By Razmig Shirinian
As Turkey and Armenia attempt to rebuild their strained relationships, political suspicions, deeply rooted in history, resurface between the two. The implementation of a “roadmap” for restoring relations between the two countries could certainly change the political alignments in the Caucasus region. Turkey, however, seems to be aiming beyond the Caucasus and attempting to reestablish its ties with the Arab and Muslim worlds. Armenia, on the other hand, has simply succumbed to the dictates of the regional policies and adjusted its national interests for the economic gains of the elite.
The post-Soviet oligarchic elites in Armenia have made every effort to normalize and establish open market relations with Turkey. The interests and wellbeing of the ordinary working people in these efforts seem to be neglected and, notably, the country remains in serious infrastructural deficiency. The open market relations with Turkey do not seek to alleviate the core economic problems of the country.
It is both ironic and elucidating that the Armenian government, as recently as December 2008, released its second Poverty Reduction Strategy Paper (PRSP). The document was prepared in collaboration with the IMF, a group of NGOs, central and local administrative representatives, trade unions, business representatives, and a number of professional groups and individuals. The PRSP Steering Committee, headed by Prime Minister Tigran Sarkisian, decided to rename the paper and call it Sustainable Development Program (SDP), since it differed from the first PRSP paper, appeared in 2003, and was more comprehensive, more inclusive, and aimed to serve as a wider “strategy for social-economic development of the country.”
Both 2003 and 2008 PRSPs for Armenia embody quite a challenging task for the years 2003-15 and beyond. However, they also seem to be largely ill-conceived economic policies in line with the dominant open market and neoliberal ideology of the post-Soviet era. Both these documents have set the policy precedent and have attuned the language of the two protocols signed with Turkey on Oct. 10, 2009. What is most notable in these documents is the fact that they fall short of some key elements of development, conveniently overlooking the equitable distribution of income and adequate appraisal of labor value, without which the overall evaluation of economic growth and development is futile.
It is, of course, both fair and appropriate to point out the remarkable neoliberal economic performance in Armenia since the turn of the century and until the onset of the recent global capitalist crisis. However, the infrastructure of growth (notably in the areas of health, education, water, and sanitation services) and the need for other improvements in basic infrastructure (say, transportation, communication, and utilities, especially in rural areas) have hardly received consideration in the country, and the questions of equitable distribution and labor value have been ignored altogether.
That’s because Armenia is a pure market-driven country. That is, the plutocratic elite’s control over the people has been legitimized and has taken the place of genuine political leadership. The majority of the Armenian people knows that the economic elite, entwined with the political leadership, is parasitic on the economic development of the country and is confined to oligarchic rule and its interests. The self-imposed plutocracy is not oriented towards infrastructural development and, as a result, the independence of Armenia since 1991 has primarily been an economic opportunity to be exploited, and not a political asset.
Lack of adequate sanitation, water, health care, roads, transportation, and utilities in general, and in rural areas in particular, come as a result of this plutocratic whim and civic deficiency. The economic development of Armenia, and of any other country for that matter, is believed to be measured first and foremost along these infrastructural bases. Otherwise, it’s the neoliberal free market dogma that will posit the unregulated market as an attractive model and obsession for development.
Since 1991, the glorification of the market has been cheered on by ruthless land privatization and small- and large-scale privatization in which business leaders, foreign investors, entrepreneurs, and the economic elite in general are to be revered as bastions of economic growth. Why then, and how is it that poverty in Armenia abounds? That teachers and scholars are neglected? Many academicians are poor? Unemployment and poverty rates are high? Income level is low? Labor is not adequately appreciated? These concerns and the facts supporting them indicate that the power of salvation should by no means be delegated to the elite if Armenia wants to develop on behalf of its ordinary people, farmers, and workers.
It is ironic that academic institutions in Armenia have not seriously examined or even questioned the neoliberal dogma that supports the IMF, World Bank, and the Turkophile policies of the ruling elite. This dogma has become a major obstacle to the improved quality of life and a threat to the general wellbeing of the people. It has increased poverty and wealth inequality, and has intensified class differences, social conflict, and hostility. Without this examination it seems that scholars, in general, would also be allured to materialistic gain and egotistic and selfish preoccupations.
