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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 – two and a half for every Soviet citizen. By 2003, output had collapsed to 1 million cans.[138] At the end of the Soviet era, Georgian tea factories turned out tea for the whole Soviet Union, some 122, 000 tons per year. By the mid-1990s, this had fallen to 6, 000 tons, never to recover.[139] The meat industry also collapsed, producing less than 1 percent of what it had in the late 1980s.[140] Georgian wine, a source of national pride, had become famous throughout the former Eastern bloc, with exports reaching 1.5 million hectolitres per year.[141] By 1994, wine and champagne exports amounted to less than 25, 000 hectolitres.[142] According to the World Bank, nowhere else in the former Soviet Union was the collapse of agriculture as severe as in Georgia.[143]

With the economy in disarray, reforms were sorely needed, and privatisation was launched in 1993. Georgia's government, however, was far too chaotic to implement such a complex reform programme successfully. Though the vast majority of companies were privatised, except for a few public utilities and so-called "strategic companies ", the results were bitterly disappointing. Neither a vibrant private sector nor any serious revenues for the state budget materialised. There was almost no foreign investment.

The late Zviad Gamsakhurdia, Georgia's first President. Photo: unknown

In 1991, the nationalist writer Zviad Gamsakhurdia became Georgia's first elected president. In January 1992, he was deposed in a coup led by Jaba Ioseliani, a Georgian "thief-in-law " (criminal boss) and paramilitary leader. Ioseliani brought back Eduard Shevardnadze, one of the Soviet Union's most experienced politicians. Shevardnadze had been Gorbachev's foreign minister, and the leader of communist Georgia from 1972 to 1985. During his early years in power, formally as chairman of the Georgian Parliament, Georgia plunged deeper into lawlessness, dragged down by a losing war in Abkhazia, an autonomous republic within Georgia that declared its independence in summer 1992. By 1995, however, a sense of new stability began to emerge. The year saw the adoption of a new constitution and the introduction of the lari as Georgia's currency. The worst paramilitary groups were disbanded and their leaders jailed. A new party led by Shevardnadze, the Citizen's Union of Georgia (CUG), won control of parliament with 46 percent of seats in the 1995 elections. (Four years later, it increased this to 56 percent.) Giga Bokeria – then an NGO activist at the Liberty Institute, one of the leading think tanks of the period, and now one of Georgia's leading politicians – recalls the sense of possibility in the mid-90s:

"When Shevardnadze came to power things seemed to be going in the right direction. 1994, 1995, 1996 – those were good years… he got rid of the armed people in the streets. And a new wave of reforms started in 1996. So we were all supporting Shevardnadze."[144]

Among those supporting Shevardnadze at the time was a young lawyer named Mikheil Saakashvili, who had been persuaded to return from Columbia University in New York in 1995 and stand for parliament. He recalls:

"There was not even one hour of electricity per day in the centre of the city, and no gas. I remember that I bought two rabbits for our son and they died of cold. When there was a fire the firemen never arrived since there was no gas in their trucks. It was very sad to see my country poorer after five years of independence than under the Soviet regime which I had detested."[145]

Saakashvili was now a member of the governing party and chairman of the parliamentary committee responsible for legal reforms. He was in charge of creating a new electoral system and an independent judiciary. A panel of journalists and human rights activists named him Georgia's "man of the year " in 1997.[146] In 1998, he informed journalists that his goal was "to make Georgia a model democracy for the whole region."[147]

Shevardnadze was widely respected in Europe and America. It was under his watch as Soviet foreign minister, after all, that the Cold War had come to an end. Many in Georgia believed that Shevardnadze would be able to use his connections to anchor Georgia to the West. Their hopes did not seem misplaced. Georgia became one of the leading recipients of US and German financial assistance. In 1999 it joined the Council of Europe. In 2000, it gained entry into the World Trade Organization. At the 2002 NATO summit in Prague, Shevardnadze declared that Georgia was "determined to be a full member of NATO " and was "resolved to work hard to prepare for this historic mission."[148]

Eduard Shevardnadze -
Eduard Shevardnadze. Photo:

NGOs like the Liberty Institute marked the emergence of a new civil society. They wielded genuine influence, and their investigations could lead to the dismissal of elected politicians. Policy issues were openly discussed both in the media and in the parliament. All this set Georgia apart from many of its neighbours in the post-Soviet region. As the foreword to the UNDP's 2000 Georgia Human Development Report notes, "the country's commitment to a free press and respect of political rights have been remarkable in a region of the world not yet known for ensuring respect of such rights to their full extent."[149] Every Sunday evening, an independent TV channel, Rustavi 2, would feature high-quality investigative reports.

