Zhongxin Finance, March 4th (Shi Rui, Pang Wuji, Wang Shibo) "Enterprise development can play a great role in achieving the goal of common prosperity." Lin Yifu, Honorary Dean of the National Development Institute of Peking University and former Chief Economist of the World Bank In a recent interview with Zhongxin Finance and Economics, he said this when he talked about the vague understanding of "private enterprises exiting the market" in the process of realizing common prosperity.
Data map: Justin Yifu Lin.
Photo by China News Agency reporter Hou Yu
Regarding common prosperity, some people think that it is possible to "lie down" and "wait for it", and some people think that the government is going to engage in "welfareism", and even give rise to vague understandings such as "private enterprises exiting the market".
In this regard, Chinese officials have made it clear many times that common prosperity must be created by hard work and wisdom, and achieving common prosperity is a long-term goal.
"To achieve common prosperity, the first thing is to make the cake bigger," Justin Yifu Lin emphasized to China-Singapore Finance, "How to make a bigger cake? We can develop according to our comparative advantages, and we can achieve the unity of fairness and efficiency in one distribution."
He explained that one of the biggest differences between low-income groups and high-income groups is the source of income. The income of low-income groups mainly comes from labor employment, while a considerable part of the income of high-income groups comes from capital gains. With the development of the economy, the economy can develop the fastest, and the capital accumulation will be the fastest, then the capital will gradually change from a relative shortage to a relative abundance, which is a process of continuous improvement.
"If capital becomes relatively abundant and labor becomes relatively scarce, then labor wages will rise very quickly, and the wages of low-income groups will rise very quickly. Conversely, capital gains of high-income groups will be relatively lower. Looking at it, the main source of income for the low-income group—the wages earned from labor continues to rise, and the main source of income for the high-income group—the remuneration to capital is gradually declining, so that income distribution will be more equitable.”
From the perspective of efficiency, Justin Yifu Lin believes that if the economy is developed according to its comparative advantages, the production cost of factors of enterprises can be minimized. If the government can provide suitable software infrastructure and reduce transaction costs, the total cost of enterprises will be the lowest. Domestic and international markets will have the greatest competition.
He believes that if enterprises develop according to their comparative advantages, they are competitive and do not need government subsidies. Under this situation, fiscal taxation does not need to subsidize uncompetitive enterprises, and the resources that can be used for secondary distribution in fiscal taxation will not be used. The more there will be, the equalization of urban and rural public services can be solved (problems), to invest in education, to take care of people who are temporarily unemployed, etc.
The government uses more resources for secondary distribution, which can further narrow the income gap.
As for the third allocation, Justin Yifu Lin believes that as technological innovation and industrial upgrading promote rapid economic development, there will always be some "genius" entrepreneurs who are particularly capable in technology. They may innovate in technology or business form. Soon you can become a "billionaire". "I believe that after a certain level of income, it is only a number for a person, and people's pursuit is not only a number, but also the pursuit of social respect and a harmonious society."
"If we have a more appropriate tax to encourage these extremely high-income groups to carry out some social welfare activities, I believe that there will be more donation activities at the third distribution level, which can not only make the cake bigger, but also promote economic development. In the process, the income distribution will become more and more fair," he said.