UNM’s Mistakes
This is the second note in the series on UNM and GD. In my previous
note I tried to demonstrate the tremendous contribution of UNM to
Georgia’s development over the last 9 years. To me, this contribution is
indisputable, and the transformation enacted by it is among the most
dramatic improvements in Georgia’s history.
A natural question is then, how did the party that did so much good for Georgia managed to acquire such a negative status with a large segment of the population, and in the end lost elections to a force of a very questionable nature? Well, the simple answer is that they made quite a few mistakes as well.
Here, I will not go into listing all the mistakes that UNM made over the last 9 years. Many of the mistakes were fairly minor, and I would expect any political force that tries to enact dramatic changes in a society to make some mistakes of a similar kind. There were other mistakes which, while serious in my opinion, are in no way related to why UNM lost the elections. For example, I consider the following to be some of their more serious mistakes:
As I mentioned above, none of these were the reasons for why UNM lost popularity among a significant portion of the population. Those who voted against UNM did so for a variety of reasons but most frequently I could hear the following:
To summarize: I do think there were some very valid accusations against UNM which had led to the loss of their popularity, however, in many cases these accusations were exaggerated beyond any reason. In many areas UNM did the best they could (or in fact, the best anyone could) – and they don’t deserve such a harsh criticism. I must say though, that nothing is without its cause and even exaggerations have reasons to exist. In many ways, the accusations I listed above are surface manifestations of more deeply running issues. To me, there were 3 strategic mistakes UNM made when they were in power. If these were handled differently many of the more “surface” mistakes could have been avoided. So, let’s look at these strategic mistakes one by one:
1. Significant government involvement into the economy
Under UNM, the government undertook a myriad of projects aimed at reviving Georgia’s economy. These included building roads, promoting entire industries (e.g. tourism), “beautifying” cities (or even building new ones). While government investment into infrastructure is necessary, UNM significantly overreached in this area. In the recent years, the government expenditures in Georgia comprised about 40% of GDP – a level more common for developed countries. Government spearheaded many of the projects and was directly involved in such diverse things as building hotels or popularizing new agricultural techniques. While this led to many positive results (I really like how the new Batumi looks) – nothing is without its price. In this case, I believe, that the positives gained by the government involvement were significantly outweighed by the negatives.
When the government decides to get involved into the economy two things happen: (1) the number of touch points between the government and private citizens increases, and (2) the government needs money to finance its projects. Both of these create very negative effects in the society. Specifically:
1. As the number of touch points between the government and private citizens increases, additional opportunities for corruption are created. This is an especially big problem in Georgia where favoritisms is fairly widespread. Any project that the government undertakes is susceptible to favoritism, and the more projects there are the more likely it is that some of them will be undertaken under less than kosher conditions. For example, if the government is involved in a construction of a hotel, opportunities for favoritism abound – the choice of the land plot, the choice of the construction company, the choice of the investor – all of these could be done in such a way as to favor someone who has government ties. On the other hand, if the government has nothing (or very little) to do with the construction of the hotel, no favoritism is possible. What’s worse, the favoritism does not actually need to take place – whenever there is government involvement, there is always a suspicion that someone benefited wrongfully – regardless of whether this was the case or not. It is not surprising then, that UNM lost the elections in areas where they actually undertook a lot of projects (e.g. Batumi), and won in areas where their involvement into the economy was much less limited (e.g. Samegrelo).
2. Any increase in government involvement requires additional funds. This in turn means higher taxes, and nobody likes higher taxes. If the government did not get involved into as many projects as it did, taxes could have been made significantly lower which would have benefitted the business environment. Alternatively, increased number of projects means that some projects of significant economic importance get delayed. For example, as much as I like the look of new Batumi, I think that if the resources spent on the development of Batumi were diverted to building the Tbilisi-Batumi autobahn and it would have been completed by now – it would have been better.
I do not want to say that government should completely abstain from infrastructure investment. Building roads, bridges, airports etc. is something that Georgia desperately needs given the long period of neglect. But it should have been understood that each new project the government engages in has very real negative consequences – it means higher taxes and creates opportunities for corruption. Thus, only absolutely necessary projects should warrant government involvement. Building a Tbilisi-Batumi autobahn is one such project, moving parliament to Kutaisi is another (and I wish both of these were completed at least a couple of years ago). However, building hotels or improving agricultural techniques should be left to private investors. “Beautification” of cities should be left to empowered local governments, which have the power of taxation to finance these projects if the local population looks favorably on them. I am confident, that if the projects UNM government undertook over the last 9 years were analyzed from this perspective, many of them would have been canceled. At the very least, it would have helped with curtailing favoritism.
