Cultural Ties with Contemporary Economic Policies and Reform: A Case Study Comparing China and the U.S.

Abstract

The main goal of this essay is to try linking the effects of the traditional values and ideals of both the People’s Republic of China and the United States of America to their contemporary economic policies. The methods used to conduct this research use both historical and contemporary sources as well as data to justify some present day economic policies and reforms in said countries. For the United States, since there are vastly different ideals that branch off the same foundation within individuals and presidents. I would be using Donald Trump’s ideals, arguably one of the more popular presidents in the last decade, as the main American ideology. Overall, through this research I gained insight on the United States’ stress on individualism and liberalism that allowed it to push for policies that limited the government’s ability to influence the economy and tried to keep individual’s ability as the main factor in market competition. While China’s promotion towards collective, stable, and authoritarian society creates room for the government to limit individual’s capital, especially the ones who are wealthier, and restricting certain industries that is deemed to give unfair advantages.

Introduction

For decades, the People’s Republic of China and the United States of America have been competing for first and second place in terms of their GDP. However, one might be curious about how a socialist country and a capitalist country come toe to toe in terms of their economic might. Both countries, with completely different ideologies, cultures, and traditions are economic giants globally. With this in mind, this paper argues that traditional cultures and values do have a distinctive effect on the makings of contemporary economic decisions, and do provide reasonings for economic policies and reforms for the respective country.

What are Chinese Ideals:

Ever since the communist takeover of China in 1949, the definition of being a Chinese has changed. In half a century, China has transformed from an agrarian based, shattered feudal society to a communist, economic powerhouse. Even though the large economic boost puts China right behind the United States in terms of GDP, the average Chinese citizen has a completely different definition of what a successful society is than the average American citizen.

How would a Chinese citizen define a successful society? One of the main things that
Chinese culture stresses is stability. In Chinese history

The traditional moral-political model was able to withstand or absorb outside influences. Buddhism came from India, Mongol and Manchu invaders swept in from inner Asia, and traders from the Near East arrived along the Silk Road and by sea, but the system held fast. Chineseness was too powerful to be dislodged; it was the invaders who adapted. (Link, 2015)

With Chinese culture and traditions being kept static for such a long duration of time, it is not surprising that the Chinese would go out of their way to see a stabilized society. This is another reason why the Chinese seem to prefer more authoritarian governments. Ever since the Xia dynasty, absolute monarchies have held the reins in China, whether the ruler was Han, Mongol, Manchu, or even the self-proclaimed “democratic” leaders in the early twentieth century. Under authoritarian governments, politics is one factor that the public would not have to worry about. Even in Taoism, one of the leading philosophies throughout Chinese history, states, “those who followed the way did not try to give people knowledge, but kept them ignorant. People are difficult to rule because of their knowledge. To rule by knowledge ravages the country. To rule not by knowledge blesses the country” (Stendudd, Tzu, n.d.). With his reasoning being:

Not praising the deserving, prevents envy. Not valuing wealth, prevents theft. Not displaying what’s desirable, prevents confusion of the senses. Therefore: the sage governs by emptying senses and filling bellies, curbing strife and strengthening backs, keeping the people ignorant and without desire, making the learned afraid to act. If he acts without action, order will prevail. (Stenudd, Tzu, n.d.)

Lao Tzu’s ideals are still widespread in contemporary China, and one could definitely see why. With the stress for stability in Chinese society, the citizens believe that the government would do the best for the country, even if it means that some are sacrificed for the greater good, and that they are being good citizens simply by not interfering with the government. With the mentality of pursuing stability, this also requires the factor of collectivism, which is another strong trait found in Chinese ideologies. An additional factor for collectivism has been stated in Wong’s work, which they identified as the since relationship’s in Chinese society start with family but further extends to their extended family and village, and that any honor or face “bestowed upon a family member is shared by the family and beyond” (Wong, 2001). This further stresses the importance of collectivism in society, since if an individual
brings disgrace onto themselves, they would also affect their entire family (and possibly more). This ideology would not stop at the familial level, but also nationally and ethnically. In the end, the pursuit of stability and collectivism in contemporary China has largely influenced the current government’s economic policies and goals.