PRSPs have trivialized the concern for public interest and have advanced the fundamentals of free market growth. Oligarchs and plutocrats have been increasing their power and influence on the economy, which has surely increased the fear and insecurity of wage-earning people. This fear of personal insecurity is not unfounded. After all, there is an exploitative association of businesses and politics that is draining the democratic life and economic development from the ordinary people.
What’s further distressing, the protocols signed between Armenia and Turkey will indeed constrict Armenia’s geopolitical position and compromise its security. And the economic performance of the country outlined in PRSPs will remain dependent on foreign aid, without developing sufficient prosperity for the general population.
Dr. Razmig B. Shirinian is Instructor of Political Science at the College of the Canyons in California.
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Dr. Shirinian,
I think everyone appreciates your insight, however, I did not see any concrete steps you believe the government, Diaspora investors or foreign investors should take to lessen poverty and increase median per capita GDP. If everyone is going to be critical of certain situations, we need to also offer solutions or illustrate successful examples or at least point to people into the right direction. Unfortunately, criticism alone does not accomplish anything but frustration and demoralization.
Not sure that I understand the point the author is trying to make. Armenia has not yet solved its economic problems to become another Switzerland? What a surprise!
A number of astute observations, and eloquently articulated. The reference to the IMF and the WB echoes the thrust behind my ‘Blowing the World Bank Whistle’ campaign, which came from my parliamentary studies in 2004. The WB/IMF have been driving a thoroughly corrupt agenda in Armenia since the turn of the century, falsifying an economic boom, which would inevitably collapse, but supporting and strengthening an obviously corrupt Armenian presidency and administration. My campaign continued throughout 2007 and 2008, but despite comprehensive backing from high-level international dignitaries, organizations and departments, neither the Bank nor the INT made any effort to responsibly respond to the claims, and the INT evaded the inquiry it was obliged to carry out.
The inevitably disastrous repercussions of the corrupt World Bank and IMF activities are now clearly visible, there is increasing polarization and social unrest throughout the Armenian Republic and outrage throughout the Armenian Diaspora. By the February 2008 presidential elections the Armenian economy had already collapsed, long before the international financial crisis; the corrupt Kocharian / Sargsyan regime was replaced by what is now an openly criminal Sargsyan / Kocharian regime, forcibly imposed on the Armenian people by the March 1st slayings. World Bank and IMF corruption not only continues but has escalated alarmingly in Armenia, with hundreds of millions of dollars now being pumped directly into the pockets of regime cronies, on the implausible pretense of promoting small and medium business enterprise to help Armenia out of its crisis.
Thank you for this article. The point is clear: there is something fundamentally wrong with the economic system in Armenia. In other words, the issue is not simply that “The economy in Armenia is bad”, the way that today “The economy in the United States is bad”. The issue, rather, is that the pure-market driven system, run by the few, do nothing but lead to the downfall of the country’s general population. Put another way, even if the economy world-wide was booming right now, it would still not lead to an economically prosperous life for the general population of Armenia given its current economic policies… AND IT’S TIME FOR FUNDAMENTAL CHANGE.
Hratch / Bruce,
You both cannot demand change, when no one is coming up with actual answers to solve the problem. All you are doing is beating your chest in anger about the current situation. I understand that and appreciate the outrage; however, people need to start offering solutions or ideas before we scream out in rage.
Nishan B, I don’t beat my chest in anger about anything, nor am I screaming, so let’s please be careful with our assumptions.
The point of the above article is to state one fact: the current economic system has not been working for Armenia. In other words, the total free market system is no longer an option. A system that creates monopolies and a tiny class of elites that both own and run the country is no longer an option. And a fundamental change is needed. (And by the way, that’s a lot for a single article to cover… so don’t expect solutions in the same newspaper article).
Once people have come to this conclusion, we can move on to alternatives. The alternatives to such a system are many… but all have the same thing in common: 1) The economic system will not be merely market-regulated, but rather will be policy/government regulated. 2) The economic system will be aimed at bettering the lives of the general population rather than the very few. (In such systems, the economy will not be judged as good or bad merely by the GDP, but by a standard that evaluates the quality of life of the masses.
