Fewer Feuds And More Privatization

Prime Minister Viktor Chernomyrdin has finally entered the fray between privatization chief Anatoly Chubais and Mayor Yury Luzhkov over the sale of property in Moscow, apparently giving the upper hand to Chubais and a unified privatization plan for the entire nation.On the surface, the development can be seen as a victory for free-market reforms and a well-deserved blow for a mayor who often seems to run his city as if it were a feudal kingdom.But the reality is not that simple. Chubais is no knight on a white charger, and Luzhkov's criticisms of voucher privatization have not been completely off base.Luzhkov complains that property is being sold too inexpensively, and that these bargain prices offer few benefits to the regular people that the voucher program was designed to enfranchise. In this case, he has a point: voucher funds can snap up large shares in companies at auction very cheaply, often by illegal means, and then resell those stakes at a great profit through shell companies that hide the gains from the funds' investors. According to sources in both the funds and the stock markets, this scam is common, suggesting that much of the money made through privatization goes neither to the government nor to the majority of its constituents, but to those financiers who know how to break the rules and get away with it.Another of Luzhkov's worries is that the new owners of privatized companies in Moscow would ultimately gain ownership of valuable land, which they could sell at a profit with little regard for the privatized enterprises or their employees. Such raiding could have damaging effects on the city's industry.A separate privatization plan for Moscow, however, is not the solution, since it would only create more instability. Furthermore, once voucher privatization ends July 1, Luzhkov's most salient criticisms of privatization will lose their validity. Under Chubais' plan for post-voucher privatization, the government will focus on selling controlling shares in enterprises to the highest bidders with the best business plans. In the post-voucher world, Luzhkov would be left standing on a platform of greater government interference in the everyday operations of companies. He is demanding that the city should maintain a contract with each company to regulate the prices it charges, the number of employees it hires and what business it conducts. Both Chubais and Luzhkov agree that greater efforts must be made to attract investment if privatized enterprises are to survive. The best effort that they, and especially Luzhkov, could make would be to stop feuding and work on a stable, unified privatization program that leaves companies truly private and as healthy as possible.