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Common prosperity key trait of socialism

By Li Yiping | China Daily | Updated: 2021-08-30 07:33


Editor's Note: Common prosperity is an essential requirement of socialism and the shared aspiration of all Chinese people. And realizing common prosperity and promoting high-quality development are necessary to achieve the second centenary goal of building a great, modern socialist country. How to advance common prosperity and ensure high-quality economic development? Three experts share their views on the issue with China Daily:

At the 10th meeting of the Central Committee for Financial and Economic Affairs on Aug 17, President Xi Jinping said "common prosperity" is an essential requirement of socialism and a key feature of Chinese-style modernization, and emphasized that the Communist Party of China and the Chinese government should adhere to the people-centered and high-quality development model in order to realize common prosperity.

But the top leadership's stress on common prosperity has prompted some to ask whether China is preparing to crack down on the private sector and re-adopt egalitarianism to "rob the rich to give to the poor". The answer is a firm "no", for the development of the private economy is also necessary to realize common prosperity.

Private enterprises have made great contributions to China's economy since the launch of reform and opening-up more than four decades ago. Since then, they have contributed to 60 percent of the country's GDP growth and 70 percent of technological innovation, and accounted for more than 50 percent of the tax revenue, 80 percent of urban employment, and 90 percent of the new jobs.

As such, China has no reason to crack down on private enterprises. Instead, it aims to keep increasing national wealth and narrowing the income gap between the rich and the poor. Besides, President Xi has repeatedly emphasized the importance of boosting the private economy.

So why talk about common prosperity?

First, the CPC's original mission is to work for the welfare of the people. And we should know that poverty is not socialism, and to develop socialism, it's necessary to help the Chinese people attain prosperity.

Second, common prosperity relies on high-quality economic growth, and history shows that the pursuit of egalitarianism without sustainable economic growth usually leads to common poverty. Therefore, the top priority of the leadership is to spur economic growth.

Third, apart from personal income, another striking feature of common prosperity is public welfare provided by the government, including education and medical care, and creating equal opportunities, so everyone can get a fair shot at success.

Like many other countries, China, too, has income inequality. Since the launch of reform and opening-up, efficiency in productivity and economic governance has been prioritized over equality to promote economic growth and eradicate absolute poverty. The shift to socialist market economy from planned economy has significantly boosted productivity and made China the world's second-largest economy.

Yet the country's rapid economic growth has also widened the development gap among regions and between rural and urban areas.

Also, people have formed some wrong ideas about the outcomes of reform. For example, some people wrongly believe that reform was implemented to reduce the size of the State-owned enterprises, and push some not-so-successful SOEs into the rat race before they were strong enough to compete with others in the market. In fact, such endeavors in the past caused the loss of State assets and a small group of people accumulated huge amounts of wealth, which widened the gap between the rich and the poor.

The distribution of wealth should be more even and equitable. But in some areas, that has not been the case. Correspondingly, we are yet to make a clear distinction between productive and unproductive labor. By distinguishing between the two and rewarding them accordingly, we can boost the real economy and prevent the formation of bubbles in the booming e-economy.

Capital always seeks more profits so it can improve its competitiveness, which in turn spurs innovation and boosts economic growth. Although this process can widen the income gap, it should be accepted as long as that gap is within a reasonable range, because it creates wealth and jobs.

Moreover, the increasing share of the financial sector in economic growth should boost the real economy and raise productivity, but that has not necessarily been the case. Given its fast and high rate of return, the financial sector has been attracting more and more investments, not all of which flow into the real economy. And although this can boost GDP growth, it contributes little to the increase in wealth while fueling speculation, which is harmful to social development.

However, China can realize common prosperity through scientific policy design and institutional arrangements. But for that, it needs to adhere to the labor theory of value, which means determining the economic value of goods or services by the total amount of socially necessary labor required to produce them. Hence, distinguishing between productive labor and unproductive labor is necessary to strengthen the real economy.

It is also important to increase the income of workers, raise the proportion of remuneration in the primary distribution of wealth, and ensure wages grow in tandem with the overall economic growth. Plus, there is a need to appropriately reward people who make vital contributions to the overall health of the economy and society such as scientists and researchers in basic science.

The Aug 17 meeting also pointed out that it is necessary to correctly handle the relationship between efficiency and fairness; build a foundational system with arrangements for coordinating and supporting primary distribution, (secondary) redistribution, and tertiary (re) distribution of wealth; increase the adjustability and precision of taxation, social security, and transfer payments; expand the size of middle-income groups as a proportion of the population; increase the income of low-income groups; reasonably regulate (adjust) high incomes; and prohibit and suppress illegal incomes.

But fair distribution, redistribution and tertiary (re) distribution can be ensured only through the collaboration between the market and government. In socialist market economy, the market plays a decisive role in the allocation of resources. Yet in negotiations, capital has the upper hand over labor, so the government has to intervene to strike the right balance between the two. The government also needs to create an environment in which everybody will have equal access to public services and get equal opportunities to climb up the social ladder.

The author is a professor at the School of Economics, Renmin University of China.

The views don't necessarily represent those of China Daily.

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