Why is the Rule of Law a “First-order Macro Policy”? / Sheng Hong

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Concerned with China’s current economic downturn, there are a lot of discussions on macro policies. These discussions are mostly based on macroeconomics and put forward various suggestions on macro policies and their means. However, if we notice that macroeconomics is based on the hypothesis of market system, we will know that if the market system and its premise are not guaranteed, macroeconomics is based on the sand beach, and the discussions based on macroeconomics are meaningless.

For example, the market system is based on the property-rights institution. If the property rights are not protected, the market system is not efficient. Because the core rule of market is competition rule, economics has proved that competition without property rights is inefficient. I have quoted Professor Steven Cheung’s research. He found that in the fishing ground without delimitation of property right, fishermen can enter freely, but with the increase of the number of people entering, the rent value of fishermen (the part of fishing income higher than the social average wage) will be reduced to zero. When commenting on Taiwan’s “375 Rent Reduction” in his The Theory of Share Tenancy, Cheung said that if the rent reduced by the landlords is not transferred exclusively to the specific tenants, the tenants can freely compete for the benefits of rent reduction, and the rent value will dissipate in the competition. In his paper “The Theory of Contract Structure and Nonexclusive Resource “, Professor Steven Cheung concluded that if there are no exclusive property rights for a bounded resource, people will enter freely to compete for the rent value brought by this resource until the rent value dissipates to zero (Steven Cheung, 1970).

Of course, in concrete situations, the state of property rights is not either 100% protected or unprotected, but mostly in the middle. I have used this theory to analyze the property rights of state-owned enterprises in China, and found that this is a kind of “property rights” which has some exclusiveness in a certain period of time and cannot be maintained forever, and outsiders always want to come in and fight for it. Thus, this kind of property rights has evolved out the existing institutions of state-owned enterprises and its complicated and tortuous senior management strategy and tragic outcome. This theory also applies to private enterprises, but the specific situation is different. The problem of property rights faced by private enterprises is security. This refers to both the security of property rights and personal safety. For example, private entrepreneurs would suddenly be jailed, and their property would be “auctioned” at low prices, such as Wu Ying; they would even lose their lives without due process of law, such as Zeng Chengjie; they wouldl be put in prison without any reason, and acquitted 12 years later, but they would lose good opportunities for market development and good prime time, such as Zhang Wenzhong; there are other well-known entrepreneurs, such as Gu Chujun and Mu Qizhong.

More common are unknown businesses and entrepreneurs. In summary, there are several aspects. The first is that without due process of law, entrepreneurs are arrested, enterprises are forced to stop operation, or enterprises’ properties are forced to be “auctioned” at low prices; the second is that enterprises’ properties are forcibly collected by the administrative departments of the government; the third is that all administrative departments violate the Constitution and the Legislative Law, arrogate legislative power, formulate strict regulations, and carp enterprises in an all-round way, and impose severe punishment on tiny errors; fourth, when the administrative department of the government changes its policies, it completely denies the property rights of the private enterprises that do not conform to it, and denies the previous decisions and commitments of the government; fifth, the local government, after attracting enterprises’ investment with preferential policies, repents when it sees more profitable opportunities, and does not bear the liability for breach of contract compensation, or breaks the contract with very low “compensation”; and sixthly, to carry out law enforcement in a way of movement, in fact, is to blur the legal boundary with nonprofessional words, and thus to excuse not following the due process of law, the higher level government stipulates quantitive standard of the movement, and the lower level government, in order to achieve the standard, does not hesitate to wrongly accuse entrepreneurs and shut down enterprises.

