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Home >> Opinion
UPDATED: 15:57, March 21, 2005
China should be applauded - A dialogue with Dr. Kuhn
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Dr. Robert Lawrence Kuhn has almost became a household name in China recently. As the Managing Director of Citigroup and the archor of PBS, he authored a famous book entitled The Man who Changed China: The Life and legacy of Jiang Zemin. The book soon became a best seller. Since 1989 Dr. Kuhn has travelled between China and America frequently, advising Chinese government on a variety of major issues.

How does this China expert look at China's Scientific Concept of Development? Our Washington-based correspondent Yong Tang recently did an exclusive interview with Dr. Kuhn.

Kuhn:Two fundamental points to begin. First, China's situation is unique. When the largest population on earth undergoes one of the fastest transformations in history, traditional rules may not apply. China must go through in a few decades a transforming process that took many industrialized countries, including the United States, over one hundred years. Therefore, not all experiences and lessons from the West should or even could be applied wholesale in China. The experiences of the West are a helpful reference not an absolute prescription. The ideas here should be evaluated for applicability in China.

Second, national development strategies must be tailored to the real environment of the times. Economic or political ideas that are idealistic or exist in a vacuum are not only not effective but can be disappointing or even destructive if applied without real-world practicality and grounding. The American developmental experience, like that advocated by Deng Xiaoping and implemented under Jiang Zemin, was that economic development came first historically. Without economic development, when everyone is poor, all theory is idealism and idealistic theory alone cannot help improve the lives of people. Whereas in an ideal world it may have been theoretically preferable for economic development to proceed in a coordinated manner with social, cultural and political development, the historical reality has been, in China as in the West, that economic development did in fact come first.

Since human systems are not perfect, there are certain inevitable if not invariable consequences of rapid economic development, primarily income disparity between different segments of the population and abuses of the system by some of those in power who seek personal gain through illegal means. There is no way around this stage of development and China is not unique in now having to deal with an accumulation of these problems. In the "Robber Baron" era of American history -- at the end of the 19th century and beginning of the 20th century -- a very few people aggregated, concentrated and controlled a great deal of wealth in America, and as a result millions of common workers were paid poor wages, had few benefits (like health care or unemployment insurance), and were subjected to intolerable working conditions. Yet the "Robber Barons" performed a critical service, for a time, in making America the world's leading industrial country by energizing the American economy through aggregating resources and rapidly building the means of production so that industry could, for the first time, develop the critical mass needed to expand and flourish.

When the Great Depression hit the United States in the 1930s, the people turned to a new approach under President Franklin Delano Roosevelt, in which government played a larger role in controlling the economy, such as in regulating monopolies, enforcing fairness in the stock market, enabling fairness in labor-management relations, establishing a safety net of social services for all citizens, and by redistributing wealth from the wealthiest to the poorest citizens through progressive income and other taxes in order to promote fairness among sectors of society. These sweeping policies, however, had to take care not to destroy the incentive of entrepreneurs to continue to generate new wealth (which benefits all society).

The key point for China here is to prevent the trauma of America's "Great Depression" (which had many causes, of course) by getting out ahead of the likely historical trends and implement solutions before the problems grow larger. Economic development must come first, but after a certain time, a more complex integration of social needs must be integrated with pure economic growth. This is the only way for the fundamental interests of the people to be properly represented.

It is important to recognize that such balance among different sectors of society is not a one-time event; there is no magic formula that holds forever. Policies of economic and social balance are always dynamic and always changing so that adjustments must be made continuously. This is why the term "Scientific Concept of Development" is entirely appropriate for President Hu Jintao and China's new leadership in their stewardship of China's new era.

Yong Tang: According to the Concept, China should take economic development as a central task and promote economic, political and cultural advancement in an all-round way to achieve comprehensive socio-economic development. How is this implemented in America? What lessons China could learn from America in this regard?

Kuhn:In America there was a natural evolution and development of competing social institutions that grew to balance the pure economic forces of large, monopolistic industrial corporations. A first step in the United States was controlling the monopolies in various industries -- which created high prices for consumers and excessive profits for companies as well as limited incentives for research and development. Breaking up monopolies is something China has begun to do (e.g., telecommunications).

A subsequent step was the natural development and growth of competing social institutions such as labor unions. Although there were many traumatic encounters, even battles, between labor and business, between those representing the workers and those representing management, particularly in the middle decades of the 20th century, a working balance eventually emerged. The outcome was that the two competing forces (labor and business) would, in their negotiations and reciprocal powers, naturally optimize wages and profits for the benefit of overall society. Yet the government had to maintain constant surveillance; for example, the government had to be able to intervene and stop labor strikes (when all the workers would leave their jobs to pressure business) if national interests were at stake. The government could enforce a so-called "cooling off period,' forcing everyone back to work while negotiations continued.