The details of such a system are far long to describe in a paragraph, an article, or even a short book. But understanding the spirit of such a system is the most important thing. (After all, it would include such details as maximum hours per week to work, minimum wages, health insurance, etc.).
Nishan, many have offered actual answers to solve the problem, so I do not want to go in to that. I will however say that the regime relies on state-imposed lawlessness to maintain its grip over Armenia’s business sector and society. I for one have spent the past 18 months fighting a bogus court case in which the state has been demanding I pay $60,000+ for my business activities. The case involved more than 10 court hearings, a second judge after the first threw out the case, and eventually the government official withdrew his complaint. This is typical of what happens to anybody who dares to not toe the regime line – it happens time and time again, and it certainly can not be good for Armenia’s economy.
Hratch,
You say: “The point of the above article is to state one fact: the current economic system has not been working for Armenia.”
What is the basis for such conclusion? I am looking at two measures – GDP (as more objective) and the level of income of people I personally know (as more subjective) over the last 10 years and by both measures the progress has been stunning. I think that Armenia has achieved a lot, given the challenges of the starting point, difficult environment and internal issues. It has been very much not about what was desirable but rather what was possible.
You say further about alternatives: “The alternatives to such a system are many… but all have the same thing in common: 1) The economic system will not be merely market-regulated, but rather will be policy/government regulated.”
With all due respect, the idea that corruption and inefficiencies can be solved by giving more power and regulation to the bureaucrats, especially in Armenia’s environment, does not look very credible to me. Some level of regulation is necessary as is the development of a strategic economic framework but the government should not be running the economy (unless you want to destroy it).
Having said that, I believe that yet a lot is to be achieved to improve both the strength of the economy and the lives of the people (such as catalyzing the development of small/medium enterprises and empowering local governments and self-governance) but all of this needs to be done within the same strategic direction.
To illustrate my earlier point, this is a reference to the UN Human Development Index website for Armenia (this time a more objective measure of the quality of life in Armenia). Take a look at the chart with Armenia’s ranking over time.
http://hdrstats.undp.org/en/countries/country_fact_sheets/cty_fs_ARM.html
I think this should put some of the critical claims in prospective.
Ed´s is a more measured viewpoint/comment,the only one that in essence differs from others´.He is also carefull in not painting a rosy colour for everything.Nonetheless, there is some truth to what has been POSSIBLE to achieve.I would like to remark that right from the begining,Armenia and the rest of the 14 other ex-soviet republics went the wrong way-path,turning from a ruthlessly dictatorial economic-political regime OVERNIGHT to the present “Wild” free market economy.Since I have resided for near 13 years in a dictatorial regime(to the right) in Europe,when Portugal,Greece and Spain,underwent a transitional period of Euro-Socialism(I live 12 with latter)they were able to by and by adapt to the Free Market one,gradually.Now all three in EU .Unfortunately RA ,for us did not folow that path.Overnight ,from one extreme to the other ,and in this case -like in Moscow,Russia-a “wild” one. Someone asked if there could be an alternative solution, or why not put forward one.
I would suggest(I never offer or advise) while it is not too late,especially what with the main leading world economy country´s fiasco, Armenia ought to adopt the Swedish,Danish and Finnish style Socialistic(Euro, not soviet) government controlled economic policies.Another up above, opined that this would not work since in that latter entity(the government)in RAthey would resist it.Not totally true. If a few political important parties unite, such as the ARF, Heritage and a fdw smaller ones they could muster up enough clout to at the very least for a five year PLAN offer-suggest this Euro Socialist system, in order(they could argue) to come out of the present world Economic Crunch.Which many countries would do well to do that as well.Enough of the ultra Free market one!!
Hama Haigagani SIRO,
gaytzag
Using terms like “plutocracy” ; “neoliberal”; “economic elite” does nothing to help explain whatever point the author is trying to make.
The Government of Armenia (past and present) sold much of the controlling interest in major industries to the Russians and what is isn’t in direct Russian control is in the hands of a few people linked to the government.
