Development and formation of ownership in the period of social and economic changes in Russia

     Good morning, ladies and gentlemen. It’s a pleasure to welcome you today. Let me introduce myself. I’m XXX, the first-year student of the Budget and Treasury Academy of the Ministry of Finance of the Russian Federation. I am here today to present you my term paper. The topic of my presentation is « Development and formation of ownership in the period of social and economic changes in Russia». Today I’d like to give you an overview of the changes which happened with the category of property and to accord special priority on the privatization in Russia in the end of 1990^th. In my presentation I will focus on three major issues. I will begin with ownership structure. Then I will move on to the process of privatization. And I want to finish with the results of privatization and with a few general words about the ownership in Russia nowadays. This won’t take more than 7 minutes. There will be some time for your question in the end of my talk. Now I am ready to begin.

      So, let me first tell you about the main category of my presentation. Property is any physical or virtual entity that is owned by an individual or jointly by a group of individuals. An owner of property has the right to consume, sell, rent, mortgage, transfer and exchange his or her property. Important widely-recognized types of property include real property (land), personal property (other physical possessions), and intellectual property (rights over artistic creations, inventions, etc.), although the latter is not always as widely recognized or enforced. Public property is any property that is controlled by a state or by a whole community. Private property is any property that is not public property. Private property may be under the control of a single individual or by a group of individuals collectively. A title, or a right of ownership, is associated with property that establishes the relation between the goods/services and other individuals or groups, assuring the owner the right to dispense with the property in a manner he or she sees fit. Some philosophers assert that property rights arise from social convention. Others find origins for them in morality or natural law.

Property is usually thought of in terms of a bundle of rights as defined and protected by the local sovereignty. Ownership, however, does not necessarily equate with sovereignty. If ownership gave supreme authority it would be sovereignty, not ownership.

     So, that is all I wanted to say about ownership structure. Now let me move to my second point.

     As new Soviet legislation in 1988-1991 effectively had transferred part of property rights over enterprises from the government to the employees and management and enabled the enterprises to withdraw from associations on their own, in the process of the so-called spontaneous privatization control over some industrial assets was acquired by their managers. However, this accounted for only several thousand enterprises, a small part of the Soviet industry.

     Russian privatization was the reform consisting in privatization of state-owned industrial assets that took place in Russia in the 1990s, during the presidency of Boris Yeltsin, immediately after the collapse of the Soviet Union, where private ownership of enterprises had been illegal for a long time. The privatization enabled Russia to shift from the deteriorating Soviet planned economy towards market economy, but as a result a good deal of the national wealth fell into the hands of a relatively small group of so-called business oligarchs , and the wealth gap increased dramatically. Many non-industrial assets, most notably, most of the social welfare and telecommunications, as well as strategic industrial assets, including much of the Russian military industry, were not privatized during the 1990s. The privatization of the 1990s is still a highly contentious and polarizing issue in the Russian society, stirring up strong sentiments among the population, including the widespread negative attitude towards Anatoly Chubais, one of the most instrumental figures of the reform, and even calls for its revision.

      The privatization took place on a much wider scale in the early 1990s, when the government of Russia deliberately set a goal to sell its assets out. As the Soviet Union collapsed, the government was forced to manage the huge and inefficient state enterprise sector inherited from the Soviet economy. Privatization was carried out by the State Committee for State Property Management of the Russian Federation under Anatoly Chubais with the goal to transform the enterprises into profit-seeking businesses, not dependent on government subsidies for their survival. To distribute property quickly and to win popular support, the reformers decided to rely mostly on the mechanism of free voucher privatization, earlier implemented in Czechoslovakia, and on the nearly free transfer of shares to employees, as it was believed that the sell of property instead of the free transfer would have almost certainly resulted in a further concentration of ownership among the mafia and the former Soviet political and industrial elite, which they sought to avoid. Nevertheless, contrary to the government's expectations, insiders managed to have acquired control over most of the assets, which remained largely dependent on the state budget for years to come. Thus the initial objectives have not been fully achieved, although a great deal of assets became privatized remarkably quickly and provided some basis for market competition. The voucher privatization took place in 1992-1994. The vouchers, each corresponding to a share in the national wealth, were distributed equally among the population, including minors. They could be exchanged for shares in the enterprises to be privatized. Most people, however, weren't well-informed or were very poor and were quick to sell the vouchers for money, unprepared and unwilling to invest. Most vouchers and hence most shares ended up acquired by the management of the enterprises. Although Russia's initial privatization legislation attracted widespread popular support as it promised to distribute the national wealth among the general public and ordinary employees of the privatized enterprises, eventually the public felt deceived, and Anatoly Chubais became one of the most odious public figures in modern Russia.

      After examining this point let’s turn to the third one. Privatization is very important but only an element in changing an economic system. For the year 1992 46815 enterprises were privatized. From 1993 till 2006 94931 government enterprises were privatized. Present-day practice makes allowances into the ownership rights, giving the role of the government back. The situation in Russia is unique – the government is selling itself among the society and in business.