Chapter 29 Section 4 China Needs Economic Soft Power

In the early 1990s, Harvard University professor Joseph Nye pioneered the concept of "soft power", and since then started the trend of research and application of "soft power".According to his point of view, soft power is a kind of ability, which can achieve its goal through attraction rather than coercion or inducement, and is another component of a country's comprehensive power in addition to traditional hard power based on military and economic strength .The introduction of this concept clarifies the important value of soft power and raises it to a position equal to or even more important than traditional "hard power"—as Joseph Nye said: "Hard power and soft power are equally important. Important, but in the information age, soft power is becoming more prominent than ever.” Once the concept of “soft power” was proposed, it received positive responses from all over the world, and countries all over the world studied and seriously planned to enhance their own “soft power.” .

The meaning of "soft power" is very broad.In my opinion, economic soft power is one of the main aspects of soft power.Economic thought is the basis of economic policy and represents to a large extent the "soft power" of the economy.Marshall, the master of economics, wrote in his masterpiece: "No matter the ideas embodied in scientific and artistic ideas or practical tools, they are the most 'true' heritages passed down from generation to generation. If the world's material wealth is destroyed, and this wealth Since the thought produced is retained, it is quickly compensated. But if the loss is thought rather than material wealth, this wealth will gradually disappear and the world will return to a state of poverty. If we lose the sense of If we retain the vast majority of our knowledge of purely factual material, but retain constructive ideas, we will soon regain this knowledge; and if ideas are eliminated, the world will inevitably return to the Dark Ages."

At the end of the book "General Theory", Keynes emphasized the important influence of ideas on human economic behavior. His famous saying "In time, in good or bad, the dangerous thing is not vested interests, but ideas" has become a household name.The history of economic practice proves the charm of Keynes' prophecy.For more than 100 years, from the Industrial Revolution to the Great Depression in the United States in 1929, free market economies, stable currencies, and an open world economy were seen as guarantees of economic prosperity.After World War I, efforts to rebuild the gold standard lost currency devaluation as a measure to cover current account deficits, and prices were much harder to go down than up, greatly curtailing money supply growth, and deflation producing massive unemployment.Keynes once opposed Britain's attempt to return to the gold standard, believing that it would lead to deflation and an imbalance of relative prices at home and abroad, which would make the prices of British exports too high, which was not conducive to competition. He predicted that the policy would lead to unemployment.

Sure enough, after the end of the First World War, Britain suffered from chronic economic dislocation and severe unemployment.This wrong policy adopted by the UK resulted in an increase in the unemployment rate in the 1920s and accelerated the decline of the British economy. On September 20, 1931, the Bank of England had to announce its abandonment of the gold standard.The day before US President Hoover left office, he also warned the incoming President Roosevelt not to intervene in the economy.But at that time, the United States was in the midst of an unprecedented Great Depression. It cannot be said that President Hoover turned a blind eye to the astonishing unemployment rate. It can only be said that the influence of liberal economic thought has been so deeply ingrained that people have become numb to the disasters of real economic life.The free flow of capital internationally was taken for granted in the 1990s. In September 1998, when Malaysian Prime Minister Mahathir Mohamad announced the adoption of restrictions on capital flows in response to the Southeast Asian financial crisis, it caused an uproar in the international financial community and a lot of criticism.However, the subsequent better performance of the Malaysian economy at least partly justified the need for capital controls.Later, the IMF also came to agree with appropriate capital controls.

Let us look again at an example of the successful diffusion of economic thinking, which has been called the "Human Investment Revolution in Economic Thinking" of the 1960s, which treated spending on social services such as health care and education as comparable to spending on physical capital. Investing like investing, is an extraordinary thing. In 1960, Schultz made a systematic discussion on the view of human capital in his speech entitled "Investment in Human Capital" delivered at the annual meeting of the American Economic Association.Schultz's human capital theory divides capital into two forms: physical capital and human capital.Human capital is the capital expressed by the quantity and quality of laborers.The different levels of knowledge, technology and labor skills of workers determine the different productive effects of human capital on the economy, resulting in different degrees of national income growth.

