Chapter 24 Section 1 Out of Millennium Dynamic Equilibrium

From AD 1 to AD 1839, China's economy entered a "high-level dynamic equilibrium" of "high agricultural level, low human capital, high population growth and stagnant per capita income". During the 108 years from 1840 to 1948, this millennium equilibrium was not broken, and there was a debt crisis in the macro economy.The greatest achievement of the first 30 years of the founding of the People's Republic of China is to break out of the "high-level dynamic equilibrium" that has lasted for nearly 2,000 years. For the first time, the average living standard of the people has been continuously improved. China's economy has entered the "take-off stage" and laid the foundation.

There are three main factors that have pushed China's economy out of the millennium "high-level dynamic equilibrium": (1) The Chinese government has implemented the "first driving force" for the accumulation of human capital and stepped out of the poverty trap of "low human capital and high birth rate"; (2) China's initial industrialization has increased the rate of return on human capital. In 1952, the number of industrial employees in China was 15.31 million. By 1978, this number had increased to 69.45 million.The employment opportunities created by industrialization in 25 years are more than 51 million people.From 1952 to 1978, the productive population increased from 211.06 million to 406.82 million, a net increase of 200 million.China's industrialization has enabled one out of every four people to work in the industrial sector.While this opportunity is far from adequate, investing in human capital for ordinary households remains attractive.For example, due to the household registration system, it is extremely difficult for a rural child to "convert from a farmer to a non-agricultural person" as long as he is admitted to a technical secondary school or university, and he can stay in a factory in the city after graduation.Although the probability of rural children going to school is not high, it also stimulated rural families to invest in children's education; (3) After 1972, the effective implementation of the family planning policy.Economist Ma Yinchu's "New Population Theory" had a major impact on China's formulation and implementation of the national policy of family planning.Among these three factors, the first is the most fundamental.

In the first 30 years since the founding of the People's Republic of China, China's human capital has accumulated a lot.Mao Zedong said, "We are 'poor' on the one hand, and 'white' on the other. 'Poor' means that there is not much industry and agriculture is not developed. 'White' is a blank sheet of paper with a low level of education and science. "From 1949 to 1978, it was the stage of China's human capital investment. At the same time, the level of industrialization was greatly improved, encouraging people to accumulate a higher level of human capital in order to obtain a higher social status; the Chinese government directly invested in education, It reduces the cost of human capital accumulation for ordinary families.When human capital accumulates to a certain level, the birth rate begins to decline, and the Chinese economy begins to transform from a "high-level dynamic equilibrium" to a state of "high human capital, low birth rate, and high growth."As shown in Table 3-2, as the education level of women of childbearing age increases, the number of children born in Chinese families decreases significantly.The average number of surviving children of women of childbearing age who have not attended school is 2.21, while the average number of surviving children of women of childbearing age who have received a college education is only 0.44.This, to a certain extent, supports the basic hypothesis in this book about the negative correlation between human capital and fertility.

As shown in Figure 3-5, China's education funding has basically remained stable, at about 7% of government fiscal expenditure and about 2% of GDP, except for a sharp decrease in the early stages of the "Cultural Revolution".This is much higher than the actual investment in education of all previous governments from 1840 to 1948. From 1929 to 1936, the Nanjing National Government provided more education than the Late Qing government and the Beiyang government, but it only accounted for about 3% of fiscal expenditure and about 1% of GDP, and it only lasted for 7 years.From 1952 to 1978, China’s public education expenditure was 99.6 billion yuan, accounting for nearly one-eighth of the 772.2 billion yuan investment in fixed assets, which shows that the Chinese government attaches great importance to education and has not implemented the strategy of giving priority to heavy industry. while sacrificing investment in education.Of course, the Cultural Revolution had a severe impact on education, especially higher education, which caused immeasurable losses to education.

Before 1949, China maintained a high birth rate and high death rate.After the founding of the People's Republic of China, due to social stability, improvement of life and rapid popularization of basic medical care, China's population death rate dropped rapidly. However, China's birth rate was still high and the population base was large, which led to a sharp increase in population.Figures 3-6 show that the death rate has fallen significantly since 1950, significantly more so than in India and other less developed and poorest countries. Beginning in 1959, the "Great Leap Forward" and the three-year difficult period led to a sharp decline in the birth rate and a sharp increase in the death rate, resulting in a rare negative population growth in 1960.Due to the recovery of the economy, China's birth rate rebounded sharply in 1963. In 1964, the birth rate hit a record high of 4.2%, forming an unusually obvious population peak. I call it the "Chinese baby boom." The population peak in 1964 was the last baby boom in China after the population transition, and it was of symbolic significance to China's aging society. The birth rate began to decline steadily after 1964, which was the first time in China's thousand-year history that the birth rate continued to decline.This decline occurred before the implementation of the one-child policy in 1972.The birth rate dropped from 33.43‰ in 1970 to 18‰ in 1978. Figure 3-7 shows that the decline in China’s birth rate has been basically linear since 1950, and the population transition has been slower than that of India, other less developed countries and the poorest countries in the world. All succeeded.

