Regime Change Coming in the Republic of Georgia

Economic and political reforms have had mixed results in the former Soviet republics following the breakup of the Soviet Union in 1991.  One of the success stories is the Republic of Georgia.  Elections held October 1 will replace the party responsible for that success, raising questions about Georgia’s future.

Many of the former Soviet republics suffer from corrupt and authoritarian governments, and with substantial government involvement in the economy.  Georgia fell into that category prior to 2004 when Mikheil Saakashvili was elected president and rapidly cleaned up corruption, fired all of Georgia’s police force and replaced them, jailed people involved in organized crime, and deregulated much of the economy.  Georgia’s economy has thrived since, benefiting from low trade barriers, low taxes, and minimal government interference in economic affairs.  Georgia stands out as a post-Soviet success story.

Despite these positive developments, President Saakashvili has had his detractors, who have accused him of providing government-granted monopolies to his cronies and using the force of government to confiscate private property without compensation.  He has stood up to Russia, which may have played a role in Russia’s invasion of Georgia in 2008, and may have provoked Russia’s erecting trade barriers to limit imports from Georgia.

Two weeks before the election, a Georgian television station owned by opposition leader Bidzina Ivanishvili released a video showing prisoners being abused in Georgian prisons, which surely had an effect in turning voters toward Ivanishvili’s party.  But, this by itself could not have turned the election without a substantial opposition to Saakashvili prior to the video’s release.

Constitutional reform in Georgia is also changing the form of government.  The old form, which featured a strong president when Saakashvili held the position, will be replaced by a parliamentary democracy in which the prime minister will be the most powerful government leader.  Whereas a year ago one would have thought Saakashvili’s party would be in the position of choosing the prime minister (which many Georgians expected would be Saakashvili), it will now be Ivanishvili’s party that will choose the prime minister.

The big question is whether this regime change will reverse the huge strides toward economic freedom that were made under Saakashvili’s leadership.  Saakashvili tried to strengthen ties to Europe, and to NATO, whereas part of Ivanishvili’s platform was to work toward closer ties with Russia.  A less hostile relationship with Russia would be good for everybody, but a move toward Russia’s economic policies would be undesirable, as Georgians well know, having lived under the Soviet system for decades.

A personal note:  I spent a week and a half in Georgia this summer (teaching economics to students from 14 countries throughout the region).  I asked one of my hosts if it was safe for me to walk around the neighborhoods of Tbilisi, the capital of Georgia, with my big DSLR camera, and he told me it was safe to walk anywhere in Georgia.  That, he said, was one of the results of the cleanup of crime and corruption under President Saakashvili.  So, I did walk around taking lots of photos, and returned unmolested.

On one of my walks someone stopped me and asked me if I was an American.  It turned out he was too, and had moved to Tbilisi two years ago.  I remarked on the incredible economic progress Georgia had seen over the past decade, and he said he could see how much better things were in just the two years he lived there.  One would hope, for the sake of Georgians, that the new regime will not reverse the course the country has taken toward economic freedom.

Randall G. Holcombe is Research Fellow at the Independent Institute and DeVoe Moore Professor of Economics at Florida State University. His Independent books include Housing America: Building Out of a Crisis (edited with Benjamin Powell); and Writing Off Ideas: Taxation, Foundations, and Philanthropy in America .
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