The reversal of the privatization logic in Central European transition economies

Transcription

1 Institute of World Economics, KRTK - Hungarian Academy of Sciences Miklós Szanyi: The reversal of the privatization logic in Central European transition economies Paper to be presented on the 1st World Congress of Comparative Economics Rome, June, 2015

2 The special role of state property in the transition process Neoliberal pressure on transition process: state is a bad owner Political pressure on transition process: abolish central planning and the economic basis of incumbent management Creating effective ownership structure for (former) SOEs General institution building purpose (stock exchange and others) Result: privatization competition with yearly winners of the race announced in EBRD s Transition Report (alongside with winners of other races) Hungary: speed and budget income (sale for high bidder multinationals) Poland: social control, stakeholders involvement, slow and transparent process (less disputable property)

3 Historic changes CEE became integrated into the European business space CEE became members of the European Union 2007/9 mega crisis shaked the neoliberal principles giving way to nationalist and statist policies State ownership remained strong in Poland, has been increasing in Hungary, and is still remarkable in may other CEE (including Czech Republic, Rumania and others)

4 Why is this problematic in CEE? Because privatization logic of the 1990s can be reversed, and the same fears of rent seeking and cronyism may reemerge (maybe in different political parties) Political rent seeking (Boycko-Schleifer-Vishny, 1996): - Policy makers may want to buy excessive employment and votes - This is more easily carried out in SOEs (cost is foregone profit, bargain with client management vs. private comapany with cost paid as subsidies and bargain with independent management higher cost, politically less tolerable) Negative effect on property right enforcement, institution building (Rapaczynski, 1996): - Institutions work if they are socially embedded (rule of law) - State is entitled to disregard private property rights. If this happens frequently, government track record of permanent violations undermines the rule of law

5 Should be privatization continued? What about SOEs in traditional market economies? State property is not born by the devil. Not even in case it does not accommodate market failures or supports industrial policies. (See the origin of Austrian SOEs, or the current use of German or Italian SOES) Crucial is their market-conform activity This is best supported by mixed (partially state) ownership with efficient capital market control Political affiliation must be ruled out (no cronyism)

6 How can be evaluated current renationalizations in Hungary? Most transactions served some political goals of the governments - cutting public services prices - supporting retail supplies by local suppliers - re-selling of business to clients Personal rent seeking was also possible - filling boards with clients - financing political party related NGOs - supporting friendly business persons via overpriced procurments The whole amount of re-nationalization transactions was similar to one (better) year s privatization revenues during the 1990 s no major change in ownership structure occured The state lost credibility by establishing a record of not obeying the law and private property others (business and private persons) will follow the track

7 Consequences? (WEF Competitiveness Report GCI) 70 WEF Global Competitiveness Ranking Hungary Poland

8 Consequences? (WEF Competitiveness Report) 160 Institututional Quality Rankings - Hungary property rights public trust in politicians favoritism by govt. officials burden of govt. regulation transparency of govt. policy making

9 Consequences? (WEF Competitiveness Report) 140 Institutional Quality Rankings - Poland property rights 80 public trust in politicians favoritism by govt. officials 60 burden of govt. regulation 40 transparency of govt. policy making

10 Consequences? (WEF Competitiveness Report) Similar Qualities in Polish-Hungarian Institutional Comparison burden of govt. regulation p transparency of govt. policy making p burden of govt. regulation h transparency of govt. policy making h

11 Consequences? (WEF Competitiveness Report) Diverging Qualities In Polish-Hungarian Institutional Comparison property rights p property rights h public trust in politicians p public trust in politicians h favoritism by govt. officials p favoritism by govt. officials h

12 Thank you for your attention!!!