The development of the system has been characterized by certain stages and global events that led to modern day capitalism. Earliest among this is agrarian revolution in Europe that concentrated land into the hands of a few wealthy landlords at the expense of the multitudes who served as tenants and had to strive to attain the highest possible productivity.Next came Mercantilism whereby traders travelled and explored far away lands in order to obtain valuable goods that ould be sold in their home countries especially in European port cities.Key to this endeavor was the government support and backing of such merchants in order to expand their spheres of political power a case in point being the East India company which was given the mandate to govern and exercise control over India CITATION Ban07 \l 1033 (Banaji, 2007).Soon afterwards came the Industrial revolution characterized by increased mechanization in production and the division of labour and specialization the resultant of which was the modern factory models that have prevailed and dominated capitalism to date CITATION Bur03 \l 1033 (Peter, 2003).
The Peoples Republic of China is an interesting and complex state as far as its version of capitalism is concerned.Defined as a socialist market economy the major features of this design are an open market economy however the twist from normal capitalist models is the dominance of the state as a controlling entity in the factors of production.As a socialist state this model was introduced by Deng Xiaoping when he came to power during the Great Leap Forwad.Many have drawn parallels between this model and its variant the mixed-market economy characteristic of some Western nations. The distinction between the two lies in the level of state ownership and the strong arm political policies taken by the Chinese government in the socialist market economy. CITATION YuV10 \l 1033 (Yu, 2010).
In the year 2005 the privatization efforts were nearly stopped and reversed with governmental intervention intended to retain control of key sectors of the economy viewed as crucial to the government.Industries that soon came under complete state control were energy and power generation, armaments ,aviation,petrochemicals,shipping ,telecommunication and oil exploration.Private sector participation was forced into light industrial processes and the production of commodities for consumption.
Through the creation of large corporations that provide such key services the state was able to dictate the flow of capital by allocating resources only to those sectors or industries viewed as important and priority by the government. Needless to say this policy led to the growth of specific industries while stifling the development of those unsubsidized cash strapped industries. The non-priority industries could not attract the best labour due to low wages and soon deteriorated in value.
Most analysts have termed this as state capitalism instead because of the fact that production for use has been overshadowed by production for profit and that the high returns yielded by Chinese state-owned business ventures are not distributed to the people in an equitable manner across the board but rather are retained by state corporations and the small elite that controls the trade and operations of the businesses .As such this is a stark contrast to the letter and spirit of socialism which advocates for equality in the sharing of resources between the citizens in a state as is their right CITATION DuJ05 \l 1033 (Du & Zu, 2005).Resultant effects of this has been the weakening of the working classes in china since the market regulates the labour prices and due to the large Chinese population the majority of workers are paid meagre sums of money as the cabal of top managers and executives take home hefty salaries and perks.Wealth distribution is thus very unevenly balanced because there are very stark contrast between Chinese citizens just depending on whether one is politically connected or not.
The astronomical income inequalities continue to grow by the day which can be attributed to the shift from the labor intensive methods of production which were expensive to maintain to the cheaper capital intensive methods.Scores of workers are rendered jobless by the introduction of highly specialized and efficient machinery. It is in this regard that the number of citizens employed by once flourishing sectors such as the automobile and construction industries dwindle.The resultant unemployment and devaluation of the value of labour brings forth a gigantic wealth difference between the rich and the poor.An explanation for this is that the wealthy who control the factor of production spend less on labour due to the use of developed machinery while at the same time producing more goods.
The rich-poor gap continues to grow at a steady rate as the wealthy accumulate more and more while the poor are forced to rely on strained public resources. The affluent are able to afford extremely expensive lifestyles such as private jets,magnificent homes and lavish expenditure on jewelry and clothing. Such a fact is clearly demonstrated by the proliferation and growth of luxury brands in the major Chinese urban centres such as Beijing and Shanghai. It is concerning to note that a meagre portion of the Chinese population is in control of a significantly large proportion of the nations wealth.
