Megemlékezés Kínában Kornai Jánosról

összeállította: Bánhidi Ferenc

Kornai János munkássága egész Kínában nagy figyelmet kapott az elmúlt 40 évben, amit többek között az is bizonyít, hogy 90. születésnapja tiszteletére rendezett konferencián több magas beosztást betöltő és nemzetközi hírnévnek örvendő tudós vett részt. A Kínában született nekrológokból, méltatásokból adjuk közre most a legfontosabbakat angol fordításban.

Remembering Professor Kornai
Hungarian economist Janos Kornai died on October 18, 2021 (local time) at the age of 93.

Professor Kornay is a master of the socialist system. He had a profound impact on Chinese economic circles. In the 1980s and 1990s, he proposed the shortage economics, investment hunger, paternalism, soft budget constraint, target model, etc. Chinese economists are familiar with the concept, but also they used to analyze China’s economy, put forward reform proposals the most commonly used theoretical tool. Because he taught at Harvard five excellent Chinese students, and China and Hungary are both socialist countries, the common experience of transformation, Kornai himself has been very concerned about the tremendous achievements China has made in economic reform and development.

In 2005, as president of the International Economic Association (IEA), he advocated a roundtable on the issue. 14-15 January 2005, entitled “Markets and Socialism – China and Vietnam’s Experiences and Revelations” ( Market and Socialism:In the Light of the Experiences of China and Vietnam) At the Hong Kong University of Science and Technology. Many famous Chinese scholars, including Wu Jinglian, Qian Yingyi, Li Daokui, Xu Chenggang, Wang Yijiang, Tian Guoqiang, Zhang Weiying, and Cui Zhiyuan, taught in mainland China and overseas at that time. Economists from Europe, America and Vietnam attended the meeting. The participants presented papers on the history of economic reform in socialist countries, political economy in market economy reform, development of financial market, and reform of state-owned enterprises, and held heated discussions.

After the meeting, Professor Kornai visited China at the invitation of the Center for China and the World Economy (CCWE) and Comparison Editorial Office at Tsinghua University, where he delivered a series of lectures and discussions. This is Professor Kornay’s third visit to China after attending the Bashan Lun Conference in 1985 and China in 1999. During his stay in China, Professor Kornai delivered speeches on “The Great Transformation” at the Center for China and World Economics of Tsinghua University and the Shanghai Academy of Social Sciences. He participated in the academic exchange conference on comparative economics held by China Comparative Economics Research Society and Comparison Magazine, and was interviewed by Xiao Meng, editor of Comparison. The editorial office of Comparison summarizes the main viewpoints and contents of Professor Kornay’s speech in China. On this special day, we forward this article and his related article published in “Comparison,” in memory of Professor Kornay!

Professor Khorner’s previous push:

Nothing can make me blind

Comparison | Xu Chenggang: My mentor Kornai

Comparison | Kornai’s Congratulations to Qian Yingyi and Xu Chenggang (Including exclusive historical photos)

Concept and Institutional Paradigm of Transformation

There have been some great transformations in human history. In the Middle Ages, humanity went through a great transformation, and we are now experiencing another great transformation. If you look at the history of Europe, you will find that there has been a great transition from the Middle Ages to the modern society. From absolute monarchy to parliamentary representative democracy, from feudal society to capitalist society, From church rule and mind control to a secular society with a separation of church and state, this proves that humanity has undergone a great transformation, although the speed and process of the transformation varies from nation to nation. Now there are some Chinese people tend to think that the current transition is too slow, but from a historical perspective, the actual speed of the transformation China has experienced is not slow. Even if China’s transition takes 50 or 100 years, it is still very fast compared to a century ago. In Eastern Europe, the transition has also been relatively rapid.

I emphasize that this is a “big transformation” for two reasons:

The transition is a big event, involving many countries. When people talk about transformation, they often only compare China with Russia. Today I want to introduce the transformation of the eastern and northern European countries. Eight countries in the eastern Nordic region – Hungary, Estonia, Poland, the Czech Republic, Slovakia, Latvia, Lithuania and Slovenia – joined the EU in 2004. Although the land area, population and other aspects of these countries together are far less than China, but the accession countries have experienced a “great transformation,” which has both success and shortcomings. Their stories may not happen in China, but their stories are worth listening to. Transition is a big concept, it includes many aspects, even some small transition process. Some people put the transition simply down to the transition from a planned economy to a market economy, I do not agree with such a view. Transformation includes not only economic transformation, but also the transformation of lifestyle, culture, politics and legal system. These transformations are likely to be simultaneous, and there may be causes and consequences.  

When I began to think about the “transformational paradigm,” invited by the Berlin-Brandenburg Institute in 1998, I found that, since 1989 and 1990, While politicians, journalists, and scholars frequently cite the terms “transition” and “transformation,” they are clearly misunderstood, especially the paradigm of transformation. I thus propose a concept or approach of “system paradigm,” which seems to me more useful. The main attributes of this “institutional paradigm” can be briefly summarized as follows:

(1) Researchers who adopt institutional paradigms regard institutions as a whole, emphasizing the relationship between parts and the whole. Although they know that local analysis is also a very important research method, but these scholars in their research field basically do not use simple local analysis method.

(2) The institutional paradigm does not belong to any traditional subdiscipline (such as economics, sociology, or political science). It can be seen as a comprehensive and general school of social sciences, focusing on the interaction between various fields with different social functions (political, economic, cultural and ideological).  

