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Radical Political EconomicsXie et al.
RRPXXX10.1177/0486613412475183Review of
Review of Radical Political Economics 45(4) 440448 2013 Union for Radical Political Economics Reprints and permissions: sagepub.com/journalsPermissions.nav DOI: 10.1177/0486613412475183 rrpe.sagepub.com
Abstract The recent round of debate over Chinas state and private economy has fundamentally touched upon whether or not China should abandon or strengthen the socialist elements within the market economy. In this paper, we argue that the debate is, in essence, a continued class struggle in the political and ideological superstructure. Then we discuss the foreseeable future of stateowned enterprises (SOEs) under current political and economic conditions. We will further propose the necessary reforms for the SOEs to move towards a truly socialist form of public ownership. JEL classification: P21, P26, P31 Keywords market economy, socialism, Chinese economy, state-owned enterprises
1. Introduction
In 2009, two large cases of business reconstruction caught much attention in China. One was the takeover of the private Rizhao Iron and Steel Mill by the state-owned Shandong Iron and Steel Group; the other was the nationalization of small private coal mines in Shanxi Province. At the same time, while the recent global crisis heavily hit Chinas private economy, Chinas four-trillion-yuan ($585 billion) stimulus package has focused almost exclusively on the state sector. These events triggered a new round of attacks from the rightist elites on the state economy, followed by a wide-ranging debate among Chinese intellectuals, policy advisors, and government officials (Xie et al. 2012). The most sensational arguments against state-owned enterprises (SOEs) were put forward in a 2011 report on Chinas SOEs published by the Unirule Institute of Economics, Chinas most influential non-governmental economic think tank. The issues of contention were whether or not SOEs are efficient, monopolistic, and/or deteriorating the income distribution. People were sharply divided between the right and the left. The debate intensified in early 2012, when the World Bank and a Chinese Cabinet think tank published a new report titled China 2030, which called for further downsizing the share of
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School of Economics, Renmin University of China, Beijing, China Department of Economics, University of Massachusetts, Amherst, USA
Date accepted: July 17, 2012 Corresponding Author: Zhongjin Li, Department of Economics, University of Massachusetts, Thompson Hall, 200 Hicks Way, Amherst, MA 01003, USA. Email: zhongjin@econs.umass.edu
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SOEs in industrial output from twenty-seven percent in 2010 to around ten percent in 2030 (World Bank 2012). This was, by no means, a new prescription. Fifteen years ago, along with the report titled China 2020 also from the World Bank, China witnessed a full-scale privatization of SOEs and market liberalization. However, today the resistance against privatization has become much stronger than before. At the China 2030 press conference, Du Jianguo, an independent scholar, stood up and denounced the World Bank policy with his leaflets titled World Bank, Go Home with Your Poison. This open protest has so far received enormous support from the left as well as denouncements from the right. In what follows, we will consider the implications of the debate by focusing on three sets of questions. First, what is the nature of the debate, and how can we understand it in the context of Chinese reform? Second, what are the likely changes for SOEs considering the current political and economic situation? Third, how can we transform SOEs towards socialism so they can better represent the peoples interests?
