Unirule E-Newsletter July 2013

While the Great Famine (1959–61) is one of many famines throughoutChina’s history, this does not undermine its significance inChina’s modern history. Unlike other tragic famines in the past, the Great Famine was caused by avoidable human mistakes—not by inevitable natural disasters.

There has been a great deal of scholarship in the West on the Great Famine, where it is known as the “Great Leap Forward.” Several excellent books, such as Jasper Becker's Hungry Ghosts (1997), Frank Diköter’s Mao’s Great Famine (2010), and Ralph Thaxton's Catastrophe and Contention in Rural China (2008), have explored the catastrophe from many angles, including the political decisions made byBeijingand local governments. Yet there had been comparatively little work coming fromChina. Now, thanks to the work of Chinese reporters, scholars, and especially Yang Jisheng’s in-depth workTombstone(2012), we have a more complete picture of this dark time inChina’s recent past.

Mao Yushi is Co-Founder and former Chairman of the Unirule Institute of Economics inBeijing, and the 2012 recipient of the Milton Friedman Prize for Advancing Liberty. This article is adapted from comments the author made in response to a speech given by Yang Jisheng at Unirule’s Biweekly Academic Seminar on September 27, 2013. The author thanks Ma Junjie for translating his comments, Zhang Lin for assistance in calculating casualties from the Great Famine, and Jude Blanchette and Jim Dorn for editorial assistance.

I was in my early 30s when the Great Famine took place. Labeled as a “rightest,” I was persecuted from 1959 to 1963 along with thousands of others. At that time, many rightists were removed from their posts and sent to the countryside for re-education. During the Great Famine, many did not survive as they succumbed to hunger and disease. I was reduced to the lowest human form by the end of the Great Famine, constantly stalked by the nightmare that I could never shake: hunger. As a survivor with first-hand experience, I know that scores died during the Great Famine. As an economist and a concerned citizen, I felt an obligation to find out exactly how many people died during this catastrophe.

The causes of the Great Famine may be open to questions and debate, but the number of the deceased during this period must not be overshadowed by the necessity to be attuned to political sensitivities. It is the duty of survivors like me to determine the exact number of the deceased during the famine so that they can be remembered and a lesson for the nation can be learned.

As shown in Figure 1, the vertical axis represents population and the horizontal axis the period from 1950 to 1970. According to the government’s statistical yearbook, the population ofChinagrew continuously until the end of 1958. However, between 1959 and 1961, the population plummeted. In 1962, the population resumed its growth. The solid black line represents the actual population during this period in millions. According to the trend line of the previous years, using the method of quadratic regression, the population would have been 711.18 million by 1962, as shown by the dashed line after 1959. Compared with the real population of 658.59 million in 1961, the difference is 52 million individuals. What does 52 million mean in this context? It represents those who would have been born as well as those who would not have experienced abnormal deaths.

Two factors contributed to this loss of 52 million individuals. The first is those females whom did not give birth, while the other factor is death by starvation. If we subtract the would-be newborns, we will have the number of deceased from hunger, or the victims of the Great Famine. But we also need to ask: How many infants would have been born during this period? Taking into account the average mortality and fertility rates of the period, I concluded that 16 million babies should have been born between 1959 and 1961. The math behind this is relatively simple: 52 million minus 16 million gives us 36 million. We now have the number of unnatural deaths: 36 million. During the Great Famine, 16 million babies were not born who otherwise would have been, and 36 million individuals starved to death. The only problem with this calculation is the accuracy of the population statistics from the government. I have doubts about government statistics, which may affect the accuracy of this estimate.

What does 36 million mean? If we take a look at the casualties from WWII, we see that approximately 30 to 40 million died, including casualties in the European and Pacific theatres. This comparison shows the stunning fact that the Great Famine killed as many as the Second World War.

Considering the accuracy of this figure, I am sure it invites disagreement. Four hundred thousand Japanese died in MainlandChinaafter the Lugouqiao Incident (also known as the Marco Polo Bridge Incident). This number is accurate as the names of those who perished during the invasion are listed at the Yasukuni Shrine inTokyo. But one must ask: How many Chinese people died? We don’t know for sure. Some say 29 million, which means that for each Japanese casualty in the war, 60 to 70 Chinese lost their lives. I find this figure hard to treat as true. According to my estimate, the number of Chinese casualties during the Second World War is less than 10 million.

This is just to show that we should have our own judgment about statistics. Thirty-six million is my own judgment of what happened in the past, and others may doubt the veracity of that figure. Yet there are no sources other than the government statistics bureau for such information, which is also one of the many impediments for our research.

