Sunday, August 3, 2014

I understand China less well than I thought I did

China has been urbanizing quite a bit, and one important reason that this hasn't happened even faster is the internal passport system that restricts who can move to the city.  Usually when you have some poorish country undergoing urbanization and industrialization you find that people in the cities are being paid about twice as much as they would earn in the countryside, since that tends to be what's required for young people to leave the only life they've ever known in large numbers.  This is still a pitiful amount by Western standards, though, the masses still living out in the countryside who are willing to move to the city at that price prevent wages from getting any higher until urbanization has run it's course.  And of course rural wages tend to start increasing at the tail end of this because the amount of land in the countryside available per person goes up.

Except that in China, the government has slowed the rate at which people leave the countryside for the city, making wages for people in the cities go up faster than you would normally expect given how much of the population is still in the countryside.  I'd mostly been thinking of this in terms of the political calculations the CCP might be making.  It always struck me that the internal passport was a great tool for making urban workers leery of democracy.  After all, if everybody from the country-side could just flood in that would mean that would mean that some of the wage gains that urban workers had earned would be erased.  Since the internal passport hurts the rural majority, and since it seems to have been a plant of Chinese democracy activists, urban workers would have an incentive to support the current system.  And since CCP headquarters tend to be in cities and since it's much easier to coordinate marches inside cities, it's ok for the CCP to alienate the farmers if it means better support from the urban workers.

So that was my theory, but it seems that China is about to ease the passport system.  So all of the above analysis is probably flawed in some way.  Maybe the whole point was only slow down the potentially disruptive transition to an urbanized society.  Maybe they've urbanized enough that things would be slowing down naturally and it's not making a big difference anymore.  Maybe it's something else entirely.  I'll just say that I'm glad the change is happening.

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