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The Situation In Belarus Is Even Worse Than In Venezuela

The Situation In Belarus Is Even Worse Than In Venezuela
Leonid Zlotnikov

Today, there is no market economy or democracy in Belarus, and the standard of living is rapidly reducing.

From the EAEU to an open economy

During 2013-2015, the turnover of foreign trade between the EAEU countries was declining faster than with the entire world in the general.

For example, in 2013, at a time when oil prices were not declining yet and sanctions were not applied against Russia, the volume of trade between Russia, Kazakhstan and Belarus has decreased by 8.6%. At the same time, the trade turnover with non-CIS countries slightly increased (by 0.3%). This trend continued in the following years.

Reasons for economic discrepancies between EAEU countries and failure of the integration project are obvious: consumers in Russia, Belarus or Kazakhstan prefer imports from those countries where the product has lower price and higher quality. Respectively, they export goods to those places where they can sell them at a higher price. Therefore, the eternal desire to increase welfare destroys intensions of the integrators.

The idea of creation of the Eurasian Economic Union was predicted for failure by Russian scientists in the 1990s. The historian A. Reznikova explained the reasons.

According to A. Reznikova, only two CIS countries - Russia and Ukraine - were ready to self-driven development of market economies. It was due to the sufficient number of large cities, which citizens, basically, had values ​​corresponding to the development of free market and democracy. In addition, some of the CIS countries (Armenia, Kyrgyzstan, Tajikistan and, notably, Belarus) did not have their own power base and “did not have a chance to exist as an independent state without massive external recharge.” Therefore, these countries became active supporters of the integration of the former Soviet Union.

The closest relations have been developed between Belarus and Russia. Since 1996 to the present day, Belarus has been the main recipient of the Russian energy subsidies. In 2012, the volume of Russian energy subsidies to the EAEU countries (Belarus, Kazakhstan and Armenia) amounted to 11.8 billion dollars, 8.9 billion dollars of which was delegated to Belarus. In 2015, subsidies to Belarus decreased and amounted to 5 billion dollars. At that time, Russian credit support to Belarus was also quite significant.

Despite the generosity of the Russian government, “Belarusian leadership was merging with those Russian political forces that opposed the transition to democratic society and market economy,” writes Reznikova. Other striving to integrate with Russia CIS countries appealed to the Russian political forces in the same direction. Russia itself had many economic structures that could exist only due to the consumption of cheap natural resources and labor. All those internal and external anti-market forces “just could not help but strove for total control over the resources and society, - writes Reznikova, - at least due to the instinct of self-preservation ... in the direction of non-market authoritarianism developing into totalitarianism.”

In the 1990s and early 2000s, Russian government sought to create market economy. The Belarusian authorities did not like it. In the government newspaper “Respublika”, one could find the expression “nonsense of liberalism in Russia will soon pass off”.

On 2 April 1997, at the initiative of Lukashenko, the “Agreement on the establishment of the Union State” was signed between Belarus and Russia. The conclusion of this treaty provided Lukashenko with the opportunity to take the presidency of the Union State and influence the economic policy of the two countries. Political circles of President Yeltsin realized this only during the last night before the signing of the Constitutional Act required to run the referenda to approve the Treaty.

By the way, the Constitutional Act is not signed until now. The referendum was not carried out neither in Russia nor in Belarus. However, some organs of the Union State were somehow created, and they even carry out something. Each year, April 2 is celebrated as a day of the creation of phantom state (Day of Unity of Peoples of Belarus and Russia).

In the early 2000s, committed to the liberal views Putin supported the idea of integration of Russia with the EU. At that time, Lukashenko nominated new ideology and integration initiatives. In 2003, he publicly stated that Russia has lost the role of protector of the Slavic-Orthodox civilization from spiritual aggression of the West and that Belarus would became an outpost of Slavs.

However, the Belarusians did not embrace the new ideology. Official Belarusian media could be found saying that the best ideology - is a high salary for employees. Neither were the Slavic states willing to integrate around Belarus. Hence, Lukashenko’s initiative was soon forgotten.

