Abstract
In this chapter I explore the voucher privatization program carried out in Russia in the early 1990s, contrasting the experiences of my respondents with the stated goals of the reformers. At least initially, those who designed the Russian privatization program wanted the process to be quick, to be perceived as fair, and to generate revenue for the state. The arrangements ultimately put into effect failed on most (some would say on all) counts. For my respondents, the primary consequences of the program were the illegitimate enrichment of those in power and a sharp and unwelcome increase in economic inequality. Their recollections also make clear how unsuccessfully the leaders had prepared the population for the privatization program. One of the distinguishing characteristics of the Soviet economic system was that the capital stock—the means of production—was owned by the state. As a result, enterprises were not required to make a profit—and, indeed, if they did happen to earn a profit most of it went into the state budget to support other less profitable enterprises. This practice was less unfair than it might at first seem, since prices of both inputs and output were set by the state rather than the market and remained unchanged for long periods of time. Profit and loss were therefore more a reflection of arbitrary prices than an indication of the quality of management or the usefulness of the output. Financial reward and career prospects were tied to plan fulfillment rather than to profits, and Soviet managers therefore had little incentive either to focus on efficiency or to care about satisfying their customers.
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Notes
- 1.
Further illustrative anecdotes can be found in Klebnikov (1994). Paul Klebnikov was editor of the Russian edition of Forbes when he was shot and killed in Moscow in 2004.
- 2.
According to Blasi et al. (1997: 76–77), this negative view was more common before privatization occurred than while it was underway. Polls conducted in the third quarter of 1992 showed 43% of respondents believing the program was “a deception that would make some people richer and the rest poorer,” while those conducted in September 1994, found that 15% felt they had personally lost, 50% indicated they were unaffected and 19% gave no answer. While not strictly comparable, the two polls do suggest that the initial suspicion had waned during the first few months of the program. It is therefore striking that two decades later, the belief in deception and corruption was strong among those I spoke with.
- 3.
One example given by Klebnikov (1994) was the purchase of a 25% share in the Cosmos Hotel in Moscow, which at the time was netting about USD 10 million a year, for only USD 2.5 million.
- 4.
Somewhat surprisingly, there were almost no references—unfavorable or otherwise—to Yegor Gaidar, the economist most responsible for the design and implementation of the policies comprising Russia’s economic “shock therapy.”
- 5.
One woman, after complaining about several former leaders, was asked jokingly by a friend if she approved of anyone. She responded that Andropov had been okay, but that turned out to be simply because he had spent some years as organizer of the Komsomol in Yaroslavl and was thus considered a “local” boy.
- 6.
Norilsk Nickel, a huge mining and metallurgical complex located north of the Arctic Circle, was originally built in the 1930s by forced labor under the jurisdiction of the NKVD. The enterprise was not actually offered for sale during the voucher privatization program. Instead, it was privatized in the mid-1990s as part of a “loans for shares” program in which shares in state enterprises served as collateral for the Russian government as it took out large loans from commercial banks. Because the government could not repay the loans, the bank owners ultimately acquired the shares in these enterprises at extremely low prices. The loans for shares program is widely seen, both inside Russia and abroad, as having been thoroughly corrupt.
- 7.
She is referring to the proposal, first put forth in 2009, to sell off some of the key state-owned enterprises in energy, transportation and other sectors in order to raise government revenues, which had been sharply reduced by the fall in world oil prices that year. The plan was not put into effect, having been strongly opposed both by the managers of the enterprises and by much of the government bureaucracy, but it had received considerable attention and this woman clearly anticipated that the idea would be raised again. A detailed chronology of this unsuccessful privatization push can be found at Gaaze (2016).
- 8.
This closely parallels the description, given above, of the early days of the Russian stock market and the arrival of vehicles full of cash. Given the low level of development of commercial banking and of telecommunications at the time, the transportation of large quantities of vouchers and of cash was necessary.
- 9.
The gas industry giant did in fact exist at the time, but its shares were among the last to be made available for vouchers.
- 10.
Berezovski was an oligarch, influential during Yeltsin’s years, who came into conflict with Putin and ended up living in London until his death in 2013, the British government having refused to extradite him to Russia, where he was charged with various economic crimes.
References
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Klebnikov, Paul. 1994. Russia—The Ultimate Emerging Market. Forbes 153 (4): 88–94.
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McKinney, J. (2020). Voucher Privatization. In: Russian Women and the End of Soviet Socialism. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-16226-9_8
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