Schultz put forward 9 propositions: Human capital should be given preferential treatment in tax policy; human capital should be prevented from being idle and aging; human capital investment should be avoided from man-made interference; to improve the human capital market, banks should actively provide human capital The cost of capital needs to encourage private and public investment; the government should bear most of the cost of human capital investment, especially to finance the transfer of labor to cities; attach importance to human capital investment for low-income earners; make clear that education and health care also have economic significance, they It is an investment to reverse the imbalance of investment in this area; increase government investment and expand human capital investment to reduce income inequality.Schultz's economic thought has been widely used around the world for about 50 years from 1960 to the present. Even China's Ministry of Personnel, after merging with the Ministry of Labor and Social Security, is also called the Ministry of Human Resources and Social Security.

Economic hard power and economic soft power complement each other. It can also be said that the leadership of economic thought promotes its leadership in the economic field.From the Industrial Revolution in the middle of the 18th century until the First World War, the most influential country in the world was the United Kingdom. The United Kingdom is the research center of economics in the world, and most of the famous economists in the world From the UK.For example, the Royal Economic Society was founded in 1890."The Wealth of Nations" by Adam Smith, the full name is "An Inquiry into the Nature and Causes of the Wealth of Nations", first published in 1776. "Encyclopedia Britannica" said: "Nearly 100 years later, Smith remains a giant in the history of economic thought." "The Wealth of Nations" was crucial to the rise of Britain.Adam Smith proposed the concept of the "invisible hand", that is, the market automatically regulates the allocation of resources.At the same time, it advocates government inaction and non-interference in economic development. When "The Wealth of Nations" was introduced to China, China's "News" commented in 1900: "Adam Smith's "Wealth of Nations" was newly translated by the Western Public School Translation Academy. European financial policies were mostly similar to those of China 200 years ago. Since then, the book It was first adopted by the United Kingdom and established the foundation of today's prosperity. Today, China has been suffering from poverty for a long time, and since the peace talks are established, the financial arrangement must be the first, and it is translated into a book for reference."

After World War I, the world's economic center quietly shifted from Britain to the United States, and the world's economic research center also quietly shifted to the United States in the 1930s.The rise of the United States has also been accompanied by the rise of economic thought.As early as 1890, Marshall was acutely aware of this phenomenon when he wrote: "British economists have many adherents abroad, as well as many critics... Perhaps the greatest relevant development of recent years has been the America. A century ago the 'American School' was thought to have been formed by a group of protectionists led by Carlyle; but now a new school of bright thinkers is forming; To achieve the kind of leadership it has achieved in economic affairs." After World War II, the US economy has reached about 40% of the world economy, and it is inevitable that the United States will replace Britain's leadership in economics.Keynes may be the "last aristocrat" of Britain as the center of world economics.Unfortunately, he himself did not clearly understand this problem. In 1944, he served as the head of the British delegation to attend the United Nations Monetary and Financial Conference held in Bretton Woods in the United States.The Bretton Woods Conference created two international financial organizations after the Second World War, one is the International Bank for Reconstruction and Development, the World Bank, and the other is the International Monetary Fund.The creation of these two organizations, especially the International Monetary Fund, was initiated by Keynes for many years. However, Keynes had a heated debate with the American representative on the issue of whether the headquarters of these two organizations should be placed in the United States or Europe.The Bretton Woods conference finally decided to locate the headquarters of the World Bank and the International Monetary Fund in Washington. After returning home, Keynes was unhappy about this. On April 21, 1946, Keynes died at home of a heart attack.

With the rapid development of China's economy, the interaction with the world economy has been significantly enhanced. China urgently needs economic soft power: First, as the scale of China's economy increases, the mutual influence between China and the world economy is also increasing. The faster China's economic growth Faster, the greater the contribution to the world economy. In 2008, China's total economic volume accounted for 5% of the world's total economic volume, and its economic growth rate was 10%, which was equivalent to contributing 20 percentage points to the world's economic growth, surpassing the contribution of the United States, and ensuring that the world's real economy survived the global financial crisis. No recession, become one of the locomotives of the world economy; China is a large open economy, world trade accounts for 70% of China's total economic output, exports account for 35%, net import and export is one of the troika of China's economy, influenced by the world Affected by the financial crisis, exports will decline, and China's economic growth rate will immediately decrease.

