Communist (and post-communist) property

COMMUNIST (AND POST-COMMUNIST) PROPERTY (Draft paper, please do not cite without the author’s express permission) 1. INTRODUCTION In the preceding chapter, we argued that the classical Anglo-American view of property as a bundle of rights could mislead the researcher of post-communist transitional justice and property transformations in believing that all such transformations in Central Eastern Europe had been about rights, etc. We also argued that without a basic understanding of the nature of property in communist times, any theorization about the dynamics of property transformations and their legal vehicles, privatization and restitution, would have little value to offer, normatively or prescriptively. Therefore, in what follows, we will attempt to provide a brief description of private property in communism, necessary for the understanding of the starting point of property transformations in post-communist CEE. We will also argue that one of the main limitations of transitional justice theory with regards to post-communist transformations is the lack of analysis of privatization, the main transitional issue in post-communist CEE, from a justice theory framework. 2 COMMUNIST PROPERTY In arguably one of the best anthropological descriptions of what made property restitution so difficult after the fall of communism, Katherine Verdery gives the following account of her encounter with restitution in a small village in Transylvania: “A North American urbanite might imagine (as I did myself) that this process (of restitution-our note) would unfold something as follows. Land was collectivized by putting together all peasant farms in a village and working them in common. Therefore because a field and its constituent parcels are fixed goods-like a table with so many place mats on it, making where each piece begins and ends-to restore those parcels to their original owners is only a matter of determining the coordinate of the place mates prior to 1959 and reattributing them to whoever had them at the time. This should not be a complicated matter. Whoever thinks this is mistaken….I will show that collectives were not formed simply by putting together peasant farms, that land is not fixed but exceedingly elastic, that collectivization was more a matter of unraveling the place mats than of simply taking them up, and that the better image of decollectivisation….comes … from villagers’ biblical image of apocalypse. Transylvanians will probably never see the full restoration of their earlier rights to land…..[The restitution law] has thus produced a degree of upheaval and tension in rural areas nearly as disruptive as that of collectivization itself…..”1 After identifying two of the sources of difficulties related to the politics of restitution, respectively the political attempt to reconstruct an earlier, idealized reality several 1 Katherine Verdery: The Elasticity of Land: Problems of Property Restitution in Transylvania, in Verdery: What Was Socialism and What Comes Next, Princeton University Press, 1996, pp.133-134. 1 decades later, and the political decision to restitute a part while keeping another part in state property, she went on to concentrate on a third source of difficulty in the application of restitution law, respectively on the “the present and consequences of socialism’s operation and especially of its treatment of land, which consisted in brief in engendering “a landscape with “elastic qualities.”2 Now Verdery’s above insights clearly allude to a more “physicalist” conception of things which, although matched conceptually in the case of land, was not necessarily characteristic of all objects of property in socialism.3 And her insights were drawn from a particular Romanian restitution context, which is not necessarily applicable to the whole region.4 Irrespective of these limitations, her metaphor of the “elastic qualities” of socialist objects of property nevertheless captures a larger reality applicable to the whole region. Furthermore, while the early study by Katherine Verdery cited above was restricted to the Romanian context and probably less ambitious in terms of generalization, her subsequent work on property transformations after the fall of communism, and the work of several other cultural anthropologists in various post-communist countries came to enrich the initial picture.5 2 Verdery, id, at pp. 134-135. Verdery whole paragraph which deserves reproduction here runs as follows: “By erasing the grid of property from the landscape, by removing the boundaries that immobilized Land-by removing, as it were, the tacks that held in place mats to specific sites on the table-socialism engendered a landscape with elastic qualities. Given the political decision to restore prior ownership rather than simply to distribute land, this elasticity kindles dissension and opens wide spaces for maneuver by the village and commune elites charged with reimposing a grid. Unlike earlier times and places in which seemingly unbounded land became the object of possession, however (one thinks of the enclosures, or the colonization of the Americas), this elasticity confronts a social memory of a landscape with edges, with owners, a landscape corseted by the spatial grid of a rationalizing economy and state. Property restitution is therefore, like Kundera’s proverbial struggle of memory against the forgetting, a struggle of certain groups and persons to tie property down against other who would keep its edges flexible, uncertain, amorphous. It is a struggle of particularization against abstraction of specific clouds of earth against aggregate figures on paper, and of particular individuals and families, reasserting thereby their specificity against a collectivist order that had sought to efface it.” Id, at p. 135 3 For the psysicalist conception of “things” in Blackstone, and earlier XIX century legal American thought and its development in the modern conception, which in our view characterizes the similar developments in common and civil law of the period, see for example Kenneth Vandevelde: The New Property of the Nineteenth Century: The Development of the Modern Concept of Law, 29 Buff. L. Rev. 325 (1980) 4 For example Poland, where the Jaruzelski’s regime was forced in the early 80’s to grant constitutional standing to private landownership, or Hungary where similar changes occurred, were in many ways dissimilar to Romania, or to other CEE countries, where a stricter “socialist” regime was applied with respect to property. Furthermore, Verdery herself is careful to introduce the following disclaimer, with respect to the CEE socialist organization of property: “ Even to speak of socialist property already oversimplifies, homogenizing a reality that was much more complex and varied across both space ad time, with several parallel property arrangements coexisting at any given moment”. Verdery, id., at p. 47. However, for the purpose of the description of property arrangements, every analytical scheme simplifies and generalizes, making nonetheless any analytical analysis possible. Moreover, unlike the simplistic schemes of property proposed earlier during the post-communist “transitions”, we consider Verdery’s analysis much more sophisticated and apt to capture the complex reality of socialist property arrangements.. 5 See especially Katherine Verdery and Caroline Humphrey (eds): Property in Question, Value Transformation in the Global Economy, Berg, 2004, in particular Humphrey and Verdery, (Introduction, Raising Questions about Property, pp 1-29), Verdery.(The Obligations of Ownership: Restoring Rights to Land in Postsocialist Transylvania, pp 139-160); David Sneath: (Propietary Regimes and Sociotechnical Systems: Rights over Land in Mongolia’s “Age of the Market”,pp.161-184); & Catherine Alexander: 2 Thus in 2003, Verdery provided an analytic scheme which in spite of its susceptibility of variations from canonical forms of socialist ownership in one country or another, offers nevertheless a framework which could be applied all over the region.6 Accordingly to this scheme, from the perspective of communism as a cultural system and as organization of power, property was in the “real existing socialism” more an administrative matter rather than a legal one, and therefore it was governed by administrative measures which involved a high degree of discretion rather than by legal procedures aiming at creating regularity or certainty. 7The consequence of this characteristic was that the communist decrees and administrative procedures were more important than the laws were in matters related to property. And the former were regarded “as having the force of law but not created through a legislative process.” This characteristic might also have enormous implications in terms of property redistribution after the fall of communism, as in time the communist administrative procedures would create the sort of operational rules of property administration often at odds with the formal law, and so entrenched in the local psyche as to prevail over the formal law enacted from the center.8 Second, and from the same perspective, socialism divided property on the basis of the identity of owners and of the social relations among them, in sharp contrast with the pre communist legal divisions or western legal system division of property based on property types (for example real and personal, or state, commons, and private).9 Thus, socialist law recognized four property types, state, cooperative’s, personal and private, each with its own regime and each related to one of the three main property subjects: state, cooperatives and individuals or households.10 Furthermore, the subjects were distinguished themselves precisely by their property status, respectively by the type of property and objects they were empowered to own.11 In addition, crucial to the socialist concepts of property were the ideas that the state property formed an inalienable and indivisible fund, immune from attachment of debts, 12 and the right of direct (operational) (Value, Relations, and Changing Bodies: Privatization and Property Rights in Kazakhstan, pp.251-274) 6 See generally Katherine Verdery: The Vanishing Hectare. Property and Value in Postsocialist Transylvania, Cornell University Press, 2003. In this scheme, property is seen as simultaneously a cultural system, an organization of power, and sets of social relations, all coming together in social processes. Verdery, Vanishing Hectare at p. 48. 7 Verdery, id. It could be added that in “the real existing socialism” not only property was regulated by administrative decrees, but a lot more. In fact, the communist regimes were ruled by decrees, which often had greater force than the laws proper. 8 For an example of such operational rules aptly manipulated by the former socialist local elites in charge of “restitution,” see Katherine Verdery: Seeing like a mayor. Or, how local official obstructed Romanian land restitution, Ethnography, 3:1 (2002). Pp. 5-33, 9 Verdery, id. P 49. We should note, however, that the attachment of property to (civil status of ) persons, respectively the “de jure” understanding of property, has roots in Roman Law, and serve the basis of Hegelian argument for property based on the personality development. See Alan Carter, Philosophical Foundations Of Propery Rights, op.cit.pp. 94-97In other words, this classification of property made by the socialist law function of the person is not as strange in Continental Law as it might prima facie appear, even if the communists introduced distinctions among persons not found in the Ancient or Modern law. 10 Id. 11 Id p 50 12 Verdery, id, based on Kornai. The idea resembles somehow the state patrimony ideas which could be found in western civil law for example. However, the important distinction between the public and private 3 administration (or administrative rights), as Verdery called it.13 Equally important, were the “hierarchical relations of property forms” established in communism, in which “state property was prior to all others and enjoyed full legal protection, followed (in order) by cooperative, personal and private property”. 