And (3) researchers who are guided by institutional paradigms are more concerned with long-term institutions than with short-term economic, political or cultural issues, All economic, political and cultural phenomena occur within the framework of specific institutions, and institutions have a significant impact on their development. Special attention should be paid here to the distinction between two “systems,” which are historically shaped in the course of evolution and which are a specific component of bureaucratic decision-making. In the institutional paradigm, the concept of institution is very broad, for example, it includes the main legal order, moral norms, property rights system, distribution of power status, incentive mechanism to social members, and information structure. Institutional paradigm pays special attention to whether the basic features of social operation have specific institutional features. In other words, are these characteristics related to the system itself or are they due to other environmental factors (such as the personal qualities of political leaders, daily political or economic activities, a country’s geographical location and demographic characteristics)?  

(4) Institutional paradigm wants people to realize that there is a very close relationship between the existing human organizations and the historical processes that produced them. A researcher who conducts research under the guidance of institutional paradigm must seek an interpretive theory from a historical perspective. Therefore, the researchers of institutional paradigm look for connections between various disciplines of social science and history (reality and past).  

(5) Unlike current mainstream economics, institutional paradigm studies do not initially assume that individual preferences are predetermined. It focuses on how social conditions and personal preferences are shaped, and what shapes the behavior patterns and motivations of individuals (or groups) in a particular position.  

(6) All social paradigms use static models as one of their analytical tools, only because of methodological difficulties. All scholars know that things in society are always changing. The difference between the ideas of works that belong to the institutional paradigm and those of the same kind that do not is that the former is interested in big changes and big transformations. For example, works belonging to the institutional paradigm study what is happening in a system and how it ends and gives way to another. They are concerned with how one system can be transformed into another, or the standard model of one big system into another.  

And (7) Researchers of institutional paradigms recognize the inefficiencies and dysfunction that are closely associated with particular institutions. For example, Marx did not attribute the various negative characteristics of capitalism to the evil nature of factory owners, but saw the institutional roots. Each system is capable of modifying within the system its characteristics of the system which are of great harm. But they cannot completely overcome and eliminate these institutional features, which are deeply rooted in the system itself and tend to reproduce themselves.  

(8) Each paradigm has its own methodology and typical analytical methods. A prominent feature of institutional paradigm research is comparison: through the comparative study of the corresponding characteristics of other institutions to better understand their own institutional characteristics, and analyze the similarities and differences.

The great transformation currently under way provides a good opportunity to test and develop the institutional paradigm. For example, what speed should the shunt maintain? Should there be a comprehensive package, or should it be introduced in several stages? What is the best sequence of introducing the required legal rules? Which is first and which is second? What are the political conditions for economic change? And what are the economic conditions for political change? In what aspects can be allowed to complete the evolution and transition naturally, and in which aspects need to be actively completed through top-down promotion?

Multidimensional investigation transformation

I think we have to look at transformation in many dimensions. One dimension of transformation is from centralized command economy to market economy. From a lower level to a higher level of development, from an agricultural society to a more urban society are other dimensions. From autocracy to democracy, is also a very important perspective of transformation. Moreover, civilizations, cultures and ideas are changing. In short, there are multiple dimensions of transformation, economic transformation is one aspect, political, legal and cultural aspects are also undergoing transformation, in economic transformation, we should not only see the obvious economic performance, but also see the potential economic system change.

1. Economic performance

First, let’s look at economic growth, which is the most important aspect of transition.

China’s economy has experienced unprecedented growth in the past period, averaging around 10%. The average growth rate of the eight EU countries is 4% ~ 5%. While there are differences in economic growth rates, I need to make two points. First, although these countries experienced a severe and painful recession in the early transition period, although not as severe as Russia’s, the more important thing is that their economies are back on track. And within the European Union, 4% to 5% annual growth is not low. In fact, the G8 countries are growing much faster than the rest of the EU.  

Second, the difference in economic growth rates between China and EU countries does not mean that EU economies are performing worse than China. There are some special reasons for China’s rapid economic growth. First of all, China’s economic development level is still relatively low, on this basis it is easy to obtain rapid growth. At the beginning of the reform, China was basically an agricultural country in the early stages of industrialization. Economists have a basic historical understanding that the early stages of economic growth are rapid, then the pace will naturally slow down. The countries that joined the EU began to carry out socialist reform in the mature period of the economy, so the two different starting points, the growth rate is naturally different. Secondly, China has abundant labor resources, a huge labor reserve and a large number of unemployed people, so the actual wage level is relatively low, and the lower wage level makes Chinese products in the international market to win a strong competitiveness. On the other hand, in the EU countries, the level of economic development before the transition is higher, the real wage level is also relatively high. The level of real wages is directly reflected in the export advantage, which is an important driver of China’s economic growth, in which it is impossible for acceding countries to compete with China. But on another level, the accession countries use labor more efficiently. This kind of growth in China is called extended growth. The countries joining the EU are a kind of intensive growth.  

For both China and EU members, the bigger question now is whether the growth in the past is sustainable or not.

