which put’s us right back to a situation
where a government like the CCP is piling hundreds of billions of dollars a year into
fundamentally unproductive area’s of their economy.
Which begs the question Why do they even bother?
It would be nice to imagine that governments around the world are trying to alleviate poverty
because people suffering from hunger, poor living conditions and untreated conditions
is sad.
Now in fairness this is part of it. Governments are in one way or another beholden to their
people and making sure those people are happy and healthy is part of their job.
But in reality, poverty in china causes some much more immediate problems for the powers
that be.
The nation is heavily authoritarian so personal liberties and freedoms are roteinely infringed
upon in ways that would not be tolerated in most western nations.
Now despite what a lot of outside observers may think the people of china are not oblivious
to this fact, but they don’t really care because this government as strict as it may
be has improved their lives drastically.
This verges on sociology more so than economics but multiple studies show that Chinese citizens
have a lot more belief in their government to provide good outcomes particularly economic
outcomes.
Most of the country has gone from living in mud huts to world-class cities in a single
lifetime and if the price that they needed to pay to do that was a VPN subscription well
then so be it.
But if it becomes obvious that the government can’t provide this improvement to everybody
then one of their biggest redeeming factors becomes nullified in the public psyche.
On top of this, it’s just embarrassing.
A big part of the reason we don’t think of China as a place where poor people live
anymore is because of how much effort the government put on creating this outward appearance
of grandeur.
Look at how much money is spent on athletes and facilities to become a major sporting
power, or how any foreign film that wants access to the Chinese box office has to present
the country in a positive light, and yes of course even these amazing cities themselves
are all in part to make the chinese system look like a massive success.
But all that hard work can just as quickly be undone by even the slightest blemishes
of poverty showing.
So then how does china plan to
Fix this with cows?
A major social program has been rolled out in some of china’s poorest provinces which
is giving livestock to farmers which had previously been growing just vegetables.
This has shown some amazing results which have been reported by the government as well
as a host of independent media outlets.
You see this is almost like a nationwide adoption of the old saying, fish for a man and he will
eat for a day, teach a man to fish and he will eat for life.
Cows provide a great return on investment, they can eat food that is not suitable for
human consumption while also providing milk, fertilizer, a workforce, more cows, and well
you know, a steak dinner.
Of course, mechanized farming will be more competitive on an open market, but these towns
don’t really care about that, these cows simply work as a way to boost extremely modest
incomes.
We have recently explored a proposal that would give every American a few thousand dollars
worth of shares at birth in order to compound over their lifetime to then be used to fund
their retirement.
The core appeal of this scheme was that it shifted the burden of supporting an aging
population from the taxpayer to the financial markets.
The system that has been adopted in china moves the burden from the taxpayer to a cow,
which in this day and age might be a more stable investment
It also solves alot of the distribution issues, because someone that doesn’t necessarily
need government support but is not going to say no to free money might say no to a cow
living in their home.
The fact that a cow is you know a cow, means that it takes a lot of time and effort to
get utility out of which means only those that are poor enough to really need the tiny
amount of money to be made raising a single cow will take up this offer.
It also gives the people involved agency over their own destiny rather than waiting around
for the next government handout.
a report by the new york times told the story of a poor potato farmer which had been part
of this program.
Jai Haunwen was given a large cow that produced two healthy calves and provided dairy for
himself and his extended family for three years, he later sold the cow for the equivalent
of $2,900 American dollars which was more than he would normally make in two years growing
potatoes. He plans to repeat this process with the two
new cows.
the money he made was put to use to buy medicine for his arthritic knee as well as buy more
vegetables for his family in the local market.
“It was the best cow I’ve ever had” mr jai said.
Outro add.