ISET

ISET Economist Blog

A blog about economics in the South Caucasus.

What Kind of "State" Does a Country Need?

When Belarusian President Alexander Lukashenko visited Georgia in late April 2015, we were once again reminded that history is not over yet, certainly not in the sense pronounced by Francis Fukuyama in his 1992 book End of History and the Last Man:

"What we may be witnessing is not just the end of the Cold War, or the passing of a particular period of post-war history, but the end of history as such: that is, the end point of mankind's ideological evolution and the universalization of Western liberal democracy as the final form of human government." 

Some twenty five year later, the world is once again rife with “contradictions” (the elimination of which is key to understanding Fukuyama’s end-of-history Hegelian thinking). These contradictions are most evident in the ever intensifying migration debates in Europe and the US, renewed trade wars, geopolitical rivalries and religious conflicts.

Lukashenko-ruled Belarus represents yet another visible contradiction to the Fukuyama-pronounced “unabashed victory of economic and political liberalism”. Situated in the geographic center of the European continent, Belarus’ illiberal democracy and largely state-owned and heavily regulated economy are an irritant for liberal ideologues and politicians, and a snag on EU’s eastward expansion.

Importantly for the purposes of this essay, the very stability and – as some might argue – economic successes of Lukashenko’s regime suggest that there is no one-size-fit-all “ideal state” (a la Plato’s Republic). Rather, different political arrangements and government styles may prove functional (and, therefore, publically acceptable) in different cultural settings. Moreover, contrary to the ahistorical end-of-history concept, history teaches us that a country’s institutions must change over time, constantly adapting to internal circumstances and the external context. What seems great here and now, may prove totally ineffective elsewhere or later.


GROWING UP IN EUROPE'S LAST DICTATORSHIP

Lukashenko’s the three consecutive reelections since his initial victory in the 1994 presidential elections have been questioned by many experts and international observers. A former director of a state-owned agricultural farm, Lukashenko currently serves his fourth term, and is already Europe's longest ruling head of state. Moreover, with no presidential term limits (eliminated through the controversial 2004 referendum), high (and rising, since the beginning of the Ukrainian crisis) approval ratings, and no viable opposition in sight, Lukashenko is likely to stay in power for years to come.

Not surprisingly, Lukashenko’s Belarus is not a Western political establishment’s darling. In 2005, Belarus was targeted by the US Secretary of State Condoleezza Rice as an “Outpost of Tyranny”, along with Myanmar, Cuba, Iran, North Korea and Zimbabwe. It is also routinely referred to as “Europe’s Last Dictatorship” by Western media.

Yet, when viewed from the (local) street level, the tyrannical aspects of Lukashenko’s dictatorship are hardly visible.

Navapolatsk, a tiny Belarusian city in which Salome Gelashvili spent more than eight years of her life, never seemed to her an “outpost of tyranny”. Moreover, having come back to Georgia in 1999, she had the opportunity to more fully appreciate the many advantages of growing up in Navapolatsk compared to the much larger Tbilisi. The Tbilisi school was no comparison to the one Salome attended in Navapolatsk in terms of both hardware (facilities) and software (quality of education). Her parents and those of her Belarusian classmates were able to keep their jobs, in stark contrast with more than half of her Tbilisi neighbors. Used to uninterrupted gas and electricity supply, Salome could never imagine that one day she would be reading by candlelight due to frequent blackouts in Tbilisi and elsewhere in Georgia.

Salome’s personal experience of growing up in Navapolatsk is consistent with what we know about the Belarusian model of transition. Instead of dramatically cutting back on public services – the common practice elsewhere in the former USSR, Lukashenko’s dictatorship was able to offer Belarusian citizens a highly visible helping hand in the form of well-financed education, healthcare and social security systems.

Education is a good case in point. Belarusian government expenditure on education in 2012 constituted 13.2% out of total budget expenditures (5.1% of GDP), about twice higher than the respective figures for Georgia (6.7% of total budget and 2% of GDP). Unlike Georgians, Belarusians do not need to worry about the quality of education offered by public kindergartens and schools. Most importantly, generous state funding allows to equalize educational opportunities for students coming from different socioeconomic backgrounds and across different locations. Belarusian children get roughly the same deal in small towns, such as Salome’s Navapolatsk, larger regional centers, and Minsk.

