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New Capitalist Order

New Capitalist Order: Privatization And Ideology In Russia And Eastern Europe

Hilary Appel
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    New Capitalist Order
    Book Description:

    After the collapse of communism in the Soviet Union and eastern Europe, more than a dozen countries undertook aggressive privatization programs. Proponents of economic reform championed such large-scale efforts as the fastest, most reliable way to make the transition from a state-run to a capitalist economy.

    The idea was widely embraced, and in the span of a few years, policymakers across the region repeatedly chose an approach that distributed vast amounts of state property to the private sector essentially for free-despite the absence of any historical precedent for such a radical concept. But privatization was not a panacea. It has, instead, become increasingly synonymous with collusion, corruption, and material deprivation.

    Why was privatization so popular in the first place, and what went wrong? In answering this question, Hillary Appel breaks with mainstream empirical studies of postcommunist privatization.

    By analyzing the design and development of programs in Russia, the Czech Republic, and across eastern Europe, Appel demonstrates how the transformation of property rights in these countries was first and foremost an ideologically driven process. Looking beyond simple economic calculations or pressure from the international community, she argues that privatization was part and parcel of the foundation of the postcommunist state.

    A New Capitalist Orderreveals that privatization was designed and implemented by pro-market reformers not only to distribute gains and losses to powerful supporters, but also to advance a decidedly Western, liberal vision of the new postcommunist state. Moreover, specific ideologies-such as anticommunism, liberalism, or nationalism, to name but a few-profoundly influenced the legitimacy, the power, and even the material preferences of key economic actors and groups within the privatization process.

    eISBN: 978-0-8229-7266-2
    Subjects: History, Economics

Table of Contents

  1. Part I. Bringing Ideology Back In

    • 1. The Ideological Determinants of Post-Communist Economic Reform
      (pp. 3-21)

      When the new democratic leaders of Russia and Eastern Europe initiated the capitalist transformation of their command economies, many expected the transfer of public property to the private sector to be one of the more popular measures to implement. Indeed, when the movement to privatize state-owned industries through widespread distribution gained momentum in Great Britain in the 1980s, it was as much a populist measure to build support for Margaret Thatcher’s government as a means to revitalize sluggish industries under state control.¹ More important, considering the pain associated with other early transition programs in post-Communist Europe—such as price deregulation,...

    • 2. The International Dimension of Post-Communist Privatization
      (pp. 22-36)

      Beginning an analysis of ideology and privatization with a discussion of the international diffusion of ideas makes good sense if one accepts the premise that leaders in various East European and post-Soviet states did not develop their ideas and beliefs about privatization entirely independently. Indeed, the repeated use of a novel mass privatization approach across numerous countries with varying conditions suggests that privatization was not exclusively an individual response to domestic political and economic concerns, but was also an interrelated international phenomenon.¹ After all, private property reform topped the policy agenda for most governments in the region, with over a...

  2. Part II. Probing the Czech and Russian Cases

    • 3. The Origins and Design of Czech Large-Scale Privatization
      (pp. 39-70)

      Private ownership in the Czechoslovak economy was extremely limited under the Communist regime, with approximately 95 percent of the gross national product in 1988 still being produced in the state sector. In the late 1980s, Czech and Slovak scholars had only just begun to publicly discuss the possibility of introducing ownership reforms, in contrast to economists in Poland and Hungary. That is, only during the last year or two of Communism did Czechoslovak economists benefit from a new state tolerance for nontraditional economic analysis and from the circulation of ideas about private ownership in academic and research institutions. Moreover, the...

    • 4. The Origins and Design of Russian Large-Scale Privatization
      (pp. 71-106)

      For several years prior to the introduction of Russia’s mass privatization program, Russian economists had been analyzing policy options for revitalizing the economy, including changes to the Communist system of public ownership.¹ With Mikhail Gorbachev’s ascent to power, a wide range of policy ideas gained new consideration. The worsening of relations with much of the outside world following the Soviet invasion of Afghanistan, the upward spiraling of the arms race, the depletion of hard currency and gold reserves, and a decline in production prompted Gorbachev to seek out solutions to domestic and foreign policy problems from scholars in elite research...

  3. Part III. Elaborating the Theoretical Framework

    • 5. The Beliefs of Leaders and the Content of Reform
      (pp. 109-126)

      When the post-Communist privatization programs were initially under design, the government officials charged with reformulating the system ownership drew from liberal economic ideology to help them develop their approach to property rights reform. Neoliberalism offered a coherent set of ideas that could guide leaders through the process of identifying the kind of system that should follow in the place of Communism as well as the path to achieve it. Its principles posited specific outcomes to flow from neoliberal institutional arrangements—namely, private ownership would create more effective incentives for the channeling of resources to their most efficient use. One property...

    • 6. Power, Interests, and the Ideological Context
      (pp. 127-156)

      Just like political elites, societal actors rely upon ideological beliefs to envision a post-Communist political and economic regime, as well as their place in that regime. Beliefs shape how individuals determine their policy preferences and their strategies for advancing those preferences within a set of institutional arrangements. In any political space, the aggregate sum of mass and elite beliefs creates an ideological context. This ideological context, however, not only shapes how certain groups define their material interests within an environment of political change; it also affects the legitimacy and hence the strength of potential supporters and opponents of government programs....

    • 7. The Ideological Foundations of Building Compliance
      (pp. 157-171)

      In the early theorizing about the process of post-Communist transformation, many scholars in Western academia focused upon the challenges leaders would face in implementing simultaneous political and economic transformation.¹ How would the newly elected leaders carry out difficult capitalist reforms within a structure of electoral politics? Could the new promarket governments rely on a window of opportunity during which the population would tolerate destabilizing economic policies?² Or would neoliberal policy makers be blocked by an electorate wanting to punish them for promoting painful systemic reforms? Implicit in this debate was the concern that newly elected democratic leaders would lack the...

    • 8. The Ideological Fit and the Cost of Compliance
      (pp. 172-180)

      The previous discussion of the Russian ideological climate—and its relevance to the implementation of a liberal economic reform agenda—leads us to the final means through which ideas shape privatization outcomes. This final path relates to the relationship between the ideological bases of reforms and a given ideological context. In analyzing the role of ideology on several dimensions, this book concludes with the following contention: the implementation of a program of transformation is least costly and most effective when the ideas underlying those programs are easily compatible with the existing ideological context—that is, when they resonate with the...