Enterprise Autonomy Research Articles

Chinese Enterprise Reforms: Convergence with the Japanese Model?

This paper explores Chinese efforts to join the ranks of the East Asian developing economies of South Korea, Taiwan, Hong Kong and Singapore. It describes Chinese efforts to emulate the Japanese model of industrial management rather than American management schemes, and it notes the compatibilities between certain legacies of Maoist socialism in China's state enterprises and the Japanese model. In particular, the paper traces the development of the Chinese employment system in the state sector. Compatibilities include indications that the Chinese workers could become company men, that they prefer paternalistic managers, that their work responds to appreciation, and that they do not regard management and worker interests as necessarily conflictual. Granted the evolution of greater autonomy for Chinese state enterprises, the paper concludes that an organization-oriented system can develop within Chinese state enterprises and that a shift to a market economy need not be accompanied by a market-oriented employment system. Copyright 1995 by Oxford University Press.

Completing China's Move to the Market

Beginning in late 1978, by luck as much as design, China arrived at a strategy for market-oriented economic reform that combined substantial reform with rapid growth in GDP and exports. The sequencing of reform began with the ‘easy to reform’ sectors, agriculture and foreign trade, and then took up the more difficult task of reforming the large state-owned enterprises. With respect to agriculture, small-scale industry, and foreign investment, China found ways of introducing meaningful property rights into the increasingly marketized system. A partially unreformed financial system and inadequate autonomy of large state enterprises accounts, however, for the current stop-go nature of Chinese development.

The Chinese steel industry

The Chinese steel industry achieved even growth in the 1980s and China is now the world's fourth largest steel producing country. Two factors that have played important roles in this development of the Chinese steel industry are the reform of the system or the strengthening of enterprise autonomy accompanying market reform, and the introduction of advanced technology from Western countries as a continuing policy since the 1970s. The Chinese steel industry still lags far behind those of other steel producing countries in terms of equipment and production technology, however. The present situation and problems of the Chinese steel industry in the 1990s are discussed here, together with a review of its development in the 1980s.

Managerial Autonomy of State-Owned Enterprises: Determining Factors

The present paper reports on managerial autonomy of state-owned enterprises (SOEs), or its reverse: the control which is exerted by government and supervising public authorities on SOEs. First, it examines the types of control applied. Using evidence from a sample of 110 Greek SOEs, the paper identifies certain distinct dimensions of control related to: strategic business-boundary issues, pricing decisions, resource acquisition and mobilisation issues. Second, environmental and organisational “determinants” of the control intensity are identified. Results broadly suggest that the intensity of control, as perceived by enterprise managers, is (i) positively related to dependence on the state for resources, to enterprise size, and to “political visibility,” i.e., social orientation of product market strategy, and (ii) negatively related to market competition and demand unpredictability. An interpretation of the results is attempted drawing on wider organisational, social and economic theories. Policy implications are discussed.

Reform the Economic Structure Starting with the Expansion of Enterprise Autonomy

Reform the Economic Structure Starting with the Expansion of Enterprise Autonomy

A Good Start in Economic Structural Reform

Abstract After our party shifted its focus of work, theoreticians and comrades doing practical work have further emancipated their minds. They have summed up the experiences and lessons of the past three decades of economic work and, learning from foreign experience, have enthusiastically explored the way to reform China's economic management system. This has added impetus to the Four Modernizations. Comrades in Sichuan Province, led by the provincial party committee, have actively experimented with this reform, and the breakthrough point they chose was expansion of enterprise autonomy.

Private Policies and the Autonomy of Enterprise: Danish Local and National Industrial Policy

A prevailing notion is that the boundaries between public and are becoming increasingly blurred in many West European countries. In this article, we argue that in the case of Danish industrial policy, we are dealing with something more than the blurring of existing boundaries. The policy processes that will be described reflect more profound changes in the political organization of the Danish society. The concept of private may capture the main features of these changes. Private policymaking can be described as a set of processes by which a loosely coupled network of actors voluntarily furnish themselves with means to formulate common strategies and to implement these through persuasion, threats, and promises as well as through negotiations, agreements, and enforceable sanctions. Private policymaking processes are informal, direct, long-lasting and multidimensional relations between a multitude of autonomous (collective) agents [Kenis 1990; Kenis and Schneider 1991; Marin and Mayntz 19911 who are in-