There are 30 provincial capitals inChina, and the 36 million deaths from the Great Famine are equal to a Nanjing Massacre in every capital five times over. The numbers are so large they become senseless, but what I see in these statistics are lives just like yours and mine. They deceased long ago, but they leave us an obligation to speak on their behalf and to always speak the truth. We can’t allow people to cover the truth by saying they died not because of the Great Famine but due to their malnutrition or health problems. It’s ruthless and inhuman to deny these facts.

Li Shengming of theChineseAcademyof Social Sciences published an article entitled How Did the Lie of the Death of 30 Million Come into Being? (2013) in theChinaSocial Sciences Journal. I was stunned and infuriated by his claim that the high number of casualties in the Great Famine was wrong and those who died had nobody but themselves to blame. It’s beyond comprehension how people could even make such a claim.

This 36 million accounted for 5.5 percent of the total population of 660 million. There were 700 people in the small village where I stayed during this period, and roughly 80 to 90 died from hunger or related diseases. The casualties accounted for 10 percent of the population of that small village inShandong. As Yang Jisheng (2012: 394) rightly points out, the death rate varied from province to province, withAnhui,Henan,Sichuan,Gansu, andShandongbeing the most seriously affected. It’s not how wealthy the province was or how developed agriculture was in a certain province that accounted for the variance in death rates. In certain provinces, relatively few people died even though agriculture was less developed. But many died from hunger in provinces likeHenanandSichuanwhere agriculture was rather developed.

I concluded before that the nationwide death rate of the Great Famine was 5.5 percent. I have extended that calculation to the average death rate for the three decades of Mao Zedong’s rule, which was 1.1 percent. This means 11 people out of 1,000 died of diseases, earthquakes, and other reasons during Mao’s rule. The average death rate in the three decades after the reform and opening up was 0.66 percent, a decrease of almost 50 percent. In addition, another 10 million people died for various reasons in political movements. Roughly estimated, about 3 to 4 million people died during the Cultural Revolution (1966–76). I’ve done extensive work to estimate the unnatural deaths during Mao’s rule. But still I am not confident in my judgment, which is mostly based on common sense and information from the mass media. During the three decades under Mao’s rule, 230 million died. Death due to political reasons amounted to 45 million to 50 million. For every four normal deaths, there was one abnormal death. After the reform and opening up in 1978, death due to political reasons decreased to about 200 to 300 thousand, which is a huge improvement. I think the most remarkable achievement of the reform is that deaths for political reasons have been greatly reduced, while during Mao’s Zedong’s rule one could only count on fate to die or survive.

According toChinastatistical Yearbook(1984:397),Chinaexported 4.15 million tons of food during the Great Famine, an amount that could feed 20 million people for a year with each person consuming some200 kgof food annually. This means most of the deaths during the famine could have been avoided if there were no food exports and the food was reasonably distributed. As a matter of fact, food was sufficient in the international market during this period, but Mao Zedong was too complacent and arrogant to decide to export food and instead acted as if “New China” was doing a good job of feeding its people. But what was the reality?

Mao Zedong, along with some other people, should be held responsible for the death of so many people during peacetime. I am not accusing him of killing people intentionally. The Lushan Plenum was supposed to set the right track by correcting the problem of radicalness. But it took a shift as Mao targeted Peng Dehuai, which was purely Mao’s responsibility. As Yang has written (2012: 389), 20 million people would not have perished if the Lushan Plenum were not held. What’s more, the famine was reported to Chairman Mao continuously between 1959 and 1960, but he chose to ignore the disastrous news. Later, Mao sent PRC President Liu Shaoqi and Premier Zhou Enlai to deal with the famine, but to no avail. I doubt if Mao ever felt a sense of guilt, as he later persecuted Liu Shaoqi and other formally close comrades. I think it is purely deluded and ill-informed to still uphold his flag inChina. The Chinese people are a great people and they can’t be blinded by Mao’s mistakes.

Yang (2012: 486) describes the institutional reasons for the great number of deaths during the Great Famine, which were caused by a system characterized by monopolies and food stamps. Starvation did not occur in urban areas on a scale even close to that of in the countryside. The reason was simple: the urban population was guaranteed food stamps, which enabled them to obtain15 kgof food per month. No matter exactly how much food one could obtain, starvation sounded like a farfetched idea as one still had access to food anyway. People in rural areas, however, were not provided with food stamps. They grew their own crops, and after handing over a considerable proportion of the food they grew to the government, the remainder was at their own disposal to either consumer or sell on the market. If the government decided to collect more from the farmers, they were left with nothing to eat.

