Chapter 14 third flag bearer

In the mid-1980s, China’s economy was in turmoil and the weather was changing. Faced with a completely unfamiliar economic environment, the scholars’ judgment on the economic situation and proposals greatly affected the central government’s decision-making.In a sense, this is a period when economists have the greatest influence on policy, and it is also a period when a hundred schools of thought argue and argue the most intensely and brilliantly. From 1985 to 1986, two far-reaching debates took place in the field of economic theory. Let's talk about the first scene first. The results of the Third Plenary Session of the Twelfth Central Committee made Xue Muqiao, Ma Hong and Wu Jinglian excited for a while, but soon, the reality made them fall into new anxiety.With the recovery of the economy, the old habit of "disruption as soon as it is released" has been committed again, prices are in chaos again, and the flames of inflation are rising slowly.

Since October 1984, credit growth has been seriously out of control. In December, the total amount of bank loans increased by 48.4% compared with the same period of the previous year, and the annual growth rate was 28.9%.The State Council issued an emergency notice in November, stipulating that this year’s additional currency issuance should not exceed 18 billion yuan. In fact, the annual increase was 26.2 billion yuan, an increase of 49.5% over the same period of the previous year. The prospect of inflation, that is, an overall rise in prices, has clearly emerged.This is the first inflation generated within a transitional economy since 1978.

As a result, a big problem is placed in front of economists: how to deal with this unprecedented situation? In December, the Economic Research Center of the State Council and the Technological Economic Research Center jointly formed a research group headed by Wu Jinglian, and wrote a research report on "Current Currency Circulation Situation and Countermeasures", urgently recommending that the central government strengthen macro-control measures to stabilize the economy. This report was sent to the main person in charge of the State Council by a special person on New Year's Eve. Just after the New Year's Day holiday on January 4, 1985, the State Council held a meeting to study the macroeconomic situation, and formally decided to take "braking" action on capital construction investment.Then, in the first half of the year, the State Council convened three provincial governors' meetings in a row, demanding to control the excessive expansion of credit and consumption funds, and to set the growth rate of the annual industrial output value at 8%.However, it is not easy to slow down the "train" that has already started.In the first quarter, the industrial output value increased by 22.9% year-on-year, and in the second quarter it increased by 23.4%, and the regulation and control almost failed.

With regard to the difficult economic situation, the top leaders of the central government have disagreements, mainly because the State Council system and the Secretariat of the Central Committee of the Communist Party of China have formed two opinions: "regulation must be regulated" and "control is opposed to regulation".Affected by this, two factions of confrontation soon appeared in the economics circle. One school of scholars believed that strict regulation was necessary, while the other school of scholars believed that regulation was unnecessary.As a result, another major debate in the history of reform was triggered.

Representatives of the control faction are veteran economist Xue Muqiao and vice president of the Academy of Social Sciences Liu Guoguang.They believe that, from the perspective of international experience, inflation is not conducive to economic development and economic reform.China's main reform task is price reform, which requires a loose macroeconomic environment in which aggregate demand and aggregate supply are basically balanced, and the government's financial resources must have leeway.Therefore, the government should take decisive measures to curb inflation, control aggregate demand, and improve aggregate supply. The first batch of reform measures can be rapidly advanced only when the economic system environment is under control.

Representatives of the anti-regulatory faction are Li Yining, a professor at Peking University, and Zhu Jiaming, a young economist.They believe that inflation is a typical phenomenon in the period of economic transition and economic take-off, and it is only manifested in structural issues, not in aggregate issues, and should not be suppressed by austerity policies. The theoretical basis of this school of view is the "non-equilibrium theory" proposed by Li Yining. This talented Jiangsu scholar who was the same age as Wu Jinglian and who had studied together in the high school attached to Jinling University but did not know each other, was recommended to enter the chemical engineering department of Jinling University after graduating from middle school. After graduation, he worked as an accountant in a consumer cooperative in Yuanling, Hunan. He developed a strong interest in economics and was admitted to the Economics Department of Peking University in 1951. Since then, he has never left this school in his life.During his studies, Li Yining studied under Chen Daisun and Chen Zhenhan, both of whom had Ph.D. degrees from Harvard University. Therefore, his academic foundation has elements of western learning.After graduating from university, Li Yining stayed in school and worked as a translator in the reference room of the Department of Economics, mainly sorting out and compiling academic dynamic materials. In the eyes of the people at the time, he was sitting on a "cold bench", and this "cold bench" was a A full 20 years.He later said that this experience in the reference room enabled him to read a lot of original economics and benefited a lot. During the "Cultural Revolution", he was also labeled as a "ghost and snake spirit", and was sent to the labor reform team, Jiangxi and a farm in the suburbs of Beijing for several years. After 1978, Li Yining published a number of monographs in a row, and became famous especially for the spread of Western economics in China. In 1982, he and Professor Luo Zhiru wrote the "British Economy in the Twentieth Century-"British Disease" over a period of four years. "Research" was published, which aroused great concern in the academic circle.During the debate in the mid-1980s, he proposed a "non-equilibrium theory" of the Chinese economy.

