Lin Yifu: Victory over fate and the development experience of the potato industry in Dingxi

Source: Farmers Daily

Original title: Victory over Fate and Dingxi Potato Industry Development Experience

As a scholar of economic development, I have always paid close attention to the development experience of the potato industry in Dingxi City, Gansu Province. Dingxi is one of the poorest "three west" areas in China in history, the city is 19,000 square kilometers, located in the loess hilly gully area at an altitude of 1640-3900 meters, the annual precipitation is only more than 300 mm, mainly concentrated in autumn, evaporation is as high as more than 1400 mm, spring and summer less rain, overall, Dingxi is in an arid, high-cold area.

Dingxi City is in central Gansu, historically known as "Longzhong", known as "Longzhong Bitter Armor in the World". In 1982, a World Bank expert visited Dingxi and believed that Dingxi did not have the conditions for human survival. However, in 1996, the Dingxi municipal government proposed the potato project according to the characteristics of potatoes that are not afraid of drought, have high economic benefits, and are suitable for cultivation in loess plateau areas like Dingxi. The subsequent leaders drew a blueprint to the end, played a role in science and technology, breeding, planting, transportation and marketing, inventory, processing and other links, created experience in "company + association + base + farmer" and "company + association + railway", held economic and trade conferences, attracted investment, introduced capital and technology, and made Dingxi a well-known potato capital in the country, and Dingxi's potatoes were exported to all provinces and cities in the country and Europe and the United States. In 2020, the per capita income of Farmers in Dingxi from the potato industry will reach 2,300 yuan, and 6 counties in 1 district of Dingxi will win the battle against poverty with all parts of the country at the same time. It is awe-inspiring that an area like Dingxi can achieve such development results!

Solving the problem of poverty is the common pursuit of mankind, the original intention of the Establishment of the World Bank is to eliminate poverty, in the entrance hall of the World Bank office building there is a slogan, written in bold big words: "Our dream is a world without poverty." On September 25, 2015, the 70th anniversary of the founding of the United Nations, the United Nations Sustainable Development Summit was held at its headquarters in New York, at which the 193 member states of the United Nations formally adopted the 17 Sustainable Development Goals to be completed by 2030, the first of which is to eradicate poverty. If the 800 million poor people eliminated after China's reform and opening up are excluded, the world's poor population has not only not decreased, but also increased. Poverty eradication is the common aspiration of everyone, all countries in the world are working hard, the World Bank, the United Nations Development Programme and other international agencies have also been providing help, but it is still very far from the goal of poverty eradication, poverty is still one of the biggest problems facing countries, I think the reason is that the idea, the right way out, there is a way out.

In the first chapter of the book Overcoming Fate: Overcoming the Poverty Trap and Creating an Economic Miracle (published in 2017), I introduced the development experience of the potato industry in Dingxi to prove that as long as the idea is right, poverty is not fate, and if each place can identify the industry with comparative advantage in this place, under the joint action of an efficient market and a promising government, every place can develop.

From the perspective of the new structural economics I advocate, economic development represents the continuous improvement of people's income and living standards, and the premise of raising income and improving living standards is to continuously improve the level of labor productivity. How can we raise the level of labor productivity? It is necessary to continuously carry out technological innovation in existing industries, so that each producer can produce more and better products, and at the same time, new industries with higher added value need to continue to emerge, so that labor, capital and various resources can be reconfigured from industries with low added value to industries with higher added value, and the level of labor productivity will continue to increase. At the same time, in the process of technological innovation and industrial upgrading, it is also necessary to continuously solve the bottleneck problem of hard infrastructure, as well as the constraints of soft institutional arrangements, technological innovation and industrial upgrading, in order to continue to carry out.

From the perspective of technological innovation and industry upgrading, developing countries have the advantage of being latecomers, and can import, digest and absorb relatively good technologies and industries with relatively high added value from developed countries as the source of technological innovation and industrial upgrading. Therefore, in theory, developing countries can promote technological innovation and industrial upgrading at a lower cost than developed countries, and should develop faster than developed countries. However, we generally see that developing countries are developing at a slower pace of economic development than developed countries, and as a result, the gap between their income levels and those of developed countries is widening. Why? The reason is that in the case of technological innovation and industrial upgrading, it must conform to the comparative advantages determined by the local factor endowment structure of each country or region. If it is in line with comparative advantages, the cost of factor production can be low, but at the same time, it is necessary to solve the appropriate hard infrastructure and soft institutional arrangements required by each industry to reduce transaction costs, so as to be able to turn comparative advantages into competitive advantages. If the development of a region goes against local comparative advantages, the cost of production will be too high, the products produced will not be competitive, and in this case the efforts made will be in vain. Just like Dingxi, before proposing the potato project, the local government made a lot of efforts to produce corn and wheat, because there was often drought in Dingxi, wheat and corn were often planted because it did not rain for one or two months, it was too dry and there was no harvest, and the problem of poverty could not be solved.

Farmers in Dingxi used to produce potatoes, but only as life-saving food. For potatoes with comparative advantages to develop into a competitive industry in the market, it is necessary to develop good seeds suitable for local cultivation and market demand by science and technology. If there is more production, if you can't enter the big market, the price will be reduced, the peasants can not make a profit, to enter the big market, we must solve the problem of transportation infrastructure, for the place of Dingxi, it is necessary to use railway transportation; at the same time, there must also be sales channels, sales platforms, sales organizations, etc. Potato production is seasonal, potato consumption is year-round, and if storage is granted during the production season, the price of the product can be significantly increased in the non-production season, and investment in storage facilities is required to increase revenue. In addition, the area where potatoes can be produced in the country is not only Dingxi, but also the Dingxi potato brand must be established to win in the national competition. The industrial chain of potato products is very long, deep processing can increase added value, and the government needs to attract investment and attract large enterprises with technology, capital, sales channels and brands to invest. All of the above requires the government to play a role in guiding the situation.

From the perspective of new structural economics, if a region's economy is to develop successfully, it must choose industries and technologies according to the comparative advantages determined by the local factor endowment structure, and at the same time, it needs the joint action of the efficient market and the two hands of the government to be able to turn the comparative advantage into a competitive advantage. Dingxi's development experience confirms the theory of new structural economics. The experience of Dingxi has not only changed the fate of the people of Dingxi, but also deserves to be shared with the world. If other impoverished areas of the world can find their own comparative advantages like Dingxi, and turn their comparative advantages into competitive advantages under the joint action of an efficient market and a promising government, a world without poverty will not be a dream, but an ideal that can be realized.

In 2020, the per capita GDP of Dingxi is 17,500 yuan, only 25% of the national per capita GDP of 72,000 yuan, which is still a relatively low income level in the country, especially like Tongwei, Weiyuan, Min County or the country's 160 key rural revitalization counties, Dingxi still needs to continue to accelerate economic development. It is believed that the 2021 China Potato Conference and Summit Forum can help the further development of the potato industry in Dingxi, and it is expected that Dingxi will create new experiences on the road of rural revitalization and common prosperity, and contribute to the great rejuvenation of the Chinese nation and the realization of the ideal of a community with a shared future for mankind.

(Lin Yifu, Dean of the Institute of New Structural Economics, Peking University, Dean of the School of South-South Cooperation and Development)

Editor-in-Charge: Queen