Rebirth: I am in Jin-Cha-Ji

The Chairman looks not only at the present, but also at the future.

Wei Hongjun said, "Chairman, it's not just the free market. Even in planned economies, there are poorly managed enterprises that can only survive with financial support. It's just that we are currently in the industrialization phase, so the poor management of many state-owned enterprises has been concealed. But once our industrialization reaches a certain level, these poor management issues will become more apparent."

"And without competition and pressure, some of our state-owned enterprises simply don't take it seriously. The most typical example is the clothing factories originally established in East China. The clothes and pants they produced frequently had uneven lengths. Subsequent rectification efforts were ineffective, and quality issues persisted."

"These state-owned enterprises rely on their monopoly on the market and don't care what they produce or what the quality is. As long as they produce, they won't have to worry about selling. It's precisely because they have no pressure that production quality problems are so serious."

When talking about this, the chairman's face turned ugly.

This incident had a very negative impact at the time. The garment factory established in East China was one of the earliest state-owned factories, and it was quite large. As a result, the clothes and pants produced were often of different lengths.

But the results of several rectifications were mediocre. After the rectification, there was no problem for a while, but after the previous problems were solved, other problems would appear.

At the time, many capitalists in East China mocked the Communist Party, saying it couldn't even run a factory, let alone the economy. To produce quality products, they still needed factories run by capitalists like them.

Finally, the Chairman flew into a rage, declaring that individual businesses should be supported in opposing these garment factories. He argued that a blanket ban on all artisans and individual businesses was not the right approach. Therefore, during the socialist transformation of industry and commerce, small artisans and individual businesses were not banned.

As a result, many self-employed garment manufacturers emerged in East China. They were very active, putting considerable pressure on state-owned garment factories. However, the central government did not allow self-employed individuals to hire workers or open factories, so the scale of these businesses remained small.

However, this situation was subsequently disrupted by the development of industry and commerce in counties and townships. While individual businesses were prohibited from opening factories, rural cooperatives faced no such restrictions. On the contrary, the central government supported the opening of factories by rural cooperatives. As a result, despite numerous constraints regarding raw materials, rural cooperative garment factories boasted far greater flexibility than state-owned garment factories.

"Many planned factories have been halted or cancelled due to changing circumstances. There have been quite a few such factories since the founding of the People's Republic of China."

Don’t ever think that no factories were abolished during the planned economy era.

In contrast, during the planned economy era, a significant number of factories were closed. Sometimes, targets were set too high, leading to the establishment of too many factories. Consequently, due to insufficient raw materials or insufficient market demand, the factories remained unprofitable from the outset and required financial subsidies.

Later, when the central and local governments adjust their industrial plans, those factories that do not comply with the industrial production plans will be abolished.

Just like the great rubber war in history, countless rubber farms and supporting factories were established. The failure of the war directly abolished most of the farms and supporting factories, as well as various agricultural machinery stations and research institutes, and laid off hundreds of thousands of workers.

In 1962, during the national economic restructuring, numerous industrial plans were cut and factories were closed, affecting over 2000 million workers. In other words, over 2000 million workers lost their worker status and returned to the countryside.

Although this time and space has not experienced such large-scale factory closures, there are still small-scale cases.

"The development of local free markets will further accelerate this process. For companies that are consistently losing money and need financial support, are insolvent, and can't pay their workers, I believe the central government should establish an exit mechanism. We can't let them continue to receive government subsidies while making no contribution to the socialist economy."

New China didn't have a bankruptcy law yet. But bankruptcy law is familiar to everyone. As early as the late Qing Dynasty, when Western law was introduced, a "bankruptcy law" was enacted. It was also the first modern bankruptcy law in Chinese history.

However, the Qing Dynasty collapsed before it could implement the law. The Republic of China also enacted several bankruptcy laws, but they were never truly implemented. The bankruptcy of factories during the Republic of China era wasn't something the Bankruptcy Law could decide.

After the founding of the People's Republic of China, the Soviet Union believed that corporate bankruptcy was a phenomenon that only occurred in capitalist economies. Socialist countries implemented a planned economy and did not have the concept of corporate bankruptcy.

