Privatization, Competition and Beyond

This chapter presents a political economic analysis of the privatization movement in Turkey. In terms of pace and volume, the privatization experience in Turkey can be examined in two different periods. In the period 1985–2003, privatization amounted to only 8.2 billion dollar, while it reached approximately 36.4 billion dollar in the period 2004–2009. The radical transformation in the privatization policies of Turkey is worth analyzing from a political economy perspective. To this purpose, first, the historical background to privatization in Turkey and the circumstances leading to liberalization and privatization policies will be examined. Second, the factors influencing the privatization process such as objectives, strategies, and the effects of economic, legal, institutional, and political conditions will be discussed. Analysis of the privatization experience in Turkey reveals that factors such as legal and institutional structures, political will, unstable macroeconomic conditions, ideological resistance, and rent seeking activities shaped the privatization movement and its consequences.

Assessment of Privatization in Turkey

Selection in privatization is the decision-making process of choosing state-owned enterprises (SOEs), prioritizing and sequencing privatization events, and determining the extent of private ownership in partial privatization. We investigate this process in the important but rarely studied case of China. Using the SOE population for 1998–2008, we track 49,456 wholly state-owned firms and identify 9,359 privatization cases. Our econometric analysis concludes that privatization selection is a complex decision-making process in which local governments balance various economic, financial, and political objectives. In the recent Chinese privatization, firm performance relates to the selection, staging, and sequencing in privatization in an inverted-U fashion. The worst- and the best-performing SOEs are more likely to remain state owned, more likely to maintain higher levels of state holding when privatized, and less likely to be privatized later. These patterns suggest a privatization reform slowdown and underlying changes in the privatization policy.

In the 1980s public policy shifted sharply in favor of market-based solutions, in contrast to the previously dominant “Keynesian” approach to economic management. A number of countries, irrespective of their regimes or stages of development, are currently implementing programs designed to reduce the size and scope of the public sector and strengthen the market. The privatization of public enterprises constitutes a key element in such a strategy.1 Yet hitherto, the extent of privatization—the number of enterprises involved as well as the scale of divestiture—has been extremely limited, especially considering the amount of rhetoric the idea has generated. In addition, the vigor with which privatization policies have been pursued also shows considerable variation among countries. These “stylized facts” of privatization clearly merit an explanation.2 Here I will look for that explanation by using the Turkish experience with privatization between 1980 and 1989 as a case study.

Privatisation Policy in Spain: Stuck between Liberalisation and the Protection of Nationals' Interests

Against the backdrop of major changes in Turkey's development strategy and policy regimes, the paper provides an assessment of the aggregate performance of the non financial state-owned enterprise (SOE) sector, and examines the nature and process of reform initiatives during the decade of 1985-95. The paper argues that the performance of the SOE sector should be evaluated not only against the background of its institutional framework, but also in relation to the economic policy mix at the macro level. In this vein, the recently revised SOE data have been processed in a form that matches the policy cycle identified in the 1985-95 period. The analysis brings out the strong sensitivity of SOE financial indicators to changes in major policy characteristics, including Government's stance on income distribution, real wages and modes of deficit financing. Following the assessment of overall SOE performance over time, the paper critically reviews Turkey's privatization experience, examines legal setbacks, and documents major asset sales and related expenditures. The implications of the present analysis for future SOE reform are also discussed.

This article seeks to explain the post-2001 acceleration of privatization in Turkey. Employing a Marxian analytical framework, the article argues that the acceleration of privatization in Turkey in the post-2001 period was the result of a powerful combination of support from the power bloc (i.e., fractions of capital) in Turkey, which has been achieved with a major subordination of labor. The power bloc saw previously unavailable advantages in supporting privatization within the context of the post-2001 domestic capital accumulation regime, and therefore acted to restructure the legal and institutional framework of the state to weaken the resistance of labor and facilitate the participation of potential investors in privatization tenders. This interpretation challenges the dominance of institutionalist accounts, which draw on the legal-institutional framework and/or national interest-based discourses without considering how the changing relations among different fractions of capital and between capital and labor within the constitutive dynamics of domestic capital accumulation exerted significant influence on the acceleration of privatization. JEL Classification: P160; F50

