Highlights
The New Economy Facilitates the Emergence of Entrepreneurs
by YAO Zhongqiu, Professor, Beihang University
Translated by MA Junjie, Researcher, Unirule Institute of Economics
Professor SHENG Hong’s presentation on his model of estimating the New Economy’s contribution to growth gave us insights from a macroeconomic perspective. Now I’d like to present the micro aspect of this issue, which may be helpful for us to understand the mechanism of the New Economy.
I’ll speak on entrepreneurship and entrepreneurial capacity, or more directly, on entrepreneurs. What I propose is that the reason why the New Economy, or the Internet-based economy, brings growth is because it facilitates the emergence of entrepreneurs.
There is extensive study on economic growth. Many economists have come up with their own theories, such as Adam Smith’s theory on how division of labour facilitates growth. And there are other economists who emphasise technological advances, human capital, and organisational changes. I did some research years ago on the Austrian School of Economics, and how entrepreneurs brought about growth. Therefore, I’ll focus on this theory.
There is no doubt that entrepreneurs and their innovative activities are the main driving force of economic growth. I can’t say they are the only driving force, since calling something the sole factor resembles preaching. When we look at many present debates in the economic circles in China, they are debates between preachers, which is not beneficial to our understanding of economic activities.
No matter what, entrepreneurs are a very important factor in economic growth as economic activities concern human action. According to the Austrian School, men play an active, productive, and innovative role in the economic process, and by doing so, they are considered entrepreneurs. In a sense, anyone can be an entrepreneur, and everyone has some entrepreneurial qualities. Of course, we must admit that some people’s more enterprising, and they tend to be more of entrepreneurs than others. As long as they possess factors such as technology, labour, and resources, they can move the economy forward. Without them, economic development is impossible.
When we look at economic growth over different historic periods and economic entities, if there are any differences, they are mainly differences concerning entrepreneurship. For example, the environment for entrepreneurs to succeed in different economies and different times has a very important influence on the performance of the economy.
When we have this discussion, maybe we could use a concept such as entrepreneur index or entrepreneur ratio, which is the number of entrepreneurs compared to the whole population, or the adult population. As Mr. LIANG Chunxiao suggested that we could use the “density of online merchants”, this entrepreneur index should also be useful. With this concept, we could compare over time and space, and reach conclusions about when and where the environment is beneficial to entrepreneurial success.
I’d like to refer to two facts to illustrate this proposal.
Firstly, I’d like to examine the change of the relationship between China’s economic growth over the dynasties and the entrepreneur index in different times. It’s fair to say that the entrepreneur density has been increasing slowly and constantly over China’s long history. The history can be, therefore, divided into three phases: the first phase was the three generations in ancient China when most of the entrepreneurs in the Chinese society were official merchants. I recall an article in my Chinese textbook about a merchant in the Zheng Kingdom named Xiangao who informed the Zheng emperor about Qin Kingdom’s plan to invade it. Later as I studied the Zuo Tradition or Commentary of Zuo, an ancient Chinese narrative history that is traditionally regarded as a commentary on the ancient Chinese chronicle Spring and Autumn Annals, I discovered that in that time period it was requested for government officials to be merchants as the Zhou Emperor and other dukes granted monopoly for certain trade to them, such as selling salt, jade, and bows. This Xiangao, I presume, probably was in the trade of making and selling bows.
However, in the Warring States Period, this institution changed as free business emerged. According to SIMA Qian’s Records of the Grand Historian, there were several merchants who did business freely across China. Ever since then, for the last two thousand years, China practiced a largely free enterprises institution that upheld private property rights. Of course there were ups and downs, but in general, the institutional environment was lax. Due to this particular reason, the entrepreneur density increased, especially during the Ming and the Qing dynasty. Back then, the market order was quite advanced in areas such as the coastal areas and provinces to the south of the Changjiang River. In that environment, the main income source came from business, and most peasants were entrepreneurs. Back then, China was the world factory due to its advanced industrial and commercial development and its global reach that supported the whole international economic system.