In recent years, the cases of property rights and personal injury to entrepreneurs have increased unabated, which have caused a major blow to private enterprises and cannot be retrieved. What’s more, the fact of these injuries has formed the general view of private entrepreneurs, that is, their safety is not guaranteed, thus forming the depreciation expectation of assets. The value of an asset lies not only in its physical characteristics and use value, but also in its security. The market value of the same material assets can vary greatly with different security. Assuming that there is an enterprise with an average annual net profit of 10 million yuan, its net assets or shareholders’ equity can be estimated to be 100 million yuan at 10% return rate on net assets; its market value is about 250 million yuan at 4% discount rate; and its sales volume is about 200 million yuan at 5% net profit rate of sales. If the security of the property rights of the enterprise is not guaranteed by law, there may be 30% probability of loss, then the market value of the enterprise will be devalued by 30%, about 75 million yuan. If the legislature reduces the value-added tax by three percentage points, it will reduce the cost of the enterprise by about 5.2 million yuan; if the central bank reduces the basic interest rate by one percentage point, and if the loan amount of the enterprise is 100 million yuan, it will reduce the interest cost of 1 million yuan. However, for the 75 million yuan of asset value devaluation caused by the decline of security, 6.2 million is less than 1 / 10 of 75 million. As a rational person, will he be encouraged by such trivial 6.2 million yuan to continue production or increase investment, and ignore the loss of 75 million yuan?

Therefore, property right and personal safety are the first-order variables of macro-economy, while tax rate and interest rate are the second-order variables. The so-called “first order” and “second order” borrowed mathematical concepts. Intuitively, the first derivative of distance to time is velocity, and the second derivative is acceleration. From the absolute number of view, the second derivative is much smaller than the first derivative, about 1 / 100 ~ 1 / 10 of the latter. If the speed of 100m race is 10m / s, the acceleration of sprint is about 0.5m/s. The first-order variable determines the basic trend, while the second-order variable only increases or decreases on this basis. Therefore, when the first-order variables have obvious influence on things, the second-order variables can be ignored. Only when the first-order variable is suitable and stable, the second-order variable can play an important role. It is used to describe economic variables. If the human rights and property rights security of private enterprises are not improved significantly, all macro policy variables based on Western macro economics will not be useful. If you say to a person who is in critical condition, “cabbage price has been reduced”, it will not help his health.

This has been proved by the reality since this year. Since the two congresses this year, the Chinese government has implemented a large-scale tax reduction. The value-added tax in the manufacturing industry has been reduced by three percentage points, the transportation and construction industries by one percentage point, and other expenses have been reduced. The government claimed that the tax burden has been reduced by about two trillion yuan. However, China’s economic growth has not improved. Although the National Bureau of Statistics said GDP grew 6.2% in the first three quarters of this year, the Keqiang index was only 3.8%. And since the inflation rate published by the National Bureau of statistics is about 3.8%, the actual economic growth rate is about zero. Taking a look at the situation of two expensive commodities, automobile and real estate. According to the National Bureau of Statistics, the sales volume of completed commercial housing decreased by 10.6% year on year in October this year, and the sales space decreased by 20.4%. This downward trend has lasted for 21 months since February last year; the sales volume of housing for business reflecting the degree of economic activity decreased by 13%. Since July 2018, automobile production has been declining for 22 months. By October 2019, the cumulative year-on-year growth rate is – 14.8%. Commercial housing and automobile not only become the landmark products because of their high price, but also affect the overall economic situation because of their comprehensive and ripple effect.

Figure 1 Sales space and sales volume growth rate of completed commercial housing (%)first order.jpgData source: website of National Bureau of statistics.

Figure 2   Growth rate of automobile output (%)first order2.jpgData source: website of National Bureau of statistics.

Of course, we should also see that the tax cuts promised by the government are not really in place. According to the Ministry of finance, by October this year, the general public budget revenue increased by 3.8%, similar to the Keqiang index; if inflation factor is excluded, the growth rate will be zero, which is still the same as the national economic growth estimated above. This means that the macro tax rate has not been reduced. If we consider that the revenue of government funds has increased by 8.7% year on year, and that the government expenditure is still high, the expenditure of general budget has increased by 8.7%, while the expenditure of government funds has increased by 22.6%, we will know that the proportion of government controlled resources in national income is still rising. The deficit thus expanded needs to be covered by the issuance of government bonds or additional currency (i.e. inflation policy). According to Ricardo equivalence, the government bonds issued are equivalent to increasing the tax burden of future generations, while inflation is directly taxing the people, which still represents the increase of the proportion of government resources occupied. Nevertheless, government tax cuts remain a positive factor, as they at least stem the sustained rise in macro tax rates in the short term. The central government also realized that the tax cut at the beginning of this year was not enough to stop the economic downturn. Mr. Li Keqiang proposed to continue the large-scale tax cut.