China has a different system in that the government represents all the people, workers as well as business; yet to be effective in an increasingly complex society, China must find in the Western or American models fresh ideas for enabling the forces of diverse social institutions to compete so that government is not forced to constantly be making all the decisions in adjudicating the balance of interests in an increasingly complex and diverse society. The reason is not just that government should not make all these minute decisions, but that government is often not able to make these decisions effectively and efficiently. There are too many such decisions and they are too many inputs so that making all the decision is just impossible. It is like setting prices for goods and services in the marketplace, only the policy arena is even more complex than the price setting arena, since we are dealing with competing social and institutional forces not simply supply and demand.

One way society's competing interests are balanced in America is by the large number of lobbying groups that occupy a good deal of real estate in Washington, D.C. For almost every kind of group -- business, social, personal, various causes -- there are lobbyists who represent and promote their special interests to the administration and to the Congress. Americans often make fun of or even ridicule Washington lobbyists -- and certainly lobbyists have many excesses -- yet the system of competing interests works well to create a kind of marketplace of ideas, the best of which (ideally) emerge slowly and work their way into the laws and practices of government.

As for cultural activities and its enrichment of the people, they develop naturally as?society develops to?certain level (economically and socially). As people can fulfill the basic necessities of life and living, and then educating their children, they naturally begin to seek personal entertainment and hopefully the kind of enrichment that leads to?higher levels of?self-realization and aesthetic appreciation.?

The American model of cultural activities is more dependent on the private sector than the public sector. The key advantages of a largely private system is that it enables a wider diversity of interests to be available to the public and it limits the decision-making power of a few people in government. It also takes the financial burden off the government. The government must play a role, however. One example is the U.S. government's funding of public broadcasting (radio and television), because this is the only way to provide alternatives to the purely commercial interests of traditional American media and therefore the only to make available programming that could not be presented in any other way. Yet even with public broadcasting, the private sector is heavily involved. While the government supplies some support, the majority of the financial support for every public radio and television station in America comes from the private donations of its local audience, mostly individual donors and some corporate sponsors. Public broadcasting must therefore compete in the marketplace of ideas and money, and this too forces public broadcasting to be responsive to the needs and will of the people.

It must be stressed that it is usually a mistake to force economic entities like corporations to do lots of things that are not purely economic in nature, such as excessive social services or community responsibilities. Corporations need to be optimally efficient in converting resources (human and natural) and capital into products and services that the market needs. To burden corporations with many non-economic demands would be to limit their capacity to compete in hypercompetitive global markets. To balance corporate interests, therefore, is the responsibility of government, and of a network of diverse social institutions (nongovernmental organizations, NGOs) that can provide the checks and balances in a dynamic and growing society. Such checks and balances must be dynamic in that relationships and relative strengths and importance are constantly changing. Government can play a role in regulation, but market forces in society must also be allowed to set the relative power between various institutions. Only in this balance of forces in the total national marketplace can the system adapt optimally to the people's needs.

The American system, at its heart, is based on a system of checks and balances. This is generally recognized in government, where the checks and balances are the three-part system of executive, legislative (Congressional), and judicial branches of government. But the American system of checks and balances is even broader, since government itself competes, in a sense, with other sectors of society -- for-profit industry and companies; educational and research institutions; social and policy advocate organizations; cultural organizations; the media in all forms; the legal and judicial system; and the like. Each of the institutions in each of these broad sectors compete for the people's "votes," not just in the literally sense of electing government leaders but in the financial "voting" of purchasing goods and services from companies and in people donating their time, expertise, and personal financial resources to non-for-profit non-government organizations (NGOs). It is in the complex interactions among all these sectors that social and economic policies emerge, and in this process the short-term will of the people (which special interest groups tend to favor) is optimized with the long-term interests of the people (which government at its bests needs to assure).

Yong Tang: According to the Concept, China should balance urban-rural development, regional development, socio-economic development, harmonious development of man and nature, and domestic development and opening-up.How is this strategy implemented in America? What lessons China could learn from America in this regard?

Kuhn:The primary challenge for China will be always to keep economic development foremost, since without solid economic growth nothing else is possible. China's development since 1978 is perhaps the greatest story of sustained success in human history. Never before have the lives of so many people been changed so dramatically for the good. Yet China is, in a way, addicted to high growth, since high growth is needed to absorb the millions of new workers coming into the workforce and those being laid off from moribund state-owned companies. As such, high growth is needed and high growth, in general, comes from those geographic areas that already have enjoyed rapid development, primarily China's coastal and urban areas. But growth in these developed regions increases the income disparity in China, which is already a major problem. Herein lies the conundrum: How can China maintain its high growth and at the same time begin to alleviate income disparity? This is the great challenge to China's government today.

