In China, growth outpaces happiness

China’s new leaders, who will be anointed next month at the Communist Party’s 18th National Congress in Beijing, might want to rethink the Faustian bargain their predecessors embraced some 20 years ago – namely, that social stability could be bought by rapid economic growth.

As the recent riots at a Foxconn factory in northern China demonstrate, growth alone, even at sustained, spectacular rates, has not produced the kind of life satisfaction crucial to a stable society, an experience that shows how critically important good jobs and a strong social safety net are to people’s happiness.

Starting in 1990, as China moved to a free-market economy, real per-capita consumption and gross domestic product doubled, then doubled again. Most households now have at least one color television. Refrigerators and washing machines, rare before 1990, are common in cities.

Yet there is no evidence that the Chinese people are, on average, any happier, according to an analysis of survey data that colleagues and I conducted. If anything, they are less satisfied than in 1990, and the burden of decreasing satisfaction has fallen hardest on the bottom third of the population in terms of wealth. Satisfaction among Chinese in even the upper third has risen only moderately. Our data were collected by five survey organisations, one of them Chinese, between 1990 and 2011. The surveys focused on urban areas, where growth has been concentrated.

 Startling discovery

It is startling to find that Chinese people’s feelings of well-being have declined in a period of such momentous improvement in their economic lives. After all, most policy-makers would confidently predict that a fourfold increase in a people’s material living standard would make them considerably happier. And yet, piecing the surveys together, we found a U-shaped pattern of happiness over time, with life satisfaction declining from 1990 to the first part of this decade, and then recovering by 2010 to a level somewhat below the 1990 value. What explains the “U” at a time of unprecedented economic growth?

Before free-market reforms kicked in, most urban Chinese workers enjoyed what was called an “iron rice bowl”: permanent jobs and an extensive, employer-provided safety net which included subsidised food, housing, health care, child care, pensions and jobs for grown children. Life satisfaction during this period among urban Chinesewas almost as high as in the developed world.

The transition to a more private economy in the 1990s abruptly overturned the iron rice bowl. Hundreds of thousands of Chinese who worked at inefficient and unprofitable state companies were laid off. Growing numbers of rural migrants took city jobs that provided no benefits. Among urban workers still employed, concerns about job security and the continuation of benefits mounted. Life satisfaction in urban areas declined markedly.

In 2007, only 27 per cent of Chinese in the lowest third of the income distribution expressed satisfaction with their financial situation, down from 42 per cent in 1990. Evidence of a fraying social safety net is indicated by the decline in self-reported health among the bottom third: What can we learn from China’s transition?

Certainly not that China should return to socialism and the gross inefficiencies of central planning. But its market transition has given birth to increasing concerns among everyday Chinese about such matters as finding and holding a job, the availability of reliable and affordable health care, and provision for children and the elderly.

To its credit, the Chinese government has taken some steps in recent years to broaden and improve unemployment and pension benefits, as well as to upgrade the health-care system. Even so, the safety net remains in need of substantial repair. It is noteworthy that, at a time when the need for a strong safety net is under attack in the United States, the world’s most fervent capitalist nation inadvertently has demonstrated its critical importance for people’s happiness.

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