Politics and Policies in Post-Communist Transition

Politics and Policies in Post-Communist Transition: Primary and Secondary Privatisation in Central Europe and the Former Soviet Union

Károly Attila Soós
Copyright Date: 2011
Edition: NED - New edition, 1
Pages: 203
  • Cite this Item
  • Book Info
    Politics and Policies in Post-Communist Transition
    Book Description:

    Discusses the policies, practices and outcomes of privatization in six transition economies: the Czech Republic, Hungary, Poland, Russia, Slovenia and Ukraine, paying particular attention to cross-country differences and to interrelations between the processes of privatisation and the political transition from communism to a new system. The analysis is restricted to the privatisation in those fields where its methods have been strongly different from privatisations in advanced market economies and where differences of privatisation principles and techniques among our six countries were also rather various. This is basically the privatisation of middle-sized and large enterprises, not including banks, non-bank financial companies, natural monopolies and agricultural entities.

    eISBN: 978-963-9776-91-3
    Subjects: Political Science

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-viii)
  3. List of Graphs
    (pp. ix-x)
  4. List of Tables
    (pp. xi-xiv)
  5. Acknowledgements
    (pp. xv-xvi)
  6. Foreword and overview
    (pp. xvii-xxiv)

    During the last wave of nationalisation, in 1949, when I was five years old, Hungary's communist government confiscated my father's company (a small factory, with some 30 employees). This was the first significant socio-economic event of which I understood something. That last wave of nationalisations (i.e., confiscations) was followed four decades later by the first post-communist privatisations in my country (and another one to four years later in other former communist countries). Already an economist, with numerous publications behind me, and soon the main speech-maker on economic issues for the second largest political party in the Hungarian Parliament, I certainly...

  7. 1 Introduction
    (pp. 1-14)

    This book is not intended as a comprehensive study of privatisation in all former communist countries from the late 1980s to the present. It analyses only the typical paths and fundamental methods of privatisation. For this book’s purposes, the examples of some countries are sufficient. Six have been selected: the Czech Republic, Hungary, Poland, Russia, Slovenia and Ukraine. The reader will see the diversity of privatisation methods applied in them. That diversity cannot be increased by adding further countries to the sample. This suggests that the sample will serve our purposes. The selection was certainly influenced by the author’s familiarity...

  8. 2 Privatisation: why and how?
    (pp. 15-30)

    Of course, in this discussion of privatisation policies and mechanisms, aside from the political circumstances and pressures of those turbulent times, it is important to note some deeper, partly political but partly economic factors that determined the need for and the method of privatisation.

    In the early 1990s, the slogan of transition meant a demand for a market economy, political freedom and democracy. The herd of enterprise managers appointed and supervised by the government had been an important pillar of one-party dictatorship. To establish democracy and ensure political freedom, this kind of party-state control over the economy had to end....

  9. 3 An overview of the processes of primary privatisation in the six countries
    (pp. 31-70)

    The countries studied here implemented primary privatisation with a wide range of methods. Systematising the paths followed by different countries is not an easy task. In analysing the economies of former communist countries, an approach based on relatively homogeneous country groups—determined by geography, history, mutual and common external relations—is useful in many respects. For example, in the development of intra-industry trade with the 15 pre-2004 member countries of the European Union, the five Central European countries (the four in this study and Slovakia) have achieved various levels but much higher ones than the other countries. The second group...

  10. 4 Secondary privatisation in (essentially only) five countries
    (pp. 71-104)

    As Myant (2001) writes, supporters of voucher mass privatisation in the Czech Republic expected that the two waves of the allocation of enterprise shares would be followed by a third wave during which the new owners (the voucher owners turned small shareholders) would “vanish like … brontosaurs”. The term used in the Polish privatisation literature for this vanishing process is “secondary privatisation”. It cannot be precisely defined, but it refers to the termination of the highly dispersed ownership structure of company stocks that resulted from primary privatisation. Ending this structure, in other words, meant “unburdening” the citizens and/or the non-managerial...

  11. 5 Primary and secondary privatisation—countries of slow and rapid concentration of the ownership structure
    (pp. 105-116)

    The overview in the previous section concerning secondary privatisation in five countries shows, as expected, the growth of ownership concentration and—as an “engine” of this process—the shrinking of the stakes of both the most-preferred groups: non-managerial insider shareholders and small outsider shareholders “born” in voucher mass privatisations. These ownership forms were doomed to shrink in these countries from the outset, for two reasons, as discussed in the introduction to Section 4. First, employee ownership had little support in the legal systems, weak stimuli and not much legal support. Second, the trend observed elsewhere (by other research workers) showed...

  12. 6 The speed of secondary privatisation and the characteristics of political transition
    (pp. 117-148)

    As mentioned in subsection 5.3, foreigners are mostly uninterested in having minority stakes in former communist countries’ companies. If they want to be owners of companies in this part of the world, they seek a majority stake. Usually even a blocking minority (meaning, in most legal systems, a more than 25 percent ownership share) does not satisfy them. Obviously, they do not trust the corporate governance systems even of those countries in which they readily make investments. With a majority stake, they are free of any possible dangers threatening minority investors in these countries. This implies that the reason foreigners...

  13. 7 Conclusions
    (pp. 149-160)

    This survey of primary and secondary privatisation in six countries until the early 2000s has observed that the character of political transition had a considerable impact on secondary privatisation and a somewhat weaker one on the methods and speed of primary privatisation.

    Political transitions showing strong signs of continuity in Slovenia and Ukraine were followed by slow primary privatisation. At the same time, Russia, another country with soft political transition, had a rapid privatisation of a large share of its economy. And as for privatisation methods, on the basis of the problems with pure sales described in subsections 2.2 and...

  14. References
    (pp. 161-178)