Privatisation and Restructuring in Economies in Transition: Theory and Evidence Revisited

Abstract

TIIE QUESTION REGARDING TIJE VARIOUS METIIODS of privatisation has attracted widespread discussion in the economic literature concerning the transition process of the former socialist countries to market-style economic systems. Since the privatisation of state-owned enterprises and, moreover, the development of an (autonomous) private sector can be regarded as fundamental stages on the whole stony road to a less state-regulated economic system, there exists a wide range of proposals on how to privatise state companies and assets. These proposals and forms can basically be divided into direct and indirect methods of privatisation of state-owned enterprises. The direct methods include forms such as public auctions, tenders, public invitations, capital privatisation and employee or management buy-outs (in Poland, so-called 'liquidation'). Indirect methods include different distribution schemes elaborated to privatise a large bundle of state-owned enterprises in one mass privatisation programme. Much more interesting, however, is an analysis of the restructuring and efficiency-enhancing progress following the ownership change. In light of the uniqueness of the microeconomic transformation process in Central and Eastern European countries in transition, the lack of a well-elaborated theoretical basis covering the ownership change and necessary restructuring steps was considered to be one of the major constraints for prescriptive economic policy advice. Despite quite a large number of complaints from authors about the theoretical vacuum in which the process of economic transformation takes place, this is, in fact, not the case. A general theory of transformation has not yet been elaborated; however, this is not surprising considering the short time period of the process. Nevertheless one can find and use a rather well-developed range of economic theoretical tools to explain and deal with transitional problems. As aids in solving normative problems of the economic system, one can 'exploit' the findings of the German Ordnungspolitik and Anglo-Saxon Neo-Institutionalism. Macroeconomic issues resulting from a heavily distorted economic structure and relative prices can be dealt with through different models of stabilisation. Problems on the microeconomic level, such as restructuring and privatisation of state-owned enterprises, can be solved by using the existing and developing literature on the 'integration of ownership' (Carlin & Mayer, 1992,