Economic freedom and entrepreneurial space

Economic freedom and entrepreneurial space

People most often on the lips of a Word is probably "tired". Every now and then, we can always hear friends and colleagues feel. Brush screen some time ago a friend circle song felt hollowed out our voices. In fact, not only are white-collar workers, at all levels in the city have "hollowed out of the body" feeling.

We are working diligently, Chinese per-capita working hours was said to be the longest in the world, reaching 2,200 hours of annual working time. However, brave and hardworking, conscientious, we compared with other parts of the world, income levels are not high. Heart sounds is bitter.

Our wages are bosses to decide it? Why the Chinese are so industrious but not rich?

Since the reform and opening in 1978, the achievements of China's economic rise is very prominent. 1980 4% of China's GDP is equivalent to global GDP, 2006 has increased to about 16%. With India than in 1980, China's per capita GDP is about India 2/3, 1990, both equal to the national GDP per capita, after 1990 per capita GDP began more than India, today, China's per capita GDP was almost India twice.

But behind this achievement, we can see a lot of structural problems.

First look at consumption. 1952 Chinese consumption is probably the 69% of GDP, close to today's United States private consumption share of United States GDP 71%; until 1978, 45% of China's private consumption equal to GDP, but until recently, this had dropped to 36% per cent. By contrast, government expenditure as a percentage of GDP, from around 16% the period of planned economy, has risen to about 30% recently. If government taxation and expenditure budgets also included, will be more obvious.

An hour's pay of manufacturing workers in China, about the same as United States industry workers an hour pay 3%

Look at revenue. The people's daily article said, from 1993 to 2007, the GDP proportion of remuneration fell from 49.49% to 39.74%, down almost 10%. The Beijing News did an estimate, digital is even more shocking: the GDP proportion of earned income from the 1983 peak 56.5%, 2005 down to the low of 36.7%, down 20% 22 hours. These numbers with the observed phenomenon is relatively consistent, namely increasingly low incomes as a percentage of overall national income.

Has written an article about two Americans in Chinese manufacturing, employment and compensation for changing paper. They estimated that an hour's pay of manufacturing workers in China, about the same as United States industry workers an hour pay 3%; closest to the Philippines with China, its manufacturing workers are paid almost United States manufacturing workers 6%; Mexico is about United States manufacturing worker 12%. Many scholars believe that this is China's competitive advantages, labor costs are low, and labor force. But today, the need to sustain this advantage isn't there? If sustained, this advantage will become China's long-term disadvantage in international economic competition, because labor costs are low for a long time will inhibit the results of many other positive developments, including kill technological innovation power.

1. wage growth has lagged behind GDP growth

We look at changes in wages, can be analyzed from four aspects. First, 1978 national workers payroll (not including various welfare, and retired guarantees, and medical guarantees, non-wage content) equivalent to at GDP of 15.5%, but to 2008, this ratio Xia down to 11.2%; second, 1978 all State units wage total about for when GDP of 13%, now is Xia down to 6.1%; third, town collective enterprise workers wage accounted for GDP of proportion by 1978 of 2.5% around Xia down to now of 1%, This shows that more and more township enterprises over the past more than 10 years is squeezed, less and less space for town and township enterprises; IV, 31 years, percentage of the income of private enterprises have been rising. In 2008, the non-State-owned and collective enterprises ' wages close to the GDP of approximately 5%, which in 1978 essentially equal to zero, but the incremental managed to change overall labour income to GDP ratio and lower trend.

In fact, from 1990 to 2008, growth in average wages of staff and workers in China are always lower than the GDP growth. According to my calculations, this period, payroll growth is slower than GDP growth average of year 3.8%.

In addition to China, whether there were other countries there is a similar phenomenon? In 2007, the United States Department of Labor a research paper on manufacturing hourly compensation in different countries to do a systematic comparison. I discovered after doing some analysis according to their data, the 12 years from 1996 to 2007, Asia manufacturing income in accordance with the annual growth rate of around 2.4%, reduced the growth rate GDP growth rate over the same period will find, wage growth is slower than their average GDP growth in the same period 2%. Of course, this growth is better than the situation in China.

The situation in Europe is quite different: from 1996 to 2007, wages of manufacturing workers in these countries by 5.6% annual growth rate, higher than the GDP growth rate. The wages of manufacturing workers in North America in this period, according to an average annual rate of approximately 3.9%, 0.8% probably slower than the GDP growth rate, better than the situation in Asian countries.