Lessons from Chinese state economic reform

Between 1978 and 1989 the People's Republic of China adopted a series of policy changes designed to reform economic decision—making and to improve efficiency by separating management from state ownership of the enterprises. Major reforms consisted of (a) decentralized decision—making and enterprise profit retention, (b) an economic responsibility system of profit quotas, contracting, and leasing, (c) collective management, (d) property transfer, and (e) the stock system and private property. These changes represent a shift from a monolithic economic organization to economic agency—the allowance of greater enterprise autonomy. Chinese government policy is seen as wanting to capture the economic benefits of decentralization while retaining the ability to direct enterprise activity. This ambivalence has led to contradictions of economic policy and results. The relationship of economic and political reform is discussed in the light of the Student Democracy Movement in April–June, 1989.

ECONOMIC REFORM AND ENVIRONMENTAL PROTECTION IN THE USSR

Environmental issues are of increasing political importance in the USSR as public awareness of the scope and effects of the problem is growing under conditions of glasnost'. The author examines the policy response since 1985, with particular emphasis on the implications of economic reform efforts, including discussion of expanded enterprise autonomy, cooperatives, joint ventures, land leasing, regional decentralization, and bureaucratic restructuring. While measures adopted, in theory, provide a framework for effective environmental policy, their realization and implementation face numerous obstacles and depend on continued pressure from the public, local organs, and the Supreme Soviet.

Enterprise Autonomy and Market Structures in China

Enterprise Autonomy and Market Structures in China

The Speed of Industrial Development and the Reform of the Economic System

Since late last year, we have seen extremely rapid growth in industrial production in our country. There are different views within academic circles as to the connection between this rapid development and economic structural reform. Some comrades believe that the high speed of industrial development is primarily an effect of the new economic system. They say, "The economic reform since 1978 has brought about a transformation in the national economic structure. The role of the market structure has expanded continuously, causing a continual rationalization of the combination and structure of the factors of the forces of production." "The structural environment that produced the motive for one-sided pursuit of higher output value has gradually disappeared in the course of reform, [and] the rapid economic growth in our country in 1984 was not a product of such a one-sided pursuit of output value." They therefore see the current rapid growth as a characteristic of the new economic structure, and believe that "we should have no fear, but only welcome the advent of rapid economic growth." Some comrades also believe that only by maintaining the current high speed of industrial growth can we advance the economic structural reform; otherwise the reform enterprise will encounter difficulties. I believe that these opinions are open to question. Naturally, the gradual acceleration in the rate of growth in industrial development over the last few years in our country is inseparable from economic structural reform. Owing to the implementation of the reforms, the autonomy of enterprises has expanded, their vitality has increased, their enthusiasm has been strengthened, management has been improved, and technological transformation has been accelerated. All these are indeed major reasons for the rapid industrial development. Improvement of the external conditions of industrial production, such as the development of agriculture, energy resources, transportation, and foreign trade are also inseparable from the reform. The rapid development of collective industry is, even more so, the result of reform. Therefore, it would be absolutely wrong to negate or underestimate the impact of economic structural reform on the high speed of industrial growth. Nonetheless, can we simply say that the current rapid growth in industry is the result of the new economic structure? Can we say that the traditional economic structure that led to the one-sided pursuit of higher output value by enterprises is "no longer of any real significance?" I feel that we cannot say this, because, to begin with, this argument does not conform to the real situation.

Soviet Economic Reform: From Resurgence to Retrenchment?

When Mikhail Gorbachev became General Secretary of the CPSU in March 1985, he inherited an economy beset with serious economic problems. Rates of growth of GNP and industrial production had slowed markedly, especially during the preceding decade. Agricultural output was stagnating, forcing the state to use large amounts of scarce hard currency to import food. Improvements in living standards had become so small as to be barely perceptible to the population, shortages and queues were endemic, and the underground economy seemed to be flourishing. With money incomes growing considerably faster than supplies of goods and services, work incentives were impaired, and inflationary pressures increased. Overall productivity had been declining, and the technological gap with the West seemed to be widening. After nearly sixty years of rapid industrialization, the economy's manufactures were largely unsalable in the West, its consumer goods were shoddy by comparison, and much of the social infrastructure was in a primitive state. Finally, Gorbachev inherited an entrenched and rigid economic system-socialist central planning-that clearly was obsolete. At the root of these growing difficulties was the gross waste of resources in the economy, its sluggish receptivity to innovation, and its unresponsiveness to consumer needs-all direct outcomes of an economic system obviously ripe for fundamental reform. Such had been the perception of the Brezhnev leadership two decades earlier, when it launched the 1965 reform program, then touted as the third great economic reform in all Soviet history.' That program reorganized bureaucracies, enlarged the autonomy of enterprises, introduced new forms of incentives, revised prices, moved a little way from central allocation of materials and investment, and sanctioned a more active role for banks. When these measures failed to yield the desired improvement in labor productivity, product quality, and responsiveness to innovation, the government adopted decree after decree throughout the 1970s and early 1980s in a perpetual effort to solve these and other problems through

