Post Soviet Privatization

Topics: Russia, Economics, Soviet Union Pages: 4 (1165 words) Published: December 3, 2012
Nicky Kassab
Mr. Van Meter
Post-Soviet Eurasia
13 November 2012

Privatization of Russia
On midnight of December 31st 1991, the Soviet Union collapsed, along with the communist ideals that it followed. The former the soviet union were forced to transition from a communism to a private government literally overnight, which is why it was referred to as spontaneous privatization. This abrupt economic reform cause problems with the people, as the government struggled to devise an efficient and fair way to distribute the wealth. The government wanted to take a democratic approach to mending the economy, so the plans they proposed promoted free market economy where the distribution of wealth is left up to the people, with a low amount of government interference. For people to distribute the wealth they must first obtain it, making this the first step in privatizing the former union.

There were three schools of thought about what should be instated during the post soviet era and the beginning of privatization. The government had difficulty in choosing which would be the best, as each would have a complex effect on the economy of the former union.

The first school of thought promoted the transfer of ownership to employees so that they could trade and sell their assets to attain a greater amount of wealth. Each worker would get an amount of stocks that would be proportional to the length of their employment at their company[1]. The most common use for these shares would be to sell them for discount, giving many people shares in the company. This made this a very lucrative choice as it increased the spending budget and reduced liquidity greatly, as well as giving more power to the ruble[2].

The second possibility was a voucher based free market, in which the government would distribute vouchers as well as stock in companies to give everyone an equal opportunity to become wealthy as well as a safety net should they fail to do so. The issues in this theory...
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