2. economic freedom, low limit residents ' income growth in space

Why Asian countries prevailing manufacturing wage growth below GDP growth phenomenon? From the basic economic system, we can to find the cause.

First is the degree of economic freedom, labor rights and civil rights protection. United States there is a civil organization called Freedom House (Federal Home Loan Mortgage Corporation, Freddie Mac, formerly known as), from 1977 on the national political and individual rights, economic rights, and press freedom ratings. In 1995, was awarded the 24 countries of a free society, the manufacturing workers ' wages from 1996 to 2007, according to the average annual growth rate of 5.09%, 0.31% more than they did on average GDP growth, an additional 8 partly free countries, workers ' wages are growing faster than GDP growth down by 2.7%. Higher economic freedom, less Government on civil rights to hold national, their labour wage growth will be able to synchronize with GDP even exceeded GDP growth. Non-free country data are not public and therefore cannot be compared.

If these national classification to entrepreneurial freedom, will also see the countries with the lowest entrepreneurial freedom and labor income growth is relatively slow, entrepreneurship of the highest degree of freedom in society is just the opposite.

Specific situation in China, economic freedom and entrepreneurial freedom is what impacts labour income growth in space?

Monopoly is a concrete manifestation of economic freedom, for social labour and wage growth, labour force as a whole, including migrant employment choice is having a profound and negative impact. In China, banks, telecommunications, oil, energy and other industries, private, private enterprises still can not enter, this is a kind of economic freedom, business freedom. Of course some scholars argue that, as long as the market economy, there are no differences in State-owned enterprises, private enterprises, private, the economy as a whole as long as it is in accordance with market supply and demand, in accordance with the price to determine the allocation of resources, can compete for State-owned enterprises, private enterprises can compete, private can also compete. But that is not the case, if it is a State-owned enterprise, its shareholders can again behind legislation, interpretation, change the law and change the rules. Private enterprises are unlikely to enjoy the same rights, these inequalities bound to inhibit the social total labour income growth.

For migrant workers at the bottom of society, "migrant worker" status is not only politically discriminatory arrangements, and limiting the scope of their employment interests, living space, and space. State-owned enterprise workers ' incomes, even ordinary workers ' incomes, many more than the private or Township and village enterprises. Monopoly State-owned enterprises include monopoly on bank loans, securities and financing opportunities, ultimately inhibit private enterprise space, compress private enterprise can provide employment opportunities, once the jobs are down, workers there would be no more room for growth in labour income, employment of migrant workers at least pay minimum negotiating position.

"Migrant worker" status is not only politically discriminatory arrangements, and limiting the scope of their employment interests, living space, and space.

Not long ago I talked to some academics to discuss free trade union rights and the right to strike subject, they said that Foxconn provides conditions and wages than other foreign-invested manufacturing enterprises or private enterprises are much better, it must be recognized, but also praise the fact that. But I have to say is, don't leave the whole social context issues. Join Foxconn worker of these migrant workers, local, if they do not like to resign and leave. At the micro level, marketing component is very strong, the liberal nature of the contract significantly. But if it is placed in the whole social environment, why are there so many migrant workers? Why these migrants negotiating position is so low? Because they are rural household, not to compete for other jobs like city, only third-class citizens, only at Foxconn, or worse than Foxconn's manufacturing enterprises make choices. Only difference to further reduce, they can have more choices, their bargaining position will be higher, the overall treatment to improve.

In 1995, State-owned enterprise workers paid per capita, GDP per capita of 1.1 times, but after 2002, as "Guo Jin, min TUI," rising, income of the State-owned enterprises has been rising, according to the same level of per capita GDP growth is growing. But the collective enterprise, the collective per capita GDP per capita income remained at 0.8 times. Until now, State-owned enterprise workers in all aspects of revenue, almost twice times the collective per capita income, the income difference can be considered as premium jobs in State-owned enterprises.

Urban Hukou, the difference of identities, even if the industry, but the income gap is still very big. Economic freedom, freedom of movement does not, the distinction arising from employment, entrepreneurial space, migrant workers with companies such as Foxconn negotiations, bargaining position is very different, so that migrant workers have no other choice.

In addition, economic freedom, entrepreneurship is not free expression, but also from the perspective of administrative control. Whether it is in rural areas, is also in the city, there are many discriminatory policies in respect of administrative control, the resulting worker choices, differences in negotiating positions. Especially after the financial crisis, to strengthen control, expanding government power than previous space a lot.

