US billionaire calls on US to learn from China on wealth distribution

American hedge fund billionaire, Ray Dalio, has stirred controversy in the US after suggesting that the country needs to learn from China and adopt policies that reduce the country's wealth gap.

The founder of the $150 billion investment firm Bridgewater Associates, the largest hedge fund in the world, was speaking at the UBS Greater China conference when he made comments supporting Chinese policies seeking to tackle inequality in the country.

Dalio said that Beijing's campaign to promote "common prosperity" among its people is something that the United States should seek to emulate.

He said that Chinese leaders understand a cycle in which the country gets rich first and then makes an effort to distribute opportunities more equally.

"I think the United States through its own system needs more common prosperity and a lot of countries do," added Dalio.

In the past, Dalio has called China's economic rise "greatest economic miracle ever", and it's safe to say that the investor is more than a little enthralled with Beijing's ability to steer the country towards global economic dominance in the last few decades.

So what is China's 'common prosperity' vision?

Last year, Chinese President Xi Jinping announced a series of measures to remake the world's second-largest economy, emphasising "common prosperity."

Unlike most other major economies, China was able to weather Covid-19 better than most. In 2020 it was the only major economy to grow, even as the rest of the world shut down. That success was partly based on its ability to manage the worst of the epidemic in its own borders.

However, the country's economic growth has left policy makers in Beijing worried that the distribution of wealth in the country is creating an increasing social imbalance.

Official figures show that while the economy continues to be robust, it also revealed that the richest 20 percent of Chinese people had an average disposable income of more than $12,000 last year, 10.2 times what the poorest 20 percent earn.

The US, in contrast, has a multiple of around 8.4 and countries in Western Europe closer to a multiple of 5.

The income inequality number has some in Beijing worried about what this could mean for the country's social stability and future economic growth if left unchecked.

This is where Xi Jinping's "common prosperity" policy comes in.

The hope amongst China's political elite is that through a series of policy moves, market forces, and philanthropy will address the country's wealth gap.

China's regulators are rolling out plans to target the country's powerful technology sector and social media sites and their ability to target users for financial gain.

The legislation would also empower regular people to opt-out of algorithms that suggest things to them and ensure that elderly people are protected from fraud and scams.

Authorities are also seeking to reign in the excesses of social media users and rabid celebrity fandom - which it says is resulting in "chaos" amongst young people who will unquestioningly obey their favourite celebrities.

Social media platforms were told that they should not induce young people under-18 to purchase in celebrity shows.

Some Western news outlets have called Jinping's vision of common prosperity as a second cultural revolution harking back to the days of China's former president Mao Zedong, which resulted in millions dying.

However, Dalio has sought to rebut the claim saying that "I think a lot of people tend to make a mistake of thinking that this is like a return to communism under Mao, rather than understanding it's just part of the evolutionary process," he said.

Will America learn from China?

In the US, there is also a growing if not fractious debate about growing inequality and the impact that's having on society.

"Income and wealth inequality in the United States is substantially higher than in almost any other developed nation, and it is on the rise," said US think tank The Council on Foreign Relations (CFR).

Unlike China, where central authorities can muster the machinery of state and society and steer into the direction that they see fit, the US political system makes such measures almost impossible, resulting in increasing deadlock.

In their report on inequality in the US, the CFR warned that inequality is "worsening" and the cause is complicated but include "a failure to adapt to globalization and technological change…and long-standing racial and gender discrimination."

In 2017, the self-made Chinese billionaire and founder of Alibaba, Jack Ma, chided the US for wasting more than $14 trillion in foreign wars in the last 30 years instead of investing in human capital at home and the country's infrastructure.

He warned US policy makers that blaming China for the country's economic woes was misguided.

"It's not that other countries steal jobs from you guys," Ma said. "It's your strategy. Distribute the money and things in a proper way."

Advice by a Chinese billionaire made in a communist country and words by Dalio to emulate a version of Beijing's approach to inequality is likely to be a hard pill to swallow for a country that's accustomed to being a model for others.