East European Democratization The Political Economy of Georgia's Rose…

East European Democratization

The Political Economy of Georgia's
Rose Revolution

by Vladimer Papava
Vladimer Papava (papavavladimer@gfsis.org) is a Senior Fellow at the Georgian Foundation
for Strategic and International Studies. He was a Minister of Economy of the Republic of Georgia
(1994­2000) and Fulbright Fellow at the Central Asia-Caucasus Institute of the Nitze School at
The Johns Hopkins University's SAIS (2005­06).

Abstract: The Rose Revolution opened a new chapter in the history of modern
Georgia. The post-revolution government achieved a number of successes in
areas such as dramatically increasing state budget revenues, fighting corrup-
tion, and setting up effective cooperative relationships with the international
financial institutions. But it made some mistakes, too, in building a demo-
cratic state in general and in its economic policy in particular. Its relationship
with Russia and its excessive exposure to Russian investments is particularly
troubling. The country's policies need to be fine-tuned in order to protect its
democracy and promote further economic growth.



T
        he Georgian people's Rose Revolution of November 2003 strove
        to achieve a democratic society, improve human rights and living
        conditions, reduce corruption, and enhance the national economy.1
Accordingly, the Revolution and its heroes, led by Mikhail Saakashvili,
received the support of the Bush administration, the EU, and its member
states. Three years later, the euphoria that followed the Revolution, both
within and outside the country, has gradually been replaced by more realistic
assessments of the results of the post-revolution policies to date. The sobering
up from being drunk on revolution occurred somewhat sooner within Georgia

   1
     For more on the revolution, see Neal Ascherson, ``After the Revolution,'' London Review of
Books, Mar. 4, 2004; Zeyno Baran, ``Removing the Thorn in Georgia's Rose Revolution,''
Embassy of Georgia to the USA, Canada and Mexico, March 24, 2004, at www.georgiaemb.org;
Bruno Coppieters and Robert Legvold, eds., Statehood and Security: Georgia after the Rose
Revolution (Cambridge, Mass.: MIT Press, 2005); Charles H. Fairbanks, Jr., ``Georgia's Rose
Revolution,'' Journal of Democracy, April 2004; Zurab Karumidze and James V. Wertsch, eds.,
Enough: The Rose Revolution in the Republic of Georgia 2003 (New York: Nova Science
Publishers, 2005); Charles King, ``A Rose Among Thorns: Georgia Makes Good,'' Foreign
Affairs, March/April 2004; Eric Miller, ``Smelling the Roses: Eduard Shevardnadze's End and
Georgia's Future,'' Problems of Post-Communism, March 2004; Cory Welt, ``Georgia: Consoli-
dating the Revolution,'' Russia and Eurasia Program, Center for Strategic and International
Studies, Apr. 6, 2004, at www.csis.org.

# 2006 Published by Elsevier Limited on behalf of Foreign Policy Research Institute.


                                                                                       Fall 2006   |   657
PAPAVA


than abroad, which is quite understandable: Georgian citizens have been
experiencing the revolution firsthand, whereas Georgia's international
friends often mistake what they would like to see happening for what is
really happening. The unconditional support for all endeavors of the post-
revolutionary government on the part of the Western nations and, most of all,
of the U.S. government, is fostering the development of anti-Western and anti-
American tendencies among Georgians.
        Nevertheless, even those analysts who have been a priori supportive
of the revolutionary leaders cannot ignore some recent antidemocratic devel-
opments in Georgia, such as executive authority dominating the judiciary and
troubling incidents that are provoking discussions about the country's key
values.2 But to date none of the analysis devoted to the revolution deals in any
substantive way with economic problems. This article aims to explore the
economic transformations in post-revolution Georgia and outline basic direc-
tions of Georgia's economic development.

The Pre-Revolution Economy

         Georgia's economic development from 1991 until the revolution,
which was characterized by some successes but also several significant
mistakes,3 can be thought of in three phases: the years of disregarding
economics (1991­94), then consistent reforms (1994­98), followed by the
rise of corruption (1999­2003).

