The Private Sector after Communism: New Entrepreneurial Firms in Transition Economies

The Private Sector after Communism: New Entrepreneurial Firms in Transition Economies

The Private Sector after Communism: New Entrepreneurial Firms in Transition Economies

The Private Sector after Communism: New Entrepreneurial Firms in Transition Economies

Synopsis

Winiecki here examines the hurdles and problems that face entrepreneurs and private firms in post-communist nations. This book should appreciated by readers with an interest in transition economics.

Excerpt

The natural effort of every individual to better his own condition … is so powerful a principle, that it is alone … not only capable of carrying on the society to wealth and prosperity, but of surmounting a hundred impertinent obstructions, with which the folly of human laws too often encumbers its operations.

(Adam Smith, The Wealth of Nations, Liberty Classics edition, 1976)

This book is yet another story of post-communist transformation (or transition, or systemic change - all terms are intended to mean the same and are used interchangeably). But it is one that is rarely told from the perspective taken here. For it makes the new private firms the centerpiece of the story. Their establishment and expansion, their share in the aggregate output and employment, and the enabling conditions required for their success, are shown to be of crucial importance for the transition process.

Most of the literature dealing with the emergence and role of the private sector in post-communist transition concentrates on what is commonly called privatization. But what the authors usually mean by the term in question is the transformation of state-owned enterprises into privately owned ones. What they tend to often forget is that the private sector in post-communist economies is created via two parallel processes. Another process, alongside the ownership transformation, is the establishment and expansion of new private firms.

The author of this Introduction suggested more than a decade ago that both processes are two sides of the same story of privatization, that is the creation of the dominant private sector in national economies of post-communist countries (see Gruszecki and Winiecki, 1991, and Winiecki, 1992). While both contribute to the growth of the private sector, they differ by their respective institutional characteristics. The ownership transformation, called privatization "from above", requires much more state activism than the establishment and expansion of new private firms.

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