Today, we may be witnessing the third phase featuring online platforms such as Alibaba and Taobao that provide more convenience and room for entrepreneurs to grow. Therefore, the entrepreneur density tends to become higher. We can be sure that the entrepreneur density is higher than that in the Ming and Qing dynasty, because back in the past, though everyone could be an entrepreneur, they were constrained by factors such as transportation and the transaction network. Therefore, the distribution of entrepreneurs back then was highly imbalanced. As Mr. LIANG Chunxiao said and what I saw myself, nowadays it’s very convenient for people in remote areas to get online and have access to the global market. That is to say, as long as people are willing to become entrepreneurs, they can do so even in remote areas.
This is the great benefit brought by the Internet-based economy, which is good for China’s economic growth. Therefore, I am very optimistic about China’s economic prospect, because it is more likely for any Chinese citizen to become an entrepreneur now than ever before.
Furthermore, I’d like to put the Chinese entrepreneurship into the framework of civilisation comparison.
As I just talked about the Ming and Qing Dynasty when the Chinese economy was in a leading position within the world thanks to the prosperity of entrepreneurs, we must face the fact that since the beginning of the 18th century when the East and the West met, China was defeated. Why? This is a grave issue for China. Apparently it was not because China didn’t have a market system. We have to dig deeper.
Maybe we could return to the origin of civilisations. In a nutshell, the fundamental difference between the Chinese civilisation and the Western civilisation is that people in the West believe in different forms of theism, and in most cases monotheism, whereas the Chinese worship heaven.
Allow me to explain. In the West, people believe in the one true god, and there is the church that facilitates collective activities, i.e., as Mr. LIANG Shuming called the group life mentality. By the 18th century with the industrial revolution sweeping the western world, a special type of corporate organisation emerged: the large-scaled factories. Max Weber regarded bureaucracy as the main feature of modern society as it was a highly rational organisation. In his analysis, bureaucracy was the fundamental characteristic of Western modernity. He also thought the lack of it was the reason for China not being capitalist. As for the reason, Weber traced it back to the Protestant ethics. However, I’d like to believe that the Western world built industrial mass production on their tradition of group life habits. The combination of both brought about the big companies, the big factories that later constituted the backbone of Western capitalism, which has barely any direct connection to market economy. This can be tested through the academic history: Adam Smith’s Wealth of Nations advocated a free market economy, and he criticised mercantilism which was built upon big companies. People in the West depended on the big factories to industrialise their economy and conquered the world with great abundance of materials.
On the contrary, the Chinese worship the heaven as it allows man to be free. There are no regulations and there’s never been any organised church on this land. Therefore, the Chinese are not used to submission, or homogeneous collective life. This explains why there was no emergence of Western-style big companies after Song dynasty. Therefore, over the last few hundred years of industrialisation, China was lagging behind the West to a large extent. The very reason is that industrialisation relies on economies of scale, and the Chinese were not used to big factories under collective control.
The Chinese and Western civilisations diverged from each other this way in the past. Now it seems that we have come to another breaking point.
In the industrialisation era, big companies had obvious advantages. But one of their biggest issues was that it was built upon the most widely exploitative institution with a particular feature of bureaucracy that somehow applied military mechanism to the economic process. In big factories, only one person is the entrepreneur, and all others are non-entrepreneurs who don’t stand a chance to become one.
The advantage of such an institution is as telling as its disadvantages. These disadvantages may not be reflected in the economy, but as I see it, on smearing human dignity. In Chaplin’s movies and in Foxcon’s suicide incidents, it can be seen that in such strictly managed factories, a man can not be his full self, remain independent and keep his integrity. As a matter of fact, Adam Smith realised this after he analysed how division of labour promoted economic growth in “Wealth of Nations”. He pointed out that the division of labour would result in the damage of people’s integrity, as some of them may only be able to produce a certain product, such as pins, and others another certain product, such as cloth. Therefore, big factories produce many stubborn and incomplete people.
The Internet-based economy seems to challenge the big factories. Even within the big corporates, thanks to the Internet or the challenges it poses, the bureaucratic management mechanism is loosening. All the big corporates are decentralising, that is to allow more executives and staff to work independently though they remain in the big corporate framework. Another aspect is that this has transformed more people into entrepreneurs.
