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The chances of dinosaurs

Restructuring and privatization of large firms

What does systemic change mean for large scale Hungarian industry? How have the organizational and ownership structure of large socialist firms changed? How have their activities, behavior and orientation modified? What kind of firm strategies proved to be successful? What is the role of the state as an owner, regulator and market actor in shaping the fate of large firms? The research presented in the paper tries to find answers to the questions with by combining economic and sociological approaches. The fate of 49 large firms, considered as a special group of strategic enterprises in the planned economy, is analyzed by case studies and processing their balance sheet data.

Közgazdasági Szemle - Economic Review, XLIV. évf., 1997. January (31 - 41. O.), Study

Privatization in Central East Europe: can it be designed?

According to general understanding, privatization in Central East Europe does not simply mean the transfer of individual firms from state hands to other proprietors, but it is the precondition and the main instrument of rebuilding the whole economic system. Thus, the task is not to fit in state owned enterprises into a functioning market but to create this new integration mechanism parallel with and by the mean of a wide-ranging change of ownership structure. One of the basic dilemmas of the transformation is, whether it is possible to build up the frameworks of a decentralized market mechanism applying a comprehensive, homogeneous privatization strategy, carried out by centralized governmental institutions. In other words: can privatization be designed?
Based on the Hungarian experience, in comparison with Czech-Slovakia and Poland, this paper will argue that all governments have tried to do so. Nevertheless, their attempts to design ownership changes have been successful at a different degree - not (only) in terms of privatized assets or enterprises but in terms of the impact of programs, guidelines and centralized decision making on the transformation of the proprietary structure. The degree of "design" will be characterized by the stability versus shifts of governmental privatization policies and the relationship between the programs declared and the empirical changes.

In: Institutional Design in New Democracies, A. Lijphart, C.H. Waisman eds., Westview Press, Boulder, Colorado, 1996. 177-194.

Centralization, renationalization, redistribution

(Government's role in changing Hungary's ownership structure)

The paper discusses the shifts in Hungarian privatization strategies and in the role of the government in changing the ownership structure. Analyzing the forms of transformation, the goals and motivations of the participants (enterprises and government organizations) and the reasons for changing the main direction, it argues that the five years history of Hungarian privatization indicates the mixed and unstable character of the process. There has never been a uniform, homogeneous method of changing the ownership structure: market type techniques have been accompanied by central distribution of property.
The often changing governmental strategies, motivated predominantly by purely political considerations, show a clear tendency towards the re-establishment of centralized control of state organizations over the firms. The coming years can see an emergence of redistribution type solutions with highly dubious social and economic implications.

In: Strategic Choice and Path-dependency in Post-socialism, Jerzy Hausner, Bob Jessop, Klaus Nielsen eds., Edward Elgar, Brookfield 1995. pp. 287-308.

The Revival of Redistribution in Hungary

Politicians and analysts, businessmen and citizens generally agree that economic transformation should amount to market economy creation. Paradoxically enough, the gradual establishment of the basic institutions of the market, including private ownership, is contrasted by the signs of the reactivation of another integration mechanism, namely the redistribution. Following a temporary withdrawal in the late 1980s and early 1990s, the direct redistributive function of the state seems to have gained new vigor.

Acta Oeconomica, Vol.46.(1994)No.1-2. pp.63-78.

An Attempt at Crisis Management and Failure of the Spontaneous Privatization

Under planned economy, large state-owned enterprises used to enjoy considerable privileges and protection. They had to keep negotiating with the government for allocations and benefits, but their bargaining position was grounded in their central role in production, exports and employment, and supported by close relations with the administrative bodies of the governing party. The weakening of the old political system in the late 1980s resulted in the shaken position of formerly privileged firms. The threat of a crisis elicited a variety of responses: some enterprises adopted a strategy of wait-and-see, others tried to involve foreign investment, while a third group changed their organizational structure. During 1988 and 1989, more than a hundred enterprises transformed themselves into one or more companies. This process is known in Hungary as "spontaneous privatization."
This paper is one of the case studies of a research project, undertaken by Financial Research Ltd., focusing on transformation into company form as crisis management and its result, namely on the effect of corporate forms on the chances for privatization to succeed. We use the case of Ganz Danubius Ship and Crane Works (GD) to illustrate the alternatives and motivations of the parties concerned, their negotiations, the changes of the positions of shareholders and managers and the role of direct and indirect state control. The sources of information were the former investigations at GD, the study of enterprise documents and numerous interviews with managers and representatives of owners.

Industrial and Environmental Crisis Quarterly, Vol. 8. (1994) No. 1. 23-41.

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