To take a step back, what is more reliable, food stamps or currency? If one loses one’s food stamps, he cannot expect to gain additional stamps from his fellow citizens, as there are none to give. During the time of the famine, food stamps equaled life. Without food stamps, one did not eat. We should remember this lesson when we hear of new government programs to “help” us. For example, the current program to construct the Baozhang fang (保障房), or secure housing, might be treated with more skepticism after reviewing the history of similar projects. Perhaps a more realistic outcome is for the stock of affordable housing to shrink once the government project gets under way.

During the Great Famine, I was 30 years old and working at the Railway Research Institute. Our basketball court had been transformed into a field to grow wheat. The authorities asked the people not to waste our energy in order to save food. Not only was our basketball court turned into a field, but other research institutes experienced similar transformations.

Lester Brown, the American environmentalist and founder of Worldwatch, in his book Who Will Feed China? warned that the expanding number of golf courses inChinais endangering the food supply (Brown 1995: 60). That claim is way below professional standards and judgments. Yet golf courses can only be developed if there is sufficient land. I can only speak for myself in saying that I have doubts about the professionalism and ethical standards of someone like Lester Brown. It is a shame that he is popular inChina.

The Chinese government has been trying one way or another to ban talks and discussion on the Great Famine. This leads to a bigger concern of mine. How can a society be sustained when it is built on lies? Famine sounds like a far-fetched topic of the modern world, but the Great Famine along with the great toll is real. The lessons we learned are not in vain, and they should remain so even if my generation passes away. The current regime of China, be it under the rule of Jiang Zemin, Hu Jintao, Xi Jinping, or even Deng Xiaoping, should not hold itself accountable for the Great Famine. Deng Xiaoping may still be involved one way or another, but this regime under President Xi Jinping should not associate itself with the one in the past. Therefore, it does not make any sense to cover the truth and stand by the guilt of Mao’s rule as the legitimacy of the current regime is not dependent on Mao’s rule but on the success of the reform and opening up.

I hope the Chinese people will not forget the Great Famine, and I believe the lessons learned from it will throw light upon the future.

Brown, L. (1996) Who Will FeedChina? Wake-Up Call for a Small Planet.New York: W. W. Norton.

Diköter, F. (2010) Mao’s Great Famine: The History of China's Most Devastating Catastrophe, 1958–1962.New York:Walker.

Li, S. M. (2013) “How Did the Lie of the Death of 30 Million Come into Being?”ChinaSocial Sciences Journal. In Chinese at http://paper.people.com.cn/rmlt/html/2013-12/31/content_1370945.htm.

Mao, Y. (2011) “Method for Calculating Deaths in the Great Famine.” ChinaReview (26 May). Available at www.china-review.com/sbao.asp?id=4333&aid=27900 (in Chinese).

Thaxton, R. (2008) Catastrophe and Contention in RuralChina.Cambridge:CambridgeUniversityPress.

Yang, J. (2012)Tombstone: The Great Chinese Famine, 1958–1962.New York: Farrar, Straus and Giroux.

Current Events

Unriule Reading Circle(VI) on “The Politics and Economics of China’s Modernization in the 18th Century” Held in Beijing

December 22nd, Unirule Reading Circle (VI) on the latest book Year 13 of Qianlong Dynasty by Professor GAO Wangling was held at Unirule Institute of Economics. Present at the event were the author; Mr. HAN Jun, former deputy director of Service Center of the United Front Work Department of CPC Central Committee; Mr. LIU Yang from the Institute for the History of Natural Sciences, Chinese Academy of Sciences; and Professor SHENG Hong, Director of Unirule. Professor WANG Jun, Director of Unirule International Cooperation Center hosted this event.(To read more)

Seminar on “Land Institution and the Transition of Urbanization Against the Backdrop of New Normal” Held in Beijing

December 29th, a seminar on “Land Institution and the Transition of Urbanization Against the Backdrop of New Normal” was held jointly by Unirule Institute of Economics/ China-Review.com,finance.iundefinedfeng.com, People's Oriental Publishing & Media, and Humanism Economics Society in Beijing.

Present at the meeting were Professor MAO Yushi, Honorary President of Unirule; Professor WEN Guanzhong from Trinity College; Professor HE Xuefeng from Huazhong University of Science and Technology; Professor HUA Sheng from Southeast University; Professor ZHANG Shuguang, Chairman of Unirule Academic Committee; Professor SHENG Hong, Director of Unirule; Dr. Liang Hong, writer; Mr. TAN Qiucheng, researcher at Rural Development Institute of CASS; Mr. SHI Fengyou, Director of Land Association of Shandong Province, and several experts and journalists.(To read more)

January 10th, Unirule Master thoughts Class(2014) 3rd session was held in Beijing. This session was gracefully joined by Professor HE Guanghu from Renmin University of China, and Professor ZHANG Shuguang from Unirule.