The process of China's family planning as a national policy is difficult and tortuous, but it is generally successful.It should be said that at that time, the frontier of world economics had not raised the issue of population quality from the perspective of human capital.It was not until 1960 that Theodore Schultz delivered a speech titled "Investment in Human Capital" at the annual meeting of the American Economic Association that the revolution in economic thought on human capital began. Before 1949, Chinese economists ignored the importance of population to economic development for a long time.

After the founding of the People's Republic of China in 1949, neither the economic theorists nor the economic decision-makers were mentally prepared for China's population problem. In 1952, they basically copied the Soviet planned economy model.When the Soviet Union started a planned economy in the late 1920s, the per capita education level was relatively high, the population was small, and there was no sufficient theoretical discussion on the population issue.However, the traditional concepts in China for thousands of years are "there are three types of unfilial piety, and it is great to have no offspring" and "more children, more blessings".The unprecedented enthusiasm in the early days of the founding of the People's Republic of China and the great success of the first five-year plan made people immersed in unprecedented optimism.Under such circumstances, "a large population in China is a good thing" has become a broad social consensus.

A major shift in population policy in the short term is impossible without economic and ideological preparation.The Indian government once tried to promote family planning in the late 1970s, but it was widely protested by Indian society and had to give up. It was not until recent years that family planning began to be gradually accepted, but the law passed in 2000 to prevent the country’s population from exceeding 1.1 billion plans have failed.The United Nations Population Fund pointed out in the 2008 State of World Population Report that it is estimated that by 2050, India's population will reach 1.658 billion people, surpassing China's 1.408 billion people in the same year and becoming the most populous country in the world.

China lacked a group of qualified economists in modern times, and the understanding of China's population problem was not ahead of the times, providing sufficient economic and ideological preparations for early population control, leaving behind historical regrets.Marshall wrote in his book, "Projects of great and rapid change are now, as ever, doomed to failure and counterproductive; we cannot make steady progress if we go so far So fast that our new way of life outstrips our instincts. Indeed, human nature is changeable—new thoughts, new opportunities, and new ways of acting can change it even in a few generations, As history shows; this change in human nature may never have been as widespread, perhaps never proceeded as rapidly. But it was nonetheless a development, and thus a gradual one; Change must come out of it, and therefore must be gradual".

The first generation of economists in New China lived up to their historical mission. In 1955, at the Zhejiang Group Meeting of the Second Session of the First National People's Congress, Ma Yinchu submitted a speech titled "Population Control and Scientific Research", which immediately received a lot of criticism.Ma Yinchu said frankly: "Why do I say this? It is entirely because the population issue is really too important to our country and nation. Since I have realized the extreme importance of this issue, I must stick to it until the end. Victory. Otherwise, as an economist and a representative of the people, I will not fulfill my responsibilities to the motherland and the people." In 1957, Ma Yinchu's "New Population Theory" was published in "People's Daily" on July 5 of that year superior. "New Population Theory" is not a treatise on population, but an economic masterpiece ahead of its time, like a thunderbolt in the sky.Ma Yinchu believes: "The biggest contradiction in our country is that the population is increasing too fast and the capital accumulation seems to be too slow... The capital accumulation is so slow, and the population is multiplying so fast, it is not easy to solve the contradiction of 'less capital and large population' Is it difficult?" "New Population Theory" put forward the policy proposition of "limiting the population and improving the quality of the population".

But in China at that time, where the per capita income was less than US$200 and the per capita education was 2 to 3 years, this kind of formulation undoubtedly violated the social consensus and could not be understood by most people.Ma Yinchu has been widely criticized, and it is precisely because of this criticism that his policy recommendations have been widely disseminated, almost reaching the level of household name.In fact, China has completed the economic and ideological preparation for "family planning". Fifteen years later, that is, after 1970, in order to control the excessive population growth, China began to gradually implement the family planning policy, encourage late marriage, promote good birth and childbearing, and curb the population explosion. In August 1972, in the "Investigation Report on Family Planning Work" submitted by the Ministry of Health to the State Council, for the first time, the city's birth control experience was summarized as the policy of "late, rare, and few".The so-called "late" means that both men and women get married above the age of 25; "rare" means that the birth interval after marriage is longer; "less" means that a couple only has two children.It should be said that the population control started in 1972 was "before it is too late". On September 14, 1979, Ma Yinchu was completely rehabilitated and given due recognition.Without Ma Yinchu's "New Population Theory", China would have no economic theoretical preparation and serious policy thinking, and the implementation of family planning may be even later. China's population has shifted from "high birth, low death, high growth" to "low birth, low death, low growth" equilibrium, successfully completing the population transition, 20 years ahead of India and other underdeveloped countries.As shown in Figure 3-8, since 1964, China's per capita income has gradually shaken off the millennium stagnation and started to grow slowly.After a thousand years of stagnation and a century of sinking, China's per capita income has finally begun to grow!This is a great historical achievement!

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