Extinguishing the Post Cold War Dream

World Bank-Mandated Energy Privatization Taxes
Armenia’s Poor

Grassroots National Newspaper
Canada
by Rob Maguire

Late last month, an independent Armenia became a teenager. Food,
fireworks and a festive atmosphere commemorated the 13th anniversary
of its independence, declared on September 21, 1991. As the first
Soviet republic to proclaim sovereignty during the collapse of the
USSR, Armenians have reason to rejoice – after decades of cultural and
political oppression they may finally flout their language, heritage
and national identity without fear of reprisal.

A boy heading home from school in Karabagh, Armenia.
photo: Rob Maguire

Many in this tiny republic, however, have little else to
celebrate. While civil liberties were subject to Soviet-style
constraints, the Armenia of the 1980s enjoyed a strong economy, a
healthy and highly educated public, and one of the most egalitarian
distributions of wealth in the USSR. Once the newly independent
government began to adopt market reforms and neoliberal values, gross
domestic product plummeted, prices for basic needs such as food and
water increased dramatically, while public goods like health care
and education began to crumble.

Over a decade later, GDP has finally returned to pre-reform levels. Who
has benefited from renewed economic growth, however, is not so
clear. Spending on education and health remains low. Real wages are
less than one-eighth of what they were in 1990, and economic inequality
in Armenia has become extreme. In Yerevan, Armenia’s capital, the
number of BMWs seen rolling along city streets has mushroomed; and so
have the ranks of panhandlers roaming those very same urban boulevards.

Poverty has indeed become widespread in Armenia. Affecting roughly
fifty percent of the population, it has quickly become an epidemic
that shows little sign of subsiding.

An old man in Yerevan, Armenia. photo: Rob Maguire

Living on less than two dollars a day, the poor are
particularly vulnerable to increases in the price of basic
commodities. Privatization within the energy sector, however, has
preyed upon this very weakness. Imposed by the World Bank through
loan conditions, reforms designed to make electric utilities more
attractive to foreign takeover left people paying more than twice as
much for electricity then they were in the mid-1990s.

Furthermore, inability to pay these inflated rates now results in
disconnection. This strict marketplace logic is expressed by Andrei
Rappaport, a senior official for Unified Energy System of Russia, and
the new owner of several Armenian generating facilities: “If you want
energy pay for it, and if there is not any money to pay, then goodbye.”

Not unsurprisingly, these new conditions led to a serious decline in
household energy consumption. The poor in particular were forced to cut
electricity use considerably, by twenty percent on average. According
to a World Bank report, the typical household barely has enough
electricity to power a refrigerator and a handful of light bulbs.

Despite the decline in consumption, increased energy costs now account
for approximately thirty percent of all household expenditures, with
electricity making up the bulk of these payments. A related concern
is the move towards greater wood consumption. While this reduces the
reliance on costly electric power, it has also contributed to higher
levels of indoor air pollution and accelerated deforestation.

Energy – widely recognized as a fundamental need for human development
– has become increasingly inaccessible in Armenia. At the insistence of
the World Bank, control over this precious commodity has been handed
over to foreign interests, where social priorities are sacrificed in
the name of corporate profit and capitalist ethos.

The picture is similar in much of the former Soviet Union:
increases in cultural and, to a lesser degree, political freedoms
have been overshadowed by a sharp decline in the freedom to meet
basic human needs. This failure is directly related to the “shock
therapy” imposition of market capitalism on countries with centralized
economies – a prescription borne more of ideological zeal than sound
economic principles.

Soviet leftovers. photo: Rob Maguire

Joseph Stiglitz, former Chief Economist of the World Bank, explains:
“From this cold-war perspective, those who showed any sympathy to
transitional forms that had evolved out of the communist past and
still bore traces of that evolution must themselves be guilty of
‘communist sympathies.’ Only a blitzkrieg approach during the
‘window of opportunity’ provided by the ‘fog of transition’ would
get the changes made before the population had a chance to organize
to protect its previous vested interests.”

Poverty and inequality remain Armenia’s greatest challenges, and
some question whether the political will exists to tackle these vital
problems. This is true for the Armenian government, but perhaps more
importantly, for the World Bank and related organizations such as
the International Monetary Fund and the United States Agency for
International Development. The coercive pressure these institutions
place upon governments to engage in fire sale privatisation tactics
could be redirected to produce publicly owned utilities that are
transparent, efficient, and designed to serve the public good.

Unfortunately, these institutions appear more concerned with
ideological imperialism and creating profit opportunities for Western
corporations than they are with promoting sustainable economics,
accountable governance, and poverty reduction – all of which are
necessary for human beings to truly prosper.

Rob Maguire is a Canadian activist and graduate student living in
Yerevan, Armenia. He can be found online at

From: Emil Lazarian | Ararat NewsPress