January 10th, Professor HE Guanghu spoke on “Christianity and Modern Civilisation”. Professor HE briefly explained that the modern civilisation was the lifestyle we were encompassed in everyday. Professor HE also spoke on classic civilisation, western civilisation, and modern civilisation, and the implication of Christianity on the evolution of civilisation.

On the morning of January 11th, Professor ZHANG Shuguang spoke on “The Economy and Reform against the Backdrop of the New Normal”. Professor ZHANG firstly introduced the definition of New Normal. Generally speaking, China’s economy has shifted from a high-speed growth mode to a medium and low-speed one. A New Normal, therefore, comes into being which features growth speed adjustment, structural optimisation, and quality up-gradation. However, it is worth noting that the New Normal of China is very different from that of the US. The policy adopted by the US is to speed up growth and increase employment, but China needs to shift away from this mode featuring investment and growth. China still employs a policy of micro stimuli that did not take much effect when the changes of GDP growth of the third and fourth quarter of 2014 were taken into account. The structural imbalance of China’s economy needs to be adjusted under the New Formal. However, if this restructuring is not handled with care, the current New Normal is unsustainable.(To read more)

Summit on Western Classical Thought and Implications for Chinese Reform Held in Beijing

December 27th to 28th, Summit on Western Classical Thought and Implications for Chinese Reform was held at Unirule Institute of Economics. This summit reviewed the past session of the Western Classics Class and provided a feast of thoughts on Austrian School of Economics and its influence on China’s reforms and development. On the evening of December 27th, a Q&A session was arranged for the participants of the Western Classics Class. Present at the summit were Professor MAO Yushi, Honorary President of Unirule; Professor ZHANG Shuguang, Chairman of Unirule Academic Committee; Professor FENG Keli from Shandong University; Professor FENG Xingyuan, Director of UCERC; Professor GAO Quanxi from Beihang University of China; Dr. LIU Junning, independent researcher; Professor MAO Shoaling from Renmin University of China; Professor LI Weisen from Fudan University, and Professor ZHU Haijiu from Zhejiang Gongshang University. An audience of more than 50 people including students and journalists were present at the summit.(To read more)

January 9th, the 2015 New Year Expectations, a forum jointly held by Unirule and China-Review.com, was held for the forth time at Unirule Office in Beijing.

Professor SHENG Hong, Director of Unirule spoke at the forum on the achievements of Unirule in the past year in terms of collaborative projects on public-private partnership, research and a series of public goods. He also expressed gratitude for the support from partners, sponsors, and the public.

Experts, scholars, researchers from all various fields joined the forum. The guest speakers shared their expectations for 2015 in four thematic sessions, namely, China’s prospect, economic and political reform, rule of constitution, and expectations for civilisation and the world. They also shed light upon the past year, commented on social and public issues, and proposed ways for improvement and progress.(To read more)

December 29th, the 14th UCERC Salon and the second thematic seminar on “Improving Entrepreneurs' Survival Environment: Abolishing Death Penalties in Relation to Fund-Raising Cases in China” was held at Beijing Shengyun Law Firm in Beijing. Present at the seminar were Professor FENG Xingyuan, Director of UCERC, and a team of Unirule project researchers; joint team researcher Professor XU Xin from Beijing Institute of Technology; Professor WANG Xinfrom Peking University; Mr. WANG Youyin and some other lawyers from Beijing Shengyun Law Firm; Mr. WANG Shaoguang, lawyer for ZENG Chengjie case; and Mr. YAN Xin, lawyer from Beijing Wenxin Law Firm.(To read more)

News

The Unirule 10-D Spatial Simulation Planning Model (SSPM) is a mathematical and computational model based on economics. It is developed by a Unirule research team led by Professor SHENG Hong. SSPM is designed to simulate the development scale, economic density, industry distribution, resource constraints, ecological preservation, institutional influence, policy effect, and the evolution process in the next ten to twenty years or even longer period for a region. SSPM provides reference for the regional economic development strategy making, which can be directly adopted in the planning on regional economic development, population, land use, industry development, townships, water and ecology.

So far, SSPM has been adopted in the industry planning of Qianhai Area, Shenzhen, and the economic development planning of Yangcheng County, Shanxi Province.

