Justin Yifu Lin’s “Interpretation of China’s Economy” Note 6

Original link: https://ljf.com/2022/09/13/1148/

Lecture 10: Is China’s Growth Real and Socialist New Countryside Construction

1. Is China’s growth real?

(1) Questions raised

(2) The formation and mechanism of deflation

There are only two possible causes of deflation: a sudden drop in demand and a sudden increase in supply.

Between 1991 and 1995, the average annual growth rate of fixed-asset investment jumped to 36.9 percent from an average of 16.5 percent in the previous five years. This continued overheating of investment has resulted in an overall expansion of the productive capacity of the national economy, far exceeding the growth in consumption. Therefore, when China emerged from the shortage economy in the mid-1990s, it immediately fell into the predicament of general overcapacity and deflation.

(3) Deflation and rapid growth in China

(4) The consequences of deflation

Generally speaking, the government has two means to solve the deflation problem: one is monetary policy and the other is fiscal policy.

What really helped the United States get out of deflation in 1941 was that the United States entered World War II. The wartime fiscal deficit could be infinite, and only by this way did the United States get out of deflation.

(5) Overcapacity and solutions

The first stock demand is the investment demand of foreign enterprises. The second stock demand is the investment demand of private enterprises. The third stock demand is the consumption demand in the city. The fourth and most important stock demand for now should be the consumption demand in rural areas.

2. Construction of new socialist countryside

(1) Proposal for the construction of new socialist countryside

(2) Deflation and the “Three Rural Issues”

(3) The construction of new socialist countryside and the starting stock demand

I once did a study and calculated based on the data in 1999, if the electricity price was reduced by 1 cent, the demand for color TVs would be equivalent to an increase of 370 yuan in income, and the demand for refrigerators would be equivalent to an increase of 607 yuan in income. Yuan money, stimulating the demand for washing machines is equivalent to an increase of 909 yuan in income, which shows that these effects are very obvious. In this case, in order to effectively develop this considerable consumption stock in rural areas, it is very necessary to carry out a campaign in rural areas focusing on improving the infrastructure of farmers’ consumption environment.

We often say that there is no money in rural areas, but there are often “rich” in rural areas. Farmers in many places are not without money, but have not spent their money in the right places.

(4) Specific problems in the construction of new socialist countryside

1. Completion time of new socialist countryside construction

To complete the construction of a new socialist countryside with the goal of improving rural public infrastructure construction by 2020 is not only the aspiration of the people, but also the situation.

2. The construction site of the new socialist countryside

The construction of new socialist countryside should be based on existing natural villages.

3. The source of funds for the construction of new socialist countryside

First, there is still potential for government finances to be tapped. Second, the government can play an organizational role with the help of social forces. Third, for investment projects with the nature of private goods, farmers can invest and labor mainly, and the government will only provide appropriate subsidies.

(5) Matters needing attention in the construction of new socialist countryside

1. Construction of new socialist countryside and urbanization

By 2050, China’s per capita income can reach a medium-to-high level, but the proportion of the agricultural population will still be at least 15%. By that time, infrastructure construction in rural areas has been greatly improved, and the income gap between urban and rural areas has also been greatly reduced. There will not be much difference in living standards between living in cities and living in rural areas, so it is very likely that some people will tend to Live in the countryside. And by then, the living environment of many big cities should have basically reached saturation, so the actual population living in rural areas may be more than 30%, that is, about 400 million people. Therefore, the promotion of urbanization and the construction of new countryside can be carried out at the same time, and the two paths go hand in hand.

2. Solving rural problems and developing non-agricultural industries

3. The development of modern agriculture is the material basis for the construction of new countryside

4. New farmers are the most critical factor for the success of new rural construction

(6) Summary

The construction of the new socialist countryside is progressing smoothly and has achieved remarkable results, but there are also some notable problems encountered in the implementation, which need to be emphasized again here.

First of all, in addition to the forbidden development zones and a few optimized development zones that are no longer suitable for agricultural production in terms of the main function positioning, in most of the optimized development zones, key development zones and restricted development zones that still need to continue farming, the location of new rural construction The current natural village should be used, and the situation of destroying houses and building new villages must be avoided.

Secondly, the construction of a new socialist countryside should be positioned as a “supplementary lesson” for the government, because for a long time in the past, the country’s construction has always focused on cities, and now it is time to adjust the direction of investment and pay more attention to rural areas. building. In addition, the interests of farmers must be considered during construction. Social funds can be mobilized or farmers can be encouraged to invest and work. However, they must not ignore the requirements of the development stage and create new burdens for farmers to complete the tasks.

Finally, the development stages and conditions are different in different places. Therefore, the new rural construction cannot be standardized in the whole country. There must be long-term planning. The construction of the new countryside should be regarded as the content of village autonomy, and local farmers should participate in the discussion, decision and supervision of implementation, and should not be decided by the superior. This can not only reduce corruption, bean curd slag projects, but also conducive to the cultivation of management democracy.