2. Using “Singaporean” methods in a semi-democracy
Georgians are not very law-abiding citizens. The long Soviet (and post-soviet) period when laws were generally considered to be unfair, when bribery was commonplace, and breaking the law was a way to assert one’s individuality have left their mark on Georgian mentality. It manifests itself in many ways: from disorganized automotive traffic where hardly anyone follows traffic laws to endemic evasion of taxes. When I was in Georgia in 2008 I heard from multiple businessmen that it was a common practice to keep 3 sets of financial books – one for the government, one for the bank, and one for yourself.
What UNM tried to do over the last 9 years was to change this by applying “Singaporean” methods – that is, by enacting very strict punishments for breaking the law. These methods worked in Singapore which was much less democratic when these measures were enacted than Georgia is now. The difference is that in Singapore the government was much less dependent on popular opinion than is the Georgian government – so, it was able to weather the period of time when such measures led to the loss of popular support. This was not the case for the UNM government.
The thing is that any fine is upsetting to people – even if you know that you’ve broken the law (and especially so if you feel that the law is unfair). When we get traffic tickets for speeding, for the most part, we still feel that we’ve done nothing wrong and we are genuinely upset at the police. Given how endemic law evasion was in Georgia, once UNM started to implement very strict policies, a lot of people got slammed with fines which, while they were lawful, seemed very unfair. Just last year, I had a conversation with an importer of clothing from Turkey. He was fined almost $10K for underreporting the number of socks on his customs declaration: he was supposed to import 10,000 socks, but the shipment contained something like 10,200 (the actual discrepancy could have been larger, but that’s what I was told). Needless to say that he was very upset for paying this fine. In his words, “the government lives by collecting fines.” In another example, a distant relative of mine was fined for evading taxes on his business (the charge was fair). For some reason, he failed to pay the fine for over 6 months by which time he discovered that the fine, due to the late fees, had almost tripled (again, the actual numbers could have been different, but that’s what I was told). He was ready to pay the original fine, but the government insisted that he pay the new amount – so, he was forced to close his business.
The two examples above were lawful but still upsetting. I am sure the cases when the legality of fines was much less clear (and I am sure these happened a lot) were simply enraging. Needless to say that this turned a lot of people against UNM and contributed to the accusations of corruption. A person who is fined legally but who believes that the fine is unfair usually does not blame the law but rather blames those who implemented the law (when we get a speeding ticket we hardly say that it is the speed limit that is unfair, but rather we are upset with a police officer who caught us). Similarly, people who had to close down their business because of government fines frequently explained this as corruption, even if the fine was true to the letter of the law. The fact that the fines were paid into the government treasury did not make them feel any better.
Could UNM have done anything differently? – I believe so. For one, they could have made the fines less draconian. Yes, it would have taken more time to transform Georgians into law-abiding citizens, but it would have been much less stressful for the people, and in the end beneficial for UNM. More importantly, they could have done more to change the incentives for people to break the law. For example, eliminating VAT and corporate profit taxes removes the incentive for people to keep double or triple financial books. Changes like this could have eliminated a lot of bad blood between the government and private citizens.
3. Monopolizing power
As I mentioned above, UNM had a near monopoly on power in Georgia for almost 9 years. In the beginning this monopolization was both reflective of popular support (as I mentioned before, during presidential elections in 2004 Saakashvili received 97% of popular vote) and necessary. Necessary because many of the reforms that UNM undertook would have been simply impossible had the power been shared with other political forces. However, more recently this monopolization was less and less justified. First, UNM’s popular support declined over time, yet its hold on power remained undiluted –other political forces practically did not participate in any of the governing processes. Second, the need to wield uncontested power to conduct fundamental reforms has declined as well. In fact, UNM undertook very few (if any) such reforms in the recent years.