And the results are showing. While little of this is known in the West, Belarus is fast developing into an ICT heaven populated by hundreds of companies specialized in outsourcing, computer games (e.g. World of Tanks) and applications. These companies can draw on a pool of about 16,000 students graduating from the Belarusian university system every year with ICT and related technical skills.

Crucially, Belarusian ICT achievements are not just about quantity. For instance, the Belarusian State University’s team consistently performs at the top of the competition among more than 3,000 teams taking part in the annual International Programming Contest organized by the Association for Computing Machinery (ACM). In 2014, Belarus was ranked 38th among 166 countries on the ICT Development Index (IDI) produced by the International Telecommunications Union. In fact, with an IDI value of 6.89, Belarus is the highest ranked CIS country, leaving behind Lithuania (40th), Czech Republic (41st), and Poland (44th); moreover, in the same year, Belarus was recognized as one of the Top 9 Most Dynamic Countries thanks to a significant increase of the country's absolute IDI figure.


SOFT TRANSITION OR NO TRANSITION AT ALL?

By avoiding the rushed and highly corrupt privatizations of the early 1990s – the fate of most other former Soviet republics – Belarus was able to maintain its industrial base and employment while at the same time delivering extensive (and expensive) social services. This, and the fact that Belarus did not experience any ethnic conflicts or wars on its territory, resulted in much quicker economic recovery. Since 1995 (the year in which the Belarusian economy bottomed out) till 2008 (when it was hit by the global financial crisis), Belarusian GDP per capita has been growing at a stunning rate of close to (and sometimes above) 10% a year, well ahead of all non-oil CIS and most Eastern European economies.

WhatKindOfState1Source: World Bank.

Belarus’ growth performance has slowed down considerably after 2008, with growth rates falling from 7.9% in 2010 to 5.4, 2.6 and merely 0.6% in 2011, 2012, and 2013, respectively. Still, its average growth during the past 10 years (since 2005, see Chart 2) remains impressive, well above the growth rates achieved by most other transition countries (many Eastern European economies, which are now part of the EU, have been particularly hard hit by the global financial crisis of 2008).


WhatKindOfState2

Source: World Bank.

These data appear to show that a benevolent, Lukashenko-style dictatorship may be well suited for delivering an orderly and relatively painless economic “transition”. Certainly better than anarchy and civil war, asset grabbing and corruption unleashed by democratic revolutions in other former USSR republics – for example, in Georgia and Armenia, Kyrgyzstan and Tajikistan, Moldova, Ukraine and Russia.

What these data cannot tell us, however, is what is next in stock for Belarus.

A critical argument, often made by Lukashenko-haters, is that Belarus simply delayed the most important aspects of “transition”, and its current macroeconomic imbalances are just the beginning of a painful reform period ahead.

Indeed, as we have seen above, Belarusian growth has been fizzling out in recent years, begging the question of “reforms”, certainly as far as the economy is concerned. EBRD’s Transition Report 2014 concludes that “the country’s growth model has exhausted itself” and offers a long list of long overdue reforms. The big puzzle – not addressed, for obvious reasons, by the EBRD - is whether or not these reforms could be successful without a complementary set of political liberalization measures, and how painless will be anything approximating a genuine “transition”.

Despite many potential arguments to the opposite, we would like to suggest that any “transition” awaiting Belarus at this juncture is likely to be extremely smooth compared to the major calamities produced by the naïve and ill-conceived privatizations/liberalizations of the early 1990s.

First, the starting point of Belarus’ future transition is very high by CIS standards. Its GDP per capita is higher than in the majority of former USSR republics, placing it in the upper middle income country bracket, according to the World Bank’s classification. Moreover, this average figure greatly underestimates the wellbeing of a representative (“median”) Belarusian citizen because of more equal income distribution. While perhaps not obvious, high income levels and low levels of inequality bode well for Belarus’ eventual democratization.

