Chapter 15 Part One: Three Aspects of Sustainable Economic and Social Development in China

With the widening gap between the rich and the poor in China, the issue of the poor and the rich has become a harsh word in mainland China. Some officials, academia, and businessmen have colluded to form so-called "special interest groups" to steal the achievements of reform. For all rich people, completely negate private entrepreneurs, thereby negating reform and opening up, hoping to return to the era of national unification in the past. There are many problems in medical care, especially in education, the poor have narrow access to advancement, public power cannot be effectively restricted, and power is closely related to wealth.Some entrepreneurs are too close to power, but quite a few entrepreneurs, especially private small and medium-sized entrepreneurs, are suppressed by power and the system...

These issues are entangled, and we urgently need to sort out the clues, identify the direction, and discuss the major issues of China's economic and social sustainable development on the basis of clarifying these issues. What is the number one danger in China today? Marx has already made it clear in "Das Kapital" - an economy and society that does not pay attention to fairness and justice and capital exploitation is bound to fall into periodic economic crises and eventually perish. Don’t think that Marx’s point of view is outdated. Marx’s thesis is completely correct. A society that does not pay attention to fair distribution will eventually inevitably lead to the shrinking of continuous consumption capacity, while production is expanding infinitely, which forms what Marx called relative overproduction. Relative overproduction leads to economic crisis: a large number of products cannot be sold, and factories close down one after another.

Let's look at the developed countries in the West. They have not had an economic crisis for a long period of time. Was Marx wrong? No, these countries have changed. They have resolved the contradictions pointed out by Marx with fair and just distribution. In the words of Lang Xianping, these capitalist countries have already been socialized. We know that workers in modern western developed countries have powerful forces to compete with capital. They have strong trade unions, are backed by the government’s minimum wage law, and have the right to strike and other rights endowed and guaranteed by law. Workers’ power to fight for wages is so great that it leads to It breaks the "wage rigidity" in economics-wages can only rise but not fall.

What the Chinese government needs to guard against is to be vigilant against the capitalistization of socialist China, that is, to the situation where capital exploits labor without scruples. Since the reform and opening up, the Communist Party of China has implemented economic construction as the center, but some local government officials have implemented this policy as centering on capital and serving capital wholeheartedly. In extreme cases, it has led to the regeneration of bureaucratic capital. In the market and economic activities, workers are naturally weak compared to factory owners. As long as the government does not use force to help workers, workers are like lambs to be slaughtered, and capital exploitation will be unrestrained. This is just like the life of Marx. As in that era, the situation of the workers has reached a tragic level.Due to the disparity in power between workers and capitalists, even if the government adopts a neutral attitude towards capital and labor, it is actually an indulgence and encouragement to the exploitation of capital, not to mention the situation where the government assists capital.

The Chinese government is striving to build a harmonious society, which is the correct path in line with the historical trend.The question is how to achieve harmony? In my opinion, true harmony should be based on the balance of power. In China, the most fundamental thing is to promote the balance of power between labor and capital. Looking at the experience of other countries, harmony is achieved through the legal struggle between labor and capital, rather than harmony achieved by one powerful party overwhelming the other.Since the beginning of this year, massive strikes have not only swept across Western European countries, but also spread to the United States, Asia and Russia. The most recent strike in the United States is the strike of Hollywood screenwriters.We know that these strikes will not affect social harmony, but will promote social harmony. The whole world is on strike, why don't we?

The Chinese government should start to consider assisting workers to fight against capital and promote the balance between capital and labor. Only in this way can a real social harmony be formed and sustainable economic and social development be achieved. There is only one purpose in promoting the balance of labor and capital, and that is to realize the wealth of the people, so that the continuous strong domestic consumption and investment demand of the people will become the guarantee for the sustainable development of the economy. Marx was not the only one who realized the serious consequences of the excessive exploitation of capital. Those far-sighted economists and politicians in history all understood the logic of the economic crisis and took measures to rescue them. Otherwise, capitalist countries would have been predicted to perish by Marx. up.