For China, as far as the internal environment is concerned, with the development of economy, the advantage of factor productivity will gradually disappear. With the economic growth, labor resources began to become scarce, wages continue to rise, urbanization ratio has also increased. The most critical of these is the increase in wages. With the economic growth, the welfare enjoyed by the people began to increase, and the minimum welfare level continued to rise, which will bring more and more burden to the finance, thus affecting the economic growth. At this time, the next step of China’s economic development will have to face a dilemma: if wages are not raised, the cost advantage will still be maintained and the growth rate can be guaranteed, but welfare demand will face increasing pressure; and if the welfare level is raised, then the cost advantage will be reduced and the economic growth rate will be reduced. In addition, although China’s economy has avoided the serious recession that the joining countries have experienced and maintained rapid and stable economic growth, it should be pointed out in particular that this growth cannot be automatically guaranteed. Stable growth depends on the environment. For example, an overheated economy is dangerous and may be difficult to control. 

In terms of external environment, China’s rapid economic growth is largely due to the rapid growth of exports, of which trade between China and the United States has played a very important role. The foundation of Sino-US trade is based on US imports from China. Because China’s real wage level, welfare level, tax rate, exchange rate are relatively low, these factors lead to Chinese product prices are very low. But there are more serious problems, if the dollar once overvalued, China’s exports will fall quickly. Now the dollar is undervalued, especially against the euro, which leads to China’s exports growing very fast. Although the dollar is undervalued, the United States runs a trade deficit, and its fiscal deficit is worse. Interestingly, China’s foreign exchange reserves are high, similar to those of Japan and India, and these three Asian countries are the largest creditors of the United States. It is necessary to change the irrational situation that developing China has become a creditor while developed America has become the debtor. Now the United States has two options, one is to negotiate with China, India, to change the existing exchange rate system, if the negotiations can not solve the problem, and have to resort to the market to adjust, so easy to lead to economic recession. History tells us that imbalances in the economy are not sustainable. There is indeed an imbalance in the market now and that needs to change. Undoubtedly, the best way is to solve the problem through negotiation.

For the member countries, future economic growth depends largely on external factors, similar to their past. The eight acceding countries were members of the Soviet-led Council for Economic and Trade Relations (CMEA) before the transition, and integrated with the Soviet economy. With the serious recession of the member countries, CMEA disintegrated and the economic relations with the Soviet Union began to disintegrate. This has caused a great shock to the acceding countries.

After the eight countries join the EU, they will integrate with the European economy, which makes the economies of the acceding countries to develop trade with Western countries, mainly European countries. Therefore, the future economic success of the EU countries, in addition to its own factors, but also depends on the economic situation of the European Union. If the EU economy can maintain strong growth, accession countries will benefit from it, if the European Union economy downturn, then it will also affect the economic development of member countries. Now the economic development of the whole of Europe is relatively slow, so these countries will not develop quickly. If Europe’s growth rate reaches 2% to 3% in the future, then the new member countries could grow 3% to 5%. If these countries can maintain growth rates of 3% to 5% in the next 10-15 years, that would be a welcome result.

There are many ways to measure economic performance. In addition to economic growth, income distribution is a very important indicator. The point I want to point out is that the Gini coefficient, a representative indicator often used to measure income distribution, is an important indicator, but it is only used for measuring monetary income, not comprehensive. But beyond monetary revenue, we also need to think about public goods. Public goods have a very strong distribution function, but not included in people’s monetary income.

If we just refer to the Gini coefficient, we can find that with the rapid growth of China’s economy, the problem of unequal income distribution is becoming more and more serious.  

2. Transformation of the economic system

Economic system transformation is another essential aspect of economic dimension transformation. Institutional reform also includes many aspects. Looking at the economic system reform of various countries, I use a simple method to divide institutional reform into two categories: low-cost reform and costly reform. Low-cost institutional reform refers to the reform that is easier to implement, less sacrifice, less resistance; Costly institutional reforms, by contrast, are those that are difficult to implement, sacrifice more and resist more. In the past, China adopted the first low-cost reform, including many institutional innovations adapted to China’s conditions, including the following six specific aspects: (1) non-collectivization of agricultural production; (2) deregulation of business operations, (3) gradual narrowing of the scope of the centralized economy, (4) price liberalization, (5) open trade, and (6) open technology, education and culture.

These institutional reforms, including some institutional innovations, such as the establishment of township enterprises, are part of the success of China’s reform. But at the same time, we should also see that China has not carried out or completed reform in six other areas. These reforms are harder to implement, more costly and will encounter stronger resistance. In these respects, the eight acceding countries have reformed, adopting a second and more costly strategy. The six areas are:

(1) Privatization of State-owned Enterprises: China has completed the privatization of some small and medium-sized state-owned enterprises, but has not yet privatized some large state-owned enterprises. Of course proper privatisation of these large state-owned enterprises is easier to talk about than to do. There will be many sacrifices, many losers and beneficiaries, and there is great resistance. The acceding countries have basically completed this process.  

(2) hardening budget constraint and strengthening fiscal discipline: the problem of soft budget constraint in state-owned enterprises has a definite relationship with ownership structure.

(3) Liquidation of non-performing loans of commercial banks: This issue also involves the fiscal system. The financial burden of clearing bad loans from commercial banks has also been heavy for the EU’s acceding countries, which also require great sacrifice. This is also a huge challenge for the Chinese economy.  

(4) Regulatory system reform.

Reform of the pension system.

Reform of the medical system.

Of the six more costly reforms, there is some overlap between items 1 to 4. If the budget constraint is hardened, the bad loans of commercial banks must be liquidated. The overlap between reforms implies the need for interlocking reforms. From my personal point of view, the most difficult reform is the reform of pension and medical care system, involving the principle and specific operation of the reform, but also to pay costs and costs.  