According to this theory, in a period of economic transition, supply exceeds demand is the norm.The opening and invigoration of the economy objectively requires an increase in the money supply.Money supply faster than economic growth is a requirement of the economy itself, and keeping money supply limited ahead of time is an impetus to economic growth.In a developing country like China, the people will always be in a state where aggregate demand exceeds aggregate supply in the foreseeable future. If the government suppresses demand and restricts money supply, it will not only be detrimental to rapid economic growth, but will also damage all aspects of the economy. interests, leading to a weakening of support for reforms.Therefore, tight macro policies are not advisable.

Among some young scholars at that time, there was also a "take-off theory", represented by Zhu Jiaming and others from the Institute of Industrial Economics of the Academy of Social Sciences.They believe that inflation is a typical phenomenon in the period of economic take-off and should not be suppressed. On the contrary, inflation should be consciously used to accelerate growth.If a tight macro policy is implemented, it is a blow to and opposition to reform.It can be seen that there were great differences in the debate at that time, and even the academic differences have sometimes been raised to the height of politics and principles.

In this unprecedentedly fierce debate, Wu Jinglian belongs to the "regulatory school".In his research report at the end of 1984, he clearly pointed out that inflation was about to happen and macro-control was needed. At the beginning of 1985, he published several papers in succession, analyzing in detail the situation of China's currency circulation and the adverse effects of inflation on development and reform. had a certain effect. At this time, Wu Jinglian was born like a beautiful jade, and he was becoming more and more academically sophisticated. In February 1985, he published the article "Development Policy and Macro-control Issues in the Initial Stage of Economic Reform" in the "People's Daily". The older generation of politician and theorist Lu Dingyi was sick in bed at the time. He was quite appreciative and wrote a letter to his old friend Xue Muqiao, saying: "It's really rare to write such an economic article to 'quench the thirst'. If I edit "People's Daily", this article will definitely be published on the first page."

This is the first time that Wu Jinglian and Li Yining have differences of opinion. In the following 20 years, they will choose the main battlefield for reform, evaluate China's stock market, how to treat inflation and China's economic growth model and other major propositions. Tit-for-tat debates continued. It was against the backdrop of the great debate that on September 2, 1985, a cruise ship slowly sailed from the mountain city of Chongqing and sailed down the Yangtze River to Wuhan. On this cruise ship named "Bashan", a group of economists and academic officials who were the most important in China at that time and had a major influence on policy formulation were gathered. They decided to "retreat and promote research".This is the famous Bashanlun Conference. The full name of the conference is "International Symposium on Macroeconomic Management". It was jointly held by the National Economic System Reform Commission, the Chinese Academy of Social Sciences and the World Bank.The Chinese government also attaches great importance to this meeting. Before the meeting, the Premier of the State Council met with all foreign experts and listened to their opinions.

