On several trips to Georgia over the last six months, the one line I kept hearing from political elites from outside the ruling Georgian Dream (GD) coalition, as well as both many civil society activists and foreign and Georgian business people was a variation of the theme “this government isn’t doing anything.” This sentiment was by no means expressed by all business people, civic activists and others, but by enough people for it to make an impression. As expected, many of those who expressed this view the most emphatically were supporters of, or otherwise close to, the previous government led by the United National Movement (UNM). The irony of supporters of an avowed, at least with regards to rhetoric and spin, libertarian regime, complaining that the government wasn’t doing enough seemed to be lost on pretty much everybody. However, some who felt the government was not doing enough had no connection to, or particularly warm feelings for, the UNM.
The notion that the current government is not doing enough to combat the falling lari, unrelenting unemployment and economic stagnation that continues to bedevil Georgia is gaining more traction, and not just among political and economic elites, with each passing month. This critique is particularly potent when contrasted with the governance by adrenaline that characterized the UNM period, when the government could have been accused of a lot of things such as, mismanaging the economy, being provoked into a foolish war or abrogating civil rights, but never of simply doing nothing. It is also worth noting that for many who found their businesses harassed, or their family members being given long jail sentences with only a cursory trial, the government doing a lot less is a welcome development.
Nonetheless, the accusation that the current government is doing nothing is not entirely accurate. The government has signed an association agreement with the European Union, significantly decreased the likelihood of stumbling into war with Russia, implemented a popular health care reform program and expanded the democratic space in Georgia. These are important achievements, but they are frequently overshadowed by an economic climate that has left the government largely overmatched.
The GD, therefore, is not “doing nothing,” but the charge resonates because the economy is in bad shape and the GD has not been visible or successful enough in its efforts to address that problem. These charges, if left unchallenged, can become potent and create narratives that begin to define politics. This is the problem the government, partially because of bad luck and poor communication, but also because of its failures, now confronts.
The GD, like many incumbent parties before it all over the world, will likely pay a political price for their inadequate stewardship of the economy; and political opponents will continue to push this message that the government is doing nothing. The GD, however, has several different ways they can respond to this charge. The first is by simply communicating better, drawing attention to their successes in areas like health care reform, highlighting the handful of new major investors that have come to Georgia and the growing trade with China. The second, and more difficult, is to begin to improve the economy. This will be difficult, but a combination of a steadily increasing tourism, opening of new markets such as China, and a few good breaks could begin to change things quickly in a country as small as Georgia. Additionally, the GD must demonstrate through its policies as well as its communication strategy that it is active, recognizes the scale of the economic problems, facing Georgia and is trying to do something about it.
Thus far, the failure of the government to craft an effective economic program, unreasonably high expectations after the 2012 election, unwillingness or inability to communicate effectively, and the short memory of the Georgian people, have proven a toxic combination that has driven the GD’s polling numbers and popularity steadily downward over the last two and a half years. This trend is not irreversible, but changing it will require an energy and vision that the GD government has only occasionally demonstrated since coming to power. It will also require a more intense and robust communication strategy.
The problems confronting the Georgian economy can hardly be attributed to simply a failure of the government to communicate their successes well. Joblessness, inflation and the weak lari are facts of economic life in Georgia that cannot be disputed. What, however, can be disputed, is the belief, held by surprisingly many, that things were qualitatively better under the previous regime. A first time visitor to Georgia who listened to political and economic elites outside the government would think that in 2012 the Georgian economy was sailing along until somehow the UNM lost an election. Anybody who lived through the late UNM period, and was not close to the government, will remember those years differently. The UNM’s stewardship of the Georgian economy also included inflation and unemployment estimated at 70%. While it can be argued conditions have gotten worse under the GD government, it cannot be argued that they found a functioning economy when they assumed office. A preference for an active, at times even manic, government over a slower moving, and at times less competent seeming government is a matter of individual preference. However, the belief that the UNM was an able steward of a constantly growing Georgian economy with no deep rooted structural flaws is fantasy.
The failure of the GD to solve the economic problems facing Georgia is, of course, unfortunate and does not reflect well on the government, but the critique that the are not doing anything is at best highly subjective. A central truth of Georgia’s political economy is that joblessness and inflation are not going to be solved quickly or through radical ideological interventions. Similarly, while in a democratic system it is natural for voters to hold the incumbent government responsible for a currency crisis, larger factors such as a decline in remittences, weakness of the ruble and the strength of the dollar are also partially causing the problems the lari is facing.
The government’s record on the economy appears dismal given the difficult economic times now facing Georgia, but there is reason to think that the bigger changes they are making are structural and that their full impact has not yet been realized. The most obvious example of this is the EU Association Agreement which, in the medium range, will bring substantial economic benefit and increased trade to Georgia, but thus far has had little direct and positive impact on Georgia’s economy. The strengthening of economic ties between Georgia and China have also added a new dimension to Georgia’s economy and its trade opportunities, that will, in the long term, be positive.
Perhaps most significantly, in the last few years, for the first time since independence, a truly private sector is beginning to emerge in Georgia. The private sector is not entirely independent yet, and problems remain, as evidenced by the concerns some have raised about banking related legislation, but the movement in this area is clearly in a better direction. There have been businesses and business interests in Georgia for decades now, but that is different from a genuine private sector. The latter is not dependent upon or deeply tied to the government. While ties between business and government in Georgia were never as strong as those in, for example, Putin’s Russia, in the later years of the UNM regime crony capitalism, a politicized approach to fining and regulating businesses and political pressure on many businesses were widespread problems, and frequently mentioned by both Georgian and foreign businesspeople and investors.
The gradual emergence of a true private sector will do little in the short term to ameliorate the distress brought about by Georgia’s current economic problems, but it should not be overlooked altogether. Georgia will, at some point, turn the corner and move out of this current economic doldrums. That might happen while the GD is still in power, or after another party or coalition defeats the GD in a future election. Regardless of when it occurs, Georgia’s next strong economy will rest upon both the EU Association Agreement and the new private sector, one that is less worried about staying on the good side of whomever is in power.
As the GD moves into its fourth year in power, their record with regard to the electoral promises they made in 2012 is decidedly mixed. They have very clearly not turned the economy around, but it is equally apparent that they have liberalized the country. All but the most fervent supporters of the UNM, and their loudest cheerleaders in the right wings of European and American politics, recognize that Georgia is freer with regards to both politics and business than it was only a few years ago. This liberalization may seem to offer cold comfort to a population worried about finding work or seeing their money lose its value almost before their eyes, but in the bigger picture it an extremely positive development for Georgia.
The Georgia Analysis is a twice monthly analysis of political and other major developments in Georgia. Lincoln Mitchell is a political development, research and strategic consultant who has worked extensively in the post-Soviet space. If you would like to be on the Georgia analysis mailing list or are interested in more research, analysis or consulting for your business, government, campaign or other organization, please email email@example.com.