Here I’d like to stress that an entrepreneur and a worker in a big company are very different in terms of spirit and mindset. We can see this clearly in real life. To use Chinese concepts to describe both kinds of people, we can say that entrepreneurs are Daren (大人, gentleman), and those who work in big factories as workers are Xiaoren (小人, minor man). These concepts are neither derogatory nor bearing any ethical significance, but only describe the capabilities, mindsets and personalities of people. Entrepreneurs face the world, along with its risks and uncertainty, by themselves, and bear responsibility for their own behaviours. Whereas workers don’t have to do this. Therefore, the difference. We can say that an entrepreneur is more complete in personality than a worker. Comparatively speaking, those who work in factories doing the same thing again and again are no more than slaves.
We need to focus on the economic contribution of the New Economy or the Internet-based economy when we talk about it. But in the meantime, we should also recognise its qualitative contributions to growth, which is how it facilitates man to become entrepreneurs. Therefore, the emergence of the Internet-based economy bears not only economic significance, but also cultural and societal importance. Therefore, we need to elaborate on the contribution of the New Economy from multiple facets. As Professor SHENG Hong presented his economic analysis, we should also acknowledge how the New Economy brings about tremendous change to our society and culture. We will see more entrepreneurs springing up and becoming, in the societal sense, independent and free people.
The advantage of the Chinese culture is taking effect as I mentioned on other occasions. Almost everyone has noticed that China’s Internet-based economy develops better than that of Western countries, such as the US and European countries. Even in terms of technological innovation China’s not leading, as for application, China is definitely among the leading economies in the world. We could say that the Chinese were in a disadvantaged position in the era of industrialisation and big factories due to the fact the Chinese were not used to collective life. However, this disadvantage has turned into an advantage in the information era as we Chinese are more used to being free and independent entrepreneurs.
Of course, this cultural advantage is also useful in solving a social problem caused by the Internet-based economy. As more and more free and independent people emerge, are we increasingly going to drift apart? What is the human relationship going to be like in this context? We need to conduct research on this problem in due course. The Internet-based economy is not only an economic form, but also more importantly, a social organisational form. From the Chinese cultural perspective, I am confident that the Chinese culture is especially suitable for solving this problem and facilitates the formation of good human relationships. The Chinese culture features great saints who were born to be a cure for scattered human relationships, and Confucianism also provides a way for independent and free souls to share mutual love, and to cooperate without the guidance or restraint of a god.
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Current Events
2016 China Institutional Economics Annual Meeting(16th) Held
June 18th-19th, 2016 China Institutional Economics Annual Meeting was held in Shandong University. Over 160 papers were received by the meeting, and 110 papers were presented at the meeting.
The keynote presentations at the meeting were made by the following scholars: Professor WANG Zhongmin, Deputy President of National Council for Social Security Fund; Professor TIAN Guoqiang, President of Shanghai University of Finance and Economics; Professor YAO Yang, President of China Center for Economic Research Peking University; Professor LUO Biliang, former president of School of Economics and Management at South China Agricultural University; Professor HUANG Shaoan, President of School of Economics at Shandong University; Professor ZHANG Qi from Fudan University; Professor MAO Shoulong from Renmin University of China; and Professor WEI Qian from Shandong University.
Eight groups were designated to discuss and assess the 110 papers, and the following 8 were selected as papers of the meeting:
CHU Hongli, SUN Shengming, WEI Jian: Level of Office, Legal Design, and Penalty for Corruption: A Positive Study Based on a Preliminary Sentence of a 2014 Embezzlement Case in China.
WANG Kai, CHEN Wenting, HE Jun: Analysis of Property Rights of Phone Numbers—And the Security Development of Mobile Internet.
SUN Shengmin, CHEN Qiang: Rethinking the Household Responsibility System and China’s Agricultural Growth: Evidence from Panel Tool Variant Method.
LI Xinze: Evolution of the Misallocation of Resources and the Industrial Economic Growth—A Study on China’s Industrial Sectors from 1980 to 2014.
WANG Zhenyu, FU Xin: The Diversity of Communities and Local Economic Growth— Evidence from the City Level in China.
XU Jianming: A Study on Ownership as the Whole of Social Relations—The Property Nature of the Assets of Supply and Marketing Cooperatives in the Marxist Perspective.
HOU Lin, LV Yuxia, WEI Jian: The Prosperity of the Housing Market and the Hollow Manufacturing: Micro-evidence based on Listed Companies.
