We have argued in the previous chapter that for the stabilization programme to proceed with the least disturbance in production a number of microeconomic measures are needed as support. Among them are tax schedules, contractual laws, government regulations, as well as accounting rules, and, most of all, property rights (Pejovic 1979, 1990). The critical role of the last stems from the fact that property rights give the claimant discretion over productive resources in short supply. As such, this institution is a principal precondition for the formation of capital markets – markets of company shares and finance for investment (Breinard 1991, Brabant 1992). Since property rights determine the costs of transacting – gathering information, risk discounting, and contract coordination – they affect the interests of claimants in asset-value maximization. Property rights determine to what degree claimants to assets feel responsible for respecting their budget constraints, i.e. avoiding overspending and thus risking financial insolvency and bankruptcy (Demsetz 1974; Barzel 1993).

Given the above significance of the ownership structure, this chapter is devoted to further discussion of reforms in property rights initiated since 1990. Because Poland has been, at least initially, in the forefront of the major privatization efforts undertaken thus far in Eastern Europe and the former Soviet Union (see Roncek 1988; Schroeder 1988), its experience is of particular value in studying the region's transition to a capitalist private economy. In fact, since Poland has been first to develop and/or try certain approaches to privatization, its experience has provided important input into many programmes formulated elsewhere in the region.