Second, at the same time, international economic and financial relations have become extremely complicated. To maintain a favorable image as an economic power, you must have the right to speak and win the support of public opinion. For example, in November 2008, the Chinese government issued a 4 trillion yuan The fiscal stimulus plan has won widespread praise from international public opinion, but the international community will set off a disturbance in China's exchange rate at any time.Third, as China is a successful developing country, China's experience is more important to other developing countries.It is easy to improve the living standards of 100 million people, but it is not easy to improve the living standards of 1 billion people.There are still 1 billion people living at the bottom of the world. If the economy of these 1 billion people can gain experience from China, human civilization can take a big step forward. In 2008, Justin Yifu Lin became the World Bank's chief economist and senior vice president in charge of development economics. This is not only an international recognition of his personal academic achievements, but also a recognition and value of China's development experience.

Economic thought and development model constitute the "internal power" of soft power, and are also one of the foundations of China's international image.The reality we should face is that China's "socialist market economy" has not yet been recognized by the international economic circles, but is considered a mixed transitional economy, which requires Chinese economists to explain and market to the world. China's economic soft power must have great practical significance.In the 1930s before the emergence of Keynesian theory, the worldwide economic depression was caused by the inherent concept that the economy would be self-balancing and many wrong economic measures were introduced, which made things develop in a bad direction.In the era of industrial economy, with the Keynesian theory, the government took the initiative to use the tools of fiscal policy and monetary policy to deal with the depression, which achieved results to a certain extent.For example, the U.S. Federal Reserve adopted a tight monetary policy after 1929, which caused the Great Depression to last for too long; liquidity while rapidly easing monetary policy.The Keynesian school also profoundly influenced China's economic policy. The outbreak of the Asian financial crisis in 1997 and the world financial crisis in 2008 has induced the problem of insufficient effective demand in China's economy.In 1998 and 2008, the Chinese government decisively adopted proactive fiscal and monetary policies to stimulate domestic demand.These policies have played a very positive role in helping China's economy get rid of the pressure of deflation and promote sustained, high-speed and stable economic growth. China's economic soft power is an urgent requirement for economic system reform.With the popular broadcast of the CCTV documentary "The Rise of a Great Power", the discussion on the rise of a country is in full swing in the society, which inadvertently awakens the "great power consciousness" that has been dormant for a hundred years.But "The Rise of Great Powers" only stated the facts of the rise of nine world powers in history, and did not give an economic theoretical framework to explain the rise of these nine world powers.At present, mainstream neoclassical economics is being challenged, and its reference role for China's economic reform is no longer as good as before.But at the same time, China's "native" economic theory framework with originality and internationalization has not yet been fully established. In 1994, China embarked on the road of socialist market economy. However, the establishment of the market-oriented reform goal of the socialist economic system does not mean that we have mastered the operation experience of the market economy in practice. The "People's Daily" published on June 5, 2006 published Zhong Xuanli's signed article "Unswervingly Adhering to the Direction of Reform and Providing Strong Power and System Guarantee for Realizing the Goals of the Eleventh Five-Year Plan", pointing out that "we must be sober We can clearly see that the establishment and improvement of the socialist market economic system is a profound social change and a very complex social system project. There is still a long way to go in order to build a sound socialist market economic system in our country, and many We are not yet familiar with regularity."For example, building an efficient capital market is a long-term and arduous task for China's economic system reform.China's socialist market economy is an unprecedented great undertaking, which requires learning by doing, and also requires economists to bravely carry out innovations in economic thinking and make advance preparations for the road to reform in the future. China's economic soft power must be international.Long-term economic growth is the eternal core issue of economics.But in fact, economics does not theoretically solve some problems related to long-term growth.Why some parts of the world have achieved great success in economic growth, while others are already rich, while others are poor; Continuous decline.Today's economic growth theory does not explain well the Great Depression in the United States from 1929 to 1933, the "stagflation" in the United States and Europe in the 1970s, the "new economy" in the United States in the 1990s, and the long-term growth of the Japanese economy since 1991. Stagnation and the world financial crisis since 2008.China's economic growth should contribute China's experience to the core problem of human long-term economic growth. What is the prospect of China's economic soft power?There are currently two views. One is an optimistic prophecy.Justin Yifu Lin predicted with confidence: "With the promotion of my country's economy in the world economy, the importance of my country's economic research in world economic research will increase accordingly. When Chinese economists study my country's economic problems , with the