And yet, throughout the period of Shevardnadze's rule the Georgian state remained weak and any real economic recovery elusive. Georgia performed abysmally when it came to one of the most important attributes of statehood – the ability to collect revenues. From 1992 to 1994, during a period of virtual anarchy, Georgia suffered a total budgetary collapse. In 1994, its revenues accounted for a mere 2 percent of GDP. By January 1995, the budget was still only US$190 million, of which about $101 million was foreign aid.[150] The following years saw only modest improvements: total revenues rose from 5 percent of GDP in 1995 to 10 percent in 1997 and 14.5 percent in 2003.[151] To put this in context: the last year in which public spending in the United Kingdom was below 14 percent was 1914. Among developed countries, average government spending in 2000 stood at 45 percent of GDP. Ireland, which is about the size of Georgia (4.4 million people), had public spending of some 40.6 percent in 1989.[152]  Around the world, the only national governments spending as little as Georgia were Cambodia, Bangladesh, Turkmenistan and Afghanistan.[153]

The state's inability to collect revenues had a lot to do with the miserable shape of the Georgian public administration. The Ministry of Finance, for one, lacked even the most basic information required for budget forecasting."At every stage of implementation of the budget process one finds incorrect calculation and accounting, and total disintegration of management and coordination systems, " noted the Chamber of Control Chamber in its 1998 review on budget implementation."In all departments connected with budget implementation there is an atmosphere of incompetence, negligence, irresponsibility and impunity." With industry and agriculture in a state of collapse, the tax base had already been decimated. Even functioning enterprises preferred to conduct most of their activities in the informal sector. According to a World Bank-sponsored study, in 1999-2000 Georgia's shadow economy, at 67.3 percent of GDP, was the largest among all transition countries in Central and Eastern Europe and the CIS.[154]

In the second half of the 1990s, Georgia adopted a number of important laws inspired by European models, including a new tax code.[155] It acquired "a modern constitution, a well developed Civil Code and Code of Civil Procedures, improved court systems (mainly composed of certified judges), " according to a 2000 UNDP report. Likewise, its legislation on human rights protection met "almost all " of the Council of Europe's requirements.[156] But writing new laws was one thing, and implementing them quite another. Here, Georgia's record was decidedly less impressive.

Nepotism and corruption were omnipresent. As the IMF noted in 2002 "the main constraint to private sector investment remain the unpredictability of the legal and regulatory environment, not the laws and regulations themselves."[157] Very few rich Georgians paid any income tax whatsoever, and firms with good connections to high-level government officials were considered untouchable. Talk of future tax amnesties did little to entice tax evaders to pay.[158] A vicious circle developed. Deprived of revenues, the state could not pay its civil servants or provide services, which created incentives for even greater corruption.

One of the most striking examples of this was the state of the police, which was considered, along with customs, the most corrupt institution in the land. The restructuring of the Ministry of Interior after 1995 had turned it into a self-financing, mafia-type organisation. Police officers' salaries were measly – less than US$15 per month – and were paid not regularly. As a result the Ministry "relied almost entirely on informal sources of finance."[159] In practical terms, this meant that police officers depended on petty extractions as their main source of income. They could also be rented out for personal or private protection. The result was a very large, underpaid police force. As the UNDP noted in 1998, "it is extremely hard to establish the true number of police officers in Georgia. Declarations by representatives of the Ministry of Internal Affairs are often contradictory, but suggest a figure in the region of 30 to 35 thousand." By contrast, the total number of police officers in Ireland's National Police Service was 14, 000.[160]  The first Minister of Interior following the Rose Revolution was himself never able to establish exactly how many police officers were on the government's payroll. It was simply not documented.[161]

Tbilisi police station. Photo: panoramio/gio822

The ready access to bribe money made work as a street-level official with access to the population still an attractive business:

"Many policemen (including police chiefs at rayon level), judges, tax and customs officials and even some centrally-appointed district administrators (gamgebelis) paid anything from US$500 to US$ 50, 000 for their posts. Having put down their investment for their posts, these officials were naturally obliged to repay that investment by means of corruption and extortion."[162]

The most visible part of the system was the deeply corrupt traffic police. As Charles King observed in 2001, traffic cops made a habit of waving down cars loaded with produce for the purpose of extorting a few lari in 'fines'. For most Georgians outside of Tbilisi, King dryly observed, this was just about "the only interaction with the Georgian state."[163]

