Nizhny Novgorod became the first city in Russia to privatize its small businesses, transportation industry, and collective farms after the collapse of communism and became a model for other cities. The authors review the innovative, unprecedented, and little-known public auctions responsible for successfully privatizing Nizhny's economy. Keys to success were dedicated enlightened public leadership, consensual intergovernmental partnership in a federal system, and effective use of Western privatization experts. High and capricious taxation, over regulation, public corruption and private criminal activity, near hyperinflation, lack of commercial law, politics, and vanishing markets jeopardize privatization gains.