Disregarding economics

         The period from 1991 through the first half of 1994 saw almost a triple
decline in production coupled with hyperinflation--in 1993­94, the inflation
rate reached 50­70 percent a month.4 An interim Georgian currency, the
coupon, introduced in Spring 1993, devalued so fast that ultimately the only
product it could buy was a loaf of bread. However, even that would have been
impossible to do had the bread not been baked mostly by government-owned
bakeries and had the government not artificially kept the bread price at a low
level. The result was that the Russian ruble was the only effective currency in
circulation.

   2
     See Stephen F. Jones, ``The Rose Revolution: A Revolution without Revolutionaries?''
Cambridge Review of International Affairs, March 2006; Charles A. Kupchan, ``Sukhumi
Dispatch: Wilted Rose,'' The New Republic, Feb. 6, 2006; and Alexander Melikishvili, Response
to Kupchan's article, Johnson's Russia List, Feb. 10, 2006.
   3
     Nodar Khaduri, ``Mistakes Made in Conducting Economic Reforms in Postcommunist
Georgia,'' Problems of Economic Transition, vol. 48, no. 4, 2005.
   4
     Lado Gurgenidze, Mamuka Lobzhanidze, and David Onoprishvili, ``Georgia: From Plan-
ning to Hyperinflation,'' Communist Economies & Economic Transformation, June 1994.


658   |   Orbis
                                                            Georgian Economy


         In 1993­94, the country had no parliament-approved national budget.
Public expenditures were approved by the parliament on a quarterly basis.
The only source of national revenues was loans from the central bank, the
National Bank of Georgia (NBG). Commercial banks were extending limitless
credit.
         Liberalizing prices (except for bread) in 1992 was the only important
step taken toward a market economy. However, due to the lack of a national
budget and uncontrolled issuance of money, it had adverse results, such as
falling production, dramatically rising inflation, and the unprecedented deva-
luation of the national currency.

Reform

        In the second half of 1994, the government finally began to pay
attention to economics and institute reforms, a process that continued through
the end of 1998. The first steps were to raise the price of bread; curb the NBG's
uncontrolled lending to the government, which was underwritten by printing
excessive amounts of money; and ban overdraft credit extensions for the
commercial banks. Hyperinflation was brought under control, as was declin-
ing production. In 1995 Georgia's parliament approved a national budget, as it
has every year since. This permitted implementation of a successful currency
reform in Fall 1995. A new national currency, the lari, forced out of circulation
both the coupon and the Russian ruble. In Summer 1996, after gradual
increases in the bread price and a simultaneous privatization of public
bakeries, the bread price was entirely liberalized. All these reforms were
carried out in close cooperation with the International Monetary Fund (IMF)
and the World Bank. As a result, after 1995, Georgia turned to economic
growth and finished its exit from the hyperinflation spiral.
        Fall 1998 posed a test for the strength of the reforms. Because of the
August 1998 default in Russia, the Georgian currency started devaluing rapidly.
The government lacked control of the South Ossetian and Abkhazian sections
of the Georgian-Russian border, so there was smuggling of cheap (because of
the default) Russian goods. Also, the Russian military bases in Georgia were
used as a vehicle for flooding the Georgian market with devalued Russian
rubles. All of this contributed to U.S. dollars streaming out of Georgia into
Russia and the lari's being devalued by 70 percent. However, the government
took timely steps and the NBG ensured that not a single commercial bank went
bankrupt during this very difficult period for the Georgian economy.