As Barbara Christophe analysed in a gripping case study of the political economy of Kutaisi, Georgia's second city, state weakness served many interests.[164] While institutions were failing in providing public services, it was impossible to engage in economic activity without being targeted for bribes. Officials took pains to ensure that they would have plenty of room to impose arbitrary fines. Many rules – including tax laws – were drafted in such a way as to make compliance virtually impossible. In public markets, for instance, rules prohibited sellers from selling more than one type of product (such as flowers), enabling inspectors to extort regular bribes to ignore enforcement. Bus drivers in Tbilisi were expected to undergo daily health checks – or pay up. In 2000, a working group run by a Georgian member of parliament scrutinised the assets of 384 top-level public officials. 184 were found to possess assets worth more than half a million USD.[165]

Under Shevardnadze, there was no shortage of reform initiatives ostensibly addressing the corruption issue. A highly revealing chapter of what became a regular theatre of reform was the series of anti-corruption initiatives launched between 1997 and 2001. In 1997, which Shevardnadze declared "the year of the crusade against corruption, " the government launched its first anti-corruption campaign.[166] Some ministers were dismissed, only to be replaced by no less corrupt successors. A newly created expert group created by presidential decree in October 2000 published an impressive and very detailed anti-corruption strategy, only to see no follow-up whatsoever.[167] From simplifying the tax code to improving the management of customs, there was hardly a good idea that went unmentioned. On paper things looked great, but the reality was very different.

"One can gauge how seriously Georgia takes customs-duty collection by visiting the country's border station at Azerbaijan: it's not on the border. The station sits nearly four kilometres inside Georgian territory – and before one gets there, numerous unmonitored roads head off in various directions … When a progressive customs commissioner tried a couple of years ago to move the customs house, there was a shoot-out – and the chief was soon reassigned."[168]

The most striking aspect of the anti-corruption measures was that they did nothing to address the impunity enjoyed by corrupt senior officials. In general, the most severe sanction applied was dismissal, leaving the individual to enjoy the results of their ill-gotten wealth. As Stefes noted in his detailed study on Georgian corruption, "not a single higher official under Shevardnadze went to jail or even lost his/her position."[169] Reform initiatives were undertaken purely to pull the wool over the eyes of foreign donors and an increasingly skeptical Georgian public.

The inevitable result was a highly ineffective public administration, in pretty much any sphere of its operations. In the health sector, an impressive array of plans and reform initiatives coincided with abysmally low spending (0.6 percent of GDP in 1999) – lower than most low-income African countries. The public health system became for all practical purposes privately funded. As the UNDP noted in 2000,

"The Georgian population is de facto paying almost all health-care related expenses directly from its own pocket … Staff supplement their meager salaries via under the table payments and patients buy almost all the medical supplies they require from the black market."[170]

Out-of-pocket payments by private citizens, officially introduced in 1995, amounted to 70 to 80 percent of total health care expenditures in 2004.[171] One article described the situation as "near collapse."[172] Most of the rural and half of the urban population preferred treating themselves.[173] With good cause: studies showed that delivering a child in a public maternity ward substantially increased its risk of death. Life expectancy – as elsewhere in the former Soviet Union – was on the decline, illustrating the growing development gap between Georgia and the countries of the former Soviet bloc that joined the European Union. In 1990, a male Georgian was expected to outlive a male Pole by two years. By 2005, he was expected to live four years less.[174]

Table: male life expectancy (1990-2005)[175]

  1990 2005



















The problems in the health sector were mirrored in education. From 1991 to 1994, public expenditure on education in Georgia dropped from 7 to 1 percent of GDP, a decline described by the World Bank as "unique in the history of education worldwide."[176] Things improved only marginally in the years that followed, with spending increasing to only 2.4 percent by 1998.[177] At the same time, the sector was vastly overstaffed. According to a 2005 assessment, the teacher-student ratio was higher than the European average.[178] The result was dramatic deterioration in education infrastructure. Falling quality led to another unique situation. As a 2006 Open Society Institute study found, over 80 percent of respondents in a sample of higher education students claimed to have received some form of private tutoring.[179] In 2000, payments for such services, combined with bribes to enter schools and universities, amounted to more than 16 times the level of public spending on education.

