A Comparative Study On Property Ownership And Ownership Of The Firm

In 1978, Third Plenum of the Eleventh Communist Party of China(CPC) decided to start reform and opening up. Meanwhile, the reform of the planned economic system began. The CPC Central Committee made the decision to reform the economic system in 1984, and proposed to confirm the establishment of socialistic market economy system being the goal of China's economic reform mode; to establish and perfect the socialistic market economy system aclively; to play the basic role of market in allocating resources;to promote the establishment of modern property system and modern firm system in 1992. With the deepening of economic system reform, reform of state-owned firms entered a crucial stage. Since New China has been built, the state-owned economy grown in strength is the important basis for political power of socialist country. The development of state-owned economy is not only of great significance for guaranteeing the steady development of the national economy, enhancing overall national strength and achieving the majority of people's fundamental interests, but also for consolidating and developing the socialist system, strengthing the great unity of peoples of the country and ensuring the party and country's long-term stability. If there is no state-owned economy as the core of the public economy, there is no economic foundation of socialism. Thereby, the CPC Central Committee has emphasized to do a good job of state-owned firms and to do a good job of state-owned economy. Fourth Plenum of the Fifteenth Communist Party of China made a dicision on reforming and developing the state-owned firms to ensure the national economy under the control of state-owned economic, and to consolidate and develop the economic base of socialist state power continuously. The reform and development of State-owned firms are not only a major economic issue, but also a major political one. However, from the beginning of the 20th century 90's, with the new institutional economics theory imported into our country, some economists attempted to use the western theory of property rights to mislead our country's reform and opening-up. If this theory is allowed to spread random, it will lead to the loss of dominant position of public ownership in the national economy, and the socialist market economy will be transformed into a capitalist market economy.Third Plenum of the 14 adopted a decision, titled "on the establishment of socialist market economic system, the decision of a number of issues" in 1993. The decision proposed to establish a modern firm system, and pointed out that the shareholding system must be the main form of public ownership. This decision indicated the direction of State-owned firm reform clearly. The property ownership is the core issue of modern firm system. To establish a modern property system, in which the contribution of rights is distinct , the power ,as well as the responsibility, is clear, the protection is strict, and the flow is unhindered, is of benefit to maintain the public property and consolidate the dominant position of public ownership economy, benefit to protection of private property and promot the development of non-public economic, and is advatageous to flow and restruction of all types of capitals and promote the economic development of mixed ownership. This is the internal requirement of basic socialist economic system and an important basis of building a modern firm system.Marxist theory of property, which is built on the basis of historical materialism, is the scientific property theory and public property theory. It is completely opposite to the private property rights theory of the new system school. All the achievements obtained through the economic system reform, in particular the state-owned firm reform, since the reform and opening up are the results from adhering to and applying the Marxist theory of property rather than the use of the property rights theory. The contrary, some errors and loss of state-owned assets in reform process in some areas or some firms are the result of impact and interference with the property rights theory.Based on the analysis and comparison of Marxist property theory and the property righs theory, this thesis attempts to point out that the reform of state-owned firms and the perfection of socialist system in our country must be carried out under the direction of Marxist property theory only.The full text is divided into six chapters.In chapter 1, the theory of property ownership has been reviewed. First, some concepts, i.e., ownership and property, have been discribed. Then, the classic ideas of property of several economists, namely Adam Smith, Say, Keynes et al. , have been introduced. The last part of this chapter focuses on the Marxist theory of property from five fields, i.e., separation of the physical property and physical proterty certificate;separation of the ownership of physical property and the certificate of 3ownership of physical proterty;the purpose to make the property ownership clearly implying the flow of property;the basis of distribution being property ownership, mixed property ownership.In chapter 2, the theory of ownership of the firm has been reviewed. First, as a part of the contract theory, transaction cost theory, team production theory and incomplete contract and G-H-M theory are introuduced. In particular, the team production and supervision theory of Alchian and Demsetz's and agency cost theory of Jensen and McLean's, and principal-agent theory of Wilson and other's have been introduced in detail. Then,three definitions with respect to the concept of corporate ownership were described,which are the ownership of the firm being the residual claimancy, the ownership of the firm being the residual rights of control, and the ownership of the firm being the residual claimancy and the residual rights of control. Finally, some viewpoints which are the ownership of the firm being random dependent ownership and the corporate governance structure being the specific form of ownership arrangements were introduced.In Chapter 3, the topic that the firm is going to replace of the market or to adapt the market has been discussed according to Marxist economics and the westen economics. First, the relationship of firm and market is analyzed. It is pointed out that firm is an economic entity of production and trade, while is not a legal contract, and the firm is a creator of market rather than a replacementor. Second, from the market exploitation point of view, that is, the rise of the national economy of European countries is attributed to the development of market, while the cause of China's economic stagnation is attributed to the undeveloped market, pointed out that China's manufacturing industry can not develop without domestic and foreign markets. According to the principles of western microeconomics the reasons that firm can not substitute the market are discussed, namely, the profit of firm can be achieved only through the market, and the monopoly is not beneficial to production, as well as consume. According to the principle of Marxist economics, it is described that firms must be adapted to market, monopoly can not substitute for market competition, and firms must not only be adapted to the domestic market but also to the world market. Finally, through the innovation analysis of the Communist Party of China on the market theory, it is expounded that the defect of planned economic system being the market substituted by firm. And the achievements of economic development obtained within the three decades of reform and opening up proved that firms adapting to market have driven China's economic development. In Chapter 4, according to the analysis of the private firm and social firm, the issue of firm system evolution and capital operation is described. In the first part of this chapter, following subjects are described: the capital and human capital; the separation of labour and the right of accomplished condition of work being the premise for the firms transforming into capital ; capital relationship. The subjects discussed in the second part are the accumulation of capital and social capital focus; the optimal ownership arrangement could achieve the maximization of firm value; scientific management is not the arrangement of residual claimancy but the growth of total profits. In the second part, according to the capitalist private and social private, the separation of capitalists and entrepreneurs, and mobility and non-mobility, the private firms and social firms are analysised. In the final part of this chapter, three examples, i.e., the goal of entrepreneurs annexing other firms; capital reorganization of the firm property rights achieved by capital operation; the transfer of property changing with property, are taken to demostrate that property rights are dependent on the residual rights of control.In Chapter 5, the firm system was analyzed. It was expounded that the corporate governance structure is not the specific of ownership of the firm; the business owners does not depende on the state. It is emphasised that the distribution must be accordance with the factors of production, and the harmonious relationship among the money owner, operators and the producer has been discussed.In Chapter 6, the varied forms of effective realization of public ownership are discussed. It is expounded that the effectiveness of ownership lies in the realization of wealthy and strong country; the public ownership should be harmony with and private ownership; the social ownership is the effective realization form for public ownership. Four opinions about the effective realization form for public ownership, which is established under the guidance of Marxist property theory are suggested.