NCLUSIVE AND EXTRACTIVE ECONOMIC INSTITUTIONS: CONFLICTING TRENDS IN “POST-ROSY” GEORGIA

Inga Balarjishvili, Shalva Gogiashvili

Abstract


In 2004-2013 Georgia implemented a series of radical socio-economic reforms pursuing ambitious goals for the suppression of corruption and creation of the current economic model in one of the poorest transitive post-Soviet states. Despite obvious progress, in recent years the Georgian model has being faced a series of challenges. The author uses the approach of D. Acemoglu and J. Robinson (“inclusive” and “extractive” economic institutions) to cover theoretical and methodological foundations of Georgian reforms which are usually considered as part of the stereotype of the economic “neo-liberalism” policy. System decomposition of economic policy measures of the governments of the “Revolution of Roses” and “Georgian Dream” allows us to see in it a implementation of the course of institutional changes aimed at creating a modern inclusive economy. Institutional economic models of Georgia and countries with comparable levels of socio-economic development (Armenia, Belarus, Serbia, Ukraine) are compared; the results of comparison suggest a deep institutional transformation of the Georgian economy. The current state of the Georgian economy and the problems of its economic dynamics are considered. The author comes to a conclusion about the weakness of the internal drivers of economic growth in Georgia (low level of demand, savings, human capital) that creates a situation similar to the classic “vicious circle of underdevelopment” and the investment deficit according to Nurkse R., P. Rosenstein-Rodan. In this respect, the classical theories of the development economy complement and develop measures based on the methodology of the new institutionalism. The policy of creation of an inclusive institutional framework is a prerequisite for the formation of the modern economy, however, in the absence of formed internal drivers of growth it cannot by itself ensure high economic dynamics and cope fast enough with the problems of poverty and social inequality. To achieve such a goal, a transition towards economic policy of stimulating savings, investment and infrastructure development is required. The theory of D. Acemoglu and J. Robinson itself contains internal paradoxes, indicating that the authors’ position aimed at the consistent denial of the cultural, economic and political factors of growth is unlikely to be confirmed by examination of specific examples of national economic policy and unconditionally supported.

Keywords


inclusive and extractive economic institutions; elites; economic reforms; Georgia

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