The lack of public revenue hit the poorest parts of the population hardest. In the late 1990s, an estimated 2, 000 street children lived in Tbilisi, many having escaped unbearable conditions in state orphanages. The welfare system was reeling. Although old-age pensions were the only functioning form of social insurance, payments were far below subsistence level. Pensions (and public sector wages) were not paid for months or years on end. Spending was chaotic, with many ghost recipients remaining on pension lists. As Akaki Gogichaishvili revealed on Rustavi 2 television, 25 percent of pension payments was allocated to people already dead. Though the Ministry of Social Welfare was abolished in response, arrears continued to build up until the Rose Revolution.

In the field of welfare – as in policing, health or education – oversized institutions, insufficient resources and an environment of corruption produced the worst possible outcomes. In 1999, only 3 percent of all unemployed (some 10, 000 people) were registered under the United Employment Fund. The Fund spent only 949, 000 GEL on these few unemployed, a rate of about 7 GEL per month. Nearly as much money (930, 000 GEL) was spent on the Fund's own administration.[180]

The shortage of public funds also affected the situation in prisons. Sanitary conditions were disastrous. In 1998 UNDP estimated that one in every eleven inmates suffered from tuberculosis. Convictions were often based on confessions extracted under torture. A 1999 Law on Prisoners, though good in intention, could not be implemented due to the lack of both resources and political will. In 2000, according to the US State Department, 57 prisoners died in Georgian prisons due to beatings and abuse. In Armenia, the figure was nine.[181]

By 2000, a renewed sense of despair had begun to settle on Georgia. British journalist Wendell Steavenson, living in Tbilisi at the time, described the popular mood before the presidential elections.

"At the watchwords of Western political campaign, Future and Change, they simply shrugged their shoulders and rolled their eyes in mock cynicism at the ceiling. A taxi driver in Bolnisi was as tired of it and indignant as the next man. 'So, we're in the European Union {sic: he meant the Council of Europe} and we're talking to NATO: what difference does that all make for the working man?' He told me he did not have enough money to fix his cracked windscreen. No one did in Georgia; half the cars on the streets had cracked windscreens."[182]

Taxi driver in Tbilisi, 2006. Photo: PBase/Jan-Michael Breider

By 2001, the atmosphere in Tbilisi was dire. Electricity was becoming a luxury good. Troops began to mutiny after going 16 months without pay. In 2001, conscription was a quarter of the target figure. For those who served, there was no food, gasoline or ammunition.[183] In January 2002, a British paper warned that "while international attention has been focused on Afghanistan, Georgia has slithered towards disintegration."[184] In 2001 and 2002, over the course of 18 months, there were at least four kidnappings, two murders and several serious assaults against foreigners.[185] In July 2001 Georgi Sanaya, one of the leading journalists and presenters on TV channel Rustavi 2, was shot dead. In November 2001 gunmen kidnapped an Orthodox monk and held him in the Pankisi Gorge on the Georgian border with Chechnya.

"Corruption deterred foreign investors … yet, even more than bribery did the rising crime rates alarm foreign officials and entrepreneurs who were often the victims of assault, abductions or even murder. Shevardnadze publicly admitted that an increase in crime against foreigners harmed the national interest … yet Georgia's state officials either turned a blind eye to this crime or were actively involved in kidnappings and robberies."[186]

To make things worse, when Shevardnadze's governing party fell apart in 2001, external support to Shevardnadze's regime started to wane. Among international donors, there was growing frustration with the lack of tangible progress in the country. In July 2002, in response to the government's failure to implement required measures in the fiscal sphere, the International Monetary Fund suspended its Poverty Reduction and Growth Facility (PRGF), blocking Georgia's access to major international creditors.[187]

Ominously, the Kremlin was carefully taking stock of the weakness of the Georgian state. The word in Moscow was that Georgia had already turned into a failed state, and that this could justify Russian intervention to fight terrorism on Georgian territory. Russian pro-government expert Andranik Migranyan wrote in 2004,

"It {Georgia} has failed to build efficient and consolidated economic, political and military institutions. It continues to depend to a great degree on the financial support of the Western countries, international financial institutions and other organizations … Against this background, Abkhazia and South Ossetia resembled islands of stability, relative affluence, legitimate existence, and consolidated power… From this viewpoint, Abkhazia and South Ossetia have more right to be considered successful states than Georgia, not to mention official Tbilisi."[188]

The disastrous condition of Georgia's public institutions had become a threat to national sovereignty. In 2002 Russian defense minister Sergei Ivanov warned that due Georgia's chaotic conditions Russia might have to carry out anti-terror offensives on Georgian territory.[189] On 12 September 2002 Russian president Vladimir Putin wrote a letter to UN Secretary General Kofi Annan arguing that Russian military action in Georgia would be a matter of self-defense.[190]  Some of the younger politicians, led by Mikheil Saakashvili, reached the conclusion that drastic reforms were needed to preserve Georgian statehood.


