Cai Fang: Promote common prosperity in high-quality development

Source: Economic Daily

The tenth meeting of the Central Financial and Economic Commission stressed that "in the high-quality development to promote common prosperity, correctly handle the relationship between efficiency and fairness, and build a basic institutional arrangement for the coordination of primary distribution, redistribution and tertiary distribution". Common prosperity is an expression of the original intention and mission of the Chinese communists, and it is also a goal that has always been adhered to in the process of reform, opening up, and modernization. This time, the Party Central Committee once again emphasized a new point of common prosperity, that is, to promote common prosperity in high-quality development. We can understand this new deployment from the following three aspects.

Common prosperity is the destination of high-quality development

The Nineteenth National Congress of the Communist Party of China made an important judgment that China's economy has shifted from the stage of high-speed growth to the stage of high-quality development. This not only requires the development mode and growth momentum to be converted to the track of high-quality development, but also means that more attention is paid to sharing the fruits of development in new concepts and ways. To achieve high-quality development in the new development stage is to develop under the guidance of the new development concept. On the one hand, we should strive to implement the concept of shared development and continuously meet the people's growing needs for a better life with the fruits of reform and opening up; on the other hand, we should strive to build a modern economic system, improve productivity, innovation ability and competitiveness through reform, and solve the problem of imbalance and inadequacy in development.

Over the past 40 years of reform and opening up, China has created an unprecedented economic development miracle, which is manifested in the rapid growth of total economic volume and the substantial improvement of people's living standards. Between 1978 and 2020, China's gross domestic product (GDP) grew significantly, and on the basis of per capita GDP growth, the per capita disposable income of residents also maintained an overall synchronization. Since the Eighteenth National Congress of the Communist Party of China, under the condition of medium-high economic growth, China has increased its efforts to improve people's livelihood and overcome poverty. Through the continuous struggle of the whole party and the people of all nationalities throughout the country, the goal of building a moderately prosperous society in an all-round way has been achieved as scheduled, the problem of absolute poverty has been solved historically, and substantial steps have been taken on the road of common prosperity.

Turning to the stage of high-quality development, adhere to the shared development not only to make the "cake" bigger, but also to divide the "cake". Correspondingly, income distribution has gradually improved the role of redistribution from primary distribution to primary distribution, redistribution, and tertiary distribution as complementary and coordinated supporting each other, paying more attention to the organic unity of efficiency and fairness. On the premise of adhering to the basic socialist economic system, we should do a good job in redistribution on the basis of doing a good job in primary distribution, substantively narrow the gap between income and the supply of basic public services, and at the same time advocate and encourage voluntary donations, philanthropy, corporate social responsibility and volunteer activities, and expand the consciousness and scope of the three distributions.

Increase productivity and share results

To improve the quality of economic development, it is necessary to promote and coordinate efforts from the supply side and the demand side at the same time. On the one hand, increasing productivity to ensure that China's economy grows within a reasonable range and provide material security for common prosperity; on the other hand, sharing the fruits of productivity improvement is also an inevitable way to promote common prosperity.

With the stage changes in China's economic development and population transformation, the demographic dividend that supported high-speed growth in the past few decades tends to disappear, factor investment no longer supports the previous growth rate, and the gradual reduction of potential growth rate leads to the actual growth shift to medium and high speed. Therefore, in order to achieve the GDP growth expectations set out in the 14th Five-Year Plan and the 2035 Long-Term Goals Outline, and enter the ranks of high-income countries and middle-developed countries respectively, it is necessary to accelerate the transformation of development quality, efficiency and power, and improve total factor productivity and labor productivity.

China's economic development is also increasingly constrained by the demand side. After the international financial crisis, the world economy has fallen into a long-term stagnation, the covid-19 pandemic has highlighted the fragility of supply chains, some countries have appeared populism, protectionism and other policy tendencies, the trend of anti-globalization has intensified, and China's economic development is in a complex international environment. Therefore, to achieve high-quality development, it is necessary to build a new development pattern with the domestic cycle as the main body and the domestic and international dual cycles promoting each other, with the expansion of domestic demand as the strategic base point, especially to enhance the basic role of consumption in economic development, and to achieve a virtuous circle of domestic and international supply and demand.

To expand residents' consumption under the premise of high-quality development, we must make greater efforts in the following aspects. First, raise the people's income level under the condition of keeping pace with economic growth. The average annual growth rate between 2021 and 2035 needs to reach about 4.75%, and the per capita disposable income of residents grows at a basically the same rate, so that people's lives can reach the level corresponding to the development stage. Second, the income gap should be substantially narrowed through three distribution channels. Based on the experience of the Countries of the Organization for Economic Cooperation and Development, reducing the Gini coefficient below 0.4 ultimately requires the use of redistribution. China must not only make full use of the huge space for primary distribution to narrow the income gap, but also increase redistribution.

Unity of doing one's best and doing what one can

Adhering to the promotion of common prosperity in high-quality development can ensure the organic unity of the two principles of doing our best and doing what we can. Without sustained productivity growth and reasonable economic growth as the necessary material basis, sharing will become a source of water and rice without rice, deviating from the principle of doing what is within one's means, and the goal of common prosperity will be difficult to achieve. For example, countries often make too many welfare commitments and are powerless to maintain reasonable economic growth, resulting in empty promises.

The state, society and individuals must establish the concept of shared development, and achieve a bigger "cake" and a good "cake" through doing their best and making a difference. International lessons have shown that neither economic growth nor productivity improvement will naturally produce the so-called "trickle-down effect", and enlarging the "cake" does not necessarily guarantee that the "cake" can be divided well. Some developed market economies believe in the neoliberal concept of trickle-down economics and have not made sufficient policy efforts in redistribution, resulting in widening income disparities, polarization of the rich and the poor, and the formation of an insurmountable gap, to the extent of political divisions and social conflicts.

Common prosperity is the essential feature of socialism with Chinese characteristics, and the organic unity of doing our best and doing what we can is an important principle for promoting common prosperity. Adhering to this principle is conducive to the comprehensive use of the three effective means of primary distribution, redistribution and tertiary distribution, promoting common prosperity through deepening reform, and guiding the enthusiasm and innovative spirit of all aspects of society to the track of shared development. The three areas not only have formal differences, but also have the same connotation and goal of the same and common, unify the relevant means under the goal of promoting common prosperity, and accelerate the realization of balanced growth of residents' income, full coverage of basic public services in urban and rural areas, and high-quality supply to meet the people's growing needs for a better life.

(Source of this article: Economic Daily Author: Cai Fang, former vice president of the Chinese Academy of Social Sciences)