Once economic development has reached a certain minimum stage -- which I define as having crossed a critical mass threshold so that, like a nuclear power plant, it becomes self-generating in producing without additional inputs more power consistently than it consumes -- government can begin instituting various checks and balances. Tax policy is a favorite and effective government technique in directing economic policy. For example, by giving larger tax credits to business for research and development, these behaviors are encouraged and the national economy benefits. Similarly, a city may offer special tax incentives for companies to set up operations in poor areas. To support cultural activities, many American cultural organizations can accept donations that are tax deductible to the individual or the corporation.

China is beginning to use policies to encourage investment in its less development areas, primarily the Great West and Northeast. These incentives need to be increased. In a market economy, there is always a level of government support -- whether in the form of tax policy, special loans, investment incentives, and the like -- that will stimulate economic growth.

Obviously, the use of tax policy is only effective when tax enforcement is sufficiently strong. If companies or individuals can avoid paying taxes and easily break the law, then tax policy is meaningless. China has made significant strides in its tax enforcement administration but needs to go further so that almost everyone recognizes that it is not worth avoiding taxes, that the potential penalties exceed the potential gain. Only then will tax policies be effective in modifying economic behavior.

In America, a deep appreciation of environment protection on the part of a small minority of dedicated environmental activists has been the catalyst for a broad set of policies in sustainable development and environmental protection. This movement did not begin until the late 1960s and has always been energized by small groups of people, some of whom are considered radical. But because their cause is generally acknowledged to benefit all society, their extreme policies have influenced and balance overall policy. Industry and the environmental movement generally create a dynamic tension between them, each pushing its own agendas, but in the process of disputation and negotiation a respectable balance emerges. For example, many oil companies now recognize the need to employ large staffs of environmental scientists to assure environmental protection during the exploration and production of new energy resources. Although everyone now appreciates the correctness of this corporate behavior, it would not have occurred naturally without the outside pressure from non-governmental environmental groups who lobbied the government and used the media to promote their cause.

Yong Tang: According to the Concept, China should coordinate economic development with population growth, resource availability and environment protection, and stick to a road of sustainable development consistent with the characteristics of a modern society. How is this strategy implemented in America? What lessons China could learn from America in this regard?

Kuhn:In America, it is recognized that while government can and must set overall policy it is impossible for government alone to implement effectively and efficiently all the huge number of micro-decisions that must be made in harmonizing the vast numbers of competing interests. As such, government sets policy but allows a vast variety of different institutions, including many non-government institutions (NGOs) as well as specialized for-profit companies, to compete in the marketplace of ideas as well as in the marketplace of goods and services. For example, there are many organizations that provide environmental protection and some of them are very aggressive. Most of their support comes from the private sector, usually individuals who believe in their policies. To the degree that these organizations can win larger financial support from the people is the degree to which they can fight harder to promote their cause and agenda. This makes rough sense since the people are "voting" (as it were) with their financial support (donations) and personal participation. Government policy encourages these NGOs, and their roles in society, by allowing tax deductions for such donations (both by individuals and corporations). Of course, as stated above, for tax deductions to be an effective policy, tax collections and compliance must be at a high level. (China is making progress here but has a good way to go.)

The media in America plays a vital role in the process of adjudicating competing interests in society. The media in America traditionally has an anti-business bias, which helps to balance out the sheer economic power of large corporations. It has been primarily the American media, not the American government, that has been most effective in recent years to reign in the power of a few corporations who put their own excessive benefits far ahead of their social responsibility, whether through financial improprieties, faulty accounting and reporting, faulty products (e.g., drugs with injurious side effects), executive profligacy, government corruption, and the like. A media that is free to expose all the problems in society, no matter where they occur -- such as government corruption at all levels -- is a critical part of what makes America work. Only the media is sufficiently broad-based at all levels of society, and has sufficient incentive, to uncover corruption in all its dark hiding places.

In addition, the media in America plays a vital role in engendering culture and cultural awareness, setting social mores, and providing a coherent framework of national identity. This all takes place in the competition among private sector companies, although the government continues to set the standards of appropriateness, balancing the cherished Constitutional guarantee of freedom of speech with the appropriate social standards of decency and decorum. Once again, lobbyists from all sides are hard at work promoting their clients' opinions and beliefs, from the desire of cable networks to have unbridled freedom to attract audiences with profanity, violence, and explicit sexuality to the theologically founded belief of right-wing religious groups who seek to exert their prudish control on the entire country by limiting expressions of behaviors they find objectionable. And once again, it is the dynamic tension between these two opposite interests, contesting in the marketplace of public ideas and national government, that form part of the strength of the American media system.