3. Political transition

It is one-sided to emphasize only economic transformation. Besides economic transformation, it is necessary to promote political transformation and legal transformation. This is what characterizes the transition of acceding countries. Because it is necessary to advance the transformation of economy, politics and legal system at the same time, so from this point of view, the political, economic, legal and other reforms of the EU countries are worth thinking about, which is a very interesting experience. In fact, the accession countries completed the economic transformation, political transformation and legal transformation in a short period of time.  

The transformation of the EU countries in the field of politics and rule of law has four distinct characteristics:

A modern state governed by the rule of law has been established. What I want to emphasize is that this is not the result of the implementation of economic reforms, but rather reforms that go hand in hand with economic reforms.  

(2) Citizens’ groups are free to criticize openly. This right is protected by the newly promulgated Constitution.

And (3) people can express their discontent and dissent in a variety of ways, in an open and civilized manner, and they don’t have to worry about being suppressed, so there’s no need to deal with it in a disruptive way.  

The acceding countries have established an institutional framework within which different organizations and groups can have different views and express different values. These characteristics ensure the free expression of people’s ideas, while maintaining political and social stability.  

From a practical point of view, in the accession countries, there has been no social unrest, elections are conducted in an orderly manner. The fears that political and legal reforms would trigger a series of problems have proved unfounded. The synchronised transformation has not had adverse consequences. Reality tells us that reform can be carried out without crisis or turmoil. At the same time, people can make compromises and concessions peacefully, without resorting to violence.

In short, a market economy is a necessary but not sufficient condition for political reform. The road to a market economy is long, and only through necessary political reforms can a better external environment be provided. Market economy is connected with political reform. If there is a good market economy, political reform will come into being. But political reform also has a certain independence and can be separated from economic reform. In the long run, if we only push for economic reform, society will fall into an unfavorable political environment.  

4. Transformation of the rule of law

I believe that an important aspect of the transition to the rule of law is the independence of the judiciary. The real rule of law requires an independent judiciary. The government should not be above the law, but should be subject to the law. The true spirit of the rule of law is that government officials, no matter how high they are, are bound by the law.

I think China needs to introduce some reforms to strengthen the rule of law, but this is a process. I also hope that Chinese legal professionals can find some ways to improve the rule of law. I have seen some Chinese scholars’ literature on the order of market, democracy and rule of law. Basically, democracy is indispensable to the rule of law. The transformation of rule of law also depends on political transformation. If politics does not realize the transformation, it is impossible to achieve the true realization. Confucius in China and Max Weber in Europe have their own theory of bureaucracy. Although there are some differences, they all think that bureaucrats should be the public servants who serve the public affairs and the people. They are honest and not corrupt. But it cannot be done without political reform, without a democratic system. From a sociological point of view, without political reform, the bureaucracy can truly achieve the independence of public servants, which is naive. Because the bureaucrats were influenced either by the upper leadership or by the rich, by the corruption of big business and big companies. Such problems have emerged in China today. Therefore, the transformation of the rule of law can be successful only through political reforms such as increased transparency.  

In short, transformation includes many aspects and needs to be examined from multiple dimensions. If we compare economic growth rates only, the eight acceding countries may be far behind China, but one should not ignore the progress they have made in other areas. These achievements are reflected in three aspects. First, when welfare states carry out welfare reform, They have maintained some of the basic systems of the welfare state, including health care and pension coverage for every citizen, albeit at a low level, but meeting minimum standards. The State-funded guarantee of free minimum health care for every citizen is not a trivial achievement, but a costly one. The same goes for the pension system. The other is that the EU countries have made great progress in the reform of the legal system, and achieved judicial independence through the independence of judges. The legal systems of these countries are now fully aligned with those of the European Union and have modern legal systems. Third, important geopolitical reforms were introduced. All of these changes are building strength for democracy. The experience of the countries that joined the European Union strikes back at the misconception that the beginnings of democracy mean chaos. The eight acceding countries introduced democracy and carried out political and legal reforms in a peaceful manner without social unrest, bloodshed or violence.  

Challenges of Transition: Conflicts Caused by Institutional Incoherence

What are the difficulties of transformation? In my opinion, the most prominent problem facing the transformation is the conflict caused by the inconsistency in the system. Under the classical socialist system, it is internally consistent. Reform, on the other hand, brings inherent inconsistency. Whether we can resolve the conflict relatively smoothly and embark on the road of comprehensive and successful transformation is an issue that we must seriously face and carefully consider. Perhaps different countries are in different circumstances, and different scholars have different ideas on this issue, but I must point out two basic points of principle:

First, growth does not automatically lead to institutional reform

Economic growth sometimes makes us fall into a trap, a trap of the system, and cannot extricate ourselves. We cannot rely on the fact that China’s economy is growing so fast that it will automatically bring us into institutional reform. To this, different scholars have different views. Some people think it is possible, others don’t. But if we look back at history, we can find that there is no precedent in history that proves that institutional reform will happen automatically. Even if we are now actively committed to institutional reform, it may take 10 years, 100 years, or even a thousand years to complete the relevant work. So economic growth does not automatically lead to institutional reform.  

Therefore, relying solely on economic growth to solve the transition problem is dangerous. On the contrary, the rule of law is a necessary condition for the smooth development of market economy. Political reform, legal system reform and so on are important aspects of the transition, to solve the transition problem needs to respond in these aspects.  