It’s a good thing to continue to reduce taxes, but as mentioned above, tax reduction is only a second-order macro policy, which can’t change the current basic trend of China’s economy. One of the most important phenomena is that when the government announced a large-scale tax cut in a high-profile way, China’s total investment has become a negative growth and continued to decline. According to Dacheng Enterprise Research Institute, by September 2019, the national investment growth rate has been negative 4.6%, among which the investment growth rate of private enterprises is negative 12.2%. This clearly shows that even if the central government tries to promote economic growth, people are lack of confidence in the future, especially private entrepreneurs. They are not mainly lack of confidence in macro policies, but more importantly, lack of confidence in their property rights and personal security.

Figure 3 investment growth ratefirst order3Data source: Dacheng Enterprise Research Institute, “Stability and Advancement of China’s Economy, Private Enterprises as the Backbone”, 2019.

There is a lot of evidence to support this judgment. In The Report on the Environmental Index for the Survival and Development of Private Enterprises in China (2016 / 2017), the scores of personal safety and property safety are 7.75 and 7.32 of the 10 point system respectively, which means that entrepreneurs believe that they have a 22.5% probability of personal safety risk and a 26.8% probability of property safety risk. Considering that the harm of personal safety risk is far greater than that of property safety risk, and there is no property safety without personal safety, the 30% probability of property insecurity as in my previous words is rather conservative. According to an expert with long-term observation and study of private enterprises, by 2019, the security problem of private enterprises is not improved, but worsened.

Figure 4 Sub scores of national environment index for survival and development of private enterprises (2016-2017)first order4.jpg

Source: Research team of China entrepreneur research center, The Report on the Environmental Index for the Survival and Development of Private Enterprises in China (2016 / 2017), 2017.

Since there are dangers, there would be actions to avoid them. The possible actions that entrepreneurs feel insecure are investment and emigration to overseas. An entrepreneur with a market value of 250 million yuan is willing to transfer assets at a cost of up to 75 million yuan if he estimates that his property rights will be seized at 30% possibility. Of course, enterprises with larger market value have more motivation and ability to transfer assets. In the above report, 57% of the entrepreneurs interviewed in Zhejiang Province have already or are ready to immigrate overseas, 52% in Jiangsu Province and 27% in Sichuan Province. Since last year, the wave of emigration has been more turbulent. According to Afasia Bank and New World Wealth, there were 15000 rich Chinese immigrants in 2018, up 50% year on year, ranking first in the world. According to Hurun Research Institute, from July 2018 to September 30, 2019, the top 30 richest people in Hurun’s ranking list cashed in a total of 91.85 billion yuan, the most in the past years. This can also be seen from the rapid growth of foreign investment of private enterprises. According to China’s foreign direct investment statistics bulletin, in 2006, non-state-owned enterprises accounted for only 19% of the stock of foreign direct investment, and by 2018, the proportion had reached 52% (Ministry of Commerce, etc., 2007-2019). This certainly includes the business calculation of private entrepreneurs, but there is no doubt that their business calculation includes the consideration of asset security.

The main reason for the personal and property insecurity of private entrepreneurs is that the legal environment in China is still very poor. In the above “Sub score of environment index for survival and development of private enterprises (2016-2017),” judicial justice “only scored 4.2, and its related indicators such as” dependency of public power “,” source of government power “and” government power infringement and checks and balances “scored 2.28, 2.50 and 0.55 respectively, which can be described as” extremely poor “in terms of the 10 point system. Therefore, the insecurity of private entrepreneurs is not mainly from other citizens or enterprises, but from the government administration. The main reason is that the power of these departments has not been effectively constrained, and the judicial system cannot get rid of their interference and independent trial according to law, or even become a tool for administrative departments to infringe on enterprises. As a result, it not only cannot become a just judge and protector when private enterprises are infringed, but also make enterprises more likely to be infringed because of its existence.

