Russia : Thoughts on the Privatization Debates a Decade Later

Abstract

A decade has passed since the privatization debates concerning Russia and the other transition economies. This note reviews literature on two issues: the overall institutional change strategy, and the alternatives to and arguments against voucher privatization. The alternative is a strategy of incremental institutional change. Instead of an imagined great leap forward over the chasm between socialism and capitalism, incentives are devised to move people incrementally, but irreversibly, from the existing quasi-reformed institutions towards the ideal institutions. Instead of just negating the de facto property rights of managers and workers, they can arrive at a nearby set of legitimized de jure property rights by moving in the right direction. The market bolsheviks designed the market reforms based on voucher privatization with the exact opposite purpose to deny the de facto property rights accumulated during the communist past, to righteously wipe the slate clean, and to start afresh with formal property rights.