Light and shade of social- economic development diagnostics

Nodar Chitanava

The general analysis of present-day development of Georgian economy, peculiarities of the on-going processes of national economy transformation and tendencies testify to the fact that market economy – conglomerate – was formed in the country.

It does not have any historical analogies. Therefore, the difference of opinions about its estimation gave rise to the contradiction of different positions. A major part of population thinks that once market economy was formed (moreover, the one promised us) then why do not we live under the social and economic standards of developed countries. This viewpoint built on emotion is by no means spontaneous. It indicates at market romanticism. The propagandistic machine that acts under the different principles in state policy (supported by the vast masses) “convinced the population in “the omnipotence of market”. The society believed that the declaration of market economy, the formation-functioning of private sector was a necessary condition for the prosperity of national economy. It is noteworthy that all countries of the world have market economy. However, the major part of population is poor. Under the latest news, every year 80 million people die of starvation whereas after the World War II 50 million people were killed.
It turned out that declaration of economic freedom only does not provide for the formation functioning of strong national economy. In any case, the level of social-economic development in the country is determined by the quality of production capacity development, factors of economic efficiency improvement, indices. The gross domestic product is also universally recognized. In 2000, this index amounted to 660 dollars per head. Yet, the average index in the world makes up 5000 US dollars; the USA – 29 thousand, countries of the Seven 21-22 thousand, China – 3,800 dollars, etc. (Georgia is on the level of Cameroon by these indices). At the same time, in 1990 GDP made up 38% of this index. De-industrialization process indicates at the critical state of economic development.
In 2000, the industrial production rate made up 17% of 1990 index. The GDP production rate made up 13%. For the past period the agricultural produce has decreased by 50%, commodity circulation by 37%, and capital investment by 5,7%. It means that reform policy came in contradiction with time and world integration processes. It is common knowledge that world’s developed countries went over to the post-industrial stage. At this time Georgia went into the chronic phase of de-industrialization process. The poverty level is still high in the country, a great part of population lives beyond the poverty line. Science, education, culture, health got into a plight and, in fact, bear the features of “wild capitalism” whereas recently it has been confirmed by the analysis of national economy transformation that the objective process of transition to modern market relations and political democracy (as a rule) turned into a destructive social-economic factor in Georgia. The national economy came to a deadlock.
The essence of main political contradiction stands out against a background of these processes. We think that the main political contradiction is determined as follows: given the destruction in the country, there is a severe social contradiction between the rich minority (“the new rich”) and the impoverished majority (“the new poor”). These two notions (“the new rich” and “the new poor”) are by no means conditionally different. The difference between them consists in mentality, recognition of valuables. They have different consumers market; the influence of price formation is also different. Thus, they live in accordance with different norms of social behaviour. This special kind of social phenomenon that stands in the way of social consolidation by directly influencing the development processes and social equality, will, in the long run, become the reason of social explosion in transition to chronic state. The formation of effective market economy system is necessary for smoothing away this contradiction. Unfortunately, state economic policy does not provide for this. Therefore, the subjective factor did not suit the objective conditions of reforms.
A unique situation came into being: on the one hand, necessary political, economic and social preconditions were formed in an objective way; on the other hand, the passive economic policy of the country serves to stand in the way of reforms. “The strategy” of shifting the present into the past suffered a crash.
For the past time Georgia has formed part of different political, economic and financial structures of the world integration process (UN, IMF and others) and it cooperates with a number of regional unions (Euro union, CIS, the Black Sea economic cooperation countries and others). The main corridor of TRACECA goes through the country; historical significance is also attached to the construction and functioning of gas and oil pipeline (we should hereby also stress their political significance). F.e. Georgia acquires the function of great energy supply transportation. Though, it is rather similar to “the dormant potential”. It is noteworthy that in 1999-2000 Georgia received a great amount of financial and other kind of assistance from foreign countries. The export-import ratio grew (though in 2000 import exceeded export thrice). The external debt made up 60% of GDP, which surpasses the widely recognized limit of economic safety (30%).
One of the peculiarities of the present-day situation is that economic processes entered the stage of criminal regulation of the market, which served to create favourable conditions for the misappropriation of national wealth (on the basis of direct and appropriate law) by a minor part of population. The development of resources reproduction process was spontaneous. The national wealth petered out. In fact, the oligarchy assumed the function of controlling money-and-commodity relations. The conception of economic reforms that was offered from outside and concerned the mechanization role of the state in economic processes suffered a defeat, too. This doctrine was formed for the Third World Countries, which prevented the state from determining its own (exclusive) social economic function in economic reforms. These resulted in the economic lag of our country. F.e. according to the experts’ mind in case the present economic growth rates are preserved (4-5%), in 2005 GDP in Georgia will amount to 50% of 1990 index. It is now when the USA intends to increase this index by 140-150% and Euro Union and Japan (the Pacific Rim) by 130-135% as compared with 1990 indices. This tendency testifies to the fact that from the viewpoint of history the Georgian economy is far behind time or, to be more exact, it fails to use new factors for the economic development. Of course, this lag can not be overcome only by the omnipotence of market principles (“invisible hand”).
What are the factors that stipulate for the present-day situation of national economy? Two principal views and approaches were formed for the estimation of the existing social economic situation. The first one is based on the officially recognized position. It implies that hard economic, political and psychological environment was created during the reform process, which served to determine the contradictory and correspondingly critical nature of reforms. In accordance with this approach, the main reason of critical situation are considered to be objective condition-factors.