Therefore, although the "Economic Law", "Company Law" and "Contract Law" formulated by New China also borrowed from the laws of the Republic of China period and foreign laws, they were more formulated to adapt to the planned economy of New China.

However, with the development of a free market for agricultural and sideline products and industry and commerce in counties and townships, these legal provisions had to be revised repeatedly based on new circumstances. The emergence of various types of enterprises under different ownership structures, in particular, necessitated nearly annual revisions of the Company Law.

Although the "Economic Law" of New China has been constantly revised, it has never touched upon the concept of bankruptcy. No one would be so foolish as to bring up the concept of bankruptcy. After all, it involves the distinction between socialism and capitalism.

Putting forward this concept can easily lead to a dispute over the route.

“That means the business is bankrupt.”

The Chairman did not use the term "exit mechanism" to describe bankruptcy, as Wei Hongjun did. Instead, he simply said "bankruptcy."

You can tell from the Chairman's biography that when he spoke to small groups like this, he was always very direct. He said what he meant, and he didn't beat around the bush or play hide-and-seek.

Wei Hongjun's words made the Chairman understand that the "exit mechanism" actually meant bankruptcy, but "exit" sounded better.

"Yes, in fact, it is bankruptcy. In fact, if a daily necessities manufacturer cannot be accepted by the market, cannot generate profits, and needs financial support, the only way is bankruptcy."

"If these companies remain viable, they need financial support, not just their earnings. It's fine for one or two companies, but if they become too numerous, the financial burden will be too heavy, potentially leading to bankruptcy. More importantly, even if these companies survive, they won't be able to support their workers without profits. They could very well go months without paying their workers."

"These companies are failures. Even if they are barely supported by government orders, government policies, and financial support, nothing will change. It will only increase fiscal pressure and be of no use to the development of the socialist economy."

"What happens to the workers if the company goes bankrupt? How are they arranged?"

The Chairman didn't have much to say about corporate bankruptcies. Under the planned economy, some companies were able to meet state production targets at very low costs. But some companies, with stubbornly high costs, were unable to meet state production targets.

These are all in existence now. Although the country has been adjusting this situation, these lagging enterprises still exist.

If there are better companies that can complete national production tasks and reduce costs, then it is only natural to eliminate the existing companies that have high costs, low production efficiency, and cannot complete production tasks.

But the Chairman is concerned about the arrangements for the workers after the enterprise goes bankrupt. He cannot let the livelihoods of a large number of workers be affected because of the problems of the enterprise.

"After a company goes bankrupt, the best way out is to be acquired by other companies in the same industry."

"But if the company doesn't even look down on its peers, then workers will receive a subsidy of 50% to 70% of their original salary for one year. Of course, if they find a new job within a year, the subsidy will stop."

"As for enterprise Party members and cadres, stricter requirements must be met. When an enterprise is on the verge of bankruptcy, its Party members and cadres bear primary responsibility. Until the government sends personnel to review the enterprise's accounts and resolve all issues related to the bankrupt enterprise, subsidies should only be paid at a rate of 50% to 70% of the factory's average wage. Once the bankruptcy issues are fully resolved, their jobs will be reassigned."

"Of course, the specific issues are more complicated and require more detailed investigations and more extensive consultations."

The chairman did not express his opinion.

Instead, he kept smoking. Wei Hongjun didn't say anything either. After all, bankruptcy was something that ran counter to socialist propaganda.

When the revolution was being promoted, many people criticized the capitalist economic crisis and the bankruptcy of capitalist enterprises, believing that these were the drawbacks of the capitalist economy and that socialism would never have such problems.

But Wei Hongjun couldn't help but say this. He is now a member of the Politburo Standing Committee, directly involved in formulating major national policies. As a member of the Politburo Standing Committee, Wei Hongjun bears responsibility for the implementation of any national policy. Any adverse consequences are the responsibility of the first generation of leaders, led by the Chairman.

With the development of China's economy and the growth of local free markets, many poorly managed companies will inevitably emerge in the next ten years or so.

If we don’t formulate some policies to solve this problem early, these poorly managed enterprises will impose a huge burden on the central and local governments.

If we don't address it now, and wait until problems arise, it will take a long time to debate and it will take several years to formulate relevant policies and laws.

