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As for the industrial sectors, theprivatisation of lease relations began later there. Without doubt, theban on leasing of enterprises in many branches of industry, the existinggeneral administrative and legal restrictions and the resistance of the upperechelons all retarded progress in this field. And yet the wish of themanagers of state-owned enterprises to get rid of the control of the uppermanagerial structures, as well as their preference for lease mechanisms(instead of co-operatives), which was attributable to the more stable legalregulation, and the managers' interest in the `spill-over' effect of stateproperty taken from the state sector, gave rise to a `lease boom' in 1990-1991which led to the appearance of 20,000 lease enterprises. An importantfactor that served as a great incentive for switching over to this form was thepossibility to include a right of buy-out of the enterprise in leasecontracts. In Russia its most wide-spread form - a lease with thework collective having the right to buy out the enterprise - ceased to operatein July 1991, when a `heritage' of some 15,000 enterprises with their contractsconcluded was left.

These `transitional forms', with all theirexcesses and negative features, nevertheless made a positive contribution,making the whole process of the subsequent reforms irreversible andfacilitating the accumulation of capital for new social-pro-market strata ofthe population, partial legalisation of the shadow economy and partialtransformation of the state-owned enterprises and their management in thedirection of at least non-administrative system of relations among economicagents.

2.2. Legal Acts of 1990-1991 and the Reform ofOwnership Relations as Such

First of all, the USSR Law of 6 March 1990`On Property in the USSR' and the amendments to the Constitution of the USSR of14 March 1990 (art. 10-13) actually recognised the right to private property,allowing the ownership by citizens and non-state legal entities of means ofproduction, securities and other material and non-material objects and rightsthat earn income. At least at the level of formal declaration, all threelegal forms of property, i.e. property of citizens, collective property(including the joint stock type) and state property, were all declared equalfrom the point of view of legal rights and protection. In addition toother things, the Union law on property was actually the first act that allowedincorporation and privatisation: thus art. 10 provides for such methodsof `formation and increase of collective property' as leasing of stateenterprises by the workers with a subsequent but-out and transformation ofstate-owned enterprises into joint stock companies (incorporation). Yetbecause of the absence of any specific procedures such methods were in thenature of pilot schemes and were unique.

A whole battery of subsequent legislativeacts served to secure and detail new norms, but because of the authorities'fear of launching a radical reform in the state sector, most of them remainedonly on paper.

According to the `Fundamentals of CivilLegislation of the Union of SSR and Republics', adopted on 31 May 1990, thecategory of subjects of property rights includes citizens, legal entities andthe state, which is in fact a confirmation of the legally acquired propertyrights. A separate chapter in the Fundamentals is on securities, by whichis meant a `document certifying a proprietary right that can be realised onlyif the original document is produced'. Falling into the category ofsecurities are bonds, cheques, notes, shares, bills of lading, savingscertificates and the like issued in accordance with the legislation on thequality of securities. though practically all the above-mentioned typesof securities could already be seen in 1990-1991, at least occasionally, up tothe start of genuine privatisation programmes in Russia and the formerrepublics of the USSR state bonds and certain kinds of notes that areassociated with trade and credit turnover practically dominated thescene. And yet the very appearance of this section should be regardedpositively, especially so if one takes into account the fact that the lastmention of shares was withdrawn from USSR legislation in 1962, while jointstock companies of the 1989-1990 type were established primarily throughspecial acts of the government.

The first act on companies that was based onthe norms of the new law on property and on the provisions of the civillegislation was the USSR law of 4 June 1990 `On Enterprises in the USSR', whichprovided for the operation of enterprises based on the property of individuals(individual, family-type), on the property of work collectives(collective-type, production co-operatives, such as a joint stock companybelonging to the co-operative or other business partnership, enterprises ofpublic and religious organisations), and public and joint (mixed)enterprises. A similar Russian law was adopted in December 1990 and - forpolitical and many other reasons - this law, though obsolete, is still inforce.

The Decree of the Council of Ministers ofthe USSR No. 601 of 25 December 1990 on joint stock companies reproduced indetail (primarily in the spirit of the German legislation) the operating normsof joint stock companies and partnerships with limited liability. thisgave a start to the vigorous formation of new legal forms - at the end of 1991there were already over 150,000 newly established joint stock companies andother business partnerships on the territory of Russia (Table 2). As hasalready been pointed out above, the mass appearance of such forms led to thedecline of the co-operative movement. And yet although there was aprocedure - with its quite obvious contradictions and confusions - in the formof the Union act on the incorporation of public enterprises, this document hasnot prompted reforms of property relations at state-owned enterprises.Moreover, and this is the same story as with co-operatives, many newlyestablished joint stock companies and partnerships were instituted directly bystate-owned enterprises, thus providing a convenient infrastructure forsemi-legal operations by managements that took advantage of the `right of fullbusiness responsibility'.

8 August 1990 saw the adoption of the Unionlegislation on the fundamentals of the operations of small businesses, whichstipulated how the processes of creation and operation of small businessesshould go on, without singling out a legal form and using as guidance only acriterion on the number of people employed.

In 1990-1991 the bulk of the smallmanufacturing businesses was created through a process of detachment andtransformation of structural units (shops, departments) without changing theforms of property and retaining close linkage with the founder (for details seeIEP, September, 1991). Among those enterprises that were registered apredominant role was played by enterprises with little or no capital, engagedin intermediary activities, which, in conditions of economic shortages, poorwholesale raw materials markets and absence of real state support forindependent small business owners, remained (as with co-operatives) an easy andprofitable sphere of business. It is essential to point out here thatsmall business status gave quite a lot of legal and semi-legal opportunitiesand above all for the management of the `parental' enterprise: aconvenient means for transformation of property (both state and joint stock),transfer of non-cash means into cash, a considerable rise in salary for thoseemployed, and use of a status that conferred privileged taxationtreatment.