The importance of the SME sector is undeniable, as a driving force for growth, innovation and competitiveness, but also as an essential employer or contributor to local and national budgets. The efficiency and dynamism of the SME sector are closely related to the ambitions and motivations of the founding entrepreneurs, in pursuing growth and consolidation goals. Most researchers, however, consider that, unlike large firms, entrepreneurs of the new small venture are constantly challenged to reconcile economic and financial objectives with other non-financial goals (recognition, lifestyle, family and community, etc.) and this may create significant discrepancies between the company’s actual performance and the expectations of the entrepreneurs. These facts are probably more obvious for the new venture in tourism, where lifestyle goals often distress obtaining financial and commercial performance. In our research, which analyzed a significant number of tourism businesses included in the Entrepreneurship Database Program, we tried to answer to some questions regarding the main financial targets of the entrepreneurs, the average profit margins considered satisfactory by the new entrepreneurs, or if there is a specificity of tourism enterprises compared to the other areas. We have tried to address how financial and business growth objectives are associated with the entrepreneurial lifestyle expectations, especially in the early-stage development of the firm, in the so-called new venture.

: A year after Operation Allied Force, proponents and critics of current U.S. strategy in Kosovo disagree over its effects to date and the level of commitment required to secure U.S. interests. While successes have occurred, serious issues remain. This essay offers insights into the dilemmas and challenges facing the national security strategy to achieve stability and security in Kosovo. While focusing on the application of economic power toward stabilization and reconstruction, this paper demonstrates that economic objectives in Kosovo are inextricably linked to security and political objectives. It first provides an overview of the political, security, and economic environment. It then proceeds to outline international and regional approaches to integrate Kosovo and the rest of the region into a more stable Europe. The essay next identifies and examines specific U.S. political, economic, and military policies. Finally, in evaluating U.S. interests in Kosovo and possible alternative strategies to secure them, this essay provides recommendations to strengthen U.S. policy. U.S. policies for post-crisis Kosovo must aim to secure not only economic stabilization and growth but also the consolidation of peace and security. A strategy that fails to build on the powerful interrelation among these economic, political, and security objectives will ultimately fail to achieve any of them. While this farsightedness may seem a tall task for Kosovars, the regional and international institutions, and U.S. peacemakers and economic policy makers who support them, the charge can be no less.

The article discusses modern approaches to modeling wave processes in the field of ensuring the security of financial and economic objects based on the analysis and use of mathematical methods. The possibilities of the used dynamic models in forecasting the development of processes in the medium and long term, contributing to the implementation of strategic planning, are shown. A method of embedding the developed mathematical models into the security management system of financial and economic objects is proposed. Approaches to the design of engineering support for decisions and optimization of management have developed.

Given the apparent failure of market-oriented reform programs to improve Bangladesh's macro-economic performance in a sustainable manner, this paper poses questions about the ability of structural economic reforms to escape the dilemma of a 'low growth, low investment cycle'. It focuses on three major questions: What politico-economic factors have led the successive regimes in Bangladesh, beginning with that of General Ziaur Rahman, to implement economic liberalization programs? Despite unsatisfactory economic performance of adjustment, why did all three subsequent regimes continue to carry out market reform programs? What encouraged the democratically elected government of Khaleda Zia to accelerate the pace of such reforms? Contrary to the claims of most mainstream analysts, this paper suggests that promarket reforms were implemented in Bangladesh neither to stabilize the economy nor to meet broader development challenges. Instead, it argues that economic reforms were used primarily to consolidate the power of the ruling elites. Successive regimes, both military and civilian, treated market reforms as an instrument to build and maintain political coalitions in particular with traders and industrialists. In exchange for political support, they allowed business elites to use economic restructuring as the primary tool to attain their financial and economic objectives. As a consequence, economic liberalization programs failed either to improve the performance of the economy, or to raise the living standards for the majority.

