Politics and Policies in Post-Communist Transition. Primary and Secondary Privatisation in Central Europe and the Former Soviet Union
Reviewer: Justin R. Clardie (Cameron University)
- Publisher: Central European University Press, 2010
- ISBN: 9789639776852
- Available at: Amazon
- Author's page: Karoly Attila Soos
IMPORTANT: CEJISS is not associated with resellers. CEJISS is not responsible for the content of external links.
The economic and political transition of the post-Communist countries of Central and Eastern Europe is ranked among the most important events of the past twenty-odd years. The way that the various countries handled such transitions continue to have impact their political and economic situations today. Soos provides a comprehensive and detailed account of the dynamics of one aspect of these transitions; privatisation. Specifically, Soos compares the methods and speed of privatisation, for medium and large non-financial companies, in the Czech Republic, Hungary, Poland, Russia, Slovenia, and Ukraine. As the title of the book suggests, Soos attributes differences in the privatisation process to the politics of the countries under scrutiny and, more specifically, the influence of former Communist elites.
The first substantive chapter of the book provides a general overview of some of the debates surrounding the issue of privatisation and corporate ownership. The Anglo-Saxon model, which consists of a number of individual owners with smaller shares, and the European (continental) model, which is defined by larger shareholders, are presented as the basic choices of corporate ownership for privatising companies. However, as Soos points out in relation to the above choice as well as several other aspect of privatisation, the case of the post-Communist countries was unique and did not neatly follow the classical prescription. Choices made in privatisation were driven less by long-term economic concerns and more by political motivations and reality.
Following the more general discussion of privatisation, a specific discussion of the two phases of privatisation is offered. Soos breaks privatisation down into primary and secondary privatisation. Primary privatisation involves the initial movement of company ownership from the government to private owners. In almost all of the countries covered in the book – the exception being Hungary – primary privatisation resulted in (somewhat) scattered ownership of companies. This is largely due to the use of mass voucher privatisation and privatisation that centred on managers and employees of the company. Hungary had a much larger share of foreign investors than the other five countries, which contributed to a greater concentration in ownership. Secondary privatisation consisted of the move from the somewhat scattered ownership that resulted from the primary phase to fewer owners with larger shares. The discussion and separation of privatisation into these two phases is one of the more interesting aspects of the book. Much of the book is devoted to a very detailed comparison of the various methods and processes used in the six countries and Soos’s extensive knowledge is demonstrated to great effect. However, on occasion, the discussion is perhaps too detailed and the broader picture becomes lost somewhat in an onslaught of numbers. The data presented is important and valuable, but could be displayed in a way that better highlights the main argument of the book.
The final two substantive chapters focus on the speed of secondary privatisation and why the countries of Russia, Slovenia and Ukraine lagged behind the Czech Republic, Hungary and Poland. Soos offers an explanation that essentially results from the type of political transition that occurred. Russia, Slovenia and Ukraine are characterised as having soft transitions, meaning a number of former Communist elites maintained positions of authority in the new governments. The Czech Republic, Hungary and Poland had hard transitions resulting in less influence by former elites. The distinction between these two types of transitions is important because it had an impact on the two immediate factors that Soos argues account for the variation in the speed of secondary privatisation. One is the method of primary privatisation. In the countries with hard transitions, various forms of mass and voucher privatisation, as well as foreign investors in the case of Hungary, in primary privatisation created a better environment for secondary privatisation to take place. In the soft transition countries, insider privatisation dominated and the incentives for individual owners to sell shares was far less than in the hard transition countries.
The second explanation also derives from the type of political transition. The role of the government in ownership and management was greater in the soft transition countries than in the hard transition countries. The influence of the government reduced the interest of large investors because it created uncertainty in the future of companies, particularly related to property rights. Related to this was the imposition of tax-type, informal payments on companies by governments in the soft transition countries. These activities added to the uncertainty as well as increased the cost to potential investors. Soos offers some qualifiers in respect to Slovenia and argues that the transition there was more gradual in nature and was more influenced by ideological concerns than in Russia or Ukraine. The link that Soos makes between the type of political transition and the speed of secondary privatisation is arguably the most important contribution of the book and is an important one.
However, once again the book suffers slightly from presentation issues. The aforementioned link should be the highlight of the book. However, it is presented toward the end of the book and receives far less attention than the description of the methods of primary and secondary privatisation. Explaining the theoretical framework of the book at the beginning and further elaborating on its implications would provide important context for the more descriptive chapters of the book.
All things considered, Soos’s book is a valuable addition to the literature on the post-Communist transitions and contributes greatly to our understanding of the importance of these transitions. The book is useful to researchers who want a very detailed account of the processes of privatisation as well as to those who are looking for a more general explanation of the interaction between the political and economic transitions of post-Communist countries.