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Socialist Industry (I)

The System of Ownership

— A visit to the Talien Hungchi Shipyard

by Our Correspondents Chou Chin and Hsiang Jung

[This article is reprinted from Peking Review, #16, April 16, 1976, pp. 21-24 and 26.]

This year is the 16th anniversary of the “Charter of the Anshan Iron and Steel Company.”

Chairman Mao issued on March 22, 1960 a directive concerning a report by the Anshan City Party Committee. The directive summed up the experience of socialist revolution and socialist construction at home and abroad, and laid down the fundamental principles for running socialist enterprises: keep politics firmly in command; strengthen Party leadership; launch vigorous mass movements; institute the system of cadre participation in productive labour and worker participation in management, of reform of irrational and outdated rules and regulations, and of close co-operation among workers, cadres and technicians; and go full steam ahead with the technical innovations and technical revolution. Chairman Mao declared in his directive: “The Charter of the Anshan Iron and Steel Company has emerged in China and the Far East.” This is the basic law for running China’s socialist enterprises; like a bright beacon it illuminates the road forward for China’s industrialization.

With this issue, we are beginning a series of articles on the progress scored under the guidance of the “Charter of the Anshan Iron and Steel Company” by some socialist state-owned enterprises of Luta, an industrial coastal city in northeast China. The first article is on the system of ownership. —Ed.

WHEN we visited the Talien Hungchi Shipyard we saw a 24,000-ton oil tanker setting out for sea trials and another huge ship being put together. An enormous crane towered over the nascent vessel, busily dipping, lifting and depositing parts into the hull, while 15,000 workers covered shifts round the clock. We had come upon a hive of industry.

It was hard to visualize this shipyard, one of China’s largest, as just a small repair dock 27 years ago. Since the great leap forward in 1958 this yard has built 27 vessels of more than 10,000 tons each, 25 of them since the start of the Great Proletarian Cultural Revolution in 1966. It used to take a couple of years to build, but now it takes less than six months and the vessels Hungchi Shipyard turns out get bigger and better. Five ships were built and launched in the first nine months of last year. This shipyard, also built China’s first oil-drilling platform and a high-quality 10,000 h.p. marine diesel engine.

Great Change

China was one of the earliest countries to develop a shipbuilding industry and maritime navigation. As far back as the 5th century the famous Chinese scientist Tsu Chung-chih invented a paddle-wheel ship powered by men working treadmills. The mariner’s compass was first employed in China in the Sung Dynasty, (960-1279) and written records note that China then was building “large dragon boats” 120 metres from stem to stern and 13 metres wide and cargo ships designed to carry 600 tons of grain each. In one sea battle more than 1,000 fighting vessels were deployed. Shipbuilding in the Ming Dynasty (1368-1644) was also highly developed. In the long period of feudal society that followed, particularly during the recent 100 years of semi-feudal, semi-colonial society, the wisdom and creativity of the Chinese working people could not be brought into play. Under the reactionary rule of the Kuomintang, old China had only a few shipyards for repairing, but not for building ships. The Hungchi Shipyard of today was one of them.

This shipyard, established in 1898 when tsarist Russia occupied Luta, fell into Japanese imperialists’ hands in 1905 after the Russo-Japanese war. Its first 50 years failed to carry it beyond, small-scale operations with obsolete equipment. Of the 4,000 Chinese employees, one half were casual labourers, and all lived like slaves. They were a source of cheap labour for the imperialist plunderers.

After liberation the People’s Government confiscated the property of all enemies. In pre-liberation China the biggest and most important enterprises were concentrated in the hands of the imperialists and the Chinese bureaucrat-capitalists. Enterprises of this category were confiscated according to policy and turned over to the People’s Republic under the leadership of the proletariat. After the Hungchi Shipyard became a state-owned enterprise the workers and staff were mobilized to carry out democratic reform, during which remnant counter-revolutionaries were weeded out and systems of management which fettered the workers were done away with, such as control by gang bosses. When workers became masters of the shipyard their wisdom and strength were brought into full play. Under the leadership of the Party the workers grasped revolution, promoted production and built up the shipyard in the spirit of “maintaining independence and keeping the initiative in our own hands and relying on our own efforts.” After more than 20 years of arduous struggles it was developed into a big modern shipyard fitted out with Chinese-made equipment and was able to design and build ocean-going vessels with Chinese materials.