[129] David E. Hoffmann, The Oligarchs – Wealth and Power in the new Russia, 2003.

[130] Ghia Nodia, "Georgia's Identity Crisis ", Journal of Democracy, Vol. 6/1, January 1995.

[131] Internal Displacement Monitoring Centre, "Georgia: IDPs in Georgia Still Need Attention. A Profile of the Internal Displacement Situation, "9 July 2009, p. 6. .

[133] World Bank, Georgia: A blueprint for Reform, 1993, p. 84.

[134] World Bank, Georgia: A Blueprint for Reform, 1993, p.94.

[135] World Bank, Georgia: A Blueprint for Reform, 1993 ( "Country Data Georgia: Employment, Output and Productivity ").

[136] Statistical Office of Georgia, Industry of Georgia, 2006, p.13.

[138] Elizabeth Cullen Dunn, "Postsocialist Spores: Disease, Bodies, and the State in the Republic of Georgia ", American Ethnologist, Vol. 35/2, pp. 246, 249.

[139] World Bank, "Georgia: Reform in the Food and Agriculture Sector ", 1996, p. 5.

[140] World Bank, "Georgia: Reform in the Food and Agriculture Sector ", 1996, p.121.

[141] Georgia then also exported an additional 100, 000 hectoliters of champagne (World Bank, 1996, p.109).

[142] World Bank, "Georgia: Reform in the Food and Agriculture Sector ", 1996, p.109.

[143] World Bank, "Georgia: Reform in the Food and Agriculture Sector ", 1996.

[144] ESI interview with Giga Bokeria, May 2009

[145] Mikheil Saakachvili avec Raphael Glucksmann, Je vous parle de liberté, 2008, p. 78.              

[150] CIPDD, The Georgian Chronicle, January 1995, p. 12.

[151] UNDP National Human Development Report Georgia, 1998, Chapter 3. For the 2003 figures see: IMF Country Report no. 07/299, August 2007, p.4.

[153] See the table here: "Government Spending as a Percentage of GDP by Country ", 12 March 2008, .  This table only looks at national level government spending.

[155] Ghia Nodia and Álvaro Pinto Scholtbach, The Political Landscape of Georgia. Political Parties: Achievements, Challenges and Prospects, 2006, p.14.

[156] UNDP, "National Human Development Report Georgia ", 2000, Chapter 1, p. 10.

[157] IMF, Georgia – Joint Staff Assessment of the PRSP Preparation Status Report, 27 June 2002.

[158]UNDP, "National Human Development Report Georgia ", 1998, Chapter 3, p. 10.

[159] Jonathan Wheatley, Georgia from National Awakening to Rose Revolution, 2005, p. 109.

[160] Ireland's National Police Service, "Garda HRM Division ".

[161] ESI Interview with Giorgi Baramidze, January 2010.

[162] Jonathan Wheatley, Georgia from National Awakening to Rose Revolution, p. 105.

[163] Charles King, "Potemkin Democracy: Four Myths about Post-Soviet Georgia ", The National Interest, June 2001.

[164] Barbara Christophe, 2005. See also her English language text available online: "From Hybrid Regime to Hybrid Capitalism? The Political Economy of Georgia under Eduard Shevardnadze".

[165] Jonathan Wheatley, Georgia from National Awakening to Rose Revolution, 2005, p. 106.

[166] Christoph Stefes, Understanding Post-Soviet Transitions. Corruption, Collusion and Clientelism, p. 87.

[167] The group was chaired by Lado Chanturia, then chairman of the Supreme Court. Its executive secretary was David Usupashvili. Renowned expert Gia Nodia was a member. ESI interviews with David Usupashvili and Gia Nodia, January 2010.

[168] Ken Stier, "Entrenched Corruption Begins at Georgia's Border ", EurasiaNet, 27 June 2002.

[169] Christoph H. Stefes, Understanding Post-Soviet Transitions: Corruption, Collusion and Clientelism, Palgrave, 2006, p. 111.

[170] UNDP, "National Human Development Report Georgia ", 2000.

[171] Paolo Belli, George Gotsadze, Helen Shahriari, "Out-of-Pocket and Informal Payments in Health Sector: Evidence from Georgia ", Health Policy 70 (2004), p. 111.

