The State Enterprise As A Tool

Why is a state-owned enterprise being? What is the nature of it? These, the rooted origins of many problems related to a state-owned enterprise, are often ignored by theorists. The State Enterprise as a Tool——A study on the Nature and Reform of State Enterprises is to reveal its nature-a tool used by the government to regulate the economy and the society. The book is to prove and elucidate theoretically the functions, natures and status of tate enterprises, and through the analysis of past reforms in this perspective, to put forward a new round of reform plans.The book comes in4chapters. Chapter One deals with the relationship between state enterprises and socialism, In conventional theories, public ownership is closely connected with socialism. To study the state enterprise as a tool, we should break through the traditional theory. Based on the study of the theory of Karl Marx, Friedrich Engels, Vladimir Lenin, Joseph Stalin and Mao Zedong on the relationship of socialism and public ownership, the author summerizes our party’s efforts in this field since the reform, and proposes new ideas in this chapter. The following points are addressed:1. Marx and Engels regard the communist public ownership as a collective entity of free individuals while Lenin draws the period of public ownership to the stage of socialism and considers state ownership to be the mainstay of public ownership. Even when Lenin soon realizes the fact that the nationalization effort is in too much a haste and advocates policy of retreat, state ownership has still been regarded as having the same status. Stalin continues and perfectes the idea to the extent of forming the Stalin-styled socialism in which state ownership plays a dominant role. This has been the model followed by other socialist countries. So did our country in the past. For this reason, the Post-Stalin socialist ideas are quite different from Marx’s communist ideas in nature.2. The public ownership conceived by Karl Marx does not include state ownership. In the past we held that public ownership comes in two forms:ownership by the entire people and collective ownership. However, Marx defines it as the union of individual ownership, which stays at the civil level; while state ownership is at the bureaucratic level. The civil and bureaucratic are essentially two contradictory levels. 3. Since public ownership does not necessarily include state ownership, there should be no positive connection between state enterprises and socialism. Therefore, state enterprises do not necessarily lay the foundation for socialism either in theory or practice.Chapter Two addresses the nature of state enterprises. When we are clear about the relationship between public ownership and socialism, special attention is paid to the various problems concerning state enterprises. First, the origin of state enterprises is discussed. A new definition is produced as "a state-owned enterprise is an economic entity in which the government provides funds or is a share-holder and exerts direct or indirect control, and an entity that provides goods and services to the society by means of the market." The different functions of the state enterprise in various periods and environments as well as its character as a special corporate legal person are all dealt with. Second, the functions as a tool of state-owned enterprise are analyzed. It is held there are three functions—serving the politics, serving the economy and serving the public. Gossen’s three laws on utility are employed for discussing the tool function of state-owned enterprises. The evolution, alienation and rectification of the tool functions are identified. Finally, the problematic issues in the reform of state enterprises are discussed with the tool theory and the conclusion is reached as such "any reform ignoring the nature of the state enterprise can only be labeled as an empty effort."In Chapter Three, the author reviews on the past struggles of state enterprises in the operation of state economy. Demonstrations are shown to reveal the state-owned enterprise is a tool for the government to regulate economy and society. The author retrospects on the effort of nationalization after the Great Depress and WWII, the global privatization wave in the wake of Thatcher’s revolution and the nationalization wave that the international financial crisis has brought about. The author holds:1. the wave of nationalization conforms to the needs of coping with economic crisis and war, the needs of regulating social economy and political ideals and ideology; the state enterprise, as an important carrier of public goods and services for the government, serves as a lever that helps perfect the social and industrial structure and promote the advancement of science and technology in times of stable social economy, with a vital role to play especially when the market economy fails;2. the wave of privatization is usually brought about by the rise of new liberalism, unsatisfactory aspects in profits after nationalization and the reshuffling of economy caused by the advancement of science and technology. Usually privatization is conducive to free competition, the increase of productivity and helps check the government’s intervention on corporations. However, privatization has its limitations. In lack of relevant investing laws, privatization is likely to turn state monopoly