The Chinese participants on the cruise ship can be described as three generations under the same roof, including Ma Hong, An Zhiwen (the party secretary and deputy director of the State Economic Reform Commission), Xue Muqiao, Tong Dalin (then deputy director of the State Economic Reform Commission) and other first-timers. Generation veterans also included Mesozoic economists such as Liu Guoguang and Dai Yuanchen, as well as Wu Jinglian, Gao Shangquan (then deputy director of the State Restructuring Commission), Zhou Shulian (then director of the Institute of Industrial Economics of the Academy of Social Sciences), Zhang Zhuoyuan Scholars who grew up after the founding of the People's Republic of China, such as Chen Jiyuan (then deputy director of the Institute of Rural Development of the Academy of Social Sciences), Zhao Renwei, etc. Those, such as Xiang Huaicheng (then deputy director of the Comprehensive Planning Department of the Ministry of Finance), Hong Hu (then secretary-general of the State Restructuring Commission), Yang Qixian (then member of the State Restructuring Commission), Lou Jiwei (then the State Council Director of the Research Office of the General Office), Tian Yuan (executive officer and price group leader of the Development Research Center of the State Council at the time) and Guo Shuqing (doctoral student of the Chinese Academy of Social Sciences at the time), etc. At the request of the Chinese government, the World Bank invited a group of world-class economic experts for this meeting, which is also a "combination of east and west".Among Western scholars, including the 1981 Nobel Prize winner in economics, James Tobin of Yale University, Sir Alek Cairncross, a professor at Oxford University, Michel Albert, chairman of the French General Insurance Company, and the Federal Emminger, President of the German Central Bank, Lin Chonggeng, Director of the World Bank Representative Office in Beijing, and Minoru Kobayashi, Executive Director and Economist of the Industrial Bank of Japan, and scholars from Eastern Europe, including the Yugoslavian economist Alexander Bait, recently F. Bruce and Hungarian economist Janos Korner, who have been to China in recent years.Among them, Janos Korner published the sensational "Shortage Economics" in 1980, which is considered to be a model work describing the operation of a planned economy. In China, it has influenced the economic research paradigm.Although the Chinese version of this work was not officially published until 1987, an abstract version was specially published during the Bashan Round Conference, which has become well-known in economic circles. The meeting is divided into 7 topics - "Target Model and Transition Steps", "Fiscal Policy and Macro Management", "Monetary Policy and Financial System Reform", "Income Policy and Macro Management", "Economic Growth and Investment Issues" ", "Inflation and Price Issues" and "An Important Prerequisite for the Indirect Control of the Macroeconomy".Of course, the core topic of discussion is: how to view the current inflation?On the Bashan round, although there was only one paper provided by "regulatory" scholars Liu Guoguang and Zhao Renwei, and no scholars advocating the "beneficial inflation theory" were present, the invited Western economists covered neoliberal Germany He is an important figure in the Leiborg School and the Keynesian School, while Chinese scholars who advocate "inflation is beneficial" usually flaunt the Keynesianism, so there is still room for refutation. Judging from the existing records of the meeting, there was no expected debate on the Bashan round. The experts at the meeting almost agreed that the Chinese economy was overheated and a tighter macro-control policy must be adopted.Among them, the most convincing attitude is Tobin's attitude. He was the most famous Keynesian monetary theorist in the world at that time. China's economy is already facing severe inflation, which must be dealt with. He even proposed to immediately adopt "three tight policies" - tight fiscal policy, monetary policy and income policy to curb inflation.In a speech, Tobin said that so many first-class economists with different economic ideas have made the same diagnosis on the Chinese economy, which shows that the Chinese government should pay full attention to it. Wu Jinglian later said that it was the unanimous diagnosis of foreign experts who participated in the Bashan Round Conference that made the leaders of the State Council firm in their confidence in implementing macro-economic stability policies; and their views on China's macro-economic policies were also absorbed into the National Congress of the Communist Party of China a few days later. (September 23) in the "Suggestions of the Central Committee of the Communist Party of China on Formulating the Seventh Five-Year Plan for National Economic and Social Development". In addition to diagnosing the looming inflation problem, several other major economic reform propositions were discussed at the Bashanlun meeting, and among them, there were two that had an important impact on the subsequent central decision-making. The first issue is the target model of the reform, that is, the target model of the reform and the transitional steps towards a market economy.Korney gives an interesting conceptual construct on this issue. He divides the coordination mechanism into two types: administrative coordination and market coordination.Each coordination mechanism can be divided into two specific forms, so there are direct administrative coordination (1A), indirect administrative coordination (2A), market coordination without control (1B) and market coordination with macro control (2B).This combination of concepts had a great influence on the Chinese economics circle at that time.At the meeting, most scholars followed this combination of concepts and agreed in principle that 2B should be the target model of China's economic reform.The participating scholars also agreed that it will take a long time for China's economic reform to achieve this goal.Because the starting point of China's reform is not 1A, but may be half of 1A.In the words of Polish economist Bruce, China's transition from 1A to 2B will be "the second long march."Obviously, Korney's type classification is similar to the system of most market economy countries in the world.Wu Jinglian quoted his point of view many times in his later works. Another important point of discussion is the strategic concept of "package reform". The foreign economists attending the meeting all emphasized the importance of "a package of reforms", and believed that the reform of the economic system cannot be carried out piecemeal, and the reform needs to be coordinated as a whole.According to the meeting report compiled by Guo Shuqing and Zhao Renwei at that time, the representatives at the