Democracy is not Good Governance! Western aid and neo-liberal reform in post-revolutionary Georgia

1. Democracy is not Good Governance! Western aid and neo-liberal reform in post-revolutionary Georgia Joel Lazarus St Anthony’s College University of Oxford

2. Democracy Promotion and Good Governance

3. Democracy Promotion and Good Governance • Merging the democracy promotion and good governance agendas: • USAID: ‘Democracy and Governance’ and ‘Governing Justly and Democratically; • OECD (DAC): ‘Governance and Democracy’; • EC: ‘Governance and Human Rights/Democracy; • UNDP: ‘Democratic Governance’ • OECD’s CRS aid statistics: ‘Government and Civil Society’; ‘Participatory development/Good Governance’

4. Democracy Promotion and Good Governance • Democracy promotion and good governance: two sides of the same coin: • ‘Democracy is good for governance’ (USAID website) • ‘Democracy, good governance, and development reinforce each other to create a virtuous circle’ (USAID 2005) • ‘By holding governments accountable and making foreign aid contingent on good governance, donors can help reverse the democratic recession’ (Diamond 2008)

5. Democracy Promotion • versus • Good Governance

6. Democracy vs Good Governance

7. Democracy vs Good Governance

8. Democracy and Governance • ‘Government Effectiveness’: ‘the quality of public services, the capacity of the civil service and its independence from political pressures’ and ‘the quality of policy formulation’. • ‘Regulatory Quality’: ‘the ability of the government to provide sound policies and regulations that enable and promote private sector development’ (World Bank 2009:1)

9. Four questions…

10. Four questions… • If governance and democracy are different and if you can have ‘good governance’ without ‘democracy’ then: • What is ‘democracy’ and what is ‘governance’? • Why are they merged in theory and practice by aid donors? • How do democracy and governance differ from a critical perspective? • …Or is Georgia just an exception? An undemocratic but disciplined government?

11. A theoretical framework: • The hegemonic transnational capitalist class, neo-liberal economic globalisation

12. TCC & NLEG • ‘Neo-liberal economic globalisation’: Global removal of territorial, legal/regulatory constraints on capital since late 1970s • ‘Transnational’: Since 1970s, increasing transnationalisation of networks of global productive and financial capital (TNCs, FDI, FPEI, K markets) -> ties to territoriality greatly loosened • ‘Transnational’: Elites of all nationalities. But US as empire is driving force. • ‘Class’: Elites managing and owning MNCs at apex of state and international institutions • ‘Hegemony’ = material/military power + ideas/ideology/legitimacy

13. TCC & NLEG • ‘Hegemony is a form in which dominance is obscured by achieving an appearance of acquiescence…as if it were the natural order of things…[it] is an internalised coherence which has most probably arisen from an externally imposed order but has been transformed into an intersubjectively constituted reality’ (Cox 1994: 366).

14. TCC & NLEG • Hegemonic project of NLEG imposed through coercion and consent: • Coercion: Political (domestic force); Economic (financial markets, IFIs); Military (international force) • Consent: Epistemic communities/networks (academy, think tanks, educational institutions, media), e.g. ‘democracy issue network’ • Trasformismo – Co-opting the language of resistance and social democracy, e.g. ‘democracy’, ‘empowerment’, ‘participation’.

15. TCC & NLEG • The ‘democracy issue network’ (Scott 1999) • Western states: US, EU, EU member states • State bodies: US – State Dept’s DRL; USAID’s DG Office • Quasi-governmental organisations: NED, IRI, NDI, CIPE, AFL- CIO; German Stiftungen; NIMD • FP think tanks: CFR, CEIP, CSIS, Hoover Institution • Academic centres • Philanthropic foundations and MNCs: Ford Foundation, Rockefeller Foundation

16. TCC & NLEG • The ‘democracy issue network’ (Scott 1999): • ‘…think-tanks and political foundations seek regularized connections and interactions with their own government, officials from foreign governments, officials from international organizations, individuals from other think-tanks, foundations, or organizations, and democracy activists in other countries in their efforts to promote democracy. This critical aspect of foundation and think-tank activity contributes directly to the development, growth, and maintenance of the connections that establish the transnational democracy issue network, and facilitates the sharing of resources, information and ideas among network members, not to mention the co-ordination of their efforts… through networking think-tanks can become involved in policy recommendation and advising for foreign governments, political parties, and other foreign NGOs, establishing a route for active democracy promotion and 'international think-tanking'’ (Scott 1999: 157-8).

