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· Source of this article: Adam Smith Economics (produced by Liu Shengjun Micro Finance)
Author | Liu Shengjun
For China's reform, if you want to ask which foreign economist is the most memorable, it is undoubtedly Kornai. He provided important ideological nourishment for the development of Chinese economics and the promotion of China's reform. ——Wu Jinglian
Kornai passed away on October 18, 2021, at the age of 93
The younger generation living in the 21st century has a hard time imagining the "shortage years" of the last century, where many materials had to be "supplied by ticket", and the taste of the stomach that was always insufficient was unforgettable. Even in the 80s, if you want to buy refrigerators, color TVs, and washing machines, you have to approve strips and go through the back door. Today, living in the era of the "surplus economy", we should be most grateful to an economist: Janos Kornai, author of the economics of shortages. When Kornai visited China again in 1999, his first reaction after visiting Chinese stores was: "The shortage economy is gone." So he decided to write a new book, The Excess Economy.
01: Everyone reads Kornai
China's reform and opening up is actually a process of "opening up and seeing the world". In this far-reaching torrent of human history, a group of "foreign economists" have had a profound impact on reform and opening up. Smith, Coase, Friedman, Keynes, Hayek... Among them, the most direct influence on the Chinese economic community is Kornai.
Kornai was first promoted because Kornai was born in Hungary during the socialist era, experienced the planned economy, and received a doctorate in economics from Karl Marx University in Hungary. Kornai was born in 1928 in Budapest, Hungary, to a wealthy Jewish family, the son of a prominent lawyer, and died in Auschwitz in 1944. At just 16 years old, Kornay was fortunate to receive a security pass issued by the Swedish Embassy in Hungary.
Kornai's observations and analysis have a special "emotional and experiential resonance" for the Chinese community of economists. In particular, his "Shortage Economics" and concepts such as investment hunger and thirst, paternalism, soft budget constraints, and target models are even more directly attacking the pain points of China's planned economy. In 1986, the Chinese edition of "Shortage Economics" was first released, and the sales volume reached 100,000 copies, and everyone in the Chinese economic community at that time read Kornai. For China's "Kornai fever", Kornai empathizes:
• Chinese readers occupy a very special place in my heart and in my emotional world.
In 2009, a reporter interviewed Zhou Xiaochuan, then governor of the central bank, who wrote: "It does not seem to be the office of the central bank governor but a professor, with a desk not wide in the middle, and on the far right stack of materials is the Hungarian economist Kornai's masterpiece "The Power of Thought", and the pages are folded to indicate that he is reading." ”
02: A book of fame
During his work at the Free People' Newspaper, Kornai observed the annual plan discussion of the National Economic Commission and found that the production plans of thousands of factories in the whole country were actually decided by the director of the committee, Paul, and the effect could be imagined. Spurred on to do so, he completed his first book, Excessive Centralization of Economic Management, during his Ph.D. studies from 1953 to 1956. This was the world's first academic work from within the socialist camp that provided an in-depth analysis and critique of the Soviet-style planned economy. The discerning John Hicks (1972 Nobel Laureate in Economics) recommended the book to Oxford University Press, which immediately caused a sensation.
In 1968, Hungary became the first country in the world to undergo a comprehensive economic reform in the socialist camp. And Kornai was the mastermind and architect of this world-renowned reform.
Kornay (second from left) with Hungarian President Gentz and Federal Republic of Germany President Weizsack in 1993
In 1980, Kornai published his most influential book, The Economics of Scarcity. Kornai pointed out that the root cause of the "shortage" comes from the "father-son" relationship between the state and the enterprise. The weakening of profit stimulus, the softening of budget constraints in enterprises, bloated bureaucracies, and extensive administrative control over enterprises are the real reasons for the shortage economy. Kornai's ideas were one of the theoretical foundations for China's abolition of the directive planned economy.
03: Ideal but not idealistic
Unlike The Academic Schools such as Friedman and Hayek, Kornai, who is committed to "transition economics", is a practical and pragmatic school:
• Before I first stepped into Chinese restaurants, I was not much interested in Chinese food. But after I visited Chinese restaurants, I began to like Chinese food. "Crossing the river by feeling the stones" – China's past reform methods give the best explanation for this.
