Central Asia at the End of the Transition

Boris Z. Rumer

• Publisher: Routledge
• Year: 2016
• ISBN:
  9781315497594
• Edition: 1
• Topic: Business
• Subtopic: Business Mathematics
• Index: Business

For better or worse, the former Soviet republics of Central Asia have largely completed their post-independence transitions. Over more than a decade, they have established themselves as independent states whose internal regimes and external relations have characteristic patterns and vulnerabilities both individually and as a group. The purpose of this volume is to assess both what has been accomplished and the trends of development in the region, especially its leading states. How sound are the foundations of this "bulwark against the spread of terrorism" in Eurasia?

Part I
Overview

1
Central Asia at the End of the Transition

Boris Rumer

Whereas the first volume in this series appeared with the title Central Asia in Transition, this one appropriately bears a quite different title: Central Asia at the End of the Transition, emphasizing that indeed the transition period is now complete. I realize that this title may raise some eyebrows; I admit that I settled on it after some vacillation and after conversations with the coauthors. Of course, I do not intend to suggest that the political, social, and economic development of these countries is complete; on the contrary, one can discern the fiery sparks of future upheavals on their political horizon. But the transition period has come to an end in the sense that the states of Central Asia have largely completed the process of systemic transformation. The social and political structures in the Central Asian countries have acquired a stable and (in terms of basic characteristics) a broadly similar character. The countries have also fixed the shape of their basic features. They have established regimes, with varying degrees of authoritarianism, behind a formal quasi (or pseudo) democratic facade. These regimes range from what is a relatively moderate regime (by regional standards) in Kyrgyzstan to the full-blown despotism that prevails in Turkmenistan.

The foundation of the social and political structure that was created and consolidated in the post-Soviet era will continue to exist for the foreseeable future. Those who created these systems do not have the strength to make fundamental changes even if they wanted to. They themselves have become hostages to the new system. In my judgment, special attention must be given to two issues that are of paramount importance for understanding the situation in Central Asia and surrounding countries, and that became particularly salient in the period since the last volume in this series appeared in 2002: (a) the character and durability of the existing social and political system, and their basic structure in the countries of this region; and (b) the growing competition between Russia and the United States to establish control over the region. This introductory overview will examine in detail these two critical issues. Whereas my introduction to the preceding volume examined the two "regional superpowers" (Kazakhstan and Uzbekistan) but really concentrated mainly on the latter, the reverse is true in the present chapter: it devotes the primary attention to Kazakhstan, which has leaped ahead of the other postSoviet countries with its impressive economic growth.

Part I. Attributes of the Post-Transition Systems

The Character of Central Asian Regimes

Despite all the differences in the post-Soviet countries of Central Asia (different economies, different geopolitical orientations, different rates of overcoming the Soviet legacy), they share some things in common: an authoritarian character of rule and a corrupting fusion of political power and capital. To begin with, it is important that one does not excessively personalize the ruling regimes. When the current rulers retire or die in power, when these founding fathers (who all came from the same incubator of the upper Communist Party elite, the famous nomenklatura) give way to a new generation that was formed in the post-Soviet era, the fundamental formative elements of the system—quite apart from these personalities—will be preserved. The main goal of the established authorities in these countries is to preserve and reproduce this very power. Like Russian president Vladimir Putin's "managed democracy" (as someone once remarked, no matter what political reforms take place in Russia, these always seem to revert to monocracy), the regimes of Central Asia are virtually nothing other than dictatorships veiled in parliamentary clothing—whether the dictatorship be of a milder form, as in Kazakhstan, or of a harsher variety, as in Uzbekistan. As Dmitrii Furman in his chapter "The Regime in Kazakhstan" in this volume, has observed:

The omnipotence of presidential authority, of course, is camouflaged. In the twenty-first (indeed, in the twentieth) century an "honest" absolutism is simply impossible. But our system has placed in its hands an excellent means at once to conceal and to realize this omnipotence. That paradoxical means is law itself. Both an extralegal character and democratic legal patina are inherent in the social and political system that has taken shape here since 1991.

