China's moralising of public policy risks eroding gains in human welfare

The Chinese government's reaction to the country's persistent youth unemployment highlights a worrying tendency to apply simplistic, moralistic reasoning to complex problems. Editorials in state media encourage young people to "embrace struggle" and sacrifice their youth to the cause of national rejuvenation, as defined by the party. "Eat bitterness," leaders keep telling youngsters.

Policymaking in the mainland has, in recent years, become characterised less by pragmatism, experimentation and improvisation, and more by ideology, morality and security (in which policies are increasingly seen through the lens of national security, often at the expense of economic growth).

This shift has significant ramifications: it risks eroding the gains in human welfare that 40 years of reform and opening - an era in which Chinese policymaking was highly pragmatic and adaptive - delivered.

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Moralising public policy carries more risks in the long-term than whatever short-term benefits and political advantage such an approach brings.

China's zero-Covid policy for much of the pandemic is perhaps the most salient example of how moralising a policy issue can be self-defeating. For more than two years, Chinese authorities defended and implemented the draconian, even inhumane, policy, while criticising and denigrating other countries that had switched to "living-with-Covid" - calling them reckless, callous, and Darwinian. Zero-Covid zealotry trumped science and evidence; the policy was ideologised and moralised, and citizens were told to persevere (a moral virtue) because "perseverance is victory".

Persisting with zero-Covid was ultimately disastrous for China, especially its under-vaccinated elderly population. When the central government abruptly dropped its zero-Covid policy, the unspoken policy was Covid-for-everyone. Most credible estimates put the Covid death toll at 1 million to 1.5 million people (a very high mortality rate of about one in 1,000 people in just over three months).

The rhetoric the Chinese state is now adopting in response to the stubbornly high youth unemployment rate - which stands at around 20 per cent - reflects the same moralising, victim-blaming, and valorisation of "struggle" and "perseverance" that accompanied zero-Covid. And just as zero-Covid was ultimately tragic for China's elderly, the Chinese government's moralising and patronising reaction to youth unemployment could be disastrous for China's youth.

Extrapolating from the disaster that was China's zero-Covid policy, one can identify at least three problems with moralising public policy.

The first is that it breeds a lazy paternalism in which government leaders engage in hectoring, pontificating, scolding (of citizens), and victim-blaming as their default response to policy problems. A moralistic approach to public policy allows the policymaker to hide behind rhetoric, and to substitute form for substance - rather than to make meaningful policy changes that enhance people's well-being.

This lazy paternalism is most obviously reflected in the Chinese state's response to suggestions to boost welfare spending to support household consumption and economic growth. Many mainstream economists, including those in China, believe that the best way to boost China's ailing economy and to reduce its dependence on investment as the main engine of growth is to raise household consumption by increasing pension and health spending, and to give direct cash transfers to (lower-income) households.

But the authorities have resisted this, asserting that this creates the "trap of welfarism". Ironically, this is the same argument that is often trotted out by right-wing politicians in the United States - demonising welfare recipients as slothful and claiming without evidence that welfare dependence is a major drag on the US economy.

Lazy paternalism is also seen in the state's efforts to suppress debate and dissent. Access to key data - including the youth unemployment rate itself - has also become increasingly restrictive. All this reflects not only insecurity, but also a certain laziness, since it allows the authorities to pretend that things are well and avoid (difficult) policy reforms.

Second, once a policy is (repeatedly) moralised, it is much harder to change or reverse it. Our moral values tend to be permanent, good policies tend not to be. If a policy is defended or framed as the correct one because of its supposed moral attributes, the risk is that even when the environment changes and demands that the policy be changed, policymakers find it difficult to do so. Moralising public policy may breed dogmatism and rigidity, making it difficult for the authorities to adapt in time to a (fast-) changing environment.

The zero-Covid policy was clearly an example of how moralism can cause policy rigidity and maladaptation. In March 2021, before Shanghai went into lockdown and when some analysts were optimistic that Shanghai might be allowed to experiment with a different approach to its Covid outbreak, I expressed my deep scepticism of this suggestion to US news organisation NBC. I said the Chinese authorities had both politicised and moralised Covid policy and had demonised other countries that had adopted living with the virus, "[creating] a situation where there is no easy exit ... and there's no easy way to tell the population that living with Covid is inevitable".

A few days after, Shanghai went into a harsh, two-month long lockdown. Almost unimaginably, zero-Covid was enforced in China's most open, economically vibrant and culturally liberal and cosmopolitan city.

These lockdowns have left a lasting scar on the Chinese economy. China's post-pandemic rebound has been lacklustre. Quarterly GDP growth slowed to 0.8 per cent, compared to 2.2 per cent in the first quarter, showing slowing momentum. The headline consumer price index fell 0.3 per cent year-on-year in July to register deflation for the first time in more than two years, raising the spectre of Japanification - a reference to Japan's decade of deflation, deleveraging, and weak private consumption and investment growth in the 1990s and 2000s.

The third problem with moralising public policy is that it fosters utopian thinking and delusional optimism. Utopian thinking is the belief that risks (and more generally, things we find offensive or distasteful) not only should be eliminated, but can be eliminated. Utopian thinking applies as much to social evils such as smoking, alcohol abuse, even addiction to internet gaming and social media as it does to health risks like Covid-19.

People already have a zero-risk bias - they prefer to eliminate, rather than mitigate, risks. Framing public policy as a morality play (a battle between good and evil) - as the Chinese authorities did for more than two years in portraying Covid as an intolerable enemy - promotes a simplistic, binary view of the world.

Utopian thinking is also seen in the state's crackdown on various sectors - ranging from consumer-facing tech companies, property developers, and private tuition. There is little doubt that the rapid growth of these companies created jobs and supported economic growth. There is also little disagreement that their rise generated new and complex policy challenges - such as higher inequality, data protection and privacy, the rise of digital monopolies, internet addiction, high levels of household debt, speculative booms in real estate and wasteful competition in education, to name just a few.

Balancing these complex policy trade-offs requires more competent, pragmatic and adaptive policymakers. It requires more, not less, experimentation, a greater openness to new ideas and approaches, and careful reforms to a country's tax and regulatory systems. But instead of coming up with innovative, incentive-compatible policies, the state's crackdown on these industries looked more like a moral crusade. Internet companies were accused of "spiritual pollution", some analysts who highlighted bad news were accused of historical nihilism, and technocrats were expected to display more loyalty and ideological purity.

China still has many competent technocrats and policymakers; the question is whether they can be allowed to do their jobs well in an environment that is highly charged - ideologically and morally.

Donald Low is senior lecturer and professor of practice in public policy, and director of Leadership and Public Policy Executive Education, at the Hong Kong University of Science and Technology.

This article originally appeared on the South China Morning Post (SCMP).

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