The Transformation of the Property Regime in Croatia and Slovenia

Abstract

The transition from socialism in Eastern Europe during the last decade of 20th century could be rightly observed and analysed as a chapter of the great battle between ideologies such as liberalism, libertarianism, socialism and communism, or as a competition between the political programs of liberal democracy, social democracy, orthodox socialism and so on. Both politics and ideologies use such terms as a “free market” or “fair trade” routinely. In contrast to this approach a philosopher doesn’t take these ideas for granted; “freedom” in “free market” and “fairness” in “fair trade” are complex concepts that should be analysed, their meaning put in a context, understood and explained. The same is true of notions of property, private property as opposed to public property and of the definition of a competitive market. These concepts are the subject of my research; how the ideas of property and market were understood and implemented during the process of transformation of socialism in Croatia and Slovenia. The intention of this research is to be a positive analysis of the transition in Slovenia and Croatia. My criticism that the distinction between private and public property was not entirely adequate in the context of transition, doesn’t imply that the process of privatisation of socialist property should have been avoided. Rather I found that the distinction between private and public property was analytically less adequate than the distinction between individual and collective property and open access for the explanation of the transformation of the property regime inherited from socialism (self-management) in Croatia and Slovenia. This later distinction was based on the concept of the costliness of property, which was initiated by the work of Ronald Coase and developed by Yoram Barzel. The concept of the costliness of property enabled me to conclude that privatisation in Croatia shared some substantial characteristics with initial appropriation of nobody’s property and to understand why ownership arrangements with a dominant shareholder were favoured. Privatisation in Slovenia represented an evolution of a property regime while the dispersed shareholding that included employees and former employees was preferred. The finding that the exchange of goods and services is influenced by an implicit norm of behaviour (customary norms, or moral norm or even legal norms) and the insight that exchange would even fail to occur without an implicit assumption of norms on the part of all sides in an exchange, doesn’t amount to the imposition of a universal absolute norm of “fair trade” by the government. This would be an ideological interpretation of my arguments. The development of market institutions depends on numerous factors and influences, ideologies and political programs among them. My description of the transition in Slovenia and Croatia takes into account the influence of interest groups, political parties and also the ideologies which they used to legitimise their intentions. However, my focus is on two theoretical explanations, the neoclassical and the property rights explanation of a market economy that contributed to the formulation of the policies of privatisation in Croatia and Slovenia and participated in the creation of expectations about what would follow from future arrangements. Although I believe that my conclusions are clear and precise I feel obliged to emphasise that the criticism of neoclassical view is by no means a plea for governmental regulation as a solution for shortcomings of a particular market. Rather, I would like to point to the need to take institutions, traditions and cultural factors seriously and also that the adequate functioning of a market economy itself depends on institutions and cultural factors. Therefore I expect that my thesis, over and above its value as a detailed treatment of privatisation in Croatia and Slovenia, should be a contribution to the understanding of basic concepts of property and market and to the explanation of the development of market institutions.