Furman emphasizes this extralegal character is the very essence of the system, declaring that it is "constructed on the contradictions between formal laws and real life, the lifelessness of laws and the lawlessness of life.... Use of the law, simultaneously for purposes of arbitrariness and for concealing arbitrariness reinforces the irrational, 'Kafkaesque' fear of the authorities."¹

In striving to preserve the democratic veneer, the ruling regimes engage in mimicry, and they create quasi-human-rights organizations, various social movements and councils, and political parties, but in fact these are firmly under the government's control. All the efforts by international organizations, the European Union, the U.S. Congress, and the U.S. Department of State to push the authorities here to carry out a real liberalization of public life have, for the present, remained without issue. Any party that seriously calculates on occupying a certain niche in politics must, at a minimum, remain loyal to the regime and leader; it must also establish solid connections with the clan-based structures. If a party does not accept these rules of behavior, it is doomed to remain marginal to political life or to disappear altogether because of repression.

"5:15:80"

The material well-being of the great mass of the populace remains at the same low level as before the collapse of the Soviet Union—notwithstanding the macroeconomic stabilization and growth in the gross domestic product (GDP) during the last few years. For many countries in the "impoverished South," it is typical for the population to be divided into proportions of 5:15:80. Although only a rough approximation, this ratio provides a good representation of the material and social stratification of the population in the countries of this region. Namely, about 5 percent make up the most prosperous stratum, 15 percent are relatively well off, and 80 percent are dispossessed (a significant part of whom have incomes at or below the poverty line). Such a situation will apparently persist for the foreseeable future. There is no question that a mood of discontent and protest is building up in the ranks of that 80 percent. But the majority of the politically and economically active segment of the population (those in the "5" and "15" percent categories) is inclined to preserve the status quo that ensures not only their own prosperity but also stability in the country.

Pervasive Corruption and the Shadow Economy

Another general systemic feature in all the countries of the region is corruption, which has become, in essence, a major factor in the everyday functioning of these societies. All the Central Asian countries have witnessed, during almost one and a half decades of post-Soviet independence, a degradation of the social organization—I would even say its "archaization" to describe the fact that the development of society is determined not only by the level and structure of the economy, but also by the correlation of spheres that are governed by custom, consensus, and law. In the contemporary reality of Central Asia, the relations between actors in social and economic life are predominantly regulated not so much by laws as by customs and norms. The foundation for all this is massive corruption, which is all-encompassing, pervasive, and legitimized in everyday life. Much has been written about this general phenomenon in post-Soviet states,² and it has also been a central feature of the regimes in Central Asia.

Corruption—in one form or another, to a greater or lesser degree—is inherent in any social system, including the Western democracies. Thus, corruption scandals are a regular feature of life in France, the United States, and England. But these societies have developed authentic political opposition, free press, and independent courts that conduct a constant, effective struggle to combat and contain this evil. As a result of investigations by the government and parliament, even the heads of large corporations have lost their positions (as was, for example, the case with the chairman of the Boeing Corporation), and high-ranking public officials are convicted and sent to prison (as happened with the foreign minister of France). Corruption of course existed in the Soviet system as well. However, most successor states of the post-Soviet era—whether Russia, Azerbaijan, or the countries of Central Asia—have in effect institutionalized corruption. In Central Asia, as in Russia, venality has become a fundamental trait of the new social and political system; it regulates the functioning of the state apparatus, economic activity, and the day-to-day lives of the population. Indeed, the societies here have come to perceive corruption as a norm of life; it has lost its criminal connotation in public consciousness.

The words of an analyst in Kazakhstan, Sergei Duvanov, can unqualifiedly be applied to all the countries of Central Asia:

Corruption, which has been elevated to the rank of a state principle, signifies that everything is up for sale, including all the services in the system of state relations. Formally, there is a constitution, laws.... In fact, however, all this is a sham. The laws can simply be evaded and ignored if one pays the officials responsible for the functioning of this or that part of the state mechanism. Bribes and payoffs have turned into an obligatory attribute of social relations. Law-enforcement organs, which are obliged to combat corruption, zealously defend this systematic corruption. As a rule, both the courts and the police are on the side of those who act in accordance with the "understandings" of corruption and punish those who strive to live in compliance with the existing laws.³

The very fact that colloquial speech has fully incorporated criminal jargon like "cover" (krysha) and "kickback" (otkat) is very revealing. Racketeering at the state level has become a fundamental element in the life of society, and official racketeers permeate the state apparatus from top to bottom.

