NSE新闻｜林毅夫教授接受新经济思维研究所采访

Globalization becomes a scapegoat. Globalization is not the main reason for the domestic problems (in the US). And if we try to reduce the globalization, what we have anti-globalization, on the one hand, you will not solve your domestic problem; on the other hand, you make the growth and the employment more challenging.

My name is Justin Yifu Lin, I'm the Dean of the Institute of New Structural Economics at Peking University. The New Structural Economics is trying to advocate the use of modern economic approach to study the determinants of structure and structural evolution in the process of economic development. Because what I see, the nature of economic development is a process of structural transformation from agriculture to manufacturing to service-oriented economy, from more traditional technology to more modern technologies. And in this process, you also need to improve the hard infrastructure and institutions, and all those are structure in the economy, and economic development is a process of structural changes. And I advocate using modern economic approach to study the determinants of the structure and structural evolution. And when I say the determinant of structure and structural evolution means structure is endogenous, and structural changes is also endogenous, and to understand what causing the difference in economic structure in countries  at  different levels of development, and how to move from lower level of productivity structure to higher level of productivity structure so you can have the increase of income in a country. So that is the main focus of study of New Structural Economics.

But why do I call them New Structural Economics? Because the first generation of development economics which emerged after the Second World War is Structuralism, and I try to distinguish my studies from the Structuralism, so I call New Structural Economics. Just like in the 1960s when Douglas North started to advocate the use of modern economic approach to study institution and institutional changes, he should have referred his study as institutional economics, but because there was an Institutional School in the U.S. at the end of the 19th century and early 20th century, and he wanted to distinguish his approach from the Institutional School, so he referred those types of research as New Institutional Economics. So New Structural Economics, the “new” has the same implication as New Institution Economics. But overall, it's the use of modern economic approach to study the determinants of structure and structural transformation in a country's economic development.

China, since 1978 to now, the average annual growth rate was about 9.4%. It was a miracle in human history, because we never observed such a high growth rate to occur in a country for such a long time. And the possibility for China to achieve that, on one dimension, certainly, it was a transformation from a poor agrarian economy to modern manufacturing economy. And in this process, China climbed up the industrial ladders step by step, and that certainly can be explained by the structural transformation as I just described. But on the other hand, China in this process also transitted from a planned economy to a market economy, and China was able to maintain stability and dynamic economic growth simultaneously unlike other transition economy.  Although the intention was similar, to move from planned economy to market economy, but they encountered economic collapse and stagnation and hit by crises from time to time. But China maintained stability and dynamic economic growth. That was also related to how China cope with the distortion before the transition, because distortion itself are also endogenous. And the main reason for the distortions in a transition economy was because the country inherited with some kind of industrial structure due to the development strategies before the transition. As I mentioned, economic structure should be endogenous, but we know that after the Second World War, many developing countries gained independence, they wanted to catch up high income country immediately. So they developed all those advanced industries, but they did not have comparative advantages in those kinds of sectors. And firms in those kinds of priority industries were not viable, and without the government protections  and subsidies, then they cannot survive. In a transition economy, they inherited a lot of those kinds of non-viable firms. And China was able to maintain stability because China adopted a pragmatic dual track approach. In the transition period, the government continued to provide some kind of necessary protections and subsidies to all these industries to maintain stability. But China also liberalized the entry to the new industries, which are labor-intensive, which were consistent with China's comparative advantages, and also facilitate their growth by improving infrastructure in the industrial parks or export processing zones or special economic zones. So turned those kinds of industries from comparative advantages to national competitiveness quickly. And that was the reason why China can maintain stability and dynamic economic growth. At the same time this approach also creates condition to remove the protections and subsidies to the old sectors. The main reason the protection and subsidy to the old sectors were essential because they went against China's comparative advantages, but if we have new sectors to grow very rapidly, capital will be accumulated very rapidly, and comparative advantages  in the country will change very quickly. So the old sectors will be changing from against the country's comparative advantages to be consistent with the country's comparative advantages. When they are consistent with the country's comparative advantages, protections and subsidies will be not necessary and can be removed. And that is the reason why China can maintain stability and dynamic economic growth, and move now very close to a well-functioning market economy because the government can eliminate the transitory protections and subsidies when the comparative advantages or situation in China changes.

Well, I think that during the period of globalization, and we also observed some issues in the U.S. or other high income countries. For example, the increasing in the income disparity, and also the declining of the share of the middle class in the U.S. and other European country, and those kinds of problems causing some kind of social tensions. But we also need to understand - the stagnation of the income, of the middle class and the enlargement of income disparity - are they really caused by the globalization or not? And I think other empirical evidences or studies show actually not. The stagnation of the income of the poor class are mainly because of the automation that been adopted in the high-income country. And the declining shares of the middle class are mainly caused on the one hand, the concentration of the wealth in the Wall Street by the financial sectors, as well as the concentration of wealth in the Silicon Valley by those technological genius, and those causing the income disparities. So I would, again…Globalization, certainly, it improves the possibility of trade, and trade is always a win-win for all the countries involved. And in this process, we have some problems, but globalization becomes a scapegoat. Globalization is not the main reason for the domestic problems ( in the U.S. ). If we try to reduce the globalization, what we have anti-globalization, on the one hand, you will not solve your domestic problem; on the other hand, you make the growth and the employment in the individual country and globally in a more challenging situation. So I think that, again, just like try to address the issue of trade imbalances, if you really want to improve the problems, we need to understand the true causes of the problem. Otherwise, the action with good intention may bring with bad results.