Lukashenko tried to weaken its dependence on Russia by developing relations with countries outside the CIS, in particular with Venezuela that was building “socialism of the 21st century”.

“Globalization unifies the world and allows each country to choose partners at their own taste. Future is in the strategic alliances of countries of different sizes and locations, but of similar mentality, ideology and confidence in each other. Integration of Belarus and Venezuela... is developing as slowly as the integration of the neighboring Belarus and Russia in the middle of the 1990s,” - wrote S. Kizima, Head of the Department of Political Science at the Academy of Public Administration under the aegis of the President of the Republic of Belarus.

Oil-rich Venezuela supplied cheap oil to Cuba and other Latin American countries that have taken the path of “socialism of the 21st century.” However, Belarus was not included into the list of sponsored countries and received oil at the world market prices. Oil from faraway Venezuela was much more expensive than the one from Russia. Friendship with Venezuela came to an end, and the volume of foreign trade with it significantly reduced.

Predictions about the formation of authoritarianism in Russia came true. Since 2005, Russia began the process of withdrawal from the market economy. The private sector share in GDP is constantly decreasing.

Even “managed democracy” came to an end. Western countries introduced sanctions against Russia. All this has created the conditions for further technological backwardness of this country. Therefore, in the medium term, Russia will not be able to create a cost-competitive integration association of CIS countries.

Stagnation of Russian and Belarusian economies began in 2012. The decline in energy prices led to an abrupt decrease in competitiveness and exports of Belarusian enterprises (cheap energy became available not only for Belarusians). Moreover, over the past two years there was a reduction in energy subsidies and Russian loans. It lead to emergence of mass insolvency of enterprises, increase of overdue debt and decline in living standards of Belarusians. Perhaps, the decline in the real income of the population will continue in 2016.

Due to the integration with Russia and, accordingly, Russian subsidies, Belarus could comfortably exist for two decades, maintaining inefficient command economy. Now, when Russia is no longer able to maintain high level of subsidies, it is necessary to return to market reforms that were declined at the presidential elections of 1994. Otherwise, the standard of living will fall even lower and will remain at that level.

We must act by ourselves

However, I do not agree with the statement of Reznikova that the pursuit of certain CIS countries (including Belarus) to integrate with Russia is caused by the lack of energy resources. Japan, for example, lack mineral resources altogether, including energy. However, nowadays, Japan is a developed country. On the other hand, Venezuela has abundant oil reserves, but its per capita GDP is less than in Belarus (in 2013).

Today, the welfare of the country depends on whether the power is separated from the ownership. Ownership in the broadest sense means the ability of the owner to make different economic decisions (what to produce, for whom, at what price, etc...). The vertical of power should be separated from influence on the owner’s decisions and the fate of his property (except of cases when it is necessary to prevent market failures). In Belarus, for example, tax authorities - executive body - can seize the company's account and bankrupt the entrepreneur. In civilized countries, only court can take such decisions. The vertical of power, including the president, cannot influence the decision of the court. Such a system of power is called democracy.

However, Reznikova was right with regard to democracy. In the 90s, Belarus was not ready for democracy. At the first election, people elected the president, who opposed the free pricing. Without this, the market economy is a nonsense. Without an efficient market economy, we have to look around the world for someone who would help. In Belarus, there is no market economy or democracy, and the standard of living is rapidly reducing. The situation in Belarus is worse than in Venezuela. There, in the conditions of democracy, people chose liberal parliament, which now organizes the impeachment of the populist President. In Belarus, such way of solving the problem of people’s welfare is almost impossible.

In the current difficult situation, any integration will not help Belarus to create an effective economy. We need to take action by ourselves. The way is known. We can use Estonian experience of market reforms in the 90s. It started not with integration, but with the opening of the country to the world (import duties and restrictions on imports and exports are virtually absent). Now Estonia is the most prosperous country among all republics of the former USSR.

Belarus needs similar to Estonian reforms. Belarus should decrease the degree of integration with Russia and the CIS countries to the free-trade zone. At the same time, Belarus should develop its participation in the Eastern Partnership program and even seek to create a free trade area with the EU.

Leonid Zlotnikov, specially for charter97.org

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