SATURDAY morning in the Czechoslovak capital - auction day, and
the big money's hit town. But the bidding here at the local theater
isn't for fancy paintings or yachts.
This auction is on the front lines of one of the boldest
economic experiments of modern times - an effort to put thousands
of enterprises nationalized by the communists back into private
hands in just a few short months. Everything is up for grabs, from
hotels to restaurants, hairdressers to souvenir shops.
By the end of the year, the authorities hope to sell as many as
35,000 properties throughout the country.
Without recognizable owners who have a vested interest in seeing
their investment pay off, East Europe's reformers argue, a market
economy cannot be built. True, the West has state-run companies
that make a profit. But their products can be compared with those
of private firms.
"This is the crown jewel of the reform process," says Karel
Dyba, Czech economics minister. "Without privatization, small-scale
privatization, large-scale privatization, you cannot create a
functioning market economy."
So far, the sell-off concerns small shops sold at the auctions.
Today's first happy winner is baker Zuzanna Sindelofalova, who
bought a small property in the center of Prague. "Until now, I
delivered my cakes" to other shops, she says. "Now I will be able
to sell them in my own shop."
The privatization of large state enterprises is beginning.
A few large companies already have been sold to foreigners, most
notably Skoda's automobile operations to Volkswagen for $6 billion.
The bulk of the buying, however, will have to be done by locals,
for both political and economic reasons. Rich foreigners are only
interested in a few of the thousands of state firms. Moreover, the
public opposes a fire-sale of state companies.
The Prague government has come up with an ingenious and daring
solution: It plans, for all intents and purposes, to give the
companies away. For a nominal fee of about $32, all Czechs will be
offered the opportunity to buy vouchers which they can cash into
Despite differences in technical details, Poland is preparing a
similar voucher scheme. Hungary, more cautious, hopes to sell
directly to company managers or to the country's emerging class of
Whichever technique is used, the task dwarfs Britain's
much-heralded privatizations of the 1980s. Under Margaret Thatcher,
only two dozen companies were shifted out of government control in
12 years. In Eastern Europe, as much 80 percent or more of the
economy is to be put on the auction block.
THE process is not without its problems. One typical
complication is what to do with former owners. Last spring, the
Czechoslovak parliament passed a law saying that individuals who
had their businesses confiscated by the communists can recover