Corporate Governance in Central Europe and Russia 1. [antikvár]

1 OVERVIEW of Volumes 1 and 2 ROMAN FRYDMAN, CHERYL W. GRAY, and ANDRZEJ RAPACZYNSKI Ownership reform was one of the earliest axioms of postcommunist transition. The fall of communism came at a time when belief in markets and private property was at its highest point since World War II. It is not surprising, therefore, that it was acknowledged by both Western observers and liberal East European reformers that the state was not capable of running most productive enterprises and should not attempt to do so in the future. The severing of the ownership link between the state and the firms quickly became one of the main planks of the reform program. But the meaning of the much championed "privatization" was far from clear beyond its role in ending the politicization of economic governance. At the beginning, many reformers - most notably the Czechs, who also happened to be the most decisive, and later the Russians - consciously focused on this aspect of the process, disclaiming most efforts at further engineering the postprivatization ownership structure. Once the state was removed and the free market forces were allowed to operate, they believed, secondary markets could be trusted to lead to acceptable new arrangements. It is safe to say that this optimistic view seriously underestimated the complexity of the problems presented by the postulate of privatization. To begin with, the very mechanics of state divestment turned out to be much more complicated than expected. Many countries, especially those that acted early like Poland and Hungary and so could not benefit from the experience of other economies in transition, attempted elaborate sales programs modeled on Western privatizations. They spent extensive time and resources selling a small portion of their state assets. Political resistance to privatization also turned out to be very strong and much more effective than many reformers had imagined. Privatization was inherently threatening to incumbent nomenklatura managers, who feared for their jobs and privileges. The employees of state enterprises were similarly hostile to the