China’s Economy Back to Stabilization with Increase of the Tertiary Industry and Correction of Dependence on Policy Still Needed - Analysis on Quarter 1 Macroeconomics 2014

July 22nd, Macroeconomic Analysis on Quarter 2, 2014 was released at Unirule office in Beijing. Professor ZHANG Shuguang, Chairman of Unirule Academic Committee hosted the meeting and took questions from the audience.

Here is the abstract of the Analysis.
China’s economy stabilized due to intensive stimulus policies. In the first half of 2014, the GDP growth was 7.4% with the industrial added value increasing by 8.8%. Economic indicators look more promising than in the first quarter with the weight of the tertiary industry increasing, which shows improvement in the economic structure. In the meantime, a dependence on policy comes into existence. Adjustment and control of the real estate industry and the monetary policy are faced with great difficulty, and efforts should be taken to manage the reserves against deposit. As there is opportunity cost for any policy and government conduct, the administration needs to judge and weigh the task of guaranteeing short and long term economic growth and the task of promoting reforms and restructuring.

Current Researches/ Consulting

Over the last three decades, China’s economy has been embracing rapid growth with entrepreneurs being a key drive. The biggest and most significant structural change is the rise of entrepreneurs who constitute the pillar of the society nowadays. Today, the biggest, and the youngest group of entrepreneurs are going international, bridging China and the world.

However, because of the abnormal political, social and ideological environment of China for the last five decades, Chinese entrepreneurs happen to be widely confused and for the last thirty years, the emerging group of entrepreneurs has been suffering from severe anxiety over identity:

Firstly, due to the long time anti-market ideological propaganda by the authorities, many entrepreneurs believe they have the “original sin”. They are led to believe that their profits are based on exploiting the workers, which further leads to their confusion and anxiety over the ethical justification of their fortune and profits.

Secondly, this anti-market ideology also affects the public; leading the public to envy the fortune of entrepreneurs while disrespect them since their deeds are “unethical” and “dishonest”. This public opinion, in return, affects entrepreneurs’ self-identity. They, therefore, can’t convince themselves of the contributions they make to the society, or identify themselves within the social hierarchy.

Thirdly, Chinese entrepreneurs, especially those whose enterprises have gone international, are bothered with this severe identification anxiety. Chinese people stand out in entrepreneurship, so do Chinese enterprises. But what are the driving forces behind? Thanks to the long time culture break-up from the traditions, and the anti-tradition propaganda, Chinese entrepreneurs find it hard to comprehend and identify their cultural and social roles. This leads to the chaotic and restless mental state of entrepreneurs. This also results in the lack of a cultural supportive pillar for enterprise management in China.

“Business Ethics Declaration of Chinese Entrepreneurs” aims to provide answers to the anxiety over identity for Chinese entrepreneurs, to re-identify them by providing authentic and orthodoxical conceptions, to help them mature their thoughts and corporate social responsibilities.

This research project is committed to establishing a value system for Chinese entrepreneurs. To confront the anxiety over identity for Chinese entrepreneurs, this project provides answers to the three questions below:

1.Do Chinese entrepreneurs have the “original sin”?
2.What do Chinese entrepreneurs contribute to the society?
3.How do Chinese entrepreneurs gain respect?

Improving Entrepreneurs' Survival Environment: Abolishing Death Penalties in Relation to Fund-Raising Cases in China

In recent years, environment for private enterprises has been taking a deteriorating turn, which attracts attention from the media and the academia. The causes are complex and multi-faceted, including: 1, the abuse of powers by government officials as the government powers expand; 2, “the private-owned deteriorating with the state-owned advancing”(guojin mintui) worsens the picture where the survival environment for private enterprises gets more and more squeezed; 3, external demands of enterprises decrease while internal cost increases; 4, financial suppression escalates with the industrial restructuring and updating lagging behind; and 5, the fluctuation of macroeconomic policies by the government poses uncertainty for production and investment. Moreover, many innocent entrepreneurs were labeled and persecuted for their “gangster behaviors” by the policy and law enforcements in Chongqing city, which was just a glimpse of similar occasional “gangster crashing” movements in the country. Many entrepreneurs are suppressed and sanctioned in the name of “illegal fund-raising”. According to active law, the court can sentence entrepreneurs to death penalty with this charge.

Unirule Institute of Economics is planning to undertake research on the problems of the crime of “illegal fund-raising” and specific method to abolish this charge.

It is fit for Unirule to carry out this research project. Unirule Institute of Economics is a non-profit, non-governmental organization, which focuses on institutional economics with expertise in economics, laws, and politics. It has been dedicated to independent research on China’s institutional reforms and public policies as well as the reform of private finance. In 2003, 2011, and 2013, Unirule held seminars on the cases of Mr. SUN Dawu, Ms. WU Ying, and Mr. ZENG Chengjie. These seminars have been very influential before and after the close of the cases.

