Mass Privatization, State Capacity, and Economic Growth in Post-Communist Countries

Why did the transition from socialism to capitalism result in improved growth in some countries and significant economic decline in others? Scholars have advanced three main arguments: (1) successful countries rapidly implemented neoliberal policies; (2) failures were not due to policies but to poor institutional environments; and (3) policies were counterproductive because they damaged the state. We present a state-centered theory and empirically demonstrate for the first time one of several possible mechanisms linking neoliberal policies to poor economic performance: mass privatization programs, where implemented, created a massive fiscal shock for post-communist governments, thereby undermining the development of private-sector governance institutions and severely exacerbating the transformational recession. We performed cross-national panel regressions for a sample of 25 post-communist countries between 1990 and 2000 and found that mass privatization programs negatively affected economic growth, state capacity, and property rights protection. We further tested these findings with firm-level data from a representative survey of managers in 3,550 companies operating in 24 post-communist countries. Within countries that implemented mass-privatized programs, newly privatized firms were substantially less likely to engage in industrial restructuring but considerably more likely to use barter and accumulate tax arrears than their state-owned counterparts.Sociolog

Examining Participatory-based on Share Ownership and Management in the Bank Pembangunan Daerah as Limited Liability Companies

The Good Corporate Governance principle of limited company is required to increase the confidence, support, and participation of stakeholders or all parties concerned with the company. As it turns out in practice, however, it has certain weaknesses, particularly in view of the accountability and legitimacy aspects of its establishment. This research is an empirical legal research in examining participatory-based on share ownership and management in Bank Pembangunan Daerah (BPD) as limited liability companies. The outcomes of the research indicate that the essence of participatory share ownership and management in the BPD is not directly owned by the shareholders. Proof of ownership for the depositor is only obtained from the Cooperative that the person concerned has a nominal share deposit in the form of a certificate containing the amount of the nominal value of the ownership. Normatively, legal protection for share ownership and management is participatory based, in principle, shares that are protected under the name of Cooperatives are classified as legal protection for minority shares, while employees who de facto as depositors of nominal shares are not well protected by law. Hence, to provide legal protection and certainty to participatory share nominal depositors, there must be binding rules between the parties as outlined in the provision of fund management (management regulation) on the terms of participation. Keywords: Good Corporate Governance, Limited Company, Local Governmen

The Governance Grenade: Mass Privatization, State Capacity and Economic Growth in Post-communist Countries

Why did the transitions from state socialism to capitalism result in improved growth in some countries but significant economic declines in others? Three main arguments have been advanced: (1) the most successful countries rapidly implemented privatization, liberalization, and stabilization policies; (2) failures were unrelated to economic policies but occurred because of a poor institutional environment; and (3) the policies were counterproductive because they damaged the state. We present a state-centered theory which argues that the more radical the privatization program, the worse the subsequent performance. We agree with the second account, that institutions matter, but demonstrate that it was radical privatization itself which was a major determinant of institutional weakness. In addition, our account holds that privatization was in fact a crucial determinant of institutional failure, operating primarily through the creation of a massive shock to state revenues. We perform cross-national regressions for a sample of 30 countries between 1990 and 2000, and find that mass privatization programs negatively impacted economic growth, state capacity and property rights protection. These findings are corroborated with data from a random sample of 4,000 firms from 26 post-communist countries. We show that in countries which implemented sizable mass-privatized programs, privatized firms were substantially less likely to engage in successful industrial restructuring but considerably more likely to engage in barter and have tax arrears than their state owned counterparts.

The political economy of economic crisis

노트 : Paper presented at the workshop on Current Economic and Political Issues in Korea sponsored by the Center for Pacific-Asia Studies, the University of Stockholm, on Jan. 28-29, 1999, in Stockholm, Sweden

