Voice of Reason – Chinese Theory in Practice | Efficiency vs. Fairness

In the process of modernization, there is always the trade-off between efficiency and fairness. To promote Chinese-style modernization, we must correctly handle the relationship between efficiency and fairness to “not only create higher efficiency than capitalism, but also effectively safeguard social justice, and promote the balance between efficiency and fairness”.

Economists often compare efficiency to “baking a bigger cake” and equity to “dividing the cake more fairly”. In fact, the two are not contradictory.

Generally speaking, “baking a bigger cake” is the process of emancipating and developing social productivity and promoting rapid socio-economic development; “dividing the cake more fairly” is the process of balancing the interests of social groups and promoting social justice. From the perspective of modernization in general, capitalism has greatly promoted and developed social productivity. Marx and Engels pointed out in the “Communist Manifesto”  that “the bourgeoisie, during its rule of scarce one hundred years, has created more massive and more colossal productive forces than have all preceding generations together.” However, capitalism has not delivered and will not deliver social justice in the process of development.

According to Nobel Prize-winning economist Joseph Stiglitz, in the US, “Over the past 30 years, those in the bottom 90 percent have seen their wages increase by only about 15 percent, while those in the top 1 percent have seen their salaries skyrocket by roughly 150 percent, and by 300 percent for the top 0.1 percent.” Stiglitz thus pointed out that American democracy has evolved into a “money democracy” for, of, and by the top 1 percent.

How to correctly handle the relationship between efficiency and fairness in advancing Chinese-style modernization? Simply put, it is necessary to “get the incentives right” and “get the welfare right”. The former means we need to significantly increase people’s enthusiasm for production, thus unleashing economic and social vitality. In November 2015, Beijing used laser positioning, robot welding and other high techs to replace the old Sanyuan Bridge within 43 hours, astonishing the whole world. In the “Wuhan Defense War” against the pandemic, China built the Huoshenshan Hospital in just 9 days, and the Leishenshan Hospital in 12 days, buying time to protect people’s lives and health. “Getting the incentives right” means that Chinese-style modernization has created a higher efficiency than capitalism, we have achieved industrialization within just a few decades in comparison to hundreds of years in the West. And the Chinese nation has made great leaps from standing up, getting rich to getting strong.

While liberating and developing productive forces and “getting the incentives right,” Chinese modernization also attaches great importance to promoting social equity and justice, emphasizing “getting the welfare right.” “In the first decade of the 21st century, my average annual income was 46,500 yuan; in 2021, my total income hit 141,200 yuan; I changed my car once, my TV twice, and I have used two computers and three cell phones...” This is the family account book of a resident of Zaozhuang, Shandong Province that records the sense of gains and happiness, epitomizing the fact that economic development in China has benefited hundreds of millions.

At present, China has built the world’s largest education system, social security system, medical and health system, the coverage of universal education saw a historic leap, the basic old-age insurance now covers 1.04 billion people, the basic medical insurance coverage has stabilized at 95 percent.

What is the secret of Chinese-style modernization grasping the relationship between efficiency and fairness and solving the “Goldbach’s Conjecture” in economics? In all analysis, it is the remarkable advantage of the socialist system with Chinese characteristics. For example, we practice a socialist market system that leverages the decisive role of the market in allocation of resources while giving better play to the role of the government, hence allowing all factors of production to participate fully in market competition while enhancing the balance and sustainability of development through fiscal policy, tax system, public expenditure, transfer payments and other measures. Another example is China’s income distribution system: it insists that labor-based distribution should be the mainstay along with multiple distribution methods. Meanwhile, a coordinated, three-layered income distribution system is established in China, forming an olive-shaped income structure with the middle-income group as the mainstay. Additionally, China created the one-on-one assistance mechanism to promote industrial docking, factor mobility and cadre exchanges between the first-developed regions and areas that drag behind.

It was around 1995, when I was in elementary school, I heard the word “Assist-Tibet cadres” for the first time on TV, and I remembered the name “Kong Fansen”. At that time, I was too naive and ignorant, and couldn’t make sense of the term – why would someone from Shandong sacrifice his life in the distant and mysterious Tibet? As my knowledge grew, I came to realize that this is a special institutional arrangement of the country - the one-on-one assistance system.

In August 2014, I traveled with a team of my colleagues on an investigatory trip to the snowy plateau for the first time, where I met a lot of “Assist-Tibet cadres”. They told me in excitement that after years of endeavors, the train from Lhasa to Shigatse would soon be operational, and the Lhasa-Nyingchi Expressway was about to be completed. I immediately saw a vivid image of “Kong Fansen” and learned the importance of one-on-one aid in promoting the socio-economic development of Tibet. In many rural areas where the land transfer system is practiced, farmers sublet their land to economic cooperatives or enterprises for economies of scale, which not only improves production efficiency, but creates “multiple benefits” with one piece of land. Farmers get to earn an income from land transfer, they can then find a job elsewhere instead of being confined by their farmland, and also earn a dividend from the enterprise that operates their land. In this way the farmers are making money without doing farm work; and they get to take a job elsewhere without leaving their farm unattended.

These institutional arrangements have balanced, facilitated and unified efficiency and fairness, achieving a combined and integrated policy effect, realizing higher-quality, more efficient, fairer, more sustainable and safer development, enabling all people to share the benefits of development, and ensuring the steady progress of Chinese-style modernization.