Commentary: Uncommon poverty of the CIS

By SAM VAKNIN, UPI Senior Business Correspondent  |  Jan. 23, 2003 at 7:47 PM
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SKOPJE, Macedonia, Jan. 23 (UPI) -- The Lucerne Conference on the 9-month-old CIS-7 Initiative ended Wednesday with yet another misguided call upon weary donors to provide assistance to the poorest seven countries of the Commonwealth of Independent States in the form of grants rather than credits.

The World Bank's managing director, Shengman Zhang, concluded with the 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, the Asian Development Bank 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 (Armenia, Azerbaijan, Georgia, Kyrgyz Republic, Moldova, Tajikistan and Uzbekistan) 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 International Monetary Fund and the 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 coverup 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 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."

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 10 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 (apropos Zhang's nostrums).

Azerbaijan, its foe and neighbor, should be so lucky. Close to nine-tenths 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 1996-97 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 past 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: Tthe Kyrgyz Republic is currently the most reformed country of 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 is 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 percent in mid-2002). The current economic system retains the key features of the 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 advisers.

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.


Sam Vaknin advises governments in their negotiations with the IMF.


Send your comments to: svaknin@upi.com.

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