Georgia by Stephen H. Jones

Author:Stephen H. Jones [Jones, Stephen H.]
Language: eng
Format: epub
Tags: Georgia, Postwar History, European History, Independence
ISBN: 9780857735867
Publisher: Bloomsbury Publishing
Published: 2013-12-15T20:00:00+00:00

DEMOCRACY AND THE MARKET

Adam Przeworski and his colleagues have established a statistically important link between fair income distribution and economic growth on the one hand, and sustainable democracy on the other. The World Bank concedes that poor countries like Georgia are more likely to remain democratic if they reduce income inequality alongside growth.17 This suggests a more nuanced relationship between the market and democratic transition than the obfuscating insistence that one cannot do without the other. The premise behind Western democratization in post-communist states is that economic liberalization is necessary, even if it increases inequalities. That may be true, but it is not any old ‘market’ that leads to democracy, it is one that promotes business independence, the rule of law, and a degree of economic power for ordinary citizens. Mass unemployment – which is the major feature of Georgia’s market economy – deprives people of power and increases vulnerability to global economic downturns or natural disasters. Looking at the Latin American experience in the 1980s, Marcus Kurtz suggests neoliberalism raised ‘such severe barriers to collective action and expression as to render ordinary political participation – individual and via interest groups – difficult or even impossible for large strata of society’.18

Shevardnadze’s early measures emphasized an open trade regime, accelerated privatization and deregulation, reduced public expenditure, and weakened labor power. Policies of structural adjustment helped control inflation and stabilize the exchange rate, but neglected the role of institutional and cultural habits, and what Keynes called the ‘radical uncertainty’ underlying economic decision-making, especially at times of transformation. Responsive markets can increase popular control, but in Georgian conditions, because of old Soviet routines and economic insecurity, rapid market conversion led to businesses avoiding new taxes, to greater dependence on the illegal economy, and to a rapid fall in revenues. The weak Georgian government was unable to accommodate global capital flows or stimulate and support market growth. The result was a prolonged recession (a short one was anticipated) and, for the majority of the population, a miserable existence of dark and freezing winter nights. Opaque privatization schemes, and improperly supervised international loans, strengthened links between corrupt political and economic elites rather than sundering them. For two decades, Georgia has not been ‘marketized’, but ‘monopolized’, and Saakashvili’s new economy is no less rent seeking at its core than Shevardnadze’s.

Deregulation compounded the loss of state authority and multiplied opportunities for patronage-capitalism. Personal ties were used to leverage tax exemptions, guarantee preferential purchases of state property, and sustain monopolies. The Soviet bureaucratic state was replaced by a quasi-feudal one of elite pacts and economic monopolies.19 International Monetary Fund (IMF) policies helped create conditions that effectively strangled competition and excluded vast segments of the population from legal participation in the economy. Lucan Way and Stephen Collier call this an ‘exclusionary market regime’.20 According to Roman Gotsiridze, former chairman of the parliamentary budget committee, no Georgian businessman could achieve success under Shevardnadze without some form of government-granted financial privilege or patronage.21

The Saakashvili administration’s reaction to Shevardnadze’s economic failure (a

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