In food security, for example, garlic prices some time ago, the State Department stepped in, by the national development and Reform Commission to garlic price controls. It's incomprehensible, and food security and there is no significant relationship. My hometown, chaling, produce a lot of garlic, garlic SAR, if the price of garlic were free to go up, is a good thing for farmers in my hometown. But because of "food security" and to protect the interests of the inhabitants of the city, limiting the price of garlic. In fact, things like garlic, the Government there is no reason to regulate prices, because it is not like rice, wheat and maize full, even a month without eating and not die, and food security there was contact, but the Government is going to regulate. Take a step back, even if there are issues of food security, price free also to incentives for farmers to produce more, and achieve food security in the future. Current initiatives are forcing more farmers to abandon farming, pushing more farmers into migrant workers, to land a job at Foxconn's competitive, each migrant worker loses the price position.

Essentially, in order to limit farmers ' planting choices for food security, and push them to sell agricultural products at a low price, this is a violation of farmers ' economic freedom, sacrifice their interests, which fundamentally with scissors in both rural and urban is one thing.

3. too much taxes does not benefit the rich, also hurt domestic demand

Another important cause of slow growth in labour income is excessive government taxation. Too many government income and expenditure will inevitably hinder the increase of labour income.

Based on more than 30 countries government spending in 1995 to 2007 research, found that growth in government expenditure of the State, whose wages average growth rate close to 3%, and reduced government spending than any other country, labour income growth, average annual growth 6% growth to 0.8% higher than the GDP growth. Countries not reduced instead of increased government spending, their wage growth slower than GDP growth each year around 1.2%.

China can also illustrate this point. First 5 months of 2010, according to data released by the Finance Ministry, State financial revenue rose 30.8%. The last four or five years, the national fiscal revenue growth is GDP growth 2~3 times. GDP is a pie, more Government, necessarily mean that folk are share less. From 1995 to 2007, minus the inflation rate, State financial revenue cumulative increase of about 6.7 times, per capita disposable income of urban residents grew by 1.7 times times, farmers grew only 1.2 times.

Too much tax do not benefit the rich, also hurt domestic demand

In 1978, the national fiscal and taxation equivalent to 330 million a year in disposable income of urban residents, 1995 dropped to the lowest point, fiscal and tax equivalent to 150 million a year in disposable income of urban residents, the first for more than 10 years of reform and opening up, really into the direction of small government. But by 2009, I computed the fiscal revenue is 390 million a year in disposable income of urban residents here do calculation only includes the budget revenues, not including the land sales revenue, nor does it include the profits of State-owned enterprises earned.

If the net income of farmers is a base 2009 fiscal revenue nearly 6 trillion yuan, net income amounted to 1.38 billion farmers a year. China as a whole is not so much the number of farmers, which itself shows how government money is outrageous.

If the taxing authority is not subject to restriction, the last labour income share GDP will continue to decline, it is impossible to change this situation. State-owned assets and State-owned enterprise equity asset appreciation of China's economic growth, the majority enjoyed by the Government, ordinary people access to the wealth effect. State-owned economy is the fundamental reason people property income is very low.

In the United States, its private consumption share of GDP than in same period of 60 years has been rising, government spending on the decline, and China is just the opposite.

If no fundamental restrictions of the right to tax, not to reform the State-owned assets, the Government will continue to be more and more folk get less and less, the employee's share is only going to get less. Without political reform, reform, the trend is hard to change, if this trend does not change, means that farmers have to do more not just migrant workers, and most urban population GDP share will become less and less.

4. financial freedom suppressed entrepreneurial space

Financial freedom will inhibit growth in labour income. Based on more than 30 countries from 1995 to 2007 financial freedom change data, you will find financial freedom increased the most in the country, wage growth is fastest, average annual growth rate of close to 6%, but no change of control, or even strengthening national, labour wage growth is not only slow but also slower than the GDP growth in these countries.

Many people think that financial freedom increases, reduction of the financial regulation, will help people make more money on Wall Street, financial weapons so that they can use to finance wars, civil society interests transferred into their hands. But it is not this way, on the topic of financial regulation, a lot of people get more and more of this Lake turbidity.

To raise the United States financial crisis of United States subprime loans, for example. Apparently, Lehman Brothers and other Wall Street firms, through mortgage derivatives made a lot of money, but even more to those low-income families, particularly low-income families. If there is no further development of these financial markets, people are able to borrow funds to buy a House are not so much. If not all aspects of the development of financial derivatives, ordinary families may have to pay a higher interest rate costs; if no such financial innovations, housing loans cost more than the actual pay will be higher.