This kind of “judicial injustice” is not that the existing laws are too harsh on private enterprises. After building legal system during 40 years of reform and opening up, China’s constitution and legal system basically protect the legitimate rights of citizens and enterprises. “Judicial injustice” means if the administrative department and the judicial department do not follow the due process of law and cannot make a fair decision according to law, the parties have no means of relief, so that people cannot have a general expectation of litigation according to the existing law. People can adjust their behavior without violating the laws if the laws are just strict but can be followed, but if the due process of law is broken, the court’s ruling is not neutral, the unjust cases are frequent or the sentence is excessive, then people will not know what is the legal criterion, and they will not be able to judge what can avoid the disaster of imprisonment, and they will not know how to be safer, and could only fear the whole judicial system. The sense of insecurity comes from the uncertainty and fear of that law enforcement does not enforce the law but may have other purposes. If the law is followed, there are general expectations; if it is not followed, there are numerous possibilities, including the worst.

Some people will say that in recent years, political leaders and the central government have been emphasizing the protection of private entrepreneurs, and have introduced some judicial reform measures specifically aimed at private entrepreneurs. Why does the rule of law environment not improve, but worsen? In 2014, the Fourth Plenary Session of the 18th CPC Central Committee has put forward the task of rule of law; after that, the Supreme Court issued “The Opinions on Equal Protection of the Non-public Economy in Accordance with the Law to Promote the Healthy Development of the Non-public Economy”. In 2016, the CPC Central Committee and the State Council issued “The Opinions on Improving the Property Rights Protection System to Protect Property Rights in Accordance with the Law”, which pointed out that “the use of public power to infringe private property rights, illegal seizure and freezing of private enterprise property and other phenomena occur from time to time”, and required “equal protection of various market agents. We will increase the criminal law protection of non-public property.” After Mr. Xi Jinping held a symposium on private entrepreneurs in November 2018, the Supreme Court and the Supreme Procuratorate proposed “Carefully not to catch private entrepreneurs and not to frozen their properties”. There are many well-known entrepreneurs, such as Gu Chujun, Zhang Wenzhong, Mu Qizhong and so on, whose cases have been or will be retried, some of whom have been rehabilitated or have received mitigated punishment. In 2019, the Supreme Court abolished 103 judicial interpretations “for protect private enterprises”. We cannot say that they are not sincere, and their actions are not big.

So why didn’t it seem to play a big role? First of all, these measures have the obvious characteristics of emergency for the current utility. For example, the 2016 document was largely to cope with the decline of investment growth rate of private enterprises in that year to – 1.2% in July; the symposium in 2018 corresponded to the significant decline of economic growth in that year, and recognized that private enterprises were the backbone of China’s economy. However, since we see the utilitism of these measures, it is difficult not to doubt the stability and sustainability of these measures. Because if the situation improves, it is not so urgent to protect the property rights of private enterprises, it is possible to return to the road of infringing the property rights of private enterprises. To invest, long-term calculations are needed. This is exactly what entrepreneurs have learned in these decades. At the beginning of the reform in the 1980s-1990s, the government gave more care to the private enterprises, but since the 2010’s after the private enterprises developed, the infringement on the private enterprises occurred frequently and became more and more intense. This is jokingly called the process of “raising pigs and killing pigs”. Who knows that the current protection measures are not “raising pigs”?

Second, a government that only emphasizes the protection of some people is not sincere enough. Because “the law is just” has two meanings. One is that the law fairly adjudicates every lawsuit; the other is that it fairly treats all people. So the law protects everyone in this society. As long as one person’s rights are violated, the government must protect them. If we only protect the big profitable enterprises, but not the pancake stand, it is obvious that it is only for the current achievements, not for all citizens to provide equal judicial services. The slogan “carefully not to catch private entrepreneurs” seems to be a special favor for private entrepreneurs, but the implication is that “can catch other people carelessly”. This is still a threat to private entrepreneurs. Because an entrepreneur is a person living in the society not only by himself, he has his own family, children and friends; he is not only a professional who produces GDP, but also needs to live, consume, travel and financial investment in the society. If his relatives and friends can’t get the normal protection of the law, if the house he lives in is threatened to be demolished like Xiangtang’s house, if his children is inoculated the fake vaccine and can’t be rescued, his financial investment is swept away by the financial platform and can’t be recovered, what’s the use of just protecting him and his business?