14 In other words, “socialist state property was more inalienable, more exclusive and more property”15 than any other form, and the rights held at each level of the hierarchy constrained those at the inferior levels.16 Third, and from a dynamic perspective of communism as a cultural system and as an organization of power, the hierarchy was producing what Verdery called, following Gluckmann’s insights, a “hierarchy of estates of administration.”17 In such a hierarchy characteristic of redistributive systems, the supreme owner of the land allows for grants to its hierarchical inferiors, which could further grant rights downwards, similarly to the ways in which such grants were allotted in feudalism.18 Although any holder of a grant could behave as the owner of the objects granted, she could not alienate permanently the object of the grant. Therefore in practice nobody was seeing these downward allocations as diminishing or dismembering the ownership at the center, as the center could annul discretionary the grants at any given moment. In “real existing socialism” practice this would mean that the “party-state retained its claim to supreme ownership but exercised that ownership by passing the rights downward to lower-level entities, assigning various kinds of control over parts of the property of the whole people to inferior levels in the bureaucratic hierarchy. Recipients of these rights could further parcel them out to others still lower down the scale—for example, a ministry to its regional branch, thence to county-level planning structures, and finally to a state farm director,”19 but they were prevented by a complex set of rules to become fully autonomous.20 What further distinguished the “rights” associated with these socialist “administrative estates” from the rights associated with the patrimonies of juridical persons in western and pre-communist law was that the lower level entities were granted a sort of “administrative right” on the estate.21 The authors who analyzed such administrative rights resisted the temptation to associate the right to administrate state socialist property for productive use with the civil law usus or usufructus, as the administrative rights were patrimony of the state existing in the civil law systems, in which only the public patrimony forms and indivisible and inalienable found, but allows for the private property of the state to be attached to public actors as for example in the case of public utilities and then be assigned, sold, etc, exactly as any other private actor’s property, was inexistent in socialist law. 13 Id. 14 Id, at p. 51 15 Id. 16 Id. 17 Following Gluckmann’s insights. Verdery. id., at p. 56 18 Id. 19 Verdery, id. p.57 20 Verdery, id, based on Dunn. “The heads of these lower units were to use the rights to generate products for the state to appropriate and redistribute; meanwhile, complex rules of accounting aimed to prevent them from obtaining the information they would need in order to become fully autonomous”. See also Elizabeth Dunn: Accounting for Change, in Mihaela Kelemen and Monika Kostera (eds.): Critical Management Research in Eastern Europe: Managing the Transition, Palgrave, London, 2002, pp 38-64 21 Verdery, id. at p. 57 4 different, and had more of a sui generis character.22 Verdery even prefers to introduce a new category in which to include them, a so called “estates of production”, thus suggesting the scope of such rights, although it is not perfectly clear in her account what exact “rights” such estates would involve, what would be the boundaries between the administrative and productive estates, or if in practice they would not overlap. 23 Nevertheless, her conclusion that this system of “multiple and overlapping administrative rights over the state's unitary fund” allowed in practice for more or less similar transactions to those occurring in capitalist economies seems to be valid. As it is her additional insight which captures the dynamics of the process, that such transactions did not involve any change in ownership, as what changed hands was in fact the administrative rights over one product or another, the state remaining in theory the owner of the respective product,24 Finally, an additional factor which made such “socialist arrangements” so distinctive was “the right of socialist managers to move items of socialist property around at will,”25 in huge networks of trading made by similar socialist managers of state enterprises. The consequence of such practices, as Verdery aptly showed, was that in time all the boundaries within the state unitary fund of property were blurred, as objects moved among various people and juridical entities exercising rights on them similar to property rights, but not recognized as such.26This fact would not only produce hoarding, dissimulation, plan bargaining, and manipulations of state property by managers, which would ultimately lead to the dismissal of the idea of the state as a unitary actor and of coherent planning,27 but as it could be amply seen later, would also greatly complicate the assessment of value and ownership rights during both restitution and privatization. As Verdery aptly observed, by the time the restitution and privatization were announced, many of the “socialist” directors were becoming private owners, in a process “that socialism's hierarchy of administrative estates had facilitated.” 28 And the inability of the center to control the managers and productive estates, was not only critical in socialist transformations, but also set the stage for the state property havoc played by the powerful communist technocratic elites in the conditions of a much weakened postsocialist state.29 22 Id. See also Bregman and Lawrence: New Developments in Soviet Property Law, 28 Columbia Journal of Transnational Law 189, 191 (1990) for the point that “under operative management principles, the Soviet State assigns limited ownership rights to various state organization that produce goods and performs services. These assigned rights include the possession, use and disposition of the property”. Id 23 See Verdery, id. Following Gluckmann, again, Verdery describes the difference between the two kinds of estates as follows: “Superiors hold estates of administration, allocating rights downward, whereas those at the base hold estates of production, using the rights granted them to fructify collective assets.” Verdery also appears to see these “estate of production” as being dynamic, and generating a constant vertical conflict between the centre and the higher echelons and the periphery and the lower echelons to which the estates were granted. “ It seems that sources of tension between these two kinds of estates, a consequence of these latter rights in the socialist case was a steady erosion of the center's capacity to grant the former, administrative ones” Verdery, id., at p. 57 24 Verdery, id., at p 58 25 Id. 26 Verdery, id., at pp. 58-59 27 Id. 28 Id. 29 Venelin Ganev, Preying on the State, infra _FN at lustration. We should also note the political backlashes in Poland and Hungary which accompanied the communist states “liberalization” of corporate regimes, 5 To the above traits of property under socialism several additional observations can be added. Because the socialist managers lived not only in a hierarchy of estates but also in an economy of shortage with few penalties for irrational or inefficient behavior, they had to hide labor and materials provided by the state or produced by themselves above the planned targets, in order to improve their output. Such hoarded labor and material was traded or exchanged for reciprocal favors in the horizontal and vertical networks which operated in the socialist state, and after 1989 proved to be sources of social capital. 30 In other words, behind the curtain of communist decrees and regulations, what rendered the system operational was a sophisticated network of barter and gifts, which kept the system running.31The obligations and reciprocity resulting so were highly binding, although not required at all by the formal system. And in time they led to practices of manipulating collective property to ensure production (quotas), which depended not only on good relations of the communist technocracy with their superiors in a chain of command, but also on good relations with equals or inferiors. Nevertheless, the consequence of the socialist mangers strategies for production put them at odd with the direct producers. For example, the producers could hardly understand the acceptance of the socialist regime of moving things upward between the boundaries of the hierarchies of estates, or laterally within the fuzzy socialist categories,32 but the rejection of the same socialist regime of moving things downward, across the boundary between socialist property and lower types,33 which was categorized as “theft” and severely punished.34 Similarly, the direct producers could not understand the communist state’s tolerance of appropriation by officials which were feathering their own nest, while being excused for such practices for various reasons having to do with the inner logic of the system, such as the managers role in the lubrication of the planned economy, the enhancement of officials’ position of authority within it, and their position as efficient communist cadres.35 Nonetheless, such treatment was embedded in the followed immediately by nomenklatura privatizations, before 1989 30 Id p.60-61. For a roundtable discussion about the “networks” and their role in post-socialist economic and property’s transformations see Symposium: Postsocialist Pathways: Transforming Politics and Property in East Central Europe, 9 E. Eur. Const. Rev. 101 (2000) 31 Id, at at p. 62. In respect to networks functioning and gifts, Verdery makes the following observation: Filling [the plan and production] such need incurred social debts that had to be honored. That might be done through nebulous obligations of a general kind that helped to oil the joints of the hierarchy of administrative estates. They involved gifts to superiors, status equals, and inferiors and gifts to equals for their superiors. Whether the debts were vertical or horizontal was not always clear….” And further: “Socialist firms were not units at the end of a chain of command but were linked in extended webs of managers and politicians, all striking bargains to optimize their situations. If we stop with the allocation of administrative rights, we miss this crucial aspect of socialist property, so dependent on a corresponding system of obligations” 32 By managers. 33 By producers 34 Id 35 Id. at p 62. Verdery gives the example of a state cooperative manager who decided to cultivate an idle field without and appropriating the surplus for himself. While the producers saw such practice as outright theft, the manager replicated that albeit the field was idle anyway and the “system” did not require him to put it on productive use(this would be a sort of Lockean argument), part of the appropriation was marked for “attentions” to higher state bureaucrats who had the last word on plan quotas and allocations of resources vital for the realization of the plan, and part to hierarchical equals who could reciprocate by providing tools for the production, so such practice improved his standing and consequently the cooperative 6 organization of socialist property, with its priority of administration over legal regulation, its hierarchy of property types, and its specificity with respect to assets evaluation. To conclude so far, the socialist system entailed a very complex system of property.36 In such a system, Verdery’s observation that in order to grasp the system workings one has to set aside questions related to ownership, and look instead at the patterns of use, administrative rights and social networks of exchange and reciprocity, is probably more than pertinent. In this context the establishment by the party-states of hierarchies of “administrative and productive estates,” held together by delegation of administrative rights, and the preference of the communists for politico-administrative decision over legal procedures for allocation of resources paved the way for the restitution and privatization logistical nightmares encountered post 1989 all over the region. 37 Further, it is clear that the “real existing” socialist property regime did not establish among people and things relations which rested mainly on commodification.38 A first result was that evaluation of resources within the socialist property were not driven by the market but by politics, so post 1989 it became excruciatingly difficult to asses the value of the assets being privatized as the state had absorbed the liabilities of its subordinate firms. 39 And that in the end, as Verdery observed, some answers to the evaluation problems were provided by the third aspect of the socialist property regime, respectively from its ranked hierarchy of forms, with those of the state at the top, followed by cooperative and the individuals/households at the bottom, hierarchy which produced a powerful strata of “state-enterprise directors benefiting maximally from state resources and from their control of administrative rights over estates of production.”40 In such a ranked hierarchy, characterized also by the huge gap between the law in the books and law in action specific to socialist societies,41 it is arguably more important to understand first and foremost the unwritten operational rules of the societal subsystems which law governs, rather than the formal law, as the written law could only provide an inherently limited understanding of categories such as “socialist property.” Nonetheless, and with respect to the “formal law”, several observations should be also added. First, that the communist regimes never abolished “private property” from the “law in the books.” Thus, in the communist era, civil “private” property was a well defined category, kept more or less in line with the concept of property of the precommunist era codes. What changed in the “formal law” of private property during the communist era, in comparison with the pre-communist times, was therefore not the definition of the property, which was very much the same, but the restrictions placed on the objects of private property,42which were drastically curtailed by various standing within the system. Id, pp.62-68 36 Id, at p.41 37 Id p 73 38 Id p 74 39 Id, at 75. 