The Race to the Bottom - The Crux of Contemporary China’s Socio-Economic Problems (竞次——中国当前社会经济诸问题的症结)

Abstract

The purpose of this paper is to show that the race to the bottom is the crux of contemporary China’s major socio-economic problems, and propose appropriate policy solutions. We first analyze the nature of the race to the bottom phenomenon and put forth a basic principle, i.e. a race to the bottom is caused by marketization (or market integration) in conjunction with regulatory decentralization. Therefore, to eliminate the race to the bottom problem within a common market there must be centralization of regulatory power and harmonization of regulatory standards. According to this principle, China’s marketization reform of the past 30 years that features fiscal and administrative decentralization has led to a race to the bottom among China’s regions in a fundamental sense. We also show that the race to the bottom concerning labor standards has profound negative macro-political-economic consequences. We then discuss by turn the major socio-economic problems facing China, to show that the crux of them all is the race to the bottom. Hence, the solution to these problems lies in the proper management of the race to the bottom both on the domestic and global level. Specifically, to eliminate the domestic race to the bottom, China needs to re-centralize its regulatory power and institute common regulatory standards. On the other hand, to better cope with the global race to the bottom, China needs to adopt a strategy of selectively “quitting” the economic globalization (e.g. following a more internal-demand-oriented development model) and play an active and responsible role in the international effort to contain the global race to the bottom (e.g. harmonization of labor and environmental standards). 本文旨在论证“竞次”是中国当前社会经济诸多重大问题的症结，并提出相应的政策建议。本文首先分析了竞次现象的本质，提出了一个基本原理，即竞次是市场化（或者市场一体化）与行政监管的地方分权同时并存的必然结果，因此，要在一个共同市场的范围内消除竞次必须统一监管权力和监管标准。根据这一原理，本文指出，分权式的市场化改革是导致中国地区之间竞次的根本原因。本文还阐明，劳动标准方面的竞次会带来一系列严重的宏观政治经济学后果。在这些理论基础上，本文逐一讨论了中国当前所面临的重大社会经济问题，说明它们的症结都是竞次。因此，要从根本上解决这些社会经济问题，必须在国内和国际层面上治理竞次。具体而言，为了消除国内竞次，中国必须对行政监管重新实行中央集权并统一监管法规；为了应对全球竞次，中国需要有选择的“退出”全球化（这包括转向内需主导型的经济发展模式）并积极参与治理全球竞次的国际合作（包括统一劳动和环境标准）。