Second, although reform is arduous, it should not be put off or avoided

Reform is a task that must be accomplished. It is impossible to avoid it. Sooner or later, those problems must be solved. With regard to reform, I would like to begin by saying that there can be no reform without sacrifice, especially those that are difficult and costly. These difficult and costly reforms can be delayed for a while because of difficulties, but they cannot be delayed forever. Now everyone knows that SOE reform cannot be shelved and postponed forever. Today you can say let’s come back tomorrow to solve the problem of state-owned enterprises. By tomorrow, you can say the day after tomorrow to solve it is not too late. But you can’t say that forever. One day, the problem must be solved. And delaying costly reforms will make the problem more complex and costly over time, discouraging policymakers from making decisive changes.  

True, if reformers want to act, then the action taken must have many disturbing side effects. But the truth is that costly reform is not an impossible task. I believe that while objectively evaluating the arduousness of reform, reformers should have the courage to reform, take appropriate reform steps and solve the difficult problems through open and transparent reform.  

Reformers should have the courage to try. The negative impact of reform should be objectively recognized, not exaggerated. Exaggerating the negative aspects of reform will both dampen confidence in reform and become some of the best excuses for obstructionists. Decisive reform steps should be taken, especially where there is a strong demand for reform. It’s like you don’t need your phone until it’s in use. You wouldn’t want to use a computer without it. I didn’t know the value judgments of freedom before it became possible. It is only when freedom begins to grow that the need for it expands. When you have half, you want the whole. Before I stepped into a Chinese restaurant for the first time, I didn’t have much interest in Chinese food. But after I visited Chinese restaurants, I began to like Chinese food. “Crossing the river by feeling the stones” – China’s reform methods in the past best illustrate this point.  

The reform sequence is important. I don’t deny the need for political wisdom to find a better order. Reform should indeed take the proper sequence. I distinguish between two ownership reform strategies: strategy A and strategy B. Strategy A refers to a bottom-up strategy that allows private economic development. Strategy B is a rapid privatization of state-owned enterprises. What I am comparing here is merely ownership reform. I’m not taking a multidimensional approach to comparing the two strategies. Strategy A and strategy B are from the perspective of ownership reform, rather than referring to price reform, macro-policy or political reform. The former Soviet Union and Eastern European countries mostly adopted Strategy B. Here is a comparison between two countries where reforms have gone hand in hand: the Czech Republic and Hungary. The Czech Republic adopted strategy B, while Hungary chose strategy A. Hungary and Czech have very different reform strategies. I think the reform strategy chosen by Hungary is the right one; the Czech Republic is not so right. In terms of ownership reform, China is also doing well. China first allowed the private sector to develop. I’m all for it. That’s absolutely right.  

Data 2 Comparison of two transition strategies

Strategy A (Organic Development Strategy)

1. The most important task is to create the conditions for the private sector to grow from the bottom up;  

(2) Turning most of the State-owned enterprises into private enterprises by means of sale;  

3. The property of State-owned enterprises must be prevented from being distributed without compensation in any form;  

4. Priority must be given to a business sale programme that produces a core owner;  

5. Tighten budgetary constraints on enterprises and strengthen financial discipline to ensure the effective operation of market economy.  


Strategy B (accelerated privatization strategy)

1. The most important task is to eliminate State ownership as quickly as possible through the privatization of State-owned enterprises;

2. The main means of privatization are free distribution in the form of optional share certificates;  

Preference for a decentralized ownership structure;  

4. Not emphasizing the bottom-up development and upgrading of the nascent private sector by private enterprise;  

5. There was no requirement that privatization of State-owned enterprises automatically stiffen budgetary constraints.  

Openness and transparency simplify reform. Reformers often need to bear a lot of pressure, especially in the face of costly reform, the heavy pressure will make the reformer more hesitant. And through open, transparent way can greatly simplify the traditional model of complex reform. Policy makers need to publicly present options and provide a clear and comprehensive picture of the consequences of reform: what social or economic gains will be achieved if this path is chosen, and what the costs will be; If you choose that path, what will be the benefits, what would be the costs. In addition to providing some economic options for gains and losses, there should also be some political and social options. If not telling you that you have to do this or that, at least put a price tag on each option, indicating that it includes all the gains and losses beyond the financial ones. Such an open and transparent reform does not require reformers to deceive anyone and bear the burden of conscience, nor do they have to bear the heavy burden of arbitrary decision-making.  

Stability is not rigid

In the face of reforms, especially those that are costly, people tend to express considerable concern for stability and oppose instability. It is easy to understand that man wants stability, it is a wish of man. I understand why people want stability, and no one wants to be in chaos and turmoil. But here’s what I want to point out:

First, too much emphasis on stability leads to rigidity

Those costly reforms are more likely to be led into rigid dead ends by a focus on stability. Costly reforms are bound to produce some winners and some losers, and cannot be happy. Take the reform of state-owned enterprises as an example. In the process of reform, some enterprises have to close down, some workers have to lose their jobs and the state-owned sector has to lose some privileges. This is the price of reform. There are gains and losses in the reform, there are forces to support the reform and there are many obstacles. Piecemeal reforms tend to win the hearts and minds of the general public, while difficult reforms can seriously harm a significant number of people. At this point, if too much emphasis on stability, its loss will not only miss the good opportunity for reform, more dangerous is embarked on a rigid road of no return. The reform of state-owned enterprises is a good example. Because of the difficulty of state-owned enterprise reform, because there are many difficult problems, in order to maintain “stability,” postponing the reform has become the easiest irresponsible decision to make. But delaying reform does not solve the problem, it makes it more complex and daunting. However, in the process of postponing SOE reform, many deals are interwoven, and there is a lot of dirty corruption in it. If the state-owned enterprises in front of the reform loitering, not only did not really solve the problem, but led to the rigid system, and further narrowed the distance with corruption.  