17. TCC & NLEG • The ‘democracy issue network’ • MNCs/philanthropic foundations dominate the funding. Their personnel dominate the boards of trustees/directors • The Academy: provides scientific legitimation • NGOs (‘civil society’) – a channel of control and socialisation of (neo)liberalism: building an ‘NGO elite’. Material and ideological co-optation through access to resources

18. TCC & NLEG • The ‘democracy issue network’ • E.G. National Endowment of Democracy’s global network: • NED – Neo-conservative founders under Reagan. Congressional funding: • Funds CIPE, NDI, IRI, AFL-CIO, and gives grants to NGOs • Journal of Democracy – non-peer reviewed but unites a global group of ‘elite’ political scientists. Huge ‘symbolic capital’ • ‘International Forum for Democratic Studies’ – brings together and funds global ‘scholars, policy makers, and activists’ • ‘Network of Democracy Research Initiatives’ – connects and funds a global network of research centres • ‘World Movement for Democracy’ – links and funds global ‘democrats’ • NED links and funds academics, researchers, activists, NGOs, policy makers globally, thereby shaping ontology and epistemology of ‘democracy’

19. Three answers…

20. Three answers… • A1) What is ‘democracy’ for democracy promoters? • Within the hegemonic ‘democracy issue network’, democracy = ‘polyarchy’: • ‘It seems to us that the definition of democracy for empirical research is no longer that much of a contested issue. The baseline used in this volume is the mainstream definition descending from Schumpeter (1947: 269) and elaborated by Dahl (1971: 3) in his concept of “polyarchy”’ (Lindberg 2009: 11).

21. Three answers… • A1) What is ‘democracy’ for democracy promoters? • Polyarchy detaches the political from the economic, whilst at the same time explicitly fusing ‘democracy’ with free-market capitalism: • ‘When global capitalism is the concern, the political is expected to be linked to the social and the economic and ‘normal society’ is capitalist society. But when economic inequalities and social justice are the concern, the political is expected to be separated from the social and the economic’ (Robinson 2000: 321) • Western polyarchy promotion is designed to limit and control popular demands for democracy…

22. Three answers… • A1) What is ‘governance’ for good governance promoters? • ‘Good governance’ agenda since late 1980s: a response by World Bank to SSA ‘crisis of governance’ and to external criticism. • ‘the manner in which power is exercised in the management of a country’s economic and social resources for development’ (WB 1989). • ‘Governance consists of the traditions and institutions by which authority in a country is exercised. This includes the process by which governments are selected, monitored and replaced…’ (WB website).

23. Three answers… • A1) What is ‘governance’? • ‘Governance’ = World Bank’s ‘non-political’ avenue into political intervention • 1980s Structural Adjustment, Washington Consensus – ‘Getting the prices rights’ • 1990s Good Governance, Post-Washington Consensus – ‘Getting the politics right’ (Guilhot 2005) • 20 years of good governance: increased centralisation of decision-making by Western-educated technocrats; increased IFI intervention, micro-management and surveillance (Abrahamsen 2000, Harrison 2004, Craig & Porter 2005, Whitfield et al 2009)

24. Three answers… • A2) Why are ‘democracy’ and ‘governance’ merged in theory and practice by aid donors? • For Western donors, democracy and governance are two sides of the same coin: intervening in and shaping political and civil society. • Governance aid portrayed as ‘democratising’ the management of the state

25. Three answers… • A3) How do democracy and governance differ from a critical perspective? • Governance aid as mechanism to construct neo-liberal state.

26. Georgia: a case study

27. Why Georgia? ‘If Georgia’s democratic development were to fail during the next ten to fifteen years, it would prove a severe blow to the concept of democracy promotion. Seldom has so much effort and funding from the international community been directed to democracy promotion in a country that is open to democratic change…’ Boonstra (2010: 1)

28. Why Georgia? ‘…if democracy cannot be consolidated in Georgia, it is not clear where it can be consolidated. As difficult as the challenges are, the outlook in Georgia still looks brighter than in most of the rest of the nondemocratic world’ Lincoln Mitchell (2008: 6)

29. Why Georgia? • 2000-2009: highest post-Soviet recipient of ODA in per capita terms. 7th highest in world (OECD Stats) • 2008- : $4.5b post-war aid pledge • Major recipient of democracy promotion/good governance aid… • Georgia 6th largest per capita recipient of USAID democracy promotion/good governance aid for FY10 and FY11

30. Saakashvili era: 2004- Neo-liberal revolution • The revolutionary ruling elite • Small, neo-liberal vanguard elite with social transformation project • Goal of building neo-liberal state and economy, competitive authoritarian regime, and dominant-party system • Strong ties to US foreign policy, aid, and transnational capital networks…

