Privatization by Means of State Bureaucracy? The Treuhand Phenomenon in Eastern Germany
Privatization by Means of State Bureaucracy? The Treuhand Phenomenon in Eastern Germany
This chapter discusses that the real process of privatization is composed of a chain of constraints and dilemmas and that the institutional design of privatization plays a central role in coping with these constraints and dilemmas. It concentrates on the creation and adoption of the institutional design of a privatization linchpin such as the East German Treuhandanstalt. This was a government holding company set up to sell off or close down the state-owned businesses and property of the GDR. The chapter also describes the institutional dynamics of the privatization process in the former GDR as reflected in the organizational development of Treuhandanstalt. The chapter argues that the logic of these dynamics was formulated by the need to build-up an organization of around 4,000 employees in less than twelve months; the need to control the social and political costs of privatization; and the need to cope with the economic risks surrounding the rapidity of privatization.
Keywords: Treuhandanstalt, Treuhand Phenomenon, privatization, GDR, institutional dynamics, economic risks, costs of privatization
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