meeting emphasized the urgency of price reform many times, and advocated that a supporting reform plan with price reform as the core should be designed and launched as soon as possible.Economists, including Tobin and Jones, also proposed that the reform of the capital market and foreign exchange should be gradually promoted after the price reform is successful, and that will be 10 years later.Some experts later speculated that this opinion had a greater impact on the 1986 price, tax and fiscal reform. The Bashan round meeting lasted for 6 days and ended on September 7.At the closing ceremony, Ma Hong delivered a closing speech on behalf of the Chinese side, summed up the meeting, and comprehensively expounded China's understanding of the "planned commodity economy" system.This speech was drafted by Wu Jinglian and Tian Yuan. There is another interesting detail about this meeting.When the Bashan ship departed from Chongqing, it aroused great interest from the domestic media and theoretical circles, and people hoped to know the results of the discussion earlier.However, the meeting was conducted in a completely closed environment, and the media can only make guesses based on their own understanding of the reform.Shanghai’s World Economic Herald—the most influential weekly economic newspaper in China that fully supported reform—published a report in accordance with the prevailing view among reformers at the time, saying, “Foreign experts believe that China is in the midst of In a period of economic restructuring . . . the current price increases cannot be simply equated with inflation.” Obviously, this report completely twisted the opinion of the experts, and Wu Jinglian had to write a letter to the editorial department to clarify.He said in the letter, "Foreign experts believe that one of the most disturbing signs is the emergence of a wage-price spiral. They recommend a three-pronged fiscal policy, monetary policy and income policy..." So far, the results of the discussion of the meeting have been made public. In the history of Chinese reform, the Bashan Round Conference is a landmark event. Zhang Jun, a professor at Fudan University, commented in 2009: “Even by today’s standards, there are very few academic conferences that have as much impact on policy as the Bashan Round Conference.” Zhang Zhuoyuan, who participated in the discussion at the conference, believed, “ This is the first international conference in the true sense since the reform and opening up, it determines the orientation of China's market economy, and it is an enlightenment conference for China, including many economists."During the meeting, Chinese scholars deeply felt the lack of international experience, “When foreign experts talk about anything, they have extensive foreign experience. For example, when it comes to pensions, they talk about how Chile does it, how Singapore does it, and then talk Which ones can be of reference value to us. And we may indeed have a better understanding of the situation in China, but we don’t know how the United States does it, how the United Kingdom does it, etc.” In Wu Jinglian's view, although the Chinese economists at the Bashan Round Conference seemed a little immature, they still showed a mature side.Only four or five years ago, Chinese scholars were still very new to the Eastern European model, and were quite fascinated by market socialism.When it came to the Bashan round, their reform ideas completely surpassed their counterparts in Eastern Europe, broke away from the framework of market socialism, and kept up with the trend of modern economics.Lin Chonggeng of the World Bank told Wu Jinglian after the meeting that several Western economists thought the Chinese people were great, because at the beginning of the meeting, all parties did not have a common language at all, but when it came to the conclusion, everyone’s concepts and explanations were different. The logic is exactly the same. Therefore, in this sense, the Bashan Round Conference is a symbolic "ceremony" for the Chinese economic circles to bid farewell to the Eastern European model and "market socialism" theoretically. The direct impact of the Bashan round meeting on decision-making is obvious. Just 11 days after this meeting ended, from September 18 to 23, the National Congress of the Communist Party of China was held in Beijing. The plenary meeting discussed and passed in principle the "Proposal of the Central Committee of the Communist Party of China on Formulating the Seventh Five-Year Plan for National Economic and Social Development". .In this proposal, the discussion on macroeconomic policies is obviously influenced by the Bashan Round Conference.It describes that one of the basic tasks of the "Seventh Five-Year Plan" is: to further create a favorable economic and social environment for the reform of the economic system, strive to maintain the basic balance between the total social demand and the total supply, and make the reform more smoothly carried out, and strive to achieve the goal of five years In a few years or longer, the foundation of a new socialist economic system with Chinese characteristics will basically be laid. In terms of economic system reform, the "Proposal" adopts the idea of ​​overall matching, and proposes to "completely complete the reform of the planning system, price system, fiscal system, financial system and labor wage system, and form a complete set of plans and markets. It is a mechanism and method that organically combines micro-invigoration and macro-control. Strive to basically lay the foundation of a socialist economic system with Chinese characteristics that is full of vigor and vitality in the next five years or longer."In his speech at the Party Congress, Deng Xiaoping pointed out: "Adhere to the basic balance between total social demand and total supply, and maintain an appropriate ratio between accumulation and consumption... The speed is too high, which brings many problems, which is harmful to reform and social development. Ethos can also have adverse effects, so it’s better to be on the safe side. We must control the scale of investment in fixed assets, and don’t overspread the infrastructure.” (The third volume of "Selected Works of Deng Xiaoping", People's Publishing House, 1993 edition) Since then, credit has tightened and economic performance has leveled off.Attention has turned to how to advance the market-oriented reforms demanded by the Third Plenum of the Twelfth Central Committee. However, this scene did not last long. In the summer and autumn of 1986, the tightening policy was suddenly abandoned, and the economy heated up again, which led to the resurgence of hyperinflation. Finally, two years later, it ended with a tragic "breakthrough" failure. end. The twists and turns are weird, and it has become an unsolved case in the history of reform.