Georgia, after regainig its independence, became a place of many experiments. The nation made certain state-craft steps to obtain legitimacy and capacity to run social institutions. Including the process of restoration of private property.
Privatization, however, is not only a sale of government-owned properties: It is first and foremost a process of separating the government from intervention in many other areas, not just the economy. Georgia is a positive example, and an almost unique exception in this respect.
Most political systems still encourage politicians to promise people to solve the problems at hand with the same tools which created them in the first place: by more spending and more intervention. This, in turn, results in eliminating personal incentives and responsibilities.
Georgia became an independent nation in 1991 after 190 years of, first, annexation by Russia and then forceful incorporation in the Soviet Union. After the Soviet Union collapsed, Georgia experienced the most dramatic peacetime economic decline in human history – a 75% drop in GDP. The country needed to restart its economy, and quickly.
The Economic Freedom of the World study gives all nations a very useful tool to see in which areas their countries’ economies have weak spots, why investors are not attracted to what they offer and why individuals avoid hard work.
The experience of dealing with Russia over the past 200 years has taught us that the only thing Russia respects is power; and we will only have power if we stay close to our friends. However, soon thereafter any such pragmatism was once again forgotten and we now continue living with our illusions as if nothing has happened.
This story of bilateral cooperation between Turkey and Georgia gives an interesting example of how good will and understanding each others needs, despite of several historic and political differences in past, can create a high level of cooperation from which both sides can benefit politically and economically.
Security is the biggest challenge for our economy. To counteract a similar challenge, Israel, for example, is entirely militarized, regardless of the fact that numerous international lobbyist groups assist it, including financially. A country facing such security challenges might have armed forces three or four times stronger than Georgia and a defense budget 10 times larger.
The more powers, functions and mechanisms concentrated in the hands of a government, the more etatistic its policy with the people more restricted by, and subordinated to, the government. And vice versa, in a country where the government has very few functions, people live, act, study and work more freely.
I don’t believe that we need central banking, monetary policy or our national monetary unit. Without this, we can’t avoid two essential problems – politicization of the monetary politics and also its competitiveness. But by saying this I do not wish to imply that in this particular case of devaluation of the lari the central banking system was the major problem. Quite the opposite.