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Ukraine should beware of the Georgian development model

When Ukrainian President Zelenskyy announced that he would seek Mikhail Saakashvili’s appointment as deputy prime minister, commentators were split. For some, Zelenskyy was displaying a serious intent to kickstart reforms by appointing a seasoned anti-corruption warrior. For others, he was simply engaging in a public relations campaign to distract attention from his limited achievements in his first year in office, especially from his controversial removal of some high profile and credible reformers from office.

March 19, 2021 - Thomas Barrett - Articles and Commentary

By Lossi36

There is, however, a third and much more intriguing option: that Saakashvili’s appointment represents the culmination of Zelenskyy’s desire to adopt the Georgian development model. At first sight, this seems like a positive move. Saakashvili is famous for overseeing Georgia’s momentous developmental improvement after the disastrous Shevernadze era. On his watch, Georgia went from being an overwhelming corrupt and criminal failed state to a business-friendly, small-state economy with very low petty corruption and a meteoric improvement in international corruption and governance indicators. 

Rose Revolution not as rosy as it seems?

There is, however, a less than wholesome side to this story. Saakashvili was undoubtedly a reformer, but whether he was much of a democrat is open to question. With his popular mandate following Georgia’s Rose Revolution of 2003 (he received 96 per cent of the vote in the subsequent presidential election and his United National Movement received 76 per cent in the parliamentary election), he unleashed a reform programme with scant regard for normal democratic checks and balances. The judiciary and law enforcement were deployed as tools of the executive, rather than checks on its power. Parliament was sidelined and decision-making was concentrated around a cabal of Saakashvili’s young, Western-educated allies. The constitution was changed to transform Georgia into a “super-presidential” state with a dominant executive

Law enforcement agencies were not, or at least did not operate, independently from the government. Instead, they were frequently used selectively, targeting opponents of the ruling party while turning a blind eye to the activities of dubious business interests close to them. Although criminals and corrupt officials were stripped of their property and given draconian prison sentences, there was widespread (and arguably institutionalised) torture in the prison system. The public administration lacked independence and there was widespread use of state administrative resources to support the ruling party during election campaigns. 

It took the arrival to the political scene of Bidzina Ivanishvili – Georgia’s richest man who made his money in the chaos of 1990s Russia – to mobilise his vast wealth to remove Saakashvili and his party from power in 2012. After nine years of “autocratic modernisation” under Saakashvili, Ivanishvili was quickly able to consolidate power and take control of a heavily centralised and executive dominated state for his own purposes.

Many Georgians acknowledge that Saakashvili had an authoritarian streak, but they argue that his methods were justified by the circumstances. After all, the Georgian economy in 2003 was on the verge of collapse. Electricity and water supplies were extremely unreliable, businesses without friends in high places were strangled by corruption, criminal gangs operated as alternative law enforcement for large swathes of the country and many regions were de facto independent of central government control. Saakashvili changed all of this. But his reforms came at a price: super-Presidentialism, repressive measures and a pliant judiciary. Even if these were justified in the dire circumstances of 2003, why was he unable to give up his addiction to authoritarian tactics over 10 years in power?

Georgia’s failed libertarian dream

More attention must be paid to the political economy of Saakashvili’s rule. One of the most striking features of his reforms was their stark libertarianism. Saakashvili’s Finance Minister Kakha Benukidze’s response to corrupt bureaucracy was to slash the state to the bone, decimate regulations, close institutions and fire public servants en masse. Benukidze made every effort to ensure that Georgia rose into the top 10 of the World Bank’s “Ease of Doing Business Index.” 

Much of this made sense in the context of Georgia’s bloated and ineffective system of governance in 2003. However, barely any attempt was made to rebuild robust institutions. Social protection in Georgia is extremely limited, labour rights are scarce and there is no minimum wage. Despite its reputation for business friendliness, Georgia scores very low in terms of anti-monopoly policy, and it is no secret (both today and under Saakashvili) that those close to the ruling party have easy access to lucrative state tenders for infrastructure projects.