Of course, there are excesses and problems with the American media: the media too can act irresponsibly and make up sensational and erroneous stories or just exaggerate to promote their own commercial interests. To control the media in America, there are various laws, such as libel laws, that enable people to sue the media. The government too must also set laws to define and control the role of media, and be constantly vigilant in their enforcement.

In China, the media has an increasingly important role in national development, including: reducing disparity among sectors of the populace in knowledge and culture; unifying national culture and national interests; promoting education and social awareness; cultural enrichment; helping to expose and root out corruption; providing a check and balance on government at all levels (an enhanced transparency in government as called for by President Hu Jintao and China's new generation of leaders).

Like the American media system, the American legal system helps balance the forces in society, although there are excesses here too. American law enables individuals, if their cause is sufficiently strong, to take on giant corporations and battle them in the courts. Certain law firms specialize in suing corporations for product liability --such as faulty drugs that have had harmful side effects or automobiles with deadly defects or chemicals in products that cause disease --so that the people are not overrun to their detriment by corporate greed, backed up by corporate power,. However, when the legal capacity to attack business gets too strong, for example in malpractice suits against doctors, insurance rates are raised very high and everyone suffers (except the lawyers). Again, the solution is dynamic balance, which is the policy setting role of government -- in this case, setting the proper limits and constraints for lawyers to represent common people in suing corporations.

As Chinese society continues to mature, and as the Chinese government grows more confident in the Chinese people's inherent interest in stability, these competing forces -- like NGOs, a freer media, a stronger legal system combined with an independent judiciary -- can emerge and become, in essence, a partner with the government in administering society for the harmonious benefit of all the people.

Yong Tang: How do you think of China's move to implement the Scientific Concept of Development? Do you think this move is going to be successful? What is the biggest challenge China faces today in order to build a harmonious society?

Kuhn:I am impressed with the new thinking of the Scientific Concept of Development in China. It is a broad strategy of transformation that starts with China's historic and successful economic development and seeks to bring about a Harmonious Well-Off (Xiaokang) society. The key components of the Scientific Concept of Development -- economic development, cultural advancement, social fairness, sustainable development, environment protection, the alleviation of income disparity among regions and sectors of society -- must all work together. The stress and reliance on science and technology, and on education, is crucial for long-run successful implementation.

There are some fascinating examples in China. In Zhejiang Province, Party Secretary Xi Jinping and his senior staff have done excellent work in encouraging the development of a vibrant private sector, working harmoniously with the state-owned sector and government, in promoting economic development and social well being.

In Jiangsu Province, Party Secretary Li Yuanchao recognizes that even in Jiangsu, one of China's most successful and prosperous provinces, income disparity is a serious problem and that economic development must be balanced with cultural development to achieve a Well-Off society. Under his leadership, there is a vision to build Jiangsu with a combination of international globalization strategy, regional cooperative strategy, revitalizing the province through science and technology, sustainable development, and the enrichment of society with culture and all-around human development. Given the size and complexity of China, the results of Jiangsu's pioneering efforts in developing a coordinated growth strategy is critical, and the rest of the country can learn from its experiences and lessons.

It takes vision, wisdom and courage for provincial leaders like Li Yuanchao and Xi Jinping to take risks, to be pioneers in these new areas that can be frightfully complex due to the inherent uncertainty in social systems. I fully appreciate the concerns of Li Yuanchao, who noted that pioneers who innovate, however much they are cautious and prudent, are exposing themselves to risk. Government leaders, in general, all over the world, tend to lose more from their failures than they tend to gain from their successes. This is all the more reason to admire and respect those who do take risks, who are willing to put themselves on the line to help their country. China will be better, faster due to these leaders. China needs more?courageous officials.

I am excited by the serious recognition in China of the needs to explore the complex interaction of all the diverse forces needed to build a harmonious, well-off society, in particular the recognition of the impossibility of dictating such a society from the top down with idealistic political principles without implementing it with complex interactions from the bottom up from among diverse segments of society. For example, I applaud the efforts of the Chinese Academy of Social Sciences to address honestly many of these issues forthrightly with real-world research, tough-minded analysis, honest discussions and debates, and new thinking and innovative ideas. There is no other choice; nothing less will suffice.

China should be applauded, not only for its dramatic economic development but now for its new commitment to harmonize the diverse interests of society to create optimum living conditions for its citizens. The task is far more complex than economic growth alone, and it behooves the international community to support and encourage China's new leaders in their vision and maturity. I am confident of China's ultimate success, but no one should underestimate the complexity and difficulty of this next great steps in China's national transformation, moving from pure economic development to the structuring of a broad-based harmonious society.

By Yong Tang, Washington-based correspondent of People's Daily

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