Second, stability comes in many forms, and stability does not mean rigidity

This is a more critical point that I want to emphasize. There are many different forms of stability, stability contains a variety of different elements. Too much emphasis on stability can lead to rigidity, but stability does not mean rigidity. The word stability is borrowed from physics. Stability does not mean immobility. A pendulum, for example, swings steadily on either side, and that’s stability. The Arctic is a stable environment, but the climate is cold and the Sahara is a very stable one, but who wants to go there? If stability means a lack of healthy change, few people like it. We should pursue the establishment of a good stable system, with full of civilized, humane and peaceful rules, to implement social changes, with such changes to give people a sense of stability. The transformation of society needs stability, but does not need the rigidity of stagnation. Stability is often associated with adjustment and flexibility. Democracy is, in a sense, a very stable system, and it is a very serious misunderstanding of democracy that democracy brings chaos.  

Values in Transition

Over the past decade or so, I have been pondering a question: What is driving the great wheel of transformation? Where will this force push the future transformation? Some people think that it is inevitable that the transformation road is so far. I do not agree with the fatalism of historical determinism. In the historical process of transformation, there must be some force at play. Some people think that economic interests are the driving force of transformation. I don’t think so. I do not agree that any change is driven by economic interests. I want to stress that people are not simply driven to do things by economic interests, people can make sacrifices for ideals and other values outside the economy. The economic benefits are important, but they are not unique and do not always work. There are countless examples where people can forgo financial gain and sacrifice, even with their lives, for other ideals. Of course, it can be a meaningful contribution to a good idea or an unnecessary sacrifice to a bad idea.  

What we need to do depends on what goals we have and what values we have, and on the collective will of the various participants. It is these underlying values that guide our unfinished path of transformation. When making judgments, people tend to pursue a position of value neutrality, maintaining freedom and objective values. However, as long as people act, it is impossible to maintain a completely value-neutral position. This is not just for decision makers. Similarly, we write a book, a paper, can not be without value judgment. Therefore, personal values and guiding principles are very important. People with different backgrounds and ethics have different values. But at the same time, people should also abide by some basic values:

· View of matter. Material things are important. Basic material security is one of the most important values. This is not to advocate the supremacy of material things. I am glad to see that people’s material life is improving. But at the same time, the pursuit of material things cannot be overemphasized.  

· Equity. I am against simple egalitarianism, but also against excessive injustice. By Chinese standards, I take the middle way. There is a question of moral standing and basic judgment here. It also means balancing efficiency against equity. However, there are some basic values that must be observed in weighing compromise.  

• Stability concept. The values of stability and rigidity, of change and turbulence, which I have described before.

:: Freedom view. People should be free to express their ideas and participate in public affairs. Of course, I’m also against anarchism.  

· Strong country view. People want to be citizens of a powerful country. I support patriotism and am a Hungarian patriot myself. I support building Hungary into a strong country, but I do not subscribe to extreme nationalism, especially aggressive nationalism. Radical nationalism is very toxic.  

In addition, there is a fundamental value judgment: democracy. I don’t want to influence people’s value judgment. Nor do I want to be a prophet or advocate of democracy. On this issue, everyone should make their own decisions. Democratization is not a necessary condition for a market economy. One can look at market economies around the world over the last 200 years, and in many cases market economies coexisted with military rule and dictatorship. Therefore, I am not saying that democracy must be introduced into the market economy. And I’m not going to say that because you don’t take democracy, your economy can’t grow. Because there is such a fact. But democracy is my own value judgment and preference. Growth is not the whole story, at least in my opinion. I like poetry, I know many Chinese people like poetry. We have a great poet in Hungary, Petofi. He lived in the 19th century and participated in the 1849 Hungarian uprising against the Austrian Emperor. Many of his works are well known, such as “Better to live in fear than to die.” Petofi is a serious poet. I remember him writing poems in the first person about dogs and wolves.

It’s a personal view, a personal choice. There are trade-offs to be made among these values. Because there may be some conflict between values. There is a risk of policy and strategy distortion by focusing on just one and neglecting others. Chinese culture has always emphasized the golden mean, has always stressed harmony, I hope China can find a harmonious combination.

The goal of transformation is to create a harmonious society

The purpose of transformation is to create a harmonious society. At no time should States forget their basic moral and social obligations. Especially when a country reaches a certain level of development and becomes rich, it faces a more complex choice: Should it continue to invest more wealth into economic development and increase the rate of economic growth, or consider using some of its wealth to improve some basic welfare system? This is not a simple choice, because any growth policy that emphasizes only the quantity of growth will inevitably ignore the supply of public goods.

Economic growth is not the whole story

Economic growth is important, but it’s not the whole story. People should avoid the idea that economic growth is paramount. Back in 1972, I wrote “Radical and Harmonious Growth” Rush versus Harmonic Growth) A book. In my book, I reject the Stalinist growth mania. Because any unilateral growth frenzy is unbalanced. The negative effects of one-sided emphasis on economic growth have already begun to appear, and some of them are very serious. Such as heavy traffic, environmental pollution and so on. These are some of the costs of growing too fast. These side effects will not be eliminated for a long time to come. Therefore, the transformation should integrate all aspects, and should not only emphasize certain aspects, overemphasizing a certain value is unreasonable. We want to achieve a comprehensive transformation, to achieve comprehensive and sustainable economic development.  

