Liberalism and ultra-liberalism: the Georgian vision

The concept of 'liberal economics' is frequently discussed in Georgia. The Rose Revolution administration said when it took power that it would implement liberal economic policies, however some independent analysts challenge what it has actually done, calling it pseudo-liberal. Significantly, that liberal policies adopted by the Georgian leadership have not been much appreciated by the EU, which is built of genuinely liberal economic principles, and maybe this is why Georgia’s integration into European structures is proceeding somewhat slowly.

Stefan Fule, the EU's Commissioner for Enlargement and European Neighbourhood Policy, recently said that the ultra-liberal ideas of Georgian state officials are not quite in compliance with EU free trade principles. On May 12 a mid-term presentation was held in Brussels at which the progress Georgia made in implementing EU directives in 2009 was outlined, and here Fule mentioned that the country has made some progress but there was concern over the economic policy of the Georgian Government. Fule expressed his hope that Tbilisi would eventually bring its legislation into compliance with EU demands, but as yet we have not seen such moves being made here in Georgia.

Georgian analyst Kakha Gogolashvili states that the discrepancies between EU demands and the policies of the Georgian Government mostly concern the absence of mechanisms for controlling competition in Georgia, food safety issues and the absence of regulatory mechanisms in industry and a mechanism for ensuring that EU standards are achieved and followed. The country does not take into account that Georgian goods will not be able to enter the European market freely if it does not adopt EU policies in these areas. Another aspect is the fact that some products cannot enter the European market because Georgia is considered an unreliable country. After the August 2008 Russian invasion the EU decided to adopt a free trade regime with Georgia and thus speed up the integration process. Very strict and precise conditions were set before Georgian officials, and the Georgian Government was expected to take urgent and consistent measures to achieve EU standards in different fields and start by improving its legislation. Consultations over this with EU officials have now been going on for more than a year, and although there have been attempts by the Georgian Government to elaborate strategies in areas such as regulating competition, food safety, technical standards and the protection of intellectual property this process is going slowly. "Maybe Fule’s irritation is prompted by the fact that this process of harmonising is not going at the speed expected by the EU,” thinks Gogolashvili.

The EU is concluding free trade agreements with different countries and if Georgia’s legislation is not harmonised with the EU's demands quickly the train will go. The Government continues to promote its liberal economic policy as fiercely as the Communist regime defended the centralised planned economy, without acknowledging any need to reform it, so this divergence creates problems.

Some independent Georgian economists maintain that Georgia's policies do not comply with internationally accepted definitions of liberalism. Former Minister of State Property Management during Shevardnadze's Presidency Avtandil Silagadze thinks that the Georgian administration did choose a genuinely liberal course after the Rose Revolution but has deviated from the direction because in liberal economies the State does not interfere in business activity, property rights are protected and monopolies are prevented, but in Georgia all these fundamental issues are ignored. The anti monopoly service has been disbanded, for example. Independent analysts think that prices in the country are only partially set by the market, being mostly the result of monopolisation.

Analysts also think that the tax code is not liberal. Though actual taxes have fallen the administration of tax is far from liberal. Many articles of the tax code are subject to interpretation, and the multiplicity of instructions, orders and demands issued by the Ministry of Finance confuse taxpayers and create extra problems for them. Gia Khukhashvili thinks that while Fule said "ultra-liberalism" he most probably meant pseudo-liberalism. We do not know for sure exactly what Fule meant but his general attitude was critical, though it was criticism targeted at improving the situation.

Georgian analysts think that the most acute of the problems in the Georgian economy is monopolisation and the administration should address this. It is clear that the Georgian leadership should adjust its economic policy and orient it towards EU demands and steps in this direction should be taken urgently and as efficiently as possible.