Look at how Japan around us is doing. From 1960, the Ikeda Cabinet implemented the "National Income Doubling Plan". In 1967, the real national income doubled three years ahead of schedule. By 1973, Japan's per capita real national income Even increased by 2 times.This laid the foundation for Japan's economic take-off, from a big manufacturing country to an economic power second only to the United States. In fact, almost all western developed countries have experienced similar national income enhancement programs in their economic take-off. So far, the biggest shortcoming of my country's economic development model is that there is no similar plan to increase the national wealth simultaneously. Instead, the people have become the long-term bearers of the reform costs, leaving behind various problems such as sluggish domestic demand, economic imbalance, and intensified social conflicts. sequelae.

Increasing labor income and expanding national income is not only a necessary condition for China's long-term sustainable development, but also an urgent need for China's current sustained economic growth. At present, it is an indisputable fact that China's economy is facing a rapid turn to overheating. The just-concluded Central Economic Work Conference has focused on preventing economic growth from turning too fast to overheating, and preventing prices from structurally rising into obvious inflation.As the primary task of macro-control in 2008. There are many ways to cool down the economy. Exchange rate measures, fiscal policies, and monetary policies can all be used. However, the author agrees with a basic point of view that only by "hiding wealth among the people" can fundamentally control the overheating of the economy and push the economy to a long-term health. Development means accelerating the reform of the prices of production factors through secondary distribution, realizing the transfer of wealth to the private sector as soon as possible, so as to stimulate the domestic demand market and eliminate the worries of the people.

Expanding domestic demand by increasing labor income and saving wealth to the people will never increase inflation as commonly believed, but on the contrary, it will promote the healthy and robust development of the national economy.In the case of poor protection of labor rights and interests, the rise in wages of laborers must be an illusion. It is the rise in nominal wages caused by inflation. That is to say, the rise in wages in many industries is not caused by inflation, but on the contrary. is the result of inflation. Increasing labor income can curb economic overheating from two aspects. One is to reduce foreign dependence and reduce excessive exports. Labor wages have increased strongly, and the price advantage of export products has declined, so exports will inevitably be suppressed.The second is to curb domestic overheated investment demand, such as investment in the overheated energy industry. If the wages of miners are greatly increased, it will definitely be able to strongly curb its growth.

To sum up, increasing labor income is to inhibit investment by increasing investment costs.Cooling down the economy in this way will kill two birds with one stone: on the one hand, the trend of overheating the economy will be quickly suppressed, and on the other hand, storing wealth among the people will ensure a strong momentum for future economic development. Here, I would like to remind all business owners and rich people in China who are worried about the public's "hate the rich" that increasing labor income is not only an improvement for workers, but also a necessary condition for your sustainable development.If the poor in a society do not have enough purchasing power, where will the rich get their money.Therefore, business owners should not oppose labor wage increases, but should strongly support them.

