Russia's Season of Privatization

February 16, 1993

There are those who say it cannot be done. Or that it is all wrong. Or that this is not the time -- or way -- to do it. Yet Russia is going ahead with a massive privatization campaign.

Nearly 200 big businesses are to be sold this month, with 400 more to be offered to shareholders next month. By the end of the year, about 5,000 big enterprises should be converted into stock companies, making up 15 percent to 20 percent of the country's businesses, reports Kathy Lally, of The Sun's Moscow bureau. (The government has given each citizen a voucher to start them off on the road to capitalism).

It is easy to see what a difficult road many of these newly privatized enterprises will face. Russia is on the verge of hyperinflation; last year, the cost of living increased seven-fold. Meanwhile, chaotic conditions continue through much of the economy, from acquisition of raw materials to transportation and distribution. Bribery and other underhanded practices are often the only way an enterprise can be successful.

The economic confusion has increased the power of two elements in particular. Facile technocrats, who kept giant factories running under communism while paying lip service to party dogma, are much in demand. They were good at improvising under the previous rule; they are good at improvising under this system, too. To make things happen, they often work with the Russian mafia.

In Russia, this criminal element has nothing to do with Italian crime organizations. Instead, local hoodlums, unprincipled speculators, corrupt bureaucrats, bad cops and erstwhile KGB enforcers have formed brotherhoods that run anything from large-scale smuggling and swindling operations to theft rings and protection rackets. This mafia often is in cahoots with seemingly legitimate Russian businesses.

The current wave of privatization would seem like a perfect way to weed Russian economy of antiquated and unprofitable enterprises. Some weeding may indeed occur. But since the government -- with existing employees -- will be the majority equity partner in many big businesses that are being converted into stock companies, large-scale bankruptcies in the immediate future are likely to be few. The government is simply buying time and building a buffer so that it will not have to shoulder the blame alone when they go under or embark on radical restructuring.

While ordinary Russians ponder the vagaries of capitalism, President Boris N. Yeltsin is proposing a political moratorium for a year. The conditions and countries may be different but just like in the United States, it's the economy, durak!

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