Supply-Side Economics, Chinese-Style

Op-Ed: The latest Chinese government plan to tax the rich to bridge the income divide will have the opposite effect. In China -- perhaps even more than the West -- markets must be free, taxes low and Leviathan reigned in to increase and share wealth acros

Rollsing in dough (Cory Doctorow)
Rollsing in dough (Cory Doctorow)

BEIJING – In his report this week to the Chinese National Congress, China's Prime Minister Wen Jiabao laid out the government's new plan to raise taxes on high-income earners as a way to solve the problem of wealth disparity.

"Narrowing the gap between the rich and poor" and "common prosperity" have always been obsessive economic slogans of the Chinese regime. China's personal income tax system is indeed progressive, with rates applied so that the more one earns the more tax one pays. China's current top marginal tax rate is at 45%, comparable with some Western European countries.

Yet has levying high taxes on the rich narrowed the gap between China's rich and poor?

The Gini coefficient, which measures the degree of income disparity, has exceeded international warning levels in China since 2000. In egalitarian Sweden, it is less than 0.25, while in South Africa it is more than 0.6. In China, it stands at around 0.5.

Cai Jiming, a member of the Chinese People's Political Consultative Conference (CPPCC), made waves in 2009 when he pointed out that a government survey found that 0.4% of the population in China possesses 70% of the wealth. "The concentration is even higher than that in America," he declared. Since then, the voices warning that China's disparity of wealth has reached a dangerous level have grown louder.

Still, the approach of levying higher taxes on the rich does not seem to tackle the issue at all. Even in the United States, using tax regulation to adjust the difference between the privileged and the destitute has proved to have a very limited effect. Between 1952 and 1981, the highest marginal personal income tax rate imposed by the U.S. federal government on rich people were between 50% and 92 %, while the poor were taxed between 11% and 22.2%.

Although the applicable tax rate difference is so great, the impact of the tax on high-income groups is very small. In 1981, the top 15% of rich Americans' pre-tax income represented 38% of total revenue, while this ratio fell only to 35% after tax.

Taxes can't adjust the difference between the poor and the rich. Besides, to strike at the rich can create a moral hazard. As long as one gets rich through honest labor, no matter how high one's earnings, you are blameless. To get rich is not a crime. If taxation were used as a punishment on those who work hard to earn more, or if depriving them of their possessions is used to narrow the gap between them and others, it may actually have the inverse effect of the goal of "common prosperity" – collective poverty. Indeed, the Cultural Revolution was an extreme example of such an effect.

Luck and sweat

The gap that exists between the rich and the poor is not a problem. People have different capabilities, intelligence, luck, knowledge and levels of effort. It's only natural that people's earnings vary widely, and people don't feel dissatisfied with this kind of gap.

The kind of wealth disparity between the top and bottom layers of Chinese society today is, however, not formed by the difference of income through labor, but its origin lies in corruption and collusion between officials and businesses. Their unjust enrichment causes a seriously unfair social distribution of wealth.

Under such circumstances, it is absolutely impossible to tax corrupt revenue. The latest proposal can only harm the middle class who work honestly. Allowing the powerful to carry on unchecked with their proliferating "grey" income, while supposedly attempting to reduce the disparity of the rich and the poor is total nonsense.

The answer to helping the poor is not by limiting or fighting against the rich people who bring the wealth, but in giving the poor the ability and the opportunity of creating their own wealth. Robin Hood-like measures such as targeting landlords or redistributing land, which were implemented in the Cultural Revolution, are not going to provide sustainable help to the destitute. On the contrary, it just deprives the rewards of people who are producing and pushes the poor deeper into an absolute abyss of poverty.

What the poor in China need today is opportunity. Yet, many of our businesses are forced to go through layers and layers of control and red tape. Only rich people with close relationships with public officials can enter the system easily. Meanwhile, state-owned enterprises have the monopoly of all important resources thanks to the government's support. The small and medium-size enterprises that provide most jobs to the country's workers have to struggle to survive under heavy taxation and harsh control. How does one expect to shrink the gap between the rich and the poor like this?

Only the loosening of governmental control, elimination of privileges, breaking-up of administrative monopolies and the establishment of a truly free market will permit the poor to pursue a better life.

Read the original article in Chinese

Photo - Cory Doctorow

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food / travel

The Food Truck, A Sign That The White And Wealthy Are Moving In

In San Diego, California, a researcher tracked how in the city's low-income neighborhoods that have traditionally lacked dining options, when interesting eateries arrive the gentrification of white, affluent and college-educated people has begun.

Balboa Park Spring Fling Food Truck festival

San Diego Food Trucks via Facebook
Pascale Joassart-Marcelli

SAN DIEGO — Everybody, it seems, welcomes the arrival of new restaurants, cafés, food trucks and farmers markets.

What could be the downside of fresh veggies, homemade empanadas and a pop-up restaurant specializing in banh mis?

But when they appear in unexpected places – think inner-city areas populated by immigrants – they're often the first salvo in a broader effort to rebrand and remake the community. As a result, these neighborhoods can quickly become unaffordable and unrecognizable to longtime residents.

An appetite for gentrification

I live in San Diego, where I teach courses on urban and food geographies and conduct research on the relationship between food and ethnicity in urban contexts.

In recent years, I started to notice a pattern playing out in the city's low-income neighborhoods that have traditionally lacked food options. More ethnic restaurants, street vendors, community gardens and farmers markets were cropping up. These, in turn, spurred growing numbers of white, affluent and college-educated people to venture into areas they had long avoided.

This observation inspired me to write a book, titled The $16 Taco, about how food – including what's seen as "ethnic," "authentic" or "alternative" – often serves as a spearhead for gentrification.

