Why Saakashvili Lost?

Mikhail Saakashvili, Georgia’s president conceded the defeat of his party at the parliamentary elections. His rival Bidzina Ivanishvili, a money-splashing oligarch who made his billions in Russia and and set up the Georgian Dream party – a motley crew of oppositionists ranging from very respectable centrist politicians or former diplomats to some loony nationalists and populists – got over 50% of the votes on party lists. Saakashvili might still get a majority in the Parliament because whereas he seems to have lost the contest for the Parliament’s half seats that are elected on party lists under proportional voting system, the other half is elected as single-seat constituencies where Saakashvili’s part might have the lead.

Anyway, the election results are a big surprise. Just a couple of months ago very senior Georgian politicians were expecting something like a 50% to 30% victory for Saakahsvili, and were saying that the main danger from Ivanishvili was not for this round of elections, but for the next electoral cycle where he could build on his 30% to make the leap towards a proper majority.

Of liberalism and social democracy

The reasons for the elections results are manifold. The most important is basically too right wing a government. In his near-decade in power Saakashvili achieved huge successes in state building. The list of achievements is very long and has been so often quoted by Georgia apologists and friendly lobbyists that many people are tired of it. However, what Saakashvili achieved is no mean feat. He drastically reduced low-level corruption when it comes to the interaction between the citizen and the state – from traffic police to construction-permit issuers. He attracted significant investments, and most importantly (re)built the skeleton of a more or less functioning state, starting with the police and tax-inspectorate, then moving on to courts, universities, and municipal services (Here is a good book from the World Bank chronicling Georgia’s reforms). All was supplemented with a huge deregulation drive – that ranged from cutting red-tape and giving as free a hand to investors to drastic liberalisation of visa procedures for as many countries as possible. Georgia was open to anyone who would come to spend money or invest – from Iranian or Turks going to casinos in Batumi, to Russian, Kazakh or Gulf investors. Georgia now occupies the formidable 16th place in the Cost of Doing Business ranking and for several years held the title of the most reformist country in the world.

Georgia’s success has two key ingredients that are now becoming its weaknesses. The first was that the reforms were conducted with a firm hand, uncompromising manner and in a very centralised decision-making style. This was good for the speed and depth of reforms, but Saakashvili’s governing style alienated many of the better off, including a good chunk of the Tbilisi elite. The second was an extremely liberal approach to the business environment, as well as a preference for various ‘grand projet’ from producing a Georgian armoured vehicle (called Didgori) to a Georgian tablet computer, and from posh hotels (Tbilisi has two Marriots, a Radisson SAS, and a Sheraton) to ‘public service halls’ built by famous world architects. Such an approach attracted investments and increased tax-revenue, but created few jobs. And there has been little redistribution. All this alienated the poorer parts of society. Budgetary spending went into good salaries for the public sector (a key factor for the fight against corruption), rebuilding of the police (as an institution, and literary as a series of new glass buildings across the country), army, or roads. But not enough of it was properly redistributed via things such as pensions or support for agriculture. What was good for business was not always good for social protection. Ultra-liberalism generated growth and budgetary revenue, but was not enough to creating jobs or reducing substantially poverty. Between 2003 and 2012 Georgia’s GDP doubled in purchasing power parity (and rose by 3.5 times in nominal terms), and yet poverty was reduced from 28% to 24% only.  Saakashvili’s administration understood this, and the plan was to move the focus of the government from ‘liberalism’ to ‘social-democracy’, but this approach is too new to have visible effects.

So what explains Saakashvili’s success – quick, centralised, determined, non-consensual decision-making, deregulation, liberalism, and business-is-king attitude, also explains why parts of society grew increasingly disillusioned – from the elite that disliked political centralisation, to the underprivileged ones who got did not benefit from the growing economic pie. Another part of the explanation is politics. For a decade Saakashvili was so dominant and politically ruthless to his political opponents, than in the end all of them were forced to join forces under a single political roof – that of Bidzina Ivanishvili.

What next?   

In slightly over a year Saakashvili’s second presidential mandate will come to an end. So far he refused to say what he would do next. He was pondering his options, including the potential scenario where we would stay on as a prime-minister or speaker of the parliament. The parliamentary election results now make it much more difficult for Saakashvili to choose his options without facing strong opposition. Whatever will Saakashvili do (except from stepping aside from politics) will be much more difficult to achieve and contested in Georgia. But it also might strengthen his determination to continue the fight by staying in politics in a belief that the current opposition would just destroy his legacy, and his achievements are not irreversible enough for Georgian politics to move to a post-Saakashvili phase.

Either way Saakashvili’s defeat, is both good and bad for Georgia. It is bad because it is unclear what Ivanishvili stands for except being anti-Saakashvili and whether his party is committed enough to continue supporting Georgia transformation not just into a more pluralistic state, but into a better functioning state that continues to fight corruption, attract investments and modernise the country. But the election results can also be good news because even though not all opposition victories lead to or strengthen democracy (many of them actually don’t), fundamentally all democracies are built through victories and defeats of all governments. Benjamin Franklin once said that ‘our critics are our friends; they show us our faults’. So if these elections become a Franklin moment for Saakashvili making him and his party deliver better for the population at large and refocus their governance style and agenda – these elections might be turned from a short-term defeat into a longer-term victory.