Since 2009 my position was that one of the biggest problems of Georgia was lack of sensible opposition. To be honest, it is difficult for me to say what UNM could have done to address this. But the fact is simple: in Georgian politics there was UNM, those who hated UNM almost on a personal level, but nothing in-between. Perhaps the environment created by UNM was such that it prevented any political force that was in moderate opposition to the party from gaining steam – to be against UNM you really had to hate their guts. Perhaps the reasons lie elsewhere. But it is the inability to cultivate a sensible opposition and include it into the government processes that I consider one of UNM’s greatest strategic failings.
It is the lack of sensible opposition that led to the stigmatization of UNM despite their unprecedented achievements and in the end brought to power a political force that hates UNM to a point of irrationality. First, since UNM was the only force in power and did not share this power with any other political force it got all the blame for the mistakes made by the government. Whether the failure was in the executive, the legislative, the judicial branch, on local or national level – it was UNM’s failure. It doesn’t matter that in many cases mistakes were unavoidable, and it is likely that most other political forces would have done no better (and quite possibly much worse) – the mistakes stuck to UNM. And 9 years of mistakes with no one to share them with can stigmatize any political force in any country. So, after a while, many people simply got tired of UNM. Perhaps a simple example would illustrate my point: if UNM had ceded the control of the penitentiary system to another political force, at the very least, it would have absolved itself of the mistakes that could have happened there. In the best case, it would have led to a better and more transparent penitentiary system in which the atrocities that cost UNM the elections could not have happened.
Second, the absence of a sensible opposition ensured that when UNM lost power it lost it to a force that had nearly animalistic hatred for the party. For the reasons described above, UNM could not have held the power forever. People tend to remember mistakes but take achievements as given – this is why in electoral democracies political parties periodically replace each other. As long as they maintained electoral mechanisms of power transfer, UNM was bound to lose sooner or later and, unfortunately, without sensible opposition, this transfer of power turned out to be very damaging for the country.
The monopolization of power was damaging to UNM itself. It is extremely difficult (if not impossible) for any political force to exercise self-restraint. As such, any political party which has no opposition will sooner or later slide into complacency and authoritarianism – and UNM is no exception. While they managed to check their authoritarian tendencies and in the end conducted fairly democratic elections and peacefully gave up power, same cannot be said about complacency. It is not a secret that the party had degraded significantly in the recent years and became somewhat disconnected from the population. Many of those who joined the party did so only because this was the most straightforward way to make a career in government – not because they were loyal to UNM or their ideals (which also became quite diluted recently). The decay was such that it seems the party has to be re-built almost anew since their loss in elections.
To sum up: I believe at the core of UNM’s loss of popularity lie 3 strategic mistakes: (1) they involved the government in too many projects which should have been left to the private businesses (or in some cases to empowered local governments) – this lead to higher real and perceived corruption; (2) they took law enforcement (especially for economic crimes) to an unjustifiably harsh levels – many of the businessmen who were fined for minor violations should have been spared such fate; and (3) they failed to create conditions to cultivate a moderate opposition and did not include any other political forces into the government – thus, they had no one to check their behavior or to share their mistakes with. If they had done things differently in these 3 areas, it is quite likely that they would have still been in power, or if they lost power, it would have been a positive development for Georgia. As the things stand now, it is very difficult to be optimistic about Georgia’s near future, and it will take much work to ensure that all the positive changes UNM was able to enact over the last 9 years are not reversed.
This is the second note in the series on UNM and GD. In my previous
note I tried to demonstrate the tremendous contribution of UNM to
Georgia’s development over the last 9 years. To me, this contribution is
indisputable, and the transformation enacted by it is among the most
dramatic improvements in Georgia’s history.A natural question is then, how did the party that did so much good for Georgia managed to acquire such a negative status with a large segment of the population, and in the end lost elections to a force of a very questionable nature? Well, the simple answer is that they made quite a few mistakes as well.
