1990 Articles

Privatization in Hungary: From Plan to Market or from Plan to Clan?

Stark, David C.

For nearly three decades, the conception of reform of the state socialist economies of East Central Europe was dominated by the search for the correct mix of plan and market within the state sector. By the mid 1980s a new conception of reform emerged in Hungary focusing on the small-scale private sector, as economists debated the correct mix of public and private ownership across sectors of the economy. The year 1989 witnessed, in both Hungary and Poland, a fundamental break with these conceptions of reform: rather than simply stimulating the expansion of the traditional private sector, policy makers began designing a variety of measure for the privatization of the public sector itself. Whereas previous debates addressed question of how to reform the economic mechanisms of state socialism, current efforts seek to transform the fundamental institutions and property relations of these societies.