• Rapid, large-scale privatization and blind advocacy of marketization, in situations where society as a whole is not ready (e.g., without proper laws, without proper law enforcement agencies, without proper financial markets...). The privatization of state-owned enterprises by giving away warrants for free has caused very serious economic setbacks to countries that have adopted these policies (i.e., "shock therapy"). The most prominent examples are the former Soviet Union countries such as Russia and Ukraine and some Eastern European countries.
04: Chinese Love Affair
Kornai's special influence in China is mainly due to two points:
• Kornai has been teaching at Harvard University since 1986, and his classes include Familiar names such as Xu Chenggang, Qian Yingyi, Wang Yijiang, Li Daokui, Fan Gang, Mao Yushi, Zou Hengfu, and Hu Zuliu. Gu Xiulin (daughter of gu Zhun, an older economist), once traveled from Hawaii to Harvard to listen to Cole nai's lessons.
• In 1985, Kornai first set foot on Chinese soil and traveled to Chongqing to participate in the "International Symposium on Macroeconomic Management" ("Bashan Round Conference"). The "Bashan Round Conference" and the 1984 Moganshan Conference can be called the two economists who had the greatest impact on reform and opening up, and the most "brilliant" in the Bashan Round Meeting was Kornai. As the first scholar to give a speech, Kornai proposed his own "prescription" for China's economic reform at that time: macro-controlled market coordination. Participants on the Bashan ferry included Xue Huiqiao, An Zhiwen, Ma Hong( Ma Hong), Gao Shangquan, Wu Jinglian (), Tong Dalin, Xiang Huaicheng, Lou Jiwei, Guo Shuqing, etc. In 1999 and 2005, Kornai visited China again
05: The spirit of independence
Kornai is highly respected because of his charisma. Kornai said:
• People who do research have to look at things with a critical eye at all times, even in the face of countries that have achieved great things, whether in the face of my country or other countries, they cannot blindfold me. I'm a researcher, A teacher, and I teach my students to think in this way—at any time, I have to look at things with a critical eye. Without a critical eye, research that explores problems is unlikely to succeed.
• Economists sometimes put too much emphasis on "technological governance," and I've seen some good scholars write some good papers, including those who are good economists, but they don't get out of the box of technological governance. We have to rethink, refresh our minds, and step out of this box.
• In my life, I have never run for fame and fortune, and the only thing I have tried to pursue in my life is profound thoughts. In the words of the Hungarian poet Petëfi, "I would rather be a free, hungry wolf than a comfortable dog raised by my master."
Xu Chenggang recalled:
• In order to delve into the problems of the socialist system, I chose Kornai as one of the supervisors of my doctoral dissertation. So throughout my career at Harvard, Kornai was both my lecturer and my mentor.
• I also invited the Kornais (Janosh and Susa) to my house for dinner. What surprised me the most was that the time he came into my house was so accurate as the time we had agreed upon before! It's unbelievable. Later he told me that in order to be punctual, he drove to my door early, waited in the car, and when the time came, he would ring the doorbell on time.
• In my quarter-century of intimate interaction with Kornai, I met a man who never bowed to any evil attitude in politics, academia, and society, never bowed his head, and was always brave, honest, and forthright. He never loses his principles because of his small profits, and he drives scholarship with his personality.
06: I sincerely hope that China will succeed in its future reforms
The philosopher is dead. Let's revisit Kornai's cautionary message for China:
• I disagree with the view that the transition simply boils down to the transition from a planned economy to a market economy. Transformation does not only include economic transformation, but also includes the transformation of lifestyles and cultures, the transformation of political and legal systems, and other aspects.
• In China,as the internal environment is concerned, as the economy develops, the factor productivity advantage will gradually disappear: labor resources will become scarce, wage levels will continue to rise, the rate of urbanization will increase, and the welfare of the people will begin to increase.
