Dominant Plants Relocations and Property Rights in China's Socialist Democracy

Abstract

This paper analyzes the emerging issue of dominant plant relocations in China. Dominant plant relocations have great potential to adversely affect vast numbers of laid-off workers and their communities. Chinese commentators generally follow many U.S. economists and lawyers in thinking that the effects of dominant plant relocations result inevitably from the adoption of a market economy, and that the freedom to relocate plants, overall, promotes social efficiency. By comparative analysis, I demonstrate how U.S. policy grants plants near-absolute freedom to relocate, whereas some EU countries take employee interests into account through employee involvements in corporate decision making. This enormous divergence in policy is largely driven by different conceptions of efficiency, property right and democracy. I argue, against the prevailing view in both the U.S. and China, that dominant plant relocations are not inherently socially efficient. Even if this is not the case, social efficiency in itself does not necessarily justify full freedom of dominant plants to relocate. The failure of U.S. policy analysts and policymakers to distinguish dominant plants from non-dominant plants, has prevented them from developing alternative policies to remedy these issues in the U.S. more effectively. I claim that China’s socialist democracy embodies the conception of equal access to necessary property, and this conception is fundamental to the socialist democratic way of life. Specifically, it establishes people’s right to a job in the community where they were born or have lived for a long time. Dominant plant relocations effectively render this right unachievable. This, combined with my critique on the efficiency claim, suggests that China must reject the U.S. approach and take progressive regulations on their freedom to relocate. These regulations need not resemble regulations in the EU either. To invite further debate, I propose separate policies on relocations of state-owned plants and those of private plants. State-owned plants should voluntarily weigh adverse effects in their decisions. I provide two tentative solutions to private dominant plants. First is extending the advance-notice period in proportion to the number of employees. The second contains both opportunities and challenges. That is to grant local governments the power to take over dominant plants, provided that just compensation is rendered to plant owners.