[172] Dina Balabanova, Martin McKee, Joceline Pomerleau, Richard Rose, and Christian Haerpfer, "Health Service Utilization in the Former Soviet Union: Evidence from Eight Countries ", HSR: Health Services Research 39, no. 6, Part II (December 2004): p. 1928.

[173] UNDP, "National Human Development Report Georgia ", 2000

[174] For a comparative context see WHO, "Highlights on Health in Georgia ", 2005.

[175] Georgia's 2005 figures are given by the WHO in its 2005 report. WHO, "Highlights on Health in Georgia ", 2005, p. 6.

[176] World Bank, "Georgia Poverty Assessment, " 2009, p. 119.

[177] Total public spending on education as a percentage of GDP in 2004 was 8.4 percent in Denmark, 7.1 percent in Sweden, 5.4 percent in Austria, 5 percent in Estonia and 3.8 percent in Greece. The lowest in the EU in 2004 was Romania at 3.2 percent.

[178] The student-teacher ratio in Georgia was 14.4 in primary and 9.2 at secondary level, compared to 16 and 12 in the Europe-Central Asia region of the World Bank. See World Bank, "Georgia Poverty Assessment ", 2009, p. 119.

[180] UNDP, Human Development Report

[181] Christoph H. Stefes, Understanding Post-Soviet Transitions: Corruption, Collusion and Clientelism, 2006, p. 135.

[182] Wendell Steavenson, Stories I Stole, London, 2002, p. 176.

[183] Anatoli Lieven, "Partners in Despair: The Georgian Army ", Eurasia Insight, 6 June 2001.

[184] Patrick Cockburn, "Collapse of Georgia Is Ignored by the World, " The Independent, 14 January 2002.

[186] Christoph H. Stefes, Understanding Post-Soviet Transitions: Corruption, Collusion and Clientelism, 2006, p. 89.

[187] Vladimer Papava, "The Georgian Economy: Problems of Reform ", Eurasian Studies, Vol. 2/2, p. 53.

[188] Andranik Migranyan, "Georgia Propelling Its Disintegration ", Russia in Global Affairs, October-December 2004.

[190] Steven Lee Myers, "Echoing Bush, Putin Asks U.N. to Back Georgia Attack ", New York Times, 12 September 2002.

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 – in the Mountains of Poetry. The book describes the early descent into anarchy under Georgia's first elected president, Zviad Gamsakhurdia:

"Then came more worrying signs of clinical paranoia when he started referring to the Kremlin as 'satan' and 'anti-Georgian tendencies' massing in society around him – a fact expanded in his book The Spiritual Mission of Georgia (1991) which claimed outright the Holy Grail resided at Gelati Cathedral … with a zeal the Bolsheviks would have envied the new government set about taking over, transforming or abolishing every institution, organisation or structure of the Communists era. The chaos had begun …"

Nasmyth connects the developments he observes with Georgia's rich mythology, from Prometheus, chained to the mountains here by a jealous Zeus for the crime of giving mankind fire, to the local Caucasian legend of Amirani:

"another god-like man chained to this mountain. Amirani's sin had been to challenge the almighty (and here wise) Zeus or great spirit to a test of strength. But unlike Prometheus, Amirani's lack of psychological insight had been the cause of his imprisonment … Could this pre-Bronze age myth of a stubborn superhuman still supply links with the modern character?"

Born in a dark forest, Amirani had the "capacity to outdrink and outeat three ordinary men." He slew three-headed monsters and was extremely impatient. This impatience was his ruin, as it was for Gamsakhurdia:

"After Amirani had rid the world of nearly all its dragons, monsters and wild animals, he finally threw down the gauntlet to God himself. God warned him of its futility, that it constituted a punishable offence, but Amirani struck doggedly to this quest for omnipotence." God, so Peter Nasmyth, tried to persuade the warrior-hero that he must stop attempting the impossible." (p. 47)

God, so Peter Nasmyth, tried to persuade the warrior-hero that he must stop attempting the impossible. Since he refused to do this:

"he found himself chained to the rock of futile conquest, power and rage, for all eternity." (p. 47)

Then there is Thomas Goltz's Georgia Diary: A Chronicle of War And Political Chaos in the Post-Soviet Caucasus (2006), accurately described by its publisher as a fast-paced, first-person account "filled with fascinating details about the ongoing struggles of this little-known region of the former Soviet Union." The book takes the reader from 1992 through the Rose Revolution, the resignation of Eduard Shevardnadze to the presidency of Mikheil Saakashvili. To get a taste of Goltz's style, read his description of Tbilisi in 1994:

