Several Eastern European countries have initiated mass privatization p
rograms to transfer state-owned assets to the general population. We s
how that the decision to pursue mass privatization and even the specif
ic design of the programs are largely dictated by politics. Nonetheles
s, politically feasible programs can also be made attractive from an e
conomic standpoint in terms of maximizing value, fostering free and ef
ficient markets, and promoting corporate governance. In general, the d
esign of economic institutions is critically shaped by political facto
rs, although satisfactory economic results can be achieved in spite of
political constraints.