Selection 1:
Who is Wang Er?
Wang Er’s economics story is the story of each of us.
Wang Er is a fictional character. In this book, he is a tenant farmer for a while, a migrant worker in the city for a while, and then changes into a small business owner or a white-collar worker in an office building. In short , he is a member of the general public in China. Wang Er buys train tickets, sells grain, buys land, builds a house, decorates, keeps accounts, works part-time, opens a company, takes out three insurances and one fund, and goes to Hong Kong to make soy sauce... Through Wang Er's stories that are sometimes dull and sometimes bizarre, the author It grasps China's major economic issues at your fingertips and vividly presents the profound economic principles to readers. From shopping in supermarkets to buying houses, we make economic decisions every day. We all feel that our decisions are affected by national policies, but not everyone knows exactly how they are affected. For example, will the appreciation of the RMB increase or decrease the wealth of ordinary people? Is China's growing foreign exchange reserves a good thing or a bad thing for ordinary people? Economists may not be able to fully understand such issues, let alone explain them clearly to ordinary people. However, the author uses Wang Er's story to easily explain that he has the ability to penetrate the bottom of the pond.
Selected article 2:
Wang Er’s financial path and the management of income inequality
Wang Er is a rich man with a lot of money. The Wang family's high-walled compound is both envied by their neighbors and loathed by the same people. I was envious because the neighbors actually wanted to have a high-walled compound, but I was disgusted because only Wang Er lived in the high-walled compound.
Wang Er was not always rich. Back then, he was as poor as everyone else. It's just that Wang Er has never been willing to be poor. All he needs is the opportunity to get rich. Wang Erfa's first fortune came from farming. Not only did he work harder than anyone else, he was also very business-savvy. Others grow food, but he grows vegetables, and then he can travel dozens of miles to sell vegetables in the city. After a year, he earned more than anyone else. Within a few years, Wang Er had some savings. Because he went to the city a lot, he found that everything was easy to sell in the city, and he increasingly felt that relying on the weather to make money was always limited. So Wang Er took out all his savings and borrowed money from relatives and friends to set up a small workshop in the village. Wang Er bought a dozen sewing machines and found a dozen middle-aged women in the village to make some clothes, shoes, sweaters, etc., and then sold them in the city. The business was very good. Wang Er's small workshop soon turned into a large workshop, and then his business became more and more extensive, and he made more and more money. Until then, Wang Er was a heroic figure in the village. There are always people with red eyes, but most people still think that Wang Er deserves his money.
Wang Er, who was trying to make money for the first time, discovered that his way of making money was tiring and slow, and there were many ways to make money that were not tiring and fast. First is the land. All land in the village is publicly owned. The characteristic of public ownership is that it is not the market that has the final say on how much the land is worth and who will use it, but the village cadres. Wang Er easily obtained a large area of ??almost free land from the village to build villas and farmhouses. These villas and farmhouses are naturally sold and operated by Ouzhe at market prices. Of course, Wang Er also earned some hard-earned money from it, but after all calculations, the largest amount of money came from his land, which was almost free. Then there are loans. The loan interest rate offered by the Agricultural Bank of China in the village was only 5 to 6 percentage points per year. Wang Er calculated in his mind that with such a low interest rate, it was impossible to lose money in any business. Even if you take a loan to buy some steel, buy some copper, or buy some houses to store, the return in one year will be enough to pay off the interest. This money is too good to earn. Wang Er went to the bank for a loan. The bank was naturally very welcoming and gave him the green light all the way. In the end, the interest rate was even lowered by 10%. The result of this incident was that the more Wang Er borrowed money, the more he earned, and it was effortless at all. Finally, there are the franchises. Wang Er started his business by selling vegetables and clothes, but competition in those markets was too fierce and profits were getting thinner and thinner. But for some businesses, especially those related to the "national economy and people's livelihood", profit margins have always been guaranteed. Not everyone can do this kind of business. Of course, it is precisely because not everyone can do it that profits can be so guaranteed. Wang Er spent a lot of effort and finally got a share of the "national economy and people's livelihood". Since Wang Er grasped the three keywords of "land", "loan" and "franchise", his wealth has grown explosively. However, many people in the village had different opinions on him. Many people felt that Wang Er made ill-gotten gains and that he earned money at the expense of the interests of the villagers.
