Justin Yifu Lin on the "Chinese Path to Modernization"

China's senior economist and World Bank's former Chief Economist says judging by the gaps in GDP per capita, efforts to promote modernization in the West failed in developing countries.

The Communist Party of China (CPC) touts the Chinese path to modernization, or 中国式现代化, as a major Party theoretical development. In recent years, the set phrase first gained prominence in General Secretary Xi Jinping’s speech at the July 1, 2021 ceremony marking the centenary of the CPC

As we have upheld and developed socialism with Chinese characteristics and driven coordinated progress in material, political, cultural-ethical, social, and ecological terms, we have pioneered a new and uniquely Chinese path to modernization, and created a new model for human advancement.

At the 20th National Congress of the CPC, Xi’s report on behalf of the CPC‘s 19th Central Committee highlights the Chinese path to modernization

III. The New Journey of the New Era: Missions and Tasks of the Communist Party of China

From this day forward, the central task of the Communist Party of China will be to lead the Chinese people of all ethnic groups in a concerted effort to realize the Second Centenary Goal of building China into a great modern socialist country in all respects and to advance the rejuvenation of the Chinese nation on all fronts through a Chinese path to modernization.

Based on our decades of exploration and practice since the founding of the People's Republic of China in 1949, especially since the launch of reform and opening up in 1978, as well as the new breakthroughs made in theory and practice since the 18th National Congress, we have succeeded in advancing and expanding Chinese modernization.

Chinese modernization is socialist modernization pursued under the leadership of the Communist Party of China. It contains elements that are common to the modernization processes of all countries, but it is more characterized by features that are unique to the Chinese context.

- It is the modernization of a huge population. China is working to achieve modernization for more than 1.4 billion people, a number larger than the combined population of all developed countries in the world today. This is a task of unparalleled difficulty and complexity; it inevitably means that our pathways of development and methods of advancement will be unique. We will, as always, bear China's realities in mind as we address issues, make decisions, and take action. We will neither pursue grandiose goals nor go by the rulebook. We will stay patient in advancing the course of history and take steady and incremental steps to sustain progress.

- It is the modernization of common prosperity for all. Achieving common prosperity is a defining feature of socialism with Chinese characteristics and involves a long historical process. The immutable goal of our modernization drive is to meet the people's aspirations for a better life. We will endeavor to maintain and promote social fairness and justice, bring prosperity to all, and prevent polarization.

- It is the modernization of material and cultural-ethical advancement. Material abundance and cultural-ethical enrichment are fundamental goals of socialist modernization. Material want is not socialism, nor is cultural impoverishment. While continuing to consolidate the material foundation for modernization and improve the material conditions for people's wellbeing, we will strive to develop advanced socialist culture, foster strong ideals and convictions, and carry forward China's cultural heritage. We will thus promote all-around material abundance as well as people's well-rounded development.

- It is the modernization of harmony between humanity and nature. Humanity and nature make up a community of life. If we extract from nature without limit or inflict damage on it, we are bound to face its retaliation. China is committed to sustainable development and to the principles of prioritizing resource conservation and environmental protection and letting nature restore itself. We will protect nature and the environment as we do our own lives. We will continue to pursue a model of sound development featuring improved production, higher living standards, and healthy ecosystems to ensure the sustainable development of the Chinese nation.

- It is the modernization of peaceful development. In pursuing modernization, China will not tread the old path of war, colonization, and plunder taken by some countries. That brutal and blood-stained path of enrichment at the expense of others caused great suffering for the people of developing countries. We will stand firmly on the right side of history and on the side of human progress. Dedicated to peace, development, cooperation, and mutual benefit, we will strive to safeguard world peace and development as we pursue our own development, and we will make greater contributions to world peace and development through our own development.

The essential requirements of Chinese modernization are as follows: upholding the leadership of the Communist Party of China and socialism with Chinese characteristics, pursuing high-quality development, developing whole-process people's democracy, enriching the people's cultural lives, achieving common prosperity for all, promoting harmony between humanity and nature, building a human community with a shared future, and creating a new form of human advancement.

What does it mean in layman’s terms? Justin Yifu Lin recently offered his explanation in a speech at a book reading event on August 26, 2023, hosted by the State Organs Work Committee, with the audience being mid-level cadres in the central-level Communist Party of China and Chinese Government organs.

Justin Yifu LIN is Dean of Institute of New Structural Economics, Dean of Institute of South-South Cooperation and Development and Professor and Honorary Dean of National School of Development at Peking University. He was the Senior Vice President and Chief Economist of the World Bank, 2008-2012. Prior to this, Mr. Lin served for 15 years as Founding Director and Professor of the China Centre for Economic Research (CCER) at Peking University. He is Councillor of the State Council and a member of the Standing Committee, Chinese People’s Political Consultation Conference.

Below is the second part of Lin’s speech, dedicated to the Chinese path to modernization. The first part of his speech, on "profound changes unseen in a century,” a defining strategic assessment of the current Chinese leadership in recent years, has been shared on Pekingnology.

