Economic Freedom and Privatization -- from Egypt and Mesopotamia to Eastern Europe

By Jaffery, Aslam A. | Denver Journal of International Law and Policy, Fall 2000 | Go to article overview

Economic Freedom and Privatization -- from Egypt and Mesopotamia to Eastern Europe


Jaffery, Aslam A., Denver Journal of International Law and Policy


"Fundamentally, there are only two ways of co-coordinating the economic activities of millions. One is central direction involving the use of coercion [and] ... [t]he other is voluntary co-operation of individuals...."(1)

INTRODUCTION

On the tenth anniversary of the sudden collapse of the Berlin Wall, the seemingly immovable symbol of the Cold War, a great debate exists among the people of Eastern Europe(2) about whether the end of communism was a mistake.(3) Disillusion surrounds the issue of what good is the freedom to travel when you cannot afford to travel, or what good is the freedom of speech if no one listens.(4) Capitalism has been the most common scapegoat for the countries making the bumpy transition from communism to a free market economy. But, is it really capitalism, or are there other reasons for this widespread dissatisfaction?(5) Although the global community generally advocates for privatization and a free market economy, the reality of the process of privatization might not bring the economic prosperity initially expected.(6) Privatization, historically, has contributed to the socio-economic and political prosperity of a nation, although not without a few failures.(7) With a historical perspective in mind, this article will examine the problems with privatization, specifically in the Russian Federation and Czech Republic, where the privatization efforts have gone in opposite directions.

Part one provides historical background in the development of today's economies, the natural need for a free-market economy and the economic impact on society. Part two discusses the process of privatization in the Russian Federation and Czech Republic. Part three analyzes the three most common political, social, and economic problems of failed transitions to privatization. The article concludes with a general view of today's global economy.

I. BACKGROUND AND HISTORY

A. Humans and Economics: Early Economic Development

"Trade, in the simple form of barter, is as old as man."(8) Humans, historically, have never been satisfied with what they can produce for themselves, because they have always been driven by want rather than need.(9) Once humans possess what they need, they want to acquire what others possess, either by force or by exchange, and if they happen to possess what others might need, they trade.(10) Once local needs are satisfied, people frequently go beyond local markets and look for clients elsewhere.(11) Today, archaeologists have discovered ruins that provide evidence of ancient international exchange, proving the human nature of freely owning and trading, called the free-market.(12) Similar to today, these historical trade efforts did not occur entirely free of obstacles, such as excessive government control. Nevertheless, the commitment to trade continued.(13)

With the introduction of metal and metallurgical science, trade became a greater necessity because only a few could manufacture the things that everyone needed.(14) The manufacturer, however, had to rely on raw materials, which often had to be imported, to keep up with the constant demand.(15) There was not one solution to this growing need for trade, therefore different civilizations approached it in different ways.(16) Unlike today, these differences were not due to ideologies, because the philosophical outlook was still lacking, instead these were a result of different "economic character[s] and resources" available in certain parts of the world.(17) For instance, the ancient civilizations of Egypt and Mesopotamia employed opposite methodologies toward their respective economic systems.(18) The Egyptian and Mesopotamian civilizations are two of the oldest civilizations known in the world,(19) and, therefore, the study of their economic systems reflects that the continuous tug-of-war between a state-controlled economy and a free-market system is nothing new. The study also helps prove an understanding of the failed state-controlled economies and, consequently, the trend toward the free-market system.

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