Corruption

       Unfortunately, in 1999 President Eduard Shevardnadze began disre-
garding common sense and expert advice, especially in his government
appointments. This period was characterized by the escalation of a budget


                                                                 Fall 2006   |   659
PAPAVA


crisis, the first symptoms of which became noticeable as early as 1998, when
actual national budget revenues started lagging behind projections. The next
year represents the most palpable example of the national budget failure: in
1999, the government collected only around 70 percent of the projected
national budget. This state of affairs continued through 2003. One remarkable
characteristic of the budget crisis was a many-year ``budget war'' between the
central government and that of the Adjarian Autonomous Republic.5 In
essence, the government of the autonomous republic refused to transfer to
the central budget legally established quotas of tax revenues collected in
Adjara.
          To achieve the projected budget revenues on paper, the government
resorted to deceptive accounting techniques such as ``forwarding'' budget
funds from one budget line to another and making fictitious tax offsets. From
1999 onwards, the country was unable to obtain loans and grants from
international financial institutions and donor countries, since it could not
meet IMF requirements; in 2002, the IMF suspended its own funding. Other
international financial institutions and donor countries followed suit, and
Georgia's problem of external debt, which at that time had reached 50 percent
of GDP, became critical. With the IMF suspension, the Paris Club door was
locked for Georgia, and without restructuring, the country would never be
able to repay its debts.
          In 2000, the Georgian government invited the prominent Polish
economist Leszek Balcerowicz to become an adviser to the president. But
massive government ineptitude made futile his two-year effort to help the
country's leadership overcome economic crisis. (In a move similar to his
predecessor's, President Saakashvili recently invited the former prime minister
of Estonia, Mart Laar, to become a presidential aide on economic affairs.)
          In June 2003, President Shevardnadze approved an Economic Devel-
opment and Poverty Reduction Program for 2003­15. The program had been
developed by the government agencies in cooperation with NGOs and Geor-
gian economists, along with experts from the international organizations and
donor countries in the final phase. However, owing to the lack of political will,
the government failed even to begin implementing the program, thereby
exacerbating tension between Georgia and the IMF and other international
donors.
          While GDP growth rate had begun to fall during this period, in 2003
Georgia succeeded in achieving a high economic growth rate, primarily due to
investments in the construction of the Baku-Tbilisi-Ceyhan oil pipeline. But as
a consequence of the government's failures in all aspects of the budgetary
process, in 2003 the state budget deficit reached $90 million, or 15 percent of

   5
    Archil Gegeshidze, ``Georgia's Regional Vulnerabilities and the Ajaria Crisis,'' Insight
Turkey, April-June 2004; Mamuka Tsereteli, ``The Political Economy of the Ajarian Crisis,''
Central Asia-Caucasus Institute Analyst, Apr. 21, 2004.


660    |   Orbis
                                                             Georgian Economy


projected revenue. At the end of 2003, the total internal debt in unpaid salaries
and public-sector pensions, which had been accumulating for the entire
duration of the budget crisis, reached $120 million, even though monthly
pensions amounted to less than $7. Half the population was living under the
poverty level. This drastic deterioration of social conditions created sufficient
dissatisfaction with the Shevardnadze administration that the ground was
prepared for revolution.


Post-Revolution Economic Achievements

          The concentration of power in the president's hands is the most
notable characteristic of Georgia's development since the revolution. In
February 2004, the parliament approved the president's initiative to amend
the national constitution, giving the president the power to disband either the
parliament or the cabinet in case of a conflict between the two. The constitu-
tional amendments significantly weakened the parliament: a permanent threat
of disbanding keeps parliamentarians loyal to the government. The strength-
ening of presidential powers and the weakening of those of the parliament has
had both positive and negative consequences for the country.
          Among the positive results, the broader executive powers allowed the
government to drastically reduce redundancies and improved its ability to
maintain financial order. For example, the unlawful accounting practices for
state budget revenues have disappeared. Also, the May 2004 revolution in the
Autonomous Republic of Adjara permitted a normal budgeting process to
resume between the central government and this region, and Georgia's tax
revenues significantly increased in 2004 for the first time since it gained
independence in 1991. The new government succeeded in overcoming the
budget crisis and in covering old liabilities, including paying pensions and
salaries. Also, decisive steps were taken to intensify a war on crime in order to
improve the business climate.
          As part of its efforts to combat corruption, the government abolished
the traffic police that had existed since Soviet times and created a Western-style
police patrol. As a consequence, the practice of bribery across the country's
roads and highways was ended, opening up new opportunities for the
country's development as an important international transport corridor.
          No less impressive were the results of the reformed system of exams
for admission to the country's universities, which had been infamous for their
corruption since Soviet times. By taking the exams out of the control of
university administrators and holding them on a national level, the govern-
ment overcame the deep-rooted corruption in the admissions system.
          State budget revenues were tripled as a result of such anticorruption
measures as arresting and then releasing--for a ``price of liberty''--former
government officials and their relatives, especially friends and family of