Third, all these measures are one-way. Take a closer look at the subject of these documents or “opinions”, which refer to the administrative departments or judicial departments of the government, rather than the structure formed by the interaction of all parties as the legal judicial system of our country. If the implementation of protection is only one-sided, then the “carefulness” of “carefully catching and carefully frozening” only lies in the minds of officials. There is no external standard for what is “carefulness” and to what extent, it is only up to them. Even if “carelessness” is not a mistake or even a crime, it is at most an ignorance; then this kind of “protection” is only based on fragile hope. If we really implement the rule of law, we must really implement the judicial structure and procedures stipulated by the Constitution and laws of our country. We must first let the infringed citizens or enterprises directly use this judicial system. First of all, it means that their lawsuit can be accepted. Up to now, we have seen that many enterprises were infringed by local governments and their lawsuits didn’t be accepted by local courts. They were improperly arrested or sealed up, but they could not get the help of lawyers immediately according to law, and they could not correct the mistakes of law enforcement personnel according to law; even sometimes, their lawyers would be threatened.

Fourth, these measures do not have priority when they conflict with other legal or policy documents. These documents protecting private enterprises are mostly called “Opinions”. According to the Legislative Law, “Opinions” are not within the scope of laws and regulations at all. In the process of implementation, if there is another policy document in conflict with it, it will also give priority to those documents. For example, the campaign of “eliminating black and evil”. As long as an enterprise and its entrepreneurs are regarded as evil forces, any “Equal protection” or “Carefully catching and careful frozening” can be forgotten. Another priority over the property rights of private enterprises is the environmental protection policy. Once the short-term goal of environmental protection has been set, enterprises should be forced to move or dismantle (such as pig farms), at least more expensive equipment or raw materials (such as changing coal to gas) should be used, or environmental protection facilities are over requered to hinder the normal operation of enterprises. In fact, there is almost no government regulation that is no “priority” over corporate property rights. A frankly-speaking entrepreneur Cai Xiaopeng once said an extreme example: an enterprise was fined 20000 yuan by “water saving office” for seven drops of water leaking from a tap every minute.

Fifth, there is no fair punishment for those who violate due process of law by using public power to infringe upon citizens and enterprises. Obviously, many cases of infringing the property rights of private enterprises are the “active attack” of administrative officials. “If there was no intervention and influence on judicial justice, no police, procurator or court will make the original judgment on me, and such a major wrong case which can be seen by any non legal professional,” Zhang Wenzhong said. In Professor Xu Xin’s Defense of Innocence, there are some cases where law enforcement officers want to use public power to extort corporate assets (such as the case of Chang Yuxian), or revenge for their own interests (such as the case of Tao Hongyong). The Supreme Court has corrected the injustice of some entrepreneurs in the past one or two years, and seemed to have made a great gesture of protection. But the purpose of redressing the injustice is not only a case, its long-term goal should be to avoid the recurrence of such injustice. Up to now, even the most famous case, Nie Shubin case, has no any person to bear criminal responsibility. Who can guarantee that similar cases will not happen again? If after being found, there is no punishment on maliciously abusing public power for personal gain, it is obvious that these illegal officials are encouraged. What’s the harm for them if they infringe upon private enterprises again?