2.The Debate as Continued Class Struggle in the Political and Ideological Superstructure
When Chinese leaders initiated the reform towards marketization in 1978, they claimed that the goal was to rejuvenate and improve the socialist system in China. Some important steps of the reform were developing private enterprises, attracting foreign investment, and offering private and foreign enterprises conditions more favorable than those given to SOEs and domestic enterprises. In the process of dismantling the planned economyespecially in price reforms, the establishment of capital and land markets, and SOE reformssome party members and cadres in enterprises and government started to accumulate capital through both legal and illegal means. The weakening of central planning made the national economy increasingly reliant on market expansion and monetary incentives; various contradictions springing up during the reform were expected to be solved by further marketization. Under the name of reform, education, health care, housing, and the social security system, which were operated publicly as representatives of socialism before the reform, have been marketized continuously. The objective of the reform was declared to be the creation of a socialist market economy. However, in the 1990s, the key issue changed into being the transition to a generally marketbased economy. While the path and means of this transition became a priority of theoretical discussions and policy designs, the aftermath of this transitionthe resulting economic model and its nature - was largely absent from discussions, consciously or unconsciously. In the thirty years since 1978, time has revealed that Chinas crossing the river by touching stones was actually a move towards an American-style market economy. In this process, the socialist elements of the Chinese economy have been reduced only to SOEs and macroeconomic control. The state-owned economy has largely been regarded as the basis for state intervention, but has not functioned as models for other parts of the economy to follow (Song and Sun 2010). Worse, many SOEs were privatized or simply shut down. During the mid-1990s, massive privatization of SOEs took the form of grasping the large and letting go of the small (zhuada fangxiao), under which all medium- and small-scale SOEs and part of large-scale SOEs were privatized. The beneficiaries included governmental officials, former SOE managers, private capitalists connected with government, and transnational corporations (Li 2011). From this process has emerged, unsurprisingly, a new capitalist class composed mainly of private proprietors and multinational capital and its related interest groups. As the size and wealth of this emerging capitalist class grew larger and their power grew stronger, they would necessarily demand abandoning the socialist legacy which might impede their further accumulation of wealth (Kotz 2009). Meanwhile, tens of millions of former state-owned and
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collective unit workers were laid off and impoverished. Besides the urban labor force, migrant workers from Chinas rural belly have been the dominant source of labor supply for industrial sectors. The rising working class has organized a significant amount of petitions, protests, and strikes against the new capitalist class (Lee 2007). However, so far direct and violent capital-labor conflict has not been the dominant form of class struggle in China. First, the proletarianization of rural migrant workers is yet to be complete, because despite working in cities, the reproduction of their labor power still highly relies on the countryside where they own use rights of land and other productive resources (Pun et al. 2009). Second, although a rising tide of strikes has been conspicuous recently, most of them have been sporadic, localized, and focusing on immediate economic demands such as higher wages and better working conditions, hoping to draw attention and help from the government. These labor protests have shown that Chinas new working class is still largely a class-in-itself, not a class-for-itself. Instead, class struggle in the ideological sphere has been very significant. As Marx writes, theory becomes a material force as soon as it has gripped the masses (Marx 1978: 1843). In the top-down reform led by the Communist Party, society was successfully inculcated with the reform ideology which soon became hegemonic in discourse. Moreover, because the economic structure is the basis of politics and ideology, the changes in ownership structure and class structure that have accompanied the rise of capitalist private enterprises have been inevitably reflected in theoretical, ideological, and policy levels. The capitalist class has also taken advantage of ideological tools, like higher education and new media, to advance their interests. First, as the national economy has been geared to the American style, economics education in China has also been Americanized. Many economists trained in neoliberal economics in the United States have been invited to China and granted the power to reform economics education in top academic institutions. The popularization of neoliberal economics has worked along with the marginalization of Marxist economics, and a generation of young scholars with blind faith in neoliberalism has also been brought up (Cohn 2011). For them, the inefficiency of SOEs has become a tenet of faith, which indirectly negates the socialist elements in the market economy. In this process, socialism has been theoretically weakened and further reduced to abstract concepts such as equality or fairness, whilst capitalist features of the reform have been significantly strengthened. Second, before 1978 socialism in China was generally equivalent to a combination of public ownership, a planned economy, and distribution according to work. As reform proceeds, a planned economy and distribution according to work have been replaced with a market economy and distribution according to factor (mainly capital) contribution; and the dominant position of public ownership has been replaced with the controlling power of state ownership. As a result, SOEs have become the last resort for socialist elements of the market economy. This is why denouncing or defending SOEs has become the focal point of theoretical and ideological debates in China since 2004. Third, Chinese rightist elites are already experienced in transforming a topic into a public consensus via the media under their control. In this way, they have pressured the government to redesign policies in their favor. For instance, during the 2000s and 2010s, the rightist elites started a series of debates like the debate on SOE management buy-outs in 2004, on Chinese economics education in 2005, on the orientation of Chinese reform in 2006, on democratic socialism in 2007, on universal values and the 08 Charter in 2008. Although topics differed, these debates all revolved around whether China should persevere with or give up socialism. Moreover, each was halted by party and state officials out of fear of challenging the legitimacy of the economic system too much; each was ended by the authority as a compromise to balance the left and the right. However, the way of compromise, in fact, always leaves the door open for further ideological manipulations by rightist elites who oppose socialism and embrace privatization.
