HSIUNG B. Y.
unlike providing elementary education or building infrastruc-
ture that will bear fruits after years or decades, the IDCC will
make an impa ct directly an d immediately. In addition, an IDCC
is issued to individuals so each and every person, especially
those in the rural areas, will share the pie of economic devel-
opment. Moreover, consumption brought about by the IDCC
will have a multiplier effect, accumulating over time and add-
ing to future tax revenues. Consequently, people will actually
harvest fruits from seeds they have themselves helped plant.
Furthermore, a mere 100 RMB may be an insignificant
amount in the cities, but for people in the rural areas it is a
small fortune. People can use it as seed money to raise chickens,
ducks, sheep and pigs. The money will make a difference un-
thinkable in the cities. Finally, consumption enabled by the
IDCC and the subsequent economic activities it induces are in a
sense bringing about a market economy in the rural areas from
a vacuum. This will be an important counterforce to the fast
expanding economy in the metropolitan areas. In a nutshell,
people, especially those in the rural areas, need to have fish to
eat before they can take part in commercial activities and learn
how to fish!
Alternatively, while the above beneficial results are tangible
and mostly quantifiable, the IDCC will generate intangible and
important benefits as well. Specifically, with each individual
being issued an IDCC and then enjoying the fruits of economic
growth, a weak but perceivable thread is created between the
faceless individuals and Big Brother. When their interests are
vested in the performance of the whole economy, people will
tend to identify with the PRC government and the government
will in turn get more feedback and support for its public poli-
cies. It is more than evident that the detailed consumption in-
formation the IDCC produces will become a valuable data set
with respect to which social scientists can do research and
based on which the government can form public policies.
The potential difficulties of the IDCC need to be faced too.
First, the formula itself will be hard to derive. Conceptually
speaking, it is a formula with a certain number divided by a
certain number. The numerator could include factors such as
the growth rate of the economy, gross national product, tax
revenues, etc, and the denominator could be the total population,
population over a certain age, or populations of rural areas
and/or minorities. Various variables can be used to create a
feasible formula, and data for the past ten to twenty years can
be used to test the formula and estimate the cost involved. Se-
condly, implementing the IDCC will involve numerous govern-
ment agencies, for with the formula and the money determined
by the central government, the local governments are to distrib-
ute the IDCC to the population and then help deal with the re-
imbursement process. Cooperation by various government
agencies both vertically and horizontally is needed and this will
be a challenge to the administrative ability of the PRC.
Third, the people who benefit the most from the IDCC are
understandably people living in rural, economically backward
and hard to reach regions. There may not be roads or even
stores in these places. One possible way to deal with this diffi-
culty is to put the regions into different categories. The IDCC
will be issued first not to the most backward regions but per-
haps to the second to the worst regions, regions with rudimen-
tary infrastructures and sparse commercial activities. But this
also implies that, given that each person has, say, 100 RMB to
spend each year, supermarket chains or convenience store
chains might find it lucrative to enter these regions and enjoy
certain locked-in effects from their entrepreneurial endeavors.
Fourth, once the IDCC becomes a fixture in people’s lives, it
might invite expectations from the public that a certain amount
of money will be in the card for them to consume, an expecta-
tion that may not be fulfilled if the economy experiences busi-
ness cycles. One way to deal with this rational expectation is to,
as suggested above, group the regions into different categories.
When the economy is not doing well or the tax revenues are
below par, only people in certain categories will have money
stored in their IDCC. This actually implies that the IDCC func-
tions as an automatic stabilizer for business cycles. When the
economy is in a trough the rural and less developed regions will
get economic resources and this will help close the gap between
the metropolitan and rural areas.
Whether the IDCC should have a sunset clause is open to
discussion. As the income distribution improves to reach a cer-
tain level, issuing the IDCC to the whole population may not be
necessary. The measure, however, can become a more refined
tool to deal with problems of a more limited scope. For instance,
people from the economically deprived regions or ethnic mi-
norities could use their personalized IDCC to pay tuition or pay
off student loans in pursuing their education.
Relevant Considerations
The IDCC measure can be compared with other relevant fis-
cal tools, illustrating their strengths as well as weaknesses.
Bangladeshi economist Muhammad Yunus launched a small
loan (microcredit) scheme in the rural areas of India to great
success, earning him the Nobel Peace Prize in 2006. The IDCC
and the small loan approach are common in that even with a
small amount of money initially, both measures will generate a
chain reaction, producing changes both quantitatively and
qualitatively. The difference between the two is that while the
small loan measure is conducted with selective points (indi-
viduals), the IDCC measure is spread over the whole area (the
whole population), so to speak.
Alternatively, the contrast between the IDCC measure and
the consumption voucher is also illuminating. While the con-
sumption voucher is normally issued as a one-shot measure,
aiming to provide a stimulus to the economy, the IDCC infu-
sion is repeated yearly, providing not only continuous streams
of stimuli but more importantly the resources needed to fight
the worsening income distribution. That is, the IDCC will help
improve both efficiency and equity. In addition, food stamps in
the US have been replaced by Electronic Benefit Transfer cards
(EBT). The main differences between the EBT and the IDCC
are that the later is not meant to maintain a basic level of living
per se and that a major goal of the IDCC is to expand the reach
of the market economy.
Moreover, the IDCC measure is not only applicable to the
PRC, it is likely to prove effective in other countries and areas
such as India, Pakistan and Africa, in closing the gap between
the developed and the less developed regions. In addition, for-
eign aids can actually be made with the proviso of IDCC use,
e.g., in providing aid to North Korea, the UN could demand the
IDCC measure be implemented, ensuring that the people will
get the aid directly.
Conclusion
The problems of widening income distribution and the
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