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Comment by alienjr | Hacker News Reader

"support for the disastrous privatization of the economies of the Post-Soviet states that's lead to massive human suffering"

Lack of privatization in Post-Soviet states lead to massive human suffering. In Poland the government constantly subsidies all companies that weren't privitzed in 90s. What's worse quality of products and services in these industries is terrible. That's why for instance electricity in Poland is one of the most expensive in Europe. And it is impossible to change anything because all these companies are highly unionized and have huge political influences during elections.

Little state ownership may work fine in countries that has different culture in rest of the economy has been capitalistic for last 200 years. In Post-Soviet world it is disastrous. Look at Russia for intance - Gazprom and other state companies were overtaken by the Putin's mafia.

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I haven't got a problem with privatization per se, and recognize that some approach to privatization was called for. I have major problems with the disastrous "shock therapy" approach to privatization that was actually applied where the US economic advice was what created the mafioso oligarchs.

You are grossly overstating the influence of the "us economic advice", which was zero. The mafioso oligarchs needed and used none of it.

You might want to read up on this. It was US economic advice which led to the rapid sell-off of public assets which resulted in the creation of the oligarchs in the first place.

Seriously, I do not need to read up on this, I was there. But one does not really need to have first-hand experience to see the deliberate deception in klein's "shock doctrine" and the like: for example, different countries in the region had markedly different timings, different implementation of reforms, different rhetoric, and different resources; but the outcomes pretty much fall into two groups: places where people demanded and expected accountability on part of government (ie. baltic states, and a few former warsaw pact countries) did relatively fine, and others devolved into oligarchies (ie. the rest of the former soviet union).

Here's Jeffrey Sachs' account of his role: http://jeffsachs.org/2012/03/what-i-did-in-russia/

You can see he did NOT advocate shock therapy and resigned when he realized he could do nothing about growing corruption.

Sachs resigned when the Harvard Institute for International Development he was running was roiled in the scandal of his direct reports buying Russian stocks and working to get the first mutual fund license in Russia while they were dictating economic policy. They were recommending policies that they were directly profiting from. They lost their funding, were in a massive scandal, then Sachs resigned. His article is a sad heap of dishonest excuses and fails to take responsibility for his own involvement in the corruption he happily blames others for.

The corruption in HIIS was also a factor in the dismissal of Summers, since he set up the project.

Many European countries have very large (dominant even) state owned power companies that work pretty well.

But really the argument about Russian privatization is that it ought to have been executed less poorly, for example not donating most state property to a few corrupt oligarchs.

I would not use words "poor execution" to describe a process that achieved its exact intended effect. Nor does it have anything whatsoever to do with any American economic advisors.

It only looks like a failure if we assume that the Soviet (and post-Soviet Russian) state considered its subjects as stakeholders, which has never been the case.

"Gazprom and other state companies were overtaken by the Putin's mafia"

That is called "privatization".

Sort of. The Russian government still owns a majority stake in Gazprom and Putin's conquests have been under the banner of moving corrupt private oil companies back into the public hands of Gazprom. So it's really a landgrab by the state, which happens to own a private company. But it was the US's policy of rapid "shock" privatisation which resulted in the unmanaged sell-off of the original state assets in the 1990s and the creation of those oligarchs. It's like selling USPS for $1m - that's not privatisation, it's madness.

I agree that Russia is a very extreme case, but it would be difficult to find any place in the world where privatization was not done in the benefit of a few friends of the people in power.

Mexico and Carlos Slim comes to mind for instance.

It was a reaction to a power vacuum. A very severe power vacuum. Frontline's "Putin's Way" is highly instructive. Failed states are dangerous.

>Lack of privatization in Post-Soviet states lead to massive human suffering.

No, lack of rule-of-law and stochasticity (allowance of firms to succeed or fail on their own merits) lead to massive human suffering. If you "privatize" everything without solid rule-of-law and with bank bailouts, you get massive human suffering and no growth. If you "nationalize" things without solid rule-of-law and without allowing experiments in new ways of doing things, you get massive human suffering and no growth.

thank you. people take "rule of law" for granted.

> Look at Russia for intance - Gazprom and other state companies were overtaken by the Putin's mafia.

You must have missed the Boris Yeltsin era...

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