However, over time, these poorly managed enterprises will increase the burden on the government, and local governments will become increasingly impatient. When local governments can no longer sustain their finances, the central government will issue an order, and they will not follow the policy at all.

Regardless of whether it's good or bad, they just cut it off. Because they really don't want to let the finance department bear the blame any longer.

Stress isn't a serious problem if you release it gradually. But if you let it build up, it will eventually explode.

After a long pause, the Chairman said, "Enterprises have their ups and downs, and so do production cooperatives. The benefits of enterprise workers and the incomes of cooperative members vary greatly. Socialist 'common prosperity' will never be realized. So how do we address this issue?"

"Chairman, there is no way around this at this stage."

This is a problem that cannot be solved at all.

Profits vary widely from company to company. Even with the same central investment, large companies in the same sector don't see the same profits. Even more so, the disparity between companies in different sectors is even greater.

Even though state-owned enterprises must turn over a large portion of their profits to the government, a significant amount of money remains within the enterprise. While wages for workers in different state-owned enterprises may not differ significantly, the associated benefits and benefits are completely different.

Rich companies can provide their workers with food and cooking oil every month, while poor companies cannot provide any other benefits besides wages.

The disparity is even greater within rural production cooperatives. They earn their own income, with members of powerful cooperatives receiving hundreds of yuan annually, while members of poorer ones receive only a few dozen yuan. Even poorer cooperatives are lucky to have enough to eat.

This is an objective reality and cannot be averaged.

However, Wei Hongjun said: "Chairman, there is one point that can be gradually unified."

"Which one?"

"Regarding retirement benefits, since the situations of various government departments and factories vary, retirement benefits also vary. Retired workers from large, profitable factories receive good wages and benefits, as well as medical treatment. Because the factories have money, they can afford everything."

"But some small factories have average profitability. The benefits for retirees from these factories are significantly lower than those from larger factories. A bigger problem is that once a factory has a large number of retirees, it has to bear the additional costs of salaries and medical care for hundreds of retirees each year. In the end, it's very likely that the factory's annual revenue won't be enough to cover these expenses."

"If a factory like this is facing closure and bankruptcy, the biggest problem, besides the workers themselves, is what to do with the retired workers. They suddenly lose all their protection."

“And it’s also a huge burden on businesses.”

Under the planned economy of New China, state-owned enterprises had to bear the burden of their workers' birth, aging, illness and death. But this was not a good thing.

Apart from anything else, this state-owned enterprise model gives these factories immense power, making it impossible for local governments to control them. This is because the factories themselves are a form of government.

Large factories, in particular, have their own public security bureaus, courts, schools, and hospitals. From birth to death, a person's life can be handled entirely within the factory without any contact with society. Under these circumstances, these large factories can easily become small lords.

Even orders from the central government reaching these large factories were often rejected. Furthermore, under these closed conditions, the factories were filled with connections, making it impossible for outsiders to get in. This was the powerful state-owned enterprises of the planned economy era.

"At this stage, many of our state-owned factories are new and don't have many problems. But in a decade or two, a large number of workers will retire."

"By then, our state-owned factories could easily have 10,000 factory workers and 5,000 retirees. There could even be a situation where the number of retirees exceeds the number of factory workers. The costs of supporting so many people will increase dramatically. If the products produced don't have a strong price advantage and don't generate enough profit, the factories will gradually struggle."

"As my country develops international trade, if these issues cause factory costs to become too high, our products will lose their advantage in the international market and trade will not develop."

State-owned enterprises in the 1980s and 1990s were later said to have low production efficiency and severe institutional rigidity, and were eliminated in the market economy.

Yet, no one has analyzed the enormous burdens faced by state-owned enterprises in the 1980s and 1990s. They had to comply with national laws, meet high product quality standards, and cover the retirement wages and medical care of so many retired employees. As the number of retirees grew, by the 1990s, many state-owned enterprises had more retirees than active employees.

In contrast, foreign companies at the time enjoyed various preferential policies from the government, and private companies did not have to meet the same standards as state-owned enterprises in terms of product quality and worker treatment. Various counterfeit and inferior products flooded the market at low prices.

State-owned enterprises are like shaky old men, with so many restrictions. How could they possibly outperform foreign and private companies in a market economy? Ultimately, most state-owned enterprises collapsed.