In accordance with the second approach (author of the lines and others), in transition time we should recognize the objective factor as one of the reasons of critical situation resulting from the organizational economic reforms. However, the decisive role was performed by a subjective factor. This can be explained by a number of arguments. First of all, in the conditions of objectively, but spontaneously formed independence of the country, the political forces (the authorities) were unable to determine correctly political and social economic functions of the state. The state policy was founded on the myth of the omnipotence of market self-adjustment system the strategy of which (especially, during the functioning of the “Provisional Government”) was built on the limitation of state traditional functions. On the decisive stage of the country’s development, in fact, in extraordinary conditions, when the temporary termination of democratic processes becomes essential, non-interference of state structures (ministries, department) in the national economy (they were transformed into the so-called functional structures) turned out to be a grave mistake. Because of this, economic processes have acquired a spontaneous nature. National interests replaced private persons and separate groups. National wealth was misappropriated and cultural values depreciated, the territorial entity was put under threat. The processes of criminality in economy strengthened. The state conferred its “niche” to spontaneous criminal groups that merged with government institutions and transformed into the “leaders” of social reforms. The liberal monetary model was conceptually and methodologically legalized on the next stage. It became a main subjective factor of economic failures. This model does not meet the strategic requirements of averting the crisis. The main drawback of this model is that it makes the notion liberalization close to the meaning of spontaneous development. It is based on the principle of market universality whereas liberalization is a method and mechanism of regulating social reforms. That is why it must be supported by strong social institutions (state) in a concrete situation. This condition was not realized in Georgia. Liberalization speeded up the spontaneous development of reforms. The second element of model – mass privatization – began at the time of the depreciation of population’s savings. That is why capital owners turned out to be the potential clients of state property earned by means of misappropriation of national wealth and bribes. This is the part of population that needs the mass privatization process for the legalization of black money. Thus, the first generation of proprietors was formed in a non-democratic and illegal way. These promoted the creation of psychological environment for the social-politic acceleration. Financial stabilization is seen as one of the most important principles of the model. It is necessary because it serves both as a guiding line and mechanism. In Georgia this factor was reflected in the functioning of national currency and adjustment of inflation processes. The both processes play an important role. Yet, there are not necessary conditions for the transition to the economic growth. This process did not take place. One of the central principles of this model was consecutive implementation of the minimization of the state course. This main principle opposes both the world economic experience and time requirements. In transition period, especially, in the difficult transformation stage the adequate function of the state must be fulfilled. This was confirmed by the state policy of the USA during the depression period. Practice shows that in the post-soviet period the state objectively acquires the function of a factor that creates economic system. This factor will be replaced by the increasing role of market self-adjustment during the introduction of market relations’ principles. This conceptual approach was, in fact, ignored in Georgia. We should point out to the fact that the Nobel Prize (D. Stiglitz, D. Akuilof, M.Spencer) was conferred to the American scientists who adhered to the opinion of the increase of state role in modern economy.
Therefore, the philosophy of economic reforms in Georgia does not meet the requirements of time and the strategic interests of the country. It was formed under the influence of abstract dogmata. Naturally, an eclectic, unstable conceptual and methodological basis of reforms was came into being. As we see, the negative consequences of economic reforms were to a large extent stipulated by subjective factors. The decisive role in the formation of the above-mentioned subjective factor belonged to the conception of “new mentality” that was formed spontaneously. The society was, in fact, unprepared for playing an active role in the realization of this conception. They left different political groups (who offered the philosophy of “street life”) to settle this matter. The political phenomenon in the city streets gradually occupied a dominating place and promoted the formation of a new type of oligarch institutions by means of misappropriation of national wealth. Today, it struggles for the position of a leader. A major part of officials who came to executive and legislative power with new mottoes and pursued the veiled policy of economy degradation strengthened their own positions. Therefore, we obtained a qualitatively new element (in the form of state power) for the society that had been transformed in accordance with criminal principles. There is no doubt that many of those who came with the motto of “new mentality” have already fulfilled their historical duty and thoroughly destroyed the social national economy. They have “razed to the ground” mottoes and slogans of some national leaders and compelled them to leave the social arena. Therefore, “the new mentality” failed to be useful for the economy of the country. It means that the subjective factor (state) did not keep abreast of time. Instead of systematic program it offered the society the vector of development that could be used as a shield for the satisfaction of veiled (real) political ambitions.
This is explained by two principal reasons. First, the level of mentality in a broad sense (the basis of country’s economic policy) was not high enough for the determination of its new role in accordance with the time requirements. Secondly, the authorities were compelled to compromise with the adventurist dogmata thrust on them. In these conditions, the state did not have a necessary amount of social energy, support of society and corresponding control organs for the recovery of economic policy. Therefore, in the XXI century a new approach to the settlement of political and economic reforms is necessary for averting the crisis. First of all, it is essential to increase the mentality level. It is not an abstract task to be solved in a short space of time. Nowadays, the country requires mentality that would meet the state interests. Unfortunately, the country lacks one nowadays. At the same time, the country has a great potential for such type of mentality. This “dormant” potential can be awakened only through the support of society. The process of society’s awakening is, unfortunately, slow. Georgia must overcome the system crisis. There is a stable foundation for such mentality in the country. That is why it must be formed.
The time set a historic problem before Georgia once again: “We must not leave others to care for our present and future. We have no other way out. We must pave our way ourselves”. (I. Chavchavadze).
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