Li Lu Explains China's Economic Challenges: The Middle-Income Trap | Peking University 2024

[Transcript]

LI LU: Next, I would like to discuss reflections on these predicaments.

Domestically, these predicaments are not unique to China. Looking back at the past 500 years of world history, all countries that have experienced an initial industrial takeoff go through a period of adjustment. We generally refer to this as the transitional period into the middle-income stage. This is a universal challenge in the development process of any nation.

In my book, I divide the evolution of civilization into 3 stages: 1.0 (hunter-gatherer civilization), 2.0 (agricultural civilization), and 3.0 (modern science-technological civilization). The transitional phase between stages 2.0 and 3.0, which I call stage 2.5, is where China currently stands.

In fact, every country that has undergone industrialization has faced similar challenges to those China experiences. This includes Germany, Japan, and some countries in South America and Southeast Asia. Some countries have successfully transitioned beyond this stage, while others are still struggling in this stage. This is what we call the middle-income trap today. Each country's path is unique.

Moreover, humanity has yet to establish a 3.0 model for managing international relations in the 3.0 science-technological civilization era.

Let's go back and look at the reasons behind this issue. The essence of modernization lies in the combination of market economy and modern science and technology, which results in perpetuating, compounding, and sustainable economic growth, we call this modernization.

Compound economic growth is a striking mathematical concept. For example, since the early days of reform and opening up, China's real economic output has multiplied by more than 45 times. Nominal growth figures are even more astonishing.

However, while economic growth has compounded, social governance, human psychology, and political systems have not experienced similar compounding changes. This discrepancy arises because human nature has remained fundamentally unchanged. In fact, since the emergence of Homo sapiens 200,000 years ago, human nature has not undergone any fundamental changes.

In contrast, our economy has undergone three monumental leaps—from hunter-gatherer to agricultural civilization and then to modern science-technological civilization. Thus, when the early industrial takeoff phase concludes, a huge gap emerges within a relatively short period of time.

The gap between compound economic conditions and the slower evolution, or lack thereof, in societal, psychological, and political governance inevitably leads to significant challenges. These challenges are universal to all countries at this stage.

So, is China particularly unique in this regard? Over the past three to four decades, China's rapid economic transformation is not entirely unique. Historically, over a relatively long span, only the United Kingdom completed industrialization and modernization independently. Other countries achieved industrialization through catching up, typically over three to four decades.

For instance:

Japan transitioned from the Meiji Restoration in 1868 to defeating industrialized Russia in 1905 in the Russo-Japanese War in just over 30 years.

Germany's industrialization between its unification in 1871 and World War I also spanned roughly three to four decades.

The U.S. transitioned from post-Civil War industrialization to becoming the world's largest economy in the 1890s within a similar timeframe.

South America experienced rapid growth post World War II but fell into middle-income traps by the 1980s and 1990s, it also took around three to four decades.

Three to four decades of compound growth can drastically transform an economy, especially during its economic takeoff stage. However, this rapid transformation creates a significant mismatch with the realities of societal governance. This brings enormous challenges and significant changes to society.

The various problems encountered during this stage are usually challenges to society as a whole. Some societies can mobilize and succeed in crossing this stage, while others need a long time to adjust, some even took the wrong paths, as evidenced by the catastrophic outcomes of World War I and II.

History shows that wars themselves do not solve such issues, instead, it is often the post-war reforms that bring resolution.

 

中文版本

李录：第二个问题我想谈一谈对这个问题的思考啊，个人的一些思考。

这些问题是它的实质是什么？

就国内来说呢，这个问题并不是中国所遇到的独有的问题。我们看过去500年国际的历史，即使所有的国家在经历了最早的工业起飞的时候，都面临着一个中间盘整的这样一个过程。我们统称主要在这个过程的是一个进入到中等收入国家。这个最早工业化之后的国家面临的一些共同的问题。

我在这个书里面呢，谈到我们的这个文明。我把文明划成这个1.0狩猎文明、到2.0农业文明、到进入到3.0的这个科技文明。我把这个过程的变成2.5，那就中国今天恰恰就处在这样一个位置上。

所以从这个国内面临的这些情况呢，其实所有的国家在经历了最早期的这个工业起飞之后，其实都面临过这样的问题。这个无论是德国、日本、这个包括我们看的南美还有东南亚的一些国家。有些国家就实现了这个跨越，有些国家还在中间这个挣扎。挣扎的国家就是我们今天叫这个中等收入陷阱。那么度过的这个方式，每个国家也不太一样。

那我们看它的这个主要的原因，另外就从国际秩序讲，就是说我们其实在国际关系上，从来没有过我们这个科技文明时代的国际关系。

我们回过头来看这个问题的这个原因。就是我们谈这个现代化的本质，就是这个经济体，因为市场经济和现代科技的结合，进入一种自动的、福利性的、持续性的增长这样一种现象，我们称为现代化。

这个经济的福利的增长是一个很可怕的一个数学概念。我们只要去想一想，我们要改革开放之期，指出中国的这个情况到今天那个情况，我们可能是这个成百上千倍的这个实际上的。那么名义上的这个数字更可怕。

这个但是经济上出现了复利性的增长，但是实际上在社会治理、人文心理、人的本性、政治制度，这个没有出现同样的这个福利性的变化。那归其原因，根本上是这个人的本性并不会发生这么大的变化。

实际上，这个智人在20万年出现之后，基本上我们人的本性没有发生过根本性的变化。但是我们的这个经济发生了三次伟大的跃升：从这个最早的狩猎到农业文明的出现，到我们科技文明的出现。

所以就是当这个最早期的这个工业起飞结束之后，我们会出现一个一个短期之内出现一个这个巨大的空落差。也是经济发展的现实和政治社会心理和政治治理发生了结构性的这个落差。在这个过程里面，就会出现一系列的各种各样的问题。那么基本上，其实所有的国家都遇到过这个问题。

那么中国是不是非常的独特呢？在三四十年里面，就出现了这个这样大的这个经济上的变化。其实，也不是这个样子。

就是早期最早的这个出现的工业化，这个时间比较长，那独立实践这个工业化的过程、现代化过程，其实只有英国做到了。后面的这些国家其实都是在追赶，所以追赶的时候这个速度，其实我们看到的这个历史上有通用的现象，其实都是三四十年这个就赶上了。

我们比较熟悉的这个日本从明治维新到1868年，到1905年打败了这个工业化的俄国，中间就是三四十年的时间。德国从统一到这个一战，也就是三四十年时间。美国的工业化，大规模的工业化是在内战之后，到1890年之后，成为全世界第一大经济体，也是三四十年的这个时间。

南美从这个二战之后一直到它的这个中等收入陷阱八九十年代以后，也是三四十年的时间。

就三四十年的时间，足以让一个经济体，尤其是在经济起飞阶段发生巨大的经济上的变化。那么和社会的这个治理的现实就会发生巨大的落差。这个时候对这个社会就会带来很大很大的挑战，很大很大的变化。

在这个阶段遇到的各种各样的问题，通常这个是对一个社会的整体的挑战。有些社会能够组织起来去跨越，有些社会会在中间盘整的时间比较长，有些社会去通过一系列其他的方式去调整，甚至于造成了巨大的悲剧，那我们回头看这个一战跟二战，多多少少这个背景都与此相关。

但是实际上的这个战争其实并没有解决这个问题，反倒是战后的治理上的变化解决了问题。

 

Source: https://youtu.be/8jJA4vHWvLc?si=9LVjxvd7IKBJx49o

 

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