40 Id p 76 41 We refer to the distinction introduced by Roscoe Pound. See Roscoe Pound: Law in the Books and Law in Action, 44 Am. L. Rev 12 (1910). For the excruciating problems posed by such differences for the students of “socialist law,” see for example Maimon Schwarzschild: Review. Variations on an Enigma: Law in Practice and Law on the Books in the USSR, 99 Harv. L Rev 685 (1986) 7 regulations.43 As a consequence of such restrictions, the acquisition of private property, or the right of disposal of the objects of property, (i.e. what could constitute “private property,” or how the property could be alienated, contracted, given by testament, etc), were drastically curtailed, albeit not necessarily directly, by a change in their formal definitions in the civil codes, but mostly indirectly, by constitutional and administrative regulations, which could touch civil law matters such as inheritance, 44 contracts,45 etc. With all these formal restrictions placed on the object of private property, and this point should be stressed again, the communist regime however never abolished entirely 42 For example, the so called “means of production” could not constitute the object of “private property” during communist times, but solely of the state property, and to a limited degree of cooperatives’ property, which was considered inferior to socialist property in the socialist hierarchies of estates, but superior to “private property.” 43 Such regulations could be contained in “first generation” communist decrees of the late forties for example, which nationalized all the “means of production,” or in the myriad of administrative acts which implemented such decrees during the same period, same in excess or contrary to the given decrees. They could be contained in the laws, decrees or administrative decisions issued by the communist authorities afterwards, and in the communist constitutions which provided for the supremacy of the “socialist property,” its inalienability, and for various restrictions imposed on the ownership of the so called “means of production.” The examples of such regulations are many, but we will limit to indicate here the Romanian Laws no 4 and 5/1974, issued during a time when the Ceausescu’s regime reversed the more liberal trend in Romania during the sixties, and severely curtailed the object of private property, in contrast with more liberalizing regimes of the same period existent in Hungary or Poland. These Romanian laws were paving the way for the policy that later came to be known as the Ceausescu’s barbaric “systematization of villages,” and severely restricted the surface of land and/or buildings which a family could own, by restricting the acquisition of land and buildings by contract, or by providing for mandatory sale of everything which surpassed a certain quota, in the case of inheritance. Thus, someone could not contract for a second family home or if she did it, the contract was declared a posteriori invalid, and the property so contracted taken by the state. Similarly, if someone inherited a second or third house, plot of land, etc, she was forced to dispose of the property inherited in a period of a year, under the sanction of having such property confiscated by the state. The confiscation of the property of the persons who left the country, without compensation, was also included in these laws, keeping with a “tradition” existing in all communist countries.. Irrespective of all these dramatic changes, the Romanian Civil Code (another particularity of Romania was that it did not adopt a “socialist code” in spite of preparatory work for such a code done at the end of the sixties), enacted in 1865 under the model of the Code Napoleon, did not change, and provided for the same liberal definition of property where the owner enjoyed full triad of “usus”, “fructus” and “abusus.” 44 For the point that inheritance law served different purposes in the socialist countries in comparison with the “western” ones see Inga Markovits: Hedgehogs or Foxes? A Review of Westen’s and Schleider’s Zivilrecht im Systemvergleich, 34 Am. J. Comp. L. 113 (1986). For the continuity with civil law tradition on these matters in socialist times see for example John Quigley” Socialist Law and the Civil Law Tradition, 37 Am. J. Comp. L 781, 801(1989) 45 For the point that in the communist law of contract did not major modifications during the communist era, albeit what was left for private contracting after the communist nationalization was limited in scope, see W. J. Wagner: The Law of Contracts in Communist Countries (Russia, Bulgaria, Czechoslovakia and Hungary, 7 St. Louis U. L.J. 292 (1962-1963), at . 295. 8 private property,46 but moreover has seen “personal property”, as Verdery aptly showed, as complementary to the establishment of a socialist society.47. Therefore, albeit the private property was delegated to an inferior rank in the socialist “hierarchies of estates” if it was an estate at all,48 it never ceased to exist in legal form. The pre-communist civil codes which regulated this property subsisted long in the socialist period before being replaced by “socialist codes” which borrowed heavily on the very same pre-communist codes,49 or, as in the rather exceptional case of Romania, were never replaced.50 The pre-communist commercial codes, other possible formal sources dealing with private property relations had an “afterlife” in the communist CEE,51 as they could be never formally repealed during the socialist period, even if indirectly amended 46 Article 10 of the 1936 USSR Constitution confirms the right of Soviet citizens to “personal property” (it is not longer called private, as it was under the 1922 RSFSR Civil Code of 1922, copied after a French model. The comparative legal literature on this point is too voluminous to be cited extensively here. Suffice to say there is a consensus with respect to this point, and to indicate, with the title of example: John N Hazard : Soviet Property Law, 30 Cornell L Q 466 (1945) at 467 (in the words of Hazard “as Marx and Engels stated specifically in their Communist Manifesto. “The Distinguishing feature of communism is not the abolition of property generally, but the abolition of bourgeois property ”.The revolutionaries in Russia, as well as their fellow in Hungary, Germany and ultimately China, remembered the teachings of Marx and Engels when they had a chance to seize power after the last war…The formula was comparatively simpledestroy private ownership in the means of production, but do not eliminate private ownership in consumer’s goods. Id, p, 467), and John N Hazard: Soviet Property Law and Social Change, British Journal o Sociology 4: 1 (Mar. 1953), pp 1-13, for a clarification of what was not protected during the communist period; the private ownership of productive goods. For the flexibility of soviet doctrine in protecting private property see the example of inheritance, given also by Hazard. “Inheritance, after abolished for the estates exceeding 10,000 rubles by the Decree of January 27, 1918 was restored by the civil code in 1922, and the limitation mostly lifted in 1926, and further amended in 30 and 36.”Hazard.Id. See also Samuel Kucherov: Property in the Soviet Union, 11 Am. J. Comp Law 3 (Summer 1962), p 376. for a history of the USSR regulations in the matter. Also, Paul Betts, “Private Property and Public Culture : A Forgotten Chapter of East European Communist Life”, Histoire@Politique. Politique, culture, société, N°7, Janvier-Avril 2009, on line at http://www.histoire-politique.fr/index.php?numero=07&rub=dossier&item=71. For the point that the whole perception of Soviet Law, respectively its classification as a special family of law in spite of its Romanistic civilian roots was influenced by the Cold War politics, and as a consequence the perception of different aspects related to property suffered the same influence, see: William Partlett:Re-Classifying Russian Law: Mechanisms, Outcomes, and Solutions for an Overly Politicized Field, 2 Colum. J.E.Eur.L. 1 (2008). We should note however that the American scholars such as Hazard were always clear in their writings that the private property was never abolished entirely from the Soviet law in the books. 47 Verdery,op.cit. For the various changes in soviet policy related to “personal property”, until it became firmly embedded and accepted in the Soviet legal doctrine, see Hazard, Soviet Property Law above. 48 For a discussion on the continuity during socialist times, see Kazimierz Grzybowski: Continuity of Law in Eastern Europe, 6 Am. J. Comp. L 44 (1957). We note in passing that from a legal standpoint, the communist drafters were borrowing heavily from the notion of patrimony, when defining the state dominium, which arguably constituted the highest hierarchy of socialist estates, etc. Given the length doctrinal dispute between the “socialist” legal scholars with respect to the “special” characteristics of socialist property in rapport to private property, and the tremendous doctrinal difficulties in defining such category in a way which could stand out conceptually, we would not cite here the voluminous literature on this subject, but only point towards several examples. Among the communist CEE countries, Czechoslovakia was the only one which adopted entirely new “socialist” codes in the 60s for all the maters traditionally governed by the civil and commercial codes. At the other side of the spectrum of changing old laws with socialist codes, was the GDR, which adopted a “socialist” code in mid seventies. With the title of example or the case of the GDR and the links between German and Soviet doctrines, see the excellent article of Inga S. Markovits: Civil Law in East Germany-Its Development and Relation to Soviet Legal History and Ideology, 78 Yale L.J. 1 1968-1969, which albeit written shortly before the adoption of the GDR “socialist” Civil Code change, it is, nevertheless, an excellent history of the intellectual ideas of the 9 and not in widespread use,52 or could otherwise had important concepts transplanted to the “socialist codes” as for example in the case of dispositions regulating the international trade,53Joint Ventures,54 or to the laws allowing for the formation of commercial and private enterprises.55 Therefore, in spite of perversion of the spirit of civil codes, or of limited use of commercial codes during communist time,56 the formal dispositions of such codes regulating private property similarly to pre-socialist times were arguably an important part of the “law on the books,” when communism imploded in CEE. . Moreover, important groundwork on civil law matters was already done in the interwar period in almost all the CEE countries even when new codes were not enacted, 57 and at German or soviet civil codes. For a brief description of the main characteristics of the Eastern Germany Civil Code see A.K.R.Kiralfy: Legislation, The Civil Code of the German Democratic Republic,(Das ZGB der DDR), 5 Rev. Socialist L. 79 (1979). For an informative description of Czechoslovak civil law, and the Czechoslovak communist civil codes of 1950, 1964, and the partial 1981 amendments, see George E. Glos: The Czechoslovak civil code of 1964 and its 1982 amendment within the framework of Czechoslovak Civil Law: 6 N.Y.L. Sch. J. Int’l & Comp. L. 232 (1985-1986). Glos , notes, following Gsovski & Grzybowski, that “the 1950 Czech Civil Code was more comprehensive that those of the Soviet republics and more up to date in its efforts to codify socialist civil law.For the earlier Hungarian and Polish “socialist” civil codes see Kazimierz Grzybowski: Reform of Civil Law in Hungary, Poland, and the Soviet Union, 10 Am. J. Comp. L. 253 (1961). 49 For such an argument related to the borrowing in the case of Hungary, whose 1959 “socialist” civil code was strongly influenced by the pre-WWII civil code drafts, mainly by the 1928 draft, see András Kisfaludi: The Influence of Harmonisation of Private Law on the Development of the Civil Law in Hungary, Juridica International XIV: 130 (2008), at p. 131. 