Common Prosperity and Levelling Up
Common prosperity is about sharing wealth with the ‘Third Distribution’ being one mechanism to achieve this. Levelling up says nothing about the contribution expected from the wealthy.
It is rare for a British prime minister to announce the intention to pursue a policy pioneered by the People’s Republic of China. It is rarer still for that to be a politician of the populist Right. And yet, that is what happened when Prime Minister Boris Johnson delivered his long-awaited speech at the Conservative Party Conference in Manchester recently. He did not use the term ‘common prosperity’ but that is what he meant.
Common prosperity, a clearly stated objective of policymakers in China, is much misunderstood. Those in the Western media with limited understanding of China have likened common prosperity to a piñata, a gift box most often associated with Mexico but originating in China, or, even more insultingly, to ‘a carrot dangling in front of a donkey’.
Recent international comment has largely focussed on the so-called ‘Third Distribution’, the encouragement of large companies to allocate some of their profits to philanthropic causes. This is what socially minded US entrepreneurs did at a similar point in America’s economic development. Somewhat strangely, this has been presented as a ‘threat’, a ‘crackdown’ and as something ‘alarming China’s billionaires’. It has also been presented as something new which it is not. China’s larger corporations have, for example, been contributing large sums to poverty alleviation since at least the 1990s.
In fact, the Third Distribution is only one small component of the much more ambitious social project to achieve common prosperity. This aims to share China’s growing wealth more equitably, narrowing the discrepancies in economic development and living standards that have emerged between regions and between rural and urban areas. The result will be an olive-shaped distribution of income and wealth; few will have excessively high living standards or bottom low ones. ‘Common prosperity’ is not a political slogan but a social policy objective with a pilot project underway in the relatively prosperous Zhejiang Province. This, it is hoped, will become a model for China’s further development.
At the time of writing, the Zhejiang Construction Plan has nine broad development themes and 52 specific objectives, too many to discuss in detail. Included, though, is the realization of full, high-quality employment through investment in science-based industry, modern agriculture, integrated transport, childcare and lifelong vocational training. There is also a target ceiling to any transitional rise in unemployment. A second intention is to narrow regional, urban-rural and income inequalities to achieve and demonstrate the feasibility of an olive shaped social structure. A third goal is the provision of universal access to high-quality public services with further investment in housing, health, education and environmental protection; this, together with reform of social security and social assistance, is intended to ensure that all Zhejiang residents can enjoy common prosperity.
In his conference speech, and in his characteristically up-beat style, Prime Minister Johnson laid out an almost identical vision for Britain. Instead of ‘common prosperity’, he spoke of ‘levelling up’:
“We are dealing with the biggest underlying issues of our economy and society, the problems that no government has had the guts to tackle before… I mean the long-term structural weaknesses.”
“We are embarking now on a change of direction that has been long overdue in the UK economy. We are not going back to the same old broken model with low wages, low growth, low skills and low productivity. We will get on with our job of uniting and levelling up across the UK — the greatest project that any government can embark on.”
“We have one of the most imbalanced societies and lop-sided economies of all the richer countries. It is not just that there is a gap between London and the Southeast and the rest of the country, there are aching gaps within the regions themselves.”
“This is not just a question of social justice; it is an appalling waste of potential. And it is holding this country back because there is no reason why the inhabitants of one part of the country should be geographically fated to be poorer than others.”
With unintentional irony, Johnson lauded the achievements of Margaret Thatcher, a Conservative predecessor as prime minister whose policies he is seeking to reverse. During the 1980s, the Thatcher government legislated against the power of the trade unions to lower wage demands and reduce export prices so that Britain could compete in a globalised market. During her time in government, poverty tripled and increasingly involved working families; the poverty rate has never returned to pre-1980 levels.
Moreover, rising income inequality matched the highest rate of increase ever experienced by China, but this was intentional — to increase financial incentives. It was not, as in China, an undesirable consequence of exceptionally rapid economic growth.
Britain is still suffering the legacy of Thatcherism. Riven by economic and social disparities, it is a country that is ill at ease with itself. Elected on the negativity of ‘Brexit’ (Britain leaving the European Union) and in the absence of a credible alternative government, Johnson needs to foster social cohesion and says that he will do so by ‘levelling up’.
It is not clear whether Johnson will be able to deliver levelling-up, his version of common prosperity, or whether he even wants to. Some commentators have argued that his speech was merely intended to divert attention away from the results of his failing policies: continuing high rates of Covid-19; rising inflation; the army needed to deliver petrol to consumers; and, due to disrupted supply chains, pigs unable to be slaughtered or turkeys killed in time for Christmas. Moreover, his speech has been much criticised — ‘bluster and buffoonery’ — by the vested interests that have benefited from Britain’s concentration of wealth during the 30 years since Margaret Thatcher was prime minister.
With Prime Minister Johnson and President Xi Jinping sharing common objectives, it is the former who can learn from the latter. While Boris’s attachment to levelling up is a short-term and partial response to a self-inflicted problem, China’s commitment to ‘common prosperity’ is a long-term strategy. Professor Li Mianguan, of Sun Yat-sen University, has identified four stages in its evolution during which it has been adapted to changing economic and social conditions. Initially, in the 1950s, it was a political ideal, albeit one that motivated important land reforms. Then, in the 1980s with the opening of the economy, the emphasis was placed on generating prosperity that could in future be shared. By 2002, at the time of the 16th National Congress of the Communist Party of China, sufficient wealth was being generated to enable a process of redistribution and welfare reform, an agenda taken forward by President Hu Jintao under the banner of creating a ‘harmonious society’. Now, absolute poverty having first been abolished, the process of realising common prosperity has begun in earnest with clear evidence of progress to be achieved by 2035.
If, therefore, there is any major difference between Johnson’s ‘levelling up’ and common prosperity, it is that China has a plan to achieve it and that Britain needs one. There may be, though, one other difference to do with either presentation or honesty. Common prosperity is about sharing wealth with the ‘Third Distribution’ being one mechanism to achieve this. Levelling up says nothing about the contribution expected from the wealthy. If the disadvantaged are to be left to level up by themselves, it will never happen. Thatcherism proved that.
The article reflects the author’s opinions, and not necessarily the views of China Focus.