Lenin said that it was the “greatest change in human history from working under compulsion to working for oneself.” (How to Organize Competition.) It was precisely because of this great change which brought about the establishment of the socialist relations of production that enabled China’s productive forces to rapidly develop as it never could in the old society.

Ownership by the Whole People

The revolutionary transformation of the relations of production first of all found expression in the transformation of the ownership of factories, mines, land and other means of production. The Hungchi Shipyard, likewise, was transformed from being owned by imperialists to being owned by the whole people.

Industry under ownership by the whole people accounted for 97 per cent of the fixed assets of China’s industry, 63 per cent of the industrial population, and 86 per cent of the value of total industrial output. Industry under collective ownership by working people (that is, industrial enterprises owned by the working people of collective economic units, such as rural people’s communes,) accounts for 3 per cent of the fixed assets, 36.2 per cent of the industrial population, and 14 per cent of the total output value. Besides these, individual handicraftsmen make up 0.8 per cent of the industrial population. (Figures based on 1973 statistics.)

How is the system of ownership by the whole people expressed in terms of production and management of these industrial enterprises? The basic conditions outlined to us by several cadres of this shipyard are the same as in other Chinese state enterprises.

All wealth created by the enterprise as well as the enterprise itself, belongs to the proletariat and the entire labouring people. Production and management must serve the proletariat and the entire labouring people.

Who exercises the right of ownership and direction of the enterprise? The socialist state of the dictatorship of the proletariat, as only such a state can represent the proletariat and the entire labouring people. As China is a socialist state led by the working class and based on the worker-peasant alliance, the workers are the masters of the country and, it goes without saying, are therefore masters of these industrial enterprises. The two are identical. The nature of the system of ownership by the whole people determines that enterprises must accept the unified leadership of the political party of the proletariat and the state of the dictatorship of the proletariat. Under this leadership enterprises give full play to their initiative, engage in production and carry out business accounting.

General characteristics of the system of ownership by the whole people can be viewed from the following several aspects at the Hungchi Shipyard.

Fixed Assets. Buildings, machinery, equipment and other fixed assets of an enterprise belong to the state and are allotted to the enterprise to use. The latter can dispose of them only according to state regulations and with the consent of the departments in charge.

However, this does not mean that an enterprise sits back and waits, for the state to provide it with new equipment and other fixed assets. On the contrary, in China, it is common practice for workers to renovate old, and make new, equipment—what is known as “arming oneself by one’s own efforts,” and this is done while fulfilling production tasks. Since 1949 this shipyard has constructed 17 workshops by enlarging old ones or building new ones, and increased its fixed assets 5-fold. Much of this was done by the shipyard workers themselves. The new fixed assets thus acquired also belong to the state.

State Planning. Socialist enterprises differ fundamentally from capitalist enterprises in that the latter are run for seeking profits and production is governed by the law of value. Socialist enterprises on the contrary are owned by the whole people and the aim of production is to satisfy the needs of the state and the people. Production and management are governed by the law of planned, proportionate development of the national economy, and therefore, must follow the state plan.

Long-term and annual plans are passed on to the shipyard by the government departments concerned according to the needs of sea transport and other industries. In general, the state plan stipulates the seven economic targets for the year: type and model of vessels, total tonnage, quality, labour productivity, consumption of main materials, costs and profit. When drawing up plans the departments concerned first of all fully solicit the views of the shipyard. Once the plan has been decided upon, it is up to the shipyard to set to with a will to guarantee its fulfilment or overfulfilment.