The rest of Lin’s speech focuses on comparative advantages, the cornerstone of Lin’s New Structural Economics, and will be shared later. The speech was published in the 新经济学家 New Economist WeChat blog and confirmed by Lin to Pekingnology.

The second point concerns the Chinese path to modernization. Today, we discuss the Chinese path to modernization as one of the many forms of modernization. We also had historical discussions of the Western path to modernization. These two paths, of course, share some commonalities. So, what are these commonalities, and what exactly is modernization? Modernization stands in contrast to pre-modern societies. Before the 15th and 16th centuries, most societies were primarily agricultural, characterized by very low levels of productivity. Both China and the West were agrarian societies, with approximately 95% of the population engaged in agricultural production. During that time, productivity levels were very low, and people lived close to subsistence levels.

When a society stabilizes its population growth, it can face food shortages, famine, internal social instability, or wars between nations fighting over resources. In such cases, if wars and famines occur, the population decreases, leading to a new period of stability with increased profits and population growth.

This forms a cycle, often referred to as the Malthusian cycle, named after the scholar Malthus. Now, we can say that at that time, the world was flat, with the richer and poorer regions having very small differences. They were essentially living on the edge of subsistence.

This situation started changing in Western societies, particularly in the 15th and 16th centuries when Columbus discovered the New World, ushering in the Age of Exploration. Following the discovery of the New World, countries like Portugal and Spain began plundering large quantities of gold from the Americas. They also brought back new agricultural varieties that could be grown in relatively infertile lands, increasing agricultural yields, supporting more people, and raising their income levels. However, this progress was slow.

The most significant change occurred in the mid-18th century when Western countries underwent the Industrial Revolution. We often say that after the Industrial Revolution, science and technology advanced rapidly, and economic development proceeded at a breakneck pace. In a pre-modern society, agriculture-based economies had low productivity levels and slow economic growth.

According to some economists' research, prior to the 15th and 16th centuries, the world's economic development pattern showed very slow growth in per capita GDP, around 0.05% per year. This included now-developed countries in Western Europe. Based on the economic conditions at the time, it took 1,400 years for per capita GDP to double. After the Industrial Revolution in the 18th century, countries like the United Kingdom and Germany experienced a 20-fold increase in per capita GDP growth, increasing from 0.05% per year to 1%. The time needed to double per capita GDP decreased from 1,400 years to 70 years.

Western European countries began their Industrial Revolution in the mid-18th century, and economic growth sped up 20-fold. From the mid-19th century to the present, per capita GDP growth doubled again, from 1% per year to 2% per year. With 2% growth, per capita GDP can double in 35 years. Because the Industrial Revolution occurred first in these Western countries and the rest of the world did not catch the industrialization wave, they remained in their agricultural economies, with very slow economic growth. The earlier small differences between countries grew larger as the industrialized countries became the world's major powers and colonized other countries worldwide.

The Western powers mentioned earlier in the context of the Eight-Nation Alliance were successful industrialized countries. Other nations that did not industrialize and maintained their agrarian economic structures were left behind, resulting in a significant economic gap. Scholars studying modern history refer to this phenomenon as the "Great Divergence." The world, once relatively flat, became divided between advanced industrialized nations and those that remained agrarian. Economic development served as the foundation, causing industrialized nations to emerge as the world's major powers and leading to the colonization of various territories across the globe, where colonial rule was imposed on other nations.

Then, with the onset of World War I, numerous colonized countries, naturally unwilling to remain subjugated indefinitely, experienced a surge of nationalism. Consequently, during the war, revolutions and uprisings erupted in various regions.

After World War II, the former colonies or semi-colonial countries achieved political independence, shaking off their colonial status. After gaining political independence, these countries, under the leadership of revolutionary figures, aimed to develop their economies and catch up with developed nations. The common aspiration was to transition from agricultural economies to industrialized economies.

So, after World War II, industrialization and modernization became a global trend and a shared goal for countries worldwide. Initially, there was a belief that to achieve industrialization and modernization successfully, countries needed to learn from the successful industrialized nations.

Economically, it was commonly understood at that time that countries needed to adopt the organizational structure of developed nations, which is a capitalist market economy, to pursue industrialization and modernization.

However, by the year 2000, during these 100 years, as I mentioned earlier, the eight leading countries saw their economic share decrease from 50.4% to 47%, a drop of only 3.4 percentage points. What does this mean? It means that outside these eight countries, the rest of the world's share only increased by 3.4 percentage points. Furthermore, we know that developing countries have a faster population growth rate than developed countries. When we consider per capita GDP, even after several generations of efforts over the course of 100 years, the income gap has not decreased; it has expanded.

In other words, the efforts to promote modernization based on Western experiences were generally unsuccessful in developing countries. When we look at metrics like GDP per capita and average income, the gap is widening rather than narrowing. Therefore, the modernization path we now seek is a Chinese-style modernization aimed at realizing the great rejuvenation of the Chinese nation. The great rejuvenation certainly means catching up with developed countries in all aspects of material life. Hence, if we follow the Western path of modernization, historical experience suggests it's unlikely to succeed. We believe the right path is Chinese-style modernization.

