PRIVATIZATION IN EUROPE - A COMPARISON OF APPROACHES

There are often similarities between particular features of privatization in post-communist countries and in Western countries, although the privatization processes vary both between the two groups of countries and among the countries within each group. These common features were treated in the present paper. We concluded: (a) Ownership matters. Privatization can only be fully effective if it implies divestiture. (b) Many national characteristics which older generations recall from the time between the World Wars seem to crop up again with respect to the post-communist countries of Central Europe. (c) Transition to a market economy and wide-scale privatization are prerequisites for the EC membership of former COMECON countries. Otherwise the EEC treaty does not pave the way for a centralized Brussels policy of privatization. However, the increased competition in the EC after January 1993 will imply a pressure towards privatization by the individual EC member states. (d) it is superficial to argue that privatization of monopolistic enterprises in capitalistic economies implies a move from desirable welfare maximization to non-desirable profit maximization. It is also superficial that privatization in post-communist countries implies a change from party-political objectives to profit maximization. In both cases, privatization implies a move from one intricate principal-agent relation to another, with many more agents involved in the new situation as implied by the superficial statements above. (e) Popular capitalism is a bad instrument for good types of redistribution (that is, taking from the rich and giving to the poor). It may, however, be a good instrument for bad types of redistribution (that is, favouring particular interest groups).46 (f) Employees' shares in post-communist countries are not equitable. In general, the increase in the firm's investments due to employees' shares can make these shares attractive to employees, although their wages may be reduced, because dividend income is included in the negotiations between employer and employees. (g) if privatization leads to competition, internal subsidization becomes impossible. However, if this is not the case, new regulatory policies become necessary both in post-communist and in Western countries. From a distributional point of view, the RPI-X regulation is of particular interest because it implicitly leads to distributional pricing.