Meanwhile, Saakashvili and Benukidze’s promise that rampant market liberalisation and deregulation will transform living standards and turn Georgia into a new Singapore (one of the few examples of successful “authoritarian modernisation” – substantial growth and improved living standards without democracy) have failed to materialise. On the plus side, real wages increased ninefold between 1996 and 2012, although this is also a feature of many other post-Soviet economies due to the very low starting point after the collapse of communism. The statistics for poverty, however, are damning. Though national statistics show poverty levels falling by a staggering 40 per cent between 2000 and 2012, this is clearly the result of statistical manipulation and the reality is quite different. According to World Bank estimates, the proportion of Georgians in extreme poverty (less than 1.25 US dollars per day) rose from 5 per cent in 1996 to 18 per cent in 2010. These shocking statistics only make sense once it is recognised that Saakashvili’s drive for a business-friendly paradise simply abandoned large swathes of the population to an existence without any meaningful social protection. 

Ukraine after Maidan: reluctant compromise

What does this mean for Ukraine? Saakashvili’s appointment (now downgraded to the Head of the Executive Reform Committee after a diplomatic spat with Georgia) reflects Zelenskyy’s tendency to dismantle the Ukrainian model of development that began after the Maidan Revolution in 2014. This Ukrainian model is the product of Ukraine’s very specific circumstances. Unlike Georgia’s Rose Revolution, Maidan did not produce a large popular mandate for a “reformist” candidate.

The appeal of the successful candidate, former President Petro Poroshenko, was less as a radical reformer, and more as a “safe pair of hands” offering stability and security in the midst of war with Russia, while upholding the pro-European, pro-democratic values of the revolution. In the midst of war and a devastating financial crisis, Poroshenko was forced to introduce an unprecedented degree of pluralism into Ukrainian politics. Unlike his predecessor Yanukovych or Saakashvili after the Rose Revolution, Poroshenko was simply not in a strong enough position to appoint only loyal allies to key positions and consolidate power. His parliamentary faction “Petro Poroshenko Bloc” was forced to form a parliamentary coalition with the “People’s Front,” “Self-Reliance” and the “Radical Party.” 

Even in building his own party, he was forced to accept reformers onto his party list out of pragmatism. The 2014 elections ushered into parliament included a wave of civil society activists, many of whom were appointed into senior positions in government. The “Euro-Optimist” parliamentary faction of young reformers did what they were supposed to do: they held the government accountable, even though many had been elected on the Poroshenko ticket. 

Independent, Western-educated Ukrainians such as Ulyana Suprun and Natalie Jaresko were put in charge of ambitious healthcare reform and financial stability. The Prozorro online public procurement platform – created by civil society activists – was adopted nationwide and has already saved the Ukrainian treasury billions. The most ambitious decentralisation reforms in Europe, transferring responsibility for over 50 per cent of local tax revenue to new local government organs and giving “catch-up” payments to poorer areas, has begun to break communities’ dependence on patronage from Kyiv. 

Much of this was achieved not because of “benevolent” leadership, but because the ruling coalition was not strong enough to survive without incorporating reformist elements. It was helped by the fact that rather than building a “super-presidential” system, as Georgia did after the Rose Revolution, post-Maidan Ukraine abandoned the “super-presidential” constitution of Yanukovych and transferred substantial power to the parliament. Thus it became much harder for decisions to be limited to a small ruling clan. 

Despite some successes, it is wise not to celebrate the Poroshenko period too loudly. Graft remained rampant and many of Poroshenko’s allies were fabulously enriched. Oligarchs lost some of their revenue streams, but they continue to dominate the economy and politics. For every reformer in parliament, there were plenty who were in the pockets of oligarchs. What matters, however, is that Ukraine established its own development model after the Maidan Revolution, one that is very different from the Georgian model of “authoritarian modernisation.” 