Take City Heights, a large multi-ethnic San Diego neighborhood where successive waves of refugees from places as far away as Vietnam and Somalia have resettled. In 2016, a dusty vacant lot on the busiest boulevard was converted into an outdoor international marketplace called Fair@44. There, food vendors gather in semi-permanent stalls to sell pupusas, lechon (roasted pig), single-sourced cold-brewed coffee, cupcakes and tamarind raspado (crushed ice) to neighborhood residents, along with tourists and visitors from other parts of the city.

Informal street vendors are casualties.

A public-private partnership called the City Heights Community Development Corporation, together with several nonprofits, launched the initiative to increase "access to healthy and culturally appropriate food" and serve as "a business incubator for local micro-entrepreneurs," including immigrants and refugees who live in the neighborhood.

On paper, this all sounds great.

But just a few blocks outside the gates, informal street vendors – who have long sold goods such as fruit, tamales and ice cream to residents who can't easily access supermarkets – now face heightened harassment. They've become causalities in a citywide crackdown on sidewalk vending spurred by complaints from business owners and residents in more affluent areas.

This isn't just happening in San Diego. The same tensions have been playing out in rapidly gentrifying areas like Los Angeles' Boyle Heights neighborhood, Chicago's Pilsen neighborhood, New York's Queens borough and East Austin, Texas.

In all of these places, because "ethnic," "authentic" and "exotic" foods are seen as cultural assets, they've become magnets for development.

Food vendor at outdoor international marketplace called Fair@44.

Fairat44 via Instagram

A call for food justice

Cities and neighborhoods have long sought to attract educated and affluent residents – people whom sociologist Richard Florida dubbed "the creative class." The thinking goes that these newcomers will spend their dollars and presumably contribute to economic growth and job creation.

Food, it seems, has become the perfect lure.

It's uncontroversial and has broad appeal. It taps into the American Dream and appeals to the multicultural values of many educated, wealthy foodies. Small food businesses, with their relatively low cost of entry, have been a cornerstone of ethnic entrepreneurship in American cities. And initiatives like farmers markets and street fairs don't require much in the way of public investment; instead, they rely on entrepreneurs and community-based organizations to do the heavy lifting.

In City Heights, the Community Development Corporation hosted its first annual City Heights Street Food Festival in 2019 to "get people together around table and food stalls to celebrate another year of community building." Other recent events have included African Restaurant Week, Dia de Los Muertos, New Year Lunar Festival, Soul Food Fest and Brazilian Carnival, all of which rely on food and drink to attract visitors and support local businesses.

Meanwhile, initiatives such as the New Roots Community Farm and the City Heights Farmers' Market have been launched by nonprofits with philanthropic support in the name of "food justice," with the goal of reducing racial disparities in access to healthy food and empowering residents – projects that are particularly appealing to highly educated people who value diversity and democracy.

Upending an existing foodscape

In media coverage of changing foodscapes in low-income neighborhoods like City Heights, you'll rarely find any complaints.

San Diego Magazine's neighborhood guide for City Heights, for example, emphasizes its "claim to authentic international eats, along with live music venues, craft beer, coffee, and outdoor fun." It recommends several ethnic restaurants and warns readers not to be fooled by appearances.

Longtime residents find themselves forced to compete against the "urban food machine"

But that doesn't mean objections don't exist.

Many longtime residents and small-business owners – mostly people of color and immigrants – have, for decades, lived, worked and struggled to feed their families in these neighborhoods. To do so, they've run convenience stores, opened ethnic restaurants, sold food in parks and alleys and created spaces to grow their own food.

All represent strategies to meet community needs in a place mostly ignored by mainstream retailers.

So what happens when new competitors come to town?

Food vendor at outdoor international marketplace called Fair@44.

Fairat44 via Instagram

Starting at a disadvantage

As I document in my book, these ethnic food businesses, because of a lack of financial and technical support, often struggle to compete with new enterprises that feature fresh façades, celebrity chefs, flashy marketing, bogus claims of authenticity and disproportionate media attention. Furthermore, following the arrival of more-affluent residents, existing ones find it increasingly difficult to stay.

My analysis of real estate ads for properties listed in City Heights and other gentrifying San Diego neighborhoods found that access to restaurants, cafés, farmers markets and outdoor dining is a common selling point. The listings I studied from 2019 often enticed potential buyers with lines like "shop at the local farmers' market," "join food truck festivals" and "participate in community food drives!"

San Diego Magazine's home buyer guide for the same year identified City Heights as an "up-and-coming neighborhood," attributing its appeal to its diverse population and eclectic "culinary landscape," including several restaurants and Fair@44.

When I see that City Heights' home prices rose 58% over the past three years, I'm not surprised.

Going up against the urban food machine

Longtime residents find themselves forced to compete against what I call the "urban food machine," a play on sociologist Harvey Molotch's "urban growth machine" – a term he coined more than 50 years ago to explain how cities were being shaped by a loose coalition of powerful elites who sought to profit off urban growth.

I argue that investors and developers use food as a tool for achieving the same ends.

When their work is done, what's left is a rather insipid and tasteless neighborhood, where foodscapes become more of a marketable mishmash of cultures than an ethnic enclave that's evolved organically to meet the needs of residents. The distinctions of time and place start to blur: An "ethnic food district" in San Diego looks no different than one in Chicago or Austin.

Meanwhile, the routines and rhythms of everyday life have changed so much that longtime residents no longer feel like they belong. Their stories and culture reduced to a selling point, they're forced to either recede to the shadows or leave altogether.

It's hard to see how that's a form of inclusion or empowerment.The Conversation


Pascale Joassart-Marcelli is a Professor of Geography and Director, Urban Studies and Food Studies Programs at San Diego State University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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