6 April 2010

After two years of research, which took a team of ESI researchers across all of Georgia, from Batumi on the Georgian black sea coast to the wine-growing areas of Eastern Georgia, from Washington DC to Brussels and Moscow, we are now glad to be able to announce the upcoming publication of a brand-new ESI report later this week.

After a grim, post-Soviet decade, Georgia had captured the imagination of the world in November 2003 when a display of people power swept away the old political establishment. In its place came a new generation of leaders – young, articulate and determined to propel their small republic out of poverty and isolation and into the European mainstream.

This report looks at the promises of the Rose revolution, the way Georgia presented itself as a model for other countries, and the implications of its elites embracing libertarianism as a national ideology.

This report is about a remarkable man, a south east European country in a time of transition, and the power and influence of a seductive ideology. The man is Kakha Bendukize, a philosopher-entrepreneur and one of the most interesting thinkers in today’s post-Soviet world; the country is Georgia, a small republic of 4 million people in the South Caucasus, eager to become a global model; and the ideology is libertarianism, the belief that people will be freer and more prosperous if government intervention in people’s economic choices is minimised.

For more on our Georgia research and the report itself, please come back to the ESI website later this week. In the meantime, here is a preview from the introduction:


Election poster featuring Michael Saakashvili 2003. Photo: Peter Nasmyth
Election poster featuring Michael Saakashvili 2003. Photo: © Jonathan Wheatley
John Galt in the Caucasus

Atlas Shrugged, a 1957 novel by the libertarian thinker Ayn Rand, is an ode to the free market, the minimalist state and the sovereignty of the individual. It is also a useful text to read if one wishes to understand the worldview of Georgia’s most influential policy makers.

The main character in the novel, the engineer John Galt, escapes from an America that has become a breeding ground for socialist ideas. Galt calls on other men and women of talent and ambition to follow him to the remote mountains of Colorado in order to establish a utopia of pure capitalism. For Galt, the engineer, the scientist and the entrepreneur are the true heroes of mankind. In the end, America discovers that it cannot survive without the talents of Galt and his fellow libertarians. They return from Colorado, defeat the collectivist morality of the grey, submissive masses and bring down the oppressive state. As Galt puts it, triumphantly,

“With the sign of the dollar as our symbol – the sign of free trade and free minds – we will move to reclaim this country once more from the impotent savages who never discovered its nature, its meaning, its splendour. Those who choose to join us, will join us; those who don’t will not have the power to stop us …”

Ayn Rand’s philosophy has for decades made her one of the most popular authors in America and an icon of the American right. Her ideas owe much to her personal experiences as a child in Russia at the time of the Bolshevik revolution. John Galt’s America is in fact reminiscent of the Petrograd of her youth. Her horror of collectivism stems from the memory of her father’s shop taken over by communist revolutionaries. She left post-revolutionary Russia for the US in 1926, never to return.

Today, some of Ayn Rand’s most committed followers are in fact found very close to Rand’s native Russia. Georgia, a republic in the Southern Caucasus, has in recent years styled itself as a modern-day capitalist utopia in Europe’s highest mountains. In 2008, Georgia’s prime minister was Lado Gurgenidze, who had made his fortune as an investment banker and named his private firm Galt and Taggart, after the two heroes of Rand’s novel. Georgia’s president Mikheil Saakashvili recently informed the Georgian parliament that the 19th-century national hero (and saint) Ilia Chavchavadze was in fact “the first Georgian libertarian.” Georgia also has its own John Galt, a philosopher-entrepreneur with a mission. His name is Kakha Bendukidze, and this is his story.

Bendukidze’s biography offers ample material for a full-length novel. Born in 1956, he spent most of his adult years in Moscow. Making his fortune in Russia in the 1990′s, he rose to become one of country’s top twenty oligarchs,[1] and an influential voice on economic policy. However, by 2004, as Putin’s regime tightened its grip on strategic industries, Bendukidze found his options in Russia were becoming limited. He began disposing of assets, and moved to Georgia. In the opinion of Russian oligarch Boris Berezovsky, already in exile,

“Bendukidze does not belong to Putin’s circle of friends and he understood sooner than everyone else that everything would be taken away from him… Bendukidze by far hasn’t exhausted his potential but right now the Russian authorities do not need such talented people.”[2]

At the time, some Russian liberals even hoped that one day Bendukidze, like John Galt, might return, when libertarian ideas regained favour in Moscow. As Vitaliy Tretyakov wrote in Rossiiskaya Gazeta:

“What can be said with absolute certainty is that Russia is highly interested in the success of Bendukidze’s truly historical mission… The liberal economic experiment that Kakha Bendukidze will certainly try to carry out in Georgia would (if successful) rehabilitate Russian liberalism (if this is at all possible).” [3]

Excerpt from upcoming ESI Georgia Report

[1] Guriev and Rachinsky, “Oligarchs: The Past or the Future of Russian Capitalism?” July 2004.

[2] Alexander Shvarev, “He Is Not Sure about the Russian Authorities” (in Russian), Vremya Novostey, no. 94, Jun. 2, 2004.

[3] Vitaliy Tretyakov, “Bendukidze’s Mission” (in Russian), Rossiiskaya Gazeta (Federal issue), no. 3492, Jun. 3, 2004.

