3 - Basic thoughts on economic restructuring (1986)

Summary

Years have passed since economic restructuring came under way in this nation. What is to be done next? Here I would like to share my thoughts, which come in twenty-eight points, and involve seven issues altogether. Some of these ideas may be controversial, but I see controversy as a good thing. Without discussion and debate, there will be no economic prosperity.

Ownership reform holds the key to economic restructuring

(1) Economic restructuring may break down if price reform fails. The success of economic restructuring, however, hinges not on price reform, but on ownership reform, which entails revamping the corporate system. This is because price reform serves the main purpose of shaping an environment in favor of the growth of the market economy, but only ownership reform or corporate system reform can address such issues as interests, responsibility, motivation, and incentives.

(2) The purpose of ownership reform is to build state firms truly liable for their own gains and losses. Being “truly liable for their own gains and losses” means that, for one thing, firms should bear all the consequences of financial losses, and for another, gains and losses must be symmetrically treated not only for firms but also for their leaders. The most crucial task of ownership reform is to make state firms really accountable for their successes and failures, and, even more so, to answer the question of what is to be done with firms in the red.