PRIVATIZATION IN CENTRAL AND EASTERN EUROPE
Winter Term 1995
Joel Turkewitz
Privatization Project
European Studies Department
Central European University



Course Outline


Four years after the tumultuous events of the winter of 1989, when the "realities" of the world seemed to change before our eyes, observers have learned to be more cautious in their expectations for the future. Gone are the confident predictions of rapid change from state-controlled economies to efficient systems based on private property, replaced by a grudging acceptance that "privatization" in Eastern Europe has little in common with a large garage sale, or some other process of distribution. In 1994, participants and observers speak of privatization as a contingent process, replete with complexities both theoretical and technical.
This course will examine some of these complexities, focusing on the concept of what is property, and how it is possible for a functional and efficient property system to develop.

In order to approach these issues, the course will begin with a discussion of definitions of property. It will then move to an exploration of how property and ownership did or did not exist in the planned economies of the communist period. An analysis of some of the different privatization strategies that have been implemented in the region will follow, highlighting the experiences in the Czech Republic, Hungary, Poland, and Russia. Finally, we will explore the problems faced by each of the countries due to the privatization mechanics they have selected to implement. It should be stressed that this is not a "how to" course about how to privatize assets, not will there be a final judgement on which is the best privatization strategy. Rather, the course will concern itself with why privatization is important, and look at how ideas of property are being translated into systems of property.

Given the incomplete nature of the privatization process, emphasis will be placed on reading current research in the field and on relevant legislation. Case studies will be used extensively as will the comparative research work of the Privatization Project. No prior economics or legal training is
required.

SESSION 1: Introduction to Privatization
-Define privatization?
-What is the importance of privatization in the on-going economic transformations.

readings:
-Clarke, Fairbrother, Borisov, & Bizyukov, "The Privatisation of Industrial Enterprises in Russia: Four Case Studies", Europe-Asia Studies, vol. 46, No. 2, 1994, p 179-214
-Frydman and Rapaczynski, "Markets and Institutions and
Large-scale Privatization: An Approach to Economic and Social Transformation in Eastern Europe", p 10-44, in Frydman and Rapaczynski, Privatization in Eastern Europe: Is the State Withering Away?, 1994.

optional:
Hartley and Parker, "Privatization: A Conceptual Framework" p 11-24, in Ott and Hartley, Privatization and Economic Efficiency, 1991

SESSION 2: Property and Ownership
-What is property?
-How do "efficient" property regimes function?
-structure and functioning of private firms
readings:
selections from:
-Williamson, O.E. Markets and Hierarchies: Analysis and Antitrust Implications: A Study in the Economics of Internal Organization, 1975
-Coase, R.H. "The nature of the firm," Economica, November 1937

SESSION 3: Property Under Communism
-Does property exist under communism?
-The mechanics for handling coordination problems in state enterprises

readings:
selections from:
-Kornai, Janos, The Socialist System, 1992
-Sajo, Andras "Diffuse Rights in Search of An Agent: A Property Rights Analysis of the Firm in the Socialist Market Economy", International Review of Law and Economics, 1990, p 41-59

SESSION 4: Strategies for Privatization
-Division of privatization structures:small v. large; fast v. slow; standard v. non-standard
-Country analysis:
-small: Czech v. Poland v. Hungary v. Russia
-fast: Czech v. Russia
-medium: Hungary
-slow: Poland
readings:
selections from:
-Frydman, Rapaczynski, Earle, et al, The Privatization Process in Central Europe, 1993
-Frydman, Rapaczynski, Earle, et al, The Privatization Process in Russia, Ukraine and the Baltic States,1993
-Earle, Frydman, Rapaczynski, Turkewitz, Small Privatization: The Transformation of Retail Trade and Consumer Services in the Czech Republic,Hungary and Poland, 1994
-Stark, David "Path Dependency and Privatization Strategies in East Central Europe", East European Politics and Societies, 1992, vol. 6, no. 1

SESSION 5: Experiences: Small Privatization
-Small privatization as creating owner-manager establishments.
-The keys to success of failure.
-The meaning of success.

readings:
selections from
-Earle, Frydman, Rapaczynski, Turkewitz, Small Privatization: The Transformation of Retail Trade and Consumer Services in the Czech Republic, Hungary and Poland, 1994

SESSION 6: Experiences: Large Pravatization
-The outcome of privatization
Quantitative data
-amount privatized
-distribution of ownership
Qualitative data
-creation of effective corporate governance mechanisms
-incentives for restructuring

readings:
-Stark, David "Privatization in Hungary: From Plan to Market or From Plan to Clan", East European Politics and Societies, 1990, vol 4, no 3.
-Stark, David, "Recombinant Property in East European Capitalism", unpublished manuscript, May 1993.
-Charap and Zemplinerova, "Restructuring in the Czech Economy", EBRD Working Paper No. 2, March 1993
-Pinto, Belka & Krajewski, "Transforming State Enterprises in Poland: Evidence on Adjustment by Manufacturing Firms," Brookings Papers on Economic Activity, 1993, no. 1, pp 213-255

SESSION 7: The Ambiguity of Privatization
-The developing economic trajectories.
-Issues to be addressed.
readings:-Frydman, Rapaczynski, Earle, "Ambiguity of Privatization and the Paths of Transition to a Private Property Regime",in Frydman, Rapaczynski, Privatization in Eastern Europe: Is the State Withering Away?, 1994.
-Pistor, Turkewitz, "State Ownership After Privatization", unpublished manuscript, 1994



CRC-Curriculum Resource Center
CEU Budapest, Hungary
Modified: April, 1996


Tur_PrivatCEE.W95IR.v1

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