Social Progress: Real Goal Behind GDP Target

By+John+Ross

The central economic target of Chinas 13th Five-Year Plan （2016-20）， around which its key parameters are constructed， is Chinas goal of doubling the income， and therefore potential consumption， of both its urban and rural populations in between 2010 and 2020. This requires essentially similar GDP growth.

But achieving a “moderately prosperous society”includes not only a target for income and consumption， but also the development of education， healthcare， environmental improvement and other strategic factors. The 13th Five-Year Plans implementation is intended to constitute the first key milestone in Chinas overall development as reiterated by Chinese President Xi Jinping： “We have set the goals of completing the building of a moderately prosperous society in all respects by the centenary of the Communist Party of China in 2021 and building China into a modern socialist country that is prosperous， strong， democratic， culturally advanced and harmonious by the centenary of the Peoples Republic of China in 2049 so as to realize the Chinese Dream of the rejuvenation of the Chinese nation.”

In this overall framework， a GDP growth target is significant—but as a means and not an end. Achieving GDP growth， in conditions in which Chinas economy is far more developed than before， directly determines the plans new economic priorities， such as advanced manufacturing， innovation， integrating the Internet with other economic sectors and use of “Big Data.” Economic growth is simply the plans indispensable means to achieve broader social goals.

To understand this link between economic development and overall social goals， it should be understood that per-capita GDP growth is not socially neutral， nor primarily desirable， because it results in outputs such as steel and cement. The key point is that per-capita GDP growth is highly correlated with extremely desirable human goals， such as rising life expectancy， increasing consumption and improving health and education. Therefore， only by closing its gap in per-capita GDP with the most developed economies can China achieve the best possible all-round living standards for its population.

To illustrate in fundamental terms how economic targets in the new five-year plan are correlated with social goals， consider life expectancy， which is the most sensitive indicator of human well-being as changes in this“sum up” the consequences of positives and negatives in overall economic， social and environmental conditions. Internationally， 73 percent of differences in life expectancy between countries are accounted for by per-capita GDP differences. Therefore， rising per-capita GDP produc- es direct and indirect improvements in social conditions and this is why the new five-year plan sets the goal of doubling income. It is also why China correctly continues to target a moderate to high growth rate.

But the new parameters created by Chinas development toward a “moderately prosperous society”substantially affect the new five-year plan. China made historys greatest achievements in overcoming poverty under previous plans. It is a staggering fact that since 1981， according to World Bank data， China reduced the number of people living in internationally defined poverty by 728 million， while the rest of the world only reduced that number by 152 million. One of the most important goals to be accomplished during the 13th Five-Year Plan period， as Xi announced， is for China to lift 100 million people out of poverty.

But this gigantic historical achievement creates new challenges. When the decisive task facing China was to overcome low living standards， it became dominant and almost sufficient to deliver the essentials， such as housing， food and basic products. International studies confirm that over 80 percent of increases in a populations consumption are due to GDP increases. Therefore， because economic growths role in overcoming low living standards is decisive， almost everything became subordinated to it even when， for example， this resulted in environmental damage or unacceptable social inequality. But the social， cultural， environmental and other needs of a population， which is achieving “moderate prosperity，” are vastly more developed and complex.

There can be direct clashes between GDP growth and human well-being. For example， highly polluting factories or power plants are cheaper than those that protect the environment， and can therefore be built more cheaply， which will increase GDP growth rate. Under new conditions， with China approaching its goal of eliminating poverty and low income levels， the necessary means of GDP growth remains extremely important but must be subordinated to the overall goal of human wellbeing： the goal. This is why， as Hu Angang， one of Chinas leading economists and an adviser on drawing up the new plan， put it： “In the process of Chinas reform and opening up， the five-year plan has been remade… it has become a program for human development， or citizensneeds in all aspects.”