Of course, since the reform and opening-up, we have been pursuing modernization on our own terms. The Chinese path to modernization and the Western path of modernization (are different).

In fact, from a historical perspective, it appears that the Western path of modernization may not be suitable for our country. Chinese path to modernization is under the leadership of the Communist Party of China. Economically, we do not follow a capitalist market economy but rather a socialist market economy with Chinese characteristics. In a capitalist market economy, it's well known that the emphasis is on the role of the market, not the government's role. In our case, we utilize both the market and the government. We believe in the importance of having an efficient market while also having a facilitating government. This is a key characteristic of the socialist market economy with Chinese characteristics. Besides the differences in political and economic organization, we believe that the Chinese path to modernization may lead to a better outcome compared to the Western path of modernization.

Why? Because of five key characteristics.

The first characteristic is that our modernization involves a massive population. If we consider the Western path of modernization, starting from the 15th century to the present, over 500 years, or even from the time of the Industrial Revolution to today, which is nearly 300 years, the number of people who have entered the category of high-income countries is just 1.2 billion. This population accounts for only 15.8% of the world's total population. China has a population of 1.4 billion, accounting for 18% of the world's population.

If China achieves modernization and attains the status of a high-income country, the global population of high-income nations will double, rising from 15.8% to 33.8%. This increase is due to the addition of China's 18% population. Nevertheless, the challenge lies in achieving modernization concurrently for 1.4 billion people in a country as vast and diverse as China. While Western countries have had centuries to modernize populations of around 1.2 billion, China's task is even more formidable due to its large population and significant regional disparities. This not only amplifies the impact if China succeeds but also presents more substantial challenges and complexities in the process. This is the first point to consider.

The second point to consider in our modernization efforts is the realization of common prosperity for all. This implies an increase in the standard of living across the board and a decrease in income inequality. Western countries, during their modernization phases, experienced significant rises in income levels. This growth led to greater income disparities, particularly in comparison with other developing nations. Internally, the challenge of wealth inequality in these countries remains largely unresolved. Over a century ago, Karl Marx suggested socialism as a solution to this wealth disparity. Despite the passage of more than 100 years since Marx's era, the problem of wealth inequality in developed countries has not only persisted but has also intensified.

In recent years, a French economist named Thomas Piketty introduced "Capital in the Twenty-First Century," which conducted a comprehensive empirical study on income distribution in developed Western countries. His research revealed that income inequality in these developed countries has been increasing rather than decreasing. However, China's objective for modernization is quite the opposite. It aims for an improvement in the living standards of all citizens and a reduction in income inequality, seeking to achieve common prosperity for everyone.

The third characteristic of Chinese modernization is the harmonious development of material well-being and cultural-ethical standards, which is quite different from Western modernization, where there is often a disconnect between material and cultural aspects. The erosion of moral values and the loss of cultural-ethical standards in Western modernization have led to various personal and societal conflicts. We aim for a harmonious development in both dimensions.

The fourth aspect is the harmonious coexistence of humans and nature. After the Industrial Revolution, Western modernization caused tremendous destruction to nature. Currently, we talk about global warming, which, following the Industrial Revolution, was due to the rapid increase in carbon dioxide emissions during the industrialization process. This led to environmental pollution and continued destruction of species. After the emission of carbon dioxide into the atmosphere, it does not disappear but slowly accumulates, leading to what we call the greenhouse effect. As a result, the Earth's temperature keeps rising, causing the melting of icebergs in the Arctic and Antarctic, and also leading to a rise in sea levels.

We know that major economic activities worldwide are primarily located along coastlines. If sea levels rise, traditional cities, including New York and London, as well as coastal cities like Shanghai, could potentially be submerged. Moreover, due to climate change, there is a continual increase in extreme weather events and flooding. This poses significant challenges to human survival. Our modernization aims for a harmonious coexistence between humans and nature and advocates for sustainable development. This approach represents a significant departure from the Western path of modernization.

The fifth point is that we aim to achieve modernization as a great nation through peaceful development. In the Western model of modernization, developed countries became world powers and, in the early stages, colonized various territories around the world. This led to conflicts among these developed nations, including geopolitical struggles, resource competition, and even world wars. In contrast, our vision of modernization is characterized by peaceful development. We intend to develop while promoting peace, not only for ourselves but also to provide new and better opportunities for development to other developing countries in the world. The Chinese path to modernization represents these admirable goals. However, the challenge lies in how to make them a reality, as good intentions may remain unfulfilled dreams.

To achieve Chinese-style modernization within a country with such a large population and ensure that all regions progress simultaneously, we need to ensure that wealth is shared and prosperity is widespread as our wealth grows. Simultaneously, we must focus on both material and cultural development, enhancing the former while enriching the latter. In the course of development, we should not only be concerned with the well-being of the current generation but also provide a better and smarter environment for the development of the next generation. Moreover, we must prioritize peaceful development. I believe these are the key challenges that need to be addressed to achieve the great rejuvenation of the Chinese nation.

Again, the rest of Lin’s speech focuses on comparative advantages, the cornerstone of Lin’s New Structural Economics, and will be shared later.