Why financial regulation as strictly as possible death, last sacrifice is the most middle-and low-income families, especially the young people? Because the supply of financial services is on Wall Street, demand for mortgages was more in the lower income groups. If you are rich, don't need these products, can still buy a House. For young people, future revenue stream is very long, but now the least cash, controls on the mortgage because fewer and more supply of mortgages, more young people and low-income benefits available to. Financial controls are more stringent, these derivatives are likely to eventually pay more instead of ordinary families and individuals.

Financial freedom suppressed entrepreneurial space

In China, financial freedom, at least in the two aspects. One is so far, the State-owned banks and State-owned financial institutions have a monopoly on all kinds of financial business. This monopoly has led to financial resources, access to financing is mainly for State-owned enterprise services. Which in turn means that the fortunes of the financial industry the opportunity to lean, whether rural farmers in a position, and capable young people in the city, can get financial support will be less and less. This, in turn, inhibits the development of private enterprises, including farmers ' development of private enterprise in space. This could have a negative effect is to make rural young people in local, can be found around the town as they should have as many job opportunities. Forced them from their homes and reduce their employment start.

Another sign is the prohibition on private finance, especially for rural nongovernmental finances of inhibition. Now slowly let go, but it is very limited, in particular the land system is not flexible. Two years ago, had a happy land trading market to do more and more, including land-use right can be used to make mortgage loans, or any other capitalization, but it turns out, wind, Thunder, rain down. Results arising therefrom are forcing farmers to either farm or go to work.

If the land-use rights, including rural housing land, can be used to more capital financing of space, after farmers received support from these funds, they can venture into town or local business, choice will change much. In practice, however, they have no such choice. Can mortgage the House to the city, property can also be used for capitalization, doing business with someone else. However, rural land and Homestead does not do this kind of capital, financial operation, this is another kind of urban and rural areas of discrimination, compared to choose spatial and urban farmers, totally different, much smaller.

5. the State-owned economy too large a proportion of the people sharing the benefits limited

State-owned economy, high and low, for private consumption, private income have much impact? I will be 70 countries in 1980, such as State-owned enterprises as a percentage of GDP is divided into five groups. Statistics study found that from 1980 to 2003, the proportion of State-owned economy at least that group of countries, that is, the highest proportion of the private economy of that group of countries, private consumption to GDP rate sensitivity is 0.96, meaning that GDP for each 1% in these countries, public spending will grow by 0.96%. State-owned economy and the highest ratio of this group, 1% GDP growth, private consumption is probably 0.83%, much less sensitive.

High proportion of State-owned economy, people sharing the benefits limited

Microeconomics in a typical model, a family, a person can spend more money in a day, mainly through two channels, the first is labour income, in all aspects of the match under institutional arrangements, high proportion of State-owned economy of society, labour income growth with the GDP growth level was depressed a lot. Second is the wealth effect of asset appreciation, that is, rising land values with economic growth, property right and stock equity of enterprises will rise because of GDP growth. Second a income channel is assets sex income of channel, but a national if is to state-owned business mainly, second a channel is was seal up of, that is land can value-added, enterprise of property also can value-added many, equity also can appreciation many, but because these equity, and land, also has other resources of property are is belongs to national of, so these land of value-added, and equity of value-added, and assets of value-added, main is national enjoys, and not into for civil capital and income.

State-owned economic share more high of national, economic growth brings of value-added, for these national of people General income growth of contribution not too high, because these national of main assets is national has, and not civil has, this is why we can see private economic share more high of these national, people can spent of money, actual made of consumption, will on GDP of growth will more sensitive, share economic growth benefits of capacity in private ownership of arrangements zhixia will than State-owned business arrangements zhixia of social high out many People more through private property rights and to share the benefits of economic growth in labour income, but if it is a State-owned business arrangements, generally it is difficult to see this.

6.diligent, not rich

Why Chinese people are not rich, I have tried to answer this question. In 1998 I calculated the number of workers in the current year the number of hours worked, I estimated at that time was China's workers and 2,200 hours. Working 40 hours a week, then multiply that by 52 weeks. Is the least working hours Netherlands, and 1 350, holiday time of the year. Manufacturing workers in these countries growing faster than the GDP growth, with the situation in China is completely the other way around. In the view of some scholars, they prefer China patterns, low human rights brought about by low labor costs and GDP is growing, State and Government taxes more and more seemed more prosperous, but this pattern enrich the poor situation worse.