50 With the exceptions of parts related to physical and juridical persons, which again were the work of jurists formed during pre-socialist times, who were also borrowing heavily on work already done in presocialist times. In addition to a degree of statutory continuity, at least after the Stalinist period, there was a continuity with the legal thought of the pre-war period, and “innovation” of the learned scholars who looked beyond the communist statutory rules to more permanent legal thought “formants,” in which the “socialist categories” could be explained. See for such an argument, and for the citation of Eastern European legal scholars work in this direction, Gianmaria F. Ajani: The Supremacy of Statutory Law in Socialist Countries: Scholarly Opinions and Operative Rules, 11 Review of Socialist Law 123 (1985). Also John Quigley” Socialist Law and the Civil Law Tradition, supra, FN__ , at pp. 802-808, for an ample review of the “socialist” legal scholars sustaining the continuity. Also see Rudolfo Sacco: The Romanist Substratum in the Civil Law of the Socialist Countries, 14 Rev. Socialist L. 65 (1988), and as example of Eastern European scholarship in the same direction Mihaly: The Role of Civil Law Institutions in the Management of Communist Economies: The Hungarian Experience, 8 Am J. Comp L 310 (1959), 51 For a discussion of the commercial law in the former CEE and the USSR at is stand in 1989 see Hubert Izdebski: A Revival of Commercial Law in the Soviet Union and Other European Socialist Countries, 15 Rev. Socialist L. 365 (1989) 52 As again in the rather exceptional case of Romania. Hungary also did not repel its Commercial Code. See TamÁs SÁrkÖzy:The Law of the Institutional System of Market Economy in Hungary and the European Union, Begegnungen Schriftenreihe des Europa Institutes Budapest, Band 25:31–40 (200_), at p.35 53 As it was in the case of Eastern Germany or Czechoslovakia. “ For the scope of the Czechoslovak economic code of 1964 in rapport to the old commercial code, and its different spirit, see George E. Glos: The New Czechoslovak Commercial Code : 18 Rev. Cent & E. Eur. L. 555 (1992) Gloss notes that: “although the Czechoslovak communist regime preserved many provisions of the commercial code in the code of international trade, a commercial code stricto sensu was never enacted,” and that “Many provisions of the commercial codes-supplemented by those of the civil code dealing especially with businessmen, contracts in general, sales, insurance, banking, warehouses, the carriage of goods, etcsurvived in the code of international trade, enacted in 1963, and in the 1988 Law on Joint Ventures”. Id. For the massive borrowing of western concepts and the total lack of “socialist imagination” in the Czechoslovak Code of International Trade see George E. Gloss:The Czechoslovak Law of Sale, 4 Rev. 10 least in part influenced the reflection of socialist era lawmakers.58 Besides the influence this work exercised on socialist era lawmakers, this source of local inspiration was there and available for outright enactment at the onset of post-communist period, 59 although it is debated in the scholarship the utility of such work, and the need to overhaul completely the “socialist” era civil and commercial regulations with new codes. 60 Finally, and in addition to all of the above, the legal boundaries of a state enterprise were also more or less clear post 1989 at least in the “formal law”, as the communist era legal drafters, while modifying or not the civil codes borrowed heavily from the pre-socialist legal imagery. Therefore, almost all the necessary legal foundations of a western conception of property, although arguably not all, were already existing in the socialist Socialist L. 106, 143 (1978), For a very descriptive account of the ways in which the Czechoslovak socialist revamping of the former codes by enacting new “socialist” Civil Code, The Economic Code and the Code of International Trade made necessary the post-communist enacting of a new Commercial Code see Josef Bejcek: The New Commercial Code of the Czech Republic, 30 J. Marshall L. Rev. 699 (19961997). For an example of “socialist” borrowing from the pre-war codification work on the field of private international law in Poland, see Dominik Lasok: The Polish System of Private International Law, 15 Am.J. Comp. L 330 (1966-1967), at p. 331. 54 Which were also a product of late communism, introduced first by Yugoslavia in 1967,followed by Romania in 1971, Hungary in 1972, Poland in 1976,1979, and 1982, Bulgaria in 1980, and Czechoslovakia in 1988. The USSR also adopted a law on joint ventures in 1987. For a discussion of the “Joint Ventures” in Central Eastern European socialist law see for example Petru Buzescu: Joint-Ventures in Eastern Europe, 32 Am. J. Comp. L 407(1984). For the American origins of the Joint Ventures transplant, and for its applications in the Asian and socialist countries see M. Dornarajah: Law of International Joint Ventures, Longman, Singapore, 1992, The Joint Ventures received a great deal of attention in the legal literature in the seventies and eighties, therefore we cannot cite here all the relevant literature on the subject. But to give an example of such legal import in a socialist country, Hungary, which was also a “champion” of socialist economic reforms, we note that it introduced them in the domestic legislation in 1972 (Decree of the Minister of Finance No 281,1972(X,3), and amended this legislation in 1977 (Decree of the Minister of Finance No 7/1977 (V,6). See for example George G. Lorinczi: U.S-Hungarian Joint Ventures, 10 Int’l Bus. Law. 113 1982 55 For example the Romanian Law on Commercial Societies No 31 of 1991, which used as a major source of inspiration the drafts of Civil and Commercial Codes realized before the WWII, under the king Carol II reign, but never enacted as formal law. The drafters of the pre-war codes were heavily influenced by the German and Italian Commercial law doctrine, the most progressive at the time. 56 The residual dispositions of the commercial codes surviving the initial communist waves of abrogation were never used openly or widely in “real existing socialism,” but put to discrete use of the various corporate entities controlled by the political police involved in the foreign trade dealings of the communist states. 57 With the title of example we mention here the Romanian Civil and Commercial reforming proposals done under the Carol’s II reign, but never enacted because of Carol’s forced abdication and Romanian subsequententry into the war. Also the Czech, works on the civil and commercial reform in the 30’s not enacted because of Anschluss (Gloss, op. cit), or the Polish proposals for unification and reformation of the civil and commercial legislation in the interwar period, but not enacted because of the Poland’s entry into the war. 58 See e.g. Kazimierz Grzybowski: Reform and Codification of Polish Laws, 7 Am. J. Comp. L 393(1958) for the conscious efort of Polish late 50's drafters of the socialist codes to continue the interwar legal tradition. A similar influence is discernable in the work on the Romanian “socialist civil code” commission in the late sixties, although the proposed civil code was not enacted, the Romanian authorities preferring to keep in force the Civil Code of 1865. Interesting enough, where the Romanian authorities decided to replace portions of this code with “socialist laws,” as in the case of “physical or juridical persons,” family, etc the inter-war work on the civil code informed the choices of the socialist lawmakers. 59 For a well documented study of the subtle intellectual and institutional path-dependency of postcommunist policy and legislative developments in the case of social security and general welfare covering 11 era codes, or otherwise easily to be found in pre-socialist civil or commercial reform proposals and borrowed from there. Moreover, if “formal law” with respect to property was somehow missing or otherwise could not be borrowed from previous indigenous legislative proposals, plenty of western sources of inspiration were available, and readily for expeditious import. Yet with all these characteristics of the formal law of property, when communist imploded nobody could escape the apocalyptic feeling in relation to “distribution” of property described by Verdery.61 So, there might be arguably more out there than the simple problem of the “formal law” of property in the “transition” to post-socialist property, if the people could attach to such transformation of property apocalyptic imagery. What contributed to this feeling becomes clearer if we think at some fundamental differences between the socialist and western organization of property. For example, the socialist property organization in “hierarchies of estates” implied the allocation of “socialist property” to a “socialist” enterprise, regulated not very differently than the western corporations.62 However, what differed a great deal in “socialism” was what these corporate entities could do with “socialist property.” Thus, such socialist corporate entities administered fuzzy “socialist property,” in which the Poland, Hungary and the former Czechoslovakia see Tomasz Inglot: Welfare States in East Central Europe 1919-2004, Cambridge University Press, 2008. The “long durée” focus of Inglot’s study allows for the identification of the complex pre communist and communist era intellectual inspiration of various policies and also for identification of path-dependence institutional development of such post-communist policies. Nevertheless, there are not similar single countries or comparative studies, which could document the interplay of the pre-communist and communist era ideas and institutions related to civil and commercial law, the only study which came close to that of Inglot’s with respect to breath and historical coverage being that of Istvan Pogany related to restitution (Pogany, Righting Wrongs, op. cit.), which nevertheless is singular in the field. 60 For an argument related to the need of more than cosmetic changes of socialist codes in the postcommunist period see for example Thomas Waelde & James Gunderson: Legislative Reform in Transition Economies: Western Transplants-A Shortcut to Social Market Economy Status? 43 Int'L & Comp. L. Q. 347 (1994). For the initial perception of socialist codes as adequate for post-communist transformations and for a moderated argument related to the lowering of information costs which consolidated codes would provide see: Gianmaria Ajani and Ugo Mattei: Codifying Property Law in the Process of Transition: Some Suggestions from Comparative Law & Economics, 19 Hastings Int’l & Comp. L. Rev. 117 (1995-1996). For a review of the arguments in favor of new codification as a method of preventing unsystematic reception, see Pierre Legrand: Strange Power of Words: Codification Situated, 9 Tul. Eur. & Civ. L. F. 1 (1995). We should also keep in mind that the legal transformations and experiments with a more “liberal” property and companies’ regime began in the Soviet Union and CEE communist countries, such as Hungary or Poland at least several years before the post 1989 momentum. For a discussion on how Russia’s privatization was shaped by regulations passed by during the Gorbachev era see Marshall I. Goldman: The Piratization of Russia. Russian Reform Goes Awry, Routledge, London and New York, 2003, at pp.74-75. For the point that the legal transformations of corporate structures and governance in the last years of communism led to a virtual take over by insiders, managers, or employees, or both, in nearly all the CEE countries, see Wladimir Andreff: Transition Through Different Corporate Governance Structures in Postsocialist Economies Which Convergence? in Henk Overbeek, Bastiaan van Apeldoorn and Andreas Nölke (EDS.): The Transnational Politics of Corporate Governance Regulation, Routledge, London and New York, 2007, pp. 155-176, at p. 158. This characteristic would further constrain the options available to the post-communist legislators, as we will see below. 61 Verdery, op. cit. 62 As the communist lawmakers preserved in the “socialist” legislation the pre socialist codes legal categories and distinctions related to juridical persons, even if the “socialist enterprise” had a different social role to accomplish than the western corporation. 12 socialist administrators could move items almost at “will” between “estates,”63 respectively between various corporate entities. By contrast, the western corporations could move private property objects among corporate entities only as a result of contracts or formal acts. Unlike the socialist property which had fuzzy boundaries, the western property was clearly delimited and affected to corporate patrimonies. Therefore, if we think at these differences, it becomes clear that if one deems the dismantling of the socialist “estates” the first priority of post-communism “transitions,” she will have to address somehow the problem of moving property freely between socialist estates. Consequently, she has to address the change of the operational rules which make the moving possible in the first place, as the change of the formal law would not solve by itself the former socialist administrators’ behavior. How a change in the formal law would lead to a change in the operational rules is unclear, but arguably monitoring the former “socialist” administrators’ activity,64and addressing the agency problems would become paramount in the dismantling of the socialist “hierarchies of estates.” The enactment of formal rules related to property would be thus a secondary activity, as they were already in place or otherwise easily to be imported.65 Moreover, the private property rules would only be a small part, even if an important one, in the huge legal infrastructure which would be needed for an effective functioning of a commercial, market based economy.66 In the absence of effective regulations dealing with the myriad of possible commercial transactions, investment devices, banks, tax, environmental, zoning, antitrust and consumer protection, to cite just few of the directions in which a modern economy expands legal regulation, the simple regulation and possession of “private property” would be worthless, as no-one would be able to engage her property in meaningful transactions given the huge transactional and informational costs which the absence of legal regulations and effective monitoring of the implementation implies.67 Nonetheless, in the post-communist “property transformations” the priorities were turned upside down,68 and priority was given to formal enactments of 63 This move at will of object of socialist property was made possible by the porous boundaries of such estates and of the operational rules of “socialist property” 64 Who were largely left in their places after the communism implosion in 1989. 