31. Saakashvili era: 2004-10 Neo-liberal revolution • The revolutionary ruling elite • Mikheil Saakashvili (President) – Americophile; Colombia University law graduate • Kakha Bendukidze – close links to World Bank: • Georgia should sell ‘everything that can be sold except its conscience’ • ‘…as long as governments continue to rely on central banks and extensive regulation of the financial industry rather than free banking, periodic financial crises will continue to plague mankind.’ • Many other key ministers: Western-educated, links to US democracy aid

32. Saakashvili era: 2004-10 Neo-liberal revolution • The revolutionary ruling elite • Lado Gurgenidze (US MBA, UK Banker, Georgian PM 2007-8): • Saw himself as ‘a technocrat, not a politician’ • ‘Preserving Georgia's democracy and territorial integrity is increasingly seen as not about just Georgia any more‘, but about the inviolability of sovereign borders and the supremacy of the rule of international law over the rule of force. I would argue that there is another, often- overlooked dimension. The World Bank ranks Georgia as the 15th freest economy in the world, with the level of economic liberty exceeding our Central and Eastern European peers and most EU countries (the United Kingdom is ranked 6th). The world has a vested interest in promoting Georgia's success on its chosen path.’

33. Saakashvili era: 2004-10 Neo-liberal revolution • Major achievements • Revival of a failing kleptocratic state: • Provision of public goods again • Major infrastructural improvements • Virtual and rapid eradication of petty corruption • Dramatically improved efficiency in public administration • Ousting of Adjaran dictator Abashidze and reintegration of Adjara

34. Saakashvili era: 2004- Building competitive authoritarianism • A Competitive Authoritarian regime • Formal political institutions routinely ignored, undermined, and manipulated by ruling party and by opposition parties • ‘Skews the playing field in favor of incumbents’ (Levitsky & Way 2010: 1) • Competitive authoritarian regimes produce dominant-party systems

35. Saakashvili era: 2004-10 Building competitive authoritarianism • Building a competitive authoritarian regime • Public, selective, extra-legal attacks on ancien régime • Building a dominant party - merging party and state • Attacking the political opposition • Media clampdown • Violent break-up of huge demonstrations in Nov 2007 (May 2011?) • Formal institutional manipulation: constitution, electoral code • 2008 elections - Use of ‘administrative resource’; fraud; intimidation; media; formal institutional manipulation

36. Saakashvili era: 2004-10 Neo-liberal revolution • Economic reforms: creating a neo-liberal utopia • Tax and business laws radically simplified and lowered: corporation down, CGT abolished, VAT up • Privatisation laws untouched • Almost all regulation dismantled…including competition law and regulations • Georgians’ property rights ignored (‘de-privatisation’) • Workers’ rights removed (Labour Code 2006) • …Unprincipled libertarianism serving interests of Georgian ruling elite and foreign capital

37. Saakashvili era: 2004-10 Neo-liberal revolution • Economic reforms: creating a liberal utopia • FDI grows fivefold in 5 years: • 2003 - $340m  2007 - $1.6b • Sources of FDI very varied (transnational), not always transparent ownership! • GDP growth rates soar, reaching 12.7% in 2007 • 2006, 2007 – in World Bank’s top two reformers worldwide

38. Saakashvili era: 2004-10 Neo-liberal revolution • …for foreign and politically connected capital • Inflation up: average 8.4% between 2004 and 2007 • Unemployment up: 2003 – 11.5%; 2005-7 ->13% • Inequality grows: poorest quintile’s income = 6% in 2000, 5.4% in 2007 • Better living standards greatly dependent on welfare transfers • Economic conditions worsening in real terms • Petty corruption gone but elite corruption persists… • FDI levels collapsed post-war/economic crisis • Now big questions about economic stability (OA, MacFarlane, IMF)

39. Western aid and the construction of Georgia’s neo-liberal state

40. Western aid and the construction of Georgia’s neo-liberal state Five examples The early post-Revolution years: from civil society to direct government aid DP/GG aid: Centralising technocracy GoG, USAID, and World Bank: ‘imagineering’ Georgia MNCs’ unparalleled influence within Georgia’s political society The Democracy Issue Network in Georgia

41. Western aid and the construction of Georgia’s neo-liberal state 1. The early post-Revolution years ‘For the West generally, and the United States specifically, the Rose Revolution was viewed as an ideological and political victory. It was immediately hailed as a success story for the promotion of democracy and U.S. foreign policy. A great deal of hope was placed in the new Georgian government’s ability to deliver democracy, reform, and economic growth. Accordingly, Europe and the United States sought to support the new Georgian government beginning in the days immediately following the resignation of President Shevardnadze’ (Mitchell 2008)

