This article demonstrates linkages between neoliberal policies and poor economic performance. Mass privatization programs, where implemented, created a massive fiscal shock for post-communist governments, thereby undermining the development of private-sector governance institutions and severely exacerbating the transformational recession. Cross-national panel regressions for a sample of 25 post-communist countries between 1990 and 2000 show that mass privatization programs negatively affected economic growth, state capacity, and property rights protection. Firm-level data from a representative survey of managers in 3,550 companies operating in 24 post-communist countries confirmed the statistical study. Within countries that implemented mass-privatized programs, newly privatized firms were substantially less likely to engage in industrial restructuring but considerably more likely to use barter and accumulate tax arrears than their state-owned counterparts.