65 The reunified Germany seems to be the only “country” dealing with specific problems of such transitions which acknowledged early on the need of monitoring. See John Borneman, Settling Accounts. Violence, Justice and Accountability in Postsocialist Europe, Princeton University Press, 1997 66 For a discussion of fallacious assumptions of the neo-liberal ideology with respect to what was to be done to transform the command economies of socialist CEE states in market economies see Paul H. Brietzke: Designing the Legal Frameworks for Markets in Eastern Europe, 7 Transnat'l Law. 35 (1994). Also Carol M. Rose: Economic Claims and the Challenges of New Property, in Verdery & Humphrey (eds) Property in Question, op.cit. at pp. 275-95 67 Such a case of the impact of absence of trust and the incomplete commercial legal infrastructure in the strategies for the contracts’ conclusion and execution adopted by the “post-communist” Russian enterprises in provided by Kathryn Hanley in Kathryn. Hanley: How Russian Enterprises Cope With Payment Problems, Post-Soviet Affairs, 15:3 (1999), pp..201-234, in V.H Winston & Son, Inc, 1999, respectively in Kathryn Hendley, Peter Murrell, Randi Ryterman: Law, Relationships and Private Enforcement: Transactional Strategies of Russian Enterprises, Europe-Asia Studies 52:4 (2000), pp 627-656 68 Based on the simplistic assumption that once the property rights would be distributed, the market would magically follow and take care of the rest, and the new private owners drive for profits and efficiency would also magically solve the communist countries stagnation. See for example Robert B. Seidman, Ann Seidman and Neva Makgetla: Big Bangs and Decision-Making: What Went Wrong, 13 B.U. Int’l L. J. 435 (1995) at 451. 451 13 rules regarding property, with a complete ignorance of the monitoring and agency problems.69 Therefore one of the most difficult conceptual and practical legal problems of the post-communist “transitions,” which was in our view this transformation of the “hierarchies of socialist estates” in distinct corporate entities functioning according to the western or pre-communist legal ideas, was left unaddressed in the early years of “transitions.” Consequently the “hierarchies of socialist estates” that blurred the traditional corporate and private/public law boundaries,70 continued to exist in fact for a number of years after 1989, and did not transform in distinct corporate entities, which are treated equally before the law, and could have relationships with the objects of property similar to those which persons, physical or juridical, could have with property’s objects in the civil or common law traditions. 71 69 For a point that much of the economic literature on the first years of post-communist transitions focused on property while ignoring the problems posed by the society based on the market, see for example Paul H Rubin: Growing a Legal System in the Post-Communist Economies, 27 Cornell Int'l L. J. 1, 2 (1994), and Paul H. Brietzke: Designing the Legal Frameworks,.. supra, FN _. The problems of agency and corporate governance were also ignored, albeit after the failed voucher privatization in Russia or the Czech Republic they become more salient in the legal scholarship under the heading of corporate governance. See for example Coffee, Pistor, and Black, supra, FN 183 (Subchapt Justice Prop & Law). For the point that evelopment of a decent legal and enforcement infrastructure must precede or at least accompany privatization of large firms see Bernard Black, Reinier Kraakman, and Anna Tarassova: Russian Privatization and Corporate Governance: What Went Wrong?,52 Stanf. L. R. 1731, 1734 (2000) 70 And could move things or “rights” on objects of property at the will of their administrators. In theory, the distinction public/private was kept during the communist time, while an emphasis was put on the “public”, every object of social interest having the potential to be declared “public” , at the communist party sole will. For a discussion on the public private distinction in the civil law tradition in comparison with the common law tradition, see Mark Freedland and Jean-Bernard Auby (eds): The Public Law/ Private Law Divide. Une entente assez cordiale? La distinction du droit public et du droit privé: regards français et britanniques, Hart Publishing, 2006. For a discussion of the corporate governance role in a better understanding the relation between legal and economic institutions, and for the deep embedment of the ownership structures and managerial activities in the political, social, and economic infrastructure of a country see Curtis J, Milhaupt and Katharina Pistor: Law and Capitalism. What Corporate Crises Reveal about Legal Systems and Economic Development around the World, University of Chicago Press, 2008, at p. 4. The embedment of “socialist” property relations is a major theme of the anthropological studies on post communist property transformation (See Verdery, Alexander, Sneath, above), so the big problem of post-communist transformation could be restated as by what sort of means (economic, legal, social) could be changed one sort of property embedment based on socialist estates, with another, based on the market. For the simplistic assumptions, of weberian inspirations which drove much of the “economic” literature analysis on such transformations, see Mihaupt and Pistor, id, pp. 5-10 71 We provided infra___ (see Chapter 2 on property justice & law) a more extensive discussion of the ideas on property, understood as relations of persons to things, or as person-person relations mediated through things, and as a bundle of abstract rights, and of the similarities between common law and .civil law tradition core understanding of property. Here suffice it to indicate that seen from a property’s perspective, the “socialist estate,” and the conceptual boundaries of a socialist firm which administer such estate presents several difficult problems, which reflects on the conceptual difficulties related to the definition of privatization and property transformations. First, because the patrimony of a socialist enterprise is fuzzy and has in practice no clear boundaries delimited by law, it is hard to clearly delimitate what is lawful and unlawful in the transformation of a patrimony of a corporate form from “socialist” to “capitalist.” In theory any appropriation by the former socialist manager of objects belonging to the socialist estate would be unlawful and susceptible for severe punishment. In practice, with the passing of new corporate and privatization laws which made the fictional change from socialist corporatism to “capitalist” corporate structure mandatory, and with the abrupt disappearance of the communist state monitoring, the sole arbitrators de legality of the transfer from state to private forms were the former socialist managers, already accustomed with “private” appropriation of state property and the grey market in the last decade of 14 And as a result, the post-communist societies learned the hard way two facts. First, that because the “socialist estates” reflected a socio-legal reality and a mode of social governance different than those reflected by the western and pre-socialist civil law concepts such as “juridical person” or “patrimony”,72 the solving of formal law definitional issues followed by the simple move of objects of property such as land, buildings or assets, incorporeal or real from a “socialist estate” to private hands by privatization or restitution, would have plenty of unintended and perverse consequences. And second that formal law alone followed by moving of assets from state to private communism. The literature on such appropriations is wide and impossible to cite extensively here, and the details and wide arrays of methods of appropriation are well documented in Russia and the former CIS countries, Poland and Hungary during the infamous nomenklatura privatizations of the late eighties, the Czech Republic during the failure of voucher privatizations, Romania, Bulgaria or the Balkan countries. Just with the title of example, good analytic schemes of appropriation, in the case of restitution are provided by Verdery (Vanishing hectare, supra), and Ganev and Los and Zymbertovic for the case of “privatization” (Ganev, Preying on the state, supra, Los Privatizing Police State, infra_). For an example of the conceptual difficulties presented by post-communist transfers of property see "Nazym Khikmet" case, [1996] 2 Lloyd's L Rep, 362 (Sir Thomas Bingham, Evans LJ, and Thorpe LJ)and a commentary of the case in Emily Haslam:The Odessa File: Post Socialist Property Rights in English Courts, The Modern Law Review, 60: 5 (Sep., 1997), pp. 710-718 Second, and in addition to the problems posed by the fuzzy boundaries of socialist estates and the absence of instruments for monitoring their activities, the problems associated with the quest for the best structure of corporate governance and the multiple difficulties faced by the post-communist countries engaged in such quest were not trivial at all. For an interesting discussion on the conceptual difficulties encountered by civil & socialist lawyers in designing an optimal postcommunist corporate governance structure, in the context of Russian privatizations see Andrei A. Baev: The Transformation of the Role of the State in Monitoring Large-Firms in Russia: From the State’s Supervision to the State’s Fiduciary Duties, 8 Transnat’l Law 247 (1995). Also John C. Coffee, Jr, Starting from Scratch: The Legal and Institutional Steps to Viable Securities Markets in Transitions Economies, 27 Rev. Cent. & E. Eur. L. 7 (2001), for a more detailed discussion of what was missing in the Czech and Russian voucher privatizations. In the light of Enron and the wave of corporate scandals of the first decade of the new millennium, the whole corporate model preached to Eastern Europe and to the CIS, where it was adopted, came under scrutiny. However, the relationship between corporations, societal governance, and property is another topic which exceed the purpose of our inquiry, so we will limit our discussion to the above.. Nonetheless, we note here the reexamination of several tenets of corporate theory in the light of Russia privatization failures, and in this context . See for example Bernard S. Black:Is Corporate Law Trivial? A Political and Economic Analysis, 84 Nw.U. L Rev 582 (1990). For the point that the rather simplistic assumptions underlying the principal–agent issue in the western corporate model was damaged by the unforeseen and unintended consequences of the post-communist privatizations, and for a good descriptions of such results see Wladimir Andreff: Transition through different corporate governance structures in postsocialist economies Which convergence? in Henk Overbeek,Bastiaan van Apeldoorn and Andreas Nölke (EDS.): The Transnational Politics of Corporate Governance Regulation, Routledge, London and New York, 2007, pp. 155-176, at p 156. Also the more recent reexamination of such tenets in the light of the Corporate Scandals of the first decade of the new millennium see Pistor & Milhaupt, supra, FN (corporate scandals), Pistor__ (for the convergence, I have 2 artciles here), and Greenwald, (failure of corporate),supra, FN__ See Pistor, etc__ 72 As a matter of fact these concepts reflect arrangements on propriety which are radically different. The concept of patrimony from the civil law, albeit kept in the communist legal vocabulary covers eventually only the mass of property objects of which a physical or juridical person could dispose. While the civil law physical/juridical person distinctions are kept in the communist legal vocabulary, there is not equal standing among these persons, vis a vis of property or social ordering. And as we have seen from a property’s perspective, there is a radical departure in communist law from the civil law concept of equality of persons, the communists organizing complex hierarchies of persons with respect to property holdings. 