42. Western aid and the construction of Georgia’s neo-liberal state • 1. The early post-Revolution years • Shift from civil society to direct government aid to new ‘democratic’ government: • GoG – ‘embodiment of democracy’ USAID 2007) • USAID parliamentary strengthening programme designed to ‘implement a parliamentary strengthening project that responds to the priorities of the government of Georgia’. • Good governance seemed to become more urgent than democracy’ for Western donors (Muskhelishvili and Jorjoliani 2009: 694).

43. Western aid and the construction of Georgia’s neo-liberal state • 2. DP/GG aid: centralising technocracy • EU focus on technocratic governance aid/harmonising institutions. US focus on technocratic governance aid • ‘Technical assistance’ prioritises individuals over institutions: • EC/CofE project to ‘strengthen local and regional democracy’ required ‘professionals charged with incorporating European standards into legislation and practice’ • ‘target groups’ from within ‘influential intellectual and professional networks’ in Georgia were ‘carefully selected’ (EC/CofE 2003: 5)

44. Western aid and the construction of Georgia’s neo-liberal state • 2. DP/GG aid: centralising technocracy • USAID-sponsored project: ‘Support to the new GoG’ designed to improve government effectiveness. Development Alternatives Inc project implementer. • No mention of ‘democracy’ beyond Page 1. Focus instead on technical reforms and PR • Success based on working with and winning over ‘the right Georgian’ (DAI 2006: 13).

45. Western aid and the construction of Georgia’s neo-liberal state • 2. DP/GG aid: centralising technocracy • Governance aid delivered by Western ‘experts’ and consultants • Building neo-liberal state dependent on co-operation with small politically insulated and powerful clique of technocrats • Centralising technocratic decision-making • Bringing local elites into international aid/governance networks

46. Western aid and the construction of Georgia’s neo-liberal state • 3. ‘Imagineering’ Georgia • Bendukidze (GoG), Simeon Djankov (World Bank), USAID: close co-operation to engineer Georgia’s meteoric rise up Bank’s Ease of Doing Business Index (Schueth 2010). • Georgia: From 112th in 2006 to 37th in 2007. Georgia named Bank’s top reformer in 2007. 2010 ranking: 11th. • 2007/8 – GoG launches major international publicity campaign with Saatchi&Saatchi: ‘Invest in Georgia’, ‘And the Winner Is…’

47. Western aid and the construction of Georgia’s neo-liberal state 3. ‘Imagineering’ Georgia ‘And the Winner is…’ ‘So, looking to invest? ‘Georgia vs. Hong Kong: Which country has the world’s most liberal labour force and most literate workforce?’ ‘Georgia vs. Germany: Where it is easier to start a business?’ ‘Georgia vs. China: Which country is the world’s number one economic reformer?’ Georgia vs Australia: ‘Which country has the most liberal employment laws’ (Sources cited: WB EDBI, IMF, Heritage Foundation, etc)

48. ‘The West’ in Saakashvili’s Georgia: Aiding competitive authoritarianism 3. ‘Imagineering Georgia’ Imagineering Georgia away from failed post-Soviet state to ‘frontier market’ (Schueth 2010). Signalling to transnational capital its ‘reputational capital’ through World Bank, credit-rating agencies, international financial media But ‘image’ over substance. Formal institutional changes: WEF’s Global Competitiveness Index 2010: Georgia 90th out of 139 nations. EDBI project – a transnational capitalist project of neo-liberal state construction

49. ‘The West’ in Saakashvili’s Georgia: Aiding competitive authoritarianism • 4. Transnational capital’s political influence • 2006 Labour code designed to ‘make Georgia rather more attractive to foreign investors’ (Papava 2009) • Left workers with ‘literally no rights at all’ (Papava 2009) • Introduced without even consulting trade unions or Georgian Employers Association (GEA) • Praised by American Chamber of Commerce (AmCham) and World Bank • Criticised by EU, ILO, ITUC, even GEA -> ILO-brokered trilateral negotiations and considered amendments

50. ‘The West’ in Saakashvili’s Georgia: Aiding competitive authoritarianism • 4. Transnational capital’s political influence • AmCham ‘vigorously and publicly’ opposed the proposed amendments, denounced them as unfair to business • GoG rejected proposed amendments, kept Labour Code unchanged • Domestic labour, domestic employers ignored. Transnational capital more influential