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Creeping Privatization


The task of privatization in Russia surpassed by far the scale of privatization of certain branches of industry undertaken in some Western capitalist countries, such as Britain under Prime Minister Margaret Thatcher. Russia had inherited an economy in which the share of state property was the highest in the world – 95.4 percent. 


Officially, state property in the USSR was described as public property; that is, in theory, all citizens were regarded as equal owners of state assets. In reality, the government and party elite, which actually managed public property, came to regard it as belonging to themselves. They came to see national assets as their nomenklatura property. Naturally, they were reluctant to give up power and the assets they controlled, and they had many opportunities to delay and obstruct any real privatization or to conduct it on their terms.

The process of the creeping, unofficial “nomenklatura privatization” had started already under Gorbachev. Between 1987 and 1990, when the Soviet system began to disintegrate, the ruling elite was suddenly confronted with the prospect of losing everything it possessed. To prevent this, a series of all-union and then republican laws were enacted that carved up state property and put it under all-union, regional, and municipal control.

The new laws divided state assets further by transferring full control over them to different groups of the nomenklatura, such as the heads of various economic ministries, company directors, and collective- and state-farm managers. As a result, state assets were “hidden,” as it were, from the claims of the rising masses. Instead of one impersonal owner in the form of the state, it acquired numerous “custodians,” whom any future potential claimants, wishing to dispute their ownership rights, would have to fight separately.

The essence of what happened is best illustrated by the change in the status of directors of state companies. Formerly, directors were state employees on state salaries, which they could not legally increase by a single ruble. Now they were the de facto owners of their enterprises and had legal rights to dispose of assets and make money any way they wanted. They could now personally set the level of wages paid to workers as well as their own remuneration.


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Russia's Privatization

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Russian Federation

The "Catching up" Cycles
"Non-organic" Reforms
Great Leap to Capitalism
Russia's Privatization
Deformed Capitalism
Coping with Transition
The Yeltsin Era
Yeltsin's Legacy
Putin's Plan
Russian Federalism
The Chechen Problem
"Deprivatizing" the State
First and Second Dumas
Third and Fourth Dumas
Civil Society
"Controlled" Democracy

Post-Soviet Geopolitics

Paradoxes of Russian Mentality
Economy under Putin
The Putinite Order
Putin's Choice
People Speak (Opinion Polls)
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