On the Contradiction Between the Economic Growth Rate and Improvement of People's Well-Being

Xin Zhang ()

Chinese Economy, 1988, vol. 21, issue 3, 59-77

Abstract: The decline in the growth rate of the national economy as shown in the statistics of the first half of 1986 has aroused the concern of theoreticians. Some people regard this as a danger signal and cast blame on the policy of macroeconomic control carried out since 1985. Others believe that a temporary fall is tolerable because it will lay the foundation for economic takeoff the ground in the future.>sup>1>/sup> This article is part of the debate, but the difference is that the model it uses completely negates the importance attached to the economic growth rate. It points out that when price signal are grossly distorted and the product mix is irrational, the economic growth rate shown in national statistics cannot reflect the rise of the people's actual standard of living, and thus a debate centering around the economic growth rate is meaningless. The whole argument is still within the framework of Soviet economic theories. The model in this article points out given China's present economic structure, if we want to improve people's well-being, we should tighten macroeconomic control over aggregate demand and, micro-economically, relax price controls and make use of the market mechanism to regulate the economic structure to a state of balance as rapidly as possible so as to pave the way for the genuine growth of the economy and improvement of the people's welfare at the same time.

Date: 1988
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