So far, one of our conclusions is that the foundation of solving the problem of the rich and the poor, promoting social harmony and achieving sustainable economic development lies in increasing labor remuneration and promoting the balance of labor and capital. Improving human capital investment is the material basis for sustainable economic development. This is a principle proved by the economic development trajectories of various developed countries, especially the development history of emerging Asian countries and regions. The economies with rapid export growth (such as Japan and the four Asian tigers), as the labor costs in the region increase year by year and the opening of regions with cheaper labor in other parts of the world, they gradually lose their cost advantages and can continue to support the continued economic growth. It is the improvement of human capital advantage and product technology content. Just imagine, if Japan did not have a long-term vision and huge investment in technology research and development decades ago, but had been satisfied with the temporary advantage of labor costs, then after China's reform and opening up, it would have been eliminated by competition long ago. Japan's continued competitiveness in the international market. Many people believe that China's economic growth rate of around 10% in recent years is too fast.However, the benefits of increased economic growth are self-evident.The key problem is not too fast economic growth, but insufficient investment in human capital. A country's economic growth is largely measured by the country's total output.Total output depends on total input. Inputs come from three sources: labor, capital, and technological progress.The former two are material investments, while the latter are intangible investments. The new economic growth theory holds that endogenous technological progress can bring endogenous economic growth, and endogenous technological progress comes from the intangible capital investment of economic parties, namely human capital investment and R&D investment. Due to the externality of intangible capital, when the intangible capital investment is insufficient, the economy will not reach Pareto optimality or the economy will be dynamically ineffective. The new economic growth theory introduces knowledge and human capital factors into the economic growth model, and the application of specialized knowledge and the accumulation of human capital can generate increasing income input, so that the profit of the income is also increasing. Among them, Romer's endogenous growth model of technological progress points out that technological progress is the core of economic growth. The driving force behind growth is knowledge accumulation, and capital accumulation is not the key to growth.Knowledge accumulation and technological progress play a decisive role in economic growth, human capital has increasing returns to scale, and there is a virtuous circle in which investment stimulates the accumulation of knowledge, which in turn promotes investment. For example, after the Second World War, most of the real GDP growth rate of the Japanese economy relied on the contribution of capital and TFP, and the changes in labor input were almost negligible.Among them, TFP contribution is the decisive factor of real GDP growth, and the proportion of TFP contribution to GDP growth is 19.2%-33.3%.Therefore, technological progress was a key factor in Japan's economic growth after World War II. For another example, according to the International Competitiveness Research Report of the International Institute for Management Development (IMD) in Lausanne, Switzerland, the UK ranks fifth in the world in terms of overall R&D investment and fifth in the comprehensive evaluation of technological competitiveness.The relationship between scientific and technological progress and economic growth in the UK shows that stable economic growth and stable technological progress are related to a certain level. However, the capital-output elasticity of Southeast Asian countries is much higher than that of Japan and other developed countries, and the opposite is true for labor input.The human capital investment and R&D expenditure in East Asian countries account for a very low share in GDP. Insufficient human capital investment seriously limits the output of human capital, which in turn affects the demand for human capital. From the perspective of the new economic growth theory, there is no technological progress in the economic growth of Southeast Asian countries, that is to say, the economic growth of Southeast Asian countries lacks stamina. From our country's point of view, every time since the reform and opening up, the excessive economic growth rate is caused by the accelerated growth of material capital investment, and the high growth of material investment has driven the high economic growth.When excessive economic growth occurs, the central government will adopt austerity policies to reduce investment in fixed assets and bring economic growth back to a normal level.According to estimates, from 1987 to 2003, the overall contribution rate of my country's human capital to economic growth was less than 30%, while the contribution of material capital investment reached 70%. In 2003, the proportion of material investment activities directly and indirectly affected by government investment should be Above 60%. Therefore, it can be considered that the overheating and shrinking of physical capital investment affected by government departments and economic activities of organizations is the main reason for economic fluctuations. However, physical capital investment has diminishing returns to scale. For example, in recent years, the non-correlation between the growth of fixed asset investment in various regions of China and the local economic level has become more and more obvious. It can be seen that the fundamental countermeasure to solve the so-called excessive speed of China's economic growth is to substantially increase investment in human capital.It is generally believed that many economic problems are caused by government intervention. However, according to the research of the World Bank, many social and economic progresses are the direct consequences of government actions.Therefore, the government must pay more attention to human capital investment. Human capital investment is mainly divided into five parts: one is medical and health care; the other is training of in-service personnel; the third is formal primary, secondary and higher education; Migration of jobs and investments in enterprise capacity.Among them, investment in education and health care are the main factors of investment in human resources.Since the improvement of education and health care has externalities, it largely depends on government investment, while the relative