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Privatization Results

 

Chubais’s program envisaged several schemes to privatize state assets. The most common scheme was the one whereby the company’s management and workers declared it a closed joint-stock company owned 100 percent by themselves. In such companies, shares were not traded. Management exercised de facto control, and in many cases bought back shares issued to workers in exchange for roubles or hard currency.

 
Anatoly Chubais

Thus, although a certain amount of the shares of “privatized” enterprises was allocated among numerous small shareholders, the number of real property owners grew insignificantly.

The result of Chubais’s voucher privatization was that all Russians for a moment became candidates for property ownership, only to discover the next moment that most of them were effectively excluded from owning a slice of the former state assets. In the chaos of the post-Soviet transition, as traditional public mechanisms of constraint and law enforcement were weakened or dismantled and with few new instruments of public oversight in place, the former nomenklatura found itself ideally positioned to reap economic benefits from the deformed market. The transition years became a golden age of opportunity: everything the nomenklatura had owned anonymously and illegally was now made fast, not only by the letter of the law but also by the written law of the market: the sacred act of purchase and sale.

While the majority of people were locked in the state sector and depended on miserly and irregular wages out of the state budget or employed in enterprises facing bankruptcy, a small group of economic managers and nomenklatura capitalists seized the lion’s share of state property. Because the type of property ownership forms the foundation of an economic system, the new economic structure, which emerged as a result of government privatization, may be called “nomenklatura capitalism.”

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Russia's Privatization

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