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As Michael Burawoy argues, when struggle takes place on the terrain of ideology, the consequences of struggle must be understood through an examination of the actual relations behind ideology.Where interests are taken as given, ideology becomes a resource that people manipulate to advance their interests or a cement that contains conflict or minimizes strain (1979). Also as Marx suggests, through ideological forms people become conscious of the conflict between the productive forces and the superstructure, and fight it out (Marx 1978: 1859). At present, the debates on SOEs reveal the continuation of privatization and ongoing class struggle in China. Rightist intellectuals, policy advisors, and government officials, as well as the media, initiated these debates in order to influence the next leadership of the central government and policy making in general. Their ultimate goal is to eliminate public ownership, legitimize managers embezzlement of public wealth by privatizing SOEs, allow transnational capitals to control the Chinese economy, and thus eliminate all remaining socialist elements.
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judiciary or adopting a bicameral or federal system, and also clearly declared that further privatization was not under consideration (Wu 2011). Serial reports published in Guangming Daily recently emphasized the importance of SOEs in consolidating and developing public ownership, promoting advantages of the socialist system, strengthening economic and defense power, increasing national coherence, curbing income inequality, maintaining social fairness and justice, promoting general prosperity, consolidating the states political power, and increasing social harmony.1 Second, it is unreasonable and also difficult to further privatize the current state-owned economy. Most of the SOEs either have already gone through an initial public offering (IPO) or are huge in scale. Their major businesses involve capital- and/or technology-intensive industries. Eighty percent of the central SOEs quality assets are concentrated in listed companies and are of high market value. The property-rights exchanges of the unlisted ones must be conducted through a designated special market by public auction. In practice, Chinese private investors so far cannot afford to buy out or operate these SOEs. Also, since the debate over SOE management buy-outs in 2004, the whole society has been cautious about the complex manipulations through which managers of SOEs turned public assets into private ones, thus the state-owned assets cannot be grabbed as easily as before. Third, public attention, social pressures, and rising economic nationalism have made further privatization more difficult. First of all, the Chinese state-sector working class has accumulated class experiences in the pre-reform era and has developed a substantial degree of socialist consciousness. Once they realized that their class interests were invaded by the new capitalist class and its supporting government officials, they strongly opposed further privatization of SOEs (Li 2011). For instance, in July 2009, the proposal for privatizing Jilin Tonghua Iron and Steel Group triggered massive and violent self-organized worker protests, in which seven blast furnaces stopped working and one high-ranking manager was beaten to death. This event forced the Jilin provincial government to stop its initial plan of privatizing the enterprise. Similarly, the privatization of Henan Linzhou Iron and Steel Group was halted due to massive worker protests, in which Puyang SASACs vice director was placed under house arrest by workers for 90 hours. Both cases imply that in order to avoid further capital-labor conflicts and maintain social stability, the government will be more cautious on SOEs further reform. In addition, many nationalists argue for SOEs because SOEs are the major force against foreign capital. One study has shown that among twenty-seven major industries, wherever SOEs do not take a large share, foreign capital occupies the dominant position (Gao 2010). Thus if the SOEs retreat, it is likely that transnational monopoly capital will come to dominate Chinese domestic resources and markets. Finally, it is fallacious to exaggerate the monopoly of the state-owned economy, a central argument made by the right elites. First, monopoly is an inevitable outcome of the increasing degree of socialization of production. As a market phenomenon, monopoly is not necessarily related with forms of ownership. Due to technical and resource advantages, economy of scale, and policy reasons, both SOEs and private enterprises would develop into monopoly. Additionally, under globalization SOEs mainly compete with large transnational corporations; therefore the problem of the SOEs is not being too large, but instead being too small to compete. Also, financial statements have shown that SOEs perform well in many aspects, so it is ungrounded to implement privatization by accusing them of low efficiency (C. Zhang and Y. Zhang 2011). Thus, the current problems in Chinas SOEs are not associated with bad performance at all, but something else. In this regard, privatization, rather than being the first solution, will only make them worse (Chang 2007).
