Russian Privatization and the Voucher System

By A.K.

Following the collapse of the Soviet Union, reform was implemented to revive the Russian economy especially after the failures of the cold war. Since privatization had long been illegal under the Communist regime, the shift to a market economy was going to be challenging for Russia because it had longed relied on the planned economy and the guidance of governmental rules. Some of the goals set forth for privatization were: to gain revenue for the state, to create competition in industries, to give the workers in Russia ownership of the enterprises that they never had access to before, to open up new capital for modernization and expansion, and to bring in competition that would allow for the best qualified people in management roles.

Instrumental to the beginning processes of the voucher system was Anatoly Chubais, who was appointed by the Yeltsin administration. Chubais realized that transferring power to privatization and away from state authority needed to be done as soon as possible. He set up through the Russian legislature to allow 51% of the privatized enterprises that would be available to the management and workers within the company itself. The problem remained, that very few people had access to money to buy shares of the company, and the heads of the company were eager to get the funds that privatization would allow. Chubais did succeed in popularizing privatization with ordinary Russian citizens with hope of benefiting their socioeconomic status. Much of the country was hopeful that privatization could plunge them out of the deep poverty that they had sustained under the Soviet Union. Because of such poverty however, most of the vouchers that were given to workers in factories and lower management were sold almost immediately for money. This allowed the elite to gather the vouchers and create a monopoly on the industries creating an even higher socio-class disparity.

Though most industries were eligible for privatization it is important to note that some remained ‘off limits’, mainly the Russian military and to some extent the banking system. Unlike the United States, the government remained in control of these important enterprises because it realized that it was to soon to allow them to be privatized, and needed to analyze the results from the initial privatization. Much of the sales of arms from the arms build up during the cold war play a central part in the economy of Russia.

In the end, voucher privatization had mixed results within Russia. An unintended result was wealth disparity between the classes in the form of ownership of industries. National sentiment over privatization largely turned negative with many corruption allegations involving wealthy Russians throughout the 1990’s. Despite this, the overall goal of moving Russia into a market economy succeeded. Over 70% of Russia’s large and small industries are now privately owned and over 60% of Russia’s GDP today comes from privately owned businesses. Now, Russia will try and tackle the problem of its banking industry and whether or not it should be centralized throughout the country.