"Loans for Shares" Revisited
The "loans for shares" scheme of 1995-6--in which a handful of well-connected businessmen bought stakes in major Russian companies--is widely considered a scandal that slowed subsequent Russian economic growth. Fifteen years later, I reexamine the details of the program. In light of evidence available today, I concur with the critics that the scheme's execution appeared corrupt. However, in most other regards the conventional wisdom was wrong. The stakes involved represented a small fraction of the market; the pricing in most cases was in line with international practice; and the scheme can only explain a small part of Russia's increasing wealth inequality. The biggest beneficiaries were not the so-called "oligarchs," but Soviet era industrial managers. After the oligarchs consolidated control, their firms performed far better than comparable state enterprises and companies sold to incumbent managers, and helped fuel Russia's rapid growth after 1999.
I thank Serguey Braguinsky, Lev Freinkman, Scott Gehlbach, Martin Gilman, Sergei Guriev, Andrei Shleifer, and Konstantin Sonin for comments and valuable conversations, and the UCLA College of Letters and Science for financial support. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research.