Therefore, since the security of property rights is the first-order variable of macro-economy, implementing the rule of law to protect property rights is the first-order macro policy. Saying rule of law is a kind of “policy” seems to be a bit demeaning. Because the policy has the meaning of “short-term” and “contingency”, and the principle of rule of law is long-term and stable. However, it seems to us that the effective principle of the rule of law today might not be recognized in the beginning. Even the formation of English common law was a kind of expedient way for the King to compete with the Lords in the beginning. At that time, the jurisdiction was regarded as a kind of property right. But when we realize that this “expediency” is a long-term principle to bring about social prosperity, we should take it as a basic principle. In our country, the reform and opening up was also a stopgap at the beginning. In 1978, the Chinese government’s finance was almost bankrupt; without the implementation of the household contract system, agriculture was still a burden hindering economic development; without the help of the market, people’s food and clothing could not be solved, and even officials were poor. It is said that when Vice Premier Wang Zhen visited Britain in 1978, he was surprised to find that the wages of British cleaners were six times his.

Today, after we have tasted the sweetness of market economy, we also see that economic depression will be caused by violating the principles of market economy. We should know that it is not an expedient to follow the rules of market economy, especially to respect its premise – property-rights institution. Do not be like that you think of the market principle when you are poor, but ignore it after following it to become rich. Instead, we should sincerely respect and abide by the protection of property rights and market rules as the basic rules of society, as the rules that take precedence over all other rights and public power except the right to life and family. Because as Hayek said, what we call civilization develops on the basis of property rights. The development of civilization is “up on the basis of that spontaneous order of actions which is made possible by the delimitation of protected domains of individuals or groups.” At least in terms of expression, we should gradually change the emergency and specific expressions into general and permanent ones. And that’s not enough to believe. Only when a society is quite rich, some entrepreneurs are even so rich that can be compared with a state to stand up for the principle of protecting property rights, we can say that the government’s credit stands the test.

If we realize that the rule of law is a first-order macro policy, the first thing to do is to be sincere. It is to truly implement the rule of law. Otherwise, nothing will make sense. To do this, we should now say that we have the conditions. First, the CPC Central Committee realized the importance of rule of law in theory. This is reflected in the resolution of the Fourth Plenary Session of the 18th CPC Central Committee. The core content of the resolution is “towards rule of law”, which clearly recognizes that “the vitality of law lies in implementation, and the authority of law lies in implementation.” And emphasize ” to strengthen the restriction and supervision of administrative power, improve the mechanism of error correction and accountability”; put forward operable measures, “to take the effectiveness of rule of law construction as an important content to measure the work performance of leading groups and cadres at all levels, and incorporate it into the performance evaluation index system, and take the ability to abide by the law and act in accordance with the law as an important content to inspect cadres.” And so on. Although these claims have not been effectively implemented up to now, they are still worthy of affirmation.

Second, the pressure of economic depression discussed in this paper. Since the “first-order macro policy” does not improve, the “second-order macro policy” is useless, to improve the first-order macro policy is not an option that can be said well but need not be done in fact, nor a measure that does not need to worry, but an urgent matter. If it is not really implemented, no one can be cheated. Ultimately, the party in power and the central government should bear the responsibility. If the rule of law is not implemented, the security concerns of entrepreneurs will not be dispelled, it will be difficult for them to increase investment or even continue production, and economic growth will further decline to depression. The depression not only means that people’s income will be reduced, but also means that the new labors have no employment opportunities. If the economic growth rate is zero, there will be no employment for 13 million new workers every year. This will increase social tension. If the ruling party increases its efforts to maintain stability in a traditional way, it will not only increase government spending, make the tax reduction plan impossible to implement, but also cause widespread and deepening social uncertain and even unrest. Although I said that the implementation of the rule of law should not be utilitarian, this means that the rule of law should be implemented regardless of economic pressure, but it does not exclude that there will be utilitarian results without utilitarian mind.

If we want to truly implement the rule of law, we need to see that the previous measures have not really implemented the rule of law, but have a new perspective. If the government is the supplier of the rule of law, citizens and enterprises are the demanders of the rule of law. The new perspective is to implement the rule of law from the “demand side”. This means to awaken the demand for the rule of law of the demand side, mobilize the demand side’s initiative in the rule of law, and encourage the demand side to require the government according to the rule of law principle; it also means that the administrative department shall not suppress the rights and initiative of the demand side in the rule of law.

