BrownPrivRus

BrownPrivRus - Brown, Andrew 1 March 2005 Prikhvatizatziya:...

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Brown, Andrew 1 March 2005 Prikhvatizatziya: Privatization in Russia Prikhvatizatziya , or roughly translated from Russian as “privatization-grab”, has come to reflect the Russian public’s perception of the mass privatization of enterprises in the former Soviet nation. This paper provides a survey of privatization in transitional Russia during the 1990s. I will spend most of my attention on three aspects of privatization. First, I will examine the mechanisms employed in Russia to transform firms from state-owned enterprises to private status. These mechanisms include the mass privatization plan of 1992 to 1994, and the highly controversial and publicized “loans-for-shares” program. Second, I will discuss the economic consequences, both at the national level and firm level, of the privatization process. Lastly, I will review the political debate surrounding privatization as it applies to Russian firms today. Mass Privatization After the fall of the Soviet Union in 1991, the new Russian government was planning a track to transform the country away from the Communist past. One of the top priorities, perhaps second only to the liberalization of prices, was the privatization of Russian enterprises (Freeman, 2000). “Shock therapy” was the dominant theory from the Western scholars at the time. Speed was thought to be paramount (Black et al, 2000). In retrospect, the reforms have been viewed to be too haste, but the Russian government was looking for a swift, irreversible step away from the Communism. As one former official said, the Boris Yeltsin government recognized proposed ownership systems were bad, but Russia “needed a lot of capitalists, fast” (Black et al, 2000, p. 1741).
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Having established the motives, I will visit the realized mass privatization program that was passed in 1991 and amended in 1992. In October 1992, all Russian citizens received 10,000 rubles worth of privatization vouchers that were immediately exchangeable for cash or shares in enterprises selected for privatization. With the approval of a firm’s staff, each enterprise to be privatized would be transformed to a joint-stock company before selecting one of three ownership options. See Table 1 for a breakdown of the three ownership options. The first auction was in December 1992. From then until the end of June 1994, the last auction of this first wave of privatization, roughly 70 percent of the large state enterprises were privatized (Lavigne, 1999). See Table 2 for a breakdown of privatization by year. On July 22, 1994, Boris Yeltsin announced the second phase of mass privatization. Remaining state holdings would be sold at cash auctions and the proceeds would go to restructure privatizing firms (Coulloudon and Yasmann, 2003). The Russian government did face multiple challenges in implementing the mass
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BrownPrivRus - Brown, Andrew 1 March 2005 Prikhvatizatziya:...

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