To the issue of libertarianism in modern Georgia

(political-economic essay, part II)
Giorgi Rusiashvili, Doctor, Professor

In our recent paper we referred to the different aspects of introduction of libertarianism in modern Georgia both from theoretical and practical views.

In the current paper we want to address another thematic which relates to the issues of passiveness of different segments of society of modern Georgia in social-political life.
For this purpose, we want to mention the following circumstances: particularly, the best definition of libertarianism state to our understanding given in previous paper is rightist in economy (“capitalist”) and leftist in private affairs (“liberal”). We have mentioned altogether that the current ruling power of Georgia is far from the given state particularly by utilizing publicly the parts of social engineering instruments which indicates that due to this in Georgia at least can not exist the conditions necessary for libertarian society. Also it was highlighted that democracy as political-social formation of society is product of liberal society established.
Although Democracy can be the product of liberal society in the same way as liberal society can be outcome of democratic governance because people move towards the freedom.
In the first case, the given event can be classified as “revolution from bottom to top”, and in the other case, as “revolution from top to bottom”1.
The first case is more natural, and the second case is characterized by higher level of artificiality. Otherwise the government without the public pressure is not dedicated towards voluntary introduction of democratic governance principles and rules and this can be achieved only by relevant and appropriate public pressure (activity) which is also proved by historic experience of world countries.
The current state of Georgia’s development indicates that it is going on transformation of country towards the capitalistic economic formation which is proven by country’s transition state (underdevelopment of stock market exchanges, lower level of competition/mono-oligo-poly status of economy development, unfair competition, non-existence of trade unions etc)2.
It is noteworthy to mention that socialism or social-orientation of economy is possible to form only after development of capitalistic formation.3
Namely, the experiment conducted in former Soviet Union which alongside stipulated establishment of socialistic society without development of strong (perfect) capitalist society was false and misleading and consequently it did not work because the society was not ready for this. Accordingly it is impossible establishment of socially oriented society by force and artificial alteration of population. The human being will not refuse its personal needs against the public ones and even if he will do so he will not act rationally, but would behave contrary irrationally. Any individual psychologically is motivated to act as far as possible rationally and pragmatically4. One will probably agree that the motivation of human being towards rational behavior from economic postulates point of view is good. As a result of artificial introduction of socially-oriented society it was done total destruction – degradation of mentality of people, deterioration of their economic behavior (as of economic agents) and namely after this time it starts to work main characteristics of average Georgian personality (corruption, excessive leisure time, non-saving attitude, increased consuming behavior, careless on public goods, places, locations in compare to its own ones, support to criminal forces against the state etc)5. It is not secret that its cause was state ownership (or unidentified ownership), which in its turn effected on the deficit-wise economy expansion.
Contrary, in the normally functioning socially oriented society it is being done transformation of private ownership type companies into the publicly owned companies. Benefit of joint stock companies or corporations in compare to soviet type comprehensive “state” property is clear, especially that in former case the possibility of ownership identification even at the very least level exists, before which the management and directors are responsible with highest level of diligence and stewardship.6
Development of capitalist society in the right path in form of socially responsible society in which altogether are functioning the rule of law and sound judicial system and which can be classified as solidarity society provides formation of socially-oriented (socialistic) society. What kind of mechanisms are in place in this case? Let us briefly list the main factors: 1) social engineering (pension payments, social care on disabled persons and un-employees); 2) development of cooperative forces in the society (reduction of the number of free-riders)7 and strengthening the sense of integrity within the society; 3) priority of law and fair-competition; 4) non-discrimination and protection of human’s rights (mobility, free expression, private property, etc); 5) the quality of the reporting of the government not only in the terms of transparency of information, but also in terms of its relevance, prudence and objectivity; 6) the optimal level of Gini index according to Lorenz curve 8 etc.
Proceeding from this, in the former Soviet Union states there was no socially responsible (social) society and that formation which ever existed subsequently was just myth and allegory of real socialist society.
Therefore, the possibility of development of socially oriented (socialist) society in Georgia as in the country of former Soviet Union exists only after accomplishment of the process of formation of strong capitalistic society which still is under way9.
