Economist warns of widening wealth gap

PUBLISHED : Tuesday, 20 September, 2005, 12:00am
UPDATED : Tuesday, 20 September, 2005, 12:00am

The social conflict between the rich and poor is worsening on a daily basis

Collusion between officials and businesspeople on the mainland has created a new class of wealthy people and contributed to the nation's widening rich-poor gap, says a prominent economist.

Wu Jinglian , one of the mainland's most outspoken economists, gave a stern warning on the worsening state of income inequality, saying it could lead to 'all kinds of social instability'.

Professor Wu's remarks were carried in the Study Times newspaper, a publication backed by the Communist Party School.

Quoting a recent study of salaries by a research institute under the Ministry of Labour and Social Security, the newspaper report said the income gap had widened significantly since 2003.

The study's authors said the problem had become severe, and if no effective action was taken, conditions would worsen in five years to become dangerous.

Exploring reasons for the wealth gap, the party publication quoted Professor Wu as saying that many of the nouveau rich had benefited from 'money and power' deals between government officials and entrepreneurs.

He said the new wealthy class included staff from state-owned enterprises and government officials who had been able to take advantage of their powerful positions to monopolise the market.

Some officials had also embezzled state assets.

'All of the core problems are caused by unequal opportunity,' he said.

'Unequal opportunity does not only lead to unfair incomes. It also damages the justice and economic efficiency of our society.'

The article said Beijing had to put more emphasis on the issue of justice rather than sacrificing it to expediency.

'The crux of the issue lies with the government,' the article said. 'The government must take on the role of defending justice, while leaving the role of enhancing efficiency to the market.'

It cited a United Nations study as saying that 20 per cent of the mainland's wealthy were responsible for 50 per cent of consumption, while 20 per cent of the nation's poor accounted for a mere 4.7 per cent.

The Study Times article stated that most of the poor were living in rural areas, with farmers and the general population eager to earn a living in a fair and just system.

The article called on policymakers to take the burgeoning economic disparity problem seriously because the social conflict between the poor and rich was worsening on a daily basis.

In a call to action, Professor Wu pressed the government to be a champion of justice for the people, and make this issue its highest priority.

It needed to prevent 'unequal opportunities', and to let markets focus on efficiency under a free-market economic system.