Suggested background reading: ESI Picture Story – Peter Nasmyth’s Georgia (January 2009)

6 February 2010

Recently, some people have argued that there is a possibility of a new violent conflict in the Western Balkans. It there anything to this claim, which flies in the face of continued international troop withdrawals from the region?

Let me make the case why these claims are not only implausible but in fact dangerously misleading.

First, if either leaders or voters in the Balkans were to believe that there was a real threat of a resumption of violence one would expect this to be reflected in national defense policies: in military spending and in the size of Balkan armies or paramilitary forces.

This was certainly the case in the late 19th century. Then Balkan states had some of the largest standing armies (in proportion to their populations) in Europe.

It was true on the eve of the outbreak of war in former Yugoslavia in 1991. One toxic legacy of communist Yugoslavia’s policy of armed non-alignment was an abundance of arms and paramilitary formations, a population trained and educated in the spirit of partisan warfare and popular defense, and a large number of intelligence agencies and special forces in addition to the huge and expensive Yugoslav Army and its enormous network of domestic defense industries.

It is also the case today in the South Caucasus: a region which in the early 1990s experienced a similarly tragic trajectory of war, ethnic cleansing and aggressive nationalism as the Balkans did. Today’s leaders in Georgia, Armenia and Azerbaijan (not to mention Russia) certainly consider the very real possibility and threat of a return to war in a region, full of unresolved (frozen) conflicts. This is reflected in their rhetoric. It also has a measurable influence on policies and budgets.

However, one of the most interesting developments in the Western Balkans in recent years has, in fact, been the demobilisation of formerly highly mobilised societies. Let us not refer to trends as hard to measure as better neighbourly relations or a decline in interethnic tensions. Let us focus instead on hard facts concerning military spending and serious violent crime.

Gerald Knaus, Carl Bildt, and Miroslav Lajcak. Photo: ECFR
Rumeli Observer, Carl Bildt, and Miroslav Lajcak.
Vienna brainstorming, January 2010. Photo: ECFR

I prepared some tables to illustrate this argument for a recent brainstorming on EU Balkan policy that took place in Vienna (participants in the meeting included foreign ministers Carl Bildt, Miroslav Lajcak, analysts Mark Leonard and Ivan Krastev, Vesan Pusic and a few other Balkan analysts).

First, men under arms and defense spending. Let’s compare what has happened in the Balkans with trends elsewhere on the European periphery in recent years.

The last five years have seen growing military spending in the Caucasus. At the same time this period has seen a decline in defense spending and in the number of men under arms in the Western Balkans. As a result there are today, proportionately to the population, two and a half times (!) more men under arms in the South Caucasus than in the Balkans (see Table 1).

Western Balkan countries have also decided to have considerably smaller armies than either Turkey or Greece, their regional neighbours (table 2). And although they are richer than the countries of the South Caucasus, their military budgets are significantly smaller (table 3). This means that they can allocate more of their public spending to other things, from education and health spending to public infrastructure.

Table 1: active soldiers/paramilitaries relative to population size

Population active soldiers/active paramilitaries
Balkan states 29.9 million people 101,785
South Caucasus 15.3 million people 156,870

Table 2: active military for 1 million people

Germany 2,965
Switzerland 3,000
Western Balkans 3,404
Turkey 8,523
South Caucasus 10,252
Russia 10,490

Table 3: active soldiers/paramiliaries and defense budget relative to population size

Population (million) Active soldiers/paramilitaries Defense budget (US$)
232 million
223 million
962 million
163 million
59 million
943 million
395 million
1,258 million
1,100 million

(The data on soldiers and budgets comes from the most recent ISS publication The Military Balance 2009, except for Kosovo which has some 2,500 active soldiers/paramilitaries)

How about other forms of violence? One alternative theory is that even if real war is unlikely in the Balkans today, there is always the possibility of spontaneous, smaller scale ethnic violence erupting and than getting out of control.

Well, what we can certainly say is that there is no evidence for this in any of the data of recent years. In fact, when it comes to citizens’ inclinations to pick up arms against each other the Balkans, despite the legacies of the 1990s, are considerably more peaceful than other parts of today’s EU (see table 4).

Table 4: homicide rates per 100,000 population

Austria 0.8
Switzerland 0.9
Serbia 1.4
Slovenia 1.5
Croatia 1.6
France 1.7
Bosnia 1.8
Macedonia 2.2
Montenegro 4.1
USA 4.2
Poland 5.6
Albania 5.7
Estonia 6.8
Latvia 8.6
Ukraine 9
Russia 20
South Africa 39.5
Filed under: Balkans,Georgia — Gerald @ 2:53 pm
14 August 2008

In last night’s BBC World Today programme, the Italian and Polish Foreign Ministers, Franco Frattini and Radek Sikorski, and I were interviewed on the recent crisis in Georgia and how it affects EU-Russian relations and EU foreign policy. You can listen to the full interview here:

Get the Flash Player to see the wordTube Media Player.
Gerald Knaus on the Georgian crisis. © 2008 BBC World Today. All rights reserved.

I also wrote a commentary (in German) in the Austrian Falter magazine, it’s called “Russen und Rosen” (“Russians and Roses”)

Franco FrattiniRadek Sikorski
Franco Frattini – Radek Sikorski

Filed under: Georgia,Russia — Gerald @ 1:10 pm
Rumeli Observer

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