LIANG Chao: Marriage Market Competition: Dowry, Betrothal Gifts and the Gender Imbalance— Evidence from CHARLS.
Professor ZHANG Shuguang summarised the meeting. He thought, firstly, the meeting reflected the achievements and shortcomings of China’s institutional economic studies over the last 3 decades. On the one hand, there are many schools of economics the are well represented in the 110 papers. On the other hand, the biggest change of China’s economic studies is the advance of quantitative instruments and methods that totally shifted the traditional logic-based research methods. However, this may have led to the other extreme, that is sufficient analysis with little idea. Secondly, he pointed out the importance of having ideas and sharp observations in research. He stressed the urgency of cultivating China’s own economic studies. (To read more.)
Unirule Experts Spoke at “Chinese Economic Reforms– From state command and control to entrepreneurial market economy?” in Stockholm
June 14th, Professor MAO Yushi, Professor SHENG Hong, and Mr. MA Junjie were invited to speak at a seminar at Swedish Entrepreneurship Forum in Stockholm. The seminar was entitled “Chinese Economic Reforms– From state command and control to entrepreneurial market economy?” After presentations by the three experts, a panel discussion was held where several scholars commented on the presentations. The experts also answered questions raised by the audience. (To read more.)
A Seminar on “Lawful Loan or Fraud?” Held in Beijing
July 15th, a seminar on “Lawful Loan or Fraud?” was held at Unirule Beijing Office. Several scholars and lawyers attended this seminar.
The experts at the seminar discussed the recent case of Mr. XIA Lin, a lawyer under charge of fraud, and the issue of due procedures.
Seminar on Labour Contract Law and the Supply-Side Reform Held at Unirule
July 23rd, a Seminar on Labour Contract Law Contract and the Supply-Side Reform was held at Unirule Beijing Office. Several esteemed scholars attended this seminar, including Professor Steven N. G. Cheung; Professor DONG Baohua from East China Normal University; Professor LI Shi from Beijing Normal University; Professor LI Lingyun from East China University of Political Science and Law; Professor Ningyue from CASS; Professor SHENG Hong, Director of Unirule; Professor TIAN Silu from Nanjing University of Information Science and Technology; Mr. WU Si, President of Unirule; Professor Qinsidao from CASS; Professor ZHU Junsheng from Capital University of Economics and Business; Mr. ZHANG Xianmin from Shanghai Bureau of Human Resources and Social Security; Mr. LIU Xinlin from Center for Social Security Studies; Mr. GUO Wenlong from the Intermediate People's Court of Shanghai; Mr. TANG Dajie from China Entrepreneur Institute; and paper contributors to this seminar along with journalists, students, and Chinese businessmen.
Professor Steven N. G. Cheung sent a video presentation to this forum. He used an example of everyday life to illustrate how the current labour law violated people’s freedom to choose and come into contracts. And the very reason people came into contracts with each other was to lower transaction cost. This is where the current labour law fails, that is not to allow contracts entailing lower transaction cost, but coercing people to get into contracts of higher transaction costs. (To read more.)
News
Unirule 10-D Spatial Simulation Planning Model (SSPM)
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.
Learn more about the SSPM
Current Researches/ Consulting
Improving China’s Implimentation and Supervision Institution of the Constitution
At present, research on the implimentation and supervision institution of China’s constitution is insufficient. Multiple problems exist in the current studies, such as the lack of a cultural perspective, and empathetic understanding of China’s political tradition; a lack of authentic Chinese perspective and an indulgence of Westernized framework of analysis; and a lack of reflection of the reality and the existing political framework.
The research on China’s constitution review institution should put the protection of civil rights and constitutional construction first, with a reflection of China’s reality and take in the advantages of external researches. A plausible research approach is as follows: 1. This research ought to provide a right relief mechanism; 2. It should take into account that China is a vast country with imbalanced regional development realities which foster unique and differentiated conceptions of the law and politics in general; 3. It should be built upon the current constitutional structure and take into account the interactive system of the power of the party, the National People’s Congress, etc. in order to make it a progressive research, which can enable the elements of constitutionalism to supplement the current constitutional framework; 4. Scrupulous examination should be given to constitutional practices in other regions and cultures, especially those influenced by the Chinese culture or with a similar institutional set-up, such as Taiwan and France; 5. Observations should be made in regard to the traditional Chinese institutions, such as the institution of the expostulation system (“谏议制度”, or giving advice), supervision system, and the institutions established in this light, e.g., Taiwan’s Control Yuan.
