face is where to find the funds to undertake new capital formation, without which no program for restructuring can succeed. The radical reformers in the Yeltsin administration were hoping that new external investors would supply this capital as they acquired control over enterprises. Major changes in the structure of ownership rights in these enterprises were expected, via the resultant changes in incentives to save and invest, to lead to significant increases in real saving and real investment. 16 But the paucity of external investors casts great doubt on the possible success of such an approach. Moreover, the low level of proceeds realized by governmental agencies from the privatization process has weakened the capacity of the state to play a major role in making investible funds to the nonstate sector (or to invest in the public infrastructure) even if it has the will to do so. 17
In the last analysis, the success of the privatization process in Russia will not be measured--as it so often is now--by the percentage of former state enterprises that have been transferred into nonstate hands. Rather, it will be measured by the success of these enterprises in restructuring and improving their economic performance, in producing needed goods and services, and in providing the basis for economic stability and social security.
This chapter is a revised version of a paper presented at the International Conference on "Privatization and Socioeconomic Policy in Central and Eastern Europe," Kraków, Poland, October 18-21 1993. The author is grateful to the University of Michigan International Institute and Center for Russian and East European Studies for their support in enabling him to attend the conference.