The World Bank’s chief economist, Justin Yifu Lin, addresses income inequality in China in a recently released essay. Reuters reports (via IHT):
In “China’s Dilemma,” a collection of papers co-published by the Australian National University and the Asia Pacific Press, Lin argued that fundamental flaws in China’s economic model were partly to blame for the yawning gap between rich and poor.
Lin criticizes a basic Communist Party economic tenet that puts, in the name of “efficiency,” the interests of corporations before those of workers and leaves it to government redistribution policies to deal with the ensuing inequalities.
“It is our task to ensure that in the course of development, the income of the poor grows faster than that of the rich, but it should not be accomplished by redistribution,” Lin writes.
Companies may be achieving high profits thanks to the emphasis on “efficiency,” but it is only because the state shields them from market competition and lavishes subsidies on them, Lin argues.
“Essentially, however, these profits are a kind of wealth transfer that will inevitably lead to social instability,” he warns.