For example, according to different researches, in the economies of FSU states the labor productivity is lower in compare to European and US labor productivity by about 100-200 working hours per annum, and in compare to Chinese and Indian economies by about – 700 – 800 working hours per year. This difference is bearing catastrophic results soon in near future and indicates on necessity of intensive economic growth10.
Saturation with the capitalist – wise economic relations causes the demand for socialist economic relations introduction which is strengthened by credit economic relations principles prevalence (Creditary Economics) within the world as well as which is proved by today’s global financial crisis experience11.
Let us consider the main characteristics of the above statements: (I) rightist movement in economy; (II) liberalism; and (III) democracy12. As we mentioned before the main characteristic of whether the economy is dominated by rightists or not, is capitalism, and of democracy – “social revolution” and of liberalism – “sexual revolution”.
Accordingly in Georgia, the alternative way of development to the conservative type of social organization is through “sexual revolution”13. Considering this fact, as well as from the point of establishment of capitalistic formation we forecast that introduction of strong democracy in Georgia is possible only after attainment of these two category requirements. We will consider as to why, below in the text.
Due to first factor, from the active life there are withdrawn or inert the youth (youngsters of higher classes of school and university students etc) contrary to the national-liberation movement of 80ies of the past century when this segment of the society was the most active, the liberalization of the society was not in the agenda that time and finally which caused collapse of totalitarian soviet system which was hardly ever possible.14 Therefore due to this from this socially active life it is withdrawn the active and important segment, in the form of youth.
The second segment which is also far from the social activity are entrepreneurs, which follow entrepreneurship activity, the middle class, which is so self-provided to be absolutely independent from the state.15 Subsequently this segment is withdrawn from socially active life due to transition economic conditions contrary to 80ies of the past century, when the society was more or less wealthy and employed.
It should be mentioned that although not so critical from our research point of view, non existence of trade unions, which also is deterministic parameter for the perfect capitalistic society, underdevelopment of political parties plays as an important delay factor as well for the democratic processes development16.
Therefore from theoretical point of view social inactivity of the Georgian society in general has also sharply defined cultural aspects17. Also cultural factor, in other words endogenous factor of growth, the X-factor is the most correct explanation of modern economic growth theories which in compare to other factors, like natural resources, capital, labor resources, technological development factors, has priority of application.
It can be summarized that Georgia as a conservative traditions country in private relations, which at the same time objectively is at the stage of transition to perfect capitalistic economy is pledged due to having within it the inert “to be socially active” segments of the society, that the democratic transformations processes to delay.
In any case as it is proved by world experience the world countries are developing in the same trend scenario, but some earlier and some later.
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E-mail: giorgirus@yahoo.com

1 In current Russia it is being actively discussed the issue of modernization, aka “new perestroika”. This idea is mainly promoted by pro-presidential circles (I. Yurgens, E. Gontmacher, «Picture of foreseeable tomorrow” Institute of modern development, 2010) compare to the pro-governmental circles. EU is also promising some kind of assistance, but subject of discussion is just the starting point or from where to get started, from economy or from politics. In case if reforming of economy will be selected, which is argued by the authors of the strategy, – this means movement towards “capitalism” formation direction (or “revolution from bottom to up”), and if there would be selected reformation of politics (also called for by EU) – that would mean “democratization” movement which is “revolution from top to bottom”. In both cases authors agree that development of capitalism and democracy shall be equally reachable in the society.