convenience of being close to the water, it can be expected that when my country’s economy becomes the largest and strongest economy in the world in the 21st century, we may also usher in an era when Chinese world-class economic masters will emerge in large numbers.” The other is pessimistic prophecy.It is said that the former British Prime Minister Margaret Thatcher predicted: "Because China does not have the kind of 'contagious' doctrine that can be used to promote its own power and weaken our Western countries. Today China exports television sets, not ideas. The famous economist Zhang Wuchang also questioned: "China has been reforming and opening up for 27 years. There are so many high-rise buildings; roads are built very fast, but traffic jams are still frequent; industrial output has skyrocketed in the absence of electricity. The children are beaten by their parents so that they can move their fingers on the keyboard; the Yankees do not believe the results of the international entrance examination are true... The achievements of these forces are obvious to all and hard to count. It is a pity that some things-very important Things—it cannot be forced out. The source of academic thought cannot be forced out. Compared with the level of the West, this should be the reason why we still have few thought masters in China today.” I think Justin Yifu Lin is too optimistic.The concept of economic aggregate is one aspect, and more importantly, the level of per capita income that affects economic and financial complexity. At the end of the 19th century, when the United States quietly rose, not only its economic aggregate, but also its per capita income surpassed that of the United Kingdom.When New York really became the world's economic and financial center, it was already after the Second World War. The total economic volume of the United States was 10 times that of the United Kingdom, and its per capita income greatly exceeded that of the United Kingdom.Therefore, it took nearly 50 years for the Anglo-American alternation at the center of world economics. In 2008, while the total amount ranked third in the world, my country's per capita GDP still ranked 129th in the world, and China is still just out of the low-income level.China's economic aggregate is estimated to surpass that of the United States around 2029, but its per capita income is only one-third of that of the United States. By 2049, China's economic aggregate will greatly exceed that of the United States, and its per capita income will be just over half of that of the United States. On the other hand, I think Margaret Thatcher and Zhang Wuchang are too pessimistic.Over the past 60 years since the founding of the People's Republic of China, Chinese economists have combined modern economic theory with Chinese practice to promote China's economic development and have made important contributions.In the first 30 years, there were Ma Yinchu with the "New Population Theory" and Sun Yefang with the "Law of Value";The "scientific community" of Chinese economics has made indelible contributions to China's growth miracle, and made great contributions to China's choice of the "socialist market economy" in 1992, a grand economic strategy that shocked the world.The commodity economy is the most suitable entry point. People learn and experience the market economy, first of all, the commodity market, where they can experience price changes in commodity exchange, and then they can learn about the labor market and capital market. In the early summer of 1980, in the "Preliminary Opinions on Economic System Reform" drafted by economist Xue Muqiao and others, it was clearly stated: "my country's current socialist economy is one in which public ownership of means of production dominates and multiple economic components coexist. Commodity economy.” Li Yining put forward the idea of ​​transforming Chinese enterprises with the shareholding system from the beginning of China’s economic reform, including the transformation of state-owned enterprises, collective enterprises, township enterprises and other enterprises with unclear ownership, which has been proved to be effective by the reform and practice It was recognized by the Third Plenary Session of the 14th Central Committee, and had a profound impact on the reshaping and development of market players in China's economic reform. China's economy is becoming more and more complex and internationalized, and it faces more and more practical economic problems.This requires a "scientific community" of thousands of qualified economists to solve difficult problems and contribute to innovation in economic theory and research policy. In 2008, Justin Yifu Lin said in his article "Discovering the Gold Mine of Theoretical Innovation, Promoting the All-round Development of Disciplines, and Committed to the Revival of the National Cause", "Chinese intellectuals must also get rid of the stereotype of blindly going to the West to learn Buddhist scriptures. Science in various fields, in-depth understanding of China's history, active research on the success and failure of China and other developing countries in the past 100 years of modernization exploration experience and lessons, as well as the current domestic and international reality, creatively construct a set that can reveal The essence of China's modernization, the new ideological system and theoretical viewpoint of the constraints and opportunities it faces". "Scholars must be resolute, and there is a long way to go." Contemporary Chinese economists can contribute to China's economic soft power just around the corner.China not only exports manufactured goods, but can also export economic ideas in large quantities.When explaining the great history and future of the economy, I try to provide an economic thought for the world economy, and provide economic soft power for China’s revival, especially to reserve economic thought for the economic development after the 80th anniversary of the founding of the People’s Republic of China, and for the emergence of Chinese nationality in the future. The master of economics throws bricks and starts jade.