Even when the native expert says it, we don’t hear it
|October 2, 2009||Posted by Jeffery J. Smith under Progress Report, The Progress Report|
Even when the native expert says it, we don’t hear it
Interviews With Dr Wu Jinglian
China might be the worlds oldest continuous civilization, but can it become the next superpower? Must it first become more competitive, less dishonest? In two articles in the New York Times on the same day, Sept 26, the Chinese expert emphasized the role of land four times; the American reporter did not refer to this most salient feature of their economy even once. Is land our blind spot?
by David Barboza
In the 1980s and 90s, Wu Jinglian was an adviser to Chinas leaders, including supreme leader Deng Xiaoping. He helped push through some of this countrys earliest market reforms, paving the way for Chinas spectacular rise and earning him the nickname Market Wu. Nicholas R. Lardy, the distinguished economist at the Peterson Institute in Washington, calls Wu Jinglian the single most important economist during Chinas 30 years of economic reforms.
Mr. Wu has been a government researcher and adviser, a strong advocate of reform and also, increasingly, a strong critic of the way some of those reforms have been carried out. Last year, Chinas state-controlled media slapped him with a new moniker: spy.
Mr. Wu has not been interrogated, charged or imprisoned. But the fact that a state newspaper, The Peoples Daily, among others, was allowed to publish Internet rumors alleging that he had been detained on suspicions of being a spy for the United States hints that he is annoying some very important people in the government.
He denied the allegations, and soon after they were published, Chinas cabinet denied that an investigation was under way.
But in a country that often jails critics, Mr. Wu seems to be testing the limits of what Beijing deems permissible. While many economists argue that Chinas growth model is flawed, rarely does a prominent Chinese figure, in the government or out, speak with such candor about flaws he sees in Chinas leadership.
In an interview with David Barboza in the New York Times, Wu was quite explicit, saying
Mr. Wu: Basically the direction of Chinas economy is facing fundamental problems.
In the mid-1980s, I predicted there would be two paths that the Chinese economy could take: one is the market economy based on the rule of law; the other is crony capitalism and bureaucratic capitalism.
Im in the first group. The economists who studied in the West belong to the first group. We dont say socialism means communism but common prosperity.
In the 21st century, the economy has inflated, so the administrative levels of government are emphasized. Now, government has resources and administrative power.
And there is urbanization. Farmers come to the city; officials get a lot of land and resources from the farmers. Some of that land they get without paying money. That is corruption!
The corruption is becoming more and more serious because of urbanization, and during that process, every level of government gets the power over the land.
What is reason for corruption? Some said it was based on the shift from Marxism to capitalism. I think corruption is based on rent seeking — and the government interfering with economy.
Every level of leadership tries to control the use of land, and thats the sole reason for corruption. From recent news, you can see all the corrupted leaders; you can see the corrupt officials are from the construction department.
We have $1 trillion in loans from Chinese banks this year, and the majority of it goes to state-owned enterprises. Many of the state-owned companies put money in the stock market or real estate market.
Local state-owned enterprises, they should not monopolize. Its just an opportunity for local officials to do rent-seeking [bribery and kickbacks].
Take Shanghai for example, officials do not get a big salary. But after they retire, they can be hired as C.E.O.s.
Crony capitalism creates a bad economy.
Why did the citizen in 1989 support the students? Inflation and corruption.
After 1989 [and the crackdown on pro-democracy demonstrations], no one raised the question of political reform. After that, the government part of the economy got more power and greed. The more power the government has the more corruption.
Maoists use this excuse to advocate that we should go back to Maos time. They have Web sites and blogs; the one called Utopia is very popular.
People are angry at the government, the unfairness and corruption. People in the middle are without power — the extreme right and left have the power. Its a ridiculous thing, the two sides [pro and anti market] cannot be more different but they agree on one thing: bigger government. And it will end in social conflict. Thats the danger. This will cause a very unstable Chinese society.
We should get rid of the rent-seeking and the government interfering with economic affairs. I think most of the state-owned enterprises have to be privatized and broken up.
JJS: Geonomics can deliver that. Lose taxes on labor and capital, and you lose most government interference in the economy. Recover the value of land and use a healthy chunk of the revenue to pay citizens a dividend, rather than pay subsidies to special interests, and you lose the rest of interference, corruption, and rent-seeking. You get an economy working right for everyone, so everybody can prosper — and go on to the really important things in life.
Jeffery J. Smith runs the Forum on Geonomics.
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