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Li Keqiang Speaks

Entirely by coincidence my Chinese given name is the same as that of China’s new Premier, Li Keqiang. A friend helped me choose the name five years ago, before I knew who Li Keqiang was, or that he was expected to be China’s Premier one day.

Mr. Li also studied economics, though his education in economics is way beyond mine: he received a doctorate in the subject from Peking University.

So, I have a natural affinity and respect for many of the things he shared at a speech this past Sunday in Beijing:

Reforming is about curbing government power.

Poverty and backwardness in the midst of clear waters and verdant mountains is no good…nor is it to have prosperity and wealth while the environment deteriorates.

Nowadays moving against these interests [i.e. those who oppose market-oriented reforms–kh] is often harder than laying a hand on a soul.

I encourage my students to try to map Mr. Li’s comments to three of the “ten principles of economics” in Mankiw. Bonus points to students who comment intelligently below! (If you can’t access the blog to comment, you can submit comments by paper in class.)

  1. Mellisa Winata
    March 23, 2013 at 8:27 am

    The first statement, “Reforming is about curbing government power.” applies to the principle of people facing trade-offs. It is the trade-off between efficiency and equity. While Mr. Li is seeking for more equitable society by increasing social welfare, sacrifices are needed here. The costs are reducing the spending on official vehicles, public meetings and overseas travel; as a result of improving the equity, it will reduce the rewards for the government to work hard.

    The second statement, “Poverty and backwardness in the midst of clear waters and verdant mountains is no good,” applies to the principle that governments can sometimes improve market outcomes. We need government interference here to promote both efficiency and equity due to market failure. Policies that can be imposed by governments to reduce poverty are Minimum-Wage Laws, Welfare Programs, and Income Tax. One possible cause of market failure is an externality, Negative externality applies to this case which is pollution. Government can impose Pigovian taxes and subsidies to reduce pollution.

    The third statement, “Nowadays moving against these interests [i.e. those who oppose market-oriented reforms–kh] is often harder than laying a hand on a soul.” applies to the principle of markets are usually a good way to organize economic activity.
    Market economy has some advantages toward society such as increased efficiency by the competition from different firms and also workers are motivated to work harder due to threat of losing jobs. For those who oppose market-oriented reforms, they also need to consider that sometimes government interference could create some disadvantages that harm society such as distorting price by taxing and also housing quality reduced due to rent control policy.

  2. Nelson Abraham
    March 26, 2013 at 12:59 am

    [12:56:32 AM] Nelson Abraham:

    ‘A man who put people first ‘ Li Keqiang speech, reflects new China, new hope, good
    governance and what most Economist define as Classical Principles of Microeconomics.

    Li Keqiang said maintaining sustainable economic growth – of at least 7.5% annually
    over the coming years – was the highest priority, it is very true, sustainable economic growth can only be achieved through rules and laws and transparent government. Central government should lead by example while the local government ill follow the suit. I am impressed by measurable commitments, such as cutting down the government workforce, spending on government offices and hotels, freeze spending on overseas
    trips and official vehicles. ‘If one takes public office, he or she should cut off any
    expectation for getting rich’. No matter who you are or what you intend to do, you should not exceed the boundaries of the rule of law. If all African countries could follow the same suit, no question, we surely could all witness sustainable development, social, political and Economical.

    From his speech, I can reflect on principle of microeconomics, on how Economy as a whole works, which is quite prompting and allow me to rank Li Keqiang as well rounded educated leader.
    S tandar d of living as a me asu r e o f e co no mic gr o wth , while hundreds of millions in China have climbed out of poverty, inequality has soared and around an eighth of the population still lives on less than $1.25 per day. Standard of living is a good indicator of poor and good economy, in nations where workers can produce a large quantity of good and service per unit time of time, most of people enjoy a high standard of living compare to countires whose workers are less productive. It is true China has to upgrade its economy, to improve quality and efficiency, mores jobs and income, better environment, and efficient use of energy and resources, also expanding the size of the middle-­‐income class. There are more than 1.3 billion people in China, on a long journey towards modernization, which requires an international environment of lasting peace.

    ‘Gove r nme nt can imp r ove mar ke t ou tcome s & efficien cy vs equity (people face trade off)’ This principle can be dipicted from Li Keqiang speech, calling social fairness “a source of creativity” and “a yardstick” to measure public satisfaction with the government, government would strive to ensure all Chinese enjoy equal opportunities and receive due rewards for their hard work, whatever social or family backgrounds
    they have, all wealth creators, either state-­‐owned or private, should be duly rewarded
    for having honestly competed on a level ground.

    Tra d e ca n ma k e everyon e better off , This is most interesting part of Mr. Li speech, it is very true that, conflicts between big powers are inevitable but shared interests often override their disputes, there should be no incentive to groundless accusations against nations, instead of spending time of doing practical things towards peoples welfare. Cited from the speech, the rapid growth in the bilateral trade volume from only
    1 billion U.S. dollars three decades ago to more than 500 billion U.S. dollars last year.
    This shows how important International Trade and cooperation is important to any

    country, it is promising to hear China is ready to work with countries of the world to
    maintain global peace and expand global prosperity, more investment and cooperation Sino-­‐U.S (since 1979), Sino-­‐Russia (since1991) and Hong Kong. Countries will achieve mutual benefits which possibly shadow disputes.

    Putting in short editorial, strong point to highlight on Transnational cooperation disputes, really there is no point of groundless accusations, Rwanda is being accused of supporting M23 rebellions in Congo, I like Mr. Kagame respond which is similar to Li Keqiang argument, ‘no need of groundless accusations’ look where Rwanda is today
    from 1994 genocide, now Rwanda is among three competing economy in Africa, Rwanda
    intend to be at par with Brazil, which is a good story ! Its said value of available Congo’s gold is equal to the whole combined Europe Economy, so it is a question of intrest ! Mr. Kagame should be given room to meet Rwanda 2020 vision rather than groundless

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