scale of the Chinese government's investment in education and health care is still at a relatively low level. At the same time, the current economic growth model is not conducive to employment, which will further widen the gap between the rich and the poor, and the effective market demand will be even more insufficient, making the economic growth rate more dependent on investment demand and export demand, and further deepening structural defects, thus forming a vicious circle . Necessary social security and welfare are the basic conditions for sustainable economic and social development.The serious deficit of social security funds is almost a common problem in all countries in the world.Furuo, the United States, Europe, and Japan are all troubled by the huge black hole of social security funds, let alone a developing country like China. As we all know, China's social security fund has a huge deficit (the official figure is 720 billion yuan). However, almost all personal pension accounts are running in an empty state. This situation is basically unique in the world. From the perspective of China's education expenditure, it only accounts for 3% of GDP, but this proportion has reached about 5% in many developing countries.Therefore, I think it is normal for education, health and social security expenditures to each account for about 5% of GDP. The social security fund mainly relies on financial support and dividends from state-owned enterprises. One is to increase the central and provincial governments' investment in social security.The provision of the above-mentioned basic services by the government can be guaranteed by increasing the intensity of transfer payments or increasing the proportion of local governments in tax sharing.In the effort to expand public financial services to the entire countryside, the government should mainly focus on the following aspects: nine-year compulsory education, basic health care, basic unemployment relief and pension insurance, and necessary public facilities Serve. Inadequate provision of public services is unacceptable for a country striving to build a harmonious society. Therefore, minimum national standards should be established for the following core public services: nine-year compulsory education, basic health care facilities, basic unemployment benefits and pension insurance, and basic public facility services in rural areas.In addition, it must be emphasized that it is the responsibility of the central government to ensure that all citizens can enjoy the core public service items provided by the government. The second is that state-owned enterprises pay dividends and invest in the social security system.State-owned enterprises are theoretically owned by all citizens. State-owned enterprises are invested and constructed by the state with taxpayers’ money. resettlement costs and pensions, and this is an important reason for the subsequent increase in the profits of these state-owned enterprises), so all taxpayers are actually shareholders of state-owned enterprises.Take it from the people and use it for the people. State-owned enterprises should transform the state dividends into social security system to inject funds. In 2004, the state-owned enterprises under the SASAC realized a total profit of 400 billion yuan, and in the first half of 2005, they realized a profit of 299.9 billion yuan.If 50% of the profits of state-owned enterprises were turned over to the government in 2004, which was 6.5% of that year's GDP, the Chinese government's education, medical care, and social security related expenditures could increase by 85% accordingly. The improvement of the level of social security can reduce the capital expenditure of residents in related fields, so it can correct the current imbalance of wealth distribution and improve the quality of life of the people to a certain extent. State-owned enterprise dividend policies must strengthen audits to prevent fraudulent accounts, and must ensure that state-owned enterprise dividends are fully converted into social security funds. Relevant laws must be introduced including the management and use of state-owned enterprise dividend funds to ensure that state-owned enterprise dividends can truly be turned into public welfare. The people can truly become the biggest beneficiaries of reform and development.For the allocation of resources, there must be a unified budget allocation process, that is, to allocate all resources according to a set of unified standards to meet public needs and improve fairness and efficiency.At the same time, institutionalized management of social security funds must be carried out, and corrupt officials must be severely punished.The current punishment for those involved in the case is too light, not only does not help to curb corruption, but it is condoning corruption.Recently, the Ministry of Finance of China, together with the State-owned Assets Supervision and Administration Commission, issued the "Administrative Measures for the Collection of State-owned Capital Income from Central Enterprises", which marks the arrival of a new era of state-owned enterprise dividends in China. Although most of the current state-owned enterprise dividends are still reinvested in state-owned enterprises, there is no clear regulation In the part of people's livelihood, but if you start, there will be hope. My dream is that one day China will incorporate the dividends of state-owned enterprises into the public budget and put them into social security funds. China should prevent monopolistic state-owned enterprises from becoming a tool to satisfy the interests of a few people. Since state-owned enterprises are owned by the whole people, they should benefit all the people. An important obstacle to the realization of state-owned enterprise dividends lies in the fact that the interests of state-owned enterprises have led to the actual control of state-owned enterprises being manipulated by small groups. During the reform and development of some state-owned enterprises, internal management power has been inbred, and the power structure has gradually been dominated by senior family members or members of interest circles. Monopoly, property resources are gradually occupied or borrowed by small groups, which has resulted in the development of some state-owned enterprises being enjoyed by a few people. Western developed countries have a sound supervision and control system for state-owned enterprises to avoid this situation.In these countries, the congress or parliament supervises companies mainly by reviewing companies' annual reports, implementing laws, and filing lawsuits. British law stipulates that state-owned enterprises must submit annual reports and accounts to the parliament, and the parliament will monitor and review the operation of state-owned enterprises by frequently listening to the financial