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 methods 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.
Business Ethics Declaration of Chinese Entrepreneurs
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?
An Economic Research of Chinese Urban Smog Management
The issue of smog has been on the spotlight in China that no matter government officials, ordinary citizens, or journalists and the press have expressed serious concern and anxiety towards it. Unirule Institute of Economics takes on this research topic and is conducting an economic research on China’s urban smog management.
The urban smog is attributed to multiple factors with many interest parties involved, which also makes it an economic issue. Unirule seeks to find a solution to the management of smog by the design of institutions from an economic point of view.
Fairness and Efficiency of Financial Resource Allocation
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.
Research on China's Urbanization on the Local Level
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.
Research on the Public Governance Index of Provincial Capitals
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.
Research on Disclosure of Government Information
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
Unirule Biweekly Symposiums
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. 553: 15th Jul., 2016
Biweekly Symposium No. 554: 29th Jul., 2016
Previous Biweekly Symposiums
Biweekly Symposium No. 551: Illustrating the Logic of Political Collapse.
Lecturer: FANG Shaowei
Host: QIN Sidao
Commentators: LEI Yi, WU Si, JIA Xijin
Mr. FANG Shaowei started his presentation by introducing the lack of an argument on how political collapse happens in the neo-institutional economics which is established by theories such as Buchanan’s public choice, Olson’s collective action, Kaplan’s collective faith, De Mesquita’s political loyalty, North’s open opportunity, and Acemoglu’s inclusive system. Mr. FANG’s new book The Logic of Political Collapse aims to explain how political systems collapse whatsoever. Mr. FANG dismissed many traditional theories that tried and failed to illustrate how political systems came into collapse following the evolution of political institutions.
Historial Mr. LEI Yi commented that theories all have limitations, and a certain theoretical framework was not capable of explaining everything. Historian Mr. WU Si commented that if we separate politics into power and polity, it could be seen that the collapse of polity did not necessarily mean the collapse of power. A prominent case is Republic of China. Professor JIA Xijin from Tsinghua University questioned the lecture that more elements and factors could lead to the collapse of a political system, however, the book only touched upon and fixated on two such factors. Professor SHENG Hong pointed out the limitations of human reasoning, especially when it came to complex systems.
Biweekly Symposium No. 552: Real Emperors Tend to Die--A Quantitative Research on Abnormal Death of Ancient Chinese Emperors.
Lecturer: CHEN Zhiwu
Host: SHENG Hong
Commentators: ZHOU Xiaozheng, LIU Yeijin, WU Si
Professor CHENG Zhiwu introduced his latest endeavour to undertake quantitative research into history. He emphasised that conducts of various sorts, no matter political, economic, or others all have a lot to do with the calculation of interest, cost, and benefits. Therefore, it is on this solid ground that the quantitative research is commenced.
Professor CHEN introduced that the background of his research was the evolution of civilisations. Using traditional method, such a research may become partial due to the researcher’s values, constrained to his or her personal backgrounds and conceptualisation that they were unaware of. On the contrary, by adopting quantitative methods, many economic indices were exploitable in the different dynasties and times of a civilisation, even when the institutional framework and civilisation systems remained constant.
In Professor CHEN’s research, he picked the benchmark territory of China as in 1820 Qing Dynasty. On this vast land, he researched 109 political powers, and 658 emperors over time. And he found that the average time of reign was 186.9 years, and the longest was 459 years in power. The average amount of emperors in a dynasty was 16.3, and the average age of death of an emperor was 42.3 years old. The middle point of an emperor’s reign was 8 years. He also compared the findings with data of western European countries, and found that the odds of a Chinese emperor died a brutal and sudden death were higher than those in western European countries. Such a conclusion was hard to reach by reading Chinese history literature.
Professor ZHOU Xiaozheng spoke highly of Professor CHEN’s study. Professor LIU Yejin thought this research followed the tradition of North’s new economic history school. Mr. WU Si thought this type of research answered many important questions such as what type of society the modern Chinese society was.
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Editor: MA Junjie
Revisor: Hannah Luftensteiner
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