Folks, that is how its going to stay for sometime to come.
Razmig, you are attempting to blame free market capitalism when it is clear you have no understanding of it. Do you know that during these ruthless privatization era and unregulated market mania you’re trying to describe happened with the direct involvement of the government? If you are not a hayastanci, you would have to do research to find out, but if you are a hayastanci it is common knowledge to you that in Armenia the bureaucrats allow you to do anything and everything. Now, I need to ask you to go back and read about Free Market Capitalism, Laissez-Faire capitalism. See what it says, you will understand that it is actual “no regulation” and requires the absence of government intervention. For you to understand what a beautiful thing capitalism is you need to go beyond this starting point. Also, look up Corporatism, Fascism. These are interesting things to compare to capitalism and see where the differences are in order for you to appreciate the idea of laissez-faire.
This is a terrible article by an obviously left-wing writer. Yes, Armenia has its problems, but the problem is too much government, not enough rule of law, and not enough of a free market. Also, a giant issue which the author has not even given mention to is the problem of the Armenian Central bank, because it is insidiously stealing the wealth of the savers in the economy by constantly devauling the currency. Inflation in Armenia has been fairly bad. Without a sound currency, there is no way Armenia can do well. Their interest rates are extremely high, and that is because of inflation. The Dram is a joke, and money, being the life-blood of the economy, is 1/2 of every transaction. When your money is tainted, your economy, obviously, is also going to be tainted. And I am not referring to the bogus CPI set by the central bank of Armenia. The real measure of inflation is the money supply, and that has been increasing at an ALARMING rate. In just 2008 the Money supply increased by over 50%. What we need is the government to not pick winners and losers, and to get out of the way and allow free market forces to do their job. Look at countries where there has been actual liberalization of the economy. Singapore is one example, Hong Kong is another. They have seen massive increases in the standard of living. Also, China, since liberalizing its economic system, has also been a huge benefactor of it.
Your suggesting that we need redistribution of wealth, and for labor to valued properly, shows your naive train of thought. First of all, price fixing is bad. If you can apply this knowledge to prices of goods, why do you assume that this goes out the window in reference to labor? By setting either ceilings or floors on labor, you will only be hurting the populace you are trying to protect. Redistribution of wealth is about the stupidest thing anyone can come up with. There are a million things wrong with it. For one, just based on the idea of natural rights, no man should have a claim to the production of another man. Granted it may be government that has initially given some of these people the preferable-playing-field, by redistrubuting wealth, you will only dicentivize those that are willing to bring their resources to a capital-starved-economy such as Armenia’s. Plus, you are giving the wrong incentives to those who are at or below the poverty level. Why would anyone work when you can live on the government dole? We have seen what the welfare state did to America. Do you really want to put in place the same incentives that are crushing America(particularly California and other liberal/psuedo-socialist states) as we speak?
In conclusion Armenia’s economy resembles a fascist model, or state capitalism, much more than it does a market-driven economy, or laissez-faire capitalism.
And what does ruthless land privatization mean anyways? Do you think government should own all the land? There is a reason the soviet union collapsed. You must never have heard of the economic calculation problem of socialism, not to mention the incentive problem, or the problem of the tragedy of the commons.
I find it interesting that people continue to judge how well an economy does based on everything but the quality of life of the masses.
Capitalism, by its very essence, is a money-oriented system, not a people-oriented system. Accordingly, capitalism is better for economic growth. This much I concede. However, time and time again it is proven throughout history that economic growth does not mean the gain in quality of life for the masses. (A simple example is this: a child sewing sneakers in Cambodia does not have a better life one year after the next, regardless of how many more sneakers Cambodia produces; the economy in Cambodia grows, yet the quality of life of the masses is lacking).
Now one may say, “Hey, I don’t care. I don’t care if that person lacks a quality of life. It’s not my problem. I work hard and smart, and they don’t. I don’t want to give away some of what I have so that they too may have a decent quality of life. I deserve a better quality of life.” If one gives such an argument, then that is fine. Such an argument is honest and more accurate than, “Capitalism is a beautiful system”. And for such arguments, at least we may counter them on ethical grounds as well as long term pragmatic arguments. (For example, it is unethical to leave people without education regardless of economic status. And it is in everybody’s interest in the long run that a nation not have oppressed groups).