Contemporary Chinese Economic Policies

After the takeover of mainland China by the Communist Party of China (CPC), the party has taken advantage of the collective identity and utilized it to strive for a more egalitarian society, beginning with the Land Reform in 1948. Though the Economic Reform pioneered by Deng Xiaoping has altered the path to a more individualistic approach, famously saying, “Let some people get rich first” (Deng, n.d.). This method is slowly being adjusted back to its roots by recent policies rolled out by President Xi Jinping. According to Inman, Xi, in his recent meeting with the Financial and Economic Affairs Commision has stressed that the government should “regulate excessively high incomes and encourage high-income groups and enterprises to return more to society” (Inman, 2021).The policies that Xi has pushed out in order to “encourage high-income groups and enterprises to return more to society” (Inman, 2021)7 have shown to line up with the contemporary and historical Chinese ideals of a collective, stable, and egalitarian society.

Some of the policies that were pushed out with the intent of redistributing wealth and achieving wealth and education equality were heavily imposed restrictions on both the online gaming industry and the private education industry. The restrictions imposed on the private education industry were said to be made in order to “reduce the cost of child-rearing”, due to the high competitiveness of the higher education system (Goh, 2021). The guideline,
according to Koty, states that “regional governments are no longer permitted to approve new off-campus tutoring centers providing core/compulsory education. Existing ones must become registered as non-profit institutions” as well as an excessive restriction on online classes (Koty 2021). Knowing this, it could be inferred that the “unfair” advantage that certain students with high-income families would be heavily limited. Needless to say, this policy economically impacted the education industry in China significantly, causing one of the leading private education enterprises, New Oriental Education, to suffer a seven billion dollar loss in market value, about 50 percent of their market worth in Hong Kong (CNN, 2021). In similar fashion, the online gaming industry has also been thoroughly restricted, though this time with the aim “to help prevent young people becoming addicted to video games” (CNN, 2021). This policy prevented anyone under the age of 18 from partaking in any forms of online gaming during weekdays, and only allowed a one hour session per da from Friday till Sunday. Although this policy could be seen as trying to rid the younger population of this so-called “spiritual opium” (CNN, 2021), it could also be interpreted as a means to further restrict the elite class from gaining more capital. As there are over 110 million minors that game regularly in China, there would surely be a decline in game time and money spent gaming as Niko Partners senior analyst Niko Ahmed believed according to a report by CNBC (Feiner, 2021). In the end, these policies have shown to promote, or at least used traditional and contemporary Chinese ideals to justify their means.

In addition, President Xi has also been adopting alternative ways to make sure that the top entrepreneurs in China get the memo on the country’s new campaign to recreate an ideal society. And as Standaert puts it, “many of the activities these entrepreneurs had become accustomed to […] expressing their individuality, starting charitable foundations and educational institutions in their name – are increasingly unlikely to be tolerated in President
Xi Jinping’s China in the coming years” (Standaert, 2021)14 Using the “common prosperity agenda” as a vehicle, the country has already received donations from some of the richest individuals in China. Based on the reports of Buckly, Stevenson, and Li, both Alibaba and Tencent would donate $15.5 billion towards that goal, which includes but not limited to, “rural health care and insurance for delivery workers” (Buckley, 2021). Though that is not all. An article from the New York Times claims that some of the more extreme reforms could include higher taxes on capital gains, inheritance and property, and higher public sector wages to limit corruption and bribery -which has been rampant during the post Deng era- (Inman, 2021). These reforms and pressure towards the ultra-wealthy using the goal of common prosperity could be linked back to the ideals to create the Party’s and the people’s view on creating an utopian society.

Defining American Ideals

The United States, though still a young country compared to its counterpart in Asia, has quickly solidified its position as a world superpower after the second World War. Compared to China, the United States’ national ideology could be identified as liberalism, which pushes for democracy, limited government, republicanism, the rule of law, equality. According to the reports of Tierney, “Americans without liberalism have no idea who they are” (Tierney, 2011). With liberalism stressing for more autonomy for citizens and restrictions on the government, and a protest-heavy culture, it could be inferred that the United States also has a strong individualistic value. This could be backed up by Barone’s article “American Dream”, in which he defines the American Dream as “the belief that anyone, regardless of where they were born or what class they were born into, can attain their own version of success in a society in which upward mobility is possible for everyone. The American dream is believed to be achieved through sacrifice, risk-taking, and hard work, rather than by chance” (Barone, 2021). Its individualistic approach is even more clear in the Declaration of Independence, which states, “we hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights,
that among these are Life, Liberty, and the pursuit of Happiness” (Jefferson, 1776). Notice how in the definition of the American Dream, and present in the Declaration of Independence, there is a strong emphasis on individualism qualities, whether it is to restrict the power of the government, to promote individual economic achievements and fair competition, or the right of equality towards all regardless of ethnicity, social status, or economic situations.

