Spontaneous Privatization in the Soviet Union

Many Soviet state enterprises are changing their legal form. Permissive but imprecise legislation, policy paralysis at all levels of government, the breakdown of the state supply system, and continued excess demand, have allowed managers of state firms to initiate "spontaneous privatization" -- through which managers and other individuals are effectively obtaining property rights which previously belonged to ministries, planners and the Communist Party. Spontaneous privatization often also involves fundamental changes in the organization and operations of enterprises and is rapidly rendering existing theories of Soviet managerial behavior out-of-date. The limited available evidence suggests that new property forms represent both a means to change firms contractual arrangements and an opportunity for managers and some bureaucrats to obtain property rights. There are some positive economic effects from this process, but there is also an important element of theft -- and this may have significant negative political consequences.