The Ukrainian model is far more pluralistic, reducing central pressure in favour of decentralised reform coalitions that demand, however shakily, consent and compromise between old elites and civil society reformers. It relies on democratic norms of debate, compromise and inclusion, rather than force. The reforms may be slow and chaotic – in contrast to the supercharged certainties of Georgia after 2003 – but this should not be seen as a sign of weakness.

Zelenskyy the aspiring Saakashvili?

Against this backdrop, the appointment of Saakashvili implicitly reflects his desire to abandon the post-Maidan development model. Given that Zelenskyy’s parliamentary election victory in 2019 largely expelled the “Euro-Optimists” and other Poroshenko-era reformers, it is a desire that could come to fruition. Zelenskyy initially appointed a young, technocratic government that included a number of activists in his parliamentary faction. He quickly replaced them with largely unknown bureaucrats. He has also removed most credible reformers from office, not least the Prosecutor General, the heads of the Tax and Customs services, the head of the State Ecological Inspection and the head of the Health Service. Moreover, he has filled a large number of senior posts with former employees of his television channel Kvartal 95, which suggests that loyalty is much more important to him than ability or expertise.

In terms of economic policy, Zelenskyy shares Saakashvili’s attachment to market liberalisation. He is committed to kickstarting the privatisation of state-owned enterprises and reducing business regulations. One of his centrepiece policies is the opening up of the Ukrainian land market by the end of 2020. Especially since foreigners will remain barred from buying land until 2024, Ukraine’s lands are likely to be carved up by the oligarchs, as Ukrainian farmers possess limited capital and they cannot borrow against their land. Furthermore, he seems unwilling to take on the biggest barrier to Foreign Direct Investment in Ukraine, namely the pervasive interference by law enforcement and the Security Services of Ukraine in the economy.

His decision to retain the widely unpopular Arsen Avakov as Minister of Internal Affairs is largely seen as an expression of his desire to maintain control of law enforcement as a political weapon. His initial drive to reform the Constitutional Court – initially viewed with widespread optimism – has ground to a halt, and little has been done to address widespread corruption in the rest of the judiciary. In short, these measures suggest that Zelenskyy is pushing to liberalise Ukraine’s economy without any checks on the already monopolistic and market distorting power of the oligarchs. As Georgia has already shown, unregulated free markets can prove just as fertile an environment for oligarchic domination as stifling bureaucracy.

Zelenskyy seems to have decided that he does not need to continue the uneasy cooperation with civil society, which was a pillar of the Poroshenko administration. He has a strong mandate, high approval ratings and a parliamentary majority. His rhetorical commitment to fighting corruption and promoting Euro-Atlantic integration seems to be enough to maintain the optimism of many of his supporters, despite his backsliding and lacklustre achievements. The appointment of Saakashvili looks very much like a rejection of the post-Maidan political compromise. If so, any modernisation and development is likely to be imposed by the centre with minimal input from Ukraine’s civil society, which has produced almost all of Ukraine’s post-Maidan political successes. Saakashvili is convinced that his mission is to do to Ukraine what he did to Georgia. 

But Ukraine in 2021 is not Georgia in 2003. It is not a failed state, it has its own history of struggle against corrupt elite, it has experienced its own pro-democracy revolutions, produced its own civil society and it is in the process of experimenting with its own democratic path. Saakashvili represents a kind of modernisation – his style of “autocratic modernisation” is the antithesis of the “Revolution of Dignity.” Ukraine can learn from the Rose Revolution, but should be beware of repeating it.

This article is part of a collaboration between Lossi 36 and New Eastern Europe. Lossi 36 is an online media project publishing news, analysis, and photography from Central and Eastern Europe, Russia, the Caucasus, and Central Asia. Since 2018, we are committed to providing high-quality content while shining a spotlight on the work of students and up-and-coming professionals. Read the original post in its entirety here

Thomas Barrett is a Research Fellow at Yerevan Brusov State University. He is a Master’s student of Eastern European Studies at the Free University of Berlin and a graduate of the University of Oxford. His research focus is on judicial politics and EU legal approximation in post-Soviet countries.

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