Privatisation: a false hope

Abstract

Examines Eastern Europe’s struggle to privatise since the end of Communism; in particular reports on the experiences of Poland, Czechoslovakia and Russia. The danger of fast privatisation without restructuring is demonstrated by Czechoslovakia’s experience. Poland shows the importance of employing tight budget constraints. Russia demonstrates that privatisation in chaos is unlikely to produce real change.

Privatization in Poland What was the government trying to achieve?1

“…The legal framework was provided by the 1990 Law on Privatization of State‐owned Enterprises, allowing for two main privatization methods: capital privatization and privatization by liquidation. Capital privatization, whereby state‐owned enterprises are sold to a large investor or on the stock exchange, faced the problem of finding suitable buyers on the one hand and of overcoming the resistance from the concerned enterprises on the other (Potts, 1999). Privatization by liquidation, where a state‐owned enterprise ceases to exist and its assets are sold, transferred to another company or leased out, proved to be an alternative but it was applicable to relatively small enterprises only (Gomulka and Jasinski, 1994).…”

Privatization ‐ The myth of free market orthodoxy in sub‐Saharan Africa

“…Its purpose has been equally varied, ranging from Magaret Thatcher's government employing it in the containment of the perceived monopoly powers of public sector trade unions in the UK (Hartley and Parker, 1991) to Ronald Reagan's use of it as a tool for limiting government spending in the USA (Donahue, 1989). In yet another environment, the emerging Eastern Europe, privatization answers to a different objective in its exigent preoccupation both as a tool to fight inflation and to cement political support for the break with the communist system (Potts, 1999). For many countries in SSA, faced with severe budgetary constraints, it was conjured that privatization proceeds would generate valuable capital revenue to ease the pressure for expenditure cuts on basic sectors.…”

Survival Through Networks: The ‘grip’ of the administrative links in the Russian post-Soviet context

“…The research covers the period from 1994 to the present time, however, what was happening to companies studied during 1994 -1996 when most of the interviews took place is of special interest since this was the most difficult period of the Russian transition for industrial enterprises and the economy as a whole. After the start of the reforms in 1992 and continuing until 1998 there was a steady and extreme decline of the Russian economy (Potts, 1999). By 1998 GDP (using constant prices) was 56% and industrial output was 46% of their pre-reform level (UNECE, 1999), and agricultural production and food processing had both decreased by 40% (Goskomstat, 2000).…”