2 Some will argue with us that by non-existence of state regulation in those positions as human resources recruitment (“hiring and firing’) and in some other spheres (food safety, protection of consumer’s rights, intellectual property protection, anti-monopoly regulation) Georgia long ago is ahead of all progressive world and instead of regulated work conditions and contracting relations, the employers hire employees with breaching of their constitutional rights (non-normative workload, and firing); instead of any regulation there is no regulation at all in regards to phito-sanitary control, provision of product safety, protection of consumer’s rights, unfair competition, environmental pollution from sustainable development point of view (this by the way was done after the “rose revolution” when the pollution tax was abolished which is required to cover those externalities used in the production processes by the enterprises in terms of environment and local population pollution); when all the world is searching for the optimal balance between the level of free trading competition and intellectual property rights protection which with each other are in objectively determined dialectical antagonism, because from one side protection of free trading competition causes abolishment of property rights and contrary, in Georgia the antimonopoly agency was once cancelled at all which in the transition period was fulfilling very specific functions. But all these factor induce not the imaginary development status of Georgia, but that real situation in which Georgia as a country by its social-economic development level (poverty) is somewhere between Liberia and Sierra-Leone. Hereby we observe that the studies conducted under WB coordination which place Georgia at 11th place by easiness of doing business require more detailed consideration because there are not mentioned any transaction costs associated with the business registration and only legislative status is discussed in this way, but in practice in transition economy there exist different transaction costs which are not considered at all in the study, therefore operating with net data which can be applicable to Singapore or to Norway, in Georgia can not be applicable directly without its scaling effect. And second, but not the least, according to the same research 11th place is just weighted average parameter among the 6 different parameters and in such positions as are property protection, competition, openness of the economy, and protection of foreign direct investments Georgia is far away from 11th place, even beyond the top 100 countries. The single position in which Georgia has “good” or second place world wide and which particularly is inducing the 11th rank is “easiness to register the business’. This can be interpreted as velocity of normative procedures of the registration act of the new business by the state organizations. According to the high rank in this position, the “easiness’ can be even negative factor functionally, which is related to business liquidation because any liquidated enterprise is motivated to re-register anew and without studying the business history of liquidated organization from the point of view of creditors and related parties it is impossible receiving by tax authority of full information regarding this or that organization, and processing of such type of information and its analysis shall be done upon new business registration whether (i) does not constitute newly formed organization successor of formerly liquidated organization with uncovered business liabilities for the purposes of debts coverage or whether (ii) it is not related to any particular business organization for the purpose of proper consolidation of taxation base and their better administration after proper reconciliation (in Georgia there is not only even business related parties consolidation practices by the state tax authorities for the purpose of more efficient administration of taxes, but it is often that the property is just transferred to the close family member and the family returns are missing data on family revenues). However this is beyond of our research focus now and this thematic will be highlighted in next articles.
3 As it is highlighted in our article “Evolution of Human Behavior from private property to public governance in western developed states’ (journal “Georgian Economics”, 2006).
4 Here we would like to mention the phrase of Winston Churchill concerning the appraisal of socialist system which to his opinion was “good system but created not for people but for angels’. But today’s socially oriented capitalist economy model is nothing but different to 20ies and 30ies “wild-wild” capitalism, as far as soviet type socialism is different in general to theoretical wise capitalism.
5 There is theory according to which corruption is interesting event in terms of Jewish and Georgian ethnical communities phenomena: first in relation to Russia (and all over the world) and second in relation to former Soviet Union. Both categories were characterized by conflict / antagonistic situation with the state (which was cheated/stolen etc by them) and by cooperative relation with its co-nationalities. Namely due to this in the history of former Soviet Union the most successful nation was Georgians, and in the history of Russia – Jews. Integration mechanism in the society induces conflict between the particular society members, and cooperation with society in general. Consequently corruption and cheating the state causes cooperation among particular society members (mainly of the same ethnical origin), and conflict relations with the society in general (actual or “imaginary’ antagonist). Let us recall the words of Georgian literature personage Avtandil in “The Knight in the Tiger’s Skin”: “One hundred thousands of money multiplied by ten is your bribe” or if it is morally justified then corruption is positive.
6 It can be argued that Marx’s statement that “In order the property to be of everyone’s, it should be actually be of no ones possession’ – is incorrect. The correct understanding of this topic would be that “in order the property to be of everyone’s possession’ it shall be of everyone’s possession actually, which is practically applied by the corporate governance and public companies (joint stock) principles promotion in western societies.
7 This momentum is essential, otherwise when the majority (sufficiently large) of the society agrees on “single fair play rules” and accordingly does not breach the law. Of course there would be so called “free riders” institution even in such society but the difference between this type of society and for example the situation which exists in Georgia is that the quantity is essential because it transforms into quality (culture of nation). In Georgia for example the number of free riders (or those who conflict the society in general by not obeying to the rule of law) exceeds the number of those who are not. Also it is noteworthy to mention that only punishing wise measures (although important part of establishment of the rule of law) will not give the required results, and the condition of the society is to be taken into consideration (which is most important). This type of society agrees and realizes that in case if majority cooperates it is easier to achieve progress of the country, otherwise they would prioritize public demands against its own personal demands.