                                                                  Fall 2006   |   661
PAPAVA


President Shevardnadze. Ostensibly this money was used to pay back to the
state money and properties that had been stolen from it, but in many cases the
``price of liberty'' no doubt was different from the amount taken. The new
government announced that during its first year some $200 million had been
returned to the national budget, but the new ``fighters against corruption'' have
certainly recovered much more than this.
         Almost immediately after coming to power, the Saakashvili govern-
ment started implementing an ambitious plan of large-scale privatization. The
country's new image, improved by the Rose Revolution, enabled it to attract
from the outset high-value privatization deals that exceeded by tens and
sometimes hundreds of times the amounts raised for the whole period before
the revolution.
         In addition to its other achievements, the new government reduced
some tax rates and the adopted a new Tax Code in late 2004. In the new tax
code, VAT decreased from 20 percent to 18 percent, the payroll tax decreased
from 32 percent to 20 percent, and a flat income tax of 12 percent replaced the
old progressive income tax. At the same time, the number of taxes also went
down: the more than twenty taxes under the old tax code and other laws were
reduced to only seven through abolishment or combination.
         By Summer 2004, the government had earned renewal of the IMF
program, enabling it to begin negotiations on restructuring the country's foreign
debt. Since then, donor countries have extended Georgia credit and grants
amounting to $1 billion. In addition, In September 2005, Washington committed
to extend the country $295.3 million in assistance under the Millennium
Challenge Account.

Post-Revolution Economic Mistakes

        One of the negative consequences of the strengthened presidential
and weakened parliamentary powers is an intensified feeling of impunity
among government officials, which has been manifested in their disregard for
the rule of law. The judiciary has been degraded and denounced, and judges
have turned into tacit executors of the prosecutors' wishes. The government's
control over the media has become overwhelming. In this context, the process
of democratization and improving human rights has encountered many
barriers.6

   6
    Zaal Anjaparidze, ``Critics Press for Improved Judicial Independence in Georgia,'' Eurasia
Daily Monitor, April 26, 2006, at www.jamestown.org; ``Newspaper: Government Controls
Editorial Policies of the Private TV Stations,'' Civil Georgia, Tbilisi, Feb. 28, 2005; Jaba
Devdariani, ``Georgia's Rose Revolution Grapples with Dilemma: Do Ends Justify Means?''
Eurasia Insight, Nov. 26, 2004, at www.eurasianet.org; and ``One Step Forward, Two Steps
Back. Human Rights in Georgia After the `Rose Revolution,''' Human Rights Information and
Documentation Center, 2004, at www.humanrights.ge.


662    |   Orbis
                                                                   Georgian Economy


          In almost all governmental ministries and departments, most of the
experienced employees were swept away by the revolutionary wave, usually
in violation of the law. Government employees with a comprehensive uni-
versity education are now almost nonexistent. New employees were selected
on a competitive basis, with preference given to young people who had
received some Western education. In hiring young staffs, the government lost
a great deal of institutional memory.
          The flipside of the changes made in the country's budget system is that
they have deprived local budgets of practically all tax revenue: if before the
revolution some 99 percent of profit taxes were left for the local budgets, after
the revolution 100 percent of such revenue has been collected by the central
government and apportioned to local budgets through distributions. Such
steps aimed at strengthening the central government fit perfectly with the
government's failure to honor its electoral promises to introduce direct
elections of city mayors.
          The government established extrabudgetary ``law-enforcement devel-
opment accounts'' where those suspected of corrupt practices were compelled
to transfer payments to buy their liberty. Thus, a new form of corruption had
developed in the form of these extrabudgetary accounts. Since such revenues
could not be raised on an ongoing basis, the government started replenishing
these accounts by means of ``voluntary contributions'' from businesses.7 Just as
in the mid-1990s, when the earlier government's extrabudgetary accounts
were closed under IMF pressure, in late 2005 the IMF demanded that the new
ones be closed, to which demand the government reluctantly acceded only
after several months of hesitation.
          Another matter of particular concern is the process of ``deprivatization''
of privatized state property, which may drag the country back to its status at the
initial stage of its transition to a market economy. Furthermore, the government's
new wave of privatization will probably make necessary sometime in the future
another round of deprivatization.8 These initiatives only create the appearance
of providing for ``social justice.'' Their real purpose is redistributing property for
the benefit of the new elite.

