Central Asia and the New Global Economy

Critical Problems, Critical Choices

Boris Z. Rumer

• Publisher: Routledge
• Year: 2019
• Print ISBN: 9780765606297
• eBook ISBN: 9781317475248
• Topic: History
• Subtopic: Historiography
• Index: History

Central Asia's new states have been buffeted by financial ill winds from East Asia and Russia and by Islamic revolutionary movements from the south. In the context of widespread and deepening impoverishment, endemic corruption, gaping inequalities, and external pressures to undertake difficult reforms, economic crisis threatens to expand into profoundly destabilizing social and political crises as well.This volume analyzes the geopolitical and macroeconomic situation of Central Asia, local policy responses to the current crisis, and alternative scenarios for the foreseeable future. It devotes particular attention to Kazakhstan, Turkmenistan, and Uzbekistan. Beyond the immediate case, the book focuses on policy measures and institutional improvements that could most directly impact the capacity of economies in the region to adapt to the globalization process.

1

Economic Crisis and Growing Intraregional Tensions

Boris Rumer

At the end of the 1990s, two distinct tendencies emerged as the dominant features of contemporary Central Asia: a degradation in the social and economic spheres (now on the path to becoming a full-blown depression), and mounting tension in the relations among states in the region. The root cause of both tendencies is profound economic crisis, which, as has become increasingly obvious, the existing regimes can neither resolve nor even contain. These two tendencies threaten not only to unleash a massive social explosion (which appears all the more likely amidst the increasing importance of the Islamic factor), but also to trigger interstate conflicts that could result in a general “Balkanization” of this vast region in the heart of Eurasia.

In the first half of the 1990s, it was generally thought that the principal dynamics of change in the Central Asian countries consisted of two key processes: (1) the transition from the Soviet command-mobilization economy to a market-based system, and (2) the establishment of institutions of political democracy. In the span of less than a decade, it has become perfectly clear (if one dispenses with ideological fantasies) that the real constellation of coordinates for Central Asia indicates neither the triumphant formation of a market economy nor an inexorable process of democratization. Rather, the primary dynamics in this region are fundamentally different: economic degradation, a precipitous decline in the standard of living, a dismantling of the social infrastructure, and the consolidation of authoritarian regimes that are based on personal rule and bear scant resemblance to democracy. In terms of their level of development, all five Central Asian states are rapidly hurtling downward and appear fated to join the ranks of the poor countries of the world—with all the attendant consequences.

I.From Regional Unity to Regional Confrontation

The Social and Economic Crisis

During the 1990s, the countries of post-Soviet Central Asia had to traverse a tortuous, twisted path—one that led them from a euphoria of unbounded hopes to a mood of profound despair and disenchantment. The exhilaration that accompanied the sudden (and unexpected) acquisition of independence at the start of the decade has given way to intense public frustration and a pervasive economic crisis.

In the years 1991–98, the level of economic activity plunged catastrophically—by 39 percent in Kazakhstan and Kyrgyzstan, 45 percent in Turkmenistan, and 66 percent in Tajikistan.¹ The main exception to this pattern was Uzbekistan, where the gross domestic product (GDP) decreased by less than 10 percent during this period. Although in 1995–96 that country even exhibited some signs of modest economic growth, those gains are highly misleading: Uzbekistan has actually been rebuilding the economic model of the former Soviet Union, a policy that can only, sooner or later, lead to stagnation and perhaps even collapse.

This general economic crisis in Central Asia has been unfolding against a background of continuous demographic growth: the economic crisis notwithstanding, the population continues to increase at exceedingly high rates. Thus, in the 1990s, the annual rate of population increase was 1.5 percent in Kyrgyzstan, approximately 2 percent in Turkmenistan, and more than 2.5 percent in Uzbekistan and even in Tajikistan (which has been rent by a decade of war and ceaseless military conflict).² In the next fifteen to twenty years, demographic growth in this region (with the exception of Kazakhstan) is expected to continue at a high rate.

The incessant demographic growth, given the simultaneous process of rapid economic decline (especially in the most modem spheres of production), has had the effect of concentrating an ever greater proportion of the labor force in agriculture and in the urban service sphere. However, both sectors (and especially agriculture) were already over-burdened with a surfeit of labor, a problem already apparent back in the 1980s. It is hardly surprising therefore that, in every sector and in the economy as a whole, the productivity of labor has fallen dramatically.

