FOR POINTS ON PRIVATIZATION By Wallace Kaufman

ANALYSIS: FOUR POINTS ON PRIVATIZATION

By Wallace Kaufman

1. Privatization is not yes or no like an electric switch. It is a process with a continuum of magnitudes. Privatization for large or small enterprises can be measured it by its position on a scale of completeness. This would help define what is and is not happening; what needs to happen for effective privatization. For instance at the worst degree is nomenklatura privatization--uncompetitive, un-advertised, poorly documented, etc. At the best end would be an entirely open, transparent, well documented auction; perhaps one in which workers had counseling beforehand on how to use vouchers, evaluate the business, etc. In short, it is possible to measure the completeness of privatization on a scale of qualities--degree of competition, dissemination of information to all possible participants, clarity and fullness of documention, effort to expand the pool of participants, etc.

2. Soviet culture and communism did not kill entrepreneurship and the human traits from which it springs. I participated in a number of studies in the early 90s of new private entrepreneurs in manufacturing in Poland, Hungary and the Czech and Slovak republics. There was, to our surprise, no lack of real entrepreneurs, starting out with everything from just an idea to stolen state equipment and buildings. Few of them were mafia or nomenklatura types because being a criminal with no rules or a nomenklatura with no personal initiative is not the kind of situation that appeals to entrepreneurial people. What entrepreneurial people needed were:
--stable laws
--low taxes (or tax incentives)
--sources of capital (partners, loans, etc)
--marketing skills
That's a very quick summary. The point is that the same people exist in Russia. I know them. But they don't have the minimal foundations in law, micro-economic climate, finance, and access to materials.

3. Observers and citizens say privatization has failed in Russia because they do not adequately distinguish between the degrees of privatization. The process in Russia, perhaps including even the recent Svyazinvest auction, has met few of the criteria for first degree privatization. Russia above all other former CIS states has mucked up its emerging entrepreneurial culture by taxing them to death, by failure to protect their investments, and by limiting and eliminating their access to assets being "privatized."

4. Workers from collective farms to coal mines and factories don't believ in the profitability of their enterprises. They are very poorly prepared to make investment decisions--whether to buy in or, if bought in, how to manage the business. The old profsoyuz (labor union) is worthless.

In other countries like Kazakstan and Uzbekistan, we will see in the privatization of major natural resource companies and exploitation rights, whether there is a commitment to opening the doors for democratic entrepreneurship or if the primary interest is to endow the central government with the profits and taxes it can redistribute according to ideology, family and friendship ties, and the nurturing of political power.