Why did the transition from socialism to capitalism result in improved growth in some countries and economic decline in others? It is all about mass privatization

Capitalism SocialismScholars have advanced three main arguments to explain why did the transition from socialism to capitalism result in improved growth in some countries and significant economic decline in others: (1) successful countries rapidly implemented neoliberal policies; (2) failures were not due to policies but to poor institutional environments; and (3) policies were counterproductive because they damaged the state.

This very interesting and impressive (open access) paperMass Privatization, State Capacity, and Economic Growth in Post-Communist Countriespresents a state-centered theory and empirically demonstrates for the first time one of several possible mechanisms linking neoliberal policies to poor economic performance: mass privatization programs, where implemented, created a massive fiscal shock for post-communist governments, thereby undermining the development of private-sector governance institutions and severely exacerbating the transformational recession. Hamm, King and Stuckler performed cross-national panel regressions for a sample of 25 post-communist countries between 1990 and 2000 and found that mass privatization programs negatively affected economic growth, state capacity, and property rights protection. They further tested these findings with firm-level data from a representative survey of managers in 3,550 companies operating in 24 post-communist countries. Within countries that implemented mass-privatized programs, newly privatized firms were substantially less likely to engage in industrial restructuring but considerably more likely to use barter and accumulate tax arrears than their state-owned counterparts. This is a valuable contribution to economic sociology!

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