The issue of income distribution is probably one of the most important political and economic challenges China is facing. Speaking of income distribution, I went to Mexico in 2011. When I got off the plane, I was told by my colleagues that Mexico has the best of two worlds: there are the fattest people alive in the world and the richest people alive in the world. Of course, they are not the same person.
When you hear this, you have to wonder: How come the richest man in the world is in an economy like Mexico, which is not very large either in terms of per capita or in total? And what kind of people can be richer than people like Gates and Buffett? After hearing the answer, I am afraid no one will be surprised: Carlos Slim's communications company happens to have an almost complete monopoly on the Mexican telecommunications market, and the market value of the company he owns accounts for nearly two-thirds of the entire Mexican stock market value. The reason why I mention Mexico is that it is a country where income distribution has always been a problem, and China's income distribution gap level, measured by the Gini coefficient, may have exceeded Mexico's.
Of course, China is not Mexico, not in many senses. An obvious difference is that Mexico's economic growth rate in the past ten years was only about 3%, while China's growth rate was more than 10%. In other words, Mexico still has a large distribution gap despite weak growth. You can even boldly guess that there may be a causal relationship between a large income distribution gap and slow growth; while in China, a large income distribution gap is accompanied by high-speed growth. When it comes to the income distribution gap, China faces a very subtle trade-off: there are many people in China who are tired and slow to get rich, just like Wang Er in the early years, and there are also many people who are not tired but make money quickly, just like later Wang Er. The former has contributed to China's growth, but both groups are widening the income distribution gap at the same time. After all, both groups are getting rich, but in very different ways.
This means that it is difficult to find a reasonable solution to the income distribution gap problem in China if we only focus on "income". The top marginal tax rate of China's personal income tax is now 45%. This tax rate is probably a very high tax rate for those early years of Wang Er. You have worked hard to earn 1 yuan, and you have to pay 4.5 cents as tax. This is when the public service is not very good. Such a high tax rate, even if it can narrow the distribution gap, may stifle innovation, effort and growth. But the marginal tax rate of 45% can only be said to be too low for Wang Er later. The assumption here is that Wang Er will really pay taxes. Because the money Wang Er later earned had nothing to do with his efforts. The more money he earned was the less money others earned. The increase in his wealth was equivalent to the decrease in other people's wealth. Even a 100% marginal tax here is too small. . Why? There is also a problem of efficiency loss. Price distortion and monopoly operations result in resources that cannot be allocated effectively. The money Wang Er earns is less than the net loss of the rest of society. Therefore, even if Wang Er hands over all his money Nor is it enough to make up for the loss.
More importantly, in reality, it is difficult to separate the early Wang Er from the later Wang Er. In China's current market environment, there is often only one Wang Er. You can find the shadow of the early Wang Er and the later Wang Er in many Chinese wealthy people. Therefore, any method of redistribution will face the problem of being unable to distinguish between the two types of kings, which makes redistribution not a good way to solve the income distribution gap.
But income distribution is a real issue. How to govern it without redistribution? It is very difficult and very simple; first eliminate the soil where the second kind of Wang Er lives. This almost inevitably means shaking up the parts of the Chinese economy that have not yet been truly market-oriented, clarifying China's still unclear property rights, and turning the government from a market participant into a defender. If it is not clear who owns the land, if bank interest rates do not reflect the true cost of funds, and if competition is artificially eliminated, how can we talk about fairness? Under such circumstances, whether the income distribution gap is large or small, it is difficult to be reasonable, because such distribution always has a large artificial component. Don’t forget that the biggest distribution problem our country faced 30 years ago was big pot rice and egalitarianism. At that time, we were less market-oriented, property rights were less clear, and the government had greater intervention in the economy.
This does not mean that as long as the income distribution gap is determined by the market, the government should not take care of it at all. Even the income distribution produced by a fully competitive market economy may not be the optimal distribution in the sense of social choice. But if the basis of our allocation is unfair due to artificial reasons, then it is best to correct these basis first. Because it is impossible for us to get a fair society through redistribution on an unfair basis.