"No, there was nothing quite like Tbilisi that late winter/early spring of 1994. A few lucky folks like Lawrence Sheets {of Reuters} had fireplaces in their apartments, but most homes depended on gas and there was none, or too little to talk about. Or electricity, aside from little spurts of juice after midnight, when televisions and radios would suddenly blare, waking up their owners – which was good, because the sudden surge in power also announced that city water would soon be gushing out of bathroom and kitchen spigots, and it was not uncommon to forget when a faucet was on or off. Yes, Georgia had hit rock bottom. It was beyond grim – and far worse than the exaggerated (and well-advertised) 'winter from hell' in Armenia the year before." (p. 199)

Barbara Christophe wrote a very interesting book (in German) on Georgia's failed state in Western Georgia – Metamorphosen des Leviathan in einr post-sozialistischen Gesellschaft  – but some of her findings are also available online in English under the title From Hybrid Regime to Hybrid Capitalism. Christophe looks, among many other things, at the actual outcomes of Georgian privatisation in the 1990s. As one result of voucher privatisation, she notes, there were "500,000 individuals, i.e. more than 10 percent of the population, performing at least nominally the role of shareholders":

"If one keeps in mind that in 2001 only 10 enterprises out of 1,773 Joint Stock Companies paid dividends to shareholders, one can easily comprehend that shareholders did not face any reasonable incentives to press for the observance of legal norms."

By the second half of the 1990s, she writes, many companies simply collapsed.

Other reforms did not fare better. A short article about Saakashvili in The New York Times in June 1998 gives a sense of the hope in the late 1990s, associated with young reformers in the governing party: "Tbilisi Journal: The 'Man of the Year,' Just 29 and Via Manhattan – Biography":

"Only 26, he had attended schools in Kiev, Strasbourg and Florence, held a degree from Columbia Law School and was winning a reputation for diligence and legal talent. After nightfall he was likely to be found either at the Metropolitan Opera or cheering for the Knicks at Madison Square Garden. Now he is a superstar of Georgian politics, hugely admired and widely viewed as having unlimited potential. Mr. Saakashvili is among the most prominent of several dozen bright and energetic young people who are playing important roles in building a new post-Communist order here."

Saakashvili's attempts at judicial reform is the focus of another New York Times article from April 1999: "Georgia, Judging That Most Judges Shouldn't, Readies Replacements"

"In one of the most sweeping attacks on corruption in the former Soviet Union, most of Georgia's judges are to be forcibly retired next month and replaced by new ones chosen by competitive examination."

In the end, however, this reform failed, as did so many others. On Georgia as a (problematic) model of judicial reform, see also a World Bank report (2000): "Legal and Judicial Reform in Central Europe and Former Soviet Union."

On the weakness of Council of Europe conditionality to end torture in Georgia, see EurasiaNet article from 2000: "Torture Persists Despite Council of Europe Efforts":

"The Council of Europe was aware of torture practices in Georgia when it welcomed the nation into its ranks last April. It admitted Georgia on condition of compliance with several safeguards to "ensure strict observance of the human rights of detainees, and continue to improve conditions of detention in prisons and pre-trial detention centers." The failure of these measures to have an adequate short-term impact on the problem reflects both the complex nature of torture and the Council's over-reliance on political goodwill to combat atrocities."

To understand the growing sense of desperation in October 2000, read The New York Times article "High Hopes Are Ebbing" by Douglas Frantz:

"Rustavi was once a model of the Soviet economy, a new city built in 1948 for 160,000 residents whose lives centered on the bustling factories. Today, Rustavi is a model for the stubborn poverty gripping a vast region rich in oil, gas and strategic importance but short of the hope that even five years ago buoyed forecasts of a better tomorrow."

On outmigration due to poverty: "Hardship abroad or hunger at home – a study of irregular migration from Georgia" published in 2001 by International Organization for Migration.

On corruption, Christoph Stefes has written one of the most comprehensive books to date, comparing corruption in Georgia with Armenia and Azerbaijan: Understanding Post-Soviet Transitions. Corruption, Collusion and Clientelism, New York: Palgrave Macmillan (2006).

