Guangdong is on the front lines of reform and opening, and Guangdong’s reformers are bold, not afraid to be the first to make a move. From Comrade Ren Zhongyi (任仲夷) to Comrade Yuan Geng (袁庚) — all of these characters form a whole generation of reform leaders with a strong sense of idealism and possessed of strong contemporary political awareness. Guangdong’s reforms are again been passed along, although they hang precariously by a thread. This year Premier Wen Jiabao came to Guangdong on an inspection visit and gave his hearty approval to the latest round of Guangdong’s though liberation movement, and he talked about new reform tasks that needed to be tackled. Here once again is the hope that Guangdong will fulfill its longstanding role as a window, model and experiment for the rest of the nation, that its soldiers will march at the front of the formation, that it will blaze new trails.
Investigations into China’s third major debate over reform
The achievements of market reforms over the past 30 years have been witnessed by everyone. But market reforms have also accumulated a number of problems, and in 2004 a major debate broke out. At that time some people seized on the loss of state-owned assets in the process of state enterprise reform, and they used these extreme cases to deny the entire process of enterprise reform. At the same time they took exception to housing reforms, education reforms and healthcare reforms. As these problems touched on issues of immediate concern to the rights of ordinary people, they really reverberated. This round of [social] debate is different from the previous two debates over the commodity economy (商品经济) and the market economy in that it is not primarily ideological in nature, but rather about very real questions of popular interests and livelihood, and so debate has persisted much longer.
In January 2006 I wrote a piece called “Reforms Cannot Be Shaken.” I felt that on the problems we are now facing the two sides of the debate were not greatly at odds. I also acknowledged six problems with market reforms. First, there is the widening of the three big gaps, between domestic regions, between the city and the countryside, and between rich and poor. Figures released by the World Bank show that China’s Gini coefficient has risen from 16 percent prior to reform and opening to 47 percent, surpassing not only the international warning line of 40 percent but surpassing that of all developed nations. Secondly, social undertakings been severely impeded. In the process of economic development, social undertakings have been overlooked. Work in healthcare, education and culture, for example, have fallen behind. The battle against SARS in 2003 made this even more obvious, exposing the weakness of healthcare infrastructure in the countryside. In 2004, the central party promoted the idea of people-based and scientific development, and this offered a new view of development that is comprehensive, coordinated and sustainable. It is not only the economy that must develop, but also politics, society and culture. Social and economic development have to go hand in hand . . . Only in this way can we achieve sustainable development. Everyone has witnessed the change in recent years, as GDP has grown rapidly and tax revenues have expanded, that many areas have built huge buildings and renovated old city neighborhoods. Government buildings have been erected with lavishness, but education, health and culture have not been given the priority they should. Many rural children cannot attend school, many urban and township residents cannot afford to buy homes and endure poor living conditions, etc. In particular, a social safety net has not yet been established. This has brought about the third problem, which is the prominence of problems of basic livelihood. For example, difficulties finding employment, going to school, seeing the doctor, finding a place to live, growing crime, etc., issues that concern ordinary people — all of these are accumulating, and cannot be resolved in one fell swoop. The fourth issue is that our method of development is rough and unrefined. A high-level of input and consumption has brought serious waste of energy, raw materials and assets. Figures in 2006 told us that while we produced four percent of the world’s economic output, we consumed 32 percent of the world’s steel, 40 percent of its concrete, 25 percent of its aluminum, 23 percent of its copper, 30 percent of its zinc and 18 percent of its nickel, and 31 percent of new demand for oil was generated by China. Fifth, we have ecological destruction and pollution of the environment, and one particularly serious problem is the shortage of potable water. The sixth problem is the spread of corruption, of collusion between officials and business interests, of exchange between money and power. The general mood of society is poor, and issues of crime and safety still need to be dealt with.
Both sides of our major debate have the same view of these six problems, but they disagree as to their causes. One side believes that they are a direct result of market reforms, that having a market economy necessarily means that gaps will widen, that the divide between rich and poor will expand, and corruption become rampant. The other side believes that market reforms have not yet been soundly implemented, that the problem is not the general move in the direction of a market economy but rather problems in the specific route chosen to reform, that power has interfered in the market, that power and capital have combined forces, and this has widened the wealth gap and brought the spread of corruption. That is to say, that these problems arise from lagging political reform. In my piece “Reforms Cannot Be Shaken,” I wrote from a theoretical perspective about major shifts in the nature of key problems, that the government’s system for administrative management had not changed, that the shift had not yet been made toward a public service model of government, realizing that after basic material subsistence issues had been resolved we needed to go further in providing fair and effective public goods, such as education, healthcare, housing, pensions, judicial fairness, information symmetry, democratic rights, etc. And so I said that we are right now “holding the bowl level with both hands to eat meat” (端起碗来吃肉), suggesting we have resolved the problem of food and clothing but we still “set down our chopsticks to curse our mothers”, meaning that it is still tough for us to get work, find a home, afford the doctor, get an education, find justice under the law, and we still do not have transparent information, or the right to participate or express our views, etc. This is the result of market reforms not going far enough.
