Columbia University professor: The Chinese possess a considerable desire to express creativity

Dawei Li Questions for Guangming Daily Due Friday May 1, 2020

Q1: Socialism or capitalism: I admire your Insuring the Survival of Post-Pandemic Economies article and it suggested many governmental interventions, should that mean commanded economy should be back? Would socialism be better in dealing with such crisis than capitalism?

Phelps: In that comment, I did not imagine a return to a “command economy.” I only meant that the government might have to undertake some kinds of interventions that would ordinarily not be considered owing to the loss of economic freedoms that they would cause – during the period over which they are instated. It is not clear to me that we should expect socialism to be better in dealing with the pandemic than capitalism would be.

Q2: Recession: On April 14, IMF predicted that the global economy will shrink by 3% this year, and it will be the worst economic recession since the depression in the 1930s. What, Edmund, is your point of view? What factors will affect the world economy in the next few years? What is the best strategy for the future global economy? Digging holes?

Phelps: If I may quote John Maynard Keynes out of context, “We simply do not know.” I do not know what are the best strategies for the various participants in the future “global economy.”

Q3: Globalization: It is seen that supporters of "globalization" have continuously questioned "globalization" in recent years. Populism and protectionism are back. This virus outbreak might be the milestone or turning point of globalization. What do you think?

Phelps: I will be surprised if it turns out that this virus outbreak proves to be the spark for globalization. Nevertheless, I certainly favor international cooperation on a broad range of matters, such student exchange, scientific research as well as international trade.

Q4: During the outbreak of the global epidemic, some countries have made decisions to withdraw their companies from the host countries. Would that be a major setback to global economy? O, are we are moving to post – Globalization era?

Phelps: I know only of a few companies, all of them American, that have withdrawn from one or more foreign countries. I think it is groundless and certainly premature to view these withdrawals as the beginning of a post globalization world economy. Thank you.

Q5. In 2017, President Xi, delivered a speech “Work Together to Build a Community of a Shared Future for Mankind” at the conference at the United Nations Office. In this speech, he supports a world of common prosperity through win-win cooperation and support for commitment to multilateralism. During the virus, China indeed donated medical equipment and experience to some nations. What’s your comment and suggestions for China’s next step as a responsible leading nation?

Phelps: I try to abstain from making policy recommendations to countries other than my own country. But as you know, a great many Chinese have encouraged me to set forth my view that China would benefit greatly from an economy oriented toward innovating – not just undertaking entrepreneurial initiatives. My feeling is that the Chinese can be great innovators, not just great entrepreneurs.

Q6: In Dynamism: The Values That Drive Innovation, Job Satisfaction, and Economic Growth book, the authors mentioned that before WWII, the main generators of indigenous innovation were the US, the UK, and France, while since WWII the US has been largely responsible for generating innovation shocks that are transmitted to other countries. Professor Phelps, you are a close observer of China’s innovation and entrepreneurship national strategy (partly inspired by the Mass flourishing book). Has China been a generator of indigenous innovation in the past decade? Do you think there are some Chinese companies as good as Solfar, Plain Vanilla, Össur and Calidris which were founded on the basis of an indigenous innovation, not merely the application of new technology? If not, how could China foster more companies like this? Phelps: I have visited several companies in China over the years, and I have formed a positive impression of most or all of them. It seems likely to me that the most innovative companies in China are as least as innovative as the most innovative companies in Iceland. Certainly, Alibaba and Megvii Technology are as innovative as any company in the world. Q7. Does Professor Phelps have some recent suggestions for China's economic development?

Phelps: The spectacular rate of new firm formation in China over the past three or four years suggests that many of these firms have been founded to try to develop and market new ideas of their founders.

I have long argued that the abundance of innovation in a nation depends greatly on the desire of the people to express their creativity and imagination. I have furthermore argued that this desire is sparked and nourished by the possession of the “right values” – values such as vitalism and the desire for self-expression. Some of my readers, however, were a skeptical that values are important. Now in my new book Dynamism: The Values that Drive Innovation, Job Satisfaction, and Economic Growth, which is being published by Harvard University Press on Monday, May 5, I and my co-authors show evidence that values are a powerful determinant of a nation’s innovation.

I would add that, in all the time I have spent in China, I have been struck by the extraordinary purposefulness and enormous determination of the Chinese people.

Q7: Professor, I believe that China is mainly a Confucius nation and with tendency of collectivism and not willing to embrace self-expression. Will that be a problem of future economic performance of China?

Phelps: It is obvious that the Chinese possess enormous vitalism. I think it’s also clear that the Chinese possess a considerable desire to express creativity. I don’t know how much willingness there is among the Chinese to embark on a voyage into the unknown.

Q8: How can the US or China or India, as a nation, promote these modern values?

Phelps: I think in the US and in China this has to begin in the education system. Of course at some point, parents can also help to encourage these values at home. Q9: it seems that we are entering into a post Post-Pandemic Economies, how should the government do? Phelps: In an article with professor Roman Frydman Insuring the survival of post-pandemic Economies, I wrote that: The systemic insurance that is needed demands a government-led effort in four main areas: 1. Redirecting the economy’s existing productive capacity to overcome the rapidly growing shortages of equipment and services required to respond effectively to the pandemic. 2. Supporting firms that are not directly involved in efforts to combat the crisis, so that they can continue to supply essential goods and services. 3. Ensuring that the population has sufficient means to purchase these goods and services. 4 Creating a financial facility to help those unable to pay their mortgage and meet other obligations, thereby mitigating cataclysmic risks to the financial sector.