Russian-Georgian Relationships

         As the West's support for Georgia has increased since 2003, so has
irritation in Moscow, to which the Georgian leaders respond in kind. The
mutual reproaches between Tbilisi and Moscow have become increasingly

   7
     Zaal Anjaparidze, ``Georgian Government Questioned about Secret Funds,'' Eurasia Daily
Monitor, Apr. 12, 2006.
   8
     Vladimer Papava, Necroeconomics: The Political Economy of Post-Communist
                                                                                    °
Capitalism--Lessons from Georgia (New York: iUniverse, 2005), pp. 60­61; Anders Aslund,
``Georgia on my Mind,'' The International Economy Magazine, Winter 2006.


                                                                         Fall 2006   |   663
PAPAVA


loud. What policy does Russia actually plan to pursue with respect to Georgia
and the other post-Soviet states?
         Russia's policy toward these states today--the author of which is
Anatoliy Chubais, the president of RAO EES (Unified Energy Systems), a huge
nationwide utility--is an updated version of the ``liberal empire'' concept.9
One of the key goals of liberal empire is to significantly weaken (if not destroy)
Western influence over the post-Soviet states. According to Chubais, because
Russia has never been invited to and actually could not be squeezed into either
NATO or the EU, it needs to create an alternative to those organizations. One
variant of such an alternative could be a liberal empire, which would be built
not by means of coercion or even military occupation of the former Soviet
republics, but rather by means of acquiring and developing assets located in
their territories.10
         Russia started fulfilling its master plan of incorporating the Caucasus in
the liberal empire with Armenia, its strategic partner in the region. In late 2002,
just before the March 2003 presidential elections in Armenia, the countries
agreed to a ``debt-for-equity'' swap. Russia gained multiple national Armenian
enterprises, the aggregate value of which turned out to be enough for Armenia
to pay off its $93 million debt to Russia.
         Georgia is a geographical obstacle on the way to Russia's creation of a
united economic space between itself and Armenia. Should Russia succeed in
implementing its liberal empire plan in Georgia, it will be an easy endeavor to
get Azerbaijan involved in this imperial project, too, as all key Azeri transport
and communications routes, including basic pipelines, cross Georgia's terri-
tory.
         In Summer 2003, RAO EES acquired the Georgian holdings of AES Silk
Road (a subsidiary of the U.S.-based power company AES Corp.), which held 75
percent of the equity in the Tbilisi electricity network and some other
important components of the Georgian electric energy system.11
         In fact, most Georgian assets in the post-revolution years have been
bought by Russian companies or their subsidiaries, registered in third coun-


