The Conditions for Privatization

Dictated economy, which relies on state ownership, has shown vitality only in countries on a low level of economic development, which also have to deal with the problem of their population's elementary existence. After an initial success, dictated economy lost its efficiency and in spite of its humane manifesto, socialism gave way to a new world process: privatization.

The legalization of private ownership of companies is the first and decisive step in the process of transformation of dictated economies into the market model. The sale of state owned companies to private individuals is the natural continuation of this process and an essential component of the transition. It is evident however that in former communist countries financial demand was insufficient to purchase state owned companies, while a number of factors limited the access to foreign investors. This is why privatization would have begun to slow, had at least part of the property not been given to new owners gratis. Although this gives the inevitable question: "What is the best way of dividing taxpayers property among new buyers?" a cynical overtone, it is clear that the abandonment of such "gifts" would have inevitably slowed down or even halted the process.

Even greater problems emerged during the transformation of state ownership in this country. The ownership itself was more like some kind of group ownership than state ownership: through their work and often independent business decisions, workers created property and wealth that belonged to the whole society. Through mechanism of self-management, directly and indirectly, they controlled and managed that property. Why would working collectives agree for their property to by given free of charge to new owners or the state, in the name of some "privatization", unless the continuity of law is broken and it is taken from them by revolutionary means? The distribution of shares to employees, with certain corrections, would have been the natural sequel to the old slogan "factories to the workers", except of course in certain special cases (infrastructural systems etc.), which were managed by the "wider social community" even during the era of self-management.

Aware of this specificity, those in charge of implementing the process of privatization often wanted to use the "one step back, two steps forward" model: first turn public ownership into state ownership, and then privatize the newly acquired state property. This unjust and unnatural expropriation of workers collectives (which strangely enough went quite smoothly) often stopped half-way so quite a few companies are further away from the market model today than they were six years ago.

Our economy can boast with a paradoxical result: after "privatization", the public sector, which was always less efficient that either private or public ownership, became much stronger.

The idea about the need for co-existence of all kinds of ownership in our economy is very popular. It is easy to show that such co-existence would lead to an inevitable destruction of the economy: publicly owned companies, particularly larger ones, could make the "wider social community" cover their losses by threatening with collapse and "social explosion" that would ensue; the state would have to cover such losses out of its budget or inflationary taxes, and thus guard social peace, and the existing manufacturing capacities; certain private firms would charge publicly owned companies (and indirectly the state) too high a price for their services, and thus make incredibly large profits. The inefficient state companies would thus be kept alive, the state would be exhausting the healthy aspects of its economy through fiscal burdens, while on the other hand new private financial empires would be allowed to develop. The question about who would be the "darling of the state", strong private companies or inefficient but indestructible publicly owned companies, is least important. What is important is that the co-existence of ownership, together with the indestructibility of public ownership, leads to losses and an inefficient allocation of resources.

Transition and privatization are processes which should establish and strengthen two main institutions of free market economy: property and contract, in former socialist countries. However indications exist that steps are being made in the totally opposite direction. Breaches and "creative interpretation" of international agreements, legalization of international terror by the state, and an emphasis on the "rights of the stronger", forceful abolishment of property rights and the exile of hundreds of thousands of people, create conditions in which it is difficult to promote the ideas of property and contract as inviolable and sacred. These conditions encourage the spirit of terrorism and reliance on brute force, which is not suitable for the processes of transition and privatization, and from a more global point of view, lead to the criminalization of public and private life.

All this points towards the fact that both domestic and international conditions for privatization are worsening. It is evident however that stopping or postponing privatization is the worst possible option which would only aggravate the problem.