American Economic Policies

For the past 40 years, United States presidents have used such ideologies to push for a Neoliberal economic policy. Neoliberalism, which pushes for deregulation of the market, celebrated cosmopolitanism (the idea that all human beings are members of a single community), and pushed for globalization (Grestle, 2021). This closely relates back to the ideals that founded the United States: deregulation of the market allows more autonomy for the citizens, cosmopolitanism relates back to values that were present in the American Dream, such as the right to give everyone a chance to succeed, and globalism also allows more autonomy for the citizens, allowing for more choices for citizens to choose and trade from. After being kick-started by president Ronald Reagan, it has been the primary economic ideology of presidents in the United States. This, with most of the Neoliberal ideals matching
with traditional American ideologies mentioned in the previous section, makes its policies a prime source for identifying how Neoliberal policies are impacted by current American beliefs.

In recent times, the Trump administration, one of the most significant and controversial administrations, a man which 25% of the nation (as of 2021) still sees as the “true president” of the United States, has pushed out policies that are easily justifiable with traditional American ideals (Brown, 2021). To demonstrate, the Tax Cut and Job Act, which allowed “significant and permanent tax cuts to corporate profits, investment income, estate tax, and more” (Floyd, 2021). At the same time, personal tax bracket rates (percentage of tax based on income level) were also being lowered. According to Investopedia, the top bracket dropped from 39.6% to 37%, while the lowest bracket dropped from 15% to 12%. As seen in Figure 1, the tax percent of the total GDP for both individuals and corporations notably dropped after President Trump was elected into office.

This policy disallowed financial restrictions that the government could utilise against corporations and individuals, which could be argued that it also limited the government’s financial abilities, which could be related back to Americans’ uneasiness with governments which have more authority and resources. Additionally, the reforms towards welfare and medicare programs, which claimed to already drop five-million citizens from its food stamp program, have similar reasoning as the tax reforms (Tankersley, 2020). These welfare program reforms raise requirements that are needed to apply to medicare, food stamps, checks for the disabled, and utilities for households (Kogan 2019). These reforms, justified by the fact that some do not think these social welfare programs are effective at creating equal opportunities, but rather wasting tax money on freeloaders. By these means, it would be easy to spot why president Trump made more restrictions for applying to these programs, which tries to create an equal opportunity for those in need and to keep out those who just want to take advantage of the system

In the end, though it is generally hard to define certain policies with a single ideology, with the evidence and justification, it could be said that these policies are definitely motivated by Neoliberal ideologies. From the impactful tax and welfare policies, it has shown to be used to limit the government’s financial abilities and as well as create a more equal and just competitive market for individuals as well as corporations.

Conclusion

Overall, using contemporary and historical ideologies to try and define economic policies and their goals has created a distinct but reasonable logic for both countries. For China, the belief of working towards a common goal (and under CPC’s rule, this has gotten even more apparent), the stress of stability, and the distinction between the common citizens and government created policies that aimed to even out individuals who have gotten too
much capital, to eliminate private education, which was seen as a mean for the wealthy to try and gain an upper hand in life, and also trying to create “common prosperity agenda” for everyone. On the other hand, the United States, which pushes for a limited government, autonomy for citizens, and equality (though it is for social equality, while China strives for economic equality), pushed Neoliberalist principles onto its economic policies. With some of the biggest examples being the tax and welfare reforms, which tries to limit the government’s participation in the market and as well as creating unfair advantages for certain individuals. These policies push the agenda that aims to promote an individual’s entrepreneurial abilities instead of working collectively to pursue state set goals.

Bibliography

Barone, Adam. “American Dream.” Investopedia. July 21, 2021. https://www.investopedia.com/terms/a/american-dream.asp.

Brown, Matthew. “Poll: A quarter of Americans say Donald Trump is ‘true president’ of the US.” USA Today. May 25, 2021. https://www.usatoday.com/story/news/politics/2021/05/25/poll-quarter-americans-surveyed-say-trump-true-president/7426714002/.

Buckley, Chris, Alexandra Stevenson, Cao Li. “Warning of Income Gap, Xi Tells China’s Tycoons to Share Wealth.” The New York Times. September 7, 2021. https://www.nytimes.com/2021/09/07/world/asia/china-xi-common-prosperity.html.