Editors Introduction

The concept of "radical" economic reform has begun to encompass much more than the notion of increased enterprise autonomy and movement toward a socialist market mechanism. It is now clear that serious thought is also being given to fundamental changes in the property system. The lead article in our current issue by Vladimir Shkredov ("Socialism and Property") illustrates some of the thinking behind proposals for property reform. For Shkredov, the property relations that dominated in the mid-1980s were "one of the main factors" obstructing Soviet social and economic development. Echoing a point often made in the current literature on property, Shkredov argues that work collectives have traditionally been placed in a position where they could not help but regard the means of production with which they worked as belonging either to "someone else" or to "no one." The author does not spell out the details of a reformed property system. But he does stress the importance of distinguishing between strictly state property (which is "directly tied to the exercise of political power") and genuinely public or social property (which is based on various forms of self-management). Moreover, the former can be expected to decline and the latter to increase in relative importance in the future. The declining role of state property, in Shkredov's view, should be accompanied by the expansion of genuinely cooperative property and the private sector (in small-scale production).

Economic Reform And Structural Change In Laos

The year 1988 marked a watershed in the tempo of reform in the Lao People's Democratic Republik (LPDR). Mid-way through the second five-year development plan (1986-90) of the LPDR, the government of the Lao People's Revolutionary Party (LPRP) introduced bold initiatives in the economy, international relations, and domestic politics. These reforms elaborate upon the approach initiated at the fourth party congress of 1986, when a decisive change was made to the centralized, bureaucratic approach to economic development planning. In its place are the beginnings of a new economic management system characterized by state enterprise autonomy and market incentives.1 Prior to 1986, ideological orthodoxy was reflected not only in a commitment to central planning but also in political isolation from the non-socialist world. Both of these tenets appear to have been abandoned. It is no coincidence that the reform process in Laos takes place alongside similar developments in Vietnam and the Soviet Union, with which Laos has close ties. Laos has experienced low productivity, weak industry growth and a lack of export diversification. This has been accentuated by a fall in the level of economic growth, which in retrospect makes the second five-year plan targets appear over-ambitious. The policy initiatives in 1988 are an acknowledgement of this poor economic performance and the role of policies based on the orthodox approach in this failure. The pace of political change in 1988 was set by two events: the February Plenary Session of the Supreme People's Assembly (SPA); and the extraordinary session of the SPA in April which promulgated bold new legislation. Both of these events will be discussed later.

GORBACHEV'S PERESTROIKA

In its broadest sense, perestroika may encompass economic reforms or restructuring, openness to criticism, and democratization. One may attribute perestroika significantly to low performance, if not failure, in the Soviet system—notably, the need to modernize and to rectify lagging growth rates. The economic content of perestroika embodies fairly radical and comprehensive changes—notably, expanding enterprise autonomy and price mechanisms, reducing the scope and intensity of centralized planning, and allowing a larger role for individual and cooperative enterprise. Soviet experience supports the view that economic and political reforms are connected. Glasnost (openness) and democratization have expanded, partly as means to foster public support for economic restructuring. Such support is crucial, due to competing factions within the Communist Party and to the Party's opposition to more radical or democratizing reforms. Mikhail Gorbachev, after rejecting both Stalinism and post‐Stalinism, has turned to pre‐Stalinist sources—the Bolshevik Revolution, Lenin, Bukharin—for intellectual inspirations. Obstacles to reforms are substantial, and one may identify several alternative scenarios.