• There are many aspects to measuring economic performance, and income distribution is a very important indicator in addition to economic growth. We can find that with the rapid growth of China's economy, the problem of uneven income distribution has become increasingly prominent
• We should also see that China has not reformed or completed reforms in the other 6 areas. These reforms are more difficult to implement, more sacrificial, and more resistant: state-owned enterprises, hardening budget constraints, liquidating non-performing loans of commercial banks, regulatory reform, pension system reform, and health care system reform.
• A market economy is a sine qua non, but not a sufficient condition, for political reform. The road to a market economy is a long one, and only by carrying out the necessary political reforms can we provide a better external environment. There is a certain connection between the market economy and political reform, and if there is a good market economy, political reform will inevitably occur. But political reform also has a certain degree of independence, which can be separated from economic reform.
• There is no precedent in history that proves that institutional reforms occur automatically. Even if we are now actively committed to institutional reform, it may take ten, a hundred, or even a thousand years to complete the work. Thus economic growth does not naturally lead to institutional reforms.
• There are no reforms that do not sacrifice, especially those that are arduous and costly. These reforms can be postponed for a while because of difficulties, but they cannot be postponed permanently.
• Stability takes many different forms, and stability does not mean rigidity. If stability refers to the lack of healthy change, then not many people like that stability. We should pursue the establishment of a good stable system, with rules full of civilization, humanity, and peace, to implement social changes, and use such changes to give the people a sense of stability. The transformation of society requires stability, but it does not need the rigidity of stagnation. Stability is often associated with adjustment and flexibility.
• There must be some force at work in the historical process of transformation. I want to emphasize that people are not driven solely by economic gain to do things, but that people can make sacrifices for ideals and other values outside the economy. Economic interests are important, but they are not the only ones, nor do they always work. There are countless examples of people who can give up their financial gains and sacrifice for other ideals, even at the cost of their lives. What action we need to take depends on what goals we have, what values we have, and the collective will of the various parties involved. It is these underlying values that guide our unfinished journey to transformation.
• When the state becomes rich, the state should provide the most basic guarantees to every citizen. On this basis, it is acceptable to open up a certain gap. For example, the State should provide basic education to every citizen, primary and secondary education should be free, and university higher education could be fee-based. A fair society should not leave many people homeless, but should provide everyone with a minimum of housing conditions ().
• I also think it's wrong to think that China is a mess and that everything is a failure. What we need to understand is what is being done right and what is not being done well enough, and that improvement is needed.
07: Kornai's Chinese confidant Wu Jinglian
Like Wu Jinglian, Kornai's favorite musician was Mozart.
In 1981, at the age of 51, Wu Jinglian traveled to Athens to attend a round table of the International Economic Society. At this meeting, he met Kornai from Hungary. After the meeting, Kornai went to Wu Jinglian's room to chat, and Wu Jinglian suddenly hated each other and hated the night.
Kornai later said, "This is the first time I've met a Chinese economist in real life... Have known each other for a long time, and have a deep friendship" ().
08: The motto that Kornai left us
For Chinese economists, I believe that The following paragraphs of Kornai should be the motto of everyone:
• Some of the great discoveries in economics were made in political science as early as the time of Aristotle and Plato. We should make up for these areas, and we should encourage economics students and teachers to read more political science, as well as books on philosophy, law, history, and other disciplines. (Note: Kornai did not come from a class in economics, his undergraduate major was history and philosophy)
• The relationship between the government and the market, similar to that of a couple's marriage. They live under one roof, and friction is inevitable. It's not a big deal for couples to have some quarrels. A happy marriage needs to learn from each other's strengths. （）
• Some of my personal views, which I have put forward frankly, have useful exchanges with scholars, rather than preaching what to suggest about China's policy and tell you what to do. China is following its own path, and policymakers and Chinese economists can choose the path that suits them. China has a population of 1.3 billion, while Hungary has only 10 million. China has a history of thousands of years, while Hungary has a relatively short history. I sincerely hope that China will succeed in its future reforms.
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Remember to forward the group that comes to your mind for the first time
Liu Shengjun
Economists who insist on telling the truth
Guo is the president of the Institute of Financial Reform
In 2014, he participated in the Prime Minister's Economic Symposium
One of the representative figures of post-70s economists
Author of The Next Decade