Unirule Institute of Economics has undertaken research projects in corporate finance and private finance in recent years. Over the years, Professor FENG Xingyuan has been carrying out pioneering research on private finance and private enterprises. He has gained rich experience and published many publications and papers on relevant topics, including Report on the Freedom of China’s Corporate Capitals, Report on the Survival Environment of China’s Private Enterprises 2012, Research on the Risks of Private Finance, etc. In August 2013, Professor FENG Xingyuan and his research team completed and released the Report on Private Enterprise Fund-Raiding in West Hunan and the Case of Mr. ZENG Chengjie, which analyzed and assessed the process, nature, problems, and causes of a series of events and proposed policy recommendations concerning the fund-raising activities in West Hunan and the case of Mr. ZENG Chengjie. Besides, Professor MAO Yushi, Honorary President and celebrated economist of Unirule Institute of Economics, is also an expert in private finance as Professor FENG Xingyuan.

Theoretical Research and Reforming Solution on Opening the Markets of Crude Oil and Petroleum Products

The present system of petroleum industry in China generally has 3 characteristics —— it focuses on state-owned business, price control and restricted access. Thus China’s petroleum industry shows a highly administrative monopoly. A few enterprises have completely monopolized the supply lines from its exploration, mining, refining, wholesale and retail, even to its imports and exports. The research intends to break the administrative monopoly of petroleum industry, stating its objective for the reform and meanwhile figuring out feasible reforming solutions to further liberate the markets of crude oil and product oil.

Strategy of Developing Areas and Planning Studies on Urban Industrialization For Yangcheng County in Jincheng City of Shanxi Province

On the basis of rethinking the strategy of development, the transformation of urban functions and the adjustment to industrial structure for Yangcheng County, Unirule Institute of Economics has developed a unique space-institution mathematical economic model, which can reunite three-dimensional space-time of cities and regions, their industries and institutions, and their economic policy analysis. The Unirule Institute will put the strategy into practice. Meanwhile, such mathematical model will be used to simulate market mechanism, to predict the final size for the long-term developing balance of cities and regions, the space distribution of population density and other economic density, the development time and process of cities and regions, the industrial distribution and its development track, and to test the flexibility of economic systems and policies. Thus the model can be used for the spatial planning of urban and rural areas in Yangcheng County.

The first scale problem of the fairness and efficiency of financial resource allocation is whether the overall tax bearing standard falls within the optimal interval, whether the design of tax kinds and the mechanism will harm the development of the economy. The second scale problem is whether the expenditure structure of the existing financial resource allocation, especially transfer payment, obeys the principal of justice, and the efficiency of financial expenditure especially the general administrative costs.

Unirule Institute of Economics is going to undertake research on the fairness and efficiency of financial resource allocation with the emphasis on the second scale problem. In order to fulfill the ideal of justice in a society, the involvement of financial resource allocation is one of the methods, and a universal one. A state can promote justice by implying financial expenditure in two ways: the direct and the indirect way. When applying the direct way of implying financial expenditure measures to promote justice, financial expenditure is directly distributed to individuals to fill the gap of incomes between individuals.

Among the financial expenditure items of China are pensions and relief funds for social welfare, rural relief funds as well as social insurance funds. The indirect way is by governments' increase in expenditure used for supporting agriculture and villagers, construction of infrastructure, education and medical treatments. This research is on the justice of financial resource allocation and it deals mainly with whether the transfer payment of financial resources obeys the second rule of Rawls's theory of justice, which states that when violation to the first rule has to be made, resource allocation can be towards the poorest group of people. Besides the justice issue, efficiency is also involved in the financial resource allocation. The administrative costs of China have long been above the average standard of other countries in the world, therefore, a big amount of public financial resources are wasted (trillions of RMB per year as estimated). In regard with the efficiency issue of the financial resource allocation, this research deals mainly with the change of ratio of administrative costs by government agencies (in addition to other costs, such as medical treatments of government officials covered by public budgets, and housing subsidies) of financial income. The reform of the fiscal and taxation system is one of the core issues in China's on-going reforms. This research aims not at a comprehensive examination of the fiscal and taxation system, but a specific aspect which is the "fairness and efficiency of financial resource allocation", and evaluating the status quo of China's financial resource allocation.

Urbanization is one of the most essential economic and social policies of the new administration. The emphasis of this policy is posed on medium and small cities as well as townships. As noticed, there are thousands of industrialized townships in China with their social governance lagging far behind their economic development.

