Global Politician, NY
Failure of IMF and World Bank in Fmr USSR: Uncommon Poverty of the
Commonwealth
3/6/2005
By Sam Vaknin, Ph.D.
The Lucerne Conference on the 9 months old CIS-7 Initiative ended two years
ago with yet another misguided call upon charity-weary donors to grant the
poorest seven countries (Armenia, Azerbaijan, Georgia, Kyrgyz Republic,
Moldova, Tajikistan, and Uzbekistan) of the Commonwealth of Independent
States financial assistance in the form of grants rather than credits.
The World Bank’s Managing Director, Shengman Zhang, concluded with the
deliriously 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 (EBRD), the Asian
Development Bank (ADB) 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 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 IMF and 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 cover-up 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 Mr. 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”.
Mr. 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 ten 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 (a-propos Zhang’s
nostrums).
Azerbaijan, its foe and neighbor, should be so lucky. Close to nine tenth 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 1996-7 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 last 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 “the Kyrgyz Republic is currently
the most reformed country of the 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 are 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% in mid-2002). The current economic system retains
the key features of 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 advisors.
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, Ph.D. is the author of Malignant Self Love – Narcissism
Revisited and After the Rain – How the West Lost the East. He served as a
columnist for Central Europe Review, PopMatters, Bellaonline, and eBookWeb,
a United Press International (UPI) Senior Business Correspondent, and the
editor of mental health and Central East Europe categories in The Open
Directory and Suite101.
Until recently, he served as the Economic Advisor to the Government of
Macedonia. Sam Vaknin’s Web site is at