The Uncommon Poverty
of the Commonwealth of Independent States (CIS)
By: Dr. Sam Vaknin
Also published by United Press International (UPI)
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Written January 23, 2003
Updated March 4, 2005
The Lucerne Conference on the then 9 months old CIS-7 Initiative ended two
years ago with yet another misguided call upon charity-weary donors to grant the
poorest seven countries (Armenia, Azerbaijan, Georgia, Kyrgyz Republic, Moldova,
Tajikistan, and Uzbekistan) of the Commonwealth of Independent States financial
assistance in the form of grants rather than credits.
The World Bank's Managing Director, Shengman Zhang, concluded with the
deliriously incoherent statement that "donor assistance in the form of highly
concessional finance and debt relief will only succeed if linked to effective
reform". None of the other five co-sponsors - the IMF, the European Bank for
Reconstruction and Development (EBRD), the Asian Development Bank (ADB) and the
indefatigable Dutch and Swiss governments - questioned this non sequitur.
Since independence a decade ago - aided and abetted by the same founts of
Washington wisdom - the seven unfortunates have regressed to a malignant
combination of unbridled autocracy and perpetual illiquidity. Poverty soared to
African proportions, the region's economies shriveled and public and external
debts mounted dizzyingly.
Ever the autistic solipsists, the IMF and World Bank maintained in a press
release that the talk shop "broadened and deepened the debate to include a range
of economic, institutional and social issues that must be tackled if the seven
countries are to achieve the targets of the Millennium Development Goals".
The release is strewn with typical IMF-newspeak.
The destitute, oppressed and diseased people of the region should achieve
"ownership of the reform agenda" in accordance with "clear national priorities".
Worry not, reassures the anonymous hack: the World Bank has embarked on Poverty
Reduction Strategy processes in all seven fiefs.
The cynical cover-up of the west's abysmal failure in the region comes replete
with unflinchingly triumphant balderdash: the policies of the Bretton-Woods
institutions are "putting the countries themselves in the driver's seat of
reforms". According to Mr. Zhang, corruption in the CIS-7 is "moderating" and
the investment climate is "beginning to improve".
The solution? "More regional integration" - in other words, more trading among
the indigent and the demonetized. This and better access to markets in "the rest
of the world" will assure "recovery and future prosperity".
Mr. Zhang conveniently neglected to mention the Stalinesque rulers of most of
the CIS-7, the political repression, the personality cults, the blatant looting
of the state by pernicious networks of cronies, the rampant nepotism, the
elimination of the free media and the proliferation of every conceivable abuse
of human and civil rights, up to - and including - the assassination of
opponents and dissidents. To raise these delicate issues would have been
impolitic when the IMF's largest shareholder - the United States - has embraced
these despots as newfound allies.
And from fantasyland to harsh reality:
According to the World Bank's own numbers, with the exception of Uzbekistan, the
current gross domestic product of the reluctant members of the CIS-7 is between
29 percent (Georgia) and 80 percent (Armenia) of its level ten years ago.
Armenia's annual GDP per capita is a miserly $670. More than half the population
is below the poverty line. These dismal results are despite seven years of
strong growth pegged at 6 percent annually and remittances from abroad which
equal a staggering one eighth of GDP. Armenia is the second most prosperous of
the lot. Its inflation is down to two digits. Its currency is stable. Its trade
is completely liberalized (a-propos Zhang's nostrums).
Azerbaijan, its foe and neighbor, should be so lucky. Close to nine tenth of its
population live as paupers. This despite a tripling of oil prices, its mainstay
commodity. The World Bank notes wistfully that its agriculture is picking up.
Its oil fund, insist the sponsoring institutions, incredibly, is "governed by
transparent and prudent management rules".
Georgia flies in the face of the Washington Consensus. Petrified by a meltdown
of its economy in the early 1990s, a surging inflation and $1 billion in
external debt - it adhered religiously to the IMF's prescriptions and
proscriptions. To no avail. Annual GDP growth collapsed from 10 percent in
1996-7 to less than 3 percent thereafter.
The Kyrgyz Republic is a special case even by the dismal standards of the
region. Again, nine tenths of its population live on less than $130 (one half on
less than $70) monthly. Poverty actually increased in the last few years when
economic growth picked up. At $310, the country's GDP per capita is sub-Saharan.
Is this appalling performance the outcome of brazen disregard for the IMF's
sagacious counsel?
Not so. according to the CIS-7 Web site "the Kyrgyz Republic is currently the
most reformed country of the Central Asia and sustains a very liberal economic
regime." The Kyrgyz predicament defies years of robust growth, single digit
inflation, a surplus in the trade balance and other oft-rehashed IMF benchmarks.
That the patient is as sick as ever casts in doubt the doctors' competence.
Moldova - with $420 in GDP per capita and 85 percent of the population under the
line of poverty - is only in marginally better shape, mainly due to the swift
recovery of its principal export market, Russia.
The best economic performance of the lot was Uzbekistan's. It is often wheeled
out as a success story and used as a fig leaf. Uzbekistan's GDP is, indeed,
unchanged compared to 1989. GDP per capita is $450 - but only one third of the
population are under - the famine-level - national poverty line.
But a closer scrutiny reveals the - customary - prestidigitation by the
proponents of the Washington orthodoxy.
With the exception of Belarus, another relative economic success story,
Uzbekistan resisted the IMF's bitter medicine longer than any other country in
transition. Its accomplishments cannot be attributed by any mental gymnastics to
anything the west has done, or said. The CIS-7 Web site describes this
contrarian polity thus:
"Today significant distortions in foreign exchange allocation remain, reflected
in a large difference between the official and curb market exchange rates (about
60% in mid-2002). The current economic system retains the key features of soviet
economy, with the state owning and exercising quite active control over the
production and distribution decisions of a significant number of Uzbek
enterprises."
There lurks an important lesson.
Central Europe - with its industrial and liberal-democratic past should not be
lumped together with east Europe. The moral seems to be that transition in the
former Soviet Union, in the east and in the Balkans was a foolhardy and
ill-informed exercise, administered by haughty and inexperienced bureaucrats and
avaricious advisors.
The countries who resisted western pressures and chose to preserve Soviet era
institutions even as they gradually liberalized prices and unleashed market
forces - seem to have fared far better than the more obsequious lot. This is the
Chinese model - as opposed to the "shock therapy" prescribed by western armchair
"experts". Tajikistan - with $170 GDP per capita and an unearthly 96 percent of
its denizens under the poverty line - may be regretting not having heeded this
lesson earlier.
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