Firstly, a big population is located in between the urban and rural level, which can't transform into citizens. Hundreds of millions of people have left their villages and moved to commercialized and industrialized towns. They are in industrial and commercial occupations and it is highly unlikely that they would go back to their villages. However, they are not entitled to local Hukou registration, which further leads to the deprivation of various rights, for example, the right of education.

Secondly, public governance in such industrialized and commercialized towns, in general, is at a rudimentary level. The number of officially budgeted posts is asymmetric with the population governed, which leads to the employment of a large number of unofficially budgeted staff and unjustified power to govern. There is a lack of financial resources for the local government to carry out infrastructure construction or to provide public goods sufficiently. Thirdly, the urbanization results in imbalanced development of the structure of society. Since the industrialized and commercialized townships are unable to complete urbanization, urbanization in China has basically become mega-urbanization which is dominated by administrative power. Local governments centralize periphery resources with administrative power and construct cities artificially, which impedes townships and villages from evolving into cities by spontaneous order. Fourthly, industry upgrading can't be undertaken in those industrialized and commercialized townships and the capacity for future economic development is greatly limited. The industry upgrading is, in essence, the upgrading of people. Enterprises ought to draw and maintain technicians, researchers, and investors, to meet their needs for living standards, which cannot be satisfied by townships. Similarly, the lagging urbanization reversely sets back the cultivation and development of the service industry, especially the medium and high-end services.

Unirule Institute of Economics is going to carry out research on urbanization of China on the local level, aiming at improving public governance of the industrialized townships, optimizing the urbanization methodologies, and improving the "citizenization" of migrant workers, therefore further pushing social governance towards self-governance and democracy.

At the beginning of the year 2013, Unirule conducted field survey, including more than 10 thousands of households in 30 local capital cities. According to the field survey, the Public Governance Index was derived. The main conclusions of the PGI report as below:

Three statements summarize the status quo of public governance in provincial capitals. Firstly, public services have generally just gotten a pass. Secondly, protection to civil rights is disturbing. Finally, governance methodologies need improvements. These statements point out the solution: the structure of the society needs to be altered from that with a government monopoly to a civil society with diverse governance subjects. The ranking of provincial capitals in the public governance assessment from the top to the bottom is as follows: Hangzhou, Nanjing, Urumqi, Tianjin, Chengdu, Shanghai, Beijing, Nanchang, Xi'an, Xining, Shijiazhuang, Wuhan, Guangzhou, Yinchuan, Hohhot, Chongqing, Shenyang, Changsha, Jinan, Kunming, Nanning, Haikou, Fuzhou, Guiyang, Harbin, Hefei, Changchun, Zhengzhou, Taiyuan and Lanzhou.

Generally speaking, all provincial capitals are graded comparatively low in the three public governance assessments from 2008 to 2012. Even those that ranked the highest in performance have just barely passed the bar of 60 points. Few provincial capitals with poor public governance got over 50 points.

There is a certain amount of correlation between the changes of ranking and improvements in public governance in provincial capitals. In the short term, should the capital cities be willing to raise their rankings, they can achieve this by increasing transparency in government information and civil servants selection, encouraging local non-governmental organizations, or promoting wider participation in local affairs. There is but a weak correlation between public governance and the local GDP level. However, a strong correlation exists between the rankings and the equity of local fiscal transfer payment. That is to say, a region gets a higher ranking in public governance if subsidies to local social security, medical care, education and housing are distributed more to the poorest residents in that region. On the contrary, a region's ranking falls if such resources are distributed with prejudice to the groups with high incomes. This phenomenon shows that equity is of significance in the assessment of the government by the people.

When residents are not satisfied with medical care, elderly support system, water supply and electricity supply, the situation can be improved when they complain to the government. But when similar situations take place in public transportation, environment greening, heating systems, and garbage management, whether by collective actions or filing complaints to government agencies, residents can hardly be satisfied with what the government does.

According to the three public governance assessments carried out from 2008 to2012, we discovered that the Gini coefficient of residents in provincial capitals was decreasing and the income fluidity was improving. From 2010 to 2012, citizens' comments on protection of civil rights are deteriorating, especially in terms of property and personal security. The request for freedom of speech is also increasing. For the moment, citizens in provincial capitals have a low evaluation on the cleanness and honesty of local governments.