In other words, this process of smallbusiness development (in both the USSR and Russia) in this period should beunderstood not in the Western meaning of this term, where we associate it witha private enterprise form of business, but rather as a process of formation ofrather flexible structures such as subsidiaries of state enterprises and jointstock companies that are used to serve the interests of the management ofstate-owned enterprises.

It was already at the `declining' stage ofthe law-making process in the USSR that a USSR law was adopted `On GeneralInitial Principles of Enterprise for Citizens in the USSR'. The law waspassed on 2 April 1991. This law, recognising the right of private andcollective entrepreneurship as an activity that serves to earn profit orpersonal income, actually for the first time openly allowed the use of hiredlabour. And it is due to this factor that this law may be treated as thefinal act in the ideological evolution of the Union legislation of that periodtoward a market-oriented framework of law.

Thus in a most general sense and declaratoryform it was only in spring 1991 that the formation of the institution ofprivate property started in the USSR (naturally not the real finalformation). This process vividly reflected the complex and contradictoryevolution of approaches to the corresponding changes, the decisive point forwhich was the ever deepening crisis of the system. If in 1978-1989granting economic independence to state-owned enterprises (including thedubious invention described as full cost accounting and management) and theemergence of co-operative and lease enterprises were treated as extremeradicalism, in 1990-1991 one can already speak about private ownership rightsas such. At the turn of 1990-1991 it gradually became clear that sometype of privatisation model was inevitable in the USSR and Russia and thatwithout that model - with the state sector still prevailing all around - itmade no sense to speak about a private property right, or about the stock andthe securities market or other features of economic and legalreform.

2.3. Privatisation in the Programmes of EconomicReforms

It is only since the autumn of 21989 thatone can speak about attempts at a `comprehensive' reform of the economy,implementing special economic programmes, each of which, to one degree oranother, provided for the development of various forms of property /8/.The first programme of this kind - a three-stage project of `moderate-radicaltransformation' suggested by L. Abalkin (November 1989) theoretically providedfor the `rights of owners' as a major condition of the operation of the market;however, practically the question of the private economic sector andlarge-scale privatisation was not raised.

The next two programmes are associated withthe name of the ex-Chairman of the Council of Ministers of the USSR, N.Ryzhkov. In December 1989 the Congress of People's Deputies of the USSRapproved a moderate version of reforms in accordance with which all largeenterprises remain in the system of direct state control and only 20% were tobecome lease enterprises by 1995. However, the aggravation of theeconomic situation in the country required a rapid revision of this programmeand so in May 1990 a second Ryzhkov programme was elaborated, which in essencewas a redrafted Abalkin plan with the idea of speeding up reforms. Thisversion directly tackled the question of restoration of property to privateownership within the next 15 years.

The programme was rejected by the SupremeSoviet of the USSR but the main issue was not that; the point was that therapid deepening of the crisis in the economy made the stabilisation projectsobsolete already at the stage of discussion. And what we saw afterSeptember 1990 was a `race' between alternative programmes of reform of theeconomic system of the USSR and the republics. As people became more andmore aware of the depth of the economic problems more and more attention waspaid to the issues of privatisation as an inevitable condition for creating acompetitive market environment and an efficient economy. As Shatalin putit, `the risk of change-over to the market is less than the punishment you getin case of shifting from one foot to the other' [Shatalin, 1991].

Among the three alternative programmes thatwere submitted for consideration by the Supreme Soviet in September 1990 - agovernmental programme, Shatalin's programme (`500 days') and a `synthesis'produced by Aganbegyan - the second should be regarded as the most radical.. Asconceived by the authors of the `500 days' programme, the process of realprivatisation (i.e. using incorporation, tenders, auctions and other forms)would have taken some 15-20 years. By the end of this period thesituation in industry as far as the relative shares of different forms ofproperty were concerned would have been: 25% state-owned enterprises(including 3-4% lease enterprises), 45% corporations, 15% partnerships andco-operatives, 10% collective enterprises and 5% private enterprises[transition..., P.73]. An indisputable advantage of the privatisationmeasures of this programme was the fact that it was well furnished with apackage of the necessary normative acts and that it offered a rather elaboratepattern of long-term and short-term measures in this area.

As far as privatisation was concerned, theSeptember programme of Ryzhkov and Abalkin was much more modest: mostprobably, this programme was considered not so much as a meas of change-over toa multi-type property system, but rather as a way of removal of `excessivefunds' from the population. In practice it meant that the governmentcontinued to adhere to basically lease-type enterprises, while the sphere ofprivatisation as such was to be limited to small and medium-size enterprises ina series of non-strategic branches of industry.

In his programme of stabilisation of theeconomy and transition to the market Aganbegyan attempted to synthesize bothprojects; however on 19 October 1990 the Supreme Soviet of the USSR adopted theUSSR President's version, `Main Trends of Stabilisation of the National Economyand transition Towards a Market Economy'. This attempted to combine theadvantages of all three alternative projects. Rather general ideas of the`main trends' relating to privatisation were strengthened by the decisions ofthe 4th Congress of the People's Deputies of the USSR, one of the provisions ofwhich ran as follows: `conditions should be provided for incorporation ofstate enterprises into market structures, transfer of property to a leasesystem, establishment of joint stock companies, support of small businesses,distribution of some state assets among the working people, giving priority tothe workers of work collectives and to veterans of labour' [IV Congress,1990]. In line with the decisions of the Congress, work in the field of aUnion law on privatisation was intensified.

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