A Possible Method: How Rural Revitalizations Program in China Would Alleviate the Problems of economic crash

When I was in high school, our economics teacher showed us a documentary about the economic crash of 2008. The economic crash of 2008 started due to the banker’s speculation on the housing market, creating a huge bubble that at the end was unable to handle. This economic crash caused a devastating effect globally. Due to the economic crash, many export-oriented countries were unable to sell their overproduced products. Millions of people lost their jobs and caused fluctuations to the society. When looking at the people occupying the wall street, calling for better economic alleviation. I wondered, isn’t there other methods that would help the countries to recover from the economic crash? This question was solved when one day I saw a lecture about the rural revitalization programs China. This program was also enacted after the economic crash of 2008. The program not only made China recovered from the dire situation, it also rewired the structure of China’s economy, making it more resilient toward economic fluctuations. Some might say that other methods such as focusing on the urban businesses or supporting huge financial businesses might be the more effective methods when facing economic crash, I would argue that rural revitalization would be a more effective method in bringing back a vital and stable economy.
Before looking at the possible methods, I think it is important for us to peek at the cause of the financial crises of the 2008. The financial crises of 2008 started mainly due to the risky financial investments of wall street companies. Due to the nature of those financial companies to use their money to maximize profit, the land companies started to give “claimed safe” packages to investors. As those financial packages started to go bad, the companies cannot sustain anymore. The effect of those bad debts also affected the banks. At the time, the fourth-biggest bank claimed bankruptcy, further exacerbating the situation. According to the Washinton Post, this economic disaster “was the worst U.S. economic disaster since the Great Depression.()” Trillions of American citizens lost their jobs and the stock market lost trillions of dollars.
From this incident, we can discover that the role of financial sectors played a decisive role in worsening the situation. Since financial companies need to maximize the capitals they have, some would try to engage in risky businesses. In here, I’m not saying that there would always be companies that try to risk their assets. However, when the economy is prosperous and large sums of money are used for speculation, it would just be a matter of time for the “fight or flight” companies to emerge and drive other stable but comparatively low -performance companies out of the financial market. More importantly, when people begin to speculate on those kinds of financial assets, the physical industries like manufacturing are being ignored. When the economic crash happened, the businesses are unable to absorb the vast amount of unemployed people, which causes society to become unstable.
Facing such a dire condition, some would suggest the government to issue debt and alleviate the financial situation of the companies that are going to be bankrupt and revive the financial sector to the “prosperous state” before the economic crash. The problem with such a plan is that the government is just trying to save a balloon that is bound to explode. The government did not solve the problem of over-speculation, and the money would go to waste. Some would also say that this kind of economic crash is a normal process and the government should have a more passive engagement with the crises. It is correct that the economic crash is a normal phenomenon in the economic cycle. However, the economic crash would bring out problems of massive unemployment and underproduction. If the government chose to do nothing, the economic crash is going to make the social upheaval unbearable and stop the country’s development. The people may survive the disaster, the government may not survive.
President Obama at the time took a different route: he chose to use debt. Government can use debt in tax reduction, job training, buying the shares of companies that are facing bankruptcy. As early as FDR, the Keynesian economists suggested using debt to break the crash cycle that is bring the economy downward. The debt could stimulate business, making them provide more jobs. The debt could also back up the banks, recover the banks credibility in case people became afraid and decide to withdraw their money from the banks. The Obama’s method reached great success in the United States, it greatly reduced the impact of the economic crises and vitalized the economy.
However, some major problems exist with such policy. The first one id where to spend. Since the Obama’s policy did little to relieve the class difference, the movement “Occupying the wall street” happened. During the protest, the protestors argued that the government should focus more on the 99 percent — the common people, instead of the 1percent — the wealthy people. This movement showed that though the Obama administration used debt to solve the economic problem, problems like growing class conflict would not be that easy to deal with. The second one is national debt. Since the government needs a lot of money to cope with the economic downturn, the national debt during Obama’s administration went skyrocket. Since the government needs to repay the debt, the government spending in the future needs to be decreased. To repay the debt, if the economy recovered, heavier taxes and tariffs would be imposed, putting the country’s economy in a less favorable situation.
Considering all the possible options for the government, I think the rural revitalization Chinese government used after the economic crises of 2008 could provide a better method. The rural revitalization plan is for the government to focus on the development in rural areas. At that time, the Chinese government directed the capitals into the areas that are less developed. Like the Obama’s economic stimulation plan, the government also use debt to issue the economic package. The difference is that instead of helping small businesses that are mostly in the cities, the government’s focus is the people in the rural areas. The Chinese government at the time issued a series of interesting policies that are worth exploring. The first one is to decrease the prices of housing utensils. The Chinese government issued a 13 percent cut on the housing utensils in rural areas. Therefore, people who were unable to buy housing utensils before were able to buy the housing product at a cheaper price. This policy greatly relieved the pressure manufacturing sector was facing. The price cut both benefited the villagers and the manufacturers. The second one is infrastructure. After the the recession, the government proposed a “3 way” plan. The “3 way” is a shortened concept about three kinds of infrastructure that people in rural areas need the most — water, roads, and electricity. This is another policy that could both benefit the village and the manufacturer. This policy coincided with the policy of the Chinese government to “eliminate poverty in 2020”. Though the goal wasn’t achieved partly due to the covid pandemic, we can still see the power of rural revitalization in boosting the economy. The government at that time also gives a huge attention in the large constructions project. Big projects like the Sanxia dam was completed at that time, greatly boosting the economic condition in the Sanxia region.
The advantage of such policy is that it not only solved the unemployment, it also increased a large sum of internal demand. People might question that why the Obama’s plan did not increase the demand. Indeed, with decreasing unemployment rate, more people would be able to buy more products. But as we see in the Occupying Wall Street incident, the economic difference between people was little improved. The poor people still remains poor. Although the educated people may recover from the economic crises with Obama’s plan, one educated people’s consumption still cannot compare with the consumption of a poor family. By focusing on improving the economic conditions of the poor, the income inequality would be solved. Before the rural revitalization policy, China suffered a lot from the urbanization problem. The condition in the village and the need for cheap labor in the factories drove the young villagers to leave their homes. In the past there were many villages with only children and elders living in it. The poor working people in the cities also created ghettos, harming the stability of the society. I still remember as a kid that I once helped my mom discovering the thief that was trying to steal my mom’s purse. The village before the policy also suffered from huge contamination problems. To maintain the cheap cost and improve the profit, many companies are trying to pollute illegally in rivers and other public resources. The contamination greatly destroyed the ecosystem outside the city. It is important to note this because the environment itself is also a resource. The contamination problem already emerged before the economic crash. One of the major ones is the industrial fog. Those hazardous gas appear every winter in cities due to the burning of coal. The rural revitalization policy banned those pollution practices and spend lots of money on trying to revive the environment and trying to create eco-friendly industries. Tourism is one of the great things the policy focused on. Not only can the environment be preserved, the awards from tourism actually reward the local government to preserve the environment.
However, problems also exist with such policies. The cooperation between the local government and the central government is one of the major concerns. Since the central government’s direction needs to be specified on a local level, the local governments need to promote their place depending on their local conditions. However, conditions vary from places to places and make the successful experiences of other places hard to duplicate. To meet the goals, some local government would also use arbitrary forces to force the villagers. One village in Shan Dong province faced such problem, where villagers were forced out of their houses and cannot find the place to live.
I believe that with the help of rural revitalization policy, the problems that other countries were facing in front of the economic crash could be relieved.