[Biweekly Symposium] No.325, Decentralization, Inequality and Development
Author:Unirule
Time：2006-12-12 14:12:54 Clicks:
Topic: Decentralization, Inequality and Development Lecturer:Dr. Yang Qijing, Renmin University of China Discussants:Prof. Zhao Renwei, Chinese Academy of Social Science;Prof. Han Chaohua, Chinese Academy of Social Science;Mr. Li Xiaoning, Chief Editor of Scientific Decision;Prof. Shi Hongxiu, China National School of Administration
Doctor Yang Qijing who graduated from University of Oxford illustrated the relationship between political system and economic development through three models. His main arguments are: federalism which protects markets will also have negative impacts on economic development; while the government is helping industrial practitioners, they are also damaging farmers’ interests and the two effects are unavoidable; when we discuss democracy, we should take different levels of economic development into consideration. In the first model (Benchmark Model), through some mathematical analysis, he concluded that in a society where resources are sparse, even if there is no corruption, the optimal price of land transaction will not equal to the market price. Besides, if the government places more importance on economic development, the price they offer to farmers who originally had the land will be lower. And if they think equality is more important, the situation is the opposite. Other deductions are as follows: 1) The sparser land is in a society, the lower price that government will offer the farmers. 2) If the government has more fiscal control, it will pay farmers more money. 3) If more capital is available in a society, the price that the government offers to farmers will be higher and meanwhile, the price for enterprises that use lands will also be higher. 4) If a government emphasizes economic development, has more control in public finance and more social assets, the economy in that society will develop in a relatively quick pace. 5) If corruption is more serious in a government, the price that the government offers to farmers will be lower and it will sell lands to enterprises at a higher price and reduce investments in public infrastructure, having a negative effect on regional economic development. 6) If corruption can be ignorable in a government, the situation will be opposite. 7) Controlling a government’s personal interests will facilitate economic development and promote equality. 8) For underdeveloped countries, when their economies are in the taking-off stage, to some extent, although centralization of state power may lead to in equality, it also benefits economic development. In the second model (Normal Competition Model), Mr. Yang had the following conclusions: 1) because competition exists in different regions, corruption in a certain government will become not very serious, and they will offer a lower price to both of farmers and enterprises and invest more in infrastructure, promoting economic development. 2) When regional competition exists, for regional governments, the central government’s policy will become not as powerful as it was before. 3) Regional competition reduces regional governments’ personal expense and save the costs for central government to monitor. 4) When regional competition exists, a healthier environment for economic development will be created. But because less money is paid to farmers, the problem of inequality will become much more serious. In the third model (Yardstick Competition), governments will offer the lowest price for enterprises and invest most in infrastructure. In this situation, corruption is rare. But the interests of farmers are neglected. Apart from this, in this model, although economic development will be heated, but it will be very difficult for governments to control. And macroeconomic adjustment may be not effective. Finally, Mr. Yang further proved the rightness of his conclusion by comparing the different situations in India and China.
