Property Rights and Privatization in the Transition to a Market Economy: A Comparative Review

The definition of property rights and the transition from an economy dominated by collective ownership to one where private property prevails, are major issues in the processes of transition to market economies now under way in the countries of Central and Eastern Europe and in Russia, and also in many developed and less developed countries. In economies in transition, privatization represents an enormous break with the past, an essential component of the change in regime. It has been assigned a crucial role in the process of macroeconomic adjustment and restructuring, and it has received strong political priority and the unconditional support of the new leadership. However, the lack of some key institutions has constrained the process dramatically, and privatization (particularly of large state-owned enterprises) has proceeded much more slowly than envisaged at the beginning of the transition. In almost all countries in transition, private activity has grown more as a result of the birth of new firms than of the privatization of existing state assets.
The book reviews the privatization experiences of Central and East European countries and Russia. It addresses some of the issues which have emerged during the processes already under way for a few years now, including whether incentives for the growth of private activity or a more gradual and partial transfer of state assets could have been attempted. This has been done manly by comparing in a common framework the experiences of some Central and East European countries, the practices in various West European countries, and theoretical schemes. Various privatization methods and their application to Central and Eastern European countries have been reviewed. Targets, constraints and implications are identified for the strategies followed by various post-communist countries. One of the main conclusions of the book is that despite the indisputable need to expand the activity of the private sector substantially, approaches to privatization more tailored to the institutional reality of the countries in transition would have implied lower costs for the state budget and, arguably, for the economy as a whole.