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          Zhu Yuan

          Balance growth with social equity

          By Zhu Yuan (China Daily)
          Updated: 2010-06-02 07:15
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          Some Chinese miss the "good old days" when the wealth gap between the haves and have-nots was not as stark as it is now.

          Certainly, their lives are better today, yet they hate the social inequities brought on by the seemingly laissez faire policies of the past three decades.

          Some even say they would rather put up with the rationing of the past (prior to 1979) than witness the wallets of capitalists or speculators grow fatter, as wealth tilts in favor of the haves.

          They, of course, are pining for an economy that was tightly reined in by the government from the early 1950s to the late 1970s.

          However, they forget that the economy, to some extent, is just as controlled today as it was then.

          Ludwig von Mises, the Austrian economist whose masterpiece, Human Action, was translated into Chinese and published in January this year, may shed some light on this dilemma.

          His magnum opus, in German, was first published in 1940 and is still considered a classic on the market economy.

          As an economist who supported the theory of classic liberalism, Mises was undoubtedly a diehard advocate of laissez faire economy and fiercely opposed the concept of a planned one.

          I may not be the best judge of Mises' theories, but I do agree with his take on progress and reactionary forces.

          "Reaction against an unwise policy is not to be condemned. And, progress towards chaos is not to be commended. Nothing should find acceptance just because it is new, radical, and fashionable."

          This is quite similar to the "cat theory" propounded by late Chinese leader Deng Xiaoping: "It doesn't matter whether a cat is white or black, as long as it catches mice."

          So, on the question of a planned economy, what mattered at the time of the reform and "opening up" was whether the old model had facilitated economic development or not. The reform in 1978 was a reaction to the old policies, and it worked.

          Due to the miracle brought about by the economic reform and opening up policy over the past three decades, the ordinary Chinese citizen's quality of life has improved considerably.

          This has proved wrong the notion that the country's nearly 80 percent farmers were not able to feed a population of some 600 million in the 1960s and that its industry could hardly meet the people's need for daily necessities then.

          To be sure, relative social justice was maintained at the cost of economic development. Uncontrolled economic activity was disallowed for fear that higher incomes in the hands of certain individuals would hurt social justice. Yet, common poverty was the result.

          Now it seems the government has moved to the other extreme, which is that, everything must serve the need of economic growth.

          Deng Xiaoping did say, "economic development is of the utmost importance."

          Classic liberalism too strongly opposes government intervention in economic activity. However, no one has advocated economic growth at the expense of social justice.

          Besides, China's economy may hardly be called laissez faire. On the contrary, government policies are behind many an economic improvement project.

          Some policies promote economic development even at the cost of hurting the poor majority.

          Laissez faire without regulation by the government and necessary oversight can be problematic, as evidenced by the Wall Street-led financial crisis.

          This is because the pursuit of profit is fundamental to human nature, and it will undoubtedly be reckless without supervision and regulation.

          We call our economy a "socialist market economy" and our system, socialism with Chinese characteristics.

          We want to let the rest of the world know that we are different from traditional Western capitalist nations. There should be no problem with that.

          It actually does not matter what we call our economy or social system as long as we strike a balance between maintaining economic growth and safeguarding social justice.

          Mises once said that there was no way of avoiding the final collapse of a boom brought about by credit expansion. It seems he had anticipated the current global financial crisis.

          My understanding is that it is just too dangerous for society to let a few people become richer even as the majority tumbles into extreme poverty. That is precisely the result of expansion of credit, and that is how social justice is given the go-by.

          Fortunately, the Chinese government has realized the potential danger of such a situation.

          Deng Xiaoping said, some people may be allowed to get rich first, but the final goal should be prosperity for all.

          This may just be the right moment to go about achieving the latter goal.

          E-mail: zhuyuan@chinadaily.com.cn

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