[MUSIC] Now two other issues, problems that are often sighted for potential overthrow of the Communist Party and the threat to the CCP Rule are inequality that's been booming within the society. And, as he has talked about himself, the question of corruption. Now here, in terms of inequality, is a table that shows comparative inequality 2013, and these are Gini Coefficients. And Gini Coefficients basically would show however they're calculated if you're at, you can see this, 0.25. It means that the wealth is relatively fairly distributed among all the members of society. As you get higher up in these numbers up into the fours and the fives then what you're talking about is a less fair distribution of wealth among the members of the society. And so here you can see that China in fact, in 2013, this is a source from the United Nation's Human Development Report, puts China in the moderately high inequality, but even within that group it's at the higher end of the moderately high inequality, and some people argue that in fact China's Gini Coefficient is actually above 0.50. We could also look at the question of, we'll get back to inequality in a second, but also look at the question of corruption. And there's another organization out there that puts together a corruption perception index, and it's based on the assessments and business opinion surveys by Transparency International which ranks countries according to the 75 criteria. And it includes questions on bribery of public officials, kickbacks in public procurement, embezzlement of public funds, and the strength of effectiveness of anti-corruption efforts where China should be strong now. And of 178 countries, China is 78th. So better than the midpoint of 89, which suggests that China's not so terrible relative to the rest of the world. And among the bricks, right, the Brazil, Russia, South Africa, India and China. The problem of corruption is more serious in China than in South Africa and Brazil and less serious than in India and Russia. Right? So here we see China at 3.5. Russia, the lower you are the more corrupt, so Russia is the most corrupt of them all, then India then China, then Brazil, and then South Africa, but still 3.5 on a ten point scale, it's not so good for China but in terms of relative to the rest of the world, it's not so disastrous in fact. Now, back in 2007, I remember this. I was visiting with a former student of mine in Peking. And she and her husband, at this time, were getting into a big discussion about what was then called, the original sin. Right? Which is a play on the idea of Christianity and how Jesus was born. But the original sin being, how did people get their original pot of gold? How did they get rich? And so many of today's billionaires actually got started back in the 1980s. When the early days of price reform, 1984, China introduced a dual price system. And this dual price system of state plans, state or plan prices and market prices allowed for arbitrage if you could get the goods at planned prices, sell them on the market, you could then make a lot of money. And a lot of people began to get rich in China, officials, ex officials began to get rich using this process. Now we know as well between 1996 and 2001, the small and medium size the enterprises were privatized. We saw that where many of the managers and the party secretaries became medium sized capitalists. And so one could argue that in fact would has merge in China Is a kind of bureaucratic capitalist class which links power and wealth. So for example in 2012, a study found that 800,000 millionaires, among those 800,000 millionaires in China 90% of them were children of officials, all right. Similarly about three four years ago when I was in China, there was a hot topic then about China's 400 families. And the argument was that there was an extremely close connection between the old revolutionary leaders who had already died off and the current leaders and their families who had been going into business. So for example Bo Xilai who was purged about two years ago, his father Bo Yibo was one of China's leading revolutionaries. Bo Xilai's family reportedly, in Western press, was worth about $200 million US dollars, particularly his wife was quite active in a lot of this. Same thing, Xi Jinping, while there's nothing to indicate that Xi himself has been engaged in any kind of corrupt activity, he has been trying to reign in his sisters and his brother in laws. Who are each reportedly worth about $200 million. One of the worst cases of this is in fact when Jabal the former prime minister, his wife is estimated to be worth 2.4 billion US dollars due to an insider trading on Ping An Insurance when it went public and she also was seen to be one of the jewelry queens of China. Another study showed that of the 12 property developers in Guangzhou, the top 12 property developers in Guangzhou, nine of them were the children of officials. Another finding, 90% of people with over $100 million US dollars are children of high ranking officials. So the question then becomes, will they act like the elite in Guatemala where there's really 300 families who dominate the entire economy. Will they act in a way to block other efforts at both people going into business and maybe block efforts at reform, because those reforms will bring them some kind of political problem? So one of the questions that can be asked then is, okay so we know that there is inequality out there, we know that there is corruption out there, but is it going to explode? Right? So one of the ways people try and look at that is my former professor Martin White, I'll show you his study in a second. He finds that Chinese citizens are just not as upset about the size and unfairness of current inequalities, as many analysts and Chinese government officials assume. Many Chinese see the inequalities as excessive, but on comparison to other countries, the concerns are not the highest in the world. Chinese citizens, more than most others, see merit based attributes, merit based characteristics as the main reason that people are poor or rich, and it suggests that inequality is not such a major threat to the CCP as some people would think. So here we have a table from a paper. I was going back and looking in the book to see if this table is still there, Marty sent me a paper before, but this was eventually published, the data is published in his book, Myth of the Social Volcano and there are three key questions here. Question number one or three statements, national income gap is too large. What percentage agree? And if you look, China, in 2004, 72% of Chinese think that the national income gap is too large. Less than the Russians. Less than the Hungarians. Less than the Czechs. In fact, about the same as West Germans in 1991. And less than the Japanese in 1991. So that doesn't say that that many people relative to other countries are that worried. Question two or statement two, why are people poor? Why are they poor? Right? And one of the amazing findings of this study is that the two key reasons that Chinese people choose for explaining why Chinese people are poor is one, a lack of ability, and two, a lack of effort. So they just don't work hard enough and they're just not very good at things. Whereas if you look at Russia, the two key explanations for why Russians are poorer is one, lose morals, 74% and two, that the economic system is unfair. Remarkably not that many people in China found that the economic system was unfair. Statement number three, point number three, why some people are rich. Right, and here we find the same thing. Why are some people rich? They have ability and they have talent. They work hard, therefore they do well, right? Why did the Russians back in 96, why do they think that people are rich? They're dishonest, and again, the unfair economic system. So this suggests very different views about why people are rich or poor, and inequality between these two societies. Now some people may say this is 2004, hasn't changed. That's a long time ago, 11 years ago. Well Marty sent me this table, he emailed it to me, and he had data for 2009 from the same survey which showed that 65.5% of Chinese still believed that hard work is always rewarded. So again, this creates an incentive for people to work hard. It's also worth remembering that you believe this because over time, consistently over the last 30 years, people have seen their incomes go up. And therefore they believe that if you work hard and try hard, you will get richer.