Providing Basic Welfare is the Foundation of Building a Harmonious Society

In my opinion, as nations become more free, their sense of social responsibility should become more prominent;When a country becomes rich, it should provide every citizen with the most basic security.On that basis, a certain gap can be accepted.For example, the state should provide basic education to every citizen. Primary and secondary education should be free of charge. Higher education in universities could be for a fee.But if students can’t afford to pay for college, they should be able to take out loans, allowing them to graduate with an income and repay the loan.Similarly, a fair society should not leave many people homeless and should provide everyone with a minimum level of housing.On this basis, there is no blame for someone building palatial villas. 

Pension reform and health care reform are important and arduous tasks. The state has an obligation to provide better care for the elderly and the sick. Pension reform and health care reform are the most concerned, but they involve many details and are very difficult to implement. Because pension reform and health care reform need to be tailored to the specific conditions of the economy, it is difficult to simply outline. However, both pension reform and health care reform need to adhere to some basic principles, these basic principles can be used to outline the reform system. Put simply:

• It is not desirable to build a pension system or a health care system through a single market mechanism or a single mandatory public instrument.  

· The pension system and the medical system should play the compulsory role of the government as well as the market law. They need an organic system that combines the public mechanism with the market mechanism.  

· Pension and healthcare systems require both public and private participation.  

State finances should provide minimum guarantees for pensions and healthcare.

Since ancient times, China has a cultural tradition of pursuing harmony and harmony, emphasizing the peaceful way to achieve national harmony and prosperity. Policymakers should analyze and evaluate different paths of transformation and coordinate a range of values to achieve a harmonious society.  

Information 3 Nine Basic Principles of Welfare Reform

Principle 1 (Individual autonomy):The changes to be promoted must increase the scope of individual decision-making in the area of welfare services and reduce that of government.  

Principle 2 (Solidarity):Help those who suffer, those in distress, and those in disadvantage.  

Principle 3 (Competitive):There should be no monopoly of State ownership and control, and competition between different forms of ownership and coordination mechanisms should be permitted.  

Principle 4 (Effective incentives):Forms of ownership and control that encourage efficiency must be created.  

Principle 5 (The new role of government):The main function of the Government in the welfare sector must be to provide a legal framework, regulate non-State institutions and provide final relief and insurance. The Government has the responsibility to ensure that every citizen enjoys the right to basic education and health insurance.  

Principle 6 (Transparency):Residents must make clear the link between welfare services provided by the state and the tax burden to finance them. Reforms must be implemented through open, informed discussions. Politicians and political parties must declare what their welfare sector policies are and how they are financed.  

Principle 7 (Time requirements for programmes):: Time must be allowed for new structures in the welfare sector to develop and for the public to learn to adapt.  

Principle 8 (Harmonious Growth):: There is a harmonious ratio between investment resources that directly promote rapid growth and resources spent on running and developing the welfare sector.  

Principle 9 (Sustainable financing):: Government budgets must be able to provide sustained financing for the fulfilment of government obligations.

Misunderstandings in the Comparative Analysis of Post-socialist Transformation

Facing the post-socialist transformation, we need a correct comparative analysis method. With all due respect, some Western scholars have done a lot of research on the post-socialist transformation in China, Russia and Europe. There are many interesting and important articles that use comparative analysis methods, but there are some misunderstandings. Perhaps I am too radical, but I will discuss these misconceptions and even fallacies frankly. But this is my purpose. Because these misconceptions, if left uncorrected, may go deep into students’ minds and become a universal point of view, I think it is worth discussing. This time the China Comparative Economics Research Association and “comparative” sponsored seminar to this as a topic, which is very good, this is a good start.

I think there are three misconceptions in the current comparative analysis of post-socialist transformation:

Myth 1: Simple overall comparison

Is to compare China with the soviet union and eastern europe as a whole. Making such a comparison is absolutely incorrect. There are many different countries in the Soviet Union and Eastern Europe. These countries have different achievements, problems, politics and culture. So it’s not okay to include everything. The three northern republics of the former Soviet Union – Estonia, Latvia, and Lithuania – were highly successful countries that joined the European Union. They had free elections, achieved a great deal and became democracies. But the southern republics of the former Soviet Union – Kazakhstan, Tajikistan and Uzbekistan – are still not democracies. Even geographically close countries, such as Russia and Ukraine, differ significantly. Since there are so many huge differences between these countries, simply comparing them as a whole is absolutely not feasible. So I object to the simple categorization of these different countries and different histories.

Does opposition to simplistic categorization affect scientific inquiry in general? My answer is no. I admit that science needs generalizations, but what is needed is correct generalization, not simple categorization. I don’t want to make a crude simplistic comparison because I think it might lead to some misunderstanding. Crude generalizations are incorrect from the point of view of sociology and politics. I try to be a generalist, but generalizations have to be careful and based on specific analysis. I worry that there is too much generalization.

Let’s use education as an analogy. Students are required to take many courses, each of which has a grade. Students perform better or worse in every subject. For example, Einstein was very successful in physics, and may have been mediocre in literature. At this time, if we simply take Einstein’s subjects for a simple average, we will come to the conclusion that Einstein was a middling student. We can see that we can not do rough generalization, simply say that students A is better than students B. It’s pointless. Everyone is graded according to his performance in different subjects. When I compare students, I will compare their math scores, history scores, whether they are diligent, whether their learning attitude is right and so on. Any comparative study needs to be very careful. Of course it’s difficult. So I think we need to continue the comparative analysis of the post-socialist transition, but in a very careful way.

