It is time to take a close second look at privatization programs in Russia and other post-Soviet republics.
Most people who are literate in econmic matters would agree that the emergence of real capitalists or real entrepreneurs who found or restructure real enterprises that produce socially beneficial goods and services for sale at competitive market prices would be a good thing for Russia and other countries of the former Soviet Union. Most observers agree that monetary and fiscal stability are also important ingredients of long term economic development in Post Soviet societies and the absence of either may undermine other aspects of economic restructuring. In the long run the creation of efficient and competitive enterprises will determine the success or failure of market oriented reforms.
However, the first experiences with privatization in Russia and elsewhere show that creating enterprises which actually compete on domestic and international markets will be a long and difficult process.
Under Russia's variant of voucher privatization, many enterprises have ended up with workers and managers together as majority owners. Other enterprises have been purchased by wheeler dealers with political connections whose primary interest seems to be acquisition of valuable properties at prices well below market value. Many of the new owners simply strip down and sell off whatever is of value with no consideration for the long term survival of the enterprises. These new owners have yet to show that they can actually restructure the companies they acquire and make them truly efficient and competitive. Few companies have actually been acquired by investors with a long term interest in developing and improving their productive capacity or the quality of products sold. No provision has been made in the Russian economic reforms for a social safety net or retraining and rehiring of displaced workers.
It will take years before a real entrepreneurial class emerges. It is possible that real entrepreneurs will be mostly people who have founded new enterprises which sell real goods and services on the market, not the speculators who acquire state properties at outrageously low prices then run them down or sell them off for a windfall. Perhaps a few of the enterprises sold off to people with political connections will eventually end up in the hands of real entrepreneurs before they are completely destroyed by the new pillagers, but this is far from certain. Perhaps a few giant monopolies will be broken down into more efficient and manageable sub-units.
The Russian and similar privatization programs are based on the assumption that the enterprises will end up in the hands of a few owners who will see to their long term improvement and development. So far this has not taken place.
There is one consideration which seems to be absent from much of the discussion of post-Communist privatization schemes. That is the transformation into viable and competitive employee owned enterprises of at least some of the "privatized" companies which have ended up in the hands of workers and socialist era managers. The livelihood of these employees is more closely tied up to the enterprise and the local economy than that of many of the new robber barons and speculators who are using their windfall speculative profits to bribe government officials and acquire new properties which they then proceed to run down and destroy. There are many examples of successful economically viable employee owned companies and non profit organizations in market economies from the Mondragon workers' cooperative in Spain to a host of employee owned companies in Canada and the United States.
We should remember that real existing market economies are a far cry from the competitive world of Adam Smith or the ideal of Pareto optimality. Many corporations in the capitalist world are not actually in the hands of core group of caring owners or shareholders who look after their long term welfare. Employee owned or non-profit firms can often function as well or better than many privately owned companies. Because the majority of Russian enterprises are still in the hands of employees, it would make sense to look for ways to turn at least some of them into efficient producing units instead of rushing to sell them off to Mafia or nomenklatura pillagers.
What has been written above is not a blanket ideological prescription for cooperativism. What happens to a particular enterprise should depend on the nature of the enterprise itself and its work force. In many cases employees and managers may lack the necessary skills or vision to transform their companies into competitive enterprises. Some companies may simply be un reformable and should be eliminated. Some employee owned enterprises, on the other hand may run much better than companies acquired by speculators or pillagers.
Some funding from economic development agencies or NGO's could and should be allocated to programs to enhance the competitiveness of these employee owned firms in the Russian Federation and other countries with similar privatization programs. The World Bank and private financial institutions should consider funding projects to improve the plant, equipment and/or upgrade accounting, marketing, and organizational skills of the managers and employee owners of these firms.
The improvement of existing employee owned enterprises and provisions for the needs of large numbers of employees who are likely to be dismissed because of inevitable enterprise restructuring are two matters which should receive much more attention than they have. If the transition to the market economy is based on patently unrealistic assumptions and leads not to the restructuring and improvement of existing companies but to their breakdown coupled with tremendous social dislocation and suffering - the very idea of the market economy will lose political support and there will be much propaganda fodder for the Zyuganovs, Zhrininovskys and other enemies of genuine economic and political reform.