Second, Belarus already has a fairly vibrant private SME sector and a modern entrepreneurial class. The IT sector, for example, is driven by young private entrepreneurs; there are many successful greenfield investments and joint ventures in services, machine building and chemicals, food and wood processing (with the likes of IKEA), preparing the cadre for expansion and future growth. One element missing – but not missed – is the “oligarchs”.

Third, if Belarus ever goes ahead and privatizes its large industrial assets it will have the opportunity to do so in an orderly fashion, e.g. by selling large stakes in its companies to global multinationals or holding IPOs in London, New York or Moscow. It would thus be able to use privatization as a means of attracting investment rather than enriching a few well-connected individuals (as happened in every single CIS country in the early 1990s).

Fourth, Belarus’ labor force is excellent in terms of general education, technical qualifications and discipline. Unlike Georgia, Belarus did very well in maintaining and further strengthening its human capital by offering a true equal (quality) opportunity in education to its young, on the one hand, and encouraging the acquisition of IT and technical skills, on the other. This asset will be a key factor in the country’s future development.


DICTATORS: TEMPORARY AND PERMANENT

It is perhaps ironic that it may take a “dictatorship” to deliver health, education and economic growth policies that benefit the vast majority of a country’s population in a crisis situation. And it is certainly sad that formal “democracy” in our part of the world is too often a façade for kleptocratic regimes ruling over poorly informed “electorates” and doing very little to promote the welfare or freedoms of their citizens.

To better grasp the past and future of the Lukashenko phenomenon (and that of its mirror images, the failed quasi-democratic states ruled by the likes of Yanukovich), it might be useful to remember that “dictatorship” is a not a modern invention. The notion that a benevolent dictator may be better suited to manage a war or handle a crisis goes all the way back to ancient Roman history. As discussed on Wikipedia:

“In the Roman Republic the term "Dictator" did not have the negative meaning it has later assumed. Rather, a Dictator was a person given sole power (unlike the normal Roman republican practice, where rule was divided between two equal Consuls) for a specific limited period, in order to deal with an emergency. At the end of his term, the Dictator was supposed to hand power over to the normal Consular rule and give account of his actions – and Roman dictators usually did.”

A key feature of Roman dictatorship was, of course, the clear constitutional constraints on its term and powers. This is what made it a) successful and b) consistent with the Roman Republic’s democratic values and political culture. In the absence of such constraints, the main challenge for modern (benevolent) dictatorships, such as Lukashenko’s Belarus, is to reform themselves and transition to a more participatory form of government. As noted by Harold James: “authoritarian systems — whatever their short-term successes in holding the line against irresponsible policies — are unsustainable in the long run. A lack of accountability inevitably produces corruption and inefficiency.”

A proper democratic transition may take time. It took England almost 500 years to gradually introduce universal suffrage since 1432 when King Henry VI of England allowed male owners of property worth at least forty shillings (a significant sum!) to vote in a county. It was not until 1918 that all British men over 21, and wealthy women won the right to vote, and it was not until 1928 that all women over 21 won the right to vote.

Being behind gives people and countries the opportunity to take a ‘free ride’ on the experience of those ahead, learn from their successes and failures. Thus, we hope it will take Belarus much less than 500 years to introduce greater political freedoms without lapsing into anarchy or kleptocracy.

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Guest - Eric Livny on Friday, 15 May 2015 15:37

As argued by Gerard Roland and Yuri Gorodnichenko (http://www.voxeu.org/article/role-culture-democratisation#.VVVpJDjFegQ.facebook), "countries with individualist culture democratise earlier than collectivist cultures that may remain stuck for a long time with relatively efficient autocracies."

Lukashenko's Belarus may be perfectly fitting their description of a "relatively efficient autocracy" underpinned by a strong collectivist culture.

As argued by Gerard Roland and Yuri Gorodnichenko (http://www.voxeu.org/article/role-culture-democratisation#.VVVpJDjFegQ.facebook), "countries with individualist culture democratise earlier than collectivist cultures that may remain stuck for a long time with relatively efficient autocracies." Lukashenko's Belarus may be perfectly fitting their description of a "relatively efficient autocracy" underpinned by a strong collectivist culture.
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