Lessons from Eastern Europe's Voucher Privatization

Abstract

Following the alleged success in Czechoslovakia, voucher privatization with investment funds became the form of privatization favored across the transition economies from Mongolia to Slovenia by the Washington consensus and by the most prominent and vocal western economic advisors. But the advisors did not impose it on supine transitional economies. New ascendant elites (often returned from exile or emerged from internal exile) in the post-socialist countries had their own political reasons for supporting voucher privatization so the marriage with the prestige of western economic advisors was a very happy one with benefits for both parties. Much of the current lesson learning has been quite superficial. Many critics of the Russian transition have taken easy potshots at the blatantly corrupt loans-for-shares privatization scheme, but the lessons of the earlier voucher privatization are much more revealing and disturbing. These are not just lessons about Russia (or Czechoslovakia); they are lessons about western development establishment and about neo-classical economic theory.