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Poor Economics and China’s 128 million people living in poverty

While China has raised hundreds of millions of people out of desperate poverty in the last 60 years, there are still 128 million people living on less that $1 per day (World Bank defines poverty as less than $1.25/day). This is actually 100 million more people than 2010, because the gov’t radically revised the definition of poverty which was hiding the true scale of the problem. While it might be tempting to “blame” poverty on the poor, or urge leaders to serve the people, or throw our hands up in despair, Abhijit Banerjee and Esther Duflo’s recent book Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty, offers more practical advice.

Instead of simply judging anti-poverty campaigns on whether or not they feel right (micro-credit may not be as effective as you think), or whether free-markets or gov’t assistance are ideologically correct (welfare programs that pay families for sending their kids to school might be a great tool even though kids should want to learn), they actually studied individual projects to see what the effects were on the community. While it seems obvious, organizations often focus only on the most impressive results of their projects, and often fail to ask – Are we actually helping people in the most efficient way? This book should be considered a must-read for anyone interested in poverty alleviation and social justice as it challenges many of the preconceived notions about the “right” way to give aid.

Since this is a China blog though, we’ll focus on the three ideas from this book that apply most directly to the Middle Kingdom (one big idea today, two more tomorrow)

Every Year of School Counts

In the past, Chinese families placed great importance on children because there was no social safety net; for China’s poor, this is still the case (the one child policy is not as strictly enforced in the countryside, only a handful of my 300 rural students were only children). Instead of treating each child as an equal opportunity to be supported in the future, each one is seen as a lottery ticket, and all of the family’s resources are pooled behind the most promising child.

I saw this first hand in Guangxi, where one of my students was sent to college, and her unlucky twin sister was sent to the factories of Guangdong to cover the cost. The same was true of my friend at the tea shop, whose family had pulled her out of school in 2nd grade because they saw her education as a waste of money compared to her “smarter” brother.

As the authors of this book found, most people underestimate the value of primary school and overestimate the value of secondary school. In reality, each year of primary and secondary school adds a roughly equal amount of value to the child’s future earnings. The result is that families focus on sending one child ahead while pulling their other children out of school, which limits their opportunities for escaping poverty.

The authors suggest that tying poverty relief to sending children to school has been effective in dozens of countries, but unfortunately due to China’s restrictive Hukou system, many rural children do not officially exist and would not benefit from such a program.

These circumstances mean that millions of children from China’s poor families are not receiving the 9 years of education they are entitled to. Ensuring that families in poor counties send their children through high-school should be a major priority at all levels of gov’t, but unfortunately, so many of these children will become migrant workers anyway, local gov’ts have little incentive to expend the effort to keep them in the classroom. Migrant workers also frequently leave their children with family members, who may not force unwilling children to attend school. Migrant workers who do bring their children to the city also find it difficult to keep them enrolled in school. Furthermore, due to perverse reward schemes that in many ways punish teachers for under-performing children, some teachers actually push their students out of their classrooms (I talked about this some in a previous post).

No less problematic is that educational policies from the Central Gov’t tend to fit into the pattern of what Abhijit and Esther call the “Three I’s” – Ignorance, Ideology, and Inertia. Ignorance – educational programs were expanded without increasing funding and without adequate personnel, legislating a system that would be difficult to implement. Ideology – The needs of rural students were not taken into account, nor were the conditions of rural schools; this lead to curriculum that is “impractical,” focusing more on creating a few students that can pass the college entrance exam, than making sure that all students master basic skills. Inertia – the system continues to focus on the most capable students, simply because Chinese education has always focused on these “smart” children.

The authors would likely have several suggestions from their studies, these would include 1. emphasize the benefits of education to the parents, and create incentives for local gov’ts to keep children in school 2. re-evaluate the national curriculum to ensure that practical skills are taught 3. widely publicize where education funds are destined so that parents can monitor the results (this apparently worked well in Uganda despite epidemic levels of corruption. Schools had only been receiving 13% of their entitled funds, but after making the funding more transparent this increased to 80% ).


5 Comments

  1. Lorin Yochim says:

    Tom, I think Banerjee & Duflo would advocate selective incentives as the approach to fixing anything, but presumably they would advocate a specific kind of incentive system based on China’s actual conditions. As you point out, this would imply taking into account the reluctance to remove hukou entirely, so I’m surprised that this isn’t addressed in your 3 points. On this very issue, it’s important to point out that, while left-behind children are a crucial issue, in many cases children are also co-migrants with their parents. Their schooling in their new homes is also very problematic. I’ve just finished reviewing a series of papers on this very issue. I hope to have a guest post up on my blog about that soon. Hopefully you can have a look and engage the writer.

    On point 1: As many researchers on education in China have pointed out, the importance of education is not lost on the poor whether they be rural or urban. As you’ve pointed out in the post, the problem may be related to perverse incentives or opportunity cost calculations. This isn’t to say that people act with perfect information about future losses due to lack of education. Furthermore, existing economic relations demand the labour of these unschooled young people. Without addressing this, money to keep children in school (clearly part of a solution) is going to run up against other needs in the economy.

    On point 2: few would disagree with this general principle. But in China, such an orientation in education is rightly viewed with suspicion. Your suggestion is certainly not Maoist, but to Chinese ears old enough to remember, it might sound that way. Also, the tertiary vocational sector has expanded massively in China, so your suggestion has already been taken up with vigour, if not unproblematically.

    On point 3: this principle is also not easy to dispute. Transparency in government spending, however, is awfully difficult to achieve. Production (i.e., publication) of this knowledge does not mean equitable access to it. I wish it were so, but information about education (spending, results) seems to make opportunity hoarding all the more effective for those best positioned to access and deploy this knowledge. It’s a real conundrum.

    • Tom says:

      On point three, I think in many cases where the local gov’t acts out of line with what the central gov’t commands, this publication of selected information in papers could go a long ways towards curbing corruption. As you point out, not everyone would necessarily take advantage of the information. Also the Central gov’t always seems leery of taking on corruption at the lowest levels for fear that it will work it’s way upward.

      • Lorin Yochim says:

        Very true. And one of the problems is that devolution of responsibility has led to a situation in which the means of raising $ is highly variegated. So the problem has been much less one of misappropriation of centrally allocated $ than it has been one of the difficulty in controlling how $ are raised (i.e., numerous and excessive extra fees). The cat and mouse game of education financing in China is fascinating. The biggest worry for me, however, is how “transparency” can work to exacerbate social inequality.

  2. […] Seeing Red in China Your guide to modern China Skip to content HomeAbout…About TomAbout Yaxue CaoAbout CaseyComplete ArchiveSuggested SitesChina Books to ReadThe Best China Movies中文 ← Poor Economics and China’s 128 million people living in poverty […]

  3. mikemiller says:

    china treats their people like shit,why does everyone think we should be more like china.

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