The first is to guarantee the right of all citizens, including entrepreneurs, to complain. If rights are violated, but cannot be said, and others do not know, they cannot be protected. Conversely, the suppression on freedom of civil complaints is more sinful than all other violations. “To defend the crime of Patricide is harder than to commit it”, said Roman jurist Paranian. It can also be understood that the crime of defending patricide is greater than patricide. In the same way, suppressing the disclosure of a crime is worse than the crime. Some people say that, didn’t the central government hold a symposium on entrepreneurs? There are two problems with this view. First of all, this kind of symposium is only for the purpose of publicity. Recently, we saw the speech of entrepreneur Cai Xiaopeng at the entrepreneurs symposium held by Central Commission for Discipline Inspection of the Communist Party of China. It turned out to be 2014. The reason why it’s still spreading wildly is that the problem hasn’t been solved. The second is to think that the central government held a forum for entrepreneurs to think that the complaints of entrepreneurs have a channel out, which is another illusion that the channel problems complained by entrepreneurs have been solved. In fact, it’s better to guarantee their rights of free expression than to hold a symposium for entrepreneurs at the top of the government. As long as they are free to complain, do they need to hold a symposium?

Second, we can’t stop redressing only several major wrong cases of entrepreneurs. In 2016, when the national development and Reform Commission discussed the opinions on improving the property rights protection system and protecting property rights in accordance with the law, I and several other scholars mentioned that “a practical redressing case of is better than a dozen document declarations”. However, we didn’t realize that the case of Deng Xiaoping’s “don’t move a fool’s melon seeds” mentioned at the beginning is different from the present case. Deng Xiaoping said this before things happened. So the “fool”, Nian Guangjiu has not been imprisoned for a long time, and this principle has been promoted to the whole country in time, and no more entrepreneurs have been arrested. But this time, some redressing cased of the entrepreneurs are after these famous entrepreneurs have been wronged. The more famous they are, the greater the bad influence they have been wronged, the more administrative departments they have imitated, and the more entrepreneurs they have been harmed. On the other hand, to pacify a few well-known entrepreneurs will also give people the illusion that all the wronged entrepreneurs in the country have been pacified. In fact, their fame just covers up the grievances of countless unknown entrepreneurs.

So what kind of standard is the standard to judge whether “the rule of law is implemented”? The implementation of the rule of law is certainly comprehensive and involves all aspects, but we can have a general and simple standard, which is to see whether due process of law is followed. Legal due process is a concept of common law, but there are similar due process of law in our legal system. First of all, it is a kind of behavior rule without direct purpose. This eliminates the possibility of using the rule of law as a utilitarian tool, let alone for the malicious purpose of plundering property. Any improper purpose will be exposed in the process of due process of law. Second, due process of law is a specific and detailed procedure. Such as that it requires to be informed before administrative punishment (Article 31 of the Administrative Punishment Law), to be allowed to defend (Article 32), to hold hearing (Article 42); if compulsory measures are taken, the party has the right to hire a defender (Article 34 of the Criminal Procedure Law); no one can be forced to prove his crime (Article 52) ; bail pending trial (Article 61); specific facts for the accusation of violation of law; etc. Some jurists point out that the details of due process of law is a good way to prevent the abuse of public power.

In this way, measures to implement the rule of law will be simple and effective. This is to stand on the side of the demanders of the rule of law and protect their reporting, administrative reconsideration or legal proceedings on the basis of due process of law against the acts of any administrative department or judicial department that fails to follow the due process of law. If the relevant administrative departments or judicial organs do not accept them, the demanders of the rule of law can appeal to the higher level, including the appeal to such inadmissibility. Until the central government. What if the central government doesn’t accept it? Then what I said previously is nothing. But I have assumed that they are sincere. For the public, they should not look at how many grievances have been eliminated by the government, but how many grievances have not been eliminated; how many appeals against violations of due process of law have been filed by citizens or enterprises, especially in the early stage, the more such appeals, the better the implementation of the principle of the rule of law. For administrative departments and judicial departments, the Communist Party of China does not want to “observe the law, act in accordance with the law as an important part of examining cadres”? The specific examining content I suggest is how many cases in their jurisdiction have not followed due process of law and have not been corrected.