15 actors, would not do the trick of transforming overnight a complex system named generically “socialist” economy in another complex system called “market” economy.73 To the above considerations related to the “formal law” of property, a second note, related to the political economy of property in the communist CEE, could be added. And in this respect, we should note that in the former Soviet CEE satellites significant pockets of such private property were tolerated.74 As we have seen, Poland reversed the collectivization course in the sixties and had the rural sector dominated by private property. For its part, Hungary, during the seventies and eighties, took important steps in experimenting with private property, and in 1989 had an important share of its GDP produced by the private sector.75 Furthermore, important stocks of private residential Moreover, the communist generic “rights of direct administration”, as we have again seen, while accomplishing somehow in communist ordering the functions the civil law property usus, fructus and abusus-- the rights to use, to collect the fruits of the thing, and to dispose of the things which form the substance of ownership, was nevertheless something conceptually different than the civil law ownership, and fell short of the qualities of ownership in civil law. The enormous difference between the social arrangements of property in the real existing socialism and in capitalism, and the conceptual lines in which they diverge are nicely captured by Catherine Alexander in her analysis of privatization in Kazahstan: Value, Relations, and Changing Bodies: Privatization and Property Rights in Kazakhstan, in Verdery and Humphery (eds): Property in Question, FN__, at pp. 251-273: “In particular, the process of privatization described here problematizes the very definitions of "person," 'thing," and "relation," bringing to the fore the polyvalent nature of value implicit in any property relation.” Moreover, and in addition to the building conceptual blocks of property relations described by Alexander, “person”, “thing” and “relation” , and “value” in the dynamic of post-socialist transformations appear another element, namely the state. Again in the words of Alexander: “The state too appears as a crucial element in the way people talk about the reconfiguring of persons, things, and relations. A sense of abandonment by an overarching structure that had meshed persons and objects together appeared repeatedly in informants' accounts under the rubric "theft." In the conclusion, I return to the notion of theft as relational absence, the dark mirror of property relations.” Alexander, Privatisation in Kazahstan, above at p._ 73 As the ample evidence of the former Soviet Union or the post-communist CEE show. 74 We used the term “Soviet satellites ” to suggest the legal operational overhaul of the civil codes in force in these countries, by a series of various decrees of Soviet inspiration, which we introduced almost simultaneously during the communist coups in the late forties, in all the countries concerned. Albeit legal differences persisted in all the CEE communist countries, the main ideas are the same, and we therefore we consider Soviet law useful for an understanding of the communist law in these countries, and for analytical descriptions. 75 Respectively 30% of the GDP for Poland (EBRD report 1999, at p. 252), and approximately 25 % in 1990 for Hungary (EBRD report,1999, p. 228). following two decades of experiementation with the so called “New Economic Mechanism” (NEP). By contrast, the most “etatised”socialist countries economies, such as that of Czechoslovakia, had under 10% of the GDP share produced by the private sector at the time. It is interesting to note that Hungary passed at the end of 1988 and in early 1989, Acts allowing for the Formation of Bussiness entities independent of the state control. Thus the Act VI of 1988 on Economic Associations was enacted by the Hungarian (communist dominated) parliament in October 1988, mofying the corporate law chapter of the 1875 Merchant Code, as well as the 1930 Act on Limited liability companies, laws governing state enterprises, cooperatives, and enterprises included foreign persons. In November 1988 the Hungarian Parliament also passed Act XXIV of 1988 on Foreign Investment, and at the end of May 1989, the same parliament passed Act XIII of 1989 on the Transformation of Business Organizations and Associations, which “allowed” for nomenklatura privatization and quickly became an embarrassment to the Hungarian Parliament, when it was clear that this legislation could not safeguard again the undervalued sale of equity in Hungarian State-owned enterprises. See George Gluck: Foreign Investment in Hungary: An Overview of Recent Legislation, 12 Whittier L. Rev. 166 (1991) noting that the “window of opportunity” for such privatizations was foreclosed as a result of the nomenklatura privatization scandals in March 1990, by the Act VII of 1990 on the State property agency and on the 16 property considered “personal property,” existed all over the CEE communist space.76 Even with the ideologically untouchable communist domain of the “means of production” there were experiments with a more liberalized regime of industrial or agricultural property. 77 Hungary was a frontrunner in this direction, and was followed by Poland and USSR in the eighties. Therefore, although considerable variation existed in 1989 in the communist CEE, with respect to the share of private property in the national economy, Czechoslovakia, the former DDR or Romania leaning towards an end of a spectrum in which “socialist property” completely dominated the economy, while Hungary and Poland being at the opposite side of the spectrum, in all the “socialist” countries private property represented a social and legal category fully accepted by the communist state,78 which at least in its formal legal characteristic did not diverge fundamentally from the western notions of property. Therefore, if one wants to see what made the transformation of “socialist” property into private property such a protracted and intractable issue during (at least) the first decade of post-communist property transformations, one has to look beyond the mere law in the books and the formal definitional aspects of property to the ways in which law operated. And ultimately, one has to look to the assumptions lying at the basis of post-communist economic transformations. In this respect, we cannot attempt to provide here a full or authoritative answer of what went wrong in the transformations, given the magnitude and the multiple dimensions of the transformations. We can only to give a very brief overview of some of the scholarly attempts to conceptualize the transformations, and the sketch of an incomplete argument, in which the “justice” dimensions of such transformations are considered. In order to provide this brief and incomplete argument, we should restate that, as we have seen above, the communist organization of property, far from “non existent” or a management and development of related property, and by Act VIII of 1990 on the protection of state property entrusted to enterprises. As far as we know there are no empirical studies documenting how the agency was capable to monitor the managers’ activity, although a particularity of the Hungarian scheme was to attract foreign investment. 76 For example in Bulgaria 84 percent of the housing stock was in private hands in late 1980’s, in Romania, close to 75 percent, in Hungary and Slovenia close to 70 percent was privately owned, while in Czechoslovakia and Poland only 40 percent of the dwelling units were privately owned. See Kiril Stanilov: Housing trends in Central and Eastern European cities during and after the period of transition, in Kiril Stanilov: The Post-Socialist City. Urban Form and Space Transformations in Central and Eastern Europe after Socialism, Springer, 2007, pp.173-190 at p. 177. Also József Hegedüs, Iván Tosics and Stephen K. Mayo: Transition of the Housing Sector in Eastern Central Europe, Review of Urban & Regional Development Studies 8:101 (1996), at p. 103, and for Poland and Czechoslovakia R. Struyk: Housing privatization in the former Soviet block to 1995, in: G.Andruzs,M. Harloe,and I.Szelenyi (eds): Cities after Socialism: Urban and Regional Change and Conflict in Post-Socialist Societies (Studies in Urban and Social Change), Oxford: Blackwell Publishers,1996, 192–213. 77 Hungary under Goulash communism of Kadar or Poland in the late years of Military regime when nomenklatura privatizations flourished are showcases of such experiments, as for an earlier period are Tito’s and Yugoslav experiments. Polish and Hungarian departures in the case of agriculture from the Soviet model, also explain why “restitution” was important in some places but not in all, and why in general “restitution” was variable in importance, and more salient in the case of countries which, as for example Romania, followed more closely the original Soviet model of collective property. 78 Even if curtailed more by some of these communist states than by the frontrunners, Hungary, Poland USSR or Yugoslavia. 17 regression from pre-socialist times, was in reality a very complex one.79 Thus, the “real socialist” property in the anthropological account was an administrative matter more than a legal one.80 In such a system, administrative discretion was far more important than legal procedures aiming at regularity and certainty. Furthermore, hierarchical relations of property forms introduced by socialism produced a hierarchy of estates of administration,81 in which to the entities lower than the state were granted a sort of “administrative rights” on the estate assigned to the entity, very different in their nature from the usus and usufructus encountered in the civil and western law. In such estates, the socialist managers had a ( sort of sui generis administrative) “right” to move items of socialist property at will in huge trade networks made by similar socialist administrators of state enterprises, while in theory the patrimony of the state, from which such administrative estates were carved, was inalienable. The fiction of the inalienability of state patrimony, to which all the items moved by socialist administrators ultimately belonged, made such movement possible, while transforming the landscape, and in our view the whole patrimony of such an entity, in one with elastic qualities.82 If one wants to change such reality, one has to change, as we seen, the “operational rules” accordingly to which such organization of property functioned, and to disrupt somehow the established networks of socialist managers, by removing such managers from the positions held. Because none of these two conditions was fully met in the early phase of post-communist transition, the operating rules of “socialist estates” continued to produce effects. So, in the early post-communist years of the CEE, such movement of items almost at “will” by socialist estates administrators left untouched by the change of regime,83 arguably posed several problems, which would reflect on the legitimacy of the whole process of post-communist property transformations. First, it allowed for the creation of the phenomenon that Stark observed in Hungary, and described as “recombinant” socialist property,84 respectively the phenomenon of reorganization of the debts of the former socialist enterprises under the umbrella of empty corporate shells, and the “privatization”, boarding, or hiding of the assets, organized under myriad corporate 79 See Roman Frydman and Andrzej Rapaczynski: Privatization in Eastern Europe. Is the State Withering Awway?, Budpaest, CEU Press, 1994, cited by Verdery, at p. 41 : “[T]he socialist economies of Eastern Europe did not have any property system…governing their productive activities.” 80 See infra, FN 37. 81 Infra, FN 46. 82 Verdery drew this inspiring characterization from her analysis of transformations in land ownership. However, we consider that this characterization could be extend to the whole notion of “patrimony” of former “socialist estates” transformed in private enterprises after the fall of communism, as in these “patrimonies” consisting according to the civil law definitions in the totality of debts, credits and physical objects “owed” by a juridical person, everything was moved at will and vanished or reappeared accordingly to the administrator’s desires. The “elastic” properties of the land, and the tendency to hide land present striking similarities with the post tsarist Russia period, even if in Russia the peasants utilized such tactics. For a detailed account of the struggles between early Soviet power and the peasants after the October Revolution see generally James C Scott: Seeing like a State. How Certain Schemes to Improve the Human Condition Have Failed, Yale University Press, New Haven and London, 1998, especially Chapter 6 The Soviet Collectivization on the Capitalist Dreams. period see ization” 83 With the former DDR as notable exception as a result of the unification. 84 See David Stark: Recombinant Property in East European Capitalism, The American Journal of Sociology 101: 4 (Jan., 1996), pp. 993-1027 18 shells, all under the control of the former socialist administrators and their cronies. 