into private monopoly. It may dilute on the public goods and services provided by the government. Regardless of the present institutional legacy, large-scale privatization may wreak havoc on social economy.This chapter reaches the following conclusions:1. For nationalization and privatization, there is no saying which is better. Some think privatization brings higher efficiency, but it is not true because of there being no grounds for comparison. In a naturalized condition, economic and social benefits are balanced, in which the lower economy is meant to achieve some social benefits. In addition, the benefits brought by nationalization is, in many periods, far beyond those in privatized economy at the same time.2. Nationalization and privatization are both tools for government to regulate the economy. The nationalization or privatization efforts in the western world are all launched by the government, aiming for serving the social economy, and they are in each time a large-scale rectification in the economic structure. The two complement each other instead of fighting off each other.3. Nationalization or privatization has no political connotations per se. Their rotations reflect the dynamic evolution of governmental functions and market mechanisms. If labeled with political tags, they are bound to turn into uncontrollable forces, highly motivated to annihilate the other. The former Soviet Union and now Russia is a case in point. History has taught us that neither is it right to adopt total nationalization nor is it right to adopt total privatization, both of which go against the economic laws and will never last.Chapter Four addresses the new round of reforms of state enterprises in China, which is the purpose of proving the state enterprise as a government tool. In this chapter, following a summary of reform history, several types of reform undertakings have been assessed and new ways of partitioning the phases are posited. The First Phase, from1978to1989, is characterized by benefit-oriented reforms. The Second Phase, from1992to2007, is featured by reforms orientated towards property rights. The opinions about the standard and purpose of state enterprises, now gaining currency, have become the author’s targets of condemnation with the help of the tool theory. The author closely examines the escalating "Re-nationalization" efforts since2006, claiming that they are fundamentally different from the nationalization programs in the western world in the wake of international financial crisis. On the one hand, the nationalization in the western world is not large in scale and purposefully directed, mainly towards the salvage of financial enterprises facing bankruptcy while in China it permeates all sectors; on the other hand, the nationalization efforts in the west are expedient policies and ready to be withdrawn when conditions are alleviated while in China no withdrawal is planned. Moreover, western reforms of nationalization are intended to aid privately-owned enterprises and the general public while our government seeks the opportunity to develop state enterprises without any trace of trying to relieving low-income citizens. Therefore, it is logically wrong to analyze the "Re-nationalization" effort in China with western examples. The strategies that state enterprises should adopt-forward or backwards-are both normal policies. The point is they should be measured with the tool theory as to whether or how or in what sector they should behave. Based on the tool theory, the author finally proposes the new ideas of the new round of state enterprise reform. Thirty years of high-speed development has brought us great achievement. However, this speedy growth characterized by high input, high consumption and high pollution is now like an spent bullet. The turning-point is near at hand-the mode of development awaits changes and the change should begin with state-owned enterprises.The new round of state enterprise reforms in China is function-oriented. They are mainly featured by four strategic transferences:the transference of state-owned assets from productive fields to the field of public goods and services; the diversification of state-owned stock holdings and transference from stock proprietary to stock taking and from holding large stocks to medium or small stocks, helping its profit growth in the free ride; the transference from conventional industries to high-tech fields, highlighting the leading and guiding role of state enterprises; and the transference from common industries to crucial sectors connected with state security and vital economic industries to strengthen national defense and core competitiveness.This is a new reform following a totally different path, which, focusing on the functions of state enterprises, intends to promote the reform of socialist market economy. However, the state enterprise alone cannot fulfill it, as it is at last pivoted on the reforms of the government governance. For this reason, the author proposes in this chapter the idea of reforming the governance. If no reforms take place in the government as the subject of profits, if no effort is made to transfer the focus of government work from economic matters to social and public matters, and if no transference is made for the government from micro-regulation to macro-regulation, the new round of the state enterprise reforms will become a futile attempt.