Development Holds the Key to Addressing All China’s Problems

From: English Edition of Qiushi Journal Updated: 2013-08-20 15:35
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Development is a general concept that refers to various different aspects of social progress. In reality, however, not all aspects of social development are aligned in parallel with one another. Of the various aspects of social progress, the productive forces and economic development serve as a foundation, exerting a decisive impact on other aspects of development. 

China’s comprehensive economic reforms began in the mid-1980s, with the focus being reform in cities. Many aspects of reform, such as increasing the vigor of enterprises, developing diverse forms of ownership, opening up to the outside world, increasing employment, promoting the mobility of the labor force, and developing the joint-stock system, involved a choice between the planned economy and the market economy. As such, these reforms were very controversial. The core of the debate was whether the market economy was socialist or capitalist. In 1992, faced with slow progress in reform and opening up under fears that China was headed towards capitalism, Deng Xiaoping remarked that “development is the absolute principle,” asserting that “the proportion of planning to market forces is not the fundamental difference between socialism and capitalism.” He stated that in making a judgment, “the chief criterion…should be whether it promotes the growth of productive forces in a socialist society, increases the overall strength of the socialist state, and raises living standards.” By applying this objective criterion to China’s undertakings in reform and development, we were able to cast unproductive debate aside and achieve two decades of extremely rapid growth.

Qiu Chufang, a designer at the Chaozhou Qingfa Ceramic Company in Guangdong Province, decorates porcelain figurines with traditional styles of clothing.  Qiu Chufang and her husband have been making porcelain dolls for more than 20 years. Their company began as a make-to-order contractor for clients in Europe and America. Now, the company’s own exclusive designs account for more than 30% of its overseas sales. / Photo by Xinhua reporter Mao Siqian

This criterion has addressed the issue of whether reform should be viewed objectively or subjectively. In the course of practice, however, it has not prevented the tendency of some people to neglect the decisive role that productive forces and economic development play. In such cases, too great an emphasis has been placed on other aspects of development. For example, while it is true that we have come to owe the people a great deal during the past decades of development, and must therefore make major efforts to improve living standards, some local governments have nevertheless stepped too far too soon in the development of well-being programs, neglecting the level of productive forces and economic development in their jurisdictions. As a result, the implementation of these programs has led to the incurrence of local debt, which has jeopardized the sustainable and healthy development of our economy and society. Therefore, at our present stage of development, it is essential that we maintain a balance within the criterion of promoting the growth of productive forces, increasing the overall strength of the socialist state, and raising living standards. This requires that we draw a distinction between the primary and the secondary, and identify which factors of development are dominant and which are dependent. In fact, the Party has continually regarded economic development as the central task since the launch of the reform and opening up drive. When Deng Xiaoping spoke of the criterion for development, he not only put the development of productive forces first, but also emphasized that it was crucial to expand the economy. He said, “Basically, when we have enough material wealth, we shall have the initiative in handling contradictions and problems.” Moreover, the report to the Eighteenth National Congress of the CPC states that “taking economic development as the central task is vital to national rejuvenation, and development still holds the key to addressing all the problems we have in China.” The report then goes on to state that “we must unwaveringly adhere to the strategic thinking that only development counts.” Only once we have fully understood that development holds the key to addressing all China’s problems will we be in a position to maintain the right balance between economic development and other aspects of development. 

At present, an important feature of China’s productive forces is a dynamic change in the ratio between repetitive labor and creative labor. As productive forces and creative labor grow, changes inevitably occur in the social division of labor, resulting in the increasing proportion of intellectual workers and creative workers in the workforce. If we can seize on this opportunity, we will be able to secure the sustainable and healthy development of our economy; if we are unable to do so, we will face the risk of falling into the “middle-income trap.” 

What are the differences between repetitive labor and creative labor in actual economic terms? In the process of production, repetitive labor is manifested as the introduction and emulation of production modes that already exist elsewhere. Given the lack of innovation that takes place in this mode of production, economic growth can only be achieved through the extensive expansion of production and the accumulation of monetary capital, which depends on keeping wages and consumer spending down. Therefore, economic growth driven by repetitive labor easily leads to imbalances between production and consumption, and the resulting surplus production capacity can only be digested by increasing exports. The problem is that continuous extensive expansion leads to increasingly acute imbalances between the supply and demand of factors of production, such as labor, natural resources, and land, which in turn hinder the export of products and eventually constrain economic development over the long term. This is a typical feature of middle-income economies. 

