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Denationalization and privatization: the stages, forms, methods and problems.

Denationalization and privatization, is the deformation of property relations for means of production. The total nationalization (the part of the state sector in the former USSR exceeded 90 %) has separated a worker from the property and power. The latter were monopolistically concentrated in state possession. It caused hypertrophied centralism in the economy regulation and provided authorities with the right to solve all the questions of economic development: structural, investment, financial and tax policies; regulation of prices and wages, to decide on suppliers and consumers what and how many to produce. The centralized decision making on all the micro- and macroeconomic levels disrupted material incentive and lead to intensification of contradictions in the society.

The state having become a monopolist in economic and political powers in fact tried to realize not the common, but mainly departmental interests. The management methods were also adequate – the methods of strict hierarchical subordination.

In these conditions property in fact was formally communal and less reflected nation-wide features. Relation to nation-wide property as to somebody else’s and impossibility to command the produced product disrupted interest in quality of labor increase.

It’s possible to escape the negative influences in economic and other spheres of life, eliminating the causes of these phenomena, which are hided in the monopolistic position of the state and its institutions that had become full owners of the production resources and the results of the labor of the society. Hence the necessity of denationalization and privatization of property the creation of mixed economy, in which the market subjects (state, cooperative, joint-stock, private and collective enterprises), will be equal.

Denationalization and privatization are interconnected, but not equal terms. Denationalization as the opposite to nationalization must reflect the complex of measures, directed to disruption of state monopoly on property, reduction of state - owned sector creation of mixed economy in forcing the processes of self regulation of economy. Changing the functions of state in the regulation of economy results in that the state doesn’t take part in problems solving on a microeconomic level, but solves only macroeconomic problems.

Privatization is a payable or non-payable transfer of the prevailing part of the state property to individual or collective private owners. Privatization cannot be identified with denationalization however they have some common features. Denationalization not always means transformation of state property into the private one. State property can be of different types of collective property. The purposes of privatization are also different: the return of state property to the people with the help of which and for the funds of which it was created; transfer of inefficient state enterprises to real owners who take risk to lose their capital and thus interested in increase of effectiveness of its usage; mass creation of real subjects of market competition which act in accordance with real market demand. It should be emphasized that privatization in any case doesn’t mean full liquidation of state property. The main directions of privatization are ‘small’ and ‘big’ privatization, land privatization and privatization of accommodation.

‘Small’ privatization is realized either by selling for cash using tenders or auctions to individual, group, private owners of state enterprises of trade, services, not big industrial, transport, building enterprises, not finished constructions; or by leasing with further redemption of these sights by the collectives working on them.

‘Big’ privatization is realized by means of incorporation of state enterprises. Joint-stock type of business is directed to deprive the state to command the means of production and its results, as well as into forming of a new owner and creating a collective owner.


The concept of economic systems. Characteristics of types of economic systems.

The essence of economic system. Economic relationships function as a definite system that includes objects and subjects of these relationships and different forms of their connection. The economy of every country is a large system, consisting of many different types of activity, and every component of the system can exist only because it is connected to other ones. Economic system is a specially organized system of connections between producers and consumers of goods and services.

The elements of forces of production are means of labour, subjects of labour and people who have experience in production and make means of production and natural forces, used by people (wind, sun, hydro recourses etc) move.

Types and models of economic systems.

- Command economy is characterized by a state form of property of most of enterprises which act according to the directions of a single economic plan. It’s regulated by administrative methods.

- Market economy is characterized by private property, system of free proprietorship where market system is used. Resources are divided according to the laws of money-commodity relations, economy is connected with high risk and liability is undertaken by the subjects of market.

- Mixed economy is characterized by a combination of private and state sectors, where a state interferes with economy through its economic functions, but with the account of self-regulating role of the market.

The main types and models of economic systems from the point of view of civilization approach.


Criteria of classification of economic systems Models of economic systems
Portion of state property and the level of state interference economy Market economy. Socially oriented economy Mixed economy. Command economy
Presence or absence of commodity-money relations and the level of their development Natural production. Command economy Production of goods. Market economy
Development of industry, implementation of science into production Agrarian society. Industrial society. Postindustrial society. Information society
Character of property on means of production Primitive-communal society. Slaveholding system. Feudal system. Capitalism



Theme № 4. The forms of social economy. Goods and money. Capital. Lecture 4. 1. A subsistence economy: the essence and evolution. Commodity production: the essence and main features. 2. The concept of "benefit", "capital", "service". Goods and its properties. Theory of value.

3. Theory of Money. The nature and functions of money. The laws of money circulation. Price as the monetary expression of value.


Key words

Insularity - изолированность

Free price – свободное ценообразование

Law of value – закон стоимости (ценности)

consumer behaviour – поведение потребителя

satisfaction – удовлетворение

utility – полезность

total utility – общая полезность

diminishing marginal utility – убывающая предельная полезность

term – термин

rank – ранжировать

dimension – измерение

indifference curve – кривая безразличия

consumer’s preferences – потребительские предпочтения

budget constraint – бюджетное ограничение

budget line – бюджетная линия

plot – наносить (точки), отмечать

money unit – денежная единица

tangent – касательный

consumer equilibrium – равновесие потребителя


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