Privatization through institutionalization, when it is necessary to create the market and the State

Luiz Carlos Bresser-Pereira

Paper presented at the conference "The Transformation of Centrally Planned Economies: The Lessons for Developing Countries", sponsored by UN/WIDER. Helsinki, September 2-3, 1992. Texto para Discussão no. 23, EAESP/FGV, dezembro 1992.

In Eastern European countries facing transition from command to capitalist economies the concern should not be just with market creation but also with strengthening state organization and institutions. In this process, it is not necessary to privatize large monopolist or quasi-monopolist enterprises. They should change from state ownership to "institutional ownership". Not for profit foundations created by the state that would own partially the stocks, control its outcomes, and elect the board members of each enterprise. This strategy would avoid wild privatization, and would be politically more acceptable.

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