The article is devoted to a comparative analysis of monetary policy objectives with a focus on their institutional framework in central bank mandates. The study proves that in modern conditions there is a systematic discrepancy between formal objectives declared in legislation and the actual priorities of monetary authorities, especially during periods of financial instability and economic shocks. The research methodology is based on a combination of comparative institutional analysis and econometric modeling of panel data, which reveals the relationship between institutional design and macroeconomic outcomes. As a result, a typology of institutional models of central banks («Focused», «Adaptive», «Hybrid») has been developed, revealing their different potential for strategic adaptation. It is established that the key factor of effectiveness is not so much formal independence as a developed system of accountability and transparent rules for coordinating multiple objectives. Using the Bank of Russia as an example, the challenges faced by «hybrid institutions» in integrating financial stability and economic growth objectives into their policy are shown.

This article deals in an axiomatic manner with problems of definition, classification, and measurement in the national accounts. It argues that the elementary units which must be classified in national accounting are economic objects (real and financial), rather than transactions. The article defines briefly a set of postulates, and shows that the structure of a simple system of national accounting can be derived from them. There are twenty postulates—certain of them establishing basic categories such as sector, time, economic object, value (price); others establishing relations between categories (for example the notion of ownership); and others describing operations in which economic objects can be involved, such as production, final consumption, change of ownership, and change of debtor and creditor (in the case of financial objects). It is shown that the system of postulates makes it possible to consider a large number of accounting concepts (flows or stocks) as classes (baskets) of real objects (e.g., exports, real capital) or financial objects (e.g., payments, total debt of a sector). These concepts can be defined without reference to prices, although prices are necessary to measure them. Other concepts cannot be defined in this way in this system of postulates, for example value added, foreign balance, saving, net worth. However, it is possible to define magnitudes of the latter type and measure them in terms of value: for example, value added can be defined as the difference between the value of receipts and the value of outlays of a sector. In this way it is possible to establish algebraic relations among the national accounting concepts. (This article is a summary of certain parts of the doctoral thesis of the author, published in Norwegian in 1955.)

Reprinted from The Review of Income and Wealth 12: 179–189 (1966)This article deals in an axiomatic manner with problems of definition, classification, and measurement in the national accounts. It argues that the elementary units which must be classified in national accounting are economic objects (real and financial), rather than transactions. The article defines briefly a set of postulates, and shows that the structure of a simple system of national accounting can be derived from them. There are twenty postulates–certain of them establishing basic categories such as sector, time, economic object, value (price); others establishing relations between categories (for example the notion of ownership); and others describing operations in which economic objects can be involved, such as production, final consumption, change of ownership, and change of debtor and creditor (in the case of financial objects). It is shown that the system of postulates makes it possible to consider a large number of accounting concepts (flows or stocks) as classes (baskets) of real objects (e.g., exports, real capital) or financial objects (e.g., payments, total debt of a sector). These concepts can be defined without reference to prices, although prices are necessary to measure them. Other concepts cannot be defined in this way in this system of postulates, for example value added, foreign balance, saving, net worth. However, it is possible to define magnitudes of the latter type and measure them in terms of value: for example, value added can be defined as the difference between the value of receipts and the value of outlays of a sector. In this way it is possible to establish algebraic relations among the national accounting concepts. (This article is a summary of certain parts of the doctoral thesis of the author, published in Norwegian in 1955.)

Did Latin American privatisation policies fail because of flawed implementation of fundamentally sound policies or because privatisation policies were themselves seriously flawed? Using the Brazilian electric power reforms as a narrative tool, this paper examines the causal chain assumed by large-scale privatisation policies that were implemented as part of structural reform and adjustment programmes. The paper concludes that many privatisation policies and the economic stabilisation programmes within which they were embedded were not mutually reinforcing in the way that policymakers had expected, and that in their application much of what privatisation theories had claimed was lost in translation.