Before the shipyard’s plans are finalized they have to be thoroughly discussed by the workers who, acting as the masters of the shipyard, press for going all out, aiming high and achieving greater, faster, better and more economical results in developing production. For example, in the wake of the rapid development of China’s oil industry more and larger tankers were required. When plans were being discussed towards the end of 1973, the yard heard that the transport department wanted the first 24,000-ton tanker within 18 months. Some people in the shipyard were afraid to accept the order. They felt it was asking too much of a yard geared to making 15,000-ton vessels, to take on 24,000-ton vessels. In terms of berth, equipment and capacity, there were too many difficulties. Most workers, however, were firmly for taking on the order. “The country’s need is our command!” they declared. “We built an oil-drilling platform, didn’t we? Then we can build a 24,000-ton tanker too.” Thus the Hungchi Shipyard got the order for these vessels. This three the whole yard in a state of great excitement. With one heart and mind the workers plunged into the task, making every moment count. One after another tough knotty problems crumbled before their determined onslaught. Eight months later the first 24,000-ton tanker, Taching 61, was launched, swiftly followed by Taching 62 (six and a half months) and Taching 63 (five and a half months). This is the pace at which the Hungehi Shipyard has been overfulfilling its state targets each year.

Labour Force. In China’s socialist society, labour power is not a commodity. The workers are no longer wage slaves selling their labour power. There are jobs for all who can work. “Employment agencies” are things of the past. The labour force has grown steadily in factories and other enterprises in pace with rising production. But enterprises can neither hire workers on their own, nor cut down the work force. All adjustments must be made by government labour departments according to an overall plan. Also uniform wage scales are set by the state for all state enterprises.

Since the start of the Great Cultural Revolution, the fast-growing shipyard has absorbed many new workers and staff. They are young people from villages, from the army and from technical institutes or institutes of higher learning, sent by government labour departments in a unified way. During this period some 3,000 Hungchi Shipyard workers and staff members were reallocated by these departments to help set up new shipyards.

Funds. The state allots a certain amount of fixed capital and working capital to the shipyard according to a unified plan. Under special circumstances, if a shortage of funds arises, the shipyard can borrow from the state bank. The government departments concerned supply the shipyard with special funds and capital construction funds for trial-producing new products, for scientific experiment and for expanding production. In addition, the state allocates a sum equal to 11 per cent of the shipyard’s total wages for welfare. This is a special fund placed at the disposal of the shipyard for providing health protection, free medical care, housing, relief of the needy, and other collective welfare services for the workers and staff.

Supply of Materials. In China’s socialist society important means of production such as rolled steel, machinery and so on, are distributed according to state plan and cannot be freely bought, or sold. The needs of the shipbuilding industry are relatively complex. The building of an ocean-going ship requires some 10,000 kinds of raw and other materials as well as complete sets of equipment drawn from some 800 factories and plants. All are allocated and supplied according to state plan. Obviously, this calls for a vast amount of detailed organizational work. However, as China’s economy is a socialist planned economy under unified leadership and a state plan, broad socialist co-operation can be carried out. Two supply channels have gradually taken shape through practice over the years. One takes the form of fixed co-operation between supplier and user; that is, materials come direct to the user from the maker. Rolled steel, for example, comes straight to the shipyard from the mills according to unified planning of the state. The other channel brings in material arranged for by the various supply departments in the area. These two channels provide the shipyard with nearly all the materials required. The rest, a tiny fraction of the total wants, the shipyard gets, within the limits prescribed by the state, through mutual help and adjustments between shipyard and factories, or buys from state stores.

Products. The Hungchi Shipyard’s orders are mostly placed by the state’s sea transport departments. Since both builders and users of the vessels are enterprises owned by the whole people, in this respect, their economic relations are no longer those of commodity buying and selling. There is no transfer of ownership. However, as China at this stage still practises a commodity system and state enterprises must still practise business accounting, exchange of products between state-owned enterprises must still be based on the principle of exchange of equal values. This is done through contracts drawn up between producer and user. Products are then delivered and accepted acording to the price, time and quality set down in the contract.

In capitalist society, prices of commodities vary with the fluctuations of demand and supply. In China, a unified and stable price policy for the whole country prevails. Prices of the means of production are determined by the state according, to the average production costs as calculated by production departments, plus a fixed proportionate amount for tax and profit. In order to promote the shipbuilding industry the state follows a policy of low profits, setting the tax at 5 per cent and profit at 6 per cent in cases of products like powered vessels.