The Participation of Working People in the Management of Production as a Factor in Heightening Labor Activism

The decisions of the Twenty-seventh CPSU Congress defined the character and rate of movement toward the qualitatively new state of Soviet society: the intensification of the economy based on the sharp acceleration of the rate of scientific-technological progress, and the radical restructuring of the economic mechanism and the system of management in general. The Soviet state has entered a critical period in the development of the economy. The human factor becomes more important in every critical period of social development, especially when socialist development is the point at issue. Ideological and educational measures plus economic reforms (especially the restructuring of the economic mechanism) are instrumental in activating this factor, in restructuring people's thinking, in orienting them toward the acceleration of scientific-technological progress, in improving product quality, and in increasing responsibility for performance. The main direction in the concept of this restructuring is known: the improvement of centralized management in the solution of strategic problems combined with broader rights and increased autonomy of enterprises and associations.

The Simultaneity of the Effects of Devaluation: Implications for Modified Planned Economies

The paper attempts to provide a clearer conceptual basis for exchange rate policymaking in modified planned economies (MPEs), by clarifying the interactions involved in the simultaneous determination of the price level, terms of trade, real income and trade balance effects of a devaluation. Using a three-good model, it is shown that existing empirical estimates of trade elasticities in MPEs may be downwardly based, and that extreme pessimistic assessments of the effects of devaluation may not be entirely internally consistent. Although trade elasticities in MPEs probably are lower than in market economies, they could be raised by measures aimed at expanding factor mobility and enterprise autonomy.

INTRODUCING MARKET FORCES INTO MANAGERIAL DECISION‐MAKING IN CHINESE INDUSTRIAL ENTERPRISES

ABSTRACTThis paper focuses on the fundamental changes in the management of state enterprises that are taking place in China. Specifically, we discuss the expansion of enterprise autonomy and changes in the managerial decision‐making structure. The genesis of the reform programme is traced back to inefficiencies caused by the over‐centralized state planning system which reduced enterprise management to little more than an administrative function dominated by the Party secretary. As a consequence, managerial and technical cadres became demoralized and the growth of staff functions such as accounting, marketing and personnel management was stunted. From a series of experiments launched in 1978 has grown the realization that tinkering around with the state planning apparatus is insufficient to stimulate entrepreneurship and vigorous industrial expansion. Accordingly, reform has been launched on a broad front both within the state apparatus, in an endeavour to roll back external constraints on enterprise, and within the enterprise itself, by seeking to provide powerful incentives both to managerial cadres and workers through a system stressing individual responsibility and rewards commensurate with results. A number of severe constraints on the reform programme are analysed, in particular, the changing balance of power within the enterprise between the factory director, the Party secretary, the workers’congress and the trade union. Contradictions exist within the new structure of decision‐making but, given a period of political stability and sustained economic growth, there should be sufficient surplus to mollify discontent and stifle those who refuse to give up their belief in the virtues of having‘politics in command’of the industrial enterprise.

The political economy of guidance planning in Post-Mao China

China adopted modernization as its new development objective in late 1978, many economic reforms have been introduced. Although the reforms cover diverse areas of the economy, the central underlying strategy is to combine economic planning with the market mechanism in order to attain the twin goals of "macro control and micro flexibility." From this strategy, various reform measures logically follow: increased autonomy of the state-owned enterprises to respond to the market, enterprise taxation to replace profit remittances to the state, greater price flexibility, enterprise management reform, etc. A key element of the strategy of combining economic planning with the market mechanism is the concept of what the Chinese call "guidance planning" (zhidao xing jihua). This concept has become so pervasive in Chinese theoretical and policy discussions, and the measures to implement it have become such an integral part of the reform of the economic system that a thorough understanding of it is essential to the understanding of China's economic reforms. This article attempts to shed light on these reforms by studying the Chinese literature on guidance planning and by critically examining the implications and actual implementation of guidance planning.

Enterprise Autonomy Policy in Post-Mao China: A Case Study of Policy-making, 1978–83

Analysts and observers expect a faster pace and a greater magnitude of change in China's economic system in the post-Mao era than was achieved in earlier decades. Yet contrary to this view researchers have found that reform between 1978 and 1983, in the genuine sense of the word, was limited. Moreover, changes that have occurred appear to have resulted from proposals made in the 1950s to 1960s. Additionally, it took eight years (from 1976 to 1984) for Chinese policy-makers to advocate reforms of any significance. In fact the Party's resolution on the reform of the economic system was not put forward until the Third Plenum of 12th Party Congress in October 1984.