The Reversal of the Privatisation Logic in Central European Transition Economies

Abstract

The main ambition of this study is to explain the unexpected change in the transition process of some Central and Eastern European (CEE) countries starting in the second half of the 2000s. Special attention is paid to changes in and the attitudes of governments toward state ownership. Although statist approaches gained momentum in the economic policy of various states in and after the 2008/2009 crisis, this did not mean a fundamental reorientation expressed in changes in the main economic conditions such as ownership patterns. Nevertheless, governments in some CEE countries seem to flirt with such ideas too in the general policy of increasing state economic intervention. The privatisation process was stopped and in a number of cases, formerly privatised assets were re-nationalised. Governments strengthened their influence in the governance structure in mixed-ownership companies. The main body of the present paper provides a better understanding of this change in state property policies. We also call attention to the risks of a reversal of the privatisation logic. An increasing role of the state as proprietor may today strengthen similar negative political and economic consequences and risks as the ones against which the privatisation agenda of the 1990s was suggested. It can reduce competition, give way for political and personal rentseeking, and weaken the functions of market economic institutions.

The Emergence of Patronage and Changing Forms of Rent Seeking in East Central Europe

“…Expanding the state sector sends a bad message to the market, especially if it is achieved by curbing private property rights. This is exactly what has happened on mass scale in both Hungary and Poland (Blaszczyk, 2017;Baltowski & Kozarzewski, 2016Kornai, 2015;Mihályi, 2015;Szanyi, 2016aSzanyi, , 2016cVoszka, 2013).…”

“…Previous research has pointed out that privatisation logic's reversal aimed to achieve the transition process' opposite (Blaszczyk, 2017;Baltowski & Kozarzewski, 2017;Kornai, 2015;Szanyi, 2016a). In the 1990s, privatisation was not only reinforced to create responsibly acting market agents but to reduce the state sector to prevent the survival of paternalistic links between business and polity (Szanyi, 2016a). The reversal of privatisation's logic meant an ambition to increase the size of the state sector so the system of patronage could capture a larger part of it.…”

Unorthodoxy in Hungary: an illiberal success story?

“…While relatively high growth would have allowed an ambitious cutback of public debt, the decision was to focus on industry. One of the surprising features of the period was the spread of public property (Szanyi, 2016), a feature which has become a region-wide phenomenon.…”

Employee Relations at Asian Subsidiaries in Hungary

“…The level of state intervention is highest in the Chinese case, while in Japan it is minimal. In the case of Hungary, we can evaluate the level of state intervention as relatively low; however, its tendency to increase after 2010 has been well-documented (Mihályi, 2015;Szanyi, 2016;Sass, 2017). The contracts of employees differ due to the special Japanese type of lifelong employment on the one hand, and on the other due to the 'mixed' economies of China and India wherein state-owned firms use long-term-, and privately-owned firms short-term contracts (Witt and Redding, 2013).…”