P31 - Socialist Enterprises and Their TransitionsReturn

The authors critically discuss some of the theses of Svetozar Pejovich from his article On the Privatization of "Stolen Goods" in Central and Eastern Europe. The Independent Review, v. X, N. 2, Fall 2005, s. 209-229. ISSN 1086- 653. Their polemic can be summarized as follows: (1) According to Pejovich, the "carriers of the institutional restructuring" relied solely on the neo-classical ("text-book") economics. The authors reply that at least in their country also the New Institutional School, Austrian Economics and Public Choice were well known and broadly applied. (2) Pejovich seems to confuse privatization of an individual enterprise with the privatization of the society as a whole, i.e. the actual task of the governments. While the former may seek for an optimal owner, the latter is assigned "only" to launch the initial market for ownership rights. (3) Pejovich seems to believe that governments could have controlled the exact sequencing of their transformation steps and measures. By contrast, the authors stress the extreme spontaneity of the real-life developments and absurdity of the attempts to postpone, e.g., privatization - freeze it till some optimal legal frame emerges and-or is installed. (4) As to the Pejovich's de-communisation, the authors speculate that he may have generalized the Yugoslav experience, where the communists could have shared their Party's titoistic ideology. Contrariwise, the membership of a typical Czech communist was never based on the ideology and thus represented nothing about his/her post-communist concepts. (5) As to the Pejovich's own proposal "how to do it", the authors stress, again, its unrealistic nature, as what the proposal requires in fact is nothing less than to (a) accurately valuate thousands of state-owned enterprises, (b) rationally restructure them physically and financially, (c) offer and sell them at a correct price and (d) fairly divide the proceeds among its citizens. To the authors of this polemic, a task of this magnitude is beyond capacity of anybody, not to mention governments, least of all the post-communist ones.

Privatization of the Czech banking sector was not an ideal process. Many errors and failures could be mentioned. The role of national banking for the raising of national entrepreneurial class was overvalued. There was also a broad naiveté about a great interest of potential investors. Also the timing of privatization of Czech banks is a topic for a discussion: It is complicated to deduce when was the optimal time for privatization but the majority of economists concluded that the banks were privatized too late. Privatization led to the following results: At the end of the process there is a standard banking sector in the Czech Republic as well the prices from privatization were the best prices (measured by price/NAV) from all of the transition countries. The cost of trans- formation of the Czech banking was extremely high. The text is focused mainly to the procedural problems of the Czech banking privatization.