Stefes also wrote a good article in the Caucasus Review of International Affairs (CRIA): "Governance, the State, and Systemic Corruption: Armenia and Georgia in Comparison" (Vol.2, 2008). EurasiaNet has a number of very good articles on corruption in Georgia: Corruption: 2001 Anti-corruption campaign in Georgia: "Georgia's anticorruption campaign enters crucial phase" (2001); "Entrenched Corruption Begins at Georgia's Borders" (2001); "Georgia: Clock is ticking as higher education eaten away by corruption" (2002).

Georgia as a failed state is captured in the gripping documentary "Power Trip" by Paul Delvin. The filmmakers provide this synopsis:

"In an environment of pervasive corruption, assassination, and street rioting, the story of chaotic post-Soviet transition is told through culture clash, electricity disconnections and blackouts. AES Corp., the massive American "global power company," has purchased the privatized electricity distribution company in Tbilisi, capital of the former Soviet Republic of Georgia. AES manager Piers Lewis must now train the formerly communist populace that, in this new world, customers pay for their electricity. The Georgians meanwhile, from pensioners to the Energy Minister, devise ever more clever ways to get it free. Amidst hot tempers and high drama, Lewis balances his love for the Georgian people with the hardships his company creates for them, as they struggle to build a nation from the rubble of Soviet collapse".

On the failure to overcome Georgia's electricity crisis in year 2000, please see New York Times article: "Tbilisi Journal; Where It's Dark and Cold Outside, and Inside, Too":

"This was not supposed to be yet another bitter winter in the gracious and fraying capital of this lovely and distressed country. An American energy company, the AES Corporation, bought the city's electric system last year and promised that Tbilisi's 1.2 million residents would no longer spend most of their winter days in darkness and their nights shivering without heat.

But overcoming the obstacles, from a broken-down power generating system and vast corruption to the effects of a summer drought and Russian meddling, proved too difficult. The electric system -- tweaked, massaged, seemingly held together with baling wire -- meets little more than half the demand. So people persevere through another winter with five or six hours of electricity a day, even less than in previous years. Essential services like hospitals, government offices and the subway have steady supplies; everyone else must improvise."

The World Bank has produced numerous studies on the electricity sector failures in Georgia and the rest of the Eastern Europe: World Bank Technical Paper No. 423 "Non-Payment in the Electricity Sector in Eastern Europe and the Former Soviet Union" (1999); World Bank Working Paper No. 21 "Revisiting Reform in the Energy Sector: Lessons from Georgia" (2003); World Bank Working Paper No. 40 "Power's Promise: Electricity Reforms in Eastern Europe and Central Asia" (2004); World Bank "People and Power: Electricity Sector Reform and the Poor in Europe and Central Asia" (2007). There is also a short discussion of this in the World Bank's "Georgia: Poverty Assessment" (2009).

The World Bank provides different accounts of state failure and economic collapse before the Rose Revolution:

"Georgia: A blueprint for reforms" (1993): pages 2-11 give an account of what caused the complete collapse of Georgia's economy, unseen in any of the other post Soviet Union countries. The rest of the paper deals with proposed reforms.

On the collapse of agriculture and agro-processing see World Bank: "Georgia: Reform in the Food and Agriculture Sector" (1996).

On trade and economic development from 1991-2002, see World Bank: "Georgia: An Integrated Trade Development Strategy" (2003).

On the healthcare crisis in Georgia there is a good section in the UNDP "Georgia: National Human Development Report" (2000).

Regarding healthcare, please see this study from 2002 by European Observatory on Health Care Systems (2002), "Health Care Systems in Transition: Georgia."

For information on the political and economic changes taking place in Georgia from 1992 to 1997, a good resource are the Georgian Chronicle monthly bulletins available from the website of the Caucasus Institute for Peace, Democracy and Development, one of Georgia's most respected think tanks.

Wendell Steavenson's Stories I Stole (2002) is a literary, almost poetic account of Georgia's failing state before the Rose Revolution (she also wrote The Weight of the Mustard Seed on Iraq). Steavenson spent 2 years in Georgia, at a time when Shevardnadze's bad governance was testing people's patience to the limit. Read the chapter on Shuki (Electricity) for a fascinating description of the crippling electricity problems of Georgia before 2004. The conclusion of her book is both philosophical and pessimistic:

"This is my last paragraph but I can form no conclusions: the Caucasus, Georgia, would make a fool out of anyone with the temerity of prediction. I can say thought that things do not always get better and that sometimes they get worse and most often they just stay the same. It is depressing and true and universal: there is nothing to be done about it. The best we can do is to respect our family, love our friends, open a bottle of wine, drink it, and then open another one." (p. 249)

April 2010

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