Local Government And Institutional Innovation For Marketization: Institutional Thought Of Revitalizing Old Northeastern Industrial Bases

Revitalizing old Northeastern industrial bases is an important and difficult task. Revitalizing means growing up from decline, so the problem of Northeastern China is not the poverty, but lacking the way to promote the resplendence. In order to realize the development, the Northeast needs many conditions such as technology, person with ability, resources, capital and traffic. What mostly needed and short of in the Northeast are the institutional arrangements to build up the sense of market economy and the institutional circumstances encouraging investment, undertaking and development. In the process of the Northeast's transformation from planned economic system to the market economic system, planned management and administrative control of local government that bequeath by planned economy intervene seriously the economic activities, so nationalization, government management and closure is the macroscopic institutional circumstances of the Northeast. The planned management and administrative control also make the effective supply during institutional change deficient. Consequently, the process of the Northeast's marketization is slow. The institution of the Northeast is unfavorable to the economical development, hence it is need to do the institutional innovation which will lead to the market economic system. Therefore, the Northeast's local government working as principal part of the institutional innovation should transform through law, competition and democracy supervise and accelerate the marketization innovation by the way of market management. As long as the Northeast's local government effectively push the process of innovation and create institutional circumstance to inspirit investment and undertaking, the solid system foundation for the development of old Northeastern industrial base can be made. The first part of this paper introduces the concept and economic meaning of institution. Institution concludes institutional arrangement, institutional circumstances and so on. Institution, namely institutional arrangement, refer to be a series of behavior rules followed by everyone in society. The aggregation of basic rules about politics, society and law, which administer economy and politics activities, (such as the rule of vote, property, contract rights) form the institutional circumstances. Based on the hypothesis of rational economicman, institution influences the property and anticipation of manpower capital and determines the collection of individual choice, from which the maximize choices of person are formed, business charges are reduced and the economic results are derived. Institution, human choice and economic result are contacted tightly. An efficient institution offering individual stimulant is the deciding factor to improve economic development. The second part of this paper discusses the condition and reasons of the institutional arrangements at Northeastern area, and points out that the institution hinders the development of economy. From the angles of property, market, law, and credit, the Northeast is a society with the characteristic of government management that stem from planned economy. The traditional economy and the order economy are the other resources dispose system running parallelly with market economy. The planned economy in the Northeast was changed slowly, so the transformation to the market economy is very difficult. The economic value of the Northeast mainly comes from the state-owned enterprises which fostered by government, so nationalization, government management and closure is the macroscopic institutional circumstances of the Northeast, and the planned management and administrative control of local government which bequeath by planned economy is the characteristic of the Northeast. The reasons for the formation of the Northeast's institution are many-faceted. First, the proportion of pure state-owned economy is too big, so planned economy has the path dependence and the transformation to the market economy is difficult. Second, the ideology of No...