Here, I will not go into listing all the mistakes that UNM made over the last 9 years. Many of the mistakes were fairly minor, and I would expect any political force that tries to enact dramatic changes in a society to make some mistakes of a similar kind. There were other mistakes which, while serious in my opinion, are in no way related to why UNM lost the elections. For example, I consider the following to be some of their more serious mistakes:
- They left local self-governments impotent and utterly dependent on the central government
- They did not use their chance to develop a truly lasting constitution
- They converted Georgia into a parliamentary republic – which, I think, was a huge mistake
- They did not use the unique chance they had to get rid of VAT and corporate profit taxes
- They were too slow in exiting CIS and calling the things as they were vis-à-vis Russia
As I mentioned above, none of these were the reasons for why UNM lost popularity among a significant portion of the population. Those who voted against UNM did so for a variety of reasons but most frequently I could hear the following:
- Corruption (or more frequently “Elite Corruption” as even UNM's opponents agreed that regular corruption was reduced significantly) – this meant that UNM officials, or their friends/relatives, enriched themselves through illegal means. While I already said in my previous note that UNM failed to curb favoritism to an adequate level, I’ve also argued that the reduction in corruption has been tremendous (and bordering on miraculous). I will argue in my next note that the accusation of “elite corruption” was greatly exaggerated
- Violation of property rights – this is directly related to “elite corruption” and more concrete accusations here were that UNM officials illegally seized businesses and property, racketeered businessmen, bankrupted businesses through illegally imposed fines, and monopolize entire industries. I do agree that UNM’s spotty record in protecting property rights was one of their biggest mistakes – I think it should have been their top priority to ensure protection of property rights beyond any criticism. But again, I think the accusations were greatly exaggerated and frequently misplaced, and I will present my arguments in the next note
- Violation of human rights – the accusations here ranged from illegal imprisonments and inhumane treatment of prisoners etc. to state sponsored murders. Again, I think most of these accusations have been greatly exaggerated and some were entirely misplaced. In terms of human right violations Georgia is no worse than an average Eastern European country
- Reduction of media freedom – UNM was in fact trying to control mass media, and I would say that to a large extent this accusation is valid. However, it is important to note that there were always opposition TV channels in Georgia which were quite popular, and UNM actually improved significantly in this area in the year leading up to the elections
- Absence of independent judiciary – in my opinion, this is another valid accusation. During their time in power, UNM failed to create a judiciary system that would be beyond reproach. Out of state institutions, judiciary was perhaps the least trusted by the population – and this, in my opinion, is one of their biggest mistakes of UNM
To summarize: I do think there were some very valid accusations against UNM which had led to the loss of their popularity, however, in many cases these accusations were exaggerated beyond any reason. In many areas UNM did the best they could (or in fact, the best anyone could) – and they don’t deserve such a harsh criticism. I must say though, that nothing is without its cause and even exaggerations have reasons to exist. In many ways, the accusations I listed above are surface manifestations of more deeply running issues. To me, there were 3 strategic mistakes UNM made when they were in power. If these were handled differently many of the more “surface” mistakes could have been avoided. So, let’s look at these strategic mistakes one by one:
1. Significant government involvement into the economy
Under UNM, the government undertook a myriad of projects aimed at reviving Georgia’s economy. These included building roads, promoting entire industries (e.g. tourism), “beautifying” cities (or even building new ones). While government investment into infrastructure is necessary, UNM significantly overreached in this area. In the recent years, the government expenditures in Georgia comprised about 40% of GDP – a level more common for developed countries. Government spearheaded many of the projects and was directly involved in such diverse things as building hotels or popularizing new agricultural techniques. While this led to many positive results (I really like how the new Batumi looks) – nothing is without its price. In this case, I believe, that the positives gained by the government involvement were significantly outweighed by the negatives.
When the government decides to get involved into the economy two things happen: (1) the number of touch points between the government and private citizens increases, and (2) the government needs money to finance its projects. Both of these create very negative effects in the society. Specifically:
1. As the number of touch points between the government and private citizens increases, additional opportunities for corruption are created. This is an especially big problem in Georgia where favoritisms is fairly widespread. Any project that the government undertakes is susceptible to favoritism, and the more projects there are the more likely it is that some of them will be undertaken under less than kosher conditions. For example, if the government is involved in a construction of a hotel, opportunities for favoritism abound – the choice of the land plot, the choice of the construction company, the choice of the investor – all of these could be done in such a way as to favor someone who has government ties. On the other hand, if the government has nothing (or very little) to do with the construction of the hotel, no favoritism is possible. What’s worse, the favoritism does not actually need to take place – whenever there is government involvement, there is always a suspicion that someone benefited wrongfully – regardless of whether this was the case or not. It is not surprising then, that UNM lost the elections in areas where they actually undertook a lot of projects (e.g. Batumi), and won in areas where their involvement into the economy was much less limited (e.g. Samegrelo).
