The privatization experience in Eastern Europe during transition to the Western capitalist system

Abstract

Since the term “privatization” was given wide currency by the sale of British Telecom in 1984, many developing countries have launched privatization programs. The dimensions of the privatization revolution have been huge. The most profound change of all has been experienced in Eastern Europe after the fall of communism, which have adopted a variety of techniques to transfer ownership rapidly to private hands. A very important key obstacle results from the legacy of communism: there was no existing private sector to buy the state-owned enterprises. In Western Europe and Latin America, , there has been a private sector capable of buying and managing state-owned enterprises, but this was not the case in Central and Eastern Europe. This meant that the economic and political leaders had to create their own mechanism to achieve privatization. Thus, to make a market economy out of the ruins of Communism faced an incredibly complicated task. They had to create a “private economy” where there was no pre-existing social group of “private owners”. The primary purpose of this thesis is the evaluation of the privatization experience of Eastern Europe in the post-communist period by showing the crucial interrelations between market reforms and democratic political reforms. The policies of post-communist governments -liberalization and privatization- were intended to allow “efficiency” considerations to shape organizations of the new capitalist economies.