The economic crisis has also seriously aggravated the intensity of social problems. By the end of the 1990s, the main mass of population in the region fell into absolute poverty. Although precise data are wanting, rough calculations indicate that up to 70 or even 80 percent of the population of Kazakhstan and Kyrgyzstan are now living in poverty. The proportion is still higher in Tajikistan, where no less than 95 percent now fall under the poverty line. Reliable data on poverty in Uzbekistan and Turkmenistan have not been published; the available figures are distorted by the fact that the national currencies are not convertible. In any case, however, the situation in these two countries is not substantially better than that reported in Kazakhstan and Kyrgyzstan.

The poorest strata of the population are concentrated primarily in rural areas. In 1998 and 1999, however, a wave of new devaluations of the national currencies in Kazakhstan and Kyrgyzstan significantly increased the level of poverty in urban areas as well. Nor is the problem limited to those two states: Turkmenistan, Tajikistan, and especially Uzbekistan may face the necessity of making an analogous devaluation of their currencies. Hence these countries share the prospect of an explosive increase in poverty among their urban populations.

The escalating impoverishment of the population, when coupled with the dismantling of state services (in education, welfare, and especially medicine), has contributed to an uncontrolled spread of diseases like tuberculosis and hepatitis. Indeed, in the past two years, Kazakhstan even reported some localized outbreaks of the bubonic plague. But the prospects for combating these negative tendencies appear even more dismal. That is because the standard prescription for macroeconomic policy, as recommended by the International Monetary Fund (IMF), still calls for the Central Asian states to reduce demand by making sharp reductions in the government’s budgetary expenditures. In reality, such budget-slashing inevitably means a further reduction in spending for the social sphere, including public health and medicine.

Political Consequences

As many indicators make clear, powerful pressures are building for a social cataclysm in the region—openly in the cases of Kazakhstan, Kyrgyzstan, and Tajikistan, and covertly in the cases of Uzbekistan and Turkmenistan. This peril cannot fail, of course, to have an impact on the political processes in these five countries. To this point, the most sensational expressions of this turmoil and tension include the series of explosions in Tashkent, the capital of Uzbekistan (February 1999), and the activity of Islamic militants in Kyrgyzstan (fall 1999). The authorities there hastened to ascribe this and similar incidents to the growing power of “Islamic fundamentalists” (or, to invoke the jargon now popular in the post-Soviet realm, Wahhabites).

However, the roots of these Uzbek explosions and the rising activism of the so-called Wahhabites in this region have little to do with Islam itself. Rather, these phenomena have their roots in the catastrophic destitution that is now overwhelming the majority of people in this region. For the general populace, at least, it is perfectly obvious that the coming decades do not offer the slightest prospect for an improvement in their living conditions. It is hardly surprising therefore that a highly politicized Islam (to be sure, one that also exploits the religious sensibilities of believers) has become a powerful force throughout Central Asia, and especially in Tajikistan, Uzbekistan, and Kyrgyzstan.

The Consolidation of “Crony Capitalism”

A complex set of processes, fraught with serious conflict, is also reconfiguring political authority and how it functions. At a superficial level, all five countries would appear to have stabilized a democratic political order. Thus, the populace regularly elects the presidents and parliaments and does so in accordance with constitutionally defined norms and in compliance with a democratic procedure based on direct, equal, and secret balloting. In fact, however, the real situation is quite different. Namely, behind this democratic facade, powerful presidents have established regimes of personal rule and have not shied away from using all the means necessary to consolidate and reinforce their power. For example, rather than hold regularly scheduled elections, they feel so uncertain of electoral support that they have resorted to special referenda to extend the presidential term beyond its prescribed limit.

How this unfolds, to be sure, varies from one republic to the next. In Turkmenistan, President Saparmurad Niiazov has firmly entrenched his personal rule, bearing the title of “Turkmenbashi” (father of all Turkmen). But the situation is not all that encouraging even in Kyrgyzstan and Kazakhstan, which are widely regarded as the states that correspond most fully to the standard Western definition of political democracy. Here too the presidents have, in fact, significantly expanded their executive powers. Thus, in both Kyrgyzstan and Kazakhstan the head of state does not feel bound by constitutional norms and often intercedes in the political process to redirect it in ways that suit his own interests.

Still worse is the fact that, in most post-Soviet states (those in Central Asia being no exception), the attempt to separate power from property has failed. On the contrary, in the course of privatization in 1992-97, the presidents of these countries relied upon the levers of state power and conducted the redistribution of property and economic assets so as to benefit their immediate entourage (and, above all, their own relatives).

To be sure, “crony capitalism” is a virtually universal and defining characteristic of most developing countries. In this sense, the Central Asian countries correspond entirely to a “third-world” paradigm of development. However, as the experience of these same developing countries amply demonstrates, such political-economic structures to regulate power and property can claim neither longevity nor the capacity to ensure continuity in the historical process.

