ABSTRACT
Defining the “private sector” in Russia is problematic because neither the leaders nor the people have fully embraced the Western notion of private property ownership, and what the Russians mean by “private property” is often unclear. If we define private property to conform with Western concepts—that is, to cover only property that an owner can use and dispose of as he sees fit, subject only to the constraints of law—then the private sector in Russia is small, accounting for less than 4 percent of the value of fixed capital at the beginning of 1992. 1
274In Russia, however, there exists a spectrum of ownership and organizational forms between full state ownership and control at one extreme and full private ownership along Western lines at the other. Enterprises that have adopted these quasi-private forms of ownership and organization, although subject to varying degrees of state control, often outperform their fully state-owned and operated counterparts by acting more responsively to market signals. When these quasi-private enterprises are included in our definition, the private business sector is fairly large and growing rapidly, employing over 15 percent of Russian workers in 1991, as compared with less than 10 percent in 1990 (see Figure 1).
This concept of a private business sector includes joint-stock companies, lease holdings, cooperatives, small private businesses, joint ventures and foreign-owned firms, and private farming. Defined in this way, the private business sector has considerable impact on the economy, accounting for about a third of trade volume and consumer services, a quarter of agricultural output and contract construction, and a fifth of industrial output. In the housing sector, which we deal with separately, a quarter of living space is privately owned.
The enterprises that comprise the private business sector can be former state enterprises (or parts thereof) that have been privatized, state enterprises undergoing privatization, or entirely new businesses. Although self-initiated privatization and some government-sponsored privatization experiments have been under way for several years, the first official privatization program was issued only in the closing days of 1991. Through May 1992, privatization conducted under the auspices of the official program consisted mainly of converting enterprises from quasi-private status to private status, usually through a worker buy out, and had therefore not yet enlarged the private business sector as a whole.