One should also note the unreliability and distortions in the contemporary picture of social and economic life that has been drawn on the basis of the accessible sources. In fact, what can one infer about the true dynamics of the GDP, if approximately 30 percent of the economic activity of the population exists outside the parameters of official statistics and is hidden from taxation? What is the structure and dynamics of this shadow sphere, which envelops practically all sectors of the economy and drug trade, exerts an enormous influence on public morality, and promotes the criminalization of society? To be sure, the shadow economy is not a phenomenon unique to post-Soviet countries; it has always existed, and it still exists in every society. However, during the period of the exploding economic catastrophe of the 1990s, the shadow economy did not in fact play a negative role; on the contrary, it actually made a positive contribution to the efforts by the mass of the population simply to survive. And it has preserved that function to the present time. It also has helped to stimulate initiative and entrepreneurial activity. The shadow economy, moreover, has a number of obvious advantages over the legal economy. It is incomparably more efficient, requires much less overhead, and remains closer to the individual person. And a substantial part of the profits from the shadow economy remains within the country and is spent on production and consumption. To repeat, this is an economy aimed at ensuring survival; it makes an extremely tangible contribution to the national income (though unrecorded in the official statistics) and helps the mass of the population to keep their heads above water. In general, the post-Soviet era has witnessed the process whereby homo sovieticus is being transformed into homo economicus.

The shadow economy is a complex and qualitatively diverse phenomenon. It has been the subject of considerable attention not only in scholarly studies on the creation of a market economy in post-Soviet countries, but also in the mass media (primarily with respect to various kinds of criminal mafia activities). But there has been virtually no study of segments like the economics of households and the so-called "social economy," which is manifested in the form of support of relatives, friends, and neighbors. It is precisely this aspect of the shadow economy that is so characteristic of the economic life of the population of Central Asia (especially in the countryside and small towns) and that has flourished in the post-Soviet era. Households, small enterprises, the exponential growth of the so-called "shuttle trade"—all this helped to absorb the shock of economic catastrophe in the post-Soviet years and made it possible for thousands and thousands of families to survive. This sphere that operates outside official statistics includes the mass of the people, not only the unskilled underclass, but also many well-educated specialists who, simply to survive, had to abandon their professions and become active in this shadow economy.

Growth Without Development

Another feature common to all the countries of this region has been the positive dynamic of growth in the GDP since the start of the new millennium. That growth is evident not only in official statistics produced by the local regimes, but also from the analyses conducted by independent organizations and experts. In any case, since 1999 economic growth has occurred in the majority of post-Soviet countries regardless of their resource potential and the strategy employed for making the transition to a market economy. The most cogent explanation for this phenomenon rests in the fact that, after the shock of the first years following the breakup of the USSR and the frenetic plundering of national wealth, these countries have entered a phase of picking up the pieces and putting things back together. The lands of Central Asia have begun to modify the structure of the economy, to rebuild its productive sector, and to adjust to domestic and foreign market trends. And although fixed capital was already largely obsolescent at the beginning of the 1990s, the level of physical depreciation (which enterprises in the Soviet time, in the course of compiling inventories for the replacement costs of machinery and equipment, greatly exaggerated) was considerably lower than what official statistics would indicate. The level of utilization of productive capacity was also heavily inflated. The real resources of industrial capacity (including the reserve capacities for mobilization purposes found in many enterprises) predetermined the opportunities for resuming economic growth in these republics. Of course, those countries that, in addition, possessed and utilized export potential had greater opportunities for growth because of the extremely favorable price dynamics for raw material and metal exports. That explains the growth of the GDP in Kazakhstan, Uzbekistan, and Turkmenistan. But the presence of underutilized capacities, given a government policy aimed at import substitution (despite all its negative aspects), was a very important factor in generating a positive economic dynamic in all these republics. Another factor of great importance was the intellectual, professional capital bequeathed from the Soviet era.

However, one should not repose all hopes on any kind of long-term effect from these factors. The reserves of productive capacity are close to being exhausted. Neither the expansion nor even the simple replacement of physical and human capital has received support. The expenditures for maintenance—to compensate for the depletion of equipment, physical plants, and installations—have been utterly insufficient throughout the post-Soviet era. State enterprises simply lacked the means to replace and upgrade during the crisis years of the 1990s. On the contrary, the strategy of the most significant enterprises in the extractive sector and metallurgy (which had been privatized by foreign, frequently offshore, companies) amounted to nothing more than the maximum exploitation of existing capacities, with no concern for their maintenance, not to mention their modernization. As for human capital, the post-Soviet rate of reproduction (especially in the technical spheres and natural sci...

Table of contents

• Cover
• Half Title
• Title
• Copyright
• Contents
• List of Tables
• Preface
• Acknowledgments
• Part I: Overview
• Part II: The External Context
• Part III: The Internal Social and Political Context
• Part IV: The Prospects for Economic Development
• Index
• About the Editor and Contributors