2. Any increase in government involvement requires additional funds. This in turn means higher taxes, and nobody likes higher taxes. If the government did not get involved into as many projects as it did, taxes could have been made significantly lower which would have benefitted the business environment. Alternatively, increased number of projects means that some projects of significant economic importance get delayed. For example, as much as I like the look of new Batumi, I think that if the resources spent on the development of Batumi were diverted to building the Tbilisi-Batumi autobahn and it would have been completed by now – it would have been better.
I do not want to say that government should completely abstain from infrastructure investment. Building roads, bridges, airports etc. is something that Georgia desperately needs given the long period of neglect. But it should have been understood that each new project the government engages in has very real negative consequences – it means higher taxes and creates opportunities for corruption. Thus, only absolutely necessary projects should warrant government involvement. Building a Tbilisi-Batumi autobahn is one such project, moving parliament to Kutaisi is another (and I wish both of these were completed at least a couple of years ago). However, building hotels or improving agricultural techniques should be left to private investors. “Beautification” of cities should be left to empowered local governments, which have the power of taxation to finance these projects if the local population looks favorably on them. I am confident, that if the projects UNM government undertook over the last 9 years were analyzed from this perspective, many of them would have been canceled. At the very least, it would have helped with curtailing favoritism.
2. Using “Singaporean” methods in a semi-democracy
Georgians are not very law-abiding citizens. The long Soviet (and post-soviet) period when laws were generally considered to be unfair, when bribery was commonplace, and breaking the law was a way to assert one’s individuality have left their mark on Georgian mentality. It manifests itself in many ways: from disorganized automotive traffic where hardly anyone follows traffic laws to endemic evasion of taxes. When I was in Georgia in 2008 I heard from multiple businessmen that it was a common practice to keep 3 sets of financial books – one for the government, one for the bank, and one for yourself.
What UNM tried to do over the last 9 years was to change this by applying “Singaporean” methods – that is, by enacting very strict punishments for breaking the law. These methods worked in Singapore which was much less democratic when these measures were enacted than Georgia is now. The difference is that in Singapore the government was much less dependent on popular opinion than is the Georgian government – so, it was able to weather the period of time when such measures led to the loss of popular support. This was not the case for the UNM government.
The thing is that any fine is upsetting to people – even if you know that you’ve broken the law (and especially so if you feel that the law is unfair). When we get traffic tickets for speeding, for the most part, we still feel that we’ve done nothing wrong and we are genuinely upset at the police. Given how endemic law evasion was in Georgia, once UNM started to implement very strict policies, a lot of people got slammed with fines which, while they were lawful, seemed very unfair. Just last year, I had a conversation with an importer of clothing from Turkey. He was fined almost $10K for underreporting the number of socks on his customs declaration: he was supposed to import 10,000 socks, but the shipment contained something like 10,200 (the actual discrepancy could have been larger, but that’s what I was told). Needless to say that he was very upset for paying this fine. In his words, “the government lives by collecting fines.” In another example, a distant relative of mine was fined for evading taxes on his business (the charge was fair). For some reason, he failed to pay the fine for over 6 months by which time he discovered that the fine, due to the late fees, had almost tripled (again, the actual numbers could have been different, but that’s what I was told). He was ready to pay the original fine, but the government insisted that he pay the new amount – so, he was forced to close his business.
The two examples above were lawful but still upsetting. I am sure the cases when the legality of fines was much less clear (and I am sure these happened a lot) were simply enraging. Needless to say that this turned a lot of people against UNM and contributed to the accusations of corruption. A person who is fined legally but who believes that the fine is unfair usually does not blame the law but rather blames those who implemented the law (when we get a speeding ticket we hardly say that it is the speed limit that is unfair, but rather we are upset with a police officer who caught us). Similarly, people who had to close down their business because of government fines frequently explained this as corruption, even if the fine was true to the letter of the law. The fact that the fines were paid into the government treasury did not make them feel any better.
Could UNM have done anything differently? – I believe so. For one, they could have made the fines less draconian. Yes, it would have taken more time to transform Georgians into law-abiding citizens, but it would have been much less stressful for the people, and in the end beneficial for UNM. More importantly, they could have done more to change the incentives for people to break the law. For example, eliminating VAT and corporate profit taxes removes the incentive for people to keep double or triple financial books. Changes like this could have eliminated a lot of bad blood between the government and private citizens.
