Core-Crust Society of China

The new year, 2007, came in, not waiting for the dusts to settle in the scandal of Shanghai's social insurance funds. And the argument on the plan of pension, which has only covered less than one eighth of the population of China, is going fiercely without any sign to converge to a conclusion. While just five days earlier, on the other side of the Pacific, Arnold Schwarzenegger, Governor of California, proposed extending health care coverage to all of California’s 36 million residents. If I had laughed at him as a brainless muscular robot before, I 'd now take it back. The contrast between the largest Socialistic nation and the largest Capitalistic nation reminds me of an essay in the German best-seller "World War for Wealth: The Global Grab for Power and Prosperity". So, I decide to excerpt part of it here as an alert.

• "When it comes to redistributing power and wealth, the state plays an important -- one could argue a decisive -- role. In the West, governments ensure that the most productive members of the economy help the whole of society. Companies keep most of the profits. But not all.
  
  The result is beneficial to everyone, and not just to those directly involved in producing wealth. The social welfare state facilitates the transfer of money from the sphere of production to those sectors of society where no wealth is produced, only consumed. Wealth created in society's economically productive core thus reaches those people on the perimeter not directly involved in a country's economic activity. Take pensioners as an example. They were once part of the productive core, but now are not -- they have meandered from the hot core to the cold crust. The money these retirees need to survive is now earned by those working today.
  
  This linking of the working world with those who have already retired is called a generational contract. It is a system characteristic of most countries in the West where the core and the crust are connected.
  
  Children are also on the non-productive fringes of society, though they are moving in the opposite direction of the pensioners. Eventually, children will enter the society's economic core and will begin to make their contribution to the production of wealth.
  
  It is important to understand the role of the Western state in all this: The state ensures that the productive sphere is linked to the unproductive sphere -- that capitalism and the welfare state work together. It is a cooperation that reaches back as far as 100 years in some instances and has developed into a number of stable pacts known as the social safety net. It is a system that cannot be canceled -- indeed it is one of the inalienable characteristics of Western economic systems."
  
  
• "In Germany, the obligation to redistribute wealth is explicitly stated in the constitution. It stipulates that society must use energy created at the productive center to warm those who might otherwise be freezing at the margins.
  
  In China, the state has another function entirely: It acts as a firewall between society's center and those at the fringes in order to ensure that nothing from the boiling core is ever allowed to cool at the outer edges. The retreat of state-controlled industry meant bidding farewell to the social net -- a notion Karl Marx would have despised.
  
  Life-long employment contracts were replaced with temporary contracts, and firing workers became a possibility. If employees refused to buy the apartments their companies had provided for them, they were simply forced out. In the private sector, social welfare was ignored right from the outset. It was left up to the family -- or nobody at all -- to take on the social responsibility the government and companies had abandoned. Since then the state has stood ready to defend the separation of the haves from the have-nots with force. And the China of today is home to the ugliest labor market practices in the world."

• "The Chinese communists are making no secret of their shift in mentality. The constitution has even been amended -- a message to everyone that this is no reform, but a revolution. Until March 2004, the state had been responsible for the "guidance, control and regulation" of the private sector. The state was the big brother that disciplined and badgered private companies -- it carried the carrots and sticks. The new constitution has, for the first time, declared private property to be a private matter.
  
  Property is now defined as inviolable. Even inheritance will be protected in China in the future. Article 11 of the recently approved constitution even calls on the state to serve the private sector and to provide "encouragement and support" to the capitalists. The redistribution of privately earned wealth for the good of society, as the German constitution stipulates, is thus transformed into a state responsibility for protecting the private sphere. Capitalists are the new ruling class and property in China is now bestowed with more rights than the people. Indeed, no other country in the world courts its entrepreneurs to the extent that China does."
  

• "The contrast with the West couldn't be greater. Whereas European workers are increasingly landing in early retirement programs, in work-creation schemes, or on the dole, Asia is heading in the opposite direction. New employees are constantly being brought into the production process -- albeit under the brutal work conditions dictated by the system. The non-existing social state thus fulfils a further function. It not only keeps the inner-core of the economy from wasting energy by heating the fringes, it also brings extra manpower into the system. Because of the lack of social welfare, these workers have no choice but to offer their services at any price.

  Company's profits come from the difference between the starvation wages earned by employees and the money made from sales. This is what fuels the steadily increasing temperature at the center of the Chinese, Indian and many other Asian economies. The massive amount of manpower available means that labor costs will remain as cheap as they currently are for the foreseeable future. Each year, millions of people in China alone leave the countryside in order to serve the country's industry. They live in cramped quarters, share beds with one or two other workers and make do with wages as low as a few cents an hour. And there are an estimated 175 million unemployed people in China and 100 million unemployed people in India who can still be utilized. And that's not even to mention the 375 million people still tilling the land in each of the two countries who are just waiting to get their chance in the city. This manpower reserve alone is larger than the entire working population of the United States and Europe combined.
  
  It is important to understand the difference between a state on the march and a society on the wane: The unemployed don't have the same significance in every part of the world. In the West, the unemployed signify the past and are a burden to the state because they cost money. Those out of work in China, on the other hand, are the energy reserve of the future -- and are useful to the economy because their presence helps keep wages down for those who do have jobs. They ensure that the Chinese workers who are already employed stay cheap and cheerful.
  
  The strategy of the Asian leaders is both brutal and clever. Brutal, because governments are now excluding millions of their fellow citizens from growing prosperity. Many people in the countryside, in particular in the north of the country, see a China on television that has little to do with their daily lives. But the strategy is also clever because it allows the state to jealously guard its core growth. The result could very well be an export industry of proportions terrifying to the rest of the world."

I'm not sure about the future of my motherland. However, though a utopia is not realizable definitely, I hope for a better one than the present, in which even the crust could be warmed.