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Georgia On My Mind – OpEd

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I am leaving tomorrow to teach in a week-long economics program for college students in the Republic of Georgia. Georgia was one of the Soviet republics until the Soviet Union dissolved 21 years ago, and the country has made remarkable strides in the two decades since.

After a slow start, Georgia instituted major economic reforms starting in the mid-1990s and economic development has been impressive in the last decade and a half. I was there once before, last year, and was impressed not only by the country’s economic performance, but also by the ideological commitment Georgians have to free markets and limited government. As many Georgians have told me, having lived under Soviet economic planning gives people an appreciation for the virtues of economic freedom.

Georgia
Georgia

Much credit for Georgia’s economic reforms goes to President Mikheil Saakashvili. Well aware of corrupt law enforcement when he took office, he fired all of the police and jailed many people involved in organized crime. To symbolize the transparency in law enforcement his government established, police stations are all glass. Yes, you can look at them from the street and see right through them. His government has consistently supported free trade, low taxes, low government spending, limited regulatory constraints, and privatization of assets previously owned by the government.

There are so many good things to report about Georgia, but there is also an undercurrent of discontent. President Saakashvili has been accused of manipulating elections, and of using the state’s political power to benefit his cronies at the expense of others. There is a clear opposition movement in Georgia.

From an economic standpoint things have gone very well for a decade and a half, but there is always the question about whether that can continue. Georgia is a new democracy with a new economic system, and as new political coalitions solidify there is always the danger that political power will lead to cronyism, and the spark of entrepreneurship that has served the newly-independent Georgia could be snuffed out.

I am optimistic, though, because of the ideology of political and economic freedom that I have seen in Georgians. In the United States, and even more in Western Europe, people take for granted the remarkable prosperity that capitalism has bestowed on them. I have commented on that recently, here and here. In Georgia, people have a clear capitalist ideology and enthusiastically support the principles of economic freedom that they see are improving their well-being. I anticipate a very interesting trip!

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Randall G. Holcombe

Randall G. Holcombe is Research Fellow at The Independent Institute, DeVoe Moore Professor of Economics at Florida State University, past President of the Public Choice Society, and past President of the Society for the Development of Austrian Economics. He received his Ph.D. in economics from Virginia Tech, and has taught at Texas A&M University and Auburn University. Dr. Holcombe is also Senior Fellow at the James Madison Institute and was a member of the Florida Governor’s Council of Economic Advisors.

3 thoughts on “Georgia On My Mind – OpEd

  • August 4, 2012 at 2:01 pm
    Permalink

    What color pills have you been taking and let me know your supplier. Most people are worst off now than before, prior to the so-called Rose Revolution and corruption has been redefined and revamped from the top down (like the Azerbaijan model). I have been teaching at Georgian universities for more than 10 years and you need to spend more than a week here – and the students will bring you up-to-date as to pseudo reforms and Potemkin Democracy/Economics. Political power here is based already on cronyism and networks of patronage.

    For instance, some of my former students working in governmental structures provided me interesting information about the ex-head of Chamber of Control, Levan Bejhashvili, how he transfered money to the “national movement”s account from his private account, while he speaks that in case of Boris Ivanishvili, as his activities in supporting his political party is criminal, but they all are also involved in financing political parties.

    Interesting information for Control Chamber!

    GeoStat has unemployment at 17% while 70% say they are unemployed in latest NDI poll – see the source yourself. Who is to be believed in the modern Georgia,

    And check the official figures for military spending.

    When you pay for public documents in Georgia (passport, ID, drivers license), the official bank record is deleted after three days, and no
    digital trace is kept. Something for TI to dig into, but they don’t follow through with their investigations. Transparency is not enough!

    Reply
  • August 5, 2012 at 7:50 am
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    Although there might be some form of capitalism in Georgia but it more resembles the kind of capitalism that can be found in Russia or China, in other words state-run capitalism that excludes democracy and system of checks and balances…

    Reply
  • August 5, 2012 at 4:44 pm
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    I read but do not believe, as this person is clearly out of touch with what is transpiring in Georgia. yes, we have heard and read in many places, “Georgia, the showcase of democracy, beacon of democracy, best democracy the “American People” could buy” – this is what the Western policy planners seem to have thought for a long time, as they were the ones puffing the country in this way. But since the 2003 Rose Revolution, which brought a US trained reformer Mikhael Saakashvili to office, this US funded experiment on the border of Russia has not lived up to this billing.
    Georgian democracy is stillborn and the government is a self-selecting clan/gang which preserves its power through various complex networks of patronage – or at least that is how things are panning out during the present period of transition, according to some pundits and policy experts.
    In spite of all efforts to reform, and the introduction of new blood (sometimes by spilling the blood of other clan members), the government and the ruling National Party have successfully monopolized power and grabbed money flows. The influx of development money, designed to produce the opposite outcome, has merely bolstered the regime and its present character. Now few can challenge the existing political machinery since it can prove hazardous to their health and security if they do.

    What went wrong?

    Was this all that was ever really planned, notwithstanding the debacle of the 2008 Georgian- Russian war and the economic and political freefall it produced? Many questions remain, but for now the public focus is on the arrival of a new savior. Bidzina Ivanishvili, consistently branded “the oligarch” by government-controlled TV stations, has contrarily been featured on the front page of Forbes as a symbol of the next stage of democratic development. He has been presented as the man who can ensure that, for the first time since it regained its independence from the Soviet Union, Georgia will achieve a peaceful transition of power.

    However, the government’s response casts doubt on this optimistic assertion. No-one will be safe – all will be pawns in the great blame-game to be fought out on the streets of Tbilisi and possible remote Georgian regions this fall and winter, connected to the so-called free and democratic elections to be held in October.

    Reply

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