Georgia Enslaved!

Op-Ed

On July 24, Bidzina Ivanishvili, Georgian tycoon and Chairman of the ruling party Georgian Dream, gave a long-awaited interview to Channel One journalist Maka Tsintsadze in which he unleashed a stream of criticism of the country’s financial system, claiming that the two leading bank institutions, TBC and Bank of Georgia, have “swallowed” the state and stuck people in endless debts. Then he called this policy “shameful”.

These statements may be perceived as historic because this is the first time in Georgian modern history that a high state official has openly and decisively attacked “business” and the “business environment” that was step-by-step established following the collapse of the Soviet Union. For years, Georgian governments were not only aware of the existing economic processes in the country but were very keen to support particular political-economic approaches, which ultimately lead to a reality where every fifth individual in the state lives in poverty today. It is interesting as to why the current government and its leader, Bidzina Ivanishvili (who is an active businessman himself), were forced to openly criticize two leading bank institutions and the business environment in general. The answer is simple: Georgia can’t move on unless some significant changes are made to it is political-economic paradigm.

Shifting Paradigms

When explaining why Marxism took such extreme forms (for example, military communism) in post-Empire Russia, prominent Russian philosopher and political thinker Nikolai Berdyaev argued that it was a result of an old tradition set by Orthodoxy. For centuries, the Russian Orthodox Church demanded blind loyalty from its “flock” that dismantled critical thinking within the ranks. As a result, the new political-economic theory of Karl Marx that would have been slowly analyzed, criticized and assessed by every Western society, was turned into another dogma; another form of totalitarian thinking in Russia.

The collapse of the Soviet Union was not only an appraisal against totalitarianism and a fight for national self-determination, but also a shift from planned economy to market. It was and still is logical that independent Georgian society wanted to abandon everything that the Soviet period had established, including the government’s involvement in everyday life. Local political and economic philosophers immediately picked up the so-called liberal-economic model, wholeheartedly preaching the “laissez-faire” model where the private sector was totally free from government interventions, while every single citizen was left “tete-a-tete” (Eng. "head to head") against business. Furthermore, Georgian governments have actively tried to create the best possible hothouse conditions for the sector, frequently turning a blind eye to the growing gap between the business and Georgian societies. This approach can be easily reflected by a statement of former Georgian Minister of Economy (June–December 2004), Minister for Reform Coordination (February 2008 – February 2009), Kakha Bendukidze, who argued that it is possible to privatize everything except your own mother.

Local political-economic thinkers became enslaved by the so-called liberal model, pushing it despite opposition. As Russia before, they managed to transform this frequently criticized model into a new undisputable dogma.

The Win-Lose Game

Ivanishvili’s expression of a “swallowed” state perfectly reflects the existing socio-economic situation on the ground. Nowadays, the obsession of local elites to push the liberal economic model, without taking into consideration some important variables such as concurrency and mentality, have led to the establishment of a “win-lose” game. In this game, business is always the winner and the consumer is always the loser. Every single deal is, by default, much more profitable for the financial institution than the citizen. Moreover, the private sector feels totally untouchable and as yet has been unpunishable. In 2015, former Prime Minister Irakli Garibashvili questioned why the price of oil on the local market continued to be high despite the cost of commodities falling around the globe. Garibashvili was highly criticized by various actors for interference in private sector matters. In April 2018, former finance minister Mamuka Bakhtadze (current PM) criticized the leading banks of the country for not pushing the state’s economy forward. Bakhtadze argued that the banking system should be driving Georgia’s economic development; a grand mission that is not pursued by the leading local financial institutions. Bakhtadze, as Garibashvili before him, was so harshly attacked that he was pushed to give some “explanations.” But Ivanishvili’s case is totally different. As a Georgian tycoon, the richest and most influential political-economic figure, he can finally break through barriers and focus on those clearly existent flaws. In 2012, Georgian society hoped that Bidzina Ivanishvili would lead the country to a better future. He has a chance to do it by pushing forward changes to the country’s financial system, transforming the “win-lose” game to “win-win”.

By and large, this tendency of ruling representatives expressing their dissatisfaction with the existing financial system is a reflection of dramatic socio-economic conditions. The Georgian state and society has become enslaved by its own business actors whose activities have frequently a more negative than positive impact; moreover, this negative impact is so immense that even state officials (who are actually to blame for its establishment) are pushed to recognize it. Georgian business holds both the state and society restrained and thus blocks state-development. The country’s political elite must free itself from “liberal fanaticism” and start implementing the necessary political-economic methods to ensure that local financial institutions are as free and independent as socially possible, working on the market, state and society simultaneously. Only in this scenario can the existing “win-lose” game be replaced by the “win-win” model. Only then will Georgia finally be able to move forward.

By Archil Sikharulidze