The Lesser of Two Evils

Thus, eight years of independence have not only failed to bring an improvement to the lives of ordinary people but, on the contrary, have caused a drastic decline in their standard of living—indeed, reducing it to a level below that of the Soviet era. Year in and year out, the authoritarian leaders of Central Asia have promised fundamental economic reform and the liberalization of civil society, but all these declarations have proven to be nothing more then empty rhetorical bombast. By now, these promissory notes are so badly overdue that the Central Asian regimes—which ensconced themselves in power during the post-Soviet era—can no longer deny their political bankruptcy.

Nevertheless, one must also concede that these regimes, for all their oppressiveness, have also played a positive role: thus far they have been able to maintain the status quo in the region, to stifle eruptions of interethnic conflict, and to prevent new explosions of popular discontent. This fact explains the West’s ambivalence toward the Central Asian regimes, which range from the relatively liberal (but still fundamentally authoritarian) regime in Kyrgyzstan to the unvarnished totalitarian dictatorship in Turkmenistan. Whatever misgivings one might have toward these undemocratic regimes, it is clear that they alone prevent this region from dissolving into bloody chaos, and that they alone can counteract a host of negative dynamics—such as artificial state boundaries, ethnic enclaves, and the build-up of interethnic animosity.

Realpolitik—a choice of real outcomes, not subjective preferences—requires that the West make a calculated judgment in defining policy toward the regimes of Central Asia. To be sure, one option is to choose a compromising policy and do business with these regimes, while making periodic protests against any major excesses. In effect, that has essentially been Western policy to this point. A second option for the West is to withhold recognition and support for these regimes and, in particular, to deny them material assistance. However ideologically self-satisfying that might be, that policy runs the risk of precipitating the collapse of these regimes and thereby opening the door to massive political and social destabilization, with all the untoward and unpredictable consequences that this outcome would entail.

In choosing between these two alternatives, Western powers might well keep in mind the instructive case of Yugoslavia. It bears recalling that, with good reason, everyone in the West once roundly condemned the dictatorial regime of Marshal Tito. With the advantage of hindsight, it is now clear that only his authoritarian regime was capable of preventing the tragedies of first Bosnia, and now Kosovo. Should not the Serbs, Albanians, and others feel genuine nostalgia for the Tito era, especially its later years? And was it so onerous for the West, NATO, and Washington to deal with Tito; that is, with someone who for nearly forty years acted as a bulwark of stability in the Balkans?

The Myth of Regional Unity

At the dawn of the post-Soviet era, the union of the five newly independent states of Central Asia at first appeared to be entirely natural and realistic. Indeed, many regarded unity as the most important precondition for political stability and economic development in the region. This belief in the possibility of economic integration and political solidarity tended to emphasize several factors: a shared Islamic faith, a common Turkic language (except for Tajikistan), territorial unity, and an integrated infrastructure. These new states also had a similar leadership: namely, Russified indigenous ethnic elites, who were formerly members of the upper ranks of the republic “partocracy” and who, in principle, should serve as a unifying factor in all five states.

By the end of the 1990s, however, the hopes for any kind of unity had receded into oblivion. The notion that confessional and cultural unity could play an important role has proven to be superficial and naive. Although often lumped together by outsiders as a single entity, the five states of Central Asia are anything but homogenous. Nor even is each individual state a coherent “nation-state.” Above all, their state boundaries are neither historical nor geographic, but the product of artificial map-making that began with the prerevolutionary Russian state and became positively deliberate and systematic in the Stalin era. Moscow arbitrarily redefined ethnic groups and recarved borders in a transparent attempt at divide et impera. These borders capriciously intersected ethnic enclaves, turning Central Asia into a patchwork quilt rent by complex disputes (ethnic, regional, and tribal) over land, water, and natural resources. The veneer of a common religion and, to some extent, Turkic language only conceals the deep divisions below—territorial conflict, interethnic tensions, clan rivalries, and social antagonism. As a result, the fault lines here run far more deeply ...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• List of Tables
• Preface
• Acknowledgments
• 1. Economic Crisis and Growing Intraregional Tensions
• 2. The Economic Development of Central Asia in the 1990s
• 3. Basic Problems of Market Transition in Central Asia
• 4. Adapting to Globalization
• 5. Foreign Trade and Investment
• 6. Kazakhstan and Uzbekistan: The Economic Consequences of Membership in the World Trade Organization
• 7. Central Asia and the Asian-Pacific Region
• 8. Central Asia: Midterm Economic Prospects
• Index
• About the Editors and Contributors