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Of the five large

Conflicts and Company Towns

cost-effectively. . . . In most cases, privatiza-

The top priority on the donors' early priva-

tions of large enterprises are almost invariably

firms assisted by

tization lists was large enterprises, or "compa-

slow in being consummated. Invariably, these

U.S. AID­paid

ny towns," with their socialist amenities such

enterprise-specific situations and the prob-

consultants, only

as health and day care, as well as employee

lems that surround them are new and com-

retreat centers. By transforming those "white

plex."21 Likewise, an evaluation commissioned

one was priva-

elephants," Western governments were to

by the European Union delicately concluded

tized, and that

drive a silver stake through the heart of social-

that "the impact of the [EU-paid] consultants

one not as a result

ism and bury it forever. In Poland, for example,

was less satisfactory in highly politicized

U.S. AID supported highly visible projects,

cases."22

of U.S. AID help.

including the privatization of huge Polish

The problems with consultants' recom-

enterprises employing thousands of people

mendations were more than a case of some

such as the Huta Warszawa steel mill and the

Central and Eastern Europeans reacting in a

Sandomierz glass company, and national

knee-jerk fashion to foreigners' advice. Rather,

icons such as LOT, the Polish national airline.

they represented a real fear that the consul-

U.S. AID judged, according to the GAO, "that

tants would say something that many of the

privatizing a few large enterprises in the air-

players in the privatization process might not

line, steel, glass, and furniture industries

want to hear: that workers' jobs and their pen-

would have a ripple effect on the economy."17

sions were no longer secure and that the bed-

rock of their existence was now quicksand.

But those large enterprises would prove

Many workers have expressed concern through

especially difficult to divest of state ownership.

the ballot box. Both Poland and Hungary have

The GAO reported that the U.S. AID/Poland

elected reformed socialist-leftist governments,

mission "concluded that firm-specific and sec-

as did some nations farther south and east.

toral assistance was too time-consuming and

Privatization aid often failed to have the

costly. For example, the $3.7 million in U.S.

effects donors intended, and consultants'

AID funding for the glass sector led to only

involvement in planning and implementation

four state-owned enterprise privatizations, at a

often left behind an undesirable legacy.

cost of more than $900,000 per enterprise pri-

Instead of encouraging privatization, in some

vatized. In addition, as of May 1994, only four

cases aid may actually have discouraged it.

of eight targeted enterprises had been priva-

Charges of industrial espionage were common

tized under the almost completed furniture

across the region. Officials, managers, and

sector project."18 Finally, U.S. AID spent more

workers sometimes suspected advisers of

than $1 million restructuring LOT in prepara-

unscrupulous intentions and even intimated

tion for privatization.19 As of this writing, LOT

that their "advice" could be designed to sabo-

is still in state hands. Thus, the GAO conclud-

tage the recipient nation's future competi-

ed that "the pace of privatization for larger

tiveness. The deputy director of NIK (the

state-owned enterprises has been slower than

Supreme Control Board, which is the Polish

expected, and significant portions of Polish

government's chief auditing agency and

productive capacity and employment remain

roughly equivalent to the GAO in the United

in the hands of the government."20 That result

States) reported in 1994 that "[a] few years ago

was typical. According to a report commis-

the (consulting) firms had an industrial espi-

sioned by U.S. AID to evaluate its Central

onage quality to them. They came and got all

European privatization projects, of the five

[the] valuable information about the enter-

large firms assisted by U.S. AID­paid consul-

prises--the state of the firm, the amount and

tants, only one was privatized, and that one

cost of production, and so on--and after this

not as a result of U.S. AID help. The evaluation

they disappeared."23

determined that "assistance to large individual

enterprises has not generally been successful

The point is not whether allegations of

in bringing about privatization promptly and

impropriety are valid in a given case but rather

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