It would be a mistake if China failed to strengthen the role of the
government in co-ordinating economic development and social policies, according
to Nobel Prize-winning economist Joseph E. Stiglitz.
The comments by the Columbia University professor of economics come amid
intense debate in the country on whether calls for the government to launch
social programmes would hamper the market economy.
Nobel Laureate Joseph
E. Stiglitz |
On the contrary, Stiglitz said in an
interview with China Daily, a government that understands and performs its
functions is essential for the market economy to continue its progress in a
harmonious social environment backed by changes in the rural sector and domestic
consumer spending.
"There is a risk of China moving from over-emphasizing the role of government
to over-weakening its role," the former chief economist of the World Bank
warned. "The risk is due to the naive understanding of the market economy."
Every successful example of the market economy has involved the role of the
government, and it is clear that China is seeking a distinct form of the market
economy, he said.
There is not one form of the market economy but many. "And governments can
play an important role together with Adam Smith's invisible hand," Stiglitz
said.
Smith, the 18th century Scottish economist and philosopher, is credited with
laying the intellectual framework for the free market; and is famous for the
expression "the invisible hand," which he used to demonstrate how self-interest
guides the most efficient use of resources in a nation's economy, with public
welfare coming as a by-product.
Stiglitz defined the government's role as providing public services such as
education, health, pension and other social safety nets and enabling the market
to function well.
He said he was glad to note that the Chinese Government has recognized the
need for a transition in its role from setting growth targets in the past to
building what he called an "institutional infrastructure" for a working market
economy. China's 11th Five-Year Plan (2006-10) can be a major step in this
transition, he said.