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Are workers better off in a state-owned factory, or private one?
By Wang Yong |
August 3, 2009, Monday
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Print Edition
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IT'S surprising for an official supposed to safeguard state assets to ridicule workers' preference for a state-owned enterprise.
Wang Xidong, an official in charge of state assets in Jilin Province, northeast China, coined the derogatory term "state-ownership complex" last month to describe the mentality of workers at a state-owned iron and steel company who opposed turning over majority control to a private company.
Before exposing Wang's ludicrous thinking, let's recount the events that led to coining such a bizarre buzzword.
According to the 21st Century Business Herald, Jilin's state-owned assets supervision and administration commission decided on July 22 to allow Jianlong Group, a private firm, to take control of 66 percent of the shares of Tonghua Iron and Steel Group; it originally had held 36 percent. The move would make it the biggest shareholder of the state-owned firm.
On July 23, Tonghua workers were informed of the decision. On July 24, many workers gathered in front of the company's office, shouting "Beat it, Jianlong."
Xinhua news agency reported that on July 24, angry workers blocked transport of raw materials, halting operation of seven furnaces at Tonghua, one of China's largest state-owned companies.
Manager killed
Chen Guojun, a manager from Jianlong's side who was newly appointed general manager of the Tonghua Iron and Steel Group, was beaten to death in the ensuing conflict.
At a press conference on July 27, Wang Xidong pointed a finger at "a small handful of retirees who spread rumors and took advantage of the 'state-ownership complex' deep in the minds of some people," Xinhua reported.
Wang seemed so sure of who were behind the death of Chen Guojun even before police came to a conclusion. And in the context of his speech, it was clear he did not like what he called a "state-ownership complex."
But what's wrong with a "state-ownership complex" in a socialist country? Many state-owned companies are inefficient and even corrupt, for sure, but that has less to do with the nature of state ownership than with those companies' poor corporate governance. China's constitution says state ownership is the pillar of China's national economy, and that together with collective ownership, it forms the public ownership that lies at the heart of a socialist economy.
This is not to say that a state-owned company cannot absorb private investment, but Wang went too far in finding fault with workers' affection for state ownership. He apparently forgot that what China pursues is a socialist market economy, not just any form of market economy, certainly not a dog-eat-dog market economy.
Better private?
Many of China's state-owned companies have problem such as red tape, nepotism and low efficiency, but does China have to root out state ownership to overcome those corporate governance problems? Is private ownership better by nature?
Jianlong acquired 36.19 percent of Tonghua's shares in 2005, becoming the second-largest shareholder after the Jilin state-owned assets supervision and administration commission.
In the past three years, the Economic Observer reported, some managers from Jianlong's side earned about 4 million yuan (US$585,430) a year while Tonghua workers salaries fell from about 1,200 yuan before 2005 to about 700 yuan at present.
On July 24, Chen Guojun was reported to have ordered the assembled crowd to go back to work, saying he would sack them otherwise.
He forgot, or ultimately never knew, that any move to rearrange workers in restructuring a state-owned company must be sanctioned by the congress of employee representatives. For all the merits of private ownership, democracy is not what makes it tick.
Wang Xidong called protesting workers "some people who did not know the truth." Xinhua news agency asked on July 28: "Why did you fail to let people know the truth in the first place, if they really did not know the truth?"
Wang Xidong, an official in charge of state assets in Jilin Province, northeast China, coined the derogatory term "state-ownership complex" last month to describe the mentality of workers at a state-owned iron and steel company who opposed turning over majority control to a private company.
Before exposing Wang's ludicrous thinking, let's recount the events that led to coining such a bizarre buzzword.
According to the 21st Century Business Herald, Jilin's state-owned assets supervision and administration commission decided on July 22 to allow Jianlong Group, a private firm, to take control of 66 percent of the shares of Tonghua Iron and Steel Group; it originally had held 36 percent. The move would make it the biggest shareholder of the state-owned firm.
On July 23, Tonghua workers were informed of the decision. On July 24, many workers gathered in front of the company's office, shouting "Beat it, Jianlong."
Xinhua news agency reported that on July 24, angry workers blocked transport of raw materials, halting operation of seven furnaces at Tonghua, one of China's largest state-owned companies.
Manager killed
Chen Guojun, a manager from Jianlong's side who was newly appointed general manager of the Tonghua Iron and Steel Group, was beaten to death in the ensuing conflict.
At a press conference on July 27, Wang Xidong pointed a finger at "a small handful of retirees who spread rumors and took advantage of the 'state-ownership complex' deep in the minds of some people," Xinhua reported.
Wang seemed so sure of who were behind the death of Chen Guojun even before police came to a conclusion. And in the context of his speech, it was clear he did not like what he called a "state-ownership complex."
But what's wrong with a "state-ownership complex" in a socialist country? Many state-owned companies are inefficient and even corrupt, for sure, but that has less to do with the nature of state ownership than with those companies' poor corporate governance. China's constitution says state ownership is the pillar of China's national economy, and that together with collective ownership, it forms the public ownership that lies at the heart of a socialist economy.
This is not to say that a state-owned company cannot absorb private investment, but Wang went too far in finding fault with workers' affection for state ownership. He apparently forgot that what China pursues is a socialist market economy, not just any form of market economy, certainly not a dog-eat-dog market economy.
Better private?
Many of China's state-owned companies have problem such as red tape, nepotism and low efficiency, but does China have to root out state ownership to overcome those corporate governance problems? Is private ownership better by nature?
Jianlong acquired 36.19 percent of Tonghua's shares in 2005, becoming the second-largest shareholder after the Jilin state-owned assets supervision and administration commission.
In the past three years, the Economic Observer reported, some managers from Jianlong's side earned about 4 million yuan (US$585,430) a year while Tonghua workers salaries fell from about 1,200 yuan before 2005 to about 700 yuan at present.
On July 24, Chen Guojun was reported to have ordered the assembled crowd to go back to work, saying he would sack them otherwise.
He forgot, or ultimately never knew, that any move to rearrange workers in restructuring a state-owned company must be sanctioned by the congress of employee representatives. For all the merits of private ownership, democracy is not what makes it tick.
Wang Xidong called protesting workers "some people who did not know the truth." Xinhua news agency asked on July 28: "Why did you fail to let people know the truth in the first place, if they really did not know the truth?"
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