Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Shatalin Pans Privatization

Russia's larger privatized enterprises have so far failed to become more productive and efficient than they were under state control, largely because privatization happened too quickly, one of the country's first reformist economists said Thursday. "The primary goal of privatization, an increase of economic effectiveness, is working very, very badly," said Stanislav Shatalin, a key author of the 500-day plan to reform the Soviet economy under Mikhail Gorbachev. "Privatization attained neither its social nor its economic goals; it did not create a class of efficient owners." A report by the independent fund Reforma, which Shatalin now heads, found that the efficiency and profitability at small firms jumped after privatization, but that changes of ownership failed to improve conditions at large and medium-sized enterprises. In a poll of 150 large private and state-owned enterprises in different economic sectors throughout Russia, according to the report, the second half of 1993 showed faster price and wage rises -- and steeper production declines -- at privatized firms than at state firms. "I don't know a single big enterprise in the major branches of the economy that started working better after workers had obtained part of its stock, administration had obtained another package, the state had gotten another one, and outsiders had gotten part of it, too," Shatalin said. He said that the estimated 40 million new shareholders created by the privatization program cannot be regarded as real owners, since they cannot really influence company policy and their main aim is only to receive dividends. Furthermore, Shatalin said, privatization happened too fast for the rest of Russia's economic reforms to keep up. Under the voucher privatization program, one of the central elements of Russia's economic reforms, every citizen received a voucher that could be traded for shares in privatizing enterprises. Since the program began in October 1992, thousands of companies have gone under the hammer. On July 1, the voucher will expire and give way to the second stage of privatization, which privatization officials say will focus on selling controlling shares in Russian companies to strategic investors, many of them foreign. But Shatalin said that the investment climate in Russia is far too unstable to attract foreign interest in post-voucher privatization. "We haven't created any serious conditions, either political or economic, to make foreign investors come," Shatalin said.