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Old city of Tbilisi. Photo: ESI

The market reforms implemented in Russia in the early 1990s were designed to transform the communist state, root and branch. Anatoly Chubais, architect of Russia's mass privatisation effort, expressed this sense of urgency in 1992: "We need to free the economy from the state, free the country from socialism. To shake off the terrible chains of that gigantic, all pervading, bureaucratic, ruinous and ineffective state." The talk at the time was of shock therapy and radical measures. Unless the changes were truly radical, reformers feared, some form of reconstituted communist party might return to power. Only the complete destruction of a system of state control could prevent any chance of a communist restoration.[129]

When Kakha Bendukidze arrived in Georgia in the summer of 2004, he joined a government that shared a similar sense of urgency, but faced a very different situation. The immediate problem was not the stifling presence of an all-powerful state or resistance to reform from publicly owned enterprises. Many state institutions had more or less collapsed in the early 1990s. As Georgian expert Ghia Nodia wrote in 1995, "Georgia played out most if not all of the nightmare scenarios that a pessimistic political scientist might devise for post-communist states."[130] A decade later, Georgian society was still suffering from the disastrous civil war and ethnic conflicts of the early 1990s. The breakaway republics of Abkhazia and South Ossetia remained outside the central government's control, and as late as in 2009, some 220, 000 to 247, 000 people still remained displaced.[131] In 2004, Georgia's GDP stood at a mere 45 percent of its 1989 level.[132]

The reasons for this dramatic decline were manifold. The Georgian economy had been closely integrated into the Soviet system. Many Georgian enterprises had been anchored to the needs of the Soviet military-industrial sector. One of the two Soviet complexes producing fighter planes was located in Tbilisi, as was the Lenin Electric Locomotives plant and the Rustavi Metallurgy company, which produced 90 percent of Soviet oil drilling tubes.[133] Georgian industry was heavily dependent on imported electricity and gas, which supplied around 80 percent of its energy needs, rendering them extremely vulnerable to the collapse of the Soviet Union.[134] 

In 1991, 488, 000 Georgians worked in the industrial sector across 1, 400 enterprises.[135] In 1998, these Soviet-era industrial enterprises were working at below 10 percent capacity. By 2004, industrial employment had collapsed, to a mere 85, 000 workers.[136] During this period of catastrophic de-industrialisation, the sale of scrap metal salvaged from these derelict enterprises, mostly to Turkey, became Georgia's most important export.[137]

The situation was equally bad in Georgia's large agro-processing sector, which had supplied the Soviet market. Neither privatised nor reformed, the sector collapsed after the breakup of the Soviet Union. In 1990, Georgia's 58 huge canneries produced some 760 million cans of food every year

Suggested readings

One of the very best accounts of Georgia from the end of the Soviet Union to the Rose Revolution is a book by Peter Nasmyth: Georgia

April 2010

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