Room for reforms is getting narrower as the opening-up and reforms deepen. It also leads to a more stabilized vertical mobilization of the demographic structure with the conflicts in the distribution of interests exacerbating. A collaborative system centering the political and law system and involving close cooperation between the police, courts, petition offices, and the city guards (Chengguan) is developed to deal with social unrest. This system is operated by local governments and finalized as a system of maintaining stability (Weiwen). There have been Internet spats over the amount of Weiwen funds. It is unsustainable to maintain such a Weiwen system, and the disclosure of government information is the most significant approach for this end. The essence of public governance is to dissolute conflicts instead of hiding and neglecting them. And one way to achieve this is by sufficient communication. Public and transparent appraisement and supervision cannot be achieved without transparent government information, otherwise the result will be the exclusion of citizens from public governance.

Unirule Institute of Economics has been undertaking research on the disclosure of government information since 2011. This research is carried out not only from the perspective of the regulations for the disclosure of government information which evaluates whether governments of various levels are obeying the regulations and their performances, but also by examining information disclosure laws in developed countries while looking at the status quo in China. There are seven aspects where government information disclosure can be improved, namely, information disclosure of government officials, transparency of finance, transparency in the decision-making mechanism, transparency in administration, transparency in public services, transparency of enterprises owned by local governments, and transparency in civil rights protection.

Upcoming Events

Now Unirule Master Thoughts Class(2014) is open for application. In today’s world of information explosion, even though we are living in the “information ocean”, two problems emerge. The first problem is the insufficiency of useful information. Useless information is everywhere and it mislead people, while condensed, useful and objective information is very scarce. The second problem is as we step into the mobile computing era, people get used to superficial reading habits instead of in-depth reading and thinking. These two problems have severely influenced people’s ability to extract, digest, and innovate. This Class integrates the best minds in China in the academic world. Their thoughts and insights will benefit you in ways you cannot even imagine.

Masters: CHEN Zhiwu, HE Guanghu, HE Weifang, LEI Yi, MAO Yushi, QIN Hui, SHENG Hong, SUN Liping, ZHANG Shuguang, ZHANG Weiying, ZHOU Qiren, ZI Zhongyun
Modules: Economics, Social Transition, Legal Affairs, Inernational Affairs, History, Philosophy
Schedule: Semester(6 months) starts on November 8th, 2014,
Tuition: RMB 35,000 per person

Mr. LI Yunzhe +86 137 1835 3757, liyunzhe@unirule.org.cn;
Ms.JIN Qianqian +86 186 0081 6278, jinqianqian@unirule.org.cn

Unirule's Biweekly Symposiums are known in China and throughout the world for their long history of open and in-depth discussions and exchanges of ideas in economics and other social sciences. Over 380 sessions have been held and over 15,000 scholars, policy makers, and students, as well as countless readers on the web, have directly and indirectly, and participated in the Biweekly Symposium for close to 20 years.

Biweekly Symposiums begin at 2 p.m. every other Friday and are free and open to the public.

Schedule
Biweekly Symposium No. 517: 30th January, 2015
Biweekly Symposium No. 518: 13th February, 2015

Previous Biweekly Symposiums

Biweekly Symposium No. 511: How Should Institutions Change?——A Comparison of Institutional Changes of Land between China and Britain
Time: October 10th, 2014
Lecturer: Professor SHENG Hong, Director of Unirule Institute of Economics
Host: Professor ZHAO Nong, Vice Chairman of Unirule Academic Committee
Commentators: LI Renqing, TAO Ran, WEI Yuerong

Professor SHENG Hong started with analysis of the evolution of the land institutions of the UK. He pointed out that the land institution back in the past was based on land tenure. However, there were several other forms, including “substitution”, “enfeoffment”, “leasing”, and “leasing and relinquishment”. Such institutions greatly mitigated the need for land during Britain’s industrialization and urbanization. By analyzing Britain’s evolution of land institution, Professor SHENG thought one of the key characteristics of Britain’s land institution was that in a comparatively rigid land institution framework, by the change of contract forms, a low cost form of land institution evolution could be adopted.

After introducing the land institution of the UK, Professor SHENG then introduced the evolution of China’s land institutions. He mentioned that the feudal land institution broke down during the Spring and Autumn and the Warring States periods. And a land contracting institution emerged which further developed into the permanent tenancy. Professor SHENG thought permanent tenancy was a land institution based on market mechanism. He gave some examples where the distribution of land property was unfair and inefficient. He also criticized that the less-developed production relation should not be the reason for land revolution. He stated that the reformed land institution did not accomplish the original goal, but rather a giant step backward. He analyzed the reason for the deterioration of institutions, including the attitudes taken by Chinese scholars, the rigid understanding of the institution and the evolution of the institution. At last, he illustrated on the issue and pointed out that as long as the evolution was nonviolent and voluntary, it would benefit the reforms in general.

Highlights

Current Events

News

Current Researches/ Consulting

Upcoming Events

Previous Biweekly Symposiums