Georgia On My MindRandall Holcombe • Friday August 3, 2012 11:17 AM PDT •
I am leaving tomorrow to teach in a week-long economics program for college students in the Republic of Georgia. Georgia was one of the Soviet republics until the Soviet Union dissolved 21 years ago, and the country has made remarkable strides in the two decades since.
After a slow start, Georgia instituted major economic reforms starting in the mid-1990s and economic development has been impressive in the last decade and a half. I was there once before, last year, and was impressed not only by the country’s economic performance, but also by the ideological commitment Georgians have to free markets and limited government. As many Georgians have told me, having lived under Soviet economic planning gives people an appreciation for the virtues of economic freedom.
Much credit for Georgia’s economic reforms goes to President Mikheil Saakashvili. Well aware of corrupt law enforcement when he took office, he fired all of the police and jailed many people involved in organized crime. To symbolize the transparency in law enforcement his government established, police stations are all glass. Yes, you can look at them from the street and see right through them. His government has consistently supported free trade, low taxes, low government spending, limited regulatory constraints, and privatization of assets previously owned by the government.
There are so many good things to report about Georgia, but there is also an undercurrent of discontent. President Saakashvili has been accused of manipulating elections, and of using the state’s political power to benefit his cronies at the expense of others. There is a clear opposition movement in Georgia.
From an economic standpoint things have gone very well for a decade and a half, but there is always the question about whether that can continue. Georgia is a new democracy with a new economic system, and as new political coalitions solidify there is always the danger that political power will lead to cronyism, and the spark of entrepreneurship that has served the newly-independent Georgia could be snuffed out.
I am optimistic, though, because of the ideology of political and economic freedom that I have seen in Georgians. In the United States, and even more in Western Europe, people take for granted the remarkable prosperity that capitalism has bestowed on them. I have commented on that recently, here and here. In Georgia, people have a clear capitalist ideology and enthusiastically support the principles of economic freedom that they see are improving their well-being. I anticipate a very interesting trip!