Why did the reform of state-owned enterprises fail?

China’s market economy can be summarized in three key words: state-owned economy, private economy, and reform and opening up. The process is really exciting. After basically understanding this period of history, I really want to pick up some experiences and compile them into words, so I plan to start with these three parts and summarize the key to success or failure under each economic system. . Although China's market path is very complicated, almost groping forward under the overlap of various systems, breaking it down and analyzing it will help us understand the background of this great era more clearly. Why did the state-owned economy stagnate in the early 1980s? Why did the private economy break through the shackles of ideology and grow rapidly in the political environment at that time? How did we resolutely embark on the road of reform and opening up after 30 years of arduous exploration of socialism and paying a huge price for transformation? I will sort out these three questions in turn and state them one by one.

Today we will mainly analyze the first question: Why did the state-owned economy stagnate in the early 1980s and why did the reform of state-owned enterprises fail?

The 1978 reform plan to revitalize state-owned enterprises did not materialize. The main idea of ??this reform is to liberate state-owned enterprises to have more operational autonomy, so that enterprises can freely use part of their income to increase the enthusiasm of management and workers. In the process of implementation, the enterprise itself must negotiate with the competent administrative department to obtain rights and profits. In the bargaining process, political struggles overwhelm economic laws. High-yield enterprises greatly subsidize the state, and loss-making enterprises are protected and subsidized by the state. At the same time, state-owned enterprises are subject to various With the intervention of peripheral powers, decentralized management structures have become increasingly prominent, leading to the emergence of trade barriers. Local governments protected local enterprises in exchange for control, which was later referred to as local protectionism, pushing China into a fiefdom economy in which each country fought independently, thus declaring that reforms were unsustainable.

Why it failed can be seen from three aspects:

One is the influence of the industrial structure at that time. In the era of decentralization policies, state-owned enterprises face a network-like regulatory structure, which is issued horizontally by local administrative departments and vertically from central ministries and commissions all the way down. Whether horizontally or vertically, instructions can always be achieved enterprise. After insisting on continuous decentralization, the greater the power of local governments, the greater the voice of the horizontal system. Different business lines of an enterprise need to be supervised by different departments. Personnel transfer, wage system, and finance are subject to horizontal communication, while production plans, investment plans, etc. are subject to vertical communication. Therefore, the division of regulatory functions and the interconnection between various departments make the management of state-owned enterprises extremely complex.

The second is the impact at the operational level. Since the production plan at that time was issued by the central government, practical problems caused variables. Categories outside the economic plan formulated by the central government cannot cover all aspects of the production and operation of state-owned enterprises, which leads to the occurrence of various unplanned transactions, which is directly reflected in the large fluctuations in market prices at that time. In addition, the prices of raw materials purchased by different companies at different times are different, but the remuneration of employees is determined by the unified wage level across the country, so wages cannot reflect the level of production efficiency. There are many restrictions and conditions, and the market environment is even more chaotic.

The third is the economic environment at that time. Before the reform of state-owned enterprises, there was no real pricing mechanism or market rules in China's state-owned industrial system. If the price is determined by the government, then it is impossible to distinguish the quality of goods through price, and companies lack the motivation to improve and develop products. Even if there is enthusiasm for improvement, faced with network supervision, they will spend their energy on hurting regulatory agencies and building relationships instead of focusing on production and product quality. At the same time, there is no correlation between workers' income and production efficiency, workers' enthusiasm is low, and companies cannot fire or recruit independently, bringing the "iron rice bowl" and "egalitarianism" to the fullest. Basic management methods to motivate employees and improve production quality have been lost. Since companies do not follow the principles of market economy, companies favored by consumers do not receive due rewards.

? Generally speaking, state-owned enterprises have too little pressure to innovate and improve efficiency under the influence of the above three aspects, leading to reform failure. This is the fundamental reason.