After that essay was published it found favor with the central party, and once they had looked into its background (发表背景) they expressed immediate support. Not long after, in early March, as the “two meetings” were going into session, President Hu Jintao visited with the Shanghai delegation and gave a speech called, “We Must Unshakingly Promote Reform and Opening,” and he said we must improve the scientific basis of reform and opening decisions and raise coordination [with other pressing issues] of reform and opening moves. He was talking about letting all people taste the fruits of reform and opening. This is the note the central party has struck in this third major debate.
Changing methods of development to break through development problems
So why is it that market reforms have accumulated so many problems along with their achievements? There are now many different analyses of this question from a theoretical perspective, and most boil down to the basic point that we have only been doing market economics but have not commensurately carried out political reforms, that the reallocation of resources has not placed the market in the leading position but has allowed unchecked power to enter the marketplace. This has caused a growing gap between rich and poor and fueled the spread of corruption. Mr. Chen Zhiwu, a professor of finance at Yale University, has researched this topic over the last two years. In one of his articles he points out that no country that has carried out privatization and market economics — no matter whether it is the United States, Britain, Germany, Russia or the transitional countries of Eastern Europe — has a gap in national income as large as China’s. Chen Zhiwu believes that privatization and the market economy are not root causes of runaway income disparities. He believes that the problem lies in the fact that China lack an effective mechanism for putting power in check, and so all resources are controlled by administrative power, and must go through state-owned enterprises and state-run banks, etc., which means that vast majority of resources affecting ordinary people are allocated by the government. As government power is subject to no checks and balances, and as resource allocation is handled by the government on behalf of the market through a state system, these resources and their opportunities are necessarily meted out among those with power and with connections to power. More resources are allocated to the “first world,” comprising places like Beijing, Shanghai and Guangzhou, then come other provinces and autonomous regions of the second world, and then come the counties, which receive yet fewer resources . . . Chen Zhiwu believes that this marriage between the pyramid of income and the pyramid of power speaks to fact that whoever has power and connections can access riches, can seek out and find opportunities for work at a higher income. This is another way of saying that those seeking wealth and higher income must travel the road where power and business intersect (官商勾结的道路). When the government steps in for the market in allocating resources, the governing principle of resource allocation is not efficiency — allocation is not market driven. Nor does allocation occur under the principle of fairness — there is no system by which citizens can check power and ask questions. Therefore, the only principle [of resource allocation] is power. This kind of economy is a power economy. He believes this is a principle reason for the growing gap between rich and poor and the spread of corruption.
Looking at the crux of the problems lately facing [China], what is the way forward for reform? This requires a new round of thought liberation (解放思想) so that we can slice anew through reforms. First of all, if this latest thought liberation differs from those in the past, this lies primarily in the fact that the previous two liberations of thought were ideological in nature, while this time the focus is on adjusting the structure of benefit distribution [in our country]. Previous liberations were about returning benefit to the people, while this time emphasizes returning rights to the people, about granting rights to citizens. The party’s 17th Congress talked about the right to know, right to express, right to participate and right to monitor, about the need to protect the rights demands of the citizens, including carrying out fair and effective allocation of public goods. Previous thought liberations focused on resolving problems on the level of thought. It was enough to raise recognition and awareness. This time around the focus is on institutional renewal (制度创新), on the building of regulations and mechanisms, improving the socialist market economic system on the basis of the legal system. The adjustment of benefit patterns and the granting of rights to the people, these are institutional matters in and of themselves. So we can only achieve these two goals through institutional renewal and regulatory protections . . .
The task of this latest round of thought liberation is to break through traditional modes and concepts of development, on the one hand setting up new development methods to promote economic development, on the other hand changing the political mode of “omnipotence” (全能主义). So the focus of this round of thought liberation is the deepening of political reform, promoting institutional reform and constructive development in a “four-in-one” model encompassing the economy, politics, culture and society.