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Kakha Bendukidze lecturing. Photo: Cato Institute

Kakha Bendukidze, the man at the centre of Georgia's libertarian revolution, likes to shock his interlocutors. He once told the head of the EU Commission delegation in Tbilisi at their first meeting that he had only half an hour for him, and that, in any case, he considered the EU-Georgia Action plan, printed out in front of him, to be rubbish. On other occasions, he offended EU member state ministers and World Bank officials, foreign civil servants and journalists. He relishes his image as someone who shoots from the hip, using Russian slang in meetings with Georgian journalists. He sums up his philosophy with pithy one-liners, like: "To ask the government for help is like trusting a drunk to do surgery on your brain".[33] He once described the IMF as "Gosplan [the Soviet state planning agency] on the Potomac," and the EU as a "sclerotic civilization." Explaining the absence of any system of food safety inspections in Georgia to the Financial Times, he noted, that "the old Soviet system of food safety was rubbish. You simply bribed the inspectors," and that he had "scrapped the system and told his fellow Georgians that if they got food poisoning, they should boycott the restaurant."[34]

The young leadership in Tbilisi was determined to be revolutionary even before Bendukidze joined the government in June 2004; but Bendukidze gave the Georgian revolution a clear sense of direction, an intellectual framework when it came to rethinking the role of the state in society. His blunt language, casual appearance (he almost never wore a suit at government meetings) and impatience (criticising journalists for posing "weak questions") can make one forget that this is a man who had been professor of economics at Russia's prestigious Higher School of Economics. In the midst of a busy career, Bendukidze also took time to write a textbook on institutional economics – one of the first ever to be published in Russia. Though pragmatic in business and politics, this is a man who is passionate about ideas. And yet, if one asks about his views on the most celebrated free market thinkers, he is likely to wave the question away. He discovered free market principles on his own, he claims, rather than by reading the classics:

"Someone congratulated me on quoting Hayek, and I said I wasn't quoting. I had never read him, I was quoting myself. So I bought his book and I felt I had read it somewhere before. It looked very familiar. I went to the bibliography and found quite a chunk of books I have in my own library – about evolution."[35]

Bendukidze also says he has little time for Ayn Rand, and no interest in the nuances between libertarian schools of thought.

"I wasn't interested, the book [Atlas Shrugged] is written in a difficult manner. I do not belong to devout libertarians – I am not interested in arguing whether Mises was a pure libertarian or if Hayek deviated from the dogmas."[36]

For Bendukidze, the basic concept of libertarianism is simple: "The point of libertarianism is to say: the government's attempt to do something good is very harmful."[37] Or, as he put it another time: "Our ideology behind the reforms was making everything private as much as possible."[38]

To form these views, Bendukidze did not need to read theory, even if he did so later. All it required was for him to live through the Russia of the late 1980s and 90s. In an interview in the Financial Times in 2005, he mentioned two thinkers who have influenced him, both friends of his in Moscow. One is Russian libertarian Andrei Illarionov, economic advisor of President Putin from 2000 until 2005 (who in turn described Bendukidze's decision to move to Georgia as "an important gain for Georgia and a serious loss for Russia.")[39] The other is Vitaly Naishul, a trained mathematician. Although Naishul is not as famous as Yegor Gaidar (the promoter of Russian shock therapy under President Boris Yeltsin) or Anatoly Chubais (the father of mass voucher privatisation), he was in fact one of the earliest and most radical economic thinkers in Russia. His book Another Life, written at his kitchen table at night and completed in 1982 while the author was working at Gosplan (the Soviet State Planning Committee), vented the author's frustration with nightmarishly complicated input-output tables and statistical fictions based on tens of thousands of targets and indicators. Naishul's conclusion at the time – that the system was out of control – led him to advocate, initially in secret, for private property and a market economy. His dream of mass privatisation was eventually taken up as a central weapon by Russian reformers in 1992 to destroy the old system.


Andrei Illarionov. Photo: russiablog.org

Like many others in the first generation of Russian free-market thinkers, Bendukidze knew the absurdities of Soviet planning first hand. He had experienced the suffocating authoritarianism of the communist party. He was in favour of the rapid dismantling of the old system, and believed in the gamble that Russians would respond to market incentives like people in other capitalist economies. He also knew how to navigate the turbulent waters of the post-Soviet political economy, becoming one of the biggest beneficiaries of the radical reforms of the early Yeltsin years. He harboured a profound scepticism about often redundant "expertise," displaying the confidence of a man who had emerged from the years of Russia's wild capitalism with wealth and influence. He shared in the spirit of Russia's new gilded age.

Bendukidze emerged from the collapse of communism with a deep distrust of bureaucratic decision making - including in the European Union and its member states. This set Bendukidze's libertarianism apart from the EU-friendly liberalism of most of the Central European reformers. Bendukidze's most often quoted models are Asian, not European: Singapore and Hong Kong, rather than Poland or Slovakia. Bendukidze became the bridge between the post-Soviet thinking and the current reforms in Tbilisi. It is to Russia's recent history, and the post-Soviet career of Kakha Bendukidze, that one must turn to understand Georgian libertarianism today.

