Policy Memos

Original Sin, Good Works, and Property Rights in Russia

Policy Memo:

431

Publication Date:

03-2007

Description:

Are property rights obtained through legally dubious means forever tainted with original sin, or can rightholders make their ill-gotten gains legitimate by doing good works? Answers to these questions have ramifications beyond academic debate. Based on the expectation that private ownership generates stronger incentives to produce, policymakers and international financial institutions have advised governments from Asia to Africa to transfer state-owned assets to private hands. However, the transfer of rights from state to private hands is only a first step in encouraging rightholders to use their assets well. The state, through its monopoly on the use of coercion, retains its ability to redraw property rights in a variety of ways, from expropriation and renationalization to changes in regulation and tax policy. Owners who expect the state to alter their rights in the future have weak incentives to use their assets productively today. The threat that privatization may be reversed can loom large well into the future despite (or perhaps because of) repeated assurances to the contrary. [...]

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About the author

Marshall D Shulman Professor of Post-Soviet Foreign Policy, Director of the Harriman Institute
Columbia University