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#6 - JRL 7032
Commentary: Uncommon poverty of the CIS
By Sam Vaknin
UPI Senior Business Correspondent

SKOPJE, Macedonia, Jan. 23 (UPI) -- The Lucerne Conference on the
9-month-old CIS-7 Initiative ended Wednesday with yet another misguided
call upon weary donors to provide assistance to the poorest seven countries
of the Commonwealth of Independent States in the form of grants rather than

The World Bank's managing director, Shengman Zhang, concluded with the
incoherent statement that "donor assistance in the form of highly
concessional finance and debt relief will only succeed if linked to
effective reform." None of the other five co-sponsors -- the IMF, the
European Bank for Reconstruction and Development, the Asian Development
Bank and the indefatigable Dutch and Swiss governments -- questioned this
non sequitur.

Since independence a decade ago -- aided and abetted by the same founts of
Washington wisdom -- the seven unfortunates (Armenia, Azerbaijan, Georgia,
Kyrgyz Republic, Moldova, Tajikistan and Uzbekistan) have regressed to a
malignant combination of unbridled autocracy and perpetual illiquidity.
Poverty soared to African proportions, the region's economies shriveled and
public and external debts mounted dizzyingly.

Ever the autistic solipsists, the International Monetary Fund and the World
Bank maintained in a press release that the talk shop "broadened and
deepened the debate to include a range of economic, institutional and
social issues that must be tackled if the seven countries are to achieve
the targets of the Millennium Development Goals."

The release is strewn with typical IMF-newspeak.

The destitute, oppressed and diseased people of the region should achieve
"ownership of the reform agenda" in accordance with "clear national
priorities." Worry not, reassures the anonymous hack: The World Bank has
embarked on Poverty Reduction Strategy processes in all seven fiefs.

The cynical coverup of the West's abysmal failure in the region comes
replete with unflinchingly triumphant balderdash: the policies of the
Bretton-Woods institutions are "putting the countries themselves in the
driver's seat of reforms." According to Zhang, corruption in the CIS-7 is
"moderating" and the investment climate is "beginning to improve."

The solution? "More regional integration" -- in other words, more trading
among the indigent and the demonetized. This and better access to markets
in "the rest of the world" will assure "recovery and future prosperity."

Zhang conveniently neglected to mention the Stalinesque rulers of most of
the CIS-7, the political repression, the personality cults, the blatant
looting of the state by pernicious networks of cronies, the rampant
nepotism, the elimination of the free media and the proliferation of every
conceivable abuse of human and civil rights, up to -- and including -- the
assassination of opponents and dissidents. To raise these delicate issues
would have been impolitic when the IMF's largest shareholder -- the United
States -- has embraced these despots as newfound allies.

And from fantasyland to harsh reality: According to the World Bank's own
numbers, with the exception of Uzbekistan, the current gross domestic
product of the reluctant members of the CIS-7 is between 29 percent
(Georgia) and 80 percent (Armenia) of its level 10 years ago.

Armenia's annual GDP per capita is a miserly $670. More than half the
population is below the poverty line. These dismal results are despite
seven years of strong growth pegged at 6 percent annually and remittances
from abroad which equal a staggering one-eighth of GDP. Armenia is the
second-most-prosperous of the lot. Its inflation is down to two digits. Its
currency is stable. Its trade is completely liberalized (apropos Zhang's

Azerbaijan, its foe and neighbor, should be so lucky. Close to nine-tenths
of its population live as paupers. This despite a tripling of oil prices,
its mainstay commodity. The World Bank notes wistfully that its agriculture
is picking up. Its oil fund, insist the sponsoring institutions,
incredibly, is "governed by transparent and prudent management rules."

Georgia flies in the face of the Washington Consensus. Petrified by a
meltdown of its economy in the early 1990s, a surging inflation and $1
billion in external debt, it adhered religiously to the IMF's prescriptions
and proscriptions. To no avail. Annual GDP growth collapsed from 10 percent
in 1996-97 to less than 3 percent thereafter.

The Kyrgyz Republic is a special case even by the dismal standards of the
region. Again, nine-tenths of its population live on less than $130
(one-half on less than $70) monthly. Poverty actually increased in the past
few years when economic growth picked up. At $310, the country's GDP per
capita is sub-Saharan. Is this appalling performance the outcome of brazen
disregard for the IMF's sagacious counsel?

Not so. according to the CIS-7 Web site: Tthe Kyrgyz Republic is currently
the most reformed country of Central Asia and sustains a very liberal
economic regime." The Kyrgyz predicament defies years of robust growth,
single-digit inflation, a surplus in the trade balance and other
oft-rehashed IMF benchmarks. That the patient is as sick as ever casts in
doubt the doctors' competence.

Moldova -- with $420 in GDP per capita and 85 percent of the population
under the line of poverty -- is only in marginally better shape, mainly due
to the swift recovery of its principal export market, Russia.

The best economic performance of the lot was Uzbekistan's. It is often
wheeled out as a success story and used as a fig leaf. Uzbekistan's GDP is,
indeed, unchanged compared to 1989. GDP per capita is $450, but only
one-third of the population is under -- the famine-level -- national
poverty line.

But a closer scrutiny reveals the -- customary -- prestidigitation by the
proponents of the Washington orthodoxy.

With the exception of Belarus, another relative economic success story,
Uzbekistan resisted the IMF's bitter medicine longer than any other country
in transition. Its accomplishments cannot be attributed by any mental
gymnastics to anything the West has done or said. The CIS-7 Web site
describes this contrarian polity thus: "Today significant distortions in
foreign exchange allocation remain, reflected in a large difference between
the official and curb market exchange rates (about 60 percent in mid-2002).
The current economic system retains the key features of the Soviet economy,
with the state owning and exercising quite active control over the
production and distribution decisions of a significant number of Uzbek

There lurks an important lesson.

Central Europe, with its industrial and liberal-democratic past, should not
be lumped together with east Europe. The moral seems to be that transition
in the former Soviet Union, in the east and in the Balkans was a foolhardy
and ill-informed exercise, administered by haughty and inexperienced
bureaucrats and avaricious advisers.

The countries who resisted Western pressures and chose to preserve
Soviet-era institutions, even as they gradually liberalized prices and
unleashed market forces, seem to have fared far better than the more
obsequious lot. This is the Chinese model -- as opposed to the "shock
therapy" prescribed by Western armchair "experts." Tajikistan -- with $170
GDP per capita and an unearthly 96 percent of its denizens under the
poverty line -- may be regretting not having heeded this lesson earlier.

Sam Vaknin advises governments in their negotiations with the IMF.

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