Myth 2: Simple one-sided comparison

The second misconception is that China achieved great success while the Soviet and Eastern European countries failed. This is not a point that stands up to scrutiny. I applaud China’s success. I am very happy about China’s achievements. I think China’s extraordinary achievement is a very important event in history. Each time I visit China, I am impressed by what China has achieved. But China also has some problems. So the idea that China does everything right, unless it is for propaganda purposes, is self-deception and unacceptable. I am a researcher, a professor, a teacher. Any time I face a country, whether it’s my country or any other country, I have to look at things critically. If you lose the critical eye, it is impossible to achieve success. Therefore, although we should have patriotic feelings, but also have a critical perspective. Some Western scholars and some Chinese scholars have somewhat lost their critical attitude in studying China. Of course, I don’t always look at things through a critical lens. On the contrary, I think it is wrong to think that China is a mess and that everything is a failure. The fact of the matter is that success or failure. What we need to understand is what is getting it right, what is not doing well enough and there is room for improvement.

For example, in the case of the eight countries that joined the European Union in 2004, the past few years have seen better economic performance, much progress in welfare reform, the independence of the judiciary and ongoing geopolitical reforms that have empowered democracy. These are commendable. I think it’s a great achievement. But I am not complacent, because I also found many problems, many things to improve. A comprehensive analysis requires assessing the pros and cons of every possibility rather than emphasizing only one aspect.

Myth 3: Simple argument: radical versus progressive

The third misconception is that China is following a gradual path, whereas the Soviet and Eastern countries adopted what is known as shock therapy. Such a statement is too simplistic for us to casually attach such general labels.

Let me talk about the story of my country, Hungary. Hungary’s transition has also taken a gradual approach. Hungary’s reforms came much earlier than China’s. In 1968, Hungary launched the reform, which has been 36 years now. 36 years of reform has been one step at a time. Every aspect of our economy has changed. Of course there were some turning points along the way. For example, in 1968, the command economy system was abolished. In addition, the adoption of the new Hungarian constitution, the first direct elections and so on were turning points. There were no disturbances, though there were a few extraordinary events. Even in 1989 and 1990, elections were negotiated for a year and a half and society remained relatively stable. An eight-volume document has now been published to show how Hungary’s new constitution was drafted through arduous negotiations. It is not shock therapy that has led Hungary to its present political situation, but rather a step-by-step approach.

Now, if we look at these countries again, we may find that changes in each country are slow and fast. This is normal. What path to choose needs specific analysis. If we are facing a high inflation rate of 300%, how can we first reduce the inflation rate from 300% to 250%, then to 220%, and take a gradual “gradual” path? What is needed is decisive monetary reform. It’s the same with keeping the speed while driving, which depends on the road, on the condition of the car and on the driver. Sometimes you need to speed up, sometimes you have to brake, sometimes it needs to slow down. Therefore, it cannot be generally said that low speed is correct. Sometimes you need to accelerate very quickly or you risk a crash. I am not trying to praise one way and criticize another. I just want to say that we must pace ourselves carefully and compare this scale.

No achievement can blind me

People who do research have to look critically at things at all times, even in the face of great achievements in the country, my country or other countries, I can not blindfold. I’m a researcher, a teacher, and I teach my students to think this way – I have to look at things critically all the time. A study that explores a problem cannot succeed without a critical eye.

I recently led a research project on integrity in the post-socialist transition at an interdisciplinary institute, with researchers from several countries participating. The researchers come from different countries with different academic backgrounds, including economists, law researchers, and political scholars. We completed 40 articles and edited and published two books. But to be honest, from my experience with this huge project, there are still gaps between the disciplines. We economists don’t read political science, and political scientists do not read economics. One man worked hard. Different disciplines are doing their own work without interacting with each other. So I had to admit my ignorance and I felt ashamed. I will catch up and try to read more about other subjects. In the last 10-15 years, I’ve done some work. But I wasn’t educated enough to support interdisciplinary research. Before coming to China, I read 40 articles about China. It is interesting to look at the marginal notes, footnotes, and references to these articles. I could tell that neither of these writers was reading other people’s articles. We move forward regardless of the right and the left.

The problem is even more serious when communication with other disciplines is considered. We studied microeconomics and macroeconomics in our first two years, but we didn’t understand politics and philosophy. Some of our great discoveries in economics have been made in politics as far back as Aristotle and Plato. We should make up lessons in these areas and encourage students majoring in economics, including teachers, to read more books on political science, philosophy, law, history and other subjects.

Here I would also like to engage in my profession – economists to make a criticism. Economists sometimes put too much emphasis on “technocracy,” and I’ve seen good scholars write some good papers, including those who are good economists, but they’re not out of the technocratic box. We need to rethink, refresh our thinking and think outside the box.

In short, China is an important player in the history of the great transformation, and I have been continuously and diligently following the situation in China. It is not possible to get a comprehensive understanding of China in just 10 days, but when I am in China, I have some personal feelings. These feelings interact with the information and understanding I already have, allowing me to strike a new balance in my understanding of China and the transformation of my understanding. These are just some of my personal views, which I would like to put forward in a frank and useful exchange with scholars, rather than lecturing on China’s policy and telling you what to do. China is on its own path, and policy makers and Chinese economists can choose the path that suits them. I sincerely wish China success in its future reforms

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