The principles of privatization in Eastern Europe

Summary The paper surveys the choice criteria in selecting the mode of privatization. The main aspects are: 1. the sociological aspect with a longer time horizon, and in particular the objective to create a large class of business people; 2. economic aspects, and in particular the objective to increase efficiency and improve management; 3. political aspects and, 4. distributional-ethical aspects, including considerations of restitution and compensation for the loss of confiscated property. The paper discusses the role of the state and the evolutionary character of the privatization process, and analyzes various property forms. The significance of the evolution of personal owners gets special emphasis. Further subjects of the discussion are employee ownership, various forms of institutional ownership, give-away schemes of privatization and property rights of foreigners. Finally, the author explains his position concerning the speed of privatization.Fourth Tinbergen Lecture, delivered on October 19, 1990 in Utrecht for the Royal Netherlands Economic Association. The Hungarian text of the lecture was translated by Brian McLean, to whom I am grateful for his excellent work. I also thank Mária Kovács and Carla Krüger for their assistance in gathering the literature on the subject.