85 Or it allowed for what another scholar of post-socialist transformations, Ganev, described as the process of “preying on the state”, after analyzing similar phenomena of transformation of state property in Bulgaria,86 and for the phenomena described by the Polish sociologists as political capitalism,87 or the privatization of the police state.88 In other words it allowed for shadow transfers of property from the state entities to various private entities, which went far beyond what was permissible under the formal law. And it was partially for this reason, namely the possibility offered by the “hierarchies of estates” to the socialist administrators to move at will items among such estates and to their “pockets”, which could not be impeded or impaired by the post-socialist “law in books” to take place, 89 why the lustration became such a bitter theme in post-socialist CEE, while non-existent as a transitional justice issue in other countries traversing democratization processes.90, as we will see in the next chapter. Since lustration targeted, among other ex-communist cadres, the former administrators of the socialist “hierarchical estates”, who were running such “post-socialist” entities,91 it had the potential to dramatically upset the post-socialist transformations of such estates. Targeting the “administrators” of the socialist “estates of production”, lustration would lead to the dismantling of the socialist networks which survived the fall of the communism and proved their efficiency in the early post-communist CEE transitions, dismantling that did 85 Stark, id. In the abstract of his article, Stark provides a definition of the phenomenon that includes and suggests not only the “elasticity” of landscape metaphor introduced by Verdery, which could be extended to concepts and social space, but also the post-communism legal problems related to the blurring of private/ public civil law domains, and the political/legal problems related to the blurring and mixing of justificatory principles. “Recombinant property is a form of organizational hedging in which actors respond to uncertainty by diversifying assets, redefining and recombining resources. It is an attempt to hold resources that can be justified by more than one legitimating principle. Property transformation in postsocialist Hungary involves the decentralized reorganization of assets and the centralized management of liabilities. Together they blur the boundaries of public and private, the boundaries of enterprises, and the boundedness of justificatory principles.” Stark, at p. 993. In the light of later corporate scandals such as Enron, it is however questionable if such phenomenon was particular to pathologies of capitalism as developed in the early stages of transformation of the transitional countries, or has more to do with the way in which law and corporations are conceptualized and work. 86 See Venelin Ganev, Preying on the State, ___need citation 87 See Jadwiga Staniszkis : “Political Capitalism” in Poland, East European Politics and Societies 5:1 (Winter 1991), 127. Sociological work was subsequently conducted to infirm empirically Staniszkis’ powerful framework, without much avail, in our view, because of methodological flaws in the research design, the difficulties presented by cross-countries analyses, the problems posed by the communist collection of data on apparatchiks and the communist managerial elites, and the difficulties to collect meaningful data on such as notorious secret people as those making the former communist secret police apparatuses or the managerial communist strata. An example of such flawed study purported to invalidate Staniszkis’ framework is in our view (French study). The seminal work which partially confirm and partially infirm Staniszkis’ work is Eyal…Making Capitalist infra FN___, albeit the methodology and collection of data of this cross countries study is not uniform or above any criticism. For a more thoughtful critique of Eyal and Szelenyi focus see Michael Burawoy: Neoclassical Sociology: From the End of Communism to the End of Classes, American Journal Sociology 106:4 (2001) pp. 1099-1120. We should revisit Burawoy below. 88 See Los infra_Privatization Police state, FN__.. 89 And led to the so-called nomenklatura “privatization” taking place in the countries which “liberalized” the corporate regimes See for example the Eur Const Rev-Roundtable discussion____ 90 See, infra, at p__LUSTRATION CHAPTER 91 Transformed in various corporative forms. 19 not happened across the region in the first post-communist years.92Therefore, “socialist” property transformation and “lustration”, albeit distinct concepts analyzed individually and separately in the transitional literature, could also be seen as interrelated in the context of post-communist transformations. Seen in an interrelated way with property transformations, lustration would support the “socialist estates” transformations in juristic or civil persons, which use the former socialist objects of property in conformity to the civil law rules. Curiously enough, the issues of nomenklatura privatizations and accumulation of property, albeit theorized more vigorously in the sociological and anthropological literature in the first decade of transformations,93 were touched less systematically in the legal scholarship94 In addition to the above, the theorization of 92 For an exemplification of the power of the networks, social capital of the former “socialist estates” administrators, in the post-communist transformations of Romania, see the seminal book of Verdery cited above; Vanishing Hectare. There are numerous other individual case studies in other post-communist CEE countries, whose enumeration will be beyond the scope of our study. 93 The sociological discussion on the nomenklatura privatization in post-communism, is is too wide to be cited here otherwise than selectively and just with the title of example. Moreover, there is no agreement among diverse authors with respect to the social implications of market transformations , and there is justified criticism for the abandonment by the sociologists of the analysis of social inequalities (generated by communism and perpetuated or amplified by the new regimes) in favor of rather vague categories such as markets and social networking. To exemplify the divergent interpretations of the transformations compare for example Nee’s argument regarding the social mobility generated by the Chinese introduction of markets in Victor Nee:A Theory of Market Transition: From Redistribution to Markets in State Socialism, American Sociological Review 54:663-81(1989) and Victor Nee: Social Inequalities in Reforming State Socialism: Between Redistribution and Markets in China, American Sociological Review 56:267-82(1991) with Elemer Hankiss’. East European Alternatives, Oxford.Clarendon Press, 1990, with Andrew Walder’s: Property Rights and Stratification in Socialist Redistributive Economies, American Sociological Review 57: 524-39 (1992), and with Jadwiga Staniszkis’: Political Capitalism in Poland, East European Politics and Societies, 5:127 (1990). Also compare Stanizkis with Gil Eyal, Ivan Szelenyi, and Eleanor Townsley’s: Making Capitalism without Capitalists. The New Ruling Elites in Eastern Europe, New York, Verso, 1998, and Eric Hanley’s: Cadre Capitalism in Hungary and Poland: Property Accumulation among Communist-era Elites, East European Politics and Societies 14: 143 (1999). Also, on the same analytical framework of networks and social capital see Ákos Róna-Tas: The First Shall Be Last? Entrepreneurship and Communist Cadres in the Transition from Socialism, The American Journal of Sociology, 100:1 (1994), pp. 40-69, and Andrew G, Walder: Elite Opportunity in Transitional Economies, American Sociological Review, 68:6 (2003), pp. 899-916, For reviews of the literature on the market transition debate see for example Ivan Szelenyi and Eric Kostello: The Market Transition Debate: Toward a Synthesis? The American Journal of Sociology, 101:4 (1996), pp. 1082-1096, and Yang Cao and Victor G. Nee: Comment.Controversies and Evidence in the Market Transition Debate, The American Journal of Sociology 105:4 (2000), pp. 1175-1189. For an institutional framework based analysis of post-communist social transformations, see, David Stark and Lazlo Bruszt: Postsocialist Pathways: Transforming Politics and Property in East Central Europe, Cambridge University Press, 1998. For a justified criticism of the abandonment in the sociological research of post communist societies transformations of the analysis of social inequalities generated by communism and perpetuated or amplified by the new regimes, in favor of rather vague categories such as markets and social networking. see Michael Burawoy: Neoclassical Sociology: From the End of Communism to the End of Classes, supra FN 79 Among the anthropological research, in addition to Verdery Alexander and Sneath contributions cited supra, FN__ (verdery & Humphrey), Chris Hann’s: From production to property: decollectivization and the family-land relationship in contemporary Hungary’, Man, 28:3 (1993), pp. 299-320 deserves a mention here. 94 This is not to say that the problems of systemic change in the post-communist CEE were not debated, or the direction of transformations was not contested in the legal literature, as there is a voluminous literature in this direction. See just with the title of example Brietzkhe and Rubin, supra. FN , Stephan, Black, & Pistor supra, FN_ . It is just to say that the theoretical boundaries of the debates were fixed by the economical and political theory literature, and themes such as “convergence” vs “divergence”, “big-bang” 20 another justice dimension of post-communist property transformations, respectively that of the inequalities originating in the communist times but amplified by the dismantling of the communist era industrial and agricultural conglomerates is generally lacking in the legal scholarship95 Yet, if we remember that a typical communist industrial or agricultural enterprise was not only the building block of communist ideas of development, but also the place where communist social redistribution was taking place,96 the social justice implications of the privatization and dismantling of such delivery points of communist redistribution are enormous, yet barely discussed in the legal scholarship.97 Albeit after 20 years, and with the the economies of former communist countries totally dominated now by the private sector, the process of privatization in Central Eastern vs “gradual”, “microeconomic” vs “institutionalist,” introduced first and hotly debated in the economic and political fields, together with the “rule of law” theme quickly adopted by the economic literature, set also the parameters of most of the legal inquiry in the first decade of transformations. Overall, and in spite of the familiarity of legal commentators with the post-communist countries made possible by legal assistance programs for CEE countries such as American Bar “Rule of Law” or the German DAAD fund there are few authors, with perhaps the notable exception of Inge Markovitz who did extensive field work and ethnographic studies in the post-communist countries they write about, so the discussion are mostly normative for the most part of the literature. 95 Although discussed in the anthropological literature. See Verdery and Alexander, in Property in Question, supra, FN 4 96 Alexander speaks in the following terms about the social infrastructure developed around such a mammoth communist conglomerate, the “Textile Kombinat” of Almaty in Kazahstan: “ The supporting social infrastructure was breathtaking. More than 9,000 people were housed in factory hostels and apartment blocks built for workers. There were kindergartens, holiday resorts, hospitals, pioneer camps, and a colossal Palace of Culture” Alexander, supra, FN 4, at p. 260. She also speaks in the following terms about what happened with the huge social infrastructure built around the conglomerate as a result of “privatization”: “The Kombinat was privatized in the mid-1990s. The immediate consequence was the rapid divestment of the social facilities and the gradual closure of one department after another… No social facilities remained;the hospitals, apartment blocks, and pioneer camps were either sold or handed over to the city council…”.Id.Although the development of such immense industrial conglomerates around the USSR and the CEE communist states varied widely, depending on the industrial or agricultural policies pursued by different communist countries at different moment of time, they represented an ideal of development during the communist times across the whole communist region, and analytically speaking they are useful units for discussions related to deindustrialization and inequalities. Yet, it barely discussed in the legal scholarship, as we pointed above, in spite of more extensive discussions in the anthropological, geographic or economic literature. An extensive citation of such literature is beyond the scope of our discussion, suffice it to say that some authors points towards the fact the postcommunist CEE regimes, unlike those in the former CIS were quicker to adopt at least some social policies capable to alleviate some costs of the economic transition and to buffer the official income plummeting in the early phase of postcommunist transition. For an argument that the weak elites which emerged from communism implosion in the region could not have the necessarily legitimacy to impose a clearly dominant plan or project of transformation and be selective and sequential in the agenda setting , but have to satisfy multiple constituencies, eventually by social protective measures,see Jon Elster, Claus Offe and Ulrich K. Preuss (eds): Institutional Design in Post-communist Societies.Rebuilding the Ship at Sea, Cambridge University Press, 1998, supra,FN__ (I cited them early) Also Pieter Vanhuysse:Divide and Pacify.Strategic Social Policies and Political Protests in Post-Communist Democracies,Central European University Press, 2006, for a comprehensive discussion of the policies of early retirement and division of labour practiced by the post-communist government in the CEE (with the notable exception of the Czech republic up to a point) as buffers for economic distress. black market tolerance. For a more comprehensive discussion of the earlier social stratification data from the the region see Henryk Domanski: On the Verge of Convergence,Social Stratification in Eastern Europe,Central European University Press (for the English Edition),2000. 