As Armenians, we have to decide, do we want to become another Vietnam or Cambodia or Thailand, with a growing economy but a lousy quality of life for the masses? Do we want to continue judging progress based on how many new tall buildings increase in Yerevan? Do we want to continue having a money-oriented system? If so, then we should stick to what we have. In which case, people will continue to leave Armenia until there a a handful left, and those handful of people will continue to own everything.
The other option is to begin judging growth and progress based on the quality of life of the majority of the people: Are they receiving a proper education? Do they have access to proper healthcare? Do they have a true voice in the government? Do they have proper working conditions and hours? Do people feel they have the dignity that all humans deserve to have? If so, then it is time to change our approach. It is time to leave capitalism the same place where most of the civilized world has left it.
Hratch,
You are really not making much sense. What is money? It is a receipt for a claim to some utility in the future. SO more wealth equals greated utility which equals happier people, and therefore, capitalism is “people” oriented. You have mistaken corporatism, which is really fascism, for capitalism, which has not existed for a long time. Socialism CANNOT WORK. There are many problems, like the incentive problem, the economic calculation problem, the tragedy of the commons problem, the inefficincies of markets because they are unable to maximize utlity in the economy, the deadwieght losses that come with it, government failures, and the bureaucrats that rise to the top, as only a few people can actually rule over a totalitarian regime as you suggest, are going to be megalomaniacs, as history has shown time and time again. The state run media will say anything it needs to say to brain wash people, and the state will continuously get more and more power over the people , until , like the leach it is, sucks the life out of its populace before it dies out. There is a reason the Soviet union has failed, why China is going away from communism, why people in North Korea are starving, and why the best Cars in Cuba are still 1950’s chevy’s.
For all this talk about ethics, its funny how you completely disregard natural rights and negative rights in general, for positive rights, which are a joke. The World owes you nothing, it was here first.
And why bring up Vietnam, which is not a free market economy, instead of Singapore, or Hong Kong, which are not free-markets, but are very close?
Vlad,
Everything you read in favor of socialism you are brushing off as either being nonsensical or terrible. For the sake of intellectual integrity, rather than blind argumentation, I ask that you take more time to prepare your responses. Just as you have misunderstood the article, you have misunderstood my posting, perhaps because you are not reading carefully.
I repeat, the issue is not that of having an economic system that is producing more or less, or bringing more money or less money into the country. The issue is that of the quality of life for the majority of the people. Who cares if capitalism is allowing Mr. X to make a billion dollars a year, if the quality of life of the majority of the people remains unbearable to the point where they continually think about survival and leaving the country?
You say, somewhat cold-heartedly, that “the world owes you nothing”. And this is fine if you wish to live your life this way. But when I think about an 8 year old Armenia girl that is being sold into slavery so her family can keep a roof over their head, my national consciousness (and my consciousness in general) does not allow me to accept a system which leads to that situation. Yes, we owe that girl something. The nation to which she belongs owes her security, education, healthcare, and human dignity… for which she in turn will owe her nation loyalty and contribute to her nations prosperity. Do you really want to live in a world where it’s “every man for himself”? That’s fine, do that. But if that is so, do not claim to care about your fellow Armenian. Do not claim that you want the best situation for them.
Also, why do you point to Cuba and the Soviet Republic (both of which were/are dictator run)? Why not rather point to Switzerland, Sweden, Norway, France, Canada, or even Israel as examples of modern socialist nations?
