Privatization and Corporate Networks in Eastern Europe

This chapter looks at corporate networks and privatization in Poland and Hungary to determine which type of capitalism is developing in Eastern Europe. In particular, the chapter examines whether the emerging structures more closely resemble the model of German corporatism or that of Anglo-Saxon market liberalism. First, the economic elites adopted a new ideology to legitimize the emerging unequal distribution of ownership and control in post-socialist societies. The chapter argues that the work of Hayek and Polanyi has structured a controversy between the proselytes of a liberal market order and those who have criticized the excesses of ‘wild east’ capitalism. Second, the privatization process created a new social structure characterized by an unequal distribution of ownership and control of the former state-owned enterprises. The different privatization methods are analyzed to show how they influenced the distribution of economic power and the process of class formation. Third, most East European countries have enacted a new corporate law that defines the governance structure of the privatized firms. This chapter examines the extent to which these laws restrict property rights and whether employee ownership may be a substitute for codetermination.