Guangming Daily is a newspaper led and managed by the Central Committee of the Chinese Communist Party. Intellectuals are its major targeted audience.
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The Angang Constitution consists of the leaders involvement in labor and the workers involvement in management. It also reforms unreasonable rules and regulations, which the general public, the leaders, and the technicians all take part in. It was initiated in the Anshan Iron and Steel Factory in Liaoning Province and soon advocated by Mao in 1960 nationwide.
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advantages of the socialist system. It is worth emphasizing here that this is not simply a battle on an ideological question. In a practical process tangled with the issue of whether or not to give up the basic socialist elements of the economic system, confrontations between economic powers are very real. Theoretical studies and propaganda are important; nevertheless, ideological rhetoric will be useless if the socialist campaign has no real power. With the deepening of the worldwide capitalist crisis and the awakening of the Chinese working class and their rising level of organization, the changes in Chinese socioeconomic structures may light the way to a socialist future. Appendix
Appendix 1. Per Capita Annual Compensation of Urban Employees in Different Units (2008-2010) Year State-owned (yuan) Collectively-owned (yuan) Privately-owned (yuan) 2008 31,005 18,338 17,071 2009 35,053 20,958 18,199 2010 39,471 24,430 20,759
Notes: Data for other types of non-privately-owned units are not reported here. Sources: National Bureau of Statistics of China, 2010b, 2010c, 2011a, 2011b.
Appendix 2. Average Wage of Employed Persons in Urban Units by Sector in Detail (2010) (units: yuan) State-owned units National Total Agriculture, Forestry, Animal Husbandry, and Fishery Mining Manufacturing Production and Distribution of Electricity, Gas, and Water Construction Traffic, Transport, Storage, and Post Information Transmission, Computer Services, and Software Wholesale and Retail Trades Hotels and Catering Services Financial Intermediation Real Estate Leasing and Business Services Scientific Research, Technical Service, and Geologic Prospecting Management of Water Conservancy, Environment Services to Households and Other Services Education Health, Social Security, and Social Welfare Culture, Sports, and Entertainment Public Management and Social Organization 38,359 16,522 44,904 36,386 47,724 31,777 40,097 46,402 35,814 23,864 66,014 33,967 33,680 53,235 25,478 32,417 39,166 41,112 42,367 38,387 Urban collectiveowned units 24,010 18,156 23,791 20,841 33,851 20,210 19,882 37,576 16,816 18,808 44,154 24,617 20,981 37,538 18,551 20,818 31,486 32,645 24,796 26,957 Urban private units 20,759 16,370 20,981 20,090 18,834 22,228 21,989 31,226 19,928 17,531 30,513 23,228 23,879 28,886 19,607 18,350 21,862 21,571 20,012 8,900
Note: Data for other types of non-private-owned units are not reported here. Source: China Statistics Yearbook, 2011, Tables 4-15, 4-17.
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Funding
The author(s) received no financial support for the research, authorship, and/or publication of this article.
References
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Fusheng Xie, PhD, is an associate professor at the School of Economics, Renmin University of China, Beijing, China. An Li and Zhongjin Li are PhD students at the Department of Economics, University of Massachusetts Amherst.