Of course, in order to implement the rule of law, the implementation of the due process of law should also increase investment. The simplest way is to transfer hundreds of billions of yuan of funds now spent on improper administrative acts to the construction of the rule of law, that is, to increase the number of judges, to safeguard the legitimate rights of parties and lawyers, to establish circuit courts of the central government, and so on. When the due process of law is followed, the abuse of power by administrative officials will be restrained, and the widespread infringement and corruption will be significantly reduced. At the same time, social concepts will change. People will clearly realize that an administrative act that fails to follow the due process of law is an invalid act, and citizens and enterprises can refuse the requirements of the administrative department; when citizens and enterprises report an act that fails to follow the due process of law, it is a legal act that they protect their rights, and they will become the active demand side of the rule of law. Their demands on the administrative departments of the government for due process of law will, in turn, restrict and change the behavior of government officials, and significantly reduce the active infringement on citizens and enterprises.

Some people say that our judicial system lacks this tradition and it is difficult to meet this standard in the short term. Actually not. China has a judicial tradition of following the procedure and pursuing “no wrong, no Indulgence”. In the Song Dynasty, there was an institution, that is, if the suspect cried out for injustice, they would immediately change to another court for retrial (Zhang Li, Humanistic Spirit in the Judicial Culture of the Song Dynasty (Electronic Edition), Hebei People’s publishing house, 2010, pp. 144-145). This tradition even passed to the Qing Dynasty. The famous case of Wang Shuwen was that after the suspect concerned cried out “wrong”  before his excution, he immediately started the retrial procedure, and finally he was redressed (Xu Zhongming, et al., Who is the Real Murderer, Guangxi Normal University Press, pp. 127-191). This is an example of following the procedure to correct a wrong case. Another example is that the wife herself confessed to kill her husband, but was suspected by officials of the Ministry of Justice, and was rejected for retrial three times (Xu Zhongming et al., pp. 1-43). It’s a good example of not relying on confession to prevent torture. After redressing the “Three Archways case”, Hu Chuanjin, who directly made the wrong case and caused the innocent death of two people, was punished to die, while Hong Rukui, who was responsible for the trial of the case, was dismissed and exiled (Xu Zhongming, et al., pp. 230-231). It’s also a good case of pursuing responsibility for a wrong case. The backwardness of the rule of law in our country, for the time being, does not need to be compared with other countries. First of all, it is thousands of years behind China itself.

Now, however, there is an opportunity for change. Turning an expedient solution to the current problem into a basic principle mainly depends on a long-term vision of civilization. Although human’s limited rationality can’t create a basic civilization rule in advance, it should have the ability to recognize when the rule appears. In the 12th century, Henry II set up the royal circuit court to start the common law process, perhaps just in order to compete with lords for judicial power and increase the royal income. By Henry III, the jurisdiction of the royal court extended to “illegal infringement”, and the accusation of this crime “was considered as an effective way to expose and punish the abuse of power by local officials” (Lin Zhiqiang, Between Autocracy and Constitutionalism, Zhongshan University Press, 2016, P. 88). The trial of “illegal infringement” by the royal court greatly reduced the infringement and corruption of local government officials, and at the same time improved the authority of the royal family. Today, if our government takes the implementation of the rule of law and the protection of property rights as the “first-order macro policy”, and clearly knows that this is not only an urgent policy, but also a long-standing constitutional principle, we can use this opportunity to move towards the road of the rule of law. Its significance will transcend the current economic problems, and it is related to the real rejuvenation of Chinese civilization.

[Note] From January to October 2019, estimation of Keqiang index: the growth rate of goods turnover, 5.4% (weight 25%); the growth rate of money supply (M1), 3.3% (weight 35%); the growth rate of power generation, 3.1% (40%). The Keqiang index was 3.8%.

December 11, 2019 in Fivewoods Studio

December 23, 2019 first published in FT Chinese

 

 

Author: flourishflood

Economist, Confucianist

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