Profit. Enterprises owned by the whole people are not allowed to put profits in command, that is, to produce whatever brings in the most profits. They must carry out state production plans. This, however, does not follow that business accounting or profits are unnecessary. Profits made under the precondition that state plans are fulfilled, come from enforcing the utmost frugality and lowering the costs of production. This kind of profit is socialist accumulation, belongs to the whole people and must all be handed over to the state treasury for disposal in an integrated and overall way in socialist construction and improving the living standard of the people.

From 1952 to 1974 the Hungchi Shipyard while fulfilling its state plans, made and handed in a total profit large enough to build four Hungchi shipyards. Of China’s budgetary receipts 94 per cent come from profits and industrial taxes paid in by state-owned enterprises such as this shipyard.

Conspicuous Superiority

When we were discussing systems of ownership with some of the shipyard workers they were full of praise for the system of socialist public ownership, particularly the older workers, who have personally experienced a world of difference between the past and the present society.

This great change wiped out exploitation based on the system of private ownership of the means of production. Never again can a handful of parasites use privately owned factories and other means of production to appropriate for themselves the wealth created with diligent labour by the working people.

This great change enabled the workers to smash and discard the yoke of wage slavery. They no longer struggle to merely keep alive while the handful of capitalists batten on their labour. They have now become masters of the state and the shipyard, working for their own class and other working people, for a prosperous and strong socialist motherland and to support the world revolution. This is why they are now such a tremendously active and creative force.

The establishment of the system of socialist public ownership has enabled China to develop the national economy in a planned and proportionate way. This has done away with the anarchy in production inherent in capitalist societies together with its accompanying confusion, waste, depression, crises and other afflictions.

The setting up of the system of socialist public ownership has also enabled comradely relations of co-operation to be established among the various industrial enterprises. It has also done away with not only “free competition” among the strong to devour the weak, but all the other bestial underhand practices of capitalist society. It has enabled all economic departments to be organized to work for common aim.

With the change in the system of ownership China’s industry and agriculture have developed at a sustained high speed unprecedented in the old society. The Hungchi Shipyard is an example. At all the other big enterprises we visited in Luta, such as the steel plant, the locomotive and rolling-stock plant, the chemical plant and so on, it was the same.

The workers said that the system of socialist public ownership was set up only after many long and bloody battles, when the three great mountains—imperialism, feudalism and bureaucrat-capitalism—were toppled by the Chinese people under the leadership of Chairman Mao and the Chinese Communist Party. They followed up their victory by carrying out the socialist revolution. In this system of ownership lies the basic difference between socialist New China and the capitalist countries, between the present society and that of old China. We must continually develop, improve and consolidate it.

They also emphasized that the setting up of the system of socialist public ownership does not mean that everything is settled once and for all. In every industrial enterprise there still remains a question of the utmost importance: who controls the leadership and what line are they carrying out? If it is not Chairman Mao’s revolutionary line, but a revisionist one, then the very nature of the system of ownership by the whole people can change and cease to exist except in name only.

They pointed out that the Soviet Union of today is a teacher by negative example. As a result of the revisionist line pushed by Khrushchov, Brezhnev and their like, the so-called “state-owned” enterprises there are throwbacks to capitalism. In the Soviet Union where “the ruble decides all,” production and management of enterprises are centred on seeking profits. And in order to make profits the heads of these enterprises can sell the means of production or turn them over to others. They can, to a great extent, determine what and how much to produce. They can also dismiss workers whenever it suits them, determine what wages to pay and so on. Profits from these enterprises are parcelled out to members of a narrow, privileged stratum by way of “profit sharing,” high wages and big bonuses, plus a clutter of personal emoluments. This tiny minority who deck themselves out as “heads of state enterprises,” some even calling themselves “communists,” are no different from the factory bosses of the old society. They are members of a new bureaucrat-monopoly capitalist class, who have turned the Soviet working class into exploited wage labourers again.

A worker activist in theoretical study said: “In explaining the characteristics of capitalism, Marx pointed out, ‘Production of surplus-value is the absolute law of this mode of production.’ (Capital.) This is exactly how the ‘state-owned’ enterprises of the Soviet Union are run today.”

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