You have completely misunderstood what I am saying and you are being either dishonest or are just not very well versed in economics. First and foremost, the amount of gains we saw in the standard of living for Americans, when it was a laissez-faire economy have been unsurpassed. I AM NOT ADVOCATING STATE CAPITALISM. I will say it again. I AM NOT ADVOCATING STATE CAPITALISM. I hope that clears things up a bit. Do you understand that in a real capitalist economy, there would be an abundance of employers, as all entrepreneurs with any sense would love to take their capital to a place that has a high amount of economic freedom? They will, by necessity, bid up the price of labor in the long run unless you can assume that all employers would form a cartel and collude against laborers. But if you have ever taken a game theory course, you know that cartels don’t work unless they are done coercively, that is through government regulation. For you to assume labor would remain stagnat does not hold up well in practice or theory. Why do you assume that Armenia will be a giant sweatshop? Do you think that only giant multinational corporations will flock to Armenia to exploit our people? Has it not occurred to you that there are honest business people with capital who would also flock their in droves.
Also, I never said to rid ourselves of rule of law. I can cede on education for the young via school vouchers for the poor, but we do not owe anyone health care or education. For you to claim that is to say that your child has a claim to my services. So either you have a claim to my production, or I have the claim to my production. It can’t be both, so which is more fair? Parents owe their children security, education, and health care, not me. I also think that an “every man for himself ” approach is the only honest way to go. If you need help, you turn to friends, family, neighbors, and charities/churches/mosques/synagogues/temples/etc. What you don’t do is look to the government to coercively steal from me, to give to you, and keep a portion for itself .
Those countries you refer to are MIXED economies, not socialist, and they all use the capitalist price mechanism, and if it were not for capitalist countries, they would be unable to even calculate meaningful prices. I use north Korea and Cuba and the USSR, because they are actual socialist countries. Also Norway makes so much money because it is an oil-exporting nation.
America too, is a mixed economy. Are you suggesting that we are also functioning as a modern socialist nation?
Furthermore, the amount of wealth that a person gets is in relation to how much good he is doing for society. If I am creating a good many people like, I will and should get wealthy. Profits are a sign that I am doing something that society values, more than they value the money they have given to me. THIS IS MUTUALLY BENEFICIAL. Also if some company is making huge excess profits, there will be others that join the industry, thus bidding up the price of employees, lowering the profits made by the original businessman, and will lower the costs to consumers. Natural monopolies are extremely hard to come by.
The bottom line is this, there are too many inefficiencies and dead weight losses that come with centralization of power. Plus the dicencentives that come about with socialism, as well the trampling of natrual rights makes my head spin. Our ends are the same. We are both looking for a better Armenia, one in which are children can excel and thrive. I believe that our corrupt bureaucracy will not allow this to happen as they are all blood-sucking parasites who are in bed with the oligarchs of Armenia. The only way to solve this is to decentralize power, and allow individuals, who cannot use the coercive power of the state, to build a new and competitive Armenia, one that can succeed and thrive in today’s economy. You must remember that it is not altruists that go into government, it is the megalomaniacs. The people that fund them are the big businesses who know they will get benefits when “their guy” comes into power. The only way to eliminate this is by completely seperating government from the economy. When politicians get involved into economic affairs, the first things bought and sold ARE the politicians.
Lastly, in a capitalist society, slavery could not occur, as no one can do anything against their will. It is all VOLUNTARY TRADE FOR MUTUAL BENEFITS.
Well given the unbearable conditions of Armenia in a capitalist system, I find those mixed economies you speak of as a wonderful alternative; as long as the “mix” is more like Switzerland and Sweden.
It is important that our moral outlook of Armenia and Armenians of being one big family be reflected in our economic system. It is wrong for people to treat the children of their fellow Armenian neighbor differently than their own. The government must provide certain services that allow a person to reach their fullest potential, including education, healthcare, security, care in old age, care for the disabled, etc. These services are necessary, accordingly we can not (as is perhaps naively suggested) leave it up to people’s good will to provide these conditions. These must be provided to each Armenian, and in turn we will gain loyal citizens who believe they owe their country, who will serve and advance their nation.
You are the naive one for believing that government is altruistic and will take care of the people. And you have zero understanding of natural rights and negative rights, or do not respect them. Coercion is not the way to go. I never said I am for Armenia’s economic system as it stands. It is state capitalism, as Ive stated many times, and I prefer laissez-faire capitalism. That is a better and fairer system then the pseudo-capitalist country we have now, and better than any big government utopia that you would wish Armenia to be become.
Love!!!!