A transição financeira na Rússia

Mestrado em Desenvolvimento e Cooperação InternacionalEste trabalho pretende analisar a transformação, num horizonte temporal de 10 anos ( 1985- 95), de uma economia centralmente planificada assente no sector público, numa economia de mercado livre e concorrencial, baseada na propriedade privada. O tema principal é, contudo, o papel do sistema bancário e dos grupos financeiro- industriais no desenvolvimento económico russo. O primeiro capítulo descreve os principais características do sistema político-económico soviético tradicional e os principais passos dados entre 1985 e 1991, no sentido da democratização e do desenvolvimento económico. A dissolução da União Soviética e o surgimento, em seu lugar, de quinze Estados independentes, entre outros e em particular, a Rússia, as mudanças políticas na Federação Russa (de 1991 a 95) visando a consolidação da democracia são também enunciadas. Não sendo os aspectos políticos da transição a principal preocupação desta dissertação, esta vertente é abordada de uma forma relativamente sintética. Este capítulo examina também as principais características económicas do antigo e do actual regime. Além disso, é feita uma análise do desempenho macroeconómico durante este período (1985 a 95), através dos índices de crescimento do PIB, inflação, investimento e outros. O segundo capítulo analisa a transformação da propriedade uma economia centralizada com grande predominância do sector público, para uma economia de mercado onde a propriedade privada assume um papel de grande relevo. Neste âmbito, são descritos os processos de privatização iniciados na época de Milchail Gorbatchev (URSS) e substancialmente desenvolvidos pelos governos chefiados por Bons Yeltsin (Rússia). O terceiro capítulo é dedicado ao aprofundamento da intermediação financeira que se verificou no sector bancário, descrevendo a passagem de um sistema monobanco para um sistema bancário bi-ancorado, e, finalmente, para um sistema englobando milhares de bancos com uma grande diversidade de serviços. O último capítulo descreve a criação e o desenvolvimento de grupos financeiro- industriais. O principal objecto deste capítulo é a relação entre a acumulação de capital e a produção, as relações bancos-indústrias.This work analyses the transfonnation, during a period of ten years ( 1985-95), from a centrally planned economy based on public sector, in a free market economy, based on private ownership. The main issue, however, is the role of banking system and financial- industrial groups in russian economic development. The first chapter describes the basic points of the traditional soviet politic-economic system, and the main steps taken between 1985 and 1991, on the way to democratization and economic development. The Soviet Union's dissolution and the appearance, in its place, of fifteen independent states, among them Russia, and the political changes in Russian Federation (from 1991 to 95) aiming the strengthning of democracy are also studied. Since political aspects are not the main issue of the study, they are only synthetically analysed. Moreover, this chapter examines the essential economic characteristics of former and actual regime. There is, also, an analysis of the macroeconomic evolution during this time ( 1985 to 95), through GDP, inflation, investment, and other growth rates. The second chapter analyses ownership transformation from a centralized economy with public sector's great dominance, to a market economy where private ownership assumes a relevant role. In this sense, the privatization processes initiated on Mikhail Gorbatchev's era (USSR) and substantially developed by Bons Yeltsin's governments (Russia) are examined in a more detailed way. The third chapter is dedicated to financial intermediation deepening that has occurred in the banking sector, describing the change from a monobank system to a "two-tier" banking system, and, finally to a free system including thousands of institutions with a great diversity of services. The last chapter describes the creation and development of financial- industrial groups (FIG's). The main object of this chapter is the relation between capital accumulation and production, banks-industries relations.info:eu-repo/semantics/publishedVersio

The Development of Small Entrepreneurship in Russia

Entrepreneurship, Private sector, SME, Transition

The political economy of financial repression in transition economies

Financial systems in developing countries tend to be"restricted"or"repressed"through burdensome reserve requirements, interest-rate ceilings, foreign-exchange regulations, rules about the composition of bank balance sheets, or heavy taxation of the financial sector. Why are governments drawn to regulate financial markets to the point of financial repression? To address this question, the authors explore preliminary evidence from the post-Communist economies of Eastern Europe and the former Soviet Union, where financial regulations have rarely been examined systematically. They find that public-finance framework has limited ability to explain financial repression in the transition economies, given the peculiar financial lineage of the socialist state. The weak distinction between"public"and"private"spheres of finance in transition economies means that the deficit often conveys little information about the governments'real fiscal activities. It is more fruitful to examine how political institutions, by shaping the incentives politicians face, affect financial policy. Their findings suggest that post-Communist governments may adopt repressive financial controls - not to finance deficits more cheaply than would be the caseunder financial liberalization, but to maintain the authority and ensure the survival of those in power. In countries where pre-reform elites are plentiful in legislative bodies, where interparty competition is low, and where government parties are well-represented in parliaments, elites have been able to perpetuate a system of implicit subsidies by"softening up"the financial sector - especially commercial banks - to ensure the continued flow of cheap credit to specific borrowers. The main beneficiaries of these policies - large formerly state-owned industries with tight financial links to the largest commercial banks - are thus able to convert their well-established claims on public resources into preferential access to credit lines. In other words, financial repression in transition economies may simply serve to solidify main-bank, main-firm relations. These results would lend support to the claim of smaller, cash-starved Eastern European entrepreneurs that the commercial banks have"taken over the role of the old planning ministries."Banks&Banking Reform,Financial Intermediation,Payment Systems&Infrastructure,Environmental Economics&Policies,Economic Theory&Research,Environmental Economics&Policies,National Governance,Financial Intermediation,Banks&Banking Reform,Economic Theory&Research

Deetatization of Culture, Privatization of Politics: The Case of the Publishing Houses in Postcommunist Romania

The paper addresses the process of postcommunist denationalization by focusing on the privatization of cultural institutions, as it occurred in the case of major Romanian publishing houses in recent decades (Editura Politică/ Humanitas, Univers, Minerva, etc.). Our approach acknowledges the leading role of humanist intellectuals in launching and legitimizing devices of privatization immediately after 1989, a curious phenomenon which reasserted the larger pattern of literature-centrism developed in the former socialist cultures. These intellectuals’ enthusiastic siding with principles of market capitalism, from their new positions of book publishers and cultural managers, paved the way for the rapid implementation of neoliberal policies. At the same time, leading the process of privatization helped these intellectual groups gain the upper hand in the public narrative on main ideological topics, such as the memory of communism, the interwar far right, and the path towards Westernization. Our analysis traces several empirical stages of this particular privatization of culture: 1) the legislative frame of denationalization and market liberalization; 2) the publishing policies and the promotion of certain book collections; 3) the dissemination of anticommunism that enabled publishing houses themselves to serve as political platforms. Overall, we aim to explain how this intellectual enterprise failed to ensure direct economic and cultural profits but was spectacularly successful in establishing a long-term recipe for neoliberal restructuring in several areas of society