CNN Business Staff. “China’s Private Education Firms Are the Latest Targets of Beijing’s Crackdown.” CNN, July 26, 2021. https://edition.cnn.com/2021/07/26/investing/china-education-crackdown-intl-hnk/index.html.

CNN Staff. “China Bans Kids From Playing Online Video Games During the Week.” CNN. August 31, 2021. https://edition.cnn.com/2021/08/31/tech/china-ban-video-games-minor-intl-hnk/index.html.

Feiner, Lauren, Arjun Khapal. “China to Ban Kids From Playing Online Games For More Then Three Hours Per Week.” CNBC. August 30, 2021. https://www.cnbc.com/2021/08/30/china-to-ban-kids-from-playing-online-games-formore-than-three-hours-per-week.html.

Floyd, David. “Explaining the Trump Tax Reform Plan.” Investopedia. September 28, 2021. https://www.investopedia.com/taxes/trumps-tax-reform-plan-explained/.

Gerstle, Gary. “The Age of Neoliberalism is Ending in America. What Will Replace It?,” The Guardian. June 28, 2021. https://www.theguardian.com/commentisfree/2021/jun/28/age-of-neoliberalism-biden-trump.

Goh, Brenda. “China Bans Private Tutors From Giving Online Classes,” Reuters, September 8, 2021, https://www.reuters.com/world/china/china-says-private-tutors-will-not-be-able-offerclasses-online-2021-09-08.

Inman, Philip. “Chinese President Vows to ‘Adjust Excessive Incomes’ of Super Rich.” The Guardian. August 18, 2021.
https://www.theguardian.com/world/2021/aug/18/chinese-president-xi-jinping-vows-to-adjust-excessive-incomes-of-super-rich.

Kogan, Richard, Hannah Katch, Dottie Rosenbaum, Douglas Rice, Kathleen Romig, Ife Floyd, Sharon Parrott. “Cuts to Low-Income Assistance Programs in President Trump’s 2020 Budget Are Wide-Ranging.” Center on Budget and Policy Priorities. May 15, 2019. https://www.cbpp.org/research/federal-budget/cuts-to-low-income-assistance-programs-in-president-trumps-2020-budget-are.

Koty, Alexander “More Regulatory Clarity After China Bans For-Profit Tutoring in Core Education.” China Briefing. September 27, 2021. https://www.china-briefing.com/news/china-bans-for-profit-tutoring-in-core-education-releases-guidelines-online-businesses/.

Link, Perry. “What It Means to Be Chinese: Nationalism and Identity in Xi’s China.” Foreign Affairs 94, no. 3 (2015): 26. http://www.jstor.org/stable/24483660.

Standaert, Michael. “Why are China’s Billionaires Suddenly Feeling so Generous?.” Al Jazeera. July 16, 2021. https://www.aljazeera.com/economy/2021/7/16/why-are-chinas-billionaires-suddenlyfeeling-so-generous.

Stenudd, Stefan, Lao Tzu. “The Taoist Classic by Lao Tzu Translated and Explained.”Taoistic. n.d. https://www.taoistic.com/taoteching-laotzu/taoteching-65.htm.

———. “The Taoist Classic by Lao Tzu Translated and Explained.” Taoistic. n.d. https://www.taoistic.com/taoteching-laotzu/taoteching-03.htm.

Tankersley, Jim, Lola Fadulu. “Millions of Americans Have Moved Off Assistance. Does Trump Get Credit?.” The New York Times. February 20, 2020. https://www.nytimes.com/2020/02/20/business/trump-welfare-poverty.html.

The Communist Party of China. “Deng Xiaoping: Let Some People Get Rich first.” News of the Communist Party of China. n.d. http://cpc.people.com.cn/GB/34136/2569304.html.

Thomas Jefferson. “July 4, Copy of Declaration of Independence.” National Archives. July 4, 1776. Manuscript/Mixed Material. https://www.loc.gov/item/mtjbib000159/.

Tierney, Dominic.“Why Are Americans so Ideologically United?.” The Atlantic. August 22, 2011. https://www.theatlantic.com/national/archive/2011/08/why-are-americans-so-ideologically-united/243951/.

Wong, Y. T. E. “The Chinese at work: Collectivism or individualism?” Lingnan University.
February 2001. http://commons.ln.edu.hk/hkibswp/31.