97 See for such a general discussion for the case of Hungary Kent Klaudt: Hungary After the Revolution: Privatization, Economic Ideology and the False Promise of the Free Market, 13 Law & Ineq. J. 303 (1995). 21 Europe, and its accompanying nomenklatura privatization could be though as long foreclosed,98 and therefore more of historical than contemporary interest, the study of the property transformations arguably still presents more than mere academic interest for several reasons. One major reason is that as we have seen in the preceding chapter private property presents problems of justification from a moral standpoint in any individualistic account, even if the restrained versions of such justification could be defensible. Now, even if we admit for the sake of the argument, that a degree of property appropriation in post-communism could be fully justified under a Lockean perspective or a Nozickian account, we could see that an appropriation of property which would break the Lockean proviso (leave enough property to be appropriated for others) or the Nozickian proviso of justice in transactions would have major problems of justification even under a classical or modern liberal account. So it is very doubtful that such acquiring of property by “grab” and “plunder” by the former agents of the communist regimes could be justified in any classical liberal theory.99 Arguably such “grab” and One explanation for this lack may rest with the ambiguity of transformations, and the persistence of black market, which render an exact determination of inequality illusory, or even the buffer social policies (see Verheysen above) whose impact are hard to asses. Speaking about Russian experience but in terms which are familiar to those experiencing “transition” across the post-communist CEE Boris Kagarlitsky has the following to say: ‘This interweaving of interests made almost everyone ‘pro-market’ and ‘anti-market’ at the same time. In the course of the ‘market reforms’, almost every group gained something and at the same time lost something. The problem was that the relationship between the ‘pluses’ and ‘minuses’ changed continually. According to the official forecast, the initial stages of the reform should have seen its negative aspects (falling living standards, and tougher demands on workers) make their impact felt. Later, in the second stage, the ‘advantages of the market mechanism’ were to undergo their full flowering. In practice, everything happened the other way round. At first, people noticed some positive changes. Chronic shortages disappeared, and, especially in Moscow and St Petersburg, good-quality foreign goods appeared in the shops. As compensation for the fall in wages, there was the chance to participate in the ‘informal economy’, while not losing one’s ‘official’ job. The following fact shows the extent to which the population was drawn into the ‘shadow’ and ‘informal’ economy: according to data from the Russian State Committee on Statistics, in the first quarter of 1997 alone citizens spent a trillion rubles more than they earned, while their savings did not diminish. This spending was on foodstuffs and clothing; in other words, the consumption was by ordinary toilers, and did not reflect the secret operations of the mafia. “Boris Kagarlitsky: Russia Under Yeltsin and Putin. Neo-liberal Autocracy,Pluto Press, London & Sterling, Virginia, 2002, at p. 134 and subseq. For a discussion on the hidden economies of post-communist countries see Mária Lackó: Hidden economy – an unknown quantity?Comparative analysis of hidden economies in transition countries, 1989–95,Economics of Transition 8:1(2000),pp.117–149 98 Or the former “socialist-managers’s drive to accumulate poperty, which up to a point accompanied a first phase of privatization across the whole region. We speak here of a first phase of privatisation, characteristic to the first years of post-communist transition, in which priority was given to the so called “small scale” privatization in a process dominated by the local people. This phase is somehow analytically distinguishable from a “second phase,” closer in time to the EU accession of the countries in the region, in which big enterprises were privatized or liquidated, and global players and investor started to invest in the region. Albeit there are major differences in the privatization strategies followed by different countries in the region, Hungary for example given priority to direct sales to foreign investors while Romania at the opposite spectrum, preferring privatization by insiders, there is a general commonality between the countries in the region regarding the impossibility to privatize or convert immediately big industrial conglomerates in viable, private enterprises. For a discussion of these distinct phases impact in the real estate development of post-socialist cities, see generally, Stanilov: Post-Socialist City, supra, FN__, for examples of industrial development Ivan Berent, supra, FN_ 134-Chapter 5 Economic Restructuring… 99 Although Russia and the CIS represent pathologies of privatization in rapport to the countries of the CEE space, Yeltsin’s regime “loans and shares” programme being unique across the post-communist space, it is instructive and to a point representative for the whole ex communist space to recount here Igor Baranovsky’s characterization of the nomenklatura privatization: “To become a millionaire in our country 22 “plunder” needs no moral justifications of any sort, and could be declared as state policies by the new post-communist governments, with the renunciations of any pretensions of justification. Unfortunately, this did not happen, and in the postcommunist property transformations moral justifications played an important role. It was not only that the communist property relations were declared morally bankrupt from an moral-utilitarian point of view, as they allegedly promoted inefficiency and waste, or otherwise were based on an initial takeover in the late forties which was morally vicious, but it was also proclaimed that the property arrangements promoted under the banner of neo-liberalism were “morally” superior to those on which the socialist ones rested. Because this moral superiority was asserted partially on the basis of an utilitarianconsequential framework, it encountered such major justificatory problems when the consequences were if not dire in any case not those “predicted” by the social engineers of the transformations. With the passing of time one might expect however that the problems with the initial acquisitions of property vanished, especially as third parties, such as foreign investors, acquired the titles of property that was initially tainted. 100 Moreover, if the consequences improve with the passing of time, one could also expect the passions provoked by initial appropriation of property by former communist agents to decay. Nonetheless, two decades later, despite some progress,101 it is still unclear in what measure the countries of the region broke with the previous cycles of underdevelopment and backwardness,102 and someone could indeed speak of economic convergence with an idealized “west,”103 which would render in turn the ways of acquiring property in postcommunism irrelevant for the regimes’ legitimacy and for the prospect of societies governed by the rule of law. 3. CONCLUSION it is not at all necessary to have a good head and specialized knowledge. Often it is enough to have active support in the government, the parliament, local power structures and law enforcement agencies. One fine day your insignificant bank is authorized, for instance, to conduct operations with budgetary funds. Or quotas are generously allotted for the export of oil, timber, and gas. In other words, you are appointed a millionaire” Cited by Bernard Black, Reinier Kraakman, Anna Tarassova: Russian Privatization and Corporate Governance: What Went Wrong?,supra FN 63, at p. 1744 (I MIGHT CITED EARLIER THIS) 100 For the theorization of emotions decay with the passing of time in the context of transitional justice see Elster: Closing the Books. Supra or infra?, FN_, chapter 8 Emotions, at pp. 216-247 But see also Elster for a circumvention of the cases when emotions do not decay (as for example in the case when there is “a daily remainder of the past injustice” . Elster,id at p.247, and an example when emotions related to property aquistion by new elites did not decay even after the passing of a century. Id. for the so called biens nationaux expropriated in France during the Revolutions, and given away to the new revolutionary elites, id at pp. 30-44.Also see Thomas J.F. Riha: The Origins of Private Property and Wealth in Post-Communist Society, International Journal of Social Economics, 23:4-6 (1996), pp. 245-268, stating that the way properties have been acquired and the injustice of the process would impact on economic developments and on the moral health and socio-political stability of the post-communist societies for generations to come. Riha, id. at p 245 101 Ivan T. Berend, From the Soviet Bloc to the European Union. The Economic and Social Transformation of Central and Eastern Europe since 1973, Cambridge University Press, 2009, at p. 135 102 The backwardness and underdevelopment thesis . See for example Daniel Chirot (ed): Origins of Backwardness in Eastern Europe, University of California Press, 1989, and Ivan T. Berend, op.cit__ 103 See for example Ivan Berend complaint that the countries of the region, despite some progresses, failed to develop an intensive R& I business model which would allow them to catch with the western model of intensive development. Berend, id 23 To conclude the discussion on communist and post-communist property, privatization, as we have seen, was the main policy and talk accompanying the regime change in the former communist CEE countries, at least in the first decade of “transition.” If “privatization” carried such a weight in the politics of post-communist transitions, arguably a theory of transitional justice applicable to the former communist space would have to devote a lot of attention to privatization. Nevertheless, this did not happen, and the main transitional justice theorizations dealt only with arguably a totally different process, namely the restitution of property to the former owners, labeled “small privatization.” This confusion of restitution with privatization leads to analytical imprecision, and to wrong characterizations of property transformations in the postcommunist space, as we will argue in the next chapter. However, the more important point is that the “transitional justice” doctrine does not offer a theory of “privatization,” which would allow for an understanding of the main transitional policy deployed in the former communist space. If privatization is “transition” for the former communist countries, to paraphrase a leading economist,104 then a “transitional justice” theory for post-communist countries would have to analyze privatization implications in terms of “justice.” Yet, such analysis is in general utterly missing in transitional justice studies, which prefer a focus on restitution. Nonetheless, as we will see in what follows, even this focus lacks in conceptual clarity, as restitution is hopelessly confused with privatization, and there is a great ambiguity with respect to which dimension of justice one properly belongs,105 with the result that restitution lose any meaningfulness as analytical category for the study of post-communist transitional justice. 104 See Joseph C. Brada: Privatization is Transition-Or Is It? Journal of Economic Perspectives, 10:2 (1996), pp. 67-86 105 Unfortunately such ambiguity is entertained in the ethical theory, with some authors considering restitution as having a distributional impact, while other authors considering it as having compensatory/retributive character 24