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Russia And Private Sector Essay

284 words - 2 pages

Prior to 1988 there was virtually no private sector in Russia or throughout the former Soviet Union. To take part in all but the most basic private sector activities was illegal. All productive assets, including land, industrial enterprises, homes and farms were in theory owned by “the people” (Leonard, Watson, 2013). This statement essentially sums up how privatized firms would be met if de-privatization becomes law. Their investment firms would become ...view middle of the document...

However, it would hurt the politically charged groups from the old regime like government officials. (Brickley, Smith, Zimmerman, 2009).
Mass privatization was an excellent solution to the problem that state ownership was omnipresent and domestic wealth holders were insufficient to buy the assets. The mass privatization strategy also facilitated an extremely speedy ownership change in most transition economies, as few countries had contained a private sector of any significance in 1990 (Leonard, Watson, 2013). This information makes de-privatization favorable in my opinion. While privatization seems excellent, it stifles future growth and limits opportunities for all. The process to transition should be gradual and well thought out.
Privatized companies run a large risk of losing their business if a violation is made. Politicians and Soviet era managers have more to gain. Political motivation and corrupt managers can make accusations of a violation and gain an interest in their favor. This system is not the most trustworthy in my opinion. In free markets gains from trades are mutually advantageous. Trade is an important form of value creation (Brickley, Smith, Zimmerman, 2009).

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