 


[33] "The Biology of Business" (in Russian), Vedomosti, Nov. 22, 1999.

[34] Quentin Peel, "FT Report: Georgia 2007 - Preaching Creative Destruction", Financial Times, Oct 31, 2007.

[35] Quentin Peel, "FT Report: Georgia 2007 - Preaching Creative Destruction", Financial Times, Oct 31, 2007.

[36] Vladimir Fedorin, An interview with Bendukidze, Mar. 17-18, 2009. Published on the "empedocl" blog.

[37] Vladimir Fedorin, "'Keynesianism Is a Phlogiston Theory': interview with Kakha Bendukidze" (in Russian), empedocl's LiveJournal blog, 23 April 2009.

[38] CATO Institute, "Georgia's Transformation into a Modern Market Democracy", Policy Forum, 13 May 2008.

Suggested readings

Among the more recent sources, a transcript of an interesting conversation with Kakha Bendukidze is available from Russian blogger Vladimir Fedorin, known by his LiveJournal username empedocl. It is divided into three parts (part 1, part 2 and part 3). The blogger met with Bendukidze in March 2009 in Tbilisi and engaged in a lengthy conversation covering a wide range of topics including the global financial crisis, pension reform in Latin America, ideas for a safety net in Georgia, and differences between Russia and Georgia concerning democracy. Bendukidze explained his understanding of libertarianism in simple terms: "The point of libertarianism is to say: the government's attempt to do something good is very harmful."

Among the influences mentioned by Bendukidze in different interviews (including with ESI), the "Austrian school of economics" stands out. One of its leading representatives was Ludwig von Mises (who died in 1973), one of the founders of laissez-faire economics. His central argument was that

"the only viable economic policy for the human race was a policy of unrestricted laissez-faire, of free markets and the unhampered exercise of the right of private property, with government strictly limited to the defense of person and property."

Murray Rothbard had studied and worked with Mises. His ideal was also the "stateless economy". Any state was for him "a gang of thieves" and the very notion of a "public sector" an intellectual fallacy:

"it necessarily lives parasitically upon the private economy … the consumers are deliberately thwarted, and the resources of the economy diverted from them to those activities desired by parasitic bureaucracy and politicians."

When Rothbard died in 1995, The New York Times referred to him as a founder of "right-wing anarchism." An excellent source on the work and influence of Ludwig von Mises is the website of the Ludwig von Mises Institute in the US, www.mises.org. It includes classic libertarian texts, including Human Action by Mises and Murray Rothbard's Fallacy of the 'Public Sector' (1961). There are also the letters to Ayn Rand by Mises and Rothbard, congratulating Rand on the success of Atlas Shrugged.

Additionally, there are the two Russian thinkers whom Bendukize mentions in a Financial Times interview in 2007 as having influenced him: Vitaliy Naishul and Andrey Illarionov.

Vitaliy Naishul's book Another Life is available online in Russian: "Другая жизнь" (1985). In the preface to the book, Naishul addresses the reader, saying,

"In this book … you will take a look at the Soviet economy and understand why you earn so little money for your work and why it is so difficult to buy necessary goods in stores. You will also learn how the planning agencies work and will be surprised to find out that there is actually little they still plan."

Naishul uses real-life examples and comparisons to explain why the standard of living in the Soviet Union is inferior to that in Western countries. He advocates radical economic reform, including privatization, which he sees as necessary to allow the Soviet economy to catch up with the West. The author also introduces the reader to key concepts of mainstream economic theory, such as the "invisible hand" and "perfect competition". There is also an interesting public lecture by Naishul in Russian, in which he talks about the history of economic reforms and privatization: "Where Did the Reformers Come From?" (2004).

To find out more about the views of Andrei Illarionov please see the CATO Institute's website. There one also finds his praise of the US economist Milton Friedman, highlighting the tragedy of Russia in the 20th century:

"At the end of the 19th century when Milton Friedman's parents moved from the provincial Hungary to Brooklyn, Russia's population (based on the territory of the modern-day Russian Federation) was only 3 percent lower than that of the U.S. population – exact figures are 66 to 69 million people, respectively …. In 2006, when Friedman died, the population in Russia was half that of the United States – 142 million people in Russia versus 298 million people in the United States. The yawning gap is even more pronounced in economic indicators. In 1894, Russia's GDP was 39 percent of that of the United States … in 2006, Russia's GDP had dropped to only 13 percent of American gross domestic product.

"Freedom is a wonderful thing whether it is economic, political, or intellectual. When individuals are allowed to freely compete under limited government and the rule of law, they create great wealth and improve human welfare. This prosperity does not depend so much on natural resources or nuclear weapons; it depends on economic and personal freedom to develop one's skills and to engage in voluntary exchange …. The most fundamental problem of present-day Russia is not the lack of investment, the so-called natural resource (oil) curse, the existence of fools, the absence of roads, or even the "robbery" going on in Russia. The real problem is the lack of freedom."

April 2010

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