reports of enterprises. The U.S. Congress has the right to send administrative officials of state-owned enterprises to testify and state the implementation of laws and the degree of policy implementation. The French Congress supervises state-owned enterprises through investigation and litigation, and the law has relatively detailed regulations on the conditions, procedures, and settlement of lawsuits. Parliamentary monitoring has improved the authority of monitoring. Therefore, in order to put an end to the grouping of interests in state-owned enterprises, it is necessary to implement the assessment and control of the leaders of state-owned enterprises. It is necessary to clarify the subject of supervision, define the powers of supervision, and at the same time impose strict penalties on the dereliction of duty of the subject of supervision and statutory regulations that have a deterrent effect on the object of supervision. Litigation rights, and at the same time necessary supervision over supervisory personnel through the judiciary, the people's congress, etc., to prevent supervisory personnel from colluding with business leaders to monopolize the interests of the whole people. The above three points are only what the author believes are the most important for maintaining long-term development. The sustainable development of China's economy and society depends on many other conditions. In these aspects, the author has expressed his opinion that China should pay more attention to exchange rate policy when it is moving towards a large-scale open economy. The sustainable development of society and economy is also indispensable to the guarantee of scientific system. Ding Xueliang said that it is right to be beaten only when the system is backward.We often talk about realizing various modernizations, but no one realizes that the system must also be modernized and scientific. What is a scientific system? A scientific system is a system that can guarantee sustainable development, instead of following a pitiful life cycle like a feudal dynasty. Regarding this issue, a conversation between Mao Zedong and Mr. Huang Yanpei in Yan'an was very thought-provoking.Huang Yanpei confided in Mao Zedong: "I have been living for 60 years. I don't tell what I heard, but what I saw with my own eyes is the so-called: its prosperity is also vigorous, and its death is also sudden. One person, one family, one group, one place, and even one In China, many units do not have the dominance to jump out of this cycle.” Mao Zedong replied: “We have found a new way, we can jump out of this cycle. This new way is democracy. Only by letting the people supervise the government, Only when the government dares not relax. Only when everyone takes responsibility can the government not be destroyed.” I believe the above words will give us more inspiration. Our long-term research at the World Bank shows that developing countries are vulnerable to vicious cycles of economic corruption, inequality, violence and social unrest, and even civil war, in which corruption is a key link. Corruption is a kind of rent-seeking behavior. The privileged class uses political power to participate in the allocation of economic resources and seeks their own self-interest. This is an extremely unfair distribution method that seriously violates social justice. At the same time, corruption and government inefficiency are twin brothers, and together they constitute the biggest obstacle to economic and social development, seriously damaging the institutional basis for economic growth. Corruption reduces the efficiency of resource allocation, inhibits the normal development of the private sector, and causes great harm to the poor. Our research shows that there is indeed a causal link between corruption and high levels of social and economic inequality.According to World Bank estimates, controlling corruption and improving government efficiency can increase per capita income by four times in a long period of time. For countries with the same other conditions, the degree of corruption control ranges from low to moderate and from moderate to high (the World Bank divides the degree of corruption control into three levels: low, medium and high), and the difference in the annual growth rate of real per capita income reaches 2~ 4 percentage points. In an environment where corruption prevails, people have extremely unequal opportunities to accumulate wealth and earn income. It is difficult for the poor to accept the reality of hardship, and the rationality of the income of the rich will be questioned.The privileged class holds the right to allocate basic resources, and by virtue of this, they can instantly accumulate unimaginable wealth for ordinary people, which is impossible under a perfect market system.If their power is not constrained by the system or morality, and their selfish desires are allowed to overflow, the whole society will fall into extreme social and economic inequality.It is not uncommon in African countries for a very small number of people to control the vast majority of social wealth while the vast majority live in abject poverty. American sociologist Stoff pointed out that the sense of relative deprivation will make some people's anti-social tendencies quite obvious, and it is an important source of social discontent and social unrest. At this point it is possible to slip into the dynamic process described by Hobbes: If the majority perceives the distribution of wealth to be unjust, social tensions can become self-reinforcing, and governments can lose control of the situation. When corruption and the resulting economic inequality are high, the poor feel a strong sense of deprivation. If people think that they can only get rich if they are deviant, corrupt or daring, then when faced with a sudden rich man, people will doubt his purity instead of seeing him as a respectable successful person.Crime and looting of property will increase as a result.For example, World Bank research in developing countries shows that a small increase in inequality can lead to a 30 to 35 percent increase in robbery. So how can developing countries avoid the vicious cycle of corruption, inequality and social unrest? In the recent joint report of the World Bank and the International Monetary Fund, the prescriptions for developing countries mainly include realizing the democratization of social and economic life; enhancing the transparency of society; establishing a fair and long-term stable property rights system.These measures can fundamentally curb corruption and improve the efficiency of government departments. In short, only by implementing the correct economic development strategy on the basis of basic institutional science can we avoid the vicious circle of corruption, inequality and social unrest, and move towards a fair and just harmonious society.