Lecture 11 Improve the market system, promote the unity of fairness and efficiency, and achieve harmonious development

1. Achievements and existing problems of reform

Since the reform and opening up, China has maintained sustained high-speed growth for 32 years, with an average annual GDP growth rate of 9.9% and an average annual growth rate of foreign trade of 16.3%.

Since 2003, the main macroeconomic problems have been the so-called “three faults”: (1) too fast investment growth and relatively insufficient consumption; (2) too much money and credit; (3) too large foreign trade surplus.

At present, China’s Gini coefficient has exceeded 0.45, which is 0.05 higher than the internationally recognized warning line.

2. Comparative Advantage: Achieving the Unity of Efficiency and Equity in One Distribution

“The primary distribution achieves the unity of fairness and efficiency” should have at least two meanings. The first layer of meaning is that the economy should grow rapidly and the overall income level should continue to increase, which is very important. As for the second meaning, what is the unity of efficiency and fairness? It means that in the process of rapid economic growth, the income growth rate of the poor is higher than that of the rich, so that fairness is expected to be achieved.

The biggest difference between the poor and the rich is that the poor have little assets to earn income apart from labor, while the rich mainly rely on capital to increase their income, using capital to hire others to make money.

The reason why Japan, South Korea, Singapore and China’s Taiwan region after World War II are called the “East Asian Miracle” is that on the one hand they maintained a long-term rapid economic growth, and on the other hand, in the process of economic growth, they also Income distribution has been continuously improved, which is supported by empirical experience.

Developed countries and developing countries have different comparative advantages, which are in line with the comparative advantages of developed countries but not in line with the national conditions determined by the factor endowment structure of developing countries. If the backward countries adopt the catching-up strategy to build capital-intensive industries on a large scale, these industries will If there is no competitiveness, the resource allocation efficiency of the whole country will be low, and the economic development efficiency will be very low, and it will also lead to a series of problems.

The developing countries that implement the catch-up strategy all have the following characteristics: at the beginning, under the protection and subsidy of the government, relying on investment to drive rapid economic growth for a certain period of time; as the surplus decreases, investment is weak, and economic growth slows down , began to look for foreign funds and maintained rapid growth for a period of time; finally, when the foreign debt matured and needed to be repaid, it was discovered that the established industry was not competitive and could not create profits to repay the debt, so it evolved into a financial crisis and a social crisis. .

Under the circumstance that a large number of social problems already exist, if the problem of fairness is solved through secondary distribution, it will fall into a dilemma like Latin American countries if you are not careful. Therefore, I am not in favor of the formulation that “primary distribution attaches importance to efficiency, and secondary distribution attaches importance to fairness”. I believe that the issues of fairness and efficiency should be solved simultaneously in primary distribution, with secondary distribution as a supplement.

In the era of planned economy, the government completely violated its comparative advantages in the process of economic development, established some capital and technology-intensive industries, artificially lowered the prices of various factors, and then allocated the scarce capital to priority development through administrative means. industry. After 1978, China has carried out gradual reforms, giving certain protection and subsidies to industries without comparative advantages, and liberalizing those industries that were restricted in the past and conforming to comparative advantages, thus not only maintaining stability, but also achieving economic growth. Rapid growth. China is currently the second largest trading country in the world, and its export products are mainly labor-intensive products. However, with the rapid economic growth and the rapid accumulation of capital, the capital content and technical content of export products are also constantly improving. This is based on comparative advantages. inevitable result of development.

It should be noted that the incremental reform also left some problems. So far, China has not established a fully competitive market system, and the government still has some interventions in resource allocation. This is a problem left over in the past to protect and subsidize industries without comparative advantages. The reasons for these problems are mainly the following “distortions”:

First, the distortion of the financial structure. (1) Small and medium-sized enterprises do not receive financial support. (2) The vast majority of farmers do not receive financial support (3) The employment opportunities are relatively insufficient. (4) The developed industries are too capital-intensive.

Second, resource prices continue to be distorted.

Third, administrative monopoly.

If China can deepen reforms, eliminate these distortions, make the market fully play its role, the national economy will develop according to its comparative advantages, and those who are able to work can be fully employed and share the fruits of economic development, then it is hoped that a one-off distribution will achieve the unity of fairness and efficiency. good and fast development. At that time, the task of the state is only to solve the problem of assistance to the incapacitated people and the widows and loneliness through secondary distribution. Such problems are relatively simple and relatively easy to solve.

3. The way out: deepen reform and improve the market system

First, deepen the reform of the market economy system, and the most important thing is to improve the financial structure.

Second, increase resource tax (fees).

Third, abolish administrative monopoly and strengthen supervision over monopoly industries that cannot introduce competition.

4. Conclusion

In order to clear the source, it is necessary to realize the unity of fairness and efficiency in one distribution, so that the economy can develop well and quickly, and gradually narrow the income gap between urban and rural areas and regions in the process of increasing employment. As people’s income level increases, they have the ability to pay, and the problems of expensive and difficult medical treatment can be fundamentally solved. At the same time, the problem of externalities is left to the government to solve, so as to avoid the development mode of excessive resource-intensive and damage to the natural environment, so as to realize the “five overall plans” and realize the concept of a harmonious society.

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