On labour rights and interests, China's economic development today, not like the original to suppress workers ' right to strike or the right to organize themselves in trade unions. If our businesses and our people as is game two, enterprises can now through mergers and acquisitions to expand their influence, across many industries and enterprises is becoming more and more strong, the status of negotiations will also rise, as Foxconn. But at the worker level, and not also changed. If they have no right to freedom, that every worker can only be used as a single individual, have no right to free association to form a group. In other words, businesses can organize a growing company by merger and acquisition, and the workers party has no such change takes place, this asymmetry is obviously not conducive to the promotion of workers ' rights.

We cannot to GDP growth, in order to maintain the advantage of China's low labor costs, low human rights advantage, continued restrictions on workers ' freedom of Association rights, even the right to strike. Freedom of Association rights is the core of one of the economic, social, political, and this is the basic and fundamental, we cannot afford to keep labor costs low and continue to do this.

A series of negative impact on the low labor cost

In addition, China's labor costs are so low now, enterprises in Jiangsu, Guangdong and other places, not even buy automated production equipment is used, more will not be bought. Because they found that hiring more workers, you can do the same thing with machines and less costly, and does not require upfront capital investment to buy equipment. They also found, with artificial do Shi scrap of proportion to below machine line, so many enterprise rather than with workers assembled and without machine assembled, this actually is in repeat China past hundreds of years of experience, that is many economic history scholars think of, in China "Kang dry spirit" and more early in Ming period, China economic prosperity, appeared has so-called of "industrious revolution" (Industrious Revolution). Mean, that periods of economic prosperity is hard hard done by, the premise is that people are very hard working and do not require income!

But in Western Europe, the situation has been reversed, because Western European countries very few relatively many, need to do a lot of work, so traditionally labor is expensive, just push them to the industrial revolution, push them to greater use of machines, so they took to the virtuous cycle of technology innovation. In contrast, when China and workers ' income is low, and when anyone will die hard, but there is no incentive to technological innovation, over and over, so that China can not get out of the vicious circle of low income, this is the "industrious revolution" of harm.

If you continue to hold down labour rights, damage to China's environment will only become more and more. Many people hope that China will continue to be the workshop of the world, China's exports accounted for total global exports continue to grow, but then again, if half of the world, or more than half the manufacturing operations in China, particularly in Guangdong, that necessarily means more than half of the world's pollution also occurred in China, resource consumption will be in China.

7. breaking the shackles of reform

To put an end to such a situation, we have fundamental reform and adjustment, so whether it is in order to address the income of migrant workers, is also to address the transformation of economic growth pattern, can bring a lot of positive changes.

First is that you have more to put an end to rural and urban household registration system, free migration rights, no matter where born, as long as the People's Republic of China citizens, you can go to the other places of employment and living, including the education of their children.

The second is to give workers the right to organize themselves in trade unions, and even the right to strike. Of course, this may bring a new game, the rising costs of doing business, but on the other hand, we have the same fundamental rights, not to the rights of the party must be the other party's rights through legal and administrative means, and so would not be a market economy.

Reform, break the chain

Third is to protect the freedom of entrepreneurship, reducing administrative control, relaxation of the market, especially on some monopolized industries, the need for more deregulation reforms.

Finally, political reform, for powers, especially the right to tax, also includes more recent discussions of a property tax, there must be a more substantial restrictions. In today's opaque opaque finances, budget, fiscal and tax in accordance with the 30% growth, almost no substantive restriction of the right to tax cases, not because of a real estate price controls needed to launch such a radical tax. Whether in China or in the United States, or other countries, taxes tend to increase the reduction only once today, because the price of real estate necessary to introduce in the regulation of a new tax, later it is difficult to cancel, so don't need such a thing. In my opinion, priority for macroeconomic control needs is much lower than the priority of the protection of private property, it is two different levels, different things.

V is around land rights to farmers, let go of the rural nongovernmental finance, allowing land capitalization, fundamentally change the bargaining position of migrant workers, in particular so that they also can be done in local entrepreneurial freedom to improve their income and expand the rich space. Recently years, I in recommends advance people has of of reform, put Central and provinces SASAC change into 32 a national property Fund, Central "national interests Fund" equity sharing to close 1.4 billion citizens, all province established himself of national interests Fund, will all province left of State-owned assets are injected national interests Fund in, will these Fund of shares according to local citizens more points, and provincial citizens less points of principles sharing down, from essentially increased people of assets sex income. Once the income from assets of the people increases, workers in the labour process of negotiation on price rise, everyone to live and accept the possibility of a low-income job will fall. Therefore, the reform would have a positive impact on many, including raising general revenue, assets, income, labour income, employment opportunities, business space, rich space, and so on. Reform is necessary to change the way China's growth.