Private Ownership and Markets: Limits to Privatisation in the Transition Process

An almost stereotypically repeated phrase in scientific literature as well as in political statements maintains that one of the essentials of a market economy lies in the existence of private ownership in general, and of the means of production in particular. Whereas for critiques of market society, private ownership is the very root of nearly all evils, proponents see it as an absolute prerequisite for individual freedom, human dignity and social justice, as is expressed for example in John Locke’s famous sentence: “Where there is no [private] property there is no justice” (Hayek 1988, 34). Whether this may hold in general or not, in any case it seems to be true that some private property is at least favourable for a person’s privacy and individuality, and must thus be seen as a virtue in itself (Munzer 1990, 88 ff). Although not independent from the above-mentioned discourse, from an economic point of view private ownership of resources and goods provides a necessary condition for economic efficiency, meaning a state in which any resource and good in the economy finds its best (i.e. highest valued) use. It is for this reason that privatisation of state-owned enterprises, land, accommodation etc. has become a pivotal issue of political, social and economic transition in countries formerly under the control of Soviet-oriented communists. Great hopes have been placed in privatisation, not least with regard to stimulating an entrepreneurial potential. The target is clear and sensible enough, but the route, speed and results of this undertaking have hitherto nowhere been completely satisfactory, though there are, of course, significant differences in degree between countries. A closer look, in particular, raises doubts as to whether the results achieved justify focusing on privatisation as an important policy for promoting entrepreneurship. In this essay we shall look more closely at the concept of ownership to find out some of the reasons why privatisation in CEECs is so thorny a matter. We argue two main theses: first, whatever further reasons may (and actually do) exist for the overall unsatisfactory state of transition after ten years, as well as for the large differentials in performance between the economies, the remaining deficiencies with regard to property rights and ownership, properly understood, are perfectly sufficient as an explanation.