3. Monopolizing power
As I mentioned above, UNM had a near monopoly on power in Georgia for almost 9 years. In the beginning this monopolization was both reflective of popular support (as I mentioned before, during presidential elections in 2004 Saakashvili received 97% of popular vote) and necessary. Necessary because many of the reforms that UNM undertook would have been simply impossible had the power been shared with other political forces. However, more recently this monopolization was less and less justified. First, UNM’s popular support declined over time, yet its hold on power remained undiluted –other political forces practically did not participate in any of the governing processes. Second, the need to wield uncontested power to conduct fundamental reforms has declined as well. In fact, UNM undertook very few (if any) such reforms in the recent years.
Since 2009 my position was that one of the biggest problems of Georgia was lack of sensible opposition. To be honest, it is difficult for me to say what UNM could have done to address this. But the fact is simple: in Georgian politics there was UNM, those who hated UNM almost on a personal level, but nothing in-between. Perhaps the environment created by UNM was such that it prevented any political force that was in moderate opposition to the party from gaining steam – to be against UNM you really had to hate their guts. Perhaps the reasons lie elsewhere. But it is the inability to cultivate a sensible opposition and include it into the government processes that I consider one of UNM’s greatest strategic failings.
It is the lack of sensible opposition that led to the stigmatization of UNM despite their unprecedented achievements and in the end brought to power a political force that hates UNM to a point of irrationality. First, since UNM was the only force in power and did not share this power with any other political force it got all the blame for the mistakes made by the government. Whether the failure was in the executive, the legislative, the judicial branch, on local or national level – it was UNM’s failure. It doesn’t matter that in many cases mistakes were unavoidable, and it is likely that most other political forces would have done no better (and quite possibly much worse) – the mistakes stuck to UNM. And 9 years of mistakes with no one to share them with can stigmatize any political force in any country. So, after a while, many people simply got tired of UNM. Perhaps a simple example would illustrate my point: if UNM had ceded the control of the penitentiary system to another political force, at the very least, it would have absolved itself of the mistakes that could have happened there. In the best case, it would have led to a better and more transparent penitentiary system in which the atrocities that cost UNM the elections could not have happened.
Second, the absence of a sensible opposition ensured that when UNM lost power it lost it to a force that had nearly animalistic hatred for the party. For the reasons described above, UNM could not have held the power forever. People tend to remember mistakes but take achievements as given – this is why in electoral democracies political parties periodically replace each other. As long as they maintained electoral mechanisms of power transfer, UNM was bound to lose sooner or later and, unfortunately, without sensible opposition, this transfer of power turned out to be very damaging for the country.
The monopolization of power was damaging to UNM itself. It is extremely difficult (if not impossible) for any political force to exercise self-restraint. As such, any political party which has no opposition will sooner or later slide into complacency and authoritarianism – and UNM is no exception. While they managed to check their authoritarian tendencies and in the end conducted fairly democratic elections and peacefully gave up power, same cannot be said about complacency. It is not a secret that the party had degraded significantly in the recent years and became somewhat disconnected from the population. Many of those who joined the party did so only because this was the most straightforward way to make a career in government – not because they were loyal to UNM or their ideals (which also became quite diluted recently). The decay was such that it seems the party has to be re-built almost anew since their loss in elections.
To sum up: I believe at the core of UNM’s loss of popularity lie 3 strategic mistakes: (1) they involved the government in too many projects which should have been left to the private businesses (or in some cases to empowered local governments) – this lead to higher real and perceived corruption; (2) they took law enforcement (especially for economic crimes) to an unjustifiably harsh levels – many of the businessmen who were fined for minor violations should have been spared such fate; and (3) they failed to create conditions to cultivate a moderate opposition and did not include any other political forces into the government – thus, they had no one to check their behavior or to share their mistakes with. If they had done things differently in these 3 areas, it is quite likely that they would have still been in power, or if they lost power, it would have been a positive development for Georgia. As the things stand now, it is very difficult to be optimistic about Georgia’s near future, and it will take much work to ensure that all the positive changes UNM was able to enact over the last 9 years are not reversed.
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