   9
     Anatoliy Chubais, ``Missia Rossii v XXI veke'' (Russia's Mission in the 21st Century),
Nezavisimaya gazeta, Oct. 1, 2003, at www.ng.ru. Liberal Empire is based on the czarist Russian
doctrine of Eurasianism and can be seen as a modification of the British-American theory of liberal
imperialism that Stanley Kurtz described in ``Democratic Imperialism,'' Policy Review, April/May
2003. See David Reiff, ``A New Age of Liberal Imperialism?'' World Policy Journal, Summer 1999;
Theo Farrell, ``Strategic Culture and American Empire,'' SAIS Review of International Affairs,
Summer/Fall 2005; and Igor Torbakov, ``Russian Policymakers Air Notion of `Liberal Empire' in
Caucasus, Central Asia,'' Eurasia Insight, Oct. 27, 2003, at www.eurasianet.org.
   10
      On Russia's investment policy and its activity in neighboring countries, see Keith Crane, D.
J. Peterson, and Olga Oliker, ``Russian Investment in the Commonwealth of Independent
States,'' Eurasian Geography and Economics, vol. 46, no. 6 (2005).
   11
      Tea Gularidze, ``Russian Company Seals Controversial Takeover of Tbilisi Electricity
Distribution,'' Civil Georgia, Tbilisi, Aug. 2, 2003, at www.civil.ge.


664    |   Orbis
                                                                       Georgian Economy


tries. Russia has thus been able to pursue its strategy in Georgia because of
insufficiently transparent privatization procedures.
         The Russian holding group Industrial Investors plans to invest up to
$200 million in the Georgian economy over the next three years.12 Through a
subsidiary, Stanton Equities Corp., it has already embarked on this by pur-
chasing, for $35 million, Madneuli, a gold-mining enterprise (it paid an
additional $16 million to pay Madneuli's state budget liabilities), and 50
percent of the shares in Kazreti, a gold alloy manufacturer.13
         Russian gas giant Gazprom is also moving aggressively in Georgia.
Gazprom is willing to purchase dozens of major gas interests in Georgia and,
most importantly, the main North-South natural gas pipeline through which
gas flows from Russia to Georgia and, by transit, to Armenia.14
         In addition to the numerous privatization schemes, there is the
precedent of renationalization implemented by the Russian side and unfortu-
nately welcomed by the Georgian government15. In early 2005, Russia's
state-owned Vneshtorgbank purchased the controlling shares in the United
Georgian Bank, the third-largest bank in Georgia. Just one year earlier,
Vneshtorgbank had acquired the controlling package of shares in the Arme-
nian Armsberbank. According to Vneshtorgbank management, the bank is
planning to embark on an ambitious investment program in Georgia which
may reach $1 billion in aggregate. The Russians started this program by
spending $40 million to purchase the gas turbines for an electricity generator
in Gardabani, south of Tbilisi.
         A major role in making Georgia part of the developing liberal empire has
been assigned to RAO EES Russia. Russia's interest in acquiring parts of the electric
power grid in Georgia in order to gain access to the huge Turkish market has
been known since Soviet times. When Tbilisi indicated its interest in privatizing
the Inguri Power Plant and renewing construction of the Khudoni Power Plant,
RAO EES's leadership indicated its strong interest in both projects.
         While most countries welcome FDI, it should be a matter of concern for
Georgia that investments are coming from a not-quite friendly nation that has
openly announced its intention of luring neighboring countries into its liberal

   12
       Gruppa ``Promyshlennye invrsoty'' namerena investirovat' v Gruzi v techenii triox let do
$200 millionov'' (Industrial Investors is Planning to Invest up to $200 Million in Georgian
Economy over the Next Three Years), Delovaia Rossia, June 7, 2004, at www.deloros.ru.
    13
       ``The winner company `Stanton Equities Corporation' pays more then 51 M USD for JSC
Madneuli,'' Nov. 2, 2005, Ministry of Economic Development of Georgia, at www.privatization.ge.
    14
       Russia's policy aims to make its ``liberal empire'' first energy-dependent and then poli-
tically dependent on it. See Keith C. Smith, Russian Energy Politics in the Baltics, Poland, and
Ukraine: A New Stealth Imperialism? (Washington: CSIS Press, 2004); and Fiona Hill, Energy
Empire: Oil, Gas and Russia's Revival (London: Foreign Policy Centre, 2004).
    15
       Vneshtogbank priobriol kontrolnyi paket aktsii Ob'edinionnogo banka Gruzii
(Vneshtorgbank Purchase the Controlling Shares of United Georgian Bank), News.ru, Jan. 18,
2005, at www.newsru.com.


