Poverty Alleviation Comparison: China and the U.S.

(By: Joshua Xu)

Introduction

Poverty alleviation is characterized by a plethora of sub-policies but is generally spearheaded by the federal government and aims to grossly improve quality of life and initiate economic growth. Targeted poverty alleviation enacted by the Chinese government focuses specifically on rural entities; this can be evaluated in tandem with the holistic poverty policies of the United States. Both distinct strategies have their benefits and drawbacks that have shaped the socio-economic culture of both respective nations. Direct comparison of the respective poverty alleviation policies between nations and their contextualization within economic policy can offer better insight into the efficacy of specific programs. Assessing poverty also assists developing countries gauge effectiveness of development strategies.

Chinese Targeted Poverty Alleviation

In China, those below the government-set poverty line of 2,800 yuan per year make up approximately 0.04% or 5.51 million of the 1.393 billion people substantiated by China’s National Bureau of Statistics. “Targeted Poverty Alleviation” adopted by President Xi in 2013 was the strategy for China to become a “moderately prosperous society”, which was precluded by the fact that certain populations (i.e. those separated by geographic isolation in rural villages) would always remain inherently remote. This means that regardless of how large China’s GDP becomes, those who are inextricably poor will remain that way. Realization of this means that individualized policies like those uptaken by China would be more successful. Since 2013, China has brought between 10 and 14 million people out of its definition of absolute poverty annually; poverty alleviation remains, according to Xi, his “most important task.” Poverty mitigation has been incorporated into China’s “Five Sphere Integrated Plan” of promoting economic, political, cultural, social, and ecological advancement.

Central to China’s strategy is the close monitoring of rural, target populations carried out by five levels of Party secretaries: provincial, municipal, country, township, and village that work to assure accountability through a process of random evaluations. Customization means that each poor family possesses its own file, each entailing its own targeted plan and updates outsourced by local officials. However, local officials dispatched to impoverished locations contribute to an expectedly high number of corruption cases (131,000 cases in 2018) (Xinhua 2018), creating a stasis of controversy over whether transparency on these statistics is advantageous, or whether it indicates a drawback to China’s approach that doesn’t fully represent misappropriation in China’s policy (China Daily 2019).

A prime example of the intricate strategy intrinsic to targeted poverty alleviation is observable in the Shibadong Village of Hunan Province, where Xi originally proposed the alleviation strategy during a tour of Hunan. Precision meant that the poverty alleviation team stationed in the village created a plethora of growing industries that were embedded with local characteristics, incorporating the value of enterprises into poverty alleviation strategy. Local Miao embroidery businesses accelerated urbanization and supplemented women at home with a source of income. Plantations centered around kiwi-fruit transcended the limitations of the village and the insubstantial cultivated land per capita and gained access to inroads to the Hong Kong and Moscow markets (Xinhua 2018).

Wages in China

As a part of their economic policy, China has also encouraged provincial and local-level governments to lift the monthly minimum wage floor. This push has occurred in spite of the acceleration of firms exiting due to the trade war with the U.S in tandem with rising living costs. Beijing most recently adjusted its base to 2,200 yuan, the equivalent of 311 USD, per month from July 1, 2019. Although China’s base wages remain much lower than developed economies, it remains higher than neighboring nations like Vietnam’s 180 USD baseline. This leads to higher costs for enterprises and thus is one of the crucial reasons for the trend of manufacturing firms moving production outside of China.

Global Perspectives on Chinese Policy

On the contrary, there exists global criticism of the credibility of China’s targeted poverty alleviation strategy and its efficacy. China’s numbers have also garnered skepticism surrounding their sustainability. Heavy quantities of government subsidies achieve seemingly stunning results, but locations like Baoshan village in Jiangxi province highlight the need for the Chinese government to consolidate poverty alleviation into a model that lets the rural economy grow naturally. Luo, the chief of the village, has expressed concern over developing, and more importantly maintaining, a consistent and reliable source of revenue once the village is no longer deemed impoverished and funds seize. Heavy government control, similar to the subject of corruption, lends to misallocation and poor management of funds; decisions made by local governments can be arbitrary and can paradoxically lead to a larger inequality through overly strict bureaucratic policies or accumulated debt.

United States Poverty Alleviation

In the United States, those living beneath the national poverty line make up slightly more than 10% of the 328 million people in the country’s population (PRB 2021). Disparate from China’s poverty strategy and similarly reflected with each respective countries’ political and economic structure is the U.S.’ less stringent approach in addressing poverty. American policy struggles to be defined holistically, but is a composite of micro-policies that are roughly influenced by decisions at the federal level.

Social Insurance

The U.S Census Bureau estimates 21.3 percent of Americans have received assistance on the state or federal level through unemployment insurance, SNAP, Medicaid, TANF, and Supplemental Security Income, lending to a consecutive annual decrease in American poverty since 2012 (Cooper and Wolfe 2019). Data from the September 2018 U.S Census Bureau evinces the fact that Social Security remains the most significant social assistance program in poverty alleviation.

The Role of Non-Profits and NGOs

Private aid programs are a critical tool often utilized to supplement the deficit of government assistance programs which often have many eligibility requirements. For instance, the nonprofit program Feeding America estimates that 73 percent of food-insecure individuals are eligible for federal food aid (Feeding America 2021), with the remaining population turning to charitable organizations and social enterprises which, according to research group Giving USA, received donations of over 400 billion USD in 2017. Despite this, it remains difficult to assess the values of charities because they are dominated by private organizations that have jurisdiction over disclosure (Coss 2018).

Corporate Role in U.S Poverty Alleviation

With respect to enterprises’ role in alleviating poverty, they are distinctively more individualistic in the US compared to state-owned enterprises in China. While Xi and the federal government centralize direct or indirect jurisdiction over enterprises and their movements with respect to poverty, the U.S.’ capitalist laissez-faire approach means enterprises develop more independently.

Large U.S corporations have also had a role in poverty alleviation abroad. For example, Chevron’s donation of $50 million to the Niger Delta Partnership Initiative has helped almost thousands of Nigerians raise their annual income by 92% (Coss 2018).

Conclusion

Overall, China has achieved substantive progress statistically towards eradicating poverty with its relatively special “Targeted Poverty Alleviation” approach. Paralleling China’s government structure, Xi’s strategy for poverty alleviation is structured territorially, aiming to lend funds and alter policy with respect to the economic and social conditions of the target location. Promoting private enterprises comes as an indirect result of this policy—which has contributed a great quantity of employment and socio-economic growth to the economy in tandem with the state-owned enterprises centered in commercial centers of China that have also been looking to raise wages for its workers. Foreign enterprises also possess a more indirect financial role towards China’s target while the converse similarly holds true. Since China has made global progress through larger projects like the Belt and Road Initiative, some policymakers believe China’s model could hold significant value. Independent of COVID, uncertainty of China’s statistical reports are coupled with skepticism about its susceptibility to corruption. Comparatively, the U.S may be defined numerically by a more imminent poverty issue, although its baseline for defining poverty is more stringent. The U.S strategic appeal lies more in its core economic policy of laissez-faire capitalism, a model that garners credit for its ability to promote individual success and opportunity through a hands-off government that eliminates barriers for entrepreneurship. While more voluntary charity organizations intend to make up the deficit for welfare programs, a market economy signifies that enterprises are crucial to employment generation, socio-economic growth, and industrial variation that occurs on a micro and macro level. Despite this, the implementation of large corporations within communities may withhold the benefits of smaller, private enterprises on impoverished communities by disrupting the businesses framework.

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