Chinas Gini coefficient which is the yardstick of rural urban inequality has significantly grown over the years.According to experts at the Peoples National Academy of Sciences (PNAS)the coefficient was at 0.55 in the year 2012. CITATION YuX14 \l 1033 (Xie, 2014).Some economists argue that this ratio has reached its peak during specific periods of Chinese history all which fall in the 20th century such; the Great Famine in the 50s, the Cultural Revolution in the 60s and the Openness and global integration at the turn of the 21st century in the late 90s.Scholars argue that development of heavy industry in the urban centers led to rural -urban inequalities.Later this was further weakened by the policy of decentralization after the economic reforms in 1978 that widened inequalities between rural and urban people,inland and coastal people and overall general inequality CITATION Rav05 \l 1033 (Kanbur & Xiaobo, 2005).
According to Chinas National Bureau of Statistics in the year 2009 urban folk eraned 3.33 times more than their rural counterparts.Such a figure is very high compared to that recorded in previous years with the smallest difference seen in the year 1983 at 1.82. CITATION Nat11 \l 1033 (National Bureau of Statistics of China, 2011).
Critical services such as health and education offered to the common citizen are of low quality hence further weakening the standards of living for most ordinary Chinese citizens.Most of the poor folk have to contend with poor health services,indecent or no housing and even the lack of proper shelter. They have to work harder to sustain themselves and the end result is a struggle which is ironically the opposite of the doctrines of socialism that the state claims to intently pursue. A look at most of the rural farmers in the nation reveals that they practice subsistence farming which yields minimal return that is only enough to keep them afloat but not enough to create a surplus that can be traded for gain. It is in this light that some view the poor farmers mostly in the west and north west of the country as pre-agrarian.
Another ill brought about by the socialist market system of capitalism is famine which leads to the demise of many. State prioritization and focus on specific industries to foster an image of a proud and powerful growing nation has hived off resources meant for agriculture.In return the government invests less in food production and subsidies in the agricultural sector producing a situation whereby there is a decline in food production that drives the cost of food upwards.The poor in turn, cannot be able to afford proper diet at such exorbitantly rising costs and many lose their lives.
The solution to this challenges ultimately lie in the formulation and development of favourable policies that spur employment and increase employment and production yields.It is important for the Chinese government to implement changes to the rural land rental market so as to enable farmers have access to land and machinery to grow from subsistence farmers to commercialized producers who can produce enough not just for their own consumption but also for surplus that can be sold at market. In implementation of such a policy the government will alleviate two existing sources of income inequalities: unemployment and subsistence farming. More and more citizens will be able to earn a decent living in the vast farms inland hence few will feel the need to migrate to the coastal cities in search of employment.
The one-child social policy should also be changed in order to avoid the pitfalls of an aging population that will worsen the current income inequality. Subsidies to support the aging population are a drain to the economy because the money is not used in the improvement on the factors of production. Reversal of this policy will however produce a young budding population and allocation of resources towards the education of the young vibrant population will provide not only enough labour but also creativity that triggers invention and entrepreneurship CITATION Hai11 \l 1033 (Zhong, 2011).
As concerns the socialist market system, the state needs ought to direct enough funds from its coffers to go straight into social services such as education healthcare and agriculture. To achieve this a couple of measures ought to be put in place such as reduction on expenditure in some of its national pride industries in order to plough them into uplifting the lives of the multitudes of the nations poor.In turn the vicious cycle of income inequalities will be relieved among the population. The state can reduce the impediments to the mobility of labour and encourage the growth of the services industry. CITATION Lou05 \l 1033 (Kuijs & Wang, 2005).
Income inequality in Peoples Republic of China is as a result of the capitalist socialist market system whereby the state devotes resources to certain industries in line with state ambitions and goals.As a result less is allocated towards social initiaves that ought to elevate the poor such as education and healthcare.In order to counter this the state should modify the model in line with the views of John Maynard Keynes and create wealth by boosting the demand for goods and services among its citizens.To achieve this,the state needs to uplift the purchasing power of its poor citizens.It is only then that income dispa...
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