                                                                             Fall 2006   |   665
PAPAVA


empire. Russian capital is always either directly owned or otherwise controlled
by the state.
         Russia manifested its desire to destabilize Georgia in the ``economic
war'' it opened in January 2006, when a gas pipeline to Georgia was blown up
on the Russian side of the two countries' border. As a result, gas deliveries to
Georgia and Armenia were disrupted for days during a particularly cold
winter.16 In Spring 2006, Russia put a ban on the importation of Moldovan
and Georgian wines, as well as plants and vegetables, claiming high levels of
heavy metals and pesticides. (In 2005, wine accounted for 9.4 percent of
Georgian exports, second only to scrap metal. More than 70 percent of these
exports were to Russia.) Other Georgian goods, such as mineral water, also
face expulsion from the Russian market.17 As a result, Georgia is considering
quitting the Commonwealth of Independent States,18 but it is still welcoming
Russian state investments.19 Georgia faces a historic choice: either to continue
moving towards Europe, or to let itself be drawn back into Russia's orbit. The
West cannot ignore these developments in the Caucasus.

Conclusions

        The democratic roots of the Rose Revolution gave hope to Georgia's
citizens and allies alike that the country would develop on the basis of
democratic values, respect for human rights, and economic reform. The fact
that many of those expectations have not yet been fulfilled has caused much
disappointment among the revolution's supporters. The new government is a
kind of mixture of democratic and authoritarian elements.20 Such hybrid
regimes are not a novelty; they are characteristic of many postcommunist
countries that have not had ``color revolutions.''21 But it is regrettable that

   16
       Cory Welt, ``Energy Insecurity in Georgia,'' Center for Strategic & International Studies, Jan.
24, 2006 at www.csis.org; ``Saakashvili Addresses Nation at End of Energy Crisis,'' Civil Georgia,
Jan. 30, 2006, at www.civil.ge.
   17
       Zaal Anjaparidze, ``Russia Continues To Press Georgian Wine Industry,'' Eurasia
Daily Monitor, April 20, 2006, at www.jamestown.org; Mamuka Tsereteli, ``Banned in Russia:
The Politics of Georgian Wine,'' Central Asia-Caucasus Institute Analyst, April 19, 2006, at
www.cacianalyst.org; and Robert Parsons, ``Russia/Georgia: Russia Impounds Georgian Mineral
Water,'' Radio Free Europe/Radio Liberty, Apr. 19, 2006, at www.frerl.org.
   18
       John Mackedon, ``Russian Economic Pressure has Georgia Thinking about Life Outside the
CIS,'' Eurasianet, Business & Economics, May 12, 2006, at www.eurasianet.org; Vladimir Socor,
``Georgia Near Exit from CIS,'' Eurasia Daily Monitor, May 11, 2006, at www.jamestown.org;
Saakashvili Comments on CIS, Civil Georgia, May 2, 2006, at www.civil.ge.
   19
       ``PM: Russian Investments Pose no Threat,'' Civil Georgia, Tbilisi, May 16, 2006, at civil.ge.
   20
       Ghia Nodia, ``The Dynamics and Sustainability of the Rose Revolution,'' in Michael
Emerson, ed., Democratisation in the European Neighbourhood. (Brussels: Centre for European
Policy Studies, 2005), pp. 44­45.
   21
       See, e.g., Valerie Bunce, ``The Political Economy of Postsocialism,'' Slavic Review, Winter
1999.


666     |   Orbis
                                                                   Georgian Economy


Georgia could not avoid the populist tendencies manifested in deprivatization,
another attribute of authoritarian regimes.22 For now, its antidemocratic
tendencies are impeding its prospects for integration with Europe and possibly
blocking its economic development. But there is still time for
international organizations and Georgia's allies to help Georgia's
government return to a democratic path.




   22
      ´
    Bela Greskovits, The Political Economy of Protest and Patience: East European and Latin
American Transformations Compared (Budapest: Central European University Press, 1998).


                                                                         Fall 2006   |   667