The Chairman listened quietly to Wei Hongjun's analysis of state-owned enterprises.

To put it bluntly, the current central leadership is busy promoting China's industrialization or considering the management of state-owned enterprises. Who would consider the problems of retired state-owned enterprise employees in a few decades, including the difficulties that state-owned enterprises will face at that time?

Because that's all for the future. The average age of workers in state-owned enterprises is less than 40 years old. It's too early to consider retirement.

But Wei Hongjun has already begun to consider the issue of retired workers and the future development of these state-owned enterprises. Regardless of whether his considerations are right or wrong, this is what the Chairman admires most about Wei Hongjun.

A strategist never looks beyond the immediate two or three steps, but instead considers what will happen a decade or even decades from now.

So the Chairman asked: "If state-owned enterprises don't care about the affairs of these retired workers, who should take care of them?"

"These retired workers should be managed by the government. Because of the different divisions of labor in revolutionary work, everyone's wages and benefits were different when they were working. But no matter who they were before retirement, after retirement they are all ordinary members of socialist China, and there should be no distinction in their retirement financial benefits."

1077 Basic pension and old-age insurance

We discussed so many issues with Wei Hongjun and listened to so many of his ideas, but what surprised the Chairman the most today was Wei Hongjun's words.

Although there were a lot of new things in what Wei Hongjun said, they were all to prove Wei Hongjun's own political and economic ideas.

Chairman Mao was quite clear about Wei Hongjun's general political and economic ideas. Therefore, he was quick to accept new concepts and theories, such as Wei Hongjun's discussions on industrial and population issues and the free market under macroeconomic regulation.

Moreover, after the Chairman implemented the system of division of labor among central leaders, he usually did not interfere in the specific work of central leaders.

It was as if the Chairman asked about the development of the "Rural Cooperative Union" and just wanted to know the thoughts of the Secretariat and the Rural Work Department.

Since the founding of the People's Republic of China, China's rural areas have developed rapidly. Chairman Mao was very satisfied with the work of the Rural Work Department and the rural development system built by Wei Hongjun and Deng Zhihui. Therefore, although Chairman Mao had some personal opinions on the issue of "large cooperative associations," he would not arbitrarily interfere in rural work unless serious problems arose in the countryside.

As the core of the first generation of collective leadership and the head of the Chinese Party, government, and military, the Chairman primarily oversaw broad direction rather than specific issues. Especially after the Ninth National Congress, the Chairman increasingly prioritized investigation and theoretical research.

But the discussion about pensions was completely different. This was a question the Chairman himself hadn't considered. But Wei Hongjun's statement directly touched upon a sensitive point in the Chairman's heart, one that he couldn't express directly due to the current circumstances.

That is to realize equality for all in New China and oppose the inequality of bourgeois legal rights.

Anyone studying politics will have seen textbooks stating that "distribution according to work" is the distribution principle for socialism, and "distribution according to need" is the distribution principle for communism. Many people assume that since socialism is "distribution according to work," then "distribution according to work" must be fair, and "distribution according to need" is the ideal for the future.

After all, it's fair and normal to get paid based on how much effort you put in. No one would say that "distribution according to work" is unfair.

However, Marxist-Leninist doctrine does not consider "distribution according to work" to be fair. According to Marxist-Leninist doctrine, "distribution according to work" is not a socialist principle of distribution, but a capitalist principle of distribution. It is inherently unfair and is the most effective embodiment of bourgeois legal rights.

The difference between socialist "distribution according to work" and capitalist "distribution according to work" is that socialist countries take a step forward by implementing public ownership of the means of production, while the latter is privately owned. However, while socialist countries take a step forward, they still use the capitalist "distribution according to work" system.

Why does Marxism-Leninism say that "distribution according to work" is not a fair distribution method?

Marx stated that any distribution of the means of consumption is merely the result of the distribution of the conditions of production themselves. And the distribution of the conditions of production, in turn, reflects the nature of the mode of production itself. For example, the capitalist mode of production is based on the fact that the material conditions of production, in the form of capital and landed property, are in the hands of non-workers, while the masses possess only the physical conditions of production—their labor power.