The Voucher: A Compromise That Worked

Last week marked the end of the life of the most widely distributed security ever, Russia's privatization check or voucher, which was always of keen interest in the country's securities markets. In fact, it is no exaggeration to say that it was the voucher that shaped that market, which is only now really beginning to develop.The voucher as we know it was the result of a political compromise between the conservative parliament and the radical reformers on Yegor Gaidar's team. According to the Law on Privatization, which was passed before the August 1991 coup, Russians were supposed to receive individual privatization checks that would not be subject to trading. As a result, there would have been no secondary securities market and, in reality, the government would have remained the country's only property owner.On the other hand, the radical reformers demanded global denationalization without any privatization checks at all. One has to recognize the flexibility and political awareness of Anatoly Chubais, who realized that privatization might not take place at all unless he compromised on the voucher issue. In the end, he agreed to the voucher, but he made it freely tradeable.Born as a political compromise, the voucher remained a prisoner of political intrigue throughout its two-year lifespan. It was issued on Oct. 1, 1992, when relations between the executive and legislative branches had already been ruined by irreconcilable differences. For the first six months of its life, the voucher could not rise above its 10,000 ruble face value. Already on Oct. 2, 1992, it traded for only 9,200 rubles and then began a long, uninterrupted decline.The more intense the conflict between the parliament and the president became, the more the value of the voucher fell. On March 22, you could buy a voucher for just 3,950 rubles. However, a month later, after the April 1993 referendum at which a majority of the voters supported President Boris Yeltsin over the parliament, the voucher began to come back and by the end of June, it had already passed the 10,000-ruble mark. Interestingly enough, last October's storming of the White House had absolutely no impact on the voucher market. No one tried to get rid of their vouchers and its value remained unchanged. But after Yeltsin's November 1993 decree that extended the life of the voucher until June 1, 1994, the voucher's value rose 50 percent in a single day. On March 25, 1994, it nearly reached 50,000 rubles, but by the June 1 it had tumbled to 20,000.According to experts at the Russian Raw Materials and Commodities Exchange (the country's main trading place for vouchers where more than 42 million have changed hands over the last two years), the most recent fall was due to the conflict between the State Property Committee and the Moscow mayor's office. There were even rumors that Chubais would be ousted. But as soon as Mayor Yury Luzhkov changed his mind about the voucher on June 8, the price of the voucher rose nearly 16,000 rubles in one day.Nonetheless, the voucher has played an enormous economic role. A vitally important element of Russia's evolving economy, the securities market, arose and began to develop based on the voucher. Millions of Russians have learned what a dividend is, and 12,000 enterprises that have been sold for vouchers now have new owners.