Creative labor brings about the intensive expansion of production. Under this mode, the expansion of production is primarily achieved through intellectual accumulation, manifested in technological innovation, as opposed to the mere accumulation of monetary capital. Technological innovation promotes rapid changes in the social division of labor. These changes raise the status of labor, thereby causing incomes to increase. Under the model of intellectual accumulation, increasing levels of consumption do not inhibit the expansion of production, but actually boost it. Moreover, unlike the capital accumulation model, under which profits are gained primarily by increasing the quantity of products, the model of intellectual accumulation aims to promote improvements in the quality and properties of products. Therefore, intellectual accumulation exerts less influence on the quantity of products that are produced, which serves to stabilize the market. This represents a typical feature of high-income and developed economies. 

In light of the current state of our productive forces and the laws governing the development of productive forces, we must attach priority significance to the following three areas in order to promote the sustainable and healthy development of the economy. 

1. Finding a sound balance between accumulation and consumption. On one hand, given that China is still heavily reliant on repetitive labor, we have no choice but to maintain high levels of accumulation in monetary capital if we are to sustain rapid economic growth and lay down material foundations for the expansion of creative labor. On the other hand, this growth pattern is the source of deep issues; maintaining the high accumulation of monetary capital not only exacerbates shortages in the supply of factors of production, but also breeds social conflicts. However, if we were to decrease the accumulation of monetary capital whilst excessively increasing incomes and the level of welfare, the inevitable result would be a drop in the rate of economic growth, which in turn would bring about even deeper social and economic problems, such as unemployment. Fundamentally speaking, increases in consumption levels and living standards occur naturally alongside the growth of creative labor and the development of productive forces. Therefore, setting our sights on long-term development, it is advisable that we maintain relatively high capital accumulation and rapid growth at present, as doing so will put us in a more advantageous position to address various problems in the future. 

2. Continuing to regard the expansion of exports as an important strategy. Looking at the experiences of countries that fell into the “middle-income trap,” we can see that in the majority of cases those countries failed to build up to the expansion of production by intensive means whilst their labor-intensive exports were increasing. Then, following the growth of consumption and social welfare, the costs of production increased and exports began to lose their international competitiveness. With the resulting drop in exports, these economies then began to shift towards domestic demand-driven modes of growth. However, there were insufficient sources of accumulation to guarantee a successful shift to domestic demand-driven economy. Under mounting growth and employment pressure, these countries had no choice but to resort to over-issuing money in place of accumulation. This resulted in stagflation, namely, stunted economic growth coupled with high inflation. Therefore, if we are to prevent the same thing from happening in China, we must adopt a strategy of boosting our export-oriented economy and developing exports, especially the export of high-tech products. The global financial crisis, the European debt crisis, and other changes in external conditions have had a certain impact on China’s exports. These changes have also exposed several other problems that our exports face at present. Therefore, in addition to expanding into new international markets, we also need to take pertinent steps to resolve our own problems. To do this, we must promote the transition to a mode of development that relies primarily on creative labor for growth, so as to prevent the impact of unfavorable factors from expanding further. 

3. Strengthening the role of the government in developing intellectual accumulation. Advances in science and technology have seen intellectual accumulation become the major driving force for expanding production. As intellectual accumulation becomes increasingly dependent on participation across all social sectors, the role of the government and the non-government sector in increasing intellectual accumulation is becoming increasingly evident. This is because with the increasing complexity of modern science and technology, the range of technologies involved in any one area is continuing to expand rapidly. As a result, enterprises will increasingly need to base their innovation activities on intellectual accumulation in both the government and non-government sectors. This in turn will boost intellectual accumulation in enterprises, in the private sector, and on the national level. China is a large developing country. Therefore, on one hand, we should encourage enterprises to engage in self-innovation, to develop core technologies, and to accelerate the development of new products. On the other hand, we should strengthen the role of the government in promoting intellectual accumulation, so as to seize the edge in the development of creative labor